In re Kelsey's Estate

• Decision Date: 30 June 1958
• Parties: In re ESTATE of A. Warren KELSEY, Settlor, Under Inter Vivos Deed dated 16 July, 1914. Appeal of lrving H. KIEFF, Guardian and Trustee ad litem.
• Court: Pennsylvania Supreme Court

143 A.2d 42

393 Pa. 513

In re ESTATE of A. Warren KELSEY, Settlor, Under Inter Vivos Deed dated 16 July, 1914. Appeal of lrving H. KIEFF, Guardian and Trustee ad litem.

Supreme Court of Pennsylvania.

June 30, 1958.

Irving N. Kieff, Philadelphia, for appellant.

W LeRoy McKinley, Walter Y. Anthony, Philadelphia, for appellee.

Before BELL, MUSMANNO, ARNOLD, BENJAMIN R. JONES and COHEN JJ.

BELL, Justice.

The question involved is narrow: Can the inter vivos trustee invest in common stocks?

A. Warren Kelsey made a Deed of Trust on July 16, 1914 in which he assigned certain enumerated bonds, having an approximate value of $300,000, and $100,000 in cash to the Germantown Trust Company, Trustee, in trust for certain persons and purposes therein set forth.

Trustee filed a partial account, denominated Sixth Account, on November 30 1955. The account showed an investment on October 25, 1955 in 20 shares of the common stock of Philadelphia Electric Company and the sale of those shares later on the same day, with a resultant loss of $34.58. The guardian ad litem and trustee ad litem demanded that the trustee be surcharged for this loss because the investment was unauthorized by the will. The Orphans' Court held by a majority of 3 to 2 that the restriction in the Deed of Trust was not an 'express restriction' against investments which were authorized by statute. From the final decree the guardian and trustee ad litem took this appeal.

In re Gillingham's Estate, 353 Pa. 493, at page 495, 46 A.2d 269, at page 270, the Court said: 'From the early history of the Commonwealth this Court has consistently held that in the absence of authority granted by the instrument creating the trust, or by the legislature, fiduciaries are not permitted to invest the trust funds in stocks or bonds of private corporations: [citing cases].'

The Legislature authorized trustees and other fiduciaries to invest in preferred stocks in and by the Act of May 29, 1949, P.L. 1828, § 9, 20 P.S. § 821.9, and to invest in common stocks in and by the Act of August 24, 1951, P.L. 1410, and the Act of June 19, 1953, P.L. 284, 20 P.S. § 821.9, each of which amended the 'Fiduciaries Investment Act of 1949', supra. Section 9 of the amendments of 1951 and 1953 authorized a trustee (or other fiduciary)--unless restricted by the testator or settlor (Section 18 infra)--to invest in common stocks which met certain specified qualifications or standards. The stock of the Philadelphia Electric Company met the tests and qualifications required by the said Acts and was a legal investment within the purview of said Acts.

The trustee's powers of investment were contained in the Eighth paragraph of Kelsey's Deed of Trust, which, after authorizing the sale and conveyance of personalty and real estate, provided with respect to the proceeds thereof as follows: 'Upon any such sales being made, the Trustee is hereby authorized * * * to invest * * * the proceeds in bonds, mortgages and such other securities as to it shall seem proper * * * but except to this extent, the power of investment of said Trustee shall not in any event ^[1] include the right to invest in stocks; And Provided However, the said Trustee shall not invest in any steam or electric railroad or traction bonds or bonds of the cities of New York or Boston, but nothing in this Deed shall be considered to prohibit said Trustee from investing in the bonds of water companies or coal companies: And Provided Further, that the said Trustee shall invest the cash transferred to it by this Deed of Trust in first mortgages on improved real estate in the State of Pennsylvania, and as far as possible shall keep approximately Twenty- five per cent (25%) of the principal of the said trust estate invested in such mortgages.'

Section 18 of the Fiduciaries Investment Act of 1949, 20 P.S. § 821.18, provides:

'The testator or settlor in the instrument establishing the trust may prescribe the powers, duties and liabilities of the fiduciary regarding the investment or non investment of principal and income and the acquisition by purchase or otherwise, retention, and disposition, by sale or otherwise, of any property which, at any time or by reason of any circumstances, shall come into his control; and whenever any such provision shall conflict with this act, such provision shall control notwithstanding this act. ^[1] In the absence, however, of any express restriction to the contrary in the trust instrument, the fiduciary may invest in any investment authorized by this act.'

We approach the solution of this problem in the light of a host of authorities which proclaim:

'No rule regarding wills is more settled than the great General Rule that the testator's intent, if it is not unlawful, must prevail! This is the reason why so many cases continually proclaim that the pole star in the construction of every will is the testator's intent. Moreover, 'The testator's intention must be ascertained from the language and scheme of his will: 'it is not what the court thinks he might or would 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 Britt's Estate, 369 Pa. 450 , 87 A.2d 243, 244'; In re Sowers' Estate, 383 Pa. 566, 119 A.2d 60, 62': In re Cannistra's Estate, 384 Pa. 605, 607, 121 A.2d 157, 158.

There are no Appellate Court decisions construing § 18 of the Fiduciaries Investment Act. The lower Court in its majority opinion held that the trustee could invest in common stocks because the Deed did not contain 'an express restriction to the contrary.' Section 18 must be given a reasonable construction, considering the entire section of the Act in the light of the principles of law hereinabove set forth.

We shall assume, without deciding, that the Legislature could enact that a testator's or settlor's powers of investment may be validly and constitutionally restricted or changed or abolished, with respect to wills and trusts theretofore existing, and shall decide this case on the broad issue upon which it was considered by the lower Court and presented in this Court.

Settlor clearly, unambiguously and...