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BURKE APPEAL (09/27/54)

September 27, 1954

BURKE APPEAL


Appeal, No. 75, Jan. T., 1951, from decree of Court of Common Pleas of Lackawanna County, May T., 1942, in Equity, No. 1, in re Appointment of Substitute Trustee in Lieu of Lee P. Stark, deceased, etc. Decree affirmed.

COUNSEL

John W. Bour, with him Matthew D. Mackie, for appellant.

James G. Colleran, with him Edward A. Reilly and Charles Nealon Bourke, for appellees.

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

Author: Chidsey

[ 378 Pa. Page 618]

OPINION BY MR. JUSTICE CHIDSEY

This is an appeal from the final decree of the Court of Common Pleas of Lackawanna County dismissing exceptions to the restated account*fn1 of Earl V. McLaughlin and William A. Bissell, substituted trustees, under an agreement dated September 19, 1940, executed by and between Walter R. Burke, E. V. McLaughlin and Lee P. Stark.

In 1934 the appellant, Walter R. Burke, was the principal owner of an extensive tract of land in Jefferson Township, Lackawanna County, Pennsylvania, known generally as Moosic Lake. Out of the entire property which consisted of about 3,000 acres, the appellant owned approximately 2,200 acres of land, a small 20 acre lake, one-half of a 90 acre lake (Moosic Lake), an undivided half interest in the other half of Moosic Lake and an undivided half interest in a tract

[ 378 Pa. Page 619]

    of 800 acres. The other one-half interest in Moosic Lake and in the 800 acres was owned by Charles Robertson, Florence Robertson and Anna Robertson.

The First National Bank of Scranton, Pennsylvania held a mortgage of $25,000 against appellant's interest in the property. In 1938 the bank demanded payment but appellant was unable to meet the terms of the mortgage. Threatened by foreclosure proceedings, appellant sought the assistance of Earl V. McLaughlin, an attorney, who had previously performed legal services for the appellant. McLaughlin, with the consent of the appellant, enlisted the aid of Lee P. Stark, also an attorney, and together they contrived a plan designed to rescue appellant from his financial predicament. After discussions and negotiations between the attorneys and the bank, it was agreed that the appellant would be granted a two year extension in which to pay the mortgage. To accomplish this the appellant on September 8, 1938 conveyed to the bank his interest in the Moosic Lake property and other improved real estate owned by him in the Borough of Dunmore, Pennsylvania. The bank, in turn, agreed to sell the properties back to appellant for $25,400; $10,400 to be paid at the end of one year and $15,000 to be paid at the end of two years. Contemporaneously Stark advanced $2,250 to finance the transaction. Under an agreement, dated September 5, 1938, appellant quitclaimed his interest in the properties to Stark and McLaughlin, and assigned to them the contract with the bank to repurchase. In consideration thereof McLaughlin and Stark agreed to manage and control the property and sell lots therefrom in order to pay off the mortgage, attorneys' fees of $10,000 and the sum advanced by Stark at the time of the extension agreement.

During the two year period from September 5, 1938 to September, 1940, the attorneys created a real estate

[ 378 Pa. Page 620]

    development at Moosic Lake, laid out lots, interested realtors and builders and sold some of the property. Stark continued to advance considerable sums of money to the enterprise throughout this period. However, at the end of two years the contract to repurchase was in default, neither appellant individually nor the Moosic Lake project having produced sufficient funds to repurchase the property. By this time the attorneys were owed $12,646.96 by reason of advancements, plus, their fee of $10,000, or a total of $22,646.96.

In contemplation of the anticipated default Stark and McLaughlin negotiated a new agreement and presented it to appellant for his consideration. Before entering into this second agreement appellant consulted independent counsel, Joseph F. Gunster, Esquire, for advice as to its meaning and effect. This agreement, which was not executed until September 19, 1940, ten days after the default, provided, inter alia, that: "... 1. Stark agrees to advance sufficient moneys to secure from The First National Bank of Scranton, Pa., an agreement for the sale of said property and hereditaments, it being understood that Stark will be obligated to the Bank for the amount due said Bank by Burke in September, 1938, as subsequently reduced. 2. Stark shall attempt to sell the property and/or hereditaments, or any part thereof, for such prices, and upon such terms as he deems proper until termination of this agreement. The proceeds of all sales shall be used to obtain a fee simple legal title, free of encumbrances, liens and taxes in the said Stark in all property and hereditaments then unsold, pay all moneys due, or to become due, as a result of advances made, or to be made, pay all counsel fees, as agreed upon, and all expenses of maintenance, operation, advertising and selling. 3. When the proceeds of all sales are sufficient to cover the expenses of obtaining the aforementioned result,

[ 378 Pa. Page 621]

    and in no event otherwise, Stark agrees to hold the property remaining unsold for the following purposes: Stark shall, at his option, retain title of the property as a trustee for himself, McLaughlin and Burke for the purpose of liquidating the same and dividing the net proceeds of such liquidation equally between himself, Burke and McLaughin, or his, or their assigns, or may transfer the property to such other persons or corporation as he may elect to hold the property as trustee in the same manner, that is, liquidate the same and divide the net proceeds between the said Stark, McLaughlin and Burke, or their assigns, or may transfer the property to a corporation that shall be formed for the sole purpose of taking title to said property and liquidating the same. In such case the stock in control of such corporation to be divided euqally between Burke, McLaughline and Stark or their assigns...".

Under this last agreement Stark proceeded to develop the property with McLaughlin as the active manager. On March 2, 1942 Stark died and by order of court, dated March 30, 1942, McLaughlin and William A. Bissell, Stark's law partner, were appointed substituted trustees in lieu of Lee P. Stark.*fn2 By virtue of the order the substituted trustees succeeded to all the rights and duties undertaken by Stark under the ...


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