J-A30027-14


NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

JOHN F. RAGANO, EXECUTOR OF THE                  IN THE SUPERIOR COURT OF
ESTATE OF CATALDO VASAPOLLI                            PENNSYLVANIA

v.



FABRIZIO SPAGNOLO AND ELISA D.
SPAGNOLO, CO-ADMINISTRATORS OF
THE ESTATE OF LUIGI SPAGNOLO

v.

A.P.S. RECYCLING, INC.

APPEAL OF: FABRIZIO SPAGNOLO AND
ELISA D. SPAGNOLO, CO-
ADMINISTRATORS OF THE ESTATE OF
LUIGI SPAGNOLO

                                                     No. 1026 EDA 2014


                Appeal from the Judgment Entered June 4, 2014
                In the Court of Common Pleas of Monroe County
                     Civil Division at No(s): 10539 CV 2008



BEFORE: LAZARUS, J., MUNDY, J., and PLATT, J.*

MEMORANDUM BY MUNDY, J.:                              FILED APRIL 30, 2015

        Appellants Fabrizio Spagnolo and Elisa D. Spagnolo, co-administrators

of the Estate of Luigi Spagnolo, deceased, appeal from the June 4, 2014

judgment determining that the Estate of Cataldo Vasapolli, represented by

____________________________________________
*
    Retired Senior Judge assigned to the Superior Court.
J-A30027-14


Appellee John F. Ragano, Executor,1 was the owner of certain disputed real

estate and personal property by virtue of a resulting trust. 2   After careful

review, we vacate the June 4, 2014 judgment and the portion of the trial

court’s January 28, 2014 order finding a resulting trust and directing

conveyance of the real estate and attendant personal property and business

license. We further remand for a new trial.

       A summary of the factual and procedural history of this case follows.

In June 2004, brothers-in-law Cataldo Vasapolli and Luigi Spagnolo entered

into an agreement regarding the purchase of certain real estate at 2 Katz

Road in the Borough of Stroudsburg, Monroe County, Pennsylvania, which

was the site of a scrap metal and recycling business.     A dispute over the

nature and extent of that agreement is at the heart of the litigation

underlying this appeal. Specifically, on June 29, 2004, the subject property,

including a bill of sale for personal property connected with the recycling

business and a junkyard operating license, was sold by Unity Bank to

Spagnolo for a purchase price of $1,012,500.00.           Vasapolli paid the
____________________________________________
1
  Ragano, an attorney, also represented Vasapolli in various matters prior to
his death.
2
  The judgment and the trial court’s January 28, 2014 order involve two
distinct matters that were tried together. Only paragraphs one, two and
three of the January 28, 2014 order, and the portion of the June 4, 2014
judgment order referencing them, are pertinent to this appeal.         We,
therefore, treat paragraphs one, two and three as a separate order and final
judgment, which is the subject of this appeal. See Moyer v. Gresh, 904
A.2d 958, 961 n.1 (Pa. Super. 2006) (treating distinct matters contained in
a single order as separate orders).


                                           -2-
J-A30027-14


purchase price and closing costs.3 At the same time, Spagnolo executed a

promissory note and mortgage for the amount of the purchase price in favor

of Vasapolli.4 The note and mortgage contained no provision for interest or

periodic payment, the note being payable on demand.5

        On November 9, 2005, Ragano, acting as Vasapolli’s lawyer, wrote to

Spagnolo’s attorney, Joseph Wiesmeth, Esquire, requesting a contract of

sale of the 2 Katz Road property from Spagnolo to Vasapolli be prepared.

Spagnolo responded on November 11, 2005, through his attorney that he

believed the property should remain in his name.

        On October 31, 2008, Vasapolli filed a complaint against Spagnolo

alleging breach of an oral, or alternatively an implied, contract to convey the

2 Katz Road property. Vasapolli claimed that at the time of the real estate

transaction, he contemplated eventually executing a real estate exchange

that would be recognized by the Internal Revenue Service (IRS) for tax

purposes under Section 1031 of the Internal Revenue Code but had not yet

sold the property whose proceeds were to be used to purchase the 2 Katz

Road property.        Vasapolli also sought equitable remedies of estoppel,
____________________________________________
3
    The purchase price and closing costs totaled $1,036,283.10.
4
    The mortgage was not recorded until May 30, 2008.
5
  Near the time of the closing, Attorney Wiesmeth incorporated A.P.S.
Recycling, Inc. as a Pennsylvania subchapter “S” corporation with Spagnolo
and Vasapolli each obtaining a 50% share. The corporation was formed to
operate a recycling and scrap-yard business at the 2 Katz Road property,
with Spagnolo handling the management of the operations.


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J-A30027-14


constructive trust, accounting and quantum meruit.       On March 11, 2009,

Spagnolo committed suicide. Vasapolli died on June 9, 2009. Estates were

raised for both decedents and their respective personal representatives,

Ragano and Appellants, were substituted as parties. Business operations of

A.P.S. Recycling, Inc. ceased following Spagnolo’s death until they were

resumed in December 2009 by Ragano on behalf of the estate of Vasapolli.

On May 7, 2010, Appellants filed an answer together with new matter

raising, inter alia, the defenses of the statute of frauds and the parol

evidence rule, and together with a counterclaim to quiet title. Additionally,

Appellants filed a joinder complaint against A.P.S. Recycling, Inc., seeking

fair rental value and back rent for the period of operation after Spagnolo’s

suicide.

       Trial on the matter was held on September 24-25, 2013.6 On January

28, 2014, the trial court determined, “[t]he Estate of Cataldo Vasapolli is the

owner of 2 Katz Road, Stroudsburg, Pennsylvania by virtue of a resulting

trust.” Trial Court Opinion and Order, 1/28/14, at 26, ¶ 1. The trial court

also determined the estate of Vasapolli was the beneficial owner of the

personal property indicated on the bill of sale from the June 29, 2004
____________________________________________
6
  On May 7, 2010, Appellants filed an application to dissolve the A.P.S.
Recycling, Inc., corporation. The respondent, Ragano, Executor of Cataldo
Vasapolli’s estate, opposed dissolution. Trial on the matter was held at the
same time as trial on Vasapolli’s complaint. The trial court’s grant of
dissolution and January 28, 2014 order requiring an accounting is the
subject of the companion appeal at 1030 EDA 2014.



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J-A30027-14


transaction. Id. at ¶ 2. Appellants were directed to execute the required

documents to transfer title to the real estate, personal property and

Junkyard license to the Estate of Cataldo Vasapolli. Id. at ¶ 3.

       On February 7, 2014, Appellants filed a timely post trial motion, which

the trial court denied on March 3, 2014. Appellants filed a notice of appeal

on March 28, 2014.7

       On appeal, Appellants raise the following issues.

              I.     Was the [t]rial [c]ourt in error when it
                     admitted unreliable, biased, and inadmissible
                     hearsay testimony to establish a [r]esulting
                     [t]rust?

              II.    Was the [t]rial [c]ourt in error when it found
                     that a [r]esulting [t]rust had been established
                     in order to complete a 1031 exchange for “tax
                     purposes” when such an exchange would have
                     been illegal?

              III.   Was the [t]rial [c]ourt in error and abuse [sic]
                     its discretion when it provided remedies that
                     had not been requested by either party?

Appellants’ Brief at 7.


____________________________________________
7
   Appellant and the trial court have complied with Pennsylvania Rule of
Appellate Procedure 1925. In its May 8, 2014 Rule 1925(a) statement, the
trial court referenced its January 28, 2014 opinion as containing the reasons
for its decisions. Additionally, by orders dated May 2, 2014 and May 22,
2014, this Court noted Appellants’ appeal was premature and directed
Appellants to praecipe the Monroe County Prothonotary to enter judgment
on the trial court’s January 28, 2014 verdict order. By stipulated order, the
trial court entered final judgment on June 4, 2014, perfecting the appeal.
See Pa.R.A.P. 905(a)(5) (noting a premature appeal is subsequently
perfected when a final, appealable order is entered).


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J-A30027-14


      Appellants first aver the trial court erred in admitting, over their

objection, testimony from Ragano about statements made to him by

Vasapolli concerning an oral agreement he had with Spagnolo relative to the

subject real estate transaction.   Id. at 15.   “[O]ur standard of review in

assessing the trial court’s evidentiary rulings is extremely narrow.    Such

decisions are referred to the [trial] court’s discretion, and will not be

disturbed absent both error and harm or prejudice to the complaining party.”

Kopytin v. Aschinger, 947 A.2d 739, 744 (Pa. Super. 2008) (citation

omitted), appeal denied, 964 A.2d 2 (Pa. 2009).

      Prior to trial, Appellants filed a motion in limine seeking to preclude

testimony from Ragano, based on statements from Vasapolli that “the

agreement between Vasapolli and Spagnolo was that Spagnolo would

[convey the property to him] at the appropriate time for tax reasons.”

Motion in Limine, 5/17/13, at 3, ¶ 6.       Appellants claimed the evidence

violated the parol evidence rule and constituted inadmissible hearsay. Id. at

3, ¶¶ 8, 9. The trial court denied the motion without prejudice to raise the

issue at trial.   Trial Court Order, 8/5/13, at 1.   Appellants renewed their

hearsay objection at trial.    N.T., 9/24/13, at 17.    Ragano, through his

attorney, asserted the testimony was admissible under Pennsylvania Rule of




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J-A30027-14


Evidence 803 as showing Vasapolli’s then existing state of mind, including

intent, plan, motive and design.8 Id. at 18; see also Ragano’s Brief at 9.

       Rule 803 provides as follows.

              Rule 803. Exceptions to the Rule Against
              Hearsay--Regardless of Whether the Declarant
              Is Available as a Witness

              The following are not excluded by the rule against
              hearsay, regardless of whether the declarant is
              available as a witness:

                                               …

              (3)    Then-Existing       Mental,    Emotional,      or
              Physical Condition. A statement of the declarant’s
              then-existing state of mind (such as motive, intent
              or plan) or emotional, sensory, or physical condition
              (such as mental feeling, pain, or bodily health), but
              not including a statement of memory or belief to
              prove the fact remembered or believed unless it
              relates to the validity or terms of the declarant’s will.

                                               …

Pa.R.E. 803(3).



____________________________________________
8
  The trial court overruled Appellants’ objection relative to admission of parol
evidence and allowed the testimony over Appellants’ hearsay objection,
deferring its decision “as to whether or not it’s hearsay, or whether it’s an
exception to the rule.” N.T., 9/24/13, at 20. The trial court never made a
subsequent formal ruling on the objection. However, it apparently accepted
and relied on Ragano’s testimony of Vasapolli’s statements in its finding that
a resulting trust was created. “[The trial court] further find[s] [] Ragano’s
testimony of the initial Agreement between [Vasapolli and Spagnolo] as to
the purchase and ownership of the real property to be credible.” Trial Court
Opinion, 1/28/14, at 18. We note the trial court does not address the basis
for its evidentiary ruling in its January 28, 2014 opinion or its May 8, 2014
Rule 1925(a) opinion.


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J-A30027-14


      We have described the applicability of this exception as it pertains to a

declarant’s state of mind as follows.

            The exception, of course, is inapplicable if the
            statements are not being introduced for the truth of
            the matter asserted, as such statements are not
            hearsay. However, where a statement is being
            introduced for the truth of the matter asserted, then
            it may be admissible if it is a declaration concerning
            “the declarant’s then existing state of mind … such
            as intent, plan, motive, design, mental feeling, pain,
            and bodily health.” Pa.R.E. 803(3). Of course, the
            statement must be relevant to the issue in the case.
            The statement must be instinctive, rather than
            deliberate[.] Moreover, a statement relating to past
            events based on memory or belief is not permissible
            to establish the truth of those events, absent relation
            to the execution, revocation, identification, or terms
            of the declarant’s will.

Schmalz v. Mfrs. & Traders Trust Co., 67 A.3d 800, 804 (Pa. Super.

2013) (some internal quotation marks, citations, and footnote omitted).

      Instantly, the relevant questioning proceeded in the following manner.

            [BY RAGANO’S ATTORNEY] Q.           Did   they    have
            any business dealings?

            [BY RAGANO] A.          Yes.

                  Q.   What was the nature of the business
            dealings between the two brothers-in-law that you
            were aware of?

                                        …

                  A.    Apparently, there was a recycling facility
            up in Pennsylvania, which is the subject of this
            lawsuit. They had a business relationship involving
            that property and the corporation that ultimately ran
            the recycling facility.


                                        -8-
J-A30027-14


                Q.    Now, the record is going to show that
          there was a property deeded to Mr. Spagnolo on
          June 29th of 2004. Did you have any function, as
          attorney for Mr. Vasapolli, in that transaction?

                A.    At that time, no.

                Q.    Did you even know about it at that time?

                A.    I don’t believe so.

                Q.    Did you learn about it subsequently?

                A.    Yes, I did.

               Q.    And     how    did     you   learn   about   it
          subsequently?

               A.      Well, after, I guess, in 2004 or 2005, Mr.
          Vasapolli told me that he –

          [APPELLANTS’ COUNSEL]:          Objection, Your Honor,
          as to hearsay evidence.

                                     …

                Q.    Mr. Ragano, do you recall the question?

                A.    No.

                Q.   Okay. Did Mr. Vasapolli discuss with you
          the property that you purchased in Stroudsburg at
          any time?

                A.    Yes.

                Q.    When was that?

               A.    In 2000 -- probably early 2005, late
          2004. I’m not sure.

                Q.    And what did he tell you?




                                    -9-
J-A30027-14


                     A.    He told me that he had purchased this
               property, and that he was going to use it as part of a
               1031 exchange; not that he purchased it, but that he
               put it in his brother-in-law’s name. So that, at a
               later date, when he sold the property in New York,
               on which he would realize a substantial capital gain,
               he could then utilize this property as part of the
               exchange to defer his tax.

                     Q.    Is that the first that you found out about
               the property?

                     A.    Yes.

N.T., 9/24/13, at 16-21.

      The trial court noted that, other than the executing documents, i.e.,

the deed, note and mortgage, there was no written expression of an

agreement       between   Spagnolo    and   Vasapolli   respecting   the   subject

transaction.     Trial Court Opinion, 1/28/14, at 14.     From the surrounding

circumstances, the trial court found that an oral agreement existed. Id.

               We find an oral agreement existed between Vasapolli
               and Spagnolo with regard to the real property and
               operation of A.P.S.       However, both men are
               deceased and there is no way to know exactly what
               that oral agreement entailed, other than by parol
               evidence. Therefore, we are bound by the written
               documents, and the parol evidence that supports or
               refutes the existence of a resulting trust.

Id.   The trial court relied on the cited testimony to conclude the parties

agreed that Spagnolo would re-convey the property to Vasapolli at a future

date to effect a 1031 exchange. Id. at 16

               Furthermore, the purchase of the real property was
               not intended to be for Spagnolo, despite the
               existence of the Mortgage and Note. [] Ragano

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J-A30027-14


             testified that Vasapolli intended the taking of title in
             Spagnolo’s name to be held only until such time as
             Vasapolli arranged a 1031 exchange of real property,
             at which time the real property would be conveyed
             back to Vasapolli and the Mortgage and Note
             extinguished. We find this testimony of an oral
             agreement credible.

Id.

      Appellants argue the trial court’s acceptance of Ragano’s testimony

about Vasapolli’s statements to him, uttered six months after the referenced

events, about his intentions regarding the real estate transaction was in

error. Appellants’ Brief at 14.

             The statement Vasapolli allegedly made to Ragano
             was not made spontaneous with the impression. It
             was a self-serving statement made long after the
             initial sale. It was not about a “then existing” mental
             condition.       Even if Vasapolli had made the
             statement, it was done far past when it could have
             been used to fall within this exception.

Id. at 18.

             The Trial Court’s acceptance of this testimony under
             Pa.R.E. 803(3), the “Then Existing Mental,
             Emotional, or Physical Condition” exception, is so
             broadly read as to make just about any hearsay
             statement admissible and to allow any statement
             made years after an incident to paint an impression
             more favorable to the declarant.

Id. at 17.

      We agree the trial court’s evidentiary ruling was in error.        It is

undisputed that the testimony of Vasapolli’s statements was for the truth of

the matter asserted and constituted hearsay evidence.           Ragano offered


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J-A30027-14


Vasapolli’s statements to show the substance of an oral agreement between

Spagnolo and Vasapolli.   See, e.g., Schmalz, supra at 803-804 nn. 3, 5

(noting distinction between state-of-mind non-hearsay evidence offered to

explain listener’s reaction and not the truth of the matter asserted, and the

state-of-mind exception to hearsay rule where declarant’s state of mind is

offered for truth of the matter asserted). To be admissible, the exception

under Rule 803(3) would have to apply.         Ragano insists the exception

applies because, “Vasapolli had discussions with Attorney Ragano that

concerned his then existing state of mind as to how the deal should be

structured, including Vasapolli’s ‘intent, plan, motive, [and] design.’”

Ragano’s Brief at 10. We disagree.

     First, we note that for the state-of-mind exception to apply, the

declarant’s intent or plan must be relevant to the issue in the case.

Schmalz, supra. In this case, it is Vasapolli’s state of mind at the time of

oral agreement with Spagnolo that is relevant.           However, Ragano’s

testimony concerned Vasapolli’s expression of his intent six months after the

relevant events.    See N.T., 9/24/13, at 16-21.        As noted above, “a

statement relating to past events based on memory or belief is not

permissible to establish the truth of those events ….”     Schmalz, supra.

Neither were Vasapolli’s statements “instinctive, rather than deliberate,” as

they were made with the view of enforcing a re-conveyance of the property.

N.T., 9/24/13, at 16-21, see id.     Accordingly, we conclude the trial court


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J-A30027-14


erred in admitting Ragano’s hearsay testimony of Vasapolli’s purported

intent and plan underlying the June 29, 2004, real estate transaction.9

       We next address whether this error resulted in harm to Appellants.

See Kopytin, supra. The trial court found “a resulting trust was formed for

the benefit of Vasapolli,” citing section 440 of the Restatement of Trusts.

Trial Court Opinion, 1/28/14, at 15. The Restatement provides as follows.

              § 440 General Rule

              Where a transfer of property is made to one person
              and the purchase price is paid by another, a resulting
              trust arises in favor of the person by whom the
              purchase price is paid, except as stated in §§ 441,
              442 and 444.

RESTATEMENT (SECOND) TRUSTS § 440 (1959).10

       However, the subject transaction did not involve a gratuitous transfer.

Rather, Vasapolli supplied the purchase funds as a loan evidenced by a note

and secured by the mortgage. Section 445 of the Restatement provides as

follows.    “Where a transfer of property is made to one person and the

purchase price is advanced by another as a loan to the transferee, no

resulting trust arises.” Id. § 445; see also Mermon v. Mermon, 390 A.2d


____________________________________________
9
  We further note that the statements, as testified to by Ragano, convey
only Vasapolli’s understanding of his own purpose. Vasapolli did not indicate
his intention was communicated to or agreed to by Spagnolo as the basis of
an oral agreement.
10
  The trial court determined that the exceptions noted in Sections 441, 442,
and 444 did not apply. Trial Court Opinion, 1/28/14, at 15.


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J-A30027-14


796, 799 (Pa. Super. 1978) (finding purchase price of property advanced as

a loan precluded finding of resulting trust, citing Section 445).

      The trial court additionally relied on Section 404 of the Restatement,

which provides as follows. Trial Court Opinion, 1/28/14, at 15.

            § 404 Where Resulting Trust Arises

            A resulting trust arises where a person makes or
            causes to be made a disposition of property under
            circumstances which raise an inference that he does
            not intend that the person taking or holding the
            property should have the beneficial interest therein,
            unless the inference is rebutted or the beneficial
            interest is otherwise effectively disposed of.

RESTATEMENT (SECOND) TRUSTS       §    404     (1959);   see   also   Galford   v.

Burkhouse, 478 A.2d 1328, 1334 (Pa. Super. 1984) (applying Section 404

to determine parties’ intent to establish resulting trust). “A resulting trust

arises when a person makes a disposition of property under circumstances

which raise an inference that he does not intend that the person taking or

holding the property should have a beneficial interest in the property.”

Fenderson v. Fenderson, 685 A.2d 600, 604 (Pa. Super. 1996), appeal

denied, 698 A.2d 594 (Pa. 1997). “To establish a right to an equitable lien,

the evidence [] must be clear, precise and indubitable as to the intention of

the parties.” Mermon, supra at 799 (internal quotation marks and citation

omitted).

            The Statute of Frauds specifically exempts such
            trusts, implied in law, from its operation. Parole
            [sic] evidence is, therefore, admissible to show the
            circumstances under which a resulting trust arose.

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J-A30027-14


            In order to establish, by oral testimony, a resulting
            trust in real estate against the person holding the
            legal title the evidence must be clear, explicit and
            unequivocal or, as it has been otherwise stated,
            clear, precise and unequivocal or clear, precise and
            convincing and satisfactory or clear, precise and
            indubitable.

                                      …

            Moreover, while parole [sic] evidence concerning the
            circumstances surrounding the execution of a deed is
            admissible to challenge the legal title and establish a
            resulting trust, such parole [sic] evidence cannot be
            the basis for an oral express trust[,] which would be
            violative of the Statute of Frauds.

Galford, supra at 1333, 1334.

      The “circumstances” relied on by the trial court in the instant case was

the parties’ purported oral agreement. Trial Court Opinion, 1/28/14, at 14.

As noted above, the trial court relied heavily on the inadmissible hearsay

evidence to make its determination about the substance of the agreement

between Spagnolo and Vasapolli, which in turn formed the basis of the trial

court’s finding that a resulting trust was created.   Id. at 16.      Absent that

evidence, it is by no means “clear, explicit and unequivocal” that such a trust

existed as required for Ragano to meet his burden of proof. See Galford,

supra at 1333. For these reasons, we are constrained to vacate the June 4,

2014 judgment. We also vacate paragraphs one, two and three of the trial

court’s January 28, 2014 order pertaining to the action underlying the

instant appeal.




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J-A30027-14


       Based on the foregoing, we conclude the trial court’s finding that a

resulting trust was created between Spagnolo and Vasapolli was based on

inadmissible hearsay evidence. Accordingly, we vacate the trial court’s June

4, 2014 judgment relative to this appeal           and remand the case for a new

trial or other further proceedings, consistent with this memorandum.11

       Judgment vacated. Case remanded. Jurisdiction relinquished.

Judgment Entered.




Joseph D. Seletyn, Esq.
Prothonotary



Date: 4/30/2015




____________________________________________
11
    We recognize that, depending on the outcome on remand, Appellants’
remaining issues may become moot or may be confronted again. Because of
our disposition of Appellants’ first issue, we decline to address them here.
We do so without prejudice to either party to revisit the issues before the
trial court on remand or in a future appeal if appropriate. We therefore
express no opinion on Appellants’ remaining issues at this juncture.


                                          - 16 -
