Appeals, Nos. 188 and 190, Jan. T., 1961, from decree of Court of Common Pleas No. 4 of Philadelphia County, Sept. T., 1958, No. 3003, in equity, in case of Charles Zagrans, trustee under deed of trust of Morris T. Goodstein v. Fannie B. Cohn, executrix of estate of Bernard R. Cohn, et al. Decree affirmed.
Abraham J. Levinson and Judah Zelitch, with them James Iannucci, for appellants.
Sylvan M. Cohen, with him Nathan B. Feinstein, and Cohen, Shapiro and Cohen, for appellee.
Before Jones, C.j., Bell, Jones, Cohen, Bok and Eagen, JJ.
OPINION BY MR. CHIEF JUSTICE JONES.
These appeals are from a final decree adjudging the defendants jointly and severally liable to the plaintiff Goodstein trust for the use made by Bernard R. Cohn, trustee, of funds of the trust estate for his purchase of property in his own name. The executrix of Cohn's estate
(which, as a party defendant, is subject to the liability imposed by the decree) has not appealed. The appellants are the defendants Baumgardners, the sellers of the property to Cohn, and defendants Brener and Kieserman, who financed Cohn's purchase of the property to the extent of his pecuniary needs in excess of the trust funds which he used for two partial payments on account of the purchase price.
As recognized in Freas's Estate, 231 Pa. 256, 258-259, 79 Atl. 513 (1911), "For more than half a century this court has invariably held that where a trustee takes title to trust property in his own name as an individual, the cestui que trust has the option to accept the investment or require the trustee to account for the purchase money with interest." Later, in Yost's Estate, 316 Pa. 463, 467-468, 175 Atl. 383 (1934), it was said to be "well settled that where a trustee invests trust money in property which he takes in his own name as an individual the beneficiary has the option to accept the investment or require the trustee to account for the money so invested, with interest [citing cases]... The trustee should not be permitted so to make an investment that he can call his own today, if good, and tomorrow, if bad, ascribe it to the trust, or shift it from one trust to another, or leave it subject to attack by creditors as his individual property. Only by giving the beneficiary a right to make the trustee account for funds thus invested can a practice so fraught with danger be effectually prevented." See also, Quest's Estate, 324 Pa. 230, 233, 188 Atl. 137 (1936).
The chancellor's material findings are amply supported by the evidence and were confirmed by the court en banc on exceptions thereto. They clearly establish that Cohn used funds of the Goodstein trust, whereof he was the fiduciary, in connection with his purchase from the Baumgardners, in his own name, of the taproom operated by the Wallace Bar Corporation, all of
whose stock was owned by the Baumgardners. At the time of the execution of the agreement of purchase between Cohn and the Baumgardners for his purchase of all of the outstanding stock of the Wallace Bar Corporation for a price of $29,000, Cohn gave the Baumgardners a check for $2,900 which, according to the terms of the agreement, was to be paid upon the signing thereof. This check in the amount of $2#900, which the Baumgardners accepted, was signed by "Bernard R. Cohn, Trustee". It was drawn on the Broad Street Trust Company, where it was paid from funds of the Goodstein trust. At the time of the settlement under the agreement of purchase, a certificate representing all of the outstanding stock of the Wallace Bar Corporation was issued to "Bernard R. Cohn" in his individual capacity. At this meeting Brener and Kieserman presented their check in the amount of $17,000 (the extent of their financing of Cohn's purchase) to the Baumgardners, who were in debt to Brener and Kieserman in respect of the same property. This check was immediately endorsed by the Baumgardners and returned to Brener and ...