Pincus' Estate, In re

• Decision Date: 25 May 1954
• Citation: 105 A.2d 82,378 Pa. 102
• Parties: In re PINCUS' ESTATE. Appeals of PINCUS (three cases).
• Court: Pennsylvania Supreme Court

Page 82

105 A.2d 82

378 Pa. 102

In re PINCUS' ESTATE Appeals of PINCUS (three cases).

Supreme Court of Pennsylvania.

May 25, 1954.

William V. Suckle, Arthur Littleton, John R. McConnell, Morgan, Lewis & Bockius, Philadelphia, for appellant.

Maxwell Strawbridge, Norristown, Morris H. Goldman, Morris Wolf, Wolf, Block, Schorr & Solis-Cohen, Philadelphia, for appellee.

Before STERN, C. J., and STEARNE, JONES, BELL, CHIDSEY, MUSMANNO and ARNOLD, JJ.

PER CURIAM.

The decree of the Court below is affirmed on the following excerpts from the Opinion of President Judge Edward Leroy VanRoden which denied a petition for review:

'This proceeding involves a petition filed on behalf of decedent's widow and children praying that the first and final account of the executors of decedent's estate be reopened and reviewed to determine whether the executors should be surcharged for an alleged diminution in the value of certain shares of stock still held as an assert of the estate.

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The court finds the facts to be as follows:

'Decedent died November 23, 1949. By his last will and testament dated July 29, 1948, duly admitted to probate on December 2, 1949, decedent created a full marital deduction trust for the benefit of his widow, Theresa, and placed the rest of his estate in trust for the benefit of his son, Lionel, and his daughter, Shirley. He designated his nephew, Irwin Nat Pincus, and his attorney, Samuel A. Goldberg, Esquire, as esecutors, trustees and guardians, with the further provision that when Lionel should attain his majority, he was to become co-executor and co-trustee. At the time of decedent's death, Lionel was not quite 19 years of age. Accordingly, the other two executors took over the administration of the estate, but from time to time they consulted with Lionel, whose opinion and business acumen they apparently respected.

'At the time of his death, decedent was the owner of 1580 shares of the corporate stock of Pincus Bros., Inc., a men's clothing manufacturing concern. The said corporation had a total of 6328 issued and outstanding shares of stock at the time of decedent's death, of which 2270 shares were held by Jacob Pincus, another brother of decedent (being the father of Irwin Nat Pincus, co-executor and co-trustee). Thus, decedent had approximately a 25% interest in said corporate stock and each of his brothers had approximately 36% interest therein.

'In addition to the manufacturing corporation, the three Pincus brothers owned substantially all the common stock of certain stores which were engaged in the retail selling of men's clothing in various cities. The brothers also owned certain real estate holdings, each having approximately a one-third interest therein. Thus, the three brothers participated in three businesses, to wit, the manufacturing business, the retail business and the real estate business, and each brother (either directly or by means of a family trust which he controlled) had approximately a one-third interest in each of the three businesses, and no brother had a controlling interest in any of the three businesses.

'On June 13, 1946, being more than three years prior to decedent's death and more than two years prior to the execution of his will, the three Pincus brothers entered into a written agreement restricting the sale or transfer of stock of Pincus Bros., Inc., except among the brothers, their immediate families, and trusts for members of their families.

'On October 9, 1950, about ten months after decedent's death, Nathan and Jacob M. Pincus entered into certain written agreements for the exchange of certain shares of the manufacturing corporation and shares of the retail stores companies, as a result of which Nathan acquired the controlling interest in the manufacturing corporation and Jacob M. acquired the controlling interest in the retail stores. The trustees of various trusts for the benefit of members of each of their families likewise participated in the said stock exchanges. Irwin Nat Pincus (being the son of Nathan Pincus as well as executor and trustee under decedent's will, as aforesaid was also a trustee and beneficiary of a trust established by his father, and in such capacity entered into the stock exchange transaction on October 9, 1950. Notice of the agreements was sent to all parties in interest, including the present petitioners.

'On March 14, 1951, the executors filed their first and final account, which was duly audited and confirmed by adjudication dated May 31, 1951. Lionel came of age on March 2, 1952, and in July of that year, he and his mother and sister complained about the stock exchange transaction of October 9, 1950.

'The executors filed their schedule of distribution on February 21, 1953, and on February 26, 1953, the present petition to reopen and review the adjudication was filed.

'The gravamen of the present complaint of the petitioners is that Irwin Nat Pincus violated his duty of loyalty to the beneficiaries of decedent's estate in that he personally benefitted by the stock exchange transactions, both as manager of the business and as beneficiary of the trust created by his father, and at the same time caused a corresponding detriment to the beneficiaries of decedent's estate of which he was executor and trustee in that said beneficiaries were relegated to the position of a minority corporate interest wihout any possibility of combining with any other interest to acquire control of the corporation. In other words, although decedent never and a controlling interest in the manufacturing corporation, he had the theoretical possibility of combining with either one of his brothers and thereby exert control by their combined two-thirds majority vote. Petitioners complain that the transfer of Jacob's interest to Nathan has foreclosed the possibility of the Henry interest participating in any combination capable of exercising control, and that as a consequence thereof, Henry's shares have declined in value to the extent of at least 30%, with the further possibility that the market for such shares has been thereby totally destroyed.

'With respect to the other executor, Samuel A. Goldberg, Esquire, the complaint is that he made no effort to prevent the execution of the stock exchange agreements by or with Nat Pincus but, on the contrary, facilitated it, and that he knew or should have known that these agreements were detrimental to the best interests of the beneficiaries of decedent's estate.

'Our first inquiry must be directed to the scope of permissible review of an adjudication. The Fiduciaries Act of 1949, Act of April 18, 1949, P.L. 512, § 721, 20 P.S. § 320.721, provides that, 'If any party in interest shall, within five years after the final confirmation of any account of a personal representative, file a petition to review any part of the account, or of an auditor's report, or of the adjudication, or of any decree of distribution, setting forth specifically alleged errors therein, the court shall give such relief as equity and justice shall require'.

'It has been well settled, however, by judicial interpretation of Section 48 of the Fiduciaries Act of 1917, replaced by the above quoted Section 721 of the 1949 Act, that 'such review will be granted as of right only (1) where there are errors of law appearing upon the face of the record; (2) where new matter has arisen since the confirmation of the account or decree; (3) where justice and equity require a review and no person will suffer thereby'. In re Osterling's Estate, 1940, 337 Pa. 225, 227-228 certiorari denied [Osterling v. Com. Trust Co.] 1940, 309 U.S. 689, 60 S.Ct. 892 .

'None of these factors is present in the instant case. No error of law appearing on the face of the record has been called to the attention of the court. The only new matter alleged to have arisen since the confirmation of the account in question is the rather belated discovery by the petitioners of the nature and extent of the legal financial consequences of the stock exchange transactions. Each of the petitioners had actual notice of the said stock exchange transactions at least five months prior to the filing of the executors' first and final account. Ordinary diligence on the...