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ESTATE ETHEL K. SCHWENK (04/04/85)

decided: April 4, 1985.

ESTATE OF ETHEL K. SCHWENK, DECEASED. APPEAL OF FRANK L. FISHER AND ELIZABETH S. WIEST


No. 114 E.D. Appeal Docket, 1984. Appeal from the Order of Superior Court No. 794, Philadelphia 1983 Which Affirmed the Order of the Orphans' Court Division of the Court of Common Pleas of Philadelphia County Docketed to No. 3476 of 1949.

COUNSEL

Fred J. Wiest, Chester C. Corse, Jr., Pottsville, for appellant.

Morris R. Brooke, Karen A. Fahrner, Philadelphia, for Girard Bank.

Stephen M. Cushmore, Norristown, for appellee.

Nix, C.j., and Larsen, Flaherty, McDermott, Hutchinson, Zappala and Papadakos, JJ. Hutchinson, J., did not participate in the decision of this case. Nix, C.j., files a dissenting opinion. Zappala, J., joins in the Majority and files a concurring and dissenting Opinion.

Author: Flaherty

[ 507 Pa. Page 412]

OPINION OF THE COURT

This is an appeal from an order of the Superior Court which affirmed an order of the Orphans' Court Division of the Court of Common Pleas of Philadelphia County confirming a trustee's final account and dismissing remaindermen's objections to a credit claimed by the trustee. Schwenk Estate, 326 Pa. Super. 253, 473 A.2d 1078 (1984). The trustee, Girard Bank (formerly Girard Trust Company, now Mellon Bank (East), N.A.), had claimed the credit, in the amount of $45,692.86, against trust principal to reflect the total of compensation which it had paid to itself quarterly

[ 507 Pa. Page 413]

    as compensation for its services as trustee during the twenty-nine years of the trust's existence. The sole issue on appeal is whether the trustee's compensation was properly to be treated as a charge against principal, or whether the trustee should have taken its compensation from the income of the trust.

The trust in question was created when a testatrix, Ethel K. Schwenk, died on June 6, 1949, leaving a will dated August 28, 1947. The will appointed Girard Bank as executor and created a testamentary trust, of which Girard Bank was to serve as trustee. Girard Bank received full compensation for its role as executor, as distinguished from trustee, when, in 1951, the executor's account was approved and duties as a trustee commenced.*fn1 Under the terms of the trust, testatrix's sister, Gertrude T. Kauffman, was given a life estate in the income of the trust, and, upon Kauffman's death, Girard Bank was to distribute the principal, in equal shares, to remaindermen consisting of the surviving children of the sisters of testatrix's deceased husband. Following the death of Gertrude T. Kauffman on December 18, 1979, the appellants, as the remaindermen of the trust, objected to the trustee's final account on grounds that compensation for services as a trustee should have been taken from income of the trust, rather than from trust principal.

[ 507 Pa. Page 414]

The relevant provision of testatrix's will, addressing compensation for the trustee, provided that Girard Bank should hold the residuary estate in trust, "to hold, invest and reinvest the principal thereof and to collect the interest, income, dividends and rentals therefrom and after the payment Page 414} of taxes, trustee's compensation and other proper charges against income, to pay the whole of the net income to my sister Gertrude T. Kauffman, for and during the term of her natural life." (Emphasis added.) We believe this language is clear and unambiguous, and that the terms of the testamentary trust could not have been more explicit in their directive to pay trustee's fees out of the income of the trust. In view of this express language in the will, the contention of Girard Bank that the will permits payment of such fees out of the principal of the trust is patently without merit.

The courts below, in holding that the trustee's compensation was a valid charge against principal, erroneously considered evidence aliunde to reach a conclusion that is plainly contrary to the intent expressed in the will. This evidence consisted of a letter, dated August 8, 1947, sent by Girard Bank to testatrix approximately three weeks before the will in question was executed. The letter recorded an understanding between the parties that Girard Bank would handle the administration of testatrix's estate, stated that the amount of the trustee's compensation would be that set forth in Girard Bank's Standard Fee Schedule, and provided as follows with regard to the manner in which the trustee's compensation would be collected:

All trustee's fees payable from time to time shall be charged against the principal of the trust unless you specifically direct otherwise under the heading "Special Provisions" on the following page . . . We will appreciate your signing and returning this letter as evidence of your acceptance of this proposal.

In accordance with the request contained in the letter, testatrix affixed her signature and returned the letter to Girard Bank. Testatrix made no entries under the heading "Special Provisions," and, thus, did not then express an intent to draft a will that provided for payment of trustee's compensation in some manner other than from the principal of the trust. This fact was the basis of Girard Bank's contention that the will in question, which was executed

[ 507 Pa. Page 415]

    approximately three weeks after Girard Bank sent the foregoing letter to the testatrix, should be interpreted as allowing compensation to be paid from trust principal.

It is well settled that, where a court can with reasonable certainty ascertain the intent of a testator through examination of the will itself, resort to consideration of matters external to that document is not generally proper. Taylor Estate, 480 Pa. 488, 494, 391 A.2d 991, 994 (1978). When a will as written is clear and unambiguous, it is error for the court to consider external evidence tending to impute an intent to the testator different from that appearing on the face of the will. Kelly Estate, 473 Pa. 48, 52-55, 373 A.2d 744, 746-748 (1977). As stated in Jacobsen Estate, 460 Pa. 118, 122-123, 331 A.2d 447, 449 (1975),

The common law has consistently proclaimed that the testator's intent is the crux in interpreting every will and that intent must be ascertained from the language chosen by the testator . . . . Courts will not search for the testator's intent beyond "the four corners of his will " when the language of that document is sufficiently clear and unambiguous so as to lead the court to believe it can with reasonable certainty effect a distribution in accordance with the testator's desires.

(citations omitted; emphasis added). See also Soles Estate, 451 Pa. 568, 571, 304 A.2d 97,99 (1973). In the instant case, the courts below committed error by looking beyond the "four corners" of testatrix's will to consider the letter that had been exchanged between the parties prior to the will's execution. That letter stood in plain contradiction to the testamentary trust's clear and unambiguous provision contemplating payment of trustee's fees from trust income.

One may only speculate as to the reasons that testatrix's will did not, in its provisions regarding the source of the trustee's compensation, conform to the terms expressed in the letter which she earlier signed and returned to Girard Bank. Whether testatrix neglected to remember the letter, failed to understand the meaning of the letter, knowingly changed her mind about the manner in which the trustee's

[ 507 Pa. Page 416]

    fee was to be paid, or breached an agreement with Girard Bank as to the provisions that would be contained in her will are all factors that are not relevant to the process of interpretation when the will itself is devoid of ambiguity.

When Girard Bank, as the designated executor and trustee for testatrix's estate, presented the instant will for probate, it undertook thereby to faithfully administer the provisions of the will, and, therefore, Girard Bank must be charged with knowledge of the clear and unambiguous terms in that document. We need not address the question of what timely recourse, if any, would have been available to Girard Bank, upon testatrix's death in 1949, when Girard Bank was charged with having discovered that the terms of the will did not conform to its expectations.

Fee agreements, governing the amount and manner of a testamentary trustee's compensation, have long been recognized as a valid means of governing terms of a testamentary trustee's compensation that have not been set forth in the will itself. See, e.g., Sinnott's Estate, 231 Pa. 299, 302, 80 A. 363, 364 (1911). See also, Decedents, Estates and Fiduciaries Code, 20 Pa.C.S.A. ยง 7185(c) (1975). Thus, in the present case, where the amount of the trustee's compensation was not set forth in the will which created the trust, and only the source of the trustee's payment was so specified, there is no dispute as to the fact that Girard Bank's Standard Fee Schedule controls the amount of the fees that the trustee could properly have claimed, since that Schedule was specified in the letter which testatrix signed and returned to Girard Bank. As to the source of the trustee's compensation, however, the will was not silent, and its terms must be regarded as controlling because they clearly express the testatrix's intent as to the funds from which the trustee should be paid. Indeed, it would be an anomaly to allow a fee agreement, a document not designed to express testamentary intent, to nullify the operative provisions of a subsequent will, where the subsequent will would have supplanted the earlier document even if the earlier document had been a will in itself.

[ 507 Pa. Page 417]

Girard Bank contends that if, as we have here decided, the will is held to override the provision of the fee agreement governing the source of the trustee's compensation, then the trustee should be awarded a trust termination commission. This commission, which Girard Bank asserts to be due only if the sums heretofore discussed which it already paid to itself are disallowed as a credit against principal, would also be assessed against principal, and would be claimed in the same amount as the disallowed payments, to wit $45,692.86. We believe, however, that ...


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