Rosenblum's Estate, In re

• Decision Date: 20 November 1974
• Citation: 459 Pa. 201,328 A.2d 158
• Parties: In the Matter of the ESTATE of Morris ROSENBLUM, Deceased. PITTSBURGH NATIONAL BANK, Trustee for benefit of Anna R. Reichman, Herman H. Rosenblum and Sarah Lucille Helfer. Appeal of Maurice A. REICHMAN et al.
• Court: Pennsylvania Supreme Court

Page 158

328 A.2d 158

459 Pa. 201

In the Matter of the ESTATE of Morris ROSENBLUM, Deceased.

PITTSBURGH NATIONAL BANK, Trustee for benefit of Anna R.

Reichman, Herman H. Rosenblum and Sarah Lucille Helfer.

Appeal of Maurice A. REICHMAN et al.

Supreme Court of Pennsylvania.

Nov. 20, 1974.

John F. Ploeger, Truel & Ploeger, Pittsburgh, Maurice A. Reichman, New York City, for appellant.

Melvin Schwartz, Cooper, Schwartz, Diamond & Reich, Richard B. Tucker, Jr., Tucker, Arensberg & Ferguson, J. Kent Culley, Pittsburgh, for appellees.

Before JONES, C.J., and EAGEN, O'BRIEN, ROBERTS, POMEROY, NIX and MANDERINO, JJ.

OPINION OF THE COURT

POMEROY, Justice.

These consolidated appeals come to us from decrees of distribution of trust assets following an accounting by the trustee, ¹ and the dismissal of exceptions thereto. Appellants are remaindermen of a series of trusts established by an agreement dated October 9, 1928 between Morris Rosenblum and Fidelity Title and Trust Company, predecessor in interest to Pittsburgh National Bank, appellee. The remaindermen contend that rents from real estate which the trustee treated as an asset of the trusts were erroneously distributed to the life tenants of the trusts. They further allege that they have been denied an adequate opportunity for discovery, and object to the allowance of legal expenses incurred by the trustee as proper charges against the trusts.

I.

The trust agreement of October 9, 1928 established four trusts; one for the benefit of each of the settlor's three children, Herman Rosenblum, Anna R. Reichman and Sarah L. Helfer, and one for the benefit of the settlor's nephew, Morris Goldstein. Each beneficiary was made life tenant of the trust for his or her benefit. The net income from each trust was to be paid to the life tenant during his or her lifetime, and on the death of the life tenant, the corpus was to be distributed free of trust to his or her descendants, per stirpes. Insurance policies on the life of Morris Rosenblum supplied the original corpus of the trusts. The seventeenth paragraph of the trust agreement provides that

'(i)n the event of any increase in the trust fund either by deposit of other policies of insurance or sums of money, or securities, or under the terms of the last will and testament of the Assured, the same shall be held by the Trustee for the benefit of the three children of the Assured, to be held in the following proportions--

Herman H. Rosenblum one-half

Anna R. Reichman one-fourth

Sarah Lucille Helfer one-fourth

and in this proportion any such increase shall be added to and become part of the trust estates hereinbefore set forth for the said children.'

On October 10, 1928, the day following execution of the life insurance trust agreement, Morris Rosenblum executed his will. By the Fourth Paragraph of the will, he left his furrier business to two of his children, Herman and Anna, and his nephew, Morris Goldstein, to 'be held by the Fidelity Title and Trust Company, as trustee, to carry on the said business . . . for a period of not less than twenty (20) years, unless in the meantime the operation of the business shall become unprofitable, in which event it may be terminated at the discretion of my trustee.' The fifth and sixth paragraphs of the will provide as follows:

'FIFTH: I authorize, empower and direct my executor and trustee to mortgage any real estate of which I may die seized in a sum not to exceed Twenty thousand ($20,000.00) Dollars, if in the opinion of my executor and trustee it shall be wise so to do, for the purpose of securing additional capital for the carrying on of my said business, without, however, any liability on the part of the mortgagee to see to the application of the proceeds.

'I further authorize, empower and direct my said executor and trustee to sell any or all of the real estate of which I may die seized, as and when it is deemed to the best interests of my estate so to do, at either public or private sale, the same to be done, however, only with the consent of my son, Herman H. Rosenblum, and my daughter, Anna R. Reichman, with full authority in my said executor and trustee to make, execute and deliver deed or deeds therefor, and without necessity on the part of the purchaser to see to the application of the purchase money; The said real estate and the proceeds of the sale thereof to be added to the principal of a certain trust fund with the Fidelity Title and Trust Company under an agreement dated the ninth day of October, 1928, the same to be held and distributed in accordance with the provisions of said trust agreement.

'SIXTH: All the rest, residue and remainder of my estate, I give, devise and bequeath to the said Fidelity Title and Trust Company, as trustee, the same to be added to the principal of a certain trust fund created under agreement dated the ninth day of October, 1928, referred to in the preceeding paragraph of this will, the same to be held and distributed by the said trustee in accordance with the provisions of said trust agreement.' (Emphasis supplied.)

Morris Rosenblum died on October 12, 1928. The only assets of his probate estate passing to the Fidelity Title and Trust Company (hereinafter 'the trustee') under the fifth and sixth paragraphs of the will were two parcels of real estate, Viz., a one-third interest in a three-car garage, and a two-story store and apartment building ('the Highland Avenue property'). These two properties have been administered as assets of the life insurance trusts for the benefit of Morris Rosenblum's children in accordance with the seventeenth paragraph of the trust agreement, and net rentals from the properties have been distributed as income to the life tenants. ² Advances from principal to the life beneficiaries, as permitted by the provisions of the life insurance trust agreement, and the purchase of a mortgage on the Highland Avenue property absorbed a substantial portion of the liquid assets of the trusts. In 1969, the tenant of the Highland Avenue property broke its lease and subsequently became insolvent. Efforts to locate a new tenant were unsuccessful, and the trustee was obliged to advance its own funds for payment of taxes, insurance, and maintenance of the property. In May, 1971, the trustee notified the beneficiaries that it was unwilling to make further advances to maintain the Highland Avenue property. Shortly thereafter, on July 13, 1971, appellant Maurice Reichman instituted an action for an accounting in the District Court of the United States for the Western District of Pennsylvania, alleging various acts of neglect and malfeasance on the part of the trustee, and seeking to surcharge the trustee for an amount in excess of seven million dollars. ³ The complaint was ultimately dismissed. In the meantime, the trustee filed its accounts for the three trusts for Morris Rosenblum's children in the orphans' court division on September 3, 1971, and, on September 14, 1971, filed its petitions for distribution.

II.

Appellants contend that net rentals from the two properties should have been accumulated for the benefit of appellants, the settlor's grandchildren, instead of being distributed to the life tenants of the trust. They base this contention in part on the theory that the real estate did not pass under the will into the life insurance trusts, but remained in a separate residuary trust established by the sixth paragraph of the will. As we read the will, this theory cannot be reconciled with its plain language. The fifth paragraph of the will empowers the trustee 'to sell any or all of the real estate of which I may die seized, as and when it is deemed to the best interests of my estate so to do . . . the said real estate and the proceeds of the sale thereof to be added to the principal of (the life insurance trusts)'. According to appellants' theory, it is only the proceeds from an exercise of the trustee's discretionary power of sale which pass into the life insurance trusts under this paragraph of the will. But this interpretation renders superfluous the testator's direction that 'said real estate' as well as 'the proceeds of the sale thereof' pour over into the life insurance trusts. As we said in Vandergrift estate, 406 Pa. 14, 16, 177 A.2d 432, 438 (1962), 'a will must be so construed, if possible, as to give effect to every word employed by the testator and a construction which renders any of the words nugatory and futile must be rejected . . .'. See also Chambers Estate, 438 Pa. 22, 263 A.2d 746 (1970); Benedum Estate, 427 Pa. 408, 235 A.2d 129 (1967). The reason for the testator's choice of words is plain. He owned two separate parcels of real estate, and it was natural for him to suppose that his trustee might decide to sell one and not the other. We conclude that the words in the fifth paragraph, 'the said real estate and the proceeds of the sale thereof', refer to 'all of the real estate of which I may die seized'; and that the testator's entire real estate holdings passed under that paragraph to the life insurance trusts.

Moreover, if unsold real estate did not pass to the insurance trusts under the fifth paragraph, it would reach the same destination under the terms of the residuary clause in the sixth paragraph. Appellants argue that this clause created a separate residuary trust of real estate. We cannot agree; it is difficult to imagine how Morris Rosenblum could have expressed more plainly his intention that the entire residue of his estate pour over into the life insurance trusts.

Appellants also contend that the existence of a separate trust of unsold real estate is implied in the testator's authorization in paragraph Fifth of the will to his 'executor and trustee' to mortgage the real estate for the purpose of securing additional capital for the testator's furrier business. It must be conceded that this aspect of Mr. Rosenblum's testamentary scheme might have given rise to some troublesome...