Appeal from decree of Orphans' Court of Erie County, Sept. T., 1967, No. 668, in re William J. Johnson Trust.
Eugene J. Brew, Jr., with him Dale & Brew, for appellant.
William W. Knox, with him Knox, Graham, Pearson & McLaughlin, for appellee.
Bell, C. J., Jones, Cohen, Eagen and Pomeroy, JJ. Opinion by Mr. Chief Justice Bell. Mr. Justice O'Brien and Mr. Justice Roberts took no part in the consideration or decision of this case.
This is an appeal from a decree of distribution entered by the Orphans' Court in the audit of a trustees' partial account awarding income and principal to the Hamot Hospital Association (appellee) instead of to the Zem Zem Hospital (appellant sur nom. Shriners' Hospital for Crippled Children of Pennsylvania).
William J. Johnson died testate November 14, 1961, leaving a will dated September 16, 1957, and a codicil dated March 21, 1958, and a second codicil dated June 30, 1960, all of which were duly admitted to probate. Mr. Johnson's will benefited many established charitable organizations located in Erie County, Pennsylvania. After making specific bequests (including ten gifts to charitable organizations of $10,000 each), his will directed that the residue of his estate be retained in trust and that specified sums or percentages be paid monthly to certain named individual beneficiaries. In Paragraph Seventh of his will, he directed that any income not distributed to the individual trust beneficiaries be paid as follows: " Fifty per cent (50%) thereof to Zem Zem Hospital, Erie, Pa. Twenty per
cent (20%) thereof to St. Vincent's Hospital, Erie, Pa. Thirty per cent (30%) thereof to Hamot Hospital, Erie, Pa. of which I am now a Corporator."*fn1
Johnson further provided in his will that upon the lapse of five years from the death of his last surviving individual income beneficiary, the trust would terminate and the assets thereof would be distributed to the three above-named hospitals in the same proportions, i.e., 50 per cent to Zem Zem Hospital, 30 per cent to Hamot Hospital, and 20 per cent to St. Vincent's Hospital.
However, Johnson executed a codicil dated March 21, 1958, which raises the basic question here involved. In this codicil, the testator provided that the bequest of income and principal to Zem Zem Hospital would be revoked and the bequest to Hamot Hospital increased by the same amount if at any time prior to the termination of the trusts "the operation and management of Zem Zem Hospital shall not be under the direction and control of Trustees who are elected, appointed or otherwise chosen in a manner substantially as at the present time, by the general membership of Zem Zem Temple, A.A.O.N.M.S., with headquarters at Erie, Pennsylvania."
On June 30, 1960, the testator executed a second codicil, which deleted the name of one of the income beneficiaries who had died and made various changes required as a result of the beneficiary's death. This codicil stated: "I hereby ratify and affirm all other provisions of my said last will and testament dated September 16, 1957." No reference was made in this codicil to the codicil of March 21, 1958.
On September 11, 1967, the testamentary trustees filed a first and partial account showing total assets of $846,163.21. The audit statement filed by the trustees stated (1) that since two of the individual income
beneficiaries had died, substantial amounts of income had not been distributed, and (2) that certain important organizational changes had occurred in or with respect to the Zem Zem Hospital. The trustees asked for a determination of whether the trust income which was payable under the will to Zem Zem Hospital should be paid to Zem Zem Hospital and Hamot Hospital, or all to Hamot Hospital.
The Orphans' Court, after a hearing, concluded that the operation and management of Zem Zem Hospital was no longer under the direction and control of trustees who were elected, appointed or otherwise chosen in a manner substantially as of the date of the testator's first codicil (March 21, 1958). Thereupon, the Orphans' Court entered a decree directing distribution (a) of the entire 80 per cent of the trust income not earmarked for individual beneficiaries to the Hamot Hospital and the remaining 20 per cent to St. Vincent's Hospital, and (b) ...