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FLAGG ESTATE (05/22/50)

May 22, 1950

FLAGG ESTATE


Appeals, Nos. 54 and 55, Jan. T., 1950, from decree of Orphans' Court of Delaware County, 1935, No. 101, in Estate of Stanley G. Flagg, Deceased. Decree reversed; reargument refused June 26, 1950.

COUNSEL

Robert T. McCracken and Maurice Bower Saul, with them J. H. Ward Hinkson and J. Rech Guckes, for appellants.

Clarence E. Hall and Charles P. Grimes, with them Edwin E. Lippincott, 2nd, William Alexander Hamilton, James Conwell Welsh and Hall, Hamilton, Wainwright & Welsh, for appellees.

Before Maxey, C.j., Drew, Linn, Stern, Stearne and Jones, JJ.

Author: Linn

[ 365 Pa. Page 83]

OPINION BY MR. JUSTICE LINN

The decree set aside redemptions of preferred stock, part of the trust estate, on the ground that the accounting trustees were also in control of the redeeming corporation

[ 365 Pa. Page 84]

    and that the existence of this conflict of interest of the trustees, on the one had, and of themselves, in charge of the corporation, violated the absolute phase of the self-dealing rule and destroyed the effect on the trust estate of the redemption.

Against this contention the appellants, trustees, contend that, in providing distribution of his property, the testator was competent to modify the general effect of the self-dealing rule, that he did so, and that their actions were in accord with his testamentary provisions.

It may be stated at the outset that the uncontradicted evidence is that there is no fraud and that the trustees and the corporation acted in good faith in making the redemptions.

The will is dated June 18, 1930, the codicil December 8, 1933. Testator died*fn1 March 14, 1934. He left surviving two children, a son, named in the will as S. Griswold Flagg, 3d, and a daughter, Marie W. F. Geyelin. In various paragraphs he refers to the children of his son S. Griswold Flagg, 3d. Testator's daughter, Marie, has two children, Elizabeth Flagg Jennings and Alice Rawle Wagg, both also having children. Apart from his residence and contents, testator's principal asset was his holding in Stanley G. Flagg and Company, Inc., a corporation created by him in 1922 under the law of Pennsylvania. It was engaged in manufacturing fittings and other products for the plumbing trade and represented what may be described as a family business established by the testator's ancestors many years ago and which, when ...


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