Court Opinion

ID: 3171390
Source: CourtListenerOpinion
Date Created: 2016-01-22 01:06:29.239811+00
Date Added: 2024-06-11T12:00:49.957975
License: Public Domain

J-A27021-15

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

IN RE: ESTATE OF DAVID ROY BITTNER,              IN THE SUPERIOR COURT OF
A/K/A DAVID R. BITTNER, DECEASED                       PENNSYLVANIA

APPEAL OF: CHASITY L. BITTNER,
INDIVIDUALLY AND AS THE SURVIVING
PARENT AND NATURAL GUARDIAN OF
PRESTON MARSHALL BITTNER
                                                     No. 1847 WDA 2014

            Appeal from the Order Entered September 17, 2014
             In the Court of Common Pleas of Bedford County
                  Orphans’ Division at No(s): 74 for 2013

BEFORE: BOWES, OLSON & STABILE, JJ.

MEMORANDUM BY OLSON, J.:                   FILED: January 21, 2016

     Appellant, Chasity Bittner, individually and as the surviving parent and

natural guardian of Preston Marshall Bittner, appeals from the order entered

on September 17, 2014, as made final by the denial of Appellant’s

exceptions on October 8, 2014. We affirm.

     The Orphans’ Court ably explained the underlying facts of this case.
       David Bittner died testate on December 31, 2011. Under
       his will, [Appellant (and her son)] were each beneficiaries of
       25% of the residual estate. David Bittner’s residual estate
       includes 12 shares of stock in Snyder’s Gateway and 14
       shares of stock in Breezewood Enterprises, both of which
       [constitute minority interests in] closely-held family entities.
       The valuation of this stock is the sole issue in the matter. . .
       .

        Co-executors M&T Bank and Robert Bittner (hereinafter
        “Executors”) applied discounts for lack of marketability and
        minority interests to the stock, listing their combined value
        at $719,059[.00] in the First and Final Account. [Appellant]
        filed objections to the First and Final Account, specifically to
        the valuation of the stock. [Appellant] argue[d] that the
J-A27021-15

        plain language of [the Amended and Restated Stock
        Restriction, Transfer and Purchase Agreement (hereinafter
        “the Shareholder Agreement”) for both companies
        mandates that no discounts should have been applied, that
        the value should have been calculated on a pro rata basis[,]
        and that, as a result, the Executors breached their fiduciary
        duty. . . .

Orphans’ Court Opinion, 9/17/14, at 1-2.

     The relevant portions of the Shareholder Agreement declare:

        § 2.05 Death of a Shareholder. Upon the death of a
        Shareholder, each Issuing Company shall have the option to
        purchase all, but not less than all, of such deceased
        Shareholder’s Common Stock at a price equal to the Fair
        Market Value of such Common Stock as determined under
        § 2.11. Likewise, upon the death of a Shareholder, the
        personal representative of such deceased Shareholder’s
        estate shall have the right to require each Issuing Company
        to purchase all of the deceased Shareholder’s Common
        Stock at a price equal to the Fair Market Value of such
        Common Stock as determined under § 2.11. Either such
        option shall be exercised, if at all, within nine (9) months of
        the date of such deceased Shareholder’s death, in writing
        delivered, in the case of the exercise of the Issuing
        Company’s option, to the personal representative, to the
        Issuing Company. Notwithstanding the foregoing provisions
        of this § 2.05, upon the death of David R. Bittner, the
        Issuing Company shall redeem all, but not less than all, of
        the Common Stock held by David R. Bittner at the time of
        his death as soon as such redemption is lawful and not in
        violation of any agreement by which the Issuing Company is
        bound.

                                     ...

        § 2.11 Fair Market Value. As used herein, the term “Fair
        Market Value” of the Common Stock being transferred
        hereunder shall mean that amount determined by the
        Shareholders to be the per share fair market value of the
        Company issuing such Common Stock (the “Issuing
        Company”) for the calendar year of the transfer, multiplied
        by the number of shares of Common Stock being

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        transferred. In the absence of a determination by the
        Shareholders of the per share fair market value of an
        Issuing Company for the calendar year of any transfer, the
        “Fair Market Value” of the Common Stock being transferred
        during such calendar year shall be the per share fair market
        value of such Company, as determined by the certified
        public accountant employed by the Company for the
        preparation of its immediately preceding annual financial
        statements and income tax returns, multiplied by the
        number of shares being transferred.

The Shareholder Agreement, dated 8/16/10, at §§ 2.05 and 2.11.

      On June 4, 2014, the parties appeared for a hearing on Appellant’s

objections to the First and Final Account. At the beginning of the hearing,

Appellant claimed that a hearing was unnecessary in this case because the

Shareholder Agreement was unambiguous. N.T. Hearing, 6/4/14, at 7. As

the Orphans’ Court explained, Appellant claimed that the plain language of

the above provisions declared that, in calculating the fair market value of the

stock, “no discounts should have been applied, [] the value should have

been calculated on a pro rata basis[,] and [], as a result, the Executors

breached their fiduciary duty.” Orphans’ Court Opinion, 9/17/14, at 2; see

also N.T. Hearing, 6/4/14, at 7-29.

      The Executors, on the other hand, claimed that a hearing was

necessary because Section 2.11 of the Shareholder Agreement was

ambiguous.    N.T. Hearing, 6/4/14, at 14-15.       Therefore, the Executors

claimed, parol evidence was needed to determine how the shares were to be

valued under the agreement. Id.

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J-A27021-15

      The Orphans’ Court deferred ruling on the issue of whether the

Shareholder Agreement was ambiguous. Id. at 25-26. The Orphans’ Court

then heard testimony on the case.

      During the hearing, Appellant produced no evidence and instead relied

upon her claim that the Shareholder Agreement was unambiguous.            The

Executors produced both lay and expert witnesses at the hearing, and their

evidence included the following:

  •   John Campbell, the “Administrative Vice President and Regional

      Manager for the Fiduciary team for Central Western and Northern PA

      for Wilmington Trust which is an M&T Company,” testified that

      “discounts for lack of marketability and lack of control when there’s a

      calculation of fair market value” of minority shares in a closely-held

      corporation are “always” a “component of developing the fair market

      value” of the shares. N.T. Hearing, 6/4/14, at 71-72;

  •   Joshua Lefcowitz, a certified public accountant who was “hired by

      Snyder’s [] Gateway and Breezewood Enterprises to perform valuation

      in connection with this estate” testified that:   “[t]he term used in

      Section 2.11 is fair market value[,] which is a well-defined term within

      the business valuation community” and “[w]hen you’re valuing a

      minority interest in a closely-held business as [here, the term

      includes] adjustments for the lack of control and lack of marketability

      that exists with that non-controlling ownership interest;” “the term

      ‘per share fair market value’ equates to the fair market value of the

                                    -4-
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      equity interest being valued;” “discounts for lack of control and lack of

      marketability are inherent in the fair market value concept” for

      minority interests in closely-held corporations; the business valuation

      company that was hired to perform the valuation in this case also

      performed    a    prior    valuation    for   both   Snyder’s       Gateway       and

      Breezewood Enterprises – and, during the prior valuation, the

      company     adjusted      the   value   for   lack   of   control    and   lack    of

      marketability, and none of the shareholders objected to the manner of

      valuation; and, it would be nonsensical if “fair market value” did not

      include the discounts for lack of control and lack of marketability

      because, if the discounts were not included in the definition, the

      corporations would be forced to buy the shares back at a price that

      was higher than fair market value; id. at 92, 103, 104, and 109; and,

  •   John   Bittner,    who    was    another      signatory   to   the    Shareholder

      Agreement, testified that it was not “[his] intent in using the term ‘fair

      market value’ . . . that [he] would just take the total company’s value

      and then just distribute the pro rata portion of it;” id. at 229.

      Within the Orphans’ Court’s later filed opinion, the Orphans’ Court

concluded that the term “Fair Market Value” in the Shareholder Agreement

was ambiguous.         Orphans’ Court Opinion, 9/17/14, at 3.               Specifically,

Section 2.11 mandated that the value of the shares be determined by the

“per share fair market value of such Company . . . multiplied by the number

of shares being transferred.” The Shareholder Agreement, dated 8/16/10,

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at § 2.11.   Yet, as the Orphans’ Court explained, this language supported

two reasonable interpretations:

        one reasonable interpretation would be to calculate the total
        fair market value of the entire company first and then
        simply divide by the number of shares. Of course, this
        interpretation assumes that “fair market value” specifically
        refers to the “Company,” which is [the interpretation]
        advanced by [Appellant].      However, . . . an equally
        reasonable interpretation would be to assess the fair market
        value of the shares themselves – including an analysis of
        the specific shares to be transferred – and computing the
        value of the number of shares transferred. In contrast to
        the former, this interpretation assumes that “fair market
        value” refers to the shares themselves rather than the
        company as a whole, which is [] the approach applied by
        the Executors.

Id. at 4.

      Given the above ambiguity, the Orphans’ Court concluded that parol

evidence was necessary to interpret the agreement.          Id.   The Orphans’

Court then determined that, under the agreement, the parties intended for

the calculation of the subject shares to include discounts for lack of

marketability and lack of control.   Id. at 6-7.    Thus, the Orphans’ Court

denied Appellant’s objections to the First and Final Account, confirmed the

accounting, and ordered that distribution occur in accordance with the

Executors’ petition. Orphans’ Court Order, 9/17/14, at 1.

      Appellant filed timely exceptions to the final order, and these

exceptions were denied. Appellant then filed a timely notice of appeal. Now

on appeal, Appellant raises the following claims:

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J-A27021-15

        1. Did the [Orphans’] Court err in admitting testimony
        regarding the interpretation of the stock purchase
        agreement?

        2. Did the [Orphans’] Court err in determining that M&T
        Bank, the corporate fiduciary, was held to the “prudent man
        standard” when in fact corporate fiduciaries are held to the
        “greater skill standard” as set forth in In re Estate of
        Killey, 326 A.2d 372 (Pa. 1974)?

        3. Did the [Orphans’] Court err in failing to properly
        construe the plain meaning of “fair market value” defined in
        Section 2.11 Fair Market Value of the Stock Purchase
        Agreement?

        4. Did the [Orphans’] Court err in failing to use
        $1,082,434.00 [pro rata] valuations for the 12 shares of
        Snyders and the 14 shares of Breezewood?

        5. Assuming for purposes of argument that discounts are
        applied to the decedent’s common stock to be transferred
        pursuant to § 2.11, the [Orphans’] Court erred in failing to
        hold that the provisions of the last sentence of the first
        paragraph of § 2.05 render moot the first three sentences
        of that paragraph.

Appellants’ Brief at 4 (some internal capitalization, italics, and underlining

omitted).

      We reviewed the briefs of the parties, the relevant law, the certified

record, and the well-written and thorough opinion from the able Orphans’

Court judge, the Honorable Travis W. Livengood.         We conclude that the

claims raised in Appellant’s brief fail and that Judge Livengood’s opinion,

filed on September 17, 2014, meticulously and accurately explains why

Appellant’s claims fail. Therefore, we adopt the Orphans’ Court’s opinion as

our own. In any future filings with this or any other court addressing this

ruling, the filing party shall attach a copy of the Orphans’ Court’s opinion.

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J-A27021-15

     Order affirmed.

Judgment Entered.

Joseph D. Seletyn, Esq.
Prothonotary

Date: 1/21/2016

                          -8-
                                                                      Circulated 12/23/2015 01:22 PM

IN THE COURT OF COMMON PLEAS OF BEDFORD COUNTY, PENNSYLVANIA

IN RE: ESTATE O:F DAV1D R. Brt'I'NEP.                           Nb: 74 FOR 2013

                                                                ORPHANS DMSION

                                MEMORANDUM OPINION

                                  .i. SUMMARY     OF .CASB

       David Bittner diedtestate on December 31, 2011. Under his will, hls widow

Chasity Bittner and his son Preston Bittner, were each beneficlaries of is% of the

residual estate. David sltener's.restdcel estate includes 12 shares of stock in Snyder's

Gateway and 14 shares of stock in Breezewood Enterprises, both of which are closely-

held family entl ties. The valuation of this stock is the sole issue in the matter. Co-

executors M & T Bank and Robert Bittner (hereinafter "Bxecutors") applied discounts

for lack of marketability and minority interests to the stock, listing their combined

value at $719,059 in the First and Pinal Ae< ount. Chasity Bittner and Preston Bittner

(hereinafter "Objectors") filed objections to the First and Fiwµ Accpunt, specifically to the

valuation of the stock. The Objectors argue that the plain language of the Shareholder

Agreement for both companies mandates that no discounts should have been applied,

that the value should have been calculated on a pro rata basis and that, as a result, the

                                                                   , ~· - \ 'i - ·. ,. 1· i: ';: ., ;.   r I L ":

                                              1

                                        4/
Executors breached their flduclary duty, We disagree with Objectors and overrule their

objections entirely.   t

                                   U. i~(;J\L STANDARD
       "[The] standard of care imposed upon the executor has been repeatedly

expressed as 'that Which a man of ordinary prudence would practice in the care of his

own estate."   "Parties seeking surcharge bear the burden pf proving the executor failed

to meet the duty of care owed to the estate." In re Dobson's Estate, 417 A.2d 138, 142

(Pa. 1980) dtihg   Estate of McCrea, 380 A.2d 773, 775-.76 (Pa. 197'7) and Estate of Lux,

3$9 A.2d 1053 (Pa. 1978).

                                     Ill. DISCUSSION

                                  lll(A,). IN'rRODUCTION

       Given the applicable standard, the burden is    upon the   Objectors to   show by a
preponderance of the evidence that the Executors breached their fiduciary duty. We

first note that Objectors chose not to present any witnesses during the evidentlary

hearing. Rather, Objectors argue that the plain language of the David Bittner's will and

the Shareholder's Agreement=without       more-are enough to flip the burden of proof

onto the Executors. We disagree.

1 We find significant merit to the Executors' Motion for Directed Verdict given Objectors'
failure to produce any testimony or evidence, relying solely upon the language in the
Shareholder Agreement. We did not specifically grant said motion only because we
believed it necessary to discuss the merits of the testimony produced by Executors in
order to rule upon the objections.

                                             2
                                Ill(B). INTEGRATION CLAUSE

       We first address Objectors argument regarding the integration clause of the

sharebolder Agreement. "Onge .a. writin~ is determined to be the parties' entire

contract, the parol evidence rule applies and evidence of any previous oral or written

negotiations or agreements involving the same subject matter as the contract is almost

always inadmissible to explain or vary the terms of the contract." Yucca v. Pitfsburgh

Steelers Sports, Inc., 854 A.2d 425, 436~3 7 (Pa. 2004). However; " ... where a term in

the parties' contract is ambiguous, 'parol 'evidence is admissible to explain or clarify Qr

resolve the ambiguity, irrespective of whether the ambiguity is created by the language

of the instrument or by extrinsic or collateral circumstances."   Id. quotlng Estate   of
Herr, 161 A.2d 32, 34 (Pa. i960). Upon careful review of the Shareholder Agreement,

we find the language=particularly Section 2; 11.....-:to be inherently ambiguous. Section

2.11 reads, in relevant part:

      "In the absence of a determination by the Shareholders of the per share
      fair market value of an Issuing Company for the calendar year of.any
      transfer, the "Fair MarketValue" of the Common Stock being transferred
      during such calendar year shall be theper sharefair market value of such
      Company, as determined by the certified public accountant employed by
      the Company for the preparation of its immediately preceding annual
      financial statements and income tax returns, multiplied by the number of
      shares being transferred."

Exhibit 3 (emphasis added). There is no dispute that Breezewood Enterprises and

Snyder's Gateway are closely-held, private, family companies. There is also no dispute

that the stock transferred upon David Bittner's death were minority interests in both

                                            3
companies. It is for these very facts that we find the above language in Section 2.1 l

ambiguous, subject to different intetpr.etations.   That ls, .one reasonable Interpretation

would be to calculate the total fair market value of the entire company first and then

simply divide   py the number ofshares.   Or course, this interpretation   assumes that

"fair market value" specifically refers to the "Company," which is essentially advanced

by Objectors.' However, we believe an equally reasonable [nterpretation would be to

assess the fair market value of the shares rhemselves=includlng      an analysis of the
specific shares to be ttansferre(l.....,.;and computing the value of the number of shares

transferred. in contrast to the former, this interpretation assumes th~.t "fair market

value" refers to the shares themselves rather than the company as a whole, which is

essentially the approach -applled by the Executors. Inasmuch as we find that at least

two reasonable interpretations to the language of the Shareholder Agreement exist, we

find an inherent ambiguity exists. Accordingly, we shall consider the parol evidence

offered by Executors regarding the Shareholder Agreement.

                    IIl(C). PAROi EViDBNCE AND FINQJNGS OF FACT

2 W~ do note that, while Objectors' interpretation may be "reasonable" in theory, we do
not find itfe~ible given the circumstances of the companies Involved, Since both
companies are private companies, closely-held by family members, we find it would be
impossible to assess a true fair market value of the entire companies without
evaluating the rt umber of shares transferred and the makeup of the remaining
shareholders. Therefore, while we find some basis in the language for Objectors'
interpretation of Section 2.11 for the purposes of thi~ particular discussion on parol
evidence, we find Executors' interpretation to be substantially better grounded in the
foundation of the language of the Shareholder Agreement and exponentially more
practical in execution.
                                              4

                                             44
      John Bjttner, David Bitmer's brother, is a shareholder in both Snyder's Gateway

and Breezewood Ehterprise·s and a signatory party to the Shareholder Agreement. John

Bittner testified that ii was never his intention for Section 2.11 to require a pro rata

valuation of shares. Rather, he testified that the purpose of the shareholder Agreement

was for family shareholders to retain the value of the company should a shareholder

leave the companies or predecease the other shareholders. According to John Bittner,

additions to the Shareholder Agreement Weremade $pedfka:tly to provide for David

Blrmer's young children shortly after David was diagnosed with a terminal health

c:ondition. We find John Bittner to be a credible witness and accept the above

testimony   as fact in our discussion.   The Executors also called John Dibert, a former

.Chiefof the Pennsylvania Department of Revenue. Mr, Dlbert testified that, in his

opinion; Section 2..11 should be interpreted to value the shares .of David Bittner as if

the shares would be transferred between a willing seller and willing buyer. Mr. Dibert

testified that, in such an evaluation, he would expect to see a discount for lack of

control and. lack of marketability since David Bittner's shares were a non-controlling

amount. We find Mr-. Dibert's testimony credible and his opinion persuasive.

              IlI(D). APPi.ICATION OP PAROL EVIDENCJ3 TO SECTION 2.11

       According to Section 2.05 of the Shareholder Agreement, the remaining

shareholders reserved the option to purchase all of David Bittner's stock in the two

companies upon his death, which they did. The valuation of the stock in this re-

                                                5

                                              ~5
purchase was to be determined by Section 2.11 of the Shareholder Agreement, which is

the key language a_t issue. Objectors argue that a "patent error" was committed by the

Executers in applying, discounts into the valuation of the stock. Specifically, Objectors

argue that Section   2. i 1   requires a pro rata valuatlon, by srmply dividing the total worth

of the company and dlvldlng that value by the number of shares.

      In supportofthis         argument, Objectors cite to various case precedent.'

Unfortunately for Objectors, we find that the guidance in said precedent.is actually

detrimental to Objector's position, given our consideration of the Shareholder

Agreement and the above-referenced testimony.

       First, we find that the Executors' interpretation of Section 2.11 is the only one

which affords reasonable consideration and gives effect to the Shareholder Agreement

as ~ whole. objectcrs' argumenrtha;          a strict pro rat~ value is required under Section

2. l 1, defined as ,; ... the total value of each Company divided by the total number of

shares," completelyignores        the multiple references to "fair market value" in the

Shareholder Agreement. Objectors' interpretation of the Shareholder Agreement

would essentially nuHify every reference to "fair market value" contained in Sections

3 Objectors cite to Ha"rrity v. Co11tineµtal-Equita~le Title & lrust Co., 124 A. 493, 494
(Pa. 1924) for the proposition that" .. .in construing a contract each and every part of it
must be taken into consideration and given effect if possible, and that the intention of
the parties must be ascertained from the entire instrument." Objectors also cite to
Lesko v~ Frankford Hospital-Bucks County, 15 A.3d 337, 342 (Pa. 2011) for the legal
premise that " ... [t]he fundamental rule in contract interpretation is to ascertain the
intent of the contracting parties."

                                                  6
                                                 4Li
· 2.05 and 2.11. While we do recognize that Executers' interpretation          of Section 2.1 r

    renders the method of calculation"   as surplusage,   it does not gut the cleat and essential

    mandate that the stock be assessed at "falr market value;' as does Objectors'

           Second, in assesslng the intention of the parties, the only testimony presented

    overwhelmingly supports the Executors' posltion. The credible testimony of John

    Bittner, a contracting party to the Shareholder Agreement, Which is bolstered by the

    oilier witnesses and evidence presented, dearly demonstrates      th~t the intent of the

    parties was to evaluate the transferred stock at fair market value-s-including applicable

    discounts. We therefore find that the interpretation of Section 2.11 empfoyed by the

Executors gives the most effect to the intention of the contracting parties to the

Shareholder.Agreement.

          We disagree with Objectors' [nterpretation of the Shareholder Agreement and,

having not produced any other evidence in support of their position, Objectors have

failed   to   meet their burden in demonstrating a breach of fiduciary duty by Executors.

Inasmuch as we have found that Executors' interpretation ·of the Shareholder

4That is, the language of Section 2.11 that the per share value be calculated, then
multiplied by the number of shares being transferred.
5
  Objectors also secondarily argue that the transfer under Section 2.05 is a "mandated"
sale due to David Bittner's death and that fair market value analysis cannot be applied
to a forced transaction. A~ with Objectors' primary argument, such an interpretation
of the Shareholder Agreement would render multiple references to "fair market value"
as useless, and is directly contradicted by the plain language of the document.

                                                7
                                              4(}
 A~.reement to ~ive the most effect to the entire contract as the contracting parties!

 intended, we therefore find that the valuation of David Blttner's shares of stock In the

 two companies in the First and Ffrial Account to be reasonable and ·proper.

        We therefore enter the following

                                         IV. ORDER.OF COURT

        AND NOW,       ·this   17th   day of September, ZOl4, the Order   b{ Court   is as follows:

 I. Executors' Mo'tionfor Directed Verdict is denied.

2. Objectors' objections to the First and.Pinal Account are denied in their entirety.

;3. Bxecutors' First qnd.Final Accou.nt is confirmed     and distrlbution is Ordered in

    accordance with the terms of Bxecutors' Peti_tionfor Adjl;ldicat-ion.

                                                                            L~~OOP,J,

·Counse]:
 For- the Executors:             R. Michael Daniel, Esquire
                                 Kevin Harkins, Esquire
                                 Mario Santilll, Ir., Esquire
For the Objectors:               Robert Rea, Esqulre
For Additional Parties:          Brand! Hershey, Bsqulre
                                 Michael Sahlanej, Esquire

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