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REZNOR ESTATE (10/13/65)

decided: October 13, 1965.

REZNOR ESTATE


Appeal from decree of Orphans' Court of Mercer County, Sept. T., 1964, No. 1, in the matter of estate of Claud L. Reznor, deceased.

COUNSEL

Nathan Routman, with him Routman, Moore & Goldstone, for appellant.

Lee C. McCandless, with him Thomas A. Sampson, Jr., for appellees.

James A. Stranahan, III, for appellee.

Bell, C. J., Musmanno, Jones, Cohen, Eagen, O'Brien and Roberts, JJ. Opinion by Mr. Justice Eagen. Mr. Chief Justice Bell dissents.

Author: Eagen

[ 419 Pa. Page 190]

This is an appeal from the decree of the Orphans' Court of Mercer County, dismissing exceptions to the final account of David R. Webster (trustee), Trustee of the Estate of Claud L. Reznor (testator), filed by Dorothy Reznor Pryts (Pryts), Executrix of the Estate of Luella L. Reznor, and directing distribution according to the proposed schedule.

Claud L. Reznor died testate on August 6, 1918, and by his will bequeathed 16 shares of stock in the Reznor Manufacturing Company (Company), then a closely-held family corporation, in trust, providing that "the dividends from the same shall by the said Trustee be paid to Luella Reznor and at her death shall be by said Trustee divided equally between my three children,

[ 419 Pa. Page 191]

George Reznor, Fred Reznor, and Dorothy Reznor or their heirs."

The named trustee died on August 7, 1918, and testator's brother qualified and served as trustee until his death on July 2, 1956. Thereafter, the present trustee was appointed and it is his account, the first ever filed in this estate, which is the subject of this appeal.

Luella L. Reznor died testate on March 22, 1964, and Pryts was appointed her Executrix. Pryts and the heirs of Fred Reznor, deceased, are the sole (for these purposes) legatees of the estate of Luella, who ignored in her will the heirs of George Reznor, also deceased. Pryts is also one of the children-remaindermen named in testator's will, being the sole survivor thereof.

After testator's death, several things happened to the capital structure of the Company. In 1922, the stock split 8 for 1, giving the trustee 144 shares. In 1928, a 60% stock dividend of newly issued 7% cumulative preferred shares was declared and issued, giving the trustee 144 shares of common and 86 shares of new preferred. In 1938, pursuant to reorganization, the 144 shares of common were called and in return therefor the trustee received 16 shares of new common (no par), and in return for the 86 shares of 7% preferred, he received 86 shares of the new common, giving him a total of 102 shares of new common. In 1950, another split of 9 for 1 gave the trustee an additional 918 shares or a total of 1020 shares of the new common. Thereafter, in 1961, the Company merged with Bell & Gossett Company, and the trustee received 18,615 shares of Bell & Gossett on an 18 1/2 for 1 basis. Then in 1963, Bell & Gossett Company merged with International Telephone and Telegraph (ITT), and in return for his 18,615 shares of Bell & Gossett, trustee received 6,236 shares of ITT common and 1303 shares of ITT preferred (plus a small amount of cash to cover fractional shares not issued). It is these shares of ITT

[ 419 Pa. Page 192]

(both common and preferred) which are the subject of this disputed distribution.

The distribution of this trust corpus proposed by the trustee, and finally confirmed by the court below, is to divide the ITT stock (as well as cash dividends received thereupon after Luella's death) into three equal parts, and to give one equal part each to Pryts, the "Estate" of George Reznor, and the "Estate" of Fred Reznor.*fn1 Pryts, as appellant, contends that certain of the events occurring during the aforementioned changes in capital structure of the Company should have resulted in apportionment between corpus and income, and that the trustee, at those times, should have turned over certain of the shares to Luella as income. The result of sustaining this contention would be that Pryts and the heirs of Fred Reznor, being the sole legatees of ...


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