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WILLIAMSON ESTATE (06/27/51)

June 27, 1951

WILLIAMSON ESTATE


Appeals, Nos. 235 and 253, Jan. T., 1950, from decrees of Orphans' Court of Philadelphia County. Oct. T., 1930, No. 3498, in Estate of Ella Williamson, Deceased. Decrees affirmed; reargument refused September 26, 1951.

COUNSEL

Thomas B. K. Ringe, with him John R. McConnell and Morgan, Lewis & Bockius, for appellant.

W. Albert Sanders, for appellee.

Morris Duane, with him Maurice Heckscher and Duane, Morris & Heckscher, for T. Williams Roberts, Trustee, amicus curiae.

Before Drew, C.j., Stern, Stearne, Jones, Bell and Chidsey, JJ.

Author: Stearne

[ 368 Pa. Page 344]

OPINION BY MR. JUSTICE ALLEN M. STEARNE

A corporate fiduciary presents a "test case" seeking to induce this Court to overrule a long line of cases extending for over a century and a half which established principles of fiduciary compensation. The appeals are an effort to induce a general revision of the compensation of trustees. It constitutes an almost perennial attempt by corporate fiduciaries to secure increased compensation and also interim commissions on principal.

The Philadelphia Orphans' Court decided that it was bound by the many decisions of this Court. It declined to award additional compensation requested by appellant, although expressing the opinion that the request appeared to them to be just and reasonable. It is urged by the able counsel for the trustee -- but

[ 368 Pa. Page 345]

    vigorously opposed by the learned guardian and trustee ad litem -- that the cases establishing these principles should now be overruled. It is asserted that corporate trustees now lose money in trust administration because of added duties and increased costs, which necessitates the "stream lining" of fiduciaries' commissions. It is argued that the requested compensation be applied retroactively.

Ella Williamson, testatrix, died February 15, 1930. Her will, dated January 5, 1925, probated by the Register in Philadelphia County, provided (tenth item) that after payment of various legacies a trust of $40,000 be erected with appellant as trustee, whereunder Margaretta C. Anthony was to receive the income for life and upon her decease the principal of the fund was to fall in and become part of the residuary estate. Under the twelfth item of the will the residue was directed to be held in trust by the appellant-trustee to pay the income to named great nieces and great nephews for their lives and upon the death of each to pay the principal to his or her descendants absolutely. The appellant and testatrix's nephew, Edward C. Dale, were named, and thereafter qualified, as executors of the will. The original record discloses that the first account of the executors was filed on October 30, 1930 and audited by President Judge LAMORELLE who filed his adjudication December 13, 1930. In the account a credit was taken by the executors of $5961.44 "commissions 3% on $198,714.69 principal" and $215.75 "commissions 5% on $4314.92 Income". By the schedule of distribution, approved June 13, 1932, $40,000 (in scheduled securities) was assigned to appellant as trustee for Margaretta C. Anthony (the trust herein accounted for) and to appellant as trustee of the residuary estate of $62,486.93 composed as therein indicated.

Appellant, as trustee for the Margaretta C. Anthony trust, filed its account stating in its petition for distribution

[ 368 Pa. Page 346]

    that the reason for such filing "is the termination of... the trust" (being the decease of the life tenant); because no account has been filed since its inception and "to permit the accountant an opportunity to present a request for compensation from the principal of the trust".

The account was audited by Judge KLEIN who said in his adjudication: "These proceedings have been undertaken by the accountant as in the nature of a test case, in an endeavor to change the long established rule in Pennsylvania which prohibits a trustee from charging commissions against principal, in the absence of the performance of extraordinary services, until the termination of the trust or the termination of the trustee's connection with the estate."

It is also stated in the adjudication: "By note attached to page 2 of the supplemental account annexed hereto the accountant requested additional credit for an item stated to be 'not yet expended' and designated 'compensation to Fidelity-Philadelphia Trust Company' in the sum of $3,000. It appears from the printed brief of counsel for the accountant, page 8, that the said sum of $3,000 'represents the aggregate of requests for compensation (a) with respect to services rendered in the Anthony Trust in the amount of $1,200 (as to which no credit was taken in the Anthony Account, reservation of the accountant's right to claim same having been recognized in the adjudication of the present Auditing Judge of even date herewith in that trust) and (b) with respect to services rendered to the Residuary Trust, less the principal of the Anthony Trust, in the amount of $1,800' (parenthesis supplied). The statement of proposed distribution requests the Auditing Judge to approve the trustee's request for such compensation."

Also: "In addition to the commissions claimed by the accountant at this audit, as recited above, the

[ 368 Pa. Page 347]

    trustee's position, as stated by Mr. Ringe, its counsel, is that 'in order for it to be adequately compensated for the performance of its duties in the future, it should be entitled to take as compensation in this estate one-half of one per cent of the principal of the trust, part to be paid from principal and part to be paid from income at the end of each year. That is to say, the trustee contends that for future services it is entitled to compensation on a "pay-as-you-go" basis.'"

The learned auditing judge expressed his opinion that while the trustee's request for additional compensation was "entirely reasonable" he declined to award it because of the many decisions of this Court to the contrary. He said: "As a court of first instance, we have no right to ignore the decision of the Supreme Court on an issue which has been so squarely decided. Until such decisions have been overruled by the Supreme Court itself, or the law changed by the Legislature, it is the law of this Commonwealth, and must be respected and followed: (citing cases)."

Upon exceptions, the court in banc refused to reverse the auditing judge's ruling that the established rule in Pennsylvania prohibits a trustee from charging commissions against principal in the absence of the performance of extraordinary services until the termination of the trust or the termination of the trustee's connection with the estate. Judge HUNTER, speaking for the court, said: "The Judges of this Court are of the opinion that the rule forbidding interim compensation should be abrogated, but agree with the Auditing Judge that until it has been overruled by the Supreme Court itself, or the law changed by the Legislature, it is the law of this Commonwealth, and must be respected ...


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