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BROWN ESTATE. (07/06/62)

July 6, 1962

IN RE BROWN ESTATE.


Appeal, No. 133, Jan. T., 1962, from decree of Orphans' Court of Delaware County, No. 30 of 1940, in re estate of John A. Brown, Jr., deceased. Decree reversed.

COUNSEL

George E. Kearns, Jr., for appellant.

F. Hastings Griffin, Jr., with him Edward R. Carpenter, Robert B. Greer, Charles Myers, and Dechert, Price & Rhoads, for trustee, appellee.

Mercer D. Tate, with him William H. Lathrop, and Montgomery, McCracken, Walker & Rhoads, for appellee.

William White, Jr., with him Martin A. Heckscher, and Duane, Morris & Heckscher, for income beneficiaries, under Rule 65.

Paul Maloney, Peter Hearn, Richard L. Freeman, and Pepper, Hamilton & Scheetz, for life tenant, under Rule 65.

Before Bell, C.j., Musmanno, Jones, Cohen, Eagen and O'brien, JJ.

Author: Bell

[ 408 Pa. Page 217]

OPINION BY MR. CHIEF JUSTICE BELL

Several perplexing and very important questions are raised by this appeal. The appeal was taken by the Guardian and Trustee and litem,*fn1 appointed to represent minor and unborn contingent remaindermen, from the Decree of the Orphans' Court of Delaware County which dismissed certain exceptions filed by the Guardian to the Fifth account of the trustee of this estate.

Decedent died July 17, 1919, leaving a last Will dated April 14, 1913, and a Codicil thereto dated February 10, 1919. By his will, decedent devised and bequeathed his entire residuary estate, except for his New York real estate, to his Trustee, IN TRUST, to pay an annuity to his wife for her life, with provisions for the payment of income for many lives and in varying proportions. It will suffice to say that the testator provided at great length and in tremendous detail as to the distribution of both income and principal. Over the years part of the trust principal has been distributed; part of the trust still continues for the benefit of certain grandnephews and grandnieces. No question is raised as to the identity of the beneficiaries or the persons ultimately entitled to the corpus.

On July 2, 1952, the trustee filed its Fourth account. On April 8, 1953, the Orphans' Court of Delaware County handed down an adjudication and memorandum opinion holding that the trustee "was duly authorized

[ 408 Pa. Page 218]

    by the legislature and not prohibited by the testator in investing funds of this trust estate in common stocks [and Authority bonds] meeting the requirements of the statute."*fn2 No appeal was taken from this adjudication.

The auditing Judge stated in his adjudication sur the present (fifth) account: "The reason or purpose of the filing of the present Accounting is the desire of the trustee [a] to secure judicial determination of the extent of the investment powers of the trustee and [b] to obtain Court approval of the transfer of certain items from principal to income by reason of allocation of proportionate share of proceeds of certain apportionable events."

When the present (fifth) Account was filed on April 9, 1959, a different Guardian and Trustee ad litem was appointed and he filed objections, inter alia, (a) to the investment power of the trustee and (b) to the legality of certain investments which appeared in this Account and (c) to the apportionment of stock dividends, corporate distributions and gains from sale of certain securities. He also contended that the Orphans' Court should review several of its rulings which were made in adjudicating the fourth Account, in the light of three recent decisions of this Court, viz., Kelsey Estate, 393 Pa. 513, 143 A.2d 42 (1958); Jeffries Estate, 393 Pa. 523, 143 A.2d 391; Saunders Estate, 393 Pa. 527, 143 A.2d 367. From the Decree which (a) reaffirmed the Orphans' Court's rulings in the fourth accounting, and (b) dismissed the objections and exceptions of the Guardian as set forth in the Adjudication, as amended, this appeal was taken by the Guardian.

The investment powers of the trustee are contained in Item Fourth of the Will, in which decedent devised

[ 408 Pa. Page 219]

    and bequeathed the residue of his estate (except his New York real estate),

"To Girard Trust Company and its successors IN TRUST, nevertheless, for the following uses and purposes: To retain existing investments or to sell the same and make reinvestments as hereinafter provided;*fn3 to invest and reinvest in mortgages which are a first lien on real estate in Pennsylvania and New York, in the first mortgage bonds of dividend paying railroads, in car trust or equipment trust certificates of dividend paying railroads, in United States loans, in the loans of the State of Pennsylvania and the State of New York, in loans of municipalities, township, school districts and similar public divisions in the State of Pennsylvania, and in ground rents in the City of Philadelphia;...."

At the time the Will was drawn in 1913 and also at testator's death in 1919, investment of trust funds in the stock of a private corporation was prohibited by Section 22 of Article III of the Constitution. The Constitution was amended in 1933 to permit such a statute, but not until 1947*fn4 did the Legislature permit investment of trust funds in preferred stock of a private corporation (which met certain statutory requirements). The Fiduciaries Investment Act of 1949*fn5 codified previous statutes and authorized investment in such preferred stock. In 1951, the Legislature amended the Fiduciaries Investment Act and authorized investment in common stock (which met certain statutory requirements).*fn6

This appeal raises four issues:*fn7

[ 408 Pa. Page 2201]

. What is the meaning of "similar public divisions in the State of Pennsylvania"?

2. Were investments in common and preferred stock of private corporations validated for this trust estate by the Fiduciaries Investment Act of 1949, as amended in 1951?

3. Is the Guardian estopped to raise these questions because of the rulings of the Orphans' Court in adjudicating the Trustee's fourth Account in this Estate?

4. With reference to questions of apportionment, Is the present audit in this estate an audit "now pending and henceforth" within the meaning of Catherwood Trust, 405 Pa. 61, 173 A.2d 86 (1961)?

We shall first state certain principles which will guide us in our determination of the controversial issues raised herein. In considering the application of the Fiduciaries Investment Act of 1949, this Court said, in Saunders Estate, 393 Pa. 527, 529: "The testator's intention is the pole star in the construction of every will and that intention must be ascertained from the language and scheme of his will; it is not what the Court thinks he might or would or should have said in the existing circumstances, or even what the Court thinks he meant to say, but what is the meaning of his words. Kelsey ...


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