No. 137 January Term 1977, Appeal from the Decree of the Court of Common Pleas of Chester County, Orphans' Court Division, at Estate No. 1975-924, Audit No. 151-1975.
Mercer D. Tate, Philadelphia, for appellant.
W. Edward Greenwood, Gawthrop & Greenwood, West Chester, for appellee.
Eagen, C. J., and O'Brien, Roberts, Nix, Manderino and Larsen, JJ. Pomeroy, former J., did not participate in the consideration or decision of this case. Manderino, J., filed a dissenting opinion.
This is an appeal from the final decree of the Court of Common Pleas, Chester County, Orphans' Court Division, dismissing exceptions of the settlor-beneficiary to the adjudication entered following audit of the amended account of Southeast National Bank of Pennsylvania, trustee, under a Deed of Trust executed by Jeanne P. Mendenhall, dated October 9, 1969.
The amended account covering the period from October 9, 1969 to October 31, 1975, was audited before the Orphans' Court on July 7, 1976. At that time, settlor objected to the account and requested surcharge of the trustee for the following reasons: (1) failure to invest large amounts of cash; (2) failure to sell on two separate occasions a holding of Philadelphia Electric preferred stock; (3) investment and retention of trust assets in Franklin New York Corporation; and, (4) improper concentration of trust assets in bank securities.
Pursuant to the parties' stipulation that the trust lost $550 income as a result of uninvested cash, the auditing judge awarded a surcharge in that amount. The remaining objections were denied, and, on July 29, 1976, the amended account was confirmed nisi, subject to a surcharge of $550. Exceptions filed to that adjudication were dismissed and the adjudication of July 29, 1976, was adopted as the court's final decree.
Initially, we must decide whether the Orphans' Court applied the correct standard in evaluating the trustee's performance and in concluding there was no breach of duty in its management of the Mendenhall trust assets. Generally, a trustee who is authorized to retain investments need only exercise the skill and judgment which a prudent person, under similar circumstances, would exercise in connection with the management of his or her own estate. Mereto Estate, 373 Pa. 466, 96 A.2d 115 (1953). However, if the trustee possesses or procures its appointment by representing it has greater skill than that of a person of ordinary prudence, then it is required to exercise such greater skill. Killey Trust, 457 Pa. 474, 326 A.2d 372 (1974). Estate of Cahen, 483 Pa. 157, 168-169, 394 A.2d 958, 964 (1978). See also Restatement (Second) of Trusts § 174 (1959).
At audit, settlor maintained that Southeast National Bank (Southeast) was a corporate fiduciary possessing greater skill in the management of trust assets than a person of ordinary prudence and, furthermore, that Southeast, in procuring its appointment as trustee in this matter, represented itself as having such greater skill. Accordingly, settlor argued Southeast should be judged by the standard of a person with such special skill. The auditing judge rejected settlor's contention stating:
"In this case there is no showing that this trustee either had extraordinary skill in the administration of Trusts or that it procured its appointment as trustee in this Estate by representing that it had such skills. For that ...