A Pennsylvania family trust held about 65 properties; a son pointed to at least $10 million in rental income by 2022 when accusing his brother of mismanagement, but a November 12 court upheld dismissal of his case
A Pennsylvania court on Thursday upheld the dismissal of a man’s case accusing his brother and others of mismanaging a family real estate trust and diverting its income. Jacob Singer claimed that millions of dollars generated through rentals could not be accounted for. However, the court found that he had not produced enough evidence to prove that the money had been improperly taken.The Pennsylvania Superior Court rejected Jacob’s challenge to an earlier ruling that dismissed his claims against his brother, David Singer, Michael Singer Inc., which operates as Michael Singer Real Estate, and the trust’s former accountants. The court also found that Jacob had not established his right to take immediate control of the properties.According to the information available on Justia, the dispute centred on a real estate portfolio built by the family’s patriarch, Michael Singer. He founded a property management company and accumulated income-generating properties. He later created trusts for his sons, including one for Jacob, whose trust document was signed in June 2005. Jacob was appointed trustee and given powers to manage its assets.Michael transferred most of his property portfolio into the trust. At the time of the proceedings, it appeared to hold around 65 properties outright, along with interests in about 23 others owned by separate entities. Jacob and Michael had been involved in managing the properties. Jacob said he had authorised his father to look after those he did not manage himself.The disagreement grew after Jacob came to believe that David and the family company had taken over the properties without his authority. He also questioned how rental earnings and payments linked to the properties were handled. In July 2022, he filed a lawsuit seeking financial records, control of the properties and relief over the alleged wrongdoing.
Why Jacob claimed millions were missing
Jacob said he had asked David and the property management company for records and the transfer of management responsibilities. He also sought financial information from the trust’s accountants, Kirk Eldridge and Mazars USA LLP. He alleged that the parties did not provide all the information he wanted and later removed the accountants from their role.He also claimed that several trust properties were not being maintained as well as those connected to David or David’s trust. Jacob suspected that the trust had overpaid on promissory notes issued to Michael and that income due to it had been diverted.A key part of his case was the difference between rental income and the money visible in a bank account. Jacob claimed the trust had earned at least $10 million in rental income by the end of 2022, but the account balance did not reflect that amount. He argued that David had moved the money into accounts under his control.The court found that this comparison did not prove that funds had been misappropriated. Jacob had not produced records showing the account’s deposits and withdrawals or where the withdrawn money had gone. He was also unable to provide a clear calculation of the losses.The defendants had submitted an expert report disputing Jacob’s belief that all promissory notes had been repaid. It said an outstanding balance remained. Jacob did not appoint an expert to support his claims. The court agreed that specialist financial knowledge was needed to examine the accounts of a trust holding dozens of rental properties.
Court rejects demand for an accounting
Jacob also sought an independent examination of the trust’s financial records. The court said that although a party can ask for an accounting as a form of relief, this does not automatically create a legal right to one. Such a right must arise from another valid claim, such as a breach of contract.Since Jacob had not established the underlying claims needed to support his request, the court found no basis to order an accounting. It also said the alleged discovery violations did not independently give him that right.Jacob had separately argued that the defendants withheld important records. The trial court had ordered them to provide further information in 2023 and April 2024, subject to confidentiality restrictions. It also allowed parties to seek sanctions if the orders were not followed.However, Jacob did not file further discovery applications or seek sanctions before discovery closed. The Superior Court said he could not later complain that the trial court had failed to enforce its directions when he had not raised the continuing dispute in time.
Why Jacob could not take control of the properties
Jacob argued that, as trustee, he had the authority to manage the properties and that David and the company had no legal basis to retain control. The defendants produced property management agreements signed by Michael, naming him and/or the family company as agents responsible for managing rental properties. Some agreements included automatic renewal provisions.Jacob challenged these agreements during his appeal, arguing that they had been signed before the properties were transferred to the trust and that licensing issues made them unenforceable. But he had not raised these objections when the agreements were submitted during the summary judgment proceedings. The court said he had raised them too late.The judges also found no evidence showing when Michael stopped managing the properties or how David and the company had wrongfully taken over that responsibility. They rejected the argument that alleged violations of Pennsylvania’s real estate licensing law automatically made the agreements invalid.
Source link
