No. 254 JANUARY TERM, 1978, Appeal from the Final Decree dated May 26, 1978, Court of Common Pleas, Orphans' Court Division, County of Philadelphia, at No. 1085 of 1973.
Donald Hayes, Philadelphia, for appellants.
George M. Brodhead, Philadelphia, for appellee.
Eagen, C. J., and O'Brien, Roberts, Nix, Larsen, Flaherty and Kauffman, JJ. Nix, J., filed a dissenting opinion.
This is an appeal from a decree of the Orphans' Court Division of the Philadelphia Court of Common Pleas which denied a claim for surcharge asserted by certain estate beneficiaries, Sally Ann Michelfelder and Joan M. Gonzales (appellants), against the appellee corporate executor, Central Penn National Bank, for alleged mismanagement of estate investments. After several hearings in the court below on objections filed by appellants, the account was confirmed by the auditing judge and exceptions to his decree nisi were dismissed by the court en banc.*fn1
On November 9, 1972, letters testamentary were issued to appellee as executor of decedent's estate. His will created a testamentary trust, the beneficiaries of which included the appellants, and designated appellee to serve as trustee. The estate property included 4314 shares of Sears Roebuck & Co. common stock valued at the commencement of the estate's administration at approximately $470,000, a figure which represented 71% of the estate's total asset value and 97% of the value of all stocks in the estate. Only 400 of the Sears shares were sold by the executor during the first year of administration, the sales being made primarily to cover costs of administration rather than for reinvestment purposes. The will gave appellee, as executor and trustee, an absolute discretionary power either to retain or sell such property. Appellants' surcharge claim was brought because of a very substantial drop in the market price of Sears stock during the period of its being held in trust.
Appellants' first contention is that the attention, supervision, and group judgment given the investment account by the appellee did not measure up to that required of an expert corporate fiduciary under the rule of Killey Trust, 457 Pa. 474, 477-478, 326 A.2d 372, 375 (1974) where we stated:
[T]he corporate trustee held itself out as an expert in the handling of estate and trust accounts. It represented itself as being possessed of greater knowledge and skill than the average man. It was therefore under a duty to exercise a skill greater than that of an ordinary man and the manner in which investments were handled must accordingly be evaluated in light of such superior skill.
After a thorough review of the record, we find, at least minimally, sufficient evidence to support the conclusion of the court below that the appellee exercised the degree of care, skill, and judgment required of a fiduciary. The testimony included an expert opinion from an investment advisor that appellee's investment practices conformed to generally followed corporate trust standards of skill and prudence. In addition, testimony was presented that appellee utilized respected outside sources of information and advice and closely followed trust account activity by frequent reviews, analyses, and group judgments. The evidence establishes that Sears stock was, during the period in question, reasonably believed to be a sound, national, broadbased stock worthy of investment by a fiduciary.
As it turned out, however, performance of the Sears stock was poor: the price per share dropped from $117 at the time of testator's death to approximately $88 by February of 1974 and continued to decline thereafter. Hindsight, however, is not the test of liability for surcharge. Mereto Estate, 373 Pa. 466, 96 A.2d 115 (1953). The exercise of investment skills greater than those possessed by the average man, as is required of a corporate fiduciary, which holds itself out ...