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GROTE TRUST. (09/30/57)

September 30, 1957

GROTE TRUST.


Appeals, Nos. 24, 25 and 26, March T., 1957, from decree of Orphans' Court of Allegheny County, 1954, No. 2598, in re trust estate of Conrad H. Grote et ux. Decree, as modified, affirmed; reargument refused November 8, 1957.

COUNSEL

Frank W. Ittel, with him Joseph I. Marshall, Robbin B. Wolf, Arthur Edwin Uber, Jr., and Reed, Smith, Shaw & McClay, for appellants.

Ella Graubart, with her Dorothy Grote Voss, and Patterson, Crawford, Arensberg & Dunn, for appellees.

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

Author: Bell

[ 390 Pa. Page 264]

OPINION BY MR. JUSTICE BELL

Conrad H. Grote and his wife, August Grote, executed a Trust Indenture on October 29, 1917, in which they conveyed to their sons, Hermann L. Grote, Ludwig I. Grote and Frederick C. Grote, as Trustees, 19 parcels of real estate in Allegheny County, described therein, for the persons and purposes set forth in the Trust Indenture. Conrad H. Grote died April 24, 1929, and his wife, Auguste Grote, died February 4, 1939.

Hermann L. Grote, one of the Trustees and beneficiaries of the Trust, died August 12, 1940, leaving to survive him two children - Esther Augusta Grote Siegert, for whom a guardian was appointed in the early part of 1952, and Meta Christine Grote Uber. Mrs. Uber has a minor child two years of age. Frederick C. Grote, the surviving Trustee and one of the beneficiaries of the Trust, died May 29, 1954, leaving to survive him a child, Dorothy Kathryn Grote Voss. Mrs. Voss has a minor child. Ludwig I. Grote is still living, but resigned as Trustee March 12, 1940. He is an old and childless man.

The Executors of the will of Frederick C. Grote filed on December 21, 1954 an exceptionally sketchy summary which they denominated "First and Final Account of Frederick C. Grote, Surviving Trustee, Under Deed of Trust Dated October 29, 1917". This account purportedly covered principal transactions for 37 years. It debited the Trustees with the 19 parcels of real estate set forth in the original Trust Indenture dated October 29, 1917, and carried for accounting purposes at $1.00 each. It then debited the Trustees with the "sale or other disposition of real estate" of 17 of the original 19 pieces of real estate, giving only the net proceeds of sale of each, which in many instances was for a consideration of $1.00. The account also showed

[ 390 Pa. Page 265]

    total income, receipts and disbursements for January, February, March and April of 1954. The account showed a balance for distribution consisting of two parcels of principal, realty, which at the audit were valued at over $250,000. No account of this Trust Estate had ever been previously filed, and all or nearly all of the records and books pertaining to the administration of the Trust have been lost or destroyed.

The Potter Bank and Trust Company, which was appointed Successor Trustee on June 14, 1954, filed a large number of exceptions to the account, which were joined in by the daughters of Hermann L. Grote not-withstanding the fact that their father would be equally liable with the accountant, their uncle Frederick, for any mismanagement of the Trust up to the time of his death on August 12, 1940, and notwithstanding releases and waivers which they executed and which will be hereinafter referred to. The objections of the exceptants included a demand for a detailed accounting of the Trust assets, receipts, disbursements, sales, mortgage transactions and proceeds of sales of real estate and of personal property from the inception of the Trust in 1917.

The Trustees were given by the Trust Indenture broad powers to sell, lease, mortgage and convey the real estate, and were likewise given broad powers with respect to a reinvestment of the proceeds of sale "in real or personal property, stocks, bonds, mortgages, and other securities as they deem reasonably safe". The Indenture also contained a strict spendthrift trust provision as to both principal and income.

The Grotes were a very close family. Hermann and Frederick Grote were closer and more inseparable than almost any other pair of brothers. Goldie Grote, widow of Hermann Grote and mother of Meta Grote Uber and

[ 390 Pa. Page 266]

Esther Grote Siegert, the individual exceptants, had been the agent for Frederick Grote, the Surviving Trustee, of the (remaining) valuable Swissvale property since 1932 - 8 years prior to Hermann Grote's death. The Trustees' use of part of the income for the improvement of the Swissvale Borough property served to increase its value to its present appraised value of $245,000. No averment of fraud in the management of the Trust property or in the conduct of any of the affairs of the Trust has been made by any one; nor was any demand for an accounting ever made by any beneficiary until shortly before the present account was filed. Since 1940 the two individual exceptants, Meta Christine Grote Uber and Esther Augusta Grote Siegert, who are daughters of Hermann Grote, have been of age and have acquiesced in the management of the Trust by their Uncle Frederick without raising any question or objection. They also signed the agreement of September 28, 1943 and the waivers and releases which will be hereinafter discussed.

Ludwig I. Grote, as Trustee and beneficiary, executed on March 12, 1940 a Power of Appointment which was given him in the 1917 Trust Indenture, and appointed "that part of the Income or the Trust property which I would be entitled to receive if living" to his two brothers Hermann and Frederick, in consideration of the conveyance to Ludwig and his wife of three valuable properties in Florida which are described in said instrument. Simultaneously, Ludwig and his wife executed a "Deed of Release and Quit-Claim and Assignment of Income" which again recited, as consideration therefor, the conveyance to them by Hermann and Frederick Grote of the Florida real estate, and in consideration thereof quit claimed and sold to Hermann

[ 390 Pa. Page 267]

    and Frederick all of Ludwig's net income to which he would be entitled under the 1917 Indenture of Trust. Thereafter, viz. after March 12, 1949, one-half of the income of the spendthrift trust was paid to Frederick C. Grote until his death on May 29, 1954, and the other one-half of the income was paid to Hermann L. Grote until his death on August 12, 1940, and thereafter in equal shares to his daughters, Meta Christine Grote Uber and Esther Augusta Grote Siegert.

On September 28, 1943, Frederick C. Grote, individually and as surviving trustee, and his daughter, Dorothy K. Grote Voss [denominated remainderman], Meta Christine Grote (now Uber) [denominated remainderman] and Esther Augusta Grote (now Siegert) [denominated remainderman], (daughters of Hermann) and Goldie G. Grote, Executrix under the will of Hermann L. Grote, entered into a lengthy family agreement under seal, in which they pertinently agreed, inter alia, as follows:

"1. To waive*fn1 any and all duty or liability of the surviving Trustee, Frederick C. Grote, the resigned Trustee, Ludwig I. Grote, or the deceased Trustee, Hermann L. Grote, or the heirs, executors, administrators, successors or assigns of them or any of them - to account for or to file in the proper tribunal any account of the ...


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