Court Opinion

ID: 6392419
Source: CourtListenerOpinion
Date Created: 2022-06-25 00:20:27.56234+00
Date Added: 2024-06-11T15:50:46.092678
License: Public Domain

Opinion Concurring in Part and Dissenting in Part

Lefever, J.,
January 18, 1965. — I agree with the reasoning and conclusion of the learned auditing judge that recent Supreme Court cases and the public policy expressed in the Act of July 25, 1963, P. L. 305, and the Act of May 1, 1953, P. L. 1173, strongly indicate that Williamson Estate, 368 Pa. 343, is no longer the law. Therefore, in my opinion, the Act of April 10, 1945, P. L. 189, may now be interpreted to constitutionally authorize award of commissions on principal to a trustee for its services performed subsequent to 1945, even though it previously received compensation for serving as executor.
On the other hand, I agree with the majority that the evidence presented to the auditing judge was insufficient upon which to base a finding of fact that $20,000 is proper compensation for the services rendered by the corporate trustee in the instant case. This court is not bound by a corporate fiduciary’s own evaluation of the worth of its services or by a schedule of compensation set by the Corporate Fiduciaries Association. The determination of the value of the trustee’s services is for this court.
Both corporate and individual fiduciaries should be properly compensated. “The laborer is worthy of his hire.” We should not, and do not, expect a trustee to perform fiduciary services at a loss. Corporate fiduciaries *737perform valuable and useful services in the community, which deserve to be encouraged. However, the burden is upon the fiduciary to prove what is fair and reasonable compensation.
This is an important case because the trustee is attempting to overcome the adverse decision in Williamson Estate, supra. Therefore, the decision in the instant case will be far reaching. Hence, the corporate trustee should have provided us with a record at least as complete as in Williamson Estate.
President Judge Klein was the auditing judge in Williamson Estate. He filed a comprehensive, well reasoned adjudication in which he carefully analyzed the voluminous record in that case. Inasmuch as his adjudication was not included in the report of this case, 70 D. & C. 230,1 am taking the liberty of quoting at length his views there expressed, which are apposite today, viz:
“We have come a long way since the days when the administrations of decedents’ estates were strictly in the control of ecclesiastical courts. Similarly, we are far removed from the days when the acceptance by an individual of a position as fiduciary was regarded as a high honor, and compensation was looked on with disdain. Today, the administration of trusts is a business, and, like all businesses, in order to continue, it must operate at a profit. This applies with equal force to a corporate trustee, as to an individual fiduciary. Fiduciary responsibilities are usually undertaken, except, perhaps, in cases of small family estates, with the expectancy of receiving adequate compensation for the work to be performed.
“The present method of compensating fiduciaries in this state has been in effect for over a hundred years. Perhaps the time has come when our entire system should be reviewed and revised, as has been done in many other states. . . .
*738“Under our present system it is not uncommon for executors of estates in which there are no trusts and which are wound up completely, and with comparative ease, within a year of the decedent’s death, to actually receive higher compensation than fiduciaries in estates of similar size, where there are continuing trusts and many involved problems. Certainly, consideration should be given not only to the services rendered by the accountant, but also to the results obtained for the beneficiaries, as well as the length or the duration of the trust. Estates with long, continuing trusts should pay more for management than those with short term trusts, or without any trusts at all. A passenger who rides on a train from Philadelphia to Chicago pays much more for his ticket than one who is going only to Harrisburg. Formerly, the commission charged against income was, in itself, regarded as the compensation for managing an estate over a long continuing period after a modest, initial commission on principal was received. Today, however, due to the advanced cost of administering estates and the diminished rate of income, the commissions charged on income are often not sufficient to permit the fiduciary to service the estate at a profit. . . .
“In my considered opinion, the request made by the accountant for $1200. compensation in connection with the Anthony Trust and for $1800. in connection with the residuary trust is fair and entirely reasonable, and, if I had the authority, I would award the sums requested. Such allowance would no more than return to the accountant a fair compensation for services already rendered to this estate. It 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.”
Judge Klein then concluded:
“However, after a careful study of the entire prob*739lem, I have reached the conclusion that I am completely without authority to make this award, as the trust has not yet terminated.”
The court en banc dismissed the exceptions to Judge Klein’s adjudication. Judge Ladner, in a concurring opinion, joined by Judge Bolger, pointed out that even this sizeable record failed to consider important factors such as (1) the trust department’s productivity of business; (2) proper adjustment of the cost of trust department space on upper floors of the bank’s building, rather than taking a pro rata share of all space; (3) giving credit for income earned on large amounts deposited in the banking department of the trustee by the trust departments of other corporate fiduciaries; and (4) proper allocation of the cost of “Executive Management” to the trust department.
In the instant case the corporate fiduciary had the duty and burden to make a full, frank and complete disclosure of the services rendered, its costs of operation, its overhead properly allocable to its trust department, and all other relevant facts. This should have included, inter alia, all the facts adduced in Williamson Estate, together with those mentioned by Judge Lad-ner, and a detailed recital of the duties of a trustee today in the light of present security markets, Federal income taxes, State inheritance and estate taxes and Federal estate taxes, personal property taxes, problems of apportionment between principal and income; etc., etc. Such a record was not made in this case. In fact, the evidence presented in the instant case, to say the least, was fragmentary.
It is noteworthy that all of the judges of this court who decided Williamson Estate, supra, indicated that they were of the opinion that additional compensation for ordinary services should be allowed to the trustee who also served as executor. Judge Ladner suggested that a statewide study should be made under the aus*740pices of the Supreme Court. Mr. Justice Stearne, speaking for the majority of the Supreme Court, stated at page 352:
“It may well be that present conditions demand that the system requires general revision. If this be true, such radical change should be made by the Legislature and not by the Court. We decline to overrule the host of our decisions over such a long period. We agree with Judge Ladner that even before a change of such magnitude should be enacted by the Legislature, there should be a wide and searching investigation by a legislative committee concerning the entire subject matter, including not only the situation of all corporate fiduciaries but of individual fiduciaries as well.”
It seems clear, therefore, that whether by the legislature, by a judge, or by a master appointed by the court, a searching study of a fiduciary’s regular, usual duties and costs should be made before the present long established principles for fixing a fiduciary’s compensation should be revised, or a flat lump sum should be awarded, as was done by the learned auditing judge in this case.
Accordingly, I would refer this case back to the auditing judge to hold further hearings to afford the trustee and the Corporate Fiduciaries’ Association an opportunity to present evidence on these points and in the light thereof to award such compensation to the trustee in this case as is warranted by the evidence adduced, and also to set down principles which would constitute a guide for future cases. In doing so, the auditing judge might well take into consideration the provisions of the Act of July 25, 1963, P. L. 305, providing: “The court shall allow such compensation to the trustee as shall in the circumstances be reasonable and just, and may take into account the market value of the trust at the time of the allowance, and calculate such compensation on a graduated percentage.”
*741Hence, I am constrained to file this partially dissenting and partially concurring opinion.