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UPP v. MELLON BANK

August 7, 1992

JOHN B. UPP, ET AL.
v.
MELLON BANK, N.A.



The opinion of the court was delivered by: BY THE COURT; MARVIN KATZ

 FINDINGS OF FACT:

 Defendant Mellon Bank, N.A. ("Mellon" or the "Bank") is the successor-in-interest to named defendant Mellon Bank (East), N.A., and to Girard Trust Corn Exchange Bank, later named Girard Trust Bank ("Girard"), which Mellon acquired.

 Mellon is a banking association organized under the laws of the United States with its head office in Greensburg, Westmoreland County, Pennsylvania and its executive offices in Pittsburgh, Pennsylvania.

 Mellon maintains banking offices in this District, including offices at Mellon Bank Center, 1755 Market Street, Philadelphia, Pennsylvania.

 Mellon conducts bank trust operations in the Commonwealth of Pennsylvania.

 Beginning in mid-1990, Mellon consolidated the charters of Mellon Bank (East), N.A., Mellon Bank (North), N.A., Commonwealth National Bank, and Mellon Bank (Central), N.A. into the single charter of Mellon Bank, N.A.

 Plaintiff John B. Upp, a citizen of the state of Maryland, is a beneficiary of three trusts for which Girard was the original trustee and for which Mellon is now the successor trustee.

 Plaintiff is an income beneficiary on certain trusts set up by his grandmother and mother. Plaintiff's mother and grandmother appointed Mellon's predecessor, Girard Bank, as trustee to administer and manage the principal and income of the trusts.

 Mr. Upp is the beneficiary of three trust accounts managed by Mellon that have been charged sweep fees. Since 1981, Mr. Upp's accounts have been charged sweep fees of approximately $ 4,012.14.

 In January, 1981, Girard became the first bank in Pennsylvania to provide its trust customers with the opportunity to earn a return through the daily temporary investment of idle cash.

 Girard inaugurated an automated system for short-term investment of cash in trust accounts, known as sweeping, on January 1, 1981 for substantially all of its trust accounts.

 From the beginning, Girard swept both principal and income cash balances.

 Girard was the first bank in Pennsylvania to have a cash sweep system and to charge sweep fees to its trust customers.

 When Girard began its cash sweep in 1981, it charged 37 and 1/2 basis points, or $ 0.375 for every $ 100 invested in these sweep investments, on an annual basis.

 In 1981-82 in Pittsburgh, Mellon designed and developed a system and procedure for the daily temporary investment of idle cash, which was implemented in January, 1983.

 In 1984, the Pennsylvania Legislature amended the Estates and Fiduciaries Code 20 Pa. C.S. ┬ž 7315.1(b), to permit a fiduciary to "make temporary investment of funds" in short term deposits or investments for which the fiduciary may "make a reasonable charge, in addition to all other compensation to which he is entitled. . .". The amended statute became effective October 12, 1984.

 The parties have agreed that the rate of Mellon's sweep fee has been 50 basis points since 1985. That is, if $ 100 was temporarily invested by Mellon every day for one year, the total charge for the entire year for the temporary investment services would be 50 cents.

 Mellon changed the sweep system in 1985 so that swept cash from one Mellon bank affiliate (such as Mellon (East)) could be deposited automatically in another, separately chartered Mellon bank affiliate (such as Mellon (Delaware)), a process which enabled Mellon to obtain the maximum FDIC insurance coverage of $ 100,000 on the deposits in each bank. By 1986, Mellon had four affiliate banks participating in the cash ...


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