Case Name: Williamson Estate
Court: Philadelphia County Orphans' Court
Jurisdiction: Pennsylvania
Decision Date: 1950-03-24
Citations: 70 Pa. D. & C. 230
Docket Number: no. 3498
Parties: Williamson Estate
Judges: Before Sinkler, P. J., Klein, Bolger, Ladner, Hunter and Boland, JJ.
Reporter: Pennsylvania District and County Reports
Volume: 70
Pages: 230–242

Head Matter:
Williamson Estate
Before Sinkler, P. J., Klein, Bolger, Ladner, Hunter and Boland, JJ.
John R. McConnell and Thomas B. K. Ringe, for exceptants.
W. Albert Sanders, contra.
Maurice Heckscher and Morris Duane, amicus curiae.
March 24, 1950.

Opinion:
Hunter, J.,
As stated by the auditing judge, these proceedings are "in the nature of a test case, in an endeavor to change the long established rule in Pennsylvania which prohibits a trustee from charging commissions against principal, in the absence of the performance of extraordinary services, until the termination of the trust or the termination of the trustee's connection with the estate".
The trustee as coexecutor, following the death of decedent in 1930, received commissions of one and one-half percent on an estate of $198,714. A commission of five percent on income has been paid during the administration of the trust.
The trust existed 17 years to the date of audit, and still continues. The services of the trustee have been numerous and detailed, but it is conceded that no extraordinary services have been performed.
The trustee, a trust company, contends that the compensation which it received was not only inadequate but actually represented an out-of-pocket loss.
Evidence in great detail was presented outlining the services rendered in this particular trust and in trust administration generally, demonstrating that the cost of operating a trust department has greatly increased since the early days when rules fixing rates of compensation for fiduciaries were established. The auditing judge has carefully analyzed the testimony and his adjudication is a complete and satisfactory recital of all important facts.
The trustee requested for past services an immediate compensation of $3,000 out of the principal of the trust. The auditing judge found that the sum requested was fair and entirely reasonable, and would no more than return to the trustee a fair compensation for services already rendered to this estate, and would in no sense be an overpayment or result in hardship to the estate, even if the trustee resigned tomorrow or the trust terminated in the near future.
The auditing judge concluded, however, that he was without authority to make this allowance because of the long established rule that except in unusual circumstances commissions on corpus are not payable until the trust expires or the trustee's relation to it ends: Mintzer's Estate, 18 Phila. 97, 43 L. I. 292, affirmed 9 Atl. 65 (1887) ; Bosler's Estate, 161 Pa. 457 (1894); Snyder Estate, 346 Pa. 615 (1943) : See also Kennedy Trust, 364 Pa. 310.
The reasons for the repeal of this rule are convincingly stated by the auditing judge. He said:
"While it is true that allowance of interim compensation might occasionally result in overpayment of commissions, if the charge is carefully scrutinized by the courts, payments of excessive amounts can be avoided. It is manifestly unfair to compel a fiduciary to await the termination of a trust, which may last for many decades, before he is paid. This is particularly unjust in the case of an individual trustee. Since trustees are usually selected for their wisdom and experience, in most cases the choice in the case of an individual is a person of mature age, who, in the normal course of events, might be expected to predecease some of the beneficiaries. In such case the trustee must die in order to be paid. Furthermore, because of the exceedingly high income and estate tax rates, receipt by individual fiduciaries of compensation in a lump sum for services rendered over a long period of time often results in disproportionate taxation, greatly reducing the fruits of the individual's labor."
The judges of this court are of the opinion that the rule forbidding interim 'Compensation should be abrogated, but agree with the auditing judge that until it has been overruled by the Supreme Court itself, or the law changed by the legislature, it is the law of this Commonwealth, and must be respected and followed.
Furthermore, it is our opinion that the standards of commissions payable to a trustee for the management of a trust should be revised in favor of increased compensation, which opinion is based not only on the facts of this case but upon our experience with trust estates generally. As was said by the auditing judge: "Today, the administration of-trusts is a business, and, like all businesses, in order to continue, it must operate at a profit."
Life tenants, the primary objects of testator's bounty, should not be taxed with the burden of this increase, especially in times of diminished returns on trust investments. Resort must be had to the principal of the trust.
If the prohibition against an immediate allowance out of principal were removed, the allowance could take the form of a lump sum for past services as here claimed by the trustee, or consideration could be given to the suggestion of the trustee that for the performance of its duties in the future an annual allowance be made, for example, a percentage based on the annual value of principal, part to be paid from principal and part from income. The allowance of a yearly compensation would put the estate upon a pay-as-you-go basis, compensation would be accurately measured by the length of the trust, and no further payment would be due at its termination.
It may be that the annual allowance suggested by this trustee is too large an increase. Certainly careful study will have to be made if a new standard of commissions is fixed, new rates compared with the old, and no more than a fair and reasonable increase granted.
Compensation, of course, is not a question of percentage, but of compensation for services rendered. Nevertheless, as in the past, for the guidance of trustees and the courts, a standard of commissions for normal services must be measured by a percentage, to be increased or diminished according to the value of services in a particular estate.
Because of the repeal by the Act of April 10, 1945, P. L. 189, of section 45 of the Fiduciaries Act of June 17, 1917, P. L. 447, 20 PS §813, which forbid double commissions where the same person was both executor and trustee, executors' commissions should be restricted to services and responsibility in that capacity, if further commissions are to be allowed to the same person as trustee. That, too, will be a subject for consideration if there is to be a general revision of the compensation of trustees.
Because we have disallowed all present commissions on principal, we agree with the auditing judge that it is not necessary to discuss the question whether the trustee is precluded from receiving additional compensation because it had received a share of executors' commissions prior to the repeal of the Fiduciaries Act of 1917, sec. 45, supra.
The exceptions are dismissed and the adjudication is confirmed absolutely.