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ESTATE FAY EARHART DOBSON (07/03/80)

decided: July 3, 1980.

IN RE ESTATE OF FAY EARHART DOBSON, A/K/A FAY E. DOBSON. APPEAL OF MARY VIRGINIA DOBSON, SARAH JANE TROY AND THE CATHOLIC-NEGRO AMERICAN MISSION BOARD


Nos. 57 & 73 March Term, 1979, Appeal from the Decree of the Court of Common Pleas of Allegheny County, Orphans' Court Division, at No. 1317 of 1977.

COUNSEL

Alice Dobson, Clyde P. Bailey, Pittsburgh, for appellants at No. 57 and appellee at No. 73.

Terrence F. McVerry, Jane Dale Ressler, Gondelman, Baxter, Mansmann & McVerry, Pittsburgh, for appellants at No. 73 and appellee at No. 57.

Eagen, C. J., and O'Brien, Roberts, Nix, Larsen, Flaherty, and Kauffman, JJ.

Author: Roberts

[ 490 Pa. Page 479]

OPINION OF THE COURT

This appeal presents the question whether appellee, the executor of decedent's estate, properly disposed of decedent's one-fourth interest in a Subchapter S corporation. The executor sold decedent's stock back to the corporation's board of directors, who purchased the shares on behalf of the corporation. Appellants, beneficiaries under decedent's will, contend that the sale price is below market value of the shares. Unlike the orphans' court, we agree with appellants that the executor improperly computed the value of decedent's shares. Accordingly, we vacate the decree of the orphans' court and remand for a determination of the amount of surcharge.

On March 16, 1977, Fay Earhart Dobson died testate, leaving a will dated December 28, 1971. The will was probated in Allegheny County and letters testamentary were granted to appellee, Abraham Fishkin, Esq., decedent's son-in-law. Other than a specific legacy to a granddaughter, the will provided that the estate be distributed in equal shares to five named beneficiaries -- the Catholic Negro-American Mission Board and four daughters, Alice Dobson Fishkin, Sara Jane Troy, Anne Dobson McDonald and Mary Virginia Dobson.

The executor filed an inventory of the estate, valuing the assets at $168,902.97. Seventy shares of Nordev, Inc. stock, which decedent received from her husband's estate, were included in the inventory at the executor's value of $60,000.

Nordev, chartered in 1954, operated as a tax-option small business corporation under the provisions of Subchapter S of the Internal Revenue Code. Nordev engaged primarily in real estate development. At decedent's death, its principal asset was a 200 acre tract of land located in Marshall Township, Allegheny County. This tract was partially subdivided for sale, but the substantial portion of the property had been developed as a golf course. Since its construction,

[ 490 Pa. Page 480]

    the golf course provided Nordev a steady income in addition to gains the corporation realized from the periodic sale of developed lots.

On September 19, 1977, at a private sale, the executor sold decedent's Nordev shares back to the corporation at the inventory value of $60,000. No court approval of the sale was sought. Following this disposition of the stock, the executor filed a first and final account. At audit, appellants objected to the account.*fn1 They argued that the value of decedent's shares was "far in excess of the redemption price accepted by the accountant." As a result of the alleged ...


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