In re Brown's Estate

• Decision Date: 06 July 1962
• Citation: 183 A.2d 307,408 Pa. 214
• Parties: ESTATE of John A. BROWN, Jr., Deceased. Appeal of George E. KEARNS, Jr., Guardian and Trustee ad litem.
• Court: Pennsylvania Supreme Court

183 A.2d 307

408 Pa. 214

ESTATE of John A. BROWN, Jr., Deceased. Appeal of George E. KEARNS, Jr., Guardian and Trustee ad litem.

Supreme Court of Pennsylvania.

July 6, 1962.

George E. Kearns, Jr., Media, William White, Jr., Martin A. Heckscher, Duane, Morris & Heckscher Philadelphia, for Jane Gordon Fletcher and Eckley B. Coxe 3rd.

Mercer D. Tate, F. Hastings Griffin, Jr., Edward R. Carpenter Dechert, Price & Rhoads, Philadelphia, Robert B. Greer Media, for Girard Trust Corn Exchange Bank, Trustee appellee; Charles Myers, Philadelphia, of counsel,

William H. Lathrop, Montgomery, McCracken, Walker & Rhoads, Philadelphia, for Estate of Rosalie Brown Dolan.

Paul Maloney, Philadelphia, for Arthur E. Pew, Jr.

Peter Hearn, Richard L. Freeman, Pepper, Hamilton & Scheetz, Philadelphia, of counsel.

Before BELL, C. J., and MUSMANNO, JONES, COHEN, BOK, EAGEN and O'BRIEN, JJ.

BELL, Chief Justice.

Several perplexing and very important questions are raised by this appeal. The appeal was taken by the Guardian and Trustee ad litem, ^[1] appointed to represent minor and unborn contingent remaindermen, from the Decree of the Orphans' Court of Delaware County which dismissed certain exceptions filed by the Guardian to the Fifth account of the trustee of this estate.

Decedent died July 17, 1919, leaving a last Will dated April 14, 1913 and a Codicil thereto dated February 10, 1919. By his will, decedent devised and bequeathed his entire residuary estate, except for his New York real estate, to his Trustee, IN TRUST, to pay an annunity to his wife for her life, with provisions for the payment of income for many lives and in varying proportions. It will suffice to say that the testator provided at great length and in tremendous detail as to the great distribution of both income and principal. Over the years part of the trust principal has been distributed; part of the trust still continues for the benefit of certain grandnephews and grandnieces. No question is raised as to the identity of the beneficiaries or the persons ultimately entitled to the corpus.

On July 2, 1952, the trustee filed its Fourth account. On April 8, 1953, the Orphans' Court of Delaware County handed down an adjudication and memorandum opinion holding that the trustee 'was duly authorized by the legislature and not prohibited by the testator in investing funds of this trust estate in common stocks [and Authority bonds] meeting the requirements of the statute.' ^[2] No appeal was taken from this adjudication.

The auditing Judge stated in his adjudication sur the present (fifth) account: 'The reason or purpose of the filing of the present Accounting is the desire of the trustee [a] to secure judicial determination of the extent of the investment powers of the trustee and [b] to obtain Court approval of the transfer of certain items from principal to income by reason of allocation of proportionate share of proceeds of certain apportionable events.'

When the present (fifth) Account was filed on April 9, 1959, a different Guardian and Trustee ad litem was appointed and he filed objections, inter alia, (a) to the investment power of the trustee and (b) to the legality of certain investments which appeared in this Account and (c) to the apportionment of stock dividends, corporate distributions and gains from sale of certain securities. He also contended that the Orphans' Court should review several of its rulings which were made in adjudicating the fourth Account, in the light of three recent decisions of this Court, viz., Kelsey's Estate, 393 Pa. 513, 143 A.2d 42 (1958); Jeffries' Estate, 393 Pa. 523, 143 A.2d 391; Saunders' Estate, 393 Pa. 527, 143 A.2d 367. From the Decree which (a) reaffirmed the Orphans' Court's rulings in the fourth accounting, and (b) dismissed the objections and exceptions of the Guardian as set forth in the Ajudication as amended, this appeal was taken by the Guardian.

The investment powers of the trustee are contained in Item Fourth of the Will, in which decedent devised and bequeathed the residue of his estate (except his New York real estate),

'To Girard Trust Company and its successors IN TRUST, nevertheless, for the following uses and purposes;

'To retain existing investments or to sell the same and make reinvestments as hereinafter provided; ^[3] to invest and reinvest in mortgages which are a first lien on real estate in Pennsylvania and New York, in the first mortgage bonds of dividend paying railroads, in car trust or equipment trust certificates of dividend paying railroads, in United States loans, in the loans of the State of Pennsylvania and the State of New York, in loans of municipalities, township, school districts and similar public divisions in the State of Pennsylvania, and in ground rents in the City of Philadelphia; * * *.'

At the time the Will was drawn in 1913 and also at testator's death in 1919, investment of trust funds in the stock of a private corporation was prohibited by Section 22 of Article III of the Constitution, P.S. The Constitution was amended in 1933 to permit such a statute, but not until 1947 ^[4] did the Legislature permit investment of trust funds in preferred stock of a private corporation (which met certain statutory requirements). The Fiduciaries Investment Act of 1949 ^[5] codified previous statutes and authorized investment in such preferred stock. In 1951, the Legislature amended the Fiduciaries Investment Act and authorized investment in common stock (which met certain statutory requirements). ^[6]

This appeal raises four issues: ^[7]

1. What is the meaning of 'similar public divisions in the State of Pennsylvania'?

2. Were investments in common and preferred stock of private corporations validated for this trust estate by the Fiduciaries Investment Act of 1949, as amended in 1951?

3. Is the Guardian estopped to raise these questions because of the rulings of the Orphans' Court in adjudicating the Trustee's fourth Account in this Estate?

4. With reference to question of apportionment, Is the present audit in this estate an audit 'now pending and henceforth' within the meaning of Catherwood's Trust, 405 Pa. 61, 173 A.2d 86 (1961)?

We shall first state certain principles which will guide us in our determination of the controversial issues raised herein. In considering the application of the Fiduciaries Investment Act of 1949, this Court said, in Saunders' Estate, 393 Pa. 527, 529, 143 A.2d 367, 368:

'The testator's intention is the pole star in the construction of every will and that intention must be ascertained from the language and scheme of his will; it is not what the Court thinks he might or would or should have said in the existing circumstances, or even what the Court thinks he meant to say, but what is the meaning of his words. In re Kelsey's Estate, Pa. , 143 A.2d 42; In re Britt's Estate, 369 Pa. 450, 87 A.2d 243; In re Sowers' Estate, 383 Pa. 566, 119 A.2d 60; In re Cannistra's Estate, 384 Pa. 605, 121 A.2d 157.'

In Kelsey's Estate, we said (393 Pa. page 519, 143 A.2d page 45):

'Courts cannot, even when aided by hindsight and the ingenuity of counsel, rewrite a settlor's deed or a testator's will, or distort or torture his language or the language of a statute relating thereto, in order to attain what we believe is beneficial and wise, or even what we believe settlor would or should have provided if he had possessed a knowledge of all presently existing circumstances.' See to the same effect, Althouse Estate, 404 Pa. 412, 416, 172 A.2d 146.

'Similar Public Divisions'

1. The trustee has invested part of the trust corpus in Pennsylvania Turnpike bonds and various Authority bonds. It is clear that these investments are in some respects similar and in some respects dissimilar to the investments enumerated by testator. First of all, 'similar public divisions' means public divisions similar to the public divisions enumerated by testator, viz., bonds of 'municipalities, townships and school districts'. We think it is clear that testator meant political subdivisions ^[8] such as those specifically enumerated by the testator.

Testator limited his trustee to what were at that time regarded as exceptionally safe investments, namely, investments in United States loans, in the loans of the State of Pennsylvania and the State of New York, in first (lien) mortgages on real estate in Pennsylvania and New York, in first mortgage bonds not of all railroads, but of dividend-paying railroads, and not in any car trust or equipment trust certificates, but in car trust or equipment trust certificates of dividend-paying railroads, and not in any ground rents in Pennsylvania, but in ground rents in the City of Philadelphia, and in loans of municipalities, townships, school districts, and similar public divisions, and even these were restricted to the State of Pennsylvania. Moreover, Testator did not even give his trustee power to invest in what at the time of his will or at the time of his death were legal investments under the law of Pennsylvania; on the contrary he limited his trustee to certain specifically enumerated investments. He did not even authorize his trustee to invest in ground rents in the Commonwealth of Pennsylvania which, at the time of his death, were an authorized legal investment; on the contrary he authorized it to invest only in ground rents in Philadelphia. Although specifically authorizing investments in loans of municipalities, townships and school districts, he did not specifically authorize investments in loans of cities, counties or boroughs which were legal investments for a trustee at the time testator made his will. However, it is reasonable to conclude that it was these political subdivisions with their tax-raising power which he had in...