Opinion
September 29, 1938.
December 5, 1938.
Trusts and trustees — Surcharge — Investments — Mortgages — Participating interest — Evidence.
Exceptions to the account of a trustee, seeking to deny the accountant the right to offer mortgage investments in distribution of the balance of the account, on the grounds, variously applying to the particular investments, that the investments were illegal, improper and improvident, that the accountant had an interest in the transactions adverse to the estate, that the interest rate on one mortgage was reduced improperly, and that there were no appraisals when certain of the investments were made for the trust, were properly dismissed, under all the evidence in the case.
Argued September 29, 1938.
Before KEPHART, C. J., SCHAFFER, MAXEY, DREW, LINN, STERN and BARNES, JJ.
Appeals, Nos. 189-90 and 199, March T., 1938, from decree of O. C. Allegheny Co., April T., 1936, No. 400, in Estate of Bessie Swindell, deceased. Decree affirmed.
Audit of account of trustee. Before TRIMBLE, P. J.
Adjudication filed dismissing exceptions to account. Exceptions to adjudication dismissed, before TRIMBLE, P. J., MITCHELL and CHALFANT, JJ., opinion per curiam, in part as follows:
"In this case, Bessie S. Rankin, Edward S. Rankin and Allan R. Smith are beneficiaries under the Will of the above-named decedent.
"Their Exceptions, which have not been disposed of by agreement of counsel, are to the offer of securities in distribution shown in the balance of the account. The Exceptants demand cash thereby denying the right of the accountant to the benefit given by the Fiduciaries Act, Section 49(e) 1. which provides, inter alia, '. . . it shall be lawful for said court to direct distribution of such assets in kind to and among those lawfully entitled thereto, including fiduciaries.'
"The Third Exception demands cash instead of the participating interest of $1,900.00 in the Somers, Fitler Todd mortgage. The property mortgaged is on Water Street between Smithfield Street and Wood Street and extends back to First Avenue, Pittsburgh, Pa. It is improved with four-story brick buildings, warehouse and store. The mortgage was originally $200,000.00 and has been reduced to $150,000.00. It was appraised at $300,000.00. It is excepted to as part of the distribution in kind because, (1) The investment was illegal, improper and improvident; (2) Accountant has an interest in the transaction adverse to this estate; (3) The interest rate was reduced; (4) There was no appraisal when the investment was made for this trust. When we search the testimony from one end to the other, we find no justification for saying that the mortgage was 'illegal, improper or improvident.' Somers, Fitler Todd is an old established institution in the City of Pittsburgh with an unquestionable standing in the business world. The mortgage was given by that concern and the successful conduct of its business is not questioned by the Exceptants. The testimony shows that the current assets of this company, at the time when the mortgage was taken, was $477,000.00. It, like all other corporations and individuals, had to face the depression. The trust company, meeting the exigencies of that event, reduced the interest from five and one-half per cent to four per cent because the company had fallen back on the payments of taxes for the years 1933 and 1934 and needed the help coming from the reduction of interest to pay current and delinquent taxes. The probabilities are that this corporation, with its valuable good will of at least a generation, will be able to pay principal and interest due on this mortgage.
"The other objection is that Mr. George, who made the appraisement, was a director in the Peoples-Pittsburgh Trust Company and was paid $107.50 for the appraisement which he made. There is no complaint that Mr. George was not competent to make the appraisement. It is certain that it would be carelessness on the part of the trustee if the appraisement had not been made. We cannot see the point in objecting to paying the appraiser for work which is considered necessary to be done before an investment of this kind is made. It does not matter, in this case, whether he was an officer or director in the company. His competency is admitted and no fraud is imputed.
"The next Exception is the Fifth Exception which concerns the Brierly mortgage. The accountant offers a participation of $1,300.00 in a total mortgage in the amount of $8,500.00. This mortgage was made in 1928 and the participation, September 30, 1930, which covers property at 4915 Main Street, 31st Ward, Pittsburgh. Here, again, it was said that the investment was 'illegal and improvident' and was originally taken in the name of the accountant and carried in its name on the public records. The Devilliers Land Company was an off-shoot of the Peoples-Pittsburgh Trust Company and the mortgage was assigned to it. It was said that there was no appraisal of the property. It is one thing to allege facts, but we must have proof of them. The testimony shows that, when the funds of the estate were invested in the mortgage on September 30, 1930, the interest, which was due on that date, had not been paid. It was paid twelve days thereafter, on October 12, 1930, and the overdue payment to this estate was $1.48. It is also true that on that date there was a balance due on the 1929 City taxes. The reason for this was that the City had widened and changed the grade of the street in front of Brierly's property and he was negotiating with the City with respect to the unpaid taxes. There can be no objection to the manner in which this mortgage was carried. It was in the name of the accountant, and properly so, because it was a pool. The Devilliers Land Company was owned and controlled by the Peoples-Pittsburgh Trust Company. Instead of taking title in the name of the trust company, the Devilliers Land Company was made grantee and the purpose was to serve trust estates. While no loss occurred by reason of this transaction, the method of dealing with this trust estate cannot be approved. The deed for this property should have been taken for the use of the Rankin Trust. There was, however, no concealment of the trust estate. The legal effect of carrying the real estate in the name of the Devilliers Land Company was not changed. There was no fraud perpetrated and no additional loss. The Exception, therefore, will be dismissed.
"The Sixth Exception states that the Frishman mortgage on the property located at 1605 Center Avenue was 'illegal, improper and improvident' and, further, that the mortgage was taken and carried on the public records, in the name of the trustee. This mortgage was originally in the sum of $7,000.00 on an appraisement of $12,000.00; $400.00 has been paid on the principal and $1,300.00 of the trust estate, now under consideration, was invested in this mortgage. The amount due to the cestui que trust here, is $1,588.44. The mortgage was foreclosed in 1933 and taken by the Peoples-Pittsburgh Trust Company. It was further stated that there was no appraisal of the property at the time the funds of this estate were invested in said mortgage, and upon foreclosure the property was bought in the name of the accountant. This is true, but there is no doubt that the company had an appraisal of the property before that time and, if it were satisfied that this appraisal were fair, that was all that was necessary."
Exceptants appealed.
Errors assigned, among others, were dismissal of exceptions.
W. Denning Stewart, of Stewart Lewis, with him William J. Kenney and Harold R. Schmidt, for appellants. James S. Crawford, of Patterson, Crawford, Arensberg Dunn, for appellee.
The endeavor to surcharge the fiduciary in this proceeding was properly denied by the court below. We affirm its action on the pertinent portions of its opinion which appear in the Reporter's notes.
We have not been convinced that there was anything in the allotment which the trustee made of the $50,000.00 which was paid on account of the Somers, Fitler Todd mortgage to other participants therein which would warrant a surcharge. We considered the same situation and approved it in Harton's Est., 331 Pa. 507, 1 A.2d 292.
We see nothing in the record before us which would warrant the court below or us in refusing the allowance made to the accountants for counsel fees.
Decree affirmed. Costs to be paid out of the estate.