Court Opinion

ID: 9850304
Source: CourtListenerOpinion
Date Created: 2023-09-24 04:54:54.24248+00
Date Added: 2024-06-11T09:20:34.878289
License: Public Domain

Bussey, Justice
(dissenting in part) :
I concur in the result reached in the opinion of the Chief Justice with respect to the stock splits and capital gains from the sale of stocks involved in the estate, but for numerous reasons, hereinafter set forth, dissent as to the disposition made of the stock dividends.
Unfortunately, the task of this court in reaching a just and proper decision in the instant controversy has been made more difficult by the fact that efforts of counsel below and on appeal seem to have been devoted much more to the trial and defense of the so-called Pennsylvania apportionment rule and the Cothran decision, 242 S. C. 80, 130 S. E. (2d) 177, than they have to developing the facts and real issues involved in the instant controversy. The record contains a great deal of evidence from experts in the fields of law, trusts, banking and corporate affairs, etc., showing rather clearly the great difficulties, expense and sometimes impossibility of complying with the Pennsylvania rule under modern day circumstances, as well as the inequities and injustices which frequently result from the application thereof.
The uncontradicted evidence, supported by legal research, clearly shows that however just and equitable the Pennsylvania rule may have been under the circumstances existing when it originated more than a century ago, it is under modern circumstances, for the most part, no longer a work*15able, equitable or just rule. As a result, this rule has been, by legislative act and/or judicial decision, repudiated throughout the United States and no vestige thereof seems to remain save in Mississippi, and South Carolina.
On the other hand, the record contains rather scanty evidence as to, precisely what is or would be involved, or the precise results which be reached, should the apportionment rule be applied in the instant controversy. The record, nevertheless, contains enough, in my view, to show: (1) that there is no need to resort to the Pennsylvania rule set forth in the Cothran decision; (2) that under the facts of the particular case, it should not be applied.
When John W. Arrington died in 1938, his estate, composed of both personal property and realty, was appraised at a value in excess of $200,000, most of which passed to the trust with which we are here concerned, he having provided for his widow prior to his death by insurance and a trust fund created for her benefit. It is, I think, obvious that the testator was sufficiently wealthy that, even in that day of much lower taxation, he was naturally concerned with the impact of taxes. His three sons, who were named as executors and trustees, were all enjoying substantial incomes, both on the date of the testator’s will and at the time of his death. The sizes of their respective estates indicate that they continued to do so throughout their lives. Under all of the attendant circumstances, it was only natural that the testator would desire to pass on to his grandchildren and/or his great grandchildren, tax free, a quite substantial trust estate. The present amount of the trust does not appear in the record, but inferentially, there are several million dollars involved.
The application of the Pennsylvania rule to the stock dividends accumulated in this trust would, I think, clearly subvert the real intention of the testator in several respects and bring about results clearly not intended or desired by him. The Pennsylvania rule of apportipntment is an equi*16table rule of construction and is never resorted to except where the testator has failed to manifest an intention with respect to allocation between income and corpus, and has also failed to manifest an intention to vest a discretionary power in his trustees to determine what constituted income or corpus. The testator’s intention does not have to be express or specific, it being sufficient that his intention be manifest. The testator’s intention is to be gathered from the whole instrument, any doubtful language being considered in the light of the circumstances known to the testator at the time of its execution. His intention need not be declared in express terms, if it can be clearly inferred from the particular provisions and from the general scope of the will. Spell v. Traxler, 229 S. C. 466, 93 S. E. (2d) 601 (1956).
In my view, when all of the provisions and the general scope of the Arrington will are considered, the intention of the testator is clearly manifest, rendering really unnecessary any resort to the circumstances known to the testator at the time of its execution. But certainly, when it is considered as a whole and in the light of the financial circumstances of the testator at the time of execution, I cannot help but agree with the conclusion of the lower court that the testator manifested a clear intention to give his trustees the discretionary power, which they fully exercised, to determine what constituted income or corpus of the trust estate.
The opinion of the Chief Justice construes Item IV of the will as doing nothing more than giving a majority of the trustees named the right to perform simply administrative and ministerial acts authorized under the provisions of the will. Such construction, I think, treats as surplusage and ignores much of the language of Item IV, it being elementary that effect must be given to every part of a will, if practicable, in construing it, and, if possible by any reasonable construction, all clauses must be harmonized with each other and with the will as a whole.
Item IV makes specific reference to the decision of his trustees pertaining to the distribution of the trust funds pur*17suant to the provisions of Item III being final, which item, in turn, provides that upon the termination of the trust “* * * (T)he corpus of the trust estate, with any accumulation of undistributed income, shall be divided and distributed in the proportion of one third to the issue of each of my said sons, per stripes.”
The quoted language is specific and when considered in connection with the entire will, evinces, I think, a clear contemplation on the part of the testator that his trustees, who were also life beneficiaries would, in carrying out and effectuating the main theme of his will, from time to time accumulate and not distribute items which were or might be contended to be income.
In Item IV, after providing that any decision of the majority of the trustees or the survivor should be final and conclusive, the testator reverted to the general powers given to his trustees, including the power “* * * (G)enerally to deal with the trust as fully as I myself if living might do, and particularly they shall have the right to invest in stocks, common or preferred, and the securities of corporations.” Item IV is not the only place in the will where the trustees are given the right to deal with the estate as freely as the testator himself could have done if living.
Item II of the will, quoted only in part in the opinion of the Chief Justice, gives broad and comprehensive powers to the trustees and contains, inter alia, the following “* * * (T)o compromise, adjust, and settle claims in favor of, or against the estate, and generally to do all things which I myself might do if living.”
Item IV restates, and therefore emphasizes, the testator’s intention, already specifically expressed in Item II, to give his trustees the power to do anything-with the estate which he himself could have done if still living. This is a testamentary trust and the testator could have revoked it in its entirety at any time, while living. It follows that his power to allocate to corpus whatever he chose was totally unlimited, *18and he gave to his trustees the power to do any and all things which he could himself have done if still living. His intention to give his trustees broad and unlimited powers is further evinced by a codicil to the will containing the following language:
“I direct that all specific bequests provided for be payable altogether as to time and amounts in the discretion of my executors or trustees, my object being that my wife shall first be provided for in such amount as they think sufficient.”
When the entire instrument is considered in the light of tax factors involved and the financial circumstances of the tetator and all members of his family, I cannot help but conclude that the testator not only intended that his affluent sons should have the power to accumulate and allocate to the corpus whatever they saw fit, including capital gains from the sale of stock, stock splits and stock dividends, and, moreover, contemplated that they would do so, and, hence, the provision in Item III for the distribution of any accumulated undistributed income in the same manner as the corpus.
I conclude that the estate here has been treated by the trustees in accordance with the manifest intention of the testator and reach a discussion of the Cothran decision only because a majority of the court is of the view that such is controlling with respect to at least the stock dividends in the instant case. We are asked by the respondent trustee to overrule the Cothran decision. The factual showing made, as well as the briefs of counsel, to my mind require, on the part of this court, at least a careful analysis and reexamination of that decision, which I hall now undertake.
The appeal in that decision reached us on the pleadings without the benefit of.testimony (such as the record here contains), as to the practical difficulties, inequities, impossible situations, and unwarranted financial burden on the trust estate itself, which frequently result from efforts to apply the apportionment rule in modern day trust adminis*19trations. Unfortunately, that case was not as fully briefed as it might have been. A petition for rehearing brought to the attention of this court matters not pointed out in the original briefs, and two members of this court were of the view that a rehearing should have been granted.
Of course, no one can now say with any degree of certainty what the result would have been had the records and briefs been as full and complete in the Cothran case as they are in the instant case. I consider it more than likely however, that in such event the opinion in the Cothran case would have at least been to some extent modified. The opinion as filed in that case, as I construe it, was based primarily on the doctrine of stare decisis, rather than any logic, justice or equity of the Pennsylvania rule. The opinion has clear support in prior decisions of the court, but it is certain that the court had not theretofore broadly, or eo nomine, adopted the Pennsylvania rule, although it had in effect, applied it to the circumstances of the cases upon which Cothran was predicated. In Cothran we referred to criticism of the Pennsylvania rule, but applied it to the extent that it had been applied prior thereto in this jurisdiction.
A review of the authorities from other jurisdictions will show the many, many problems which the courts have been confronted with and have endeavored to solve in the application of the Pennsylvania rule to modern day trust transactions. They have been required to evolve many subsidiary or ancillary rules in an effort to apply it to given situations with any degree of justice or equity. Fortunately, we have not been so far confronted with these difficult and complicated problems and consequently have not been called upon to adopt, follow or reject the rules of law evolved by other courts in their efforts to justly apply the Pennsylvania rule. The record here strongly indicates that the inevitable result of any broad adherence to the Pennsylvania rule in this case will be the creation of many problems which trustees, and eventually this court, will have to endeavor to solve in an effort to do justice.
*20The Pennsylvania rule is a rule of construction and not a rule of property. Re Allis’ Will, 6 Wis. (2d) 1, 94 N. W. (2d) 226, 69 A. L. R. (2d) 1128 (1959); Re Catherwood’s Trust, 405 Pa. 61, 173 A. (2d) 86 (1961); Re Arens, 41 N. J. 364, 197 A. (2d) 1 (1964). In the circuit court decree in Wallace v. Wallace, 90 S. C. 61, 72 S. E. 553, quoted in the opinion in the Cothran case, the rule is referred to as “the equitable rule of apportionment.” In brief, the Pennsylvania rule as originally adopted was simply a rule of construction by which the court attempted to do equity between life beneficiaries and the remaindermen, where the trust instrument was completely silent as to the intention of the trustor with respect to allocation between corpus and income. Under the circumstances existing at the time of its origin, the rule was simple in application, reached an equitable result, and a result which most likely the trustor would have intended had he seen fit to express an intention thereabout. In Cothran, instead of the record and briefs showing any real difficulty or inequity from the application of the rule, it was stipulated that it would only be necessary to have an accounting in accordance with applicable legal principles “with reference to which little controversy, if any, is anticipated.” In all of our prior decisions upon which the Cothran decision was based, apportionment between corpus and income posed no difficulty, worked no patent inequity, and it could not be said that the result reached was at variance with what the trustor would likely have desired had he seen fit to more clearly express an intention.
It is my considered view that if it be necessary to resort to the Cothran decision to decide this controversy, that such decision should not be followed beyond the absolute requirements of the doctrine of stare decisis. It should not here be broadly reaffirmed and, in effect, extended beyond the scope of that case. In brief, if the doctrine of that case is to be followed, it should be restricted to cases where the application of the so-called Pennsylvania rule is relatively simple and feasible, in which no substantial inequity to the remain*21dermen would result, and, moreover, to cases where it is at least reasonably clear that the result reached would not be the very last thing that the testator would have wanted had he seen fit to more clearly express his intention.
In the instant case, the record sufficiently shows, I think, that considerable difficulty would be encountered in attempting to apply the rule; that quite substantial expense to the estate would be involved in its application, and that in some instances portions of the estate would likely be heavily burdened with taxes, results clearly not contemplated or intended by John W. Arrington. Could he possibly have foreseen any such result, the only reasonable inference from the will itself and the record is that he would have been quite specific in using language to insure avoiding such a result.
There are additional reasons why the appellant should not here prevail. It is my considered view that Polly P. Arrington has no standing in law or equity to challenge the decision of the lower court. She and she alone challenges the holding. All other parties, whether remaindermen, or heirs, or devisees of life tenants, seem completely satisfied with the handling of the trust estate by the several trustees, and the disposition of the matter by the lower court..
Let us consider precisely the situation of the appellant. Her only interest in the controversy is as a devisee under the will of her husband, Nelson P. Arrington, the last of the three trustee brothers to die. It is elementary that as such she can have no higher standing or right than did Nelson Arrington at the date of his death. Nelson Arrington served as trustee longer than anyone else. The trust had been in existence for more than fifteen years before the present trustee had any connection therewith. Nelson Arrington occupied the position of both a trustee and a life beneficiary. He obviously attempted to carry out what he construed to be the intent of his father and throughout participated in allocating the capital gains, stock splits and stock dividends to the corpus of the estate.
*22Quite pertinent to the equities of the case, I think, is the fact that when Nelson Arrington died he left an estate in excess of $800,000, and left a will providing for his widow, the appellant, Polly P. Arrington. Nelson Arrington, as a life beneficiary and as a trustee over a period of more than twenty years, having treated the stock dividends, etc. as corpus, it is reasonable to infer that, in providing for his widow in his will, it was contemplated by him that a one third share of these stock dividends would pass to his children as remaindermen, under the trust estate, tax free.
Following the death of Nelson P. Arrington, his widow now seeks to repudiate what he has done, as trustee and life beneficiary, and at the expense of her children obtain greater wealth than was ever contemplated by Nelson Arrington. She does so despite the inequities resulting to her own children and the other parties to this action; and without regard to the financial burden which will be cast upon the estate in complying with the apportionment rule, or the inequities and burden resulting to the present trustee in being required to undo and reconstruct what Nelson P. Arrington did, or participated in doing over a period of some twenty-six years, the greater portion of which elapsed prior to the present trustee being appointed a co-trustee. The so-called Pennsylvania rule is supposed to be an equitable rule of apportionment. If appellant has any equity on her side, the record does not disclose it.1
The complaint in this action alleged, inter alia, that the three trustee brothers having treated the gains and stock dividends as corpus, those claiming under them were es-topped to question their treatment of such items. Such plea was, I think, clearly well founded under all applicable principles of law. The lower court found it unnecessary to pass *23on the issue of estoppel, and such has not been argued before this court. We reach the issue, however, for two reasons. We are always at liberty to affirm the judgment of the lower court on any ground appearing in the record. Supreme Court Rule No. 4 (8). Additionally, there are minors involved, individually and as a class representing other minor great grandchildren of the testator. They have not appealed, the lower court decision being favorable to them. It is the duty of this court to see that the rights of minors and incompetents are protected. Cumbie v. Cumbie, 245 S. C. 107, 139 S. E. (2d) 477 (1964).
To state the question narrowly and to the point, is one claiming under a trustee of a trust estate estopped to challenge the good faith acts of the trustee? New courts have apparently had occasion to consider the precise question, but all decisions coming to the attention of the writer are to the effect that such a person is estopped. There are at least two decisions in which the trustee was not only a trustee but also a life beneficiary, as was Nelson Arrington here. In both instances the person claiming under the trustee was held to be barred. Scullin v. Clark, 242 S. W. (2d) 542, 29 A. L. R. (2d) 1024 (Mo. 1951); Re Lindsay’s Will, 11 Misc. (2d) 374, 109 N. Y. S. (2d) 600 (1952). Both of these cases involved allocations as between principle and income. In the case of Hopkins v. Cleveland Trust Co., 163 Ohio St. 539, 127 N. E. (2d) 385 (1955), the Supreme Court of that state held,
“It is a well established principle of law that a sui juris beneficiary or a co-trustee who consents to, confirms or acquiesces in a claimed breach of trust in making certain allocations to corpus rather than income is estopped to claim a breach of trust growing out of the action of the trustee in that regard.”
Research discloses to me no authority to the contrary to those just above cited. While not directly in point, it was the view of the court in Blake v. Jones, 8 S. C. Eq. (Bail.) *24141 (1830), that an executor who takes custody of property in his representative capacity is estopped to deny that it is property of the estate. It would seem to follow logically that, were Nelson Arrington today alive, he would be estopped to belatedly claim as income, for his personal benefit, assets which he so long regarded and treated as corpus of the estate. His widow claiming under him, of course, stands in no better position.
In the Blake case, just above cited, the court was concerned with the title to certain stock issued to a Major Goodwyn as administrator of his wife’s estate. We quote the following from the opinion of the chancellor, concurred in and affirmed on appeal,
“Indeed, if it were, expressly shown, that the property, for which this stock was obtained, was wholly and exclusively Major Goodwyn’s, I should be inclined to think that his taking the stock, as administrator, made it her estate. Certainly, it would be evidence enough against him.
The conclusion would be, that he intended, in this way, to make a provision for his children.”
In the instant case, aside from the manifest intention of the testator, the conclusion is inescapable that Nelson P. Arrington, as life beneficiary entitled to one third of the income, by his treatment of the stock dividends, intended no benefit to himself or his widow therefrom, but, to the contrary, intended that his interest in such pass to his children, tax free, upon termination of the trust.
To summarize, my conclusions are as follows:
1. This trust estate has been administered in accordance with the manifest intention of the testator.
2. There is, accordingly, no need to resort to the Cothran decision, but if resort thereto be had, it should not be followed or applied beyond the requirements of. the doctrine of stare decisis, and, hence, has no application to the instant case which is clearly distinguishable in fact and in equity.
*253. That, in any event, the appellant, Polly P. Arrington, is estopped to challenge the acts and determination of her husband, Nelson P. Arrington, under whose will she claims.
If the appellant be not completely estopped, I think she should at least be estopped from requiring the trustee to investigate and unravel the many transactions which took place over a period of more than fifteen years prior to the bank becoming a trustee. All parties are now deprived of the benefit of the testimony of the three brothers as to how and why they handled the various transactions as they did.
The rationale of the Pennsylvania case of Re Wilbur's Estate, 334 Pa. 45, 5 A. (2d) 325 (1939), clearly supports the conclusion that the appellant here should at least be barred from requiring the present trustee to go back of the date of its appointment and apply the apportionment rule to transactions consummated prior to its appointment.
I would affirm the judgment of the lower court. ■
Brailsfosd, J., concurs.

 Appellant is depicted in the inequitable role in which her appeal, of necessity casts her; no personal reflection being intended. In fairness to her, it has come to the attention of the court, dehors the record and subsequent to the filing of opinions herein, that appellant in fact desires neither personal gain nor inequitable results, but appealed solely on the advice of counsel that an appellate decision of the issues herein was essential to the determination of certain ancillary questions.