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decided: October 3, 1975.



Cuthbert H. Latta, Morris R. Brooke, Christopher H. Gadsen, Philadelphia, for appellants Thomazine Widdowson Clum and William Work Widdowson, Jr.; Drinker, Biddle & Reath, Philadelphia, of counsel.

Samuel T. Swansen, Richard G. Schneider, Philadelphia, for John B. Stetson, IV, Georgia W. Diefendorf, Phoebe Stetson Stewart and Priscilla Stetson Odiorne; Dechert, Price & Rhoads, Philadelphia, of counsel.

John G. Harkins, Patricia L. Freeland, William Carson Bodine, Philadelphia, for appellee, The Fidelity Bank; Pepper, Hamilton & Scheetz, Philadelphia, of counsel.

Jones, C. J., and Eagen, O'Brien, Roberts, Pomeroy, Nix and Manderino, JJ.

Author: Roberts

[ 463 Pa. Page 68]


John B. Stetson died on February 18, 1906. His will established a trust for the benefit of his wife, his two sons, and their issue. This case requires us to review a decree confirming an interim accounting filed by the Fidelity Bank of Philadelphia, the succeeding and remaining trustee of that trust.


On September 16, 1970, Fidelity filed its third interim accounting in the Orphans' Court Division of the Court of Common Pleas of Montgomery County. Objections to the account were filed by two groups of objectors, all of whom are beneficiaries of the trust and grandchildren of one of the decedent's sons, John B. Stetson, Jr. The objections concerned Fidelity's allegedly imprudent failure to dispose of certain trust assets and its settlement for less than the full amount of a secured obligation held by the trust.

Fidelity's account was audited on November 2, 1970, and July 9, 1971. An evidentiary hearing was held on January 22 and 23, 1973, at which the court heard testimony and received numerous documentary exhibits. On March 7, 1974, the court rendered an adjudication nisi

[ 463 Pa. Page 69]

    confirming the account. On July 11, 1974, the court entered a decree dismissing exceptions to the adjudication filed by the objectors and confirming the account. These appeals ensued.*fn1 We affirm in part, vacate in part, and remand for further proceedings.

A precise statement of the complex factual situation is necessary for a proper understanding of this case.


A substantial portion of the assets of the trust from its creation consisted of the common and preferred stock of the John B. Stetson Co., a manufacturer of hats, of which the decedent was the founder. The decedent's will provided that, while his widow remained alive, the Stetson Co. stock was not to be disposed of by the trustee without her consent.*fn2

For many years the Stetson Co. prospered. However, in the 1960's, fashions changed and men no longer wore hats. By the mid-1960's it was evident that the hat industry in general and the Stetson Co. in particular were declining. The Stetson Co. had ceased earning a profit, the market price and book value of its shares were decreasing, and the ability of the company to continue paying dividends was in jeopardy. In 1966, Fidelity determined that the trust's shares of the Stetson Co. should be sold if a satisfactory price could be obtained.

Major difficulties were encountered in attempting to sell the stock. Until April, 1967, Stetson Co. shares were traded on the American Stock Exchange; however, the market was extremely thin, and it would have been impossible for Fidelity to have sold the trust's large block on the Exchange. Thereafter, Stetson Co. stock was traded over the counter, but here the market was even thinner.

All parties agree that the only method of disposing of the Stetson Co. stock was a sale to a group of New York

[ 463 Pa. Page 70]

    interests comprised of Ramco Enterprises, Inc., United Hat Fur Cutting Co., and Best & Co., Inc. The Ramco group, controlled by two elderly gentlemen, Ira Guilden and Phillip Roth, had by 1966 acquired a sufficient number of Stetson Co. shares to give it working, although not majority, control.

In January, 1967, Fidelity was approached by Norman Karpf, a vice-president of the Stetson Co. and president of the United Hat Fur Cutting Co. Karpf informed Fidelity that he and several others were interested in buying the trust's holdings of Stetson Co. stock. Karpf did not indicate that he was affiliated with the Ramco group. Fidelity advised Karpf to submit an offer in writing.

On March 14, 1967, Karpf, submitted a "firm offer" to buy on behalf of United Hat "and associates" the trust's Stetson Co. common stock at $20.00 per share and preferred stock at $26.00 per share. On March 27, Fidelity responded that it "had concluded that we would be willing to accept the offer of $20.00 per share for the common stock but we could not accept the offer for the preferred stock." Fidelity indicated that it would be "glad to discuss this further with you."

Two days later Karpf's (and the Ramco group's) counsel telephoned Fidelity and informed it that the buyer of the trust's common stock would be Best & Co. He also transmitted to Fidelity the draft of a proposed letter-agreement of sale. On March 30, Ramco's counsel transmitted copies of the agreement of sale executed on behalf of Best & Co.*fn3 The letter agreement, received by Fidelity

[ 463 Pa. Page 71]

    on March 31 or April 3, was executed on behalf of Fidelity, but not ...

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