Killey Trust

326 A.2d 372, 457 Pa. 474, 91 A.L.R. 3d 897, 1974 Pa. LEXIS 858

• Court: Supreme Court of Pennsylvania
• Decided: October 16, 1974
• Docket: Appeal, No. 116
• Status: Published

Opinions

Opinion by

Mr. Chief Justice Jones,

This appeal arises from the final decree of the Orphans’ Court Division of the Court of Common Pleas of Philadelphia sustaining certain exceptions and dismissing certain exceptions to the adjudication entered upon objections to the third account of the Industrial Valley Bank and Trust Company (IVB), successor trustee under an inter yivos deed of trust executed by Jessie A. Killey. The account covered the period from September 22, 1948, to February 16, 1970. The court en banc sustained appellants’ exceptions to certain transactions in United States Treasury obligations in 1962 and exceptions to the allowance of commissions to the trustee and of additional counsel fees. All other exceptions were dismissed. This direct appeal followed.

Appellants, remaindermen under the deed of trust, contend that IVB should be surcharged (1) for its total lack of attention in administering the trust during the period from September 22, 1948, through August 2, 1963, and (2) for failing to communicate with the settlor or any trust beneficiary with reference to their preferences as to investments during the period from August 1963 to February 1970, when the corpus of the trust was invested wholly in IVB’s common trust fund.

Appellants initially claim that the court below erred in dismissing their exceptions because it applied the incorrect standard for judging the propriety of IVB’s stewardship of the trust. We agree. This Court has not heretofore specifically addressed the issue of whether a stricter standard of responsibility should be exacted from trust companies as fiduciaries than from an ordinary trustee. In Linnard’s Estate, 299 Pa. 32, 148 A. 912 (1930), this issue was earnestly pressed; however, the Court, declined to make a ruling on that issue, opining that the record would not warrant any such advance in the law and that “[rjulings which involve enlarged application of established principles to new conditions, and, when subsequently followed, give rise to what become known as new or advanced principles, should be made only in cases where the facts relied on plainly appear and clearly call for such rulings.” Id. at 39, 148 A. at 914. The court below recognized that “a detailed review of this record does indicate that this trust did not receive the attention of the trustee as it should have.” We concur and therefore believe that this case occasions the appropriate opportunity to clarify the standard of care owed by a fiduciary who either has, or procured his appointment by representing that he has, greater skill than that of a man of ordinary prudence, and to eradicate any misconstructions which may have resulted from this Court’s forbearance in Linnard’s Estate.1

Since 1941 this Court has recognized that if a fiduciary has. greater skill than that of a man of ordinary prudence, then the fiduciary’s standard of care must be judged according to the standard of ai man with his special skill. See Stirling’s Estate, 342 Pa. 497, 504, 21 A.2d 72, 76 (1941). See also Lohm Estate, 440 Pa. 268, 273, 269 A.2d 451, 454 (1970); Mastria Estate, 413 Pa. 278, 281 n.3, 196 A.2d 653, 655 n.3 (1964); Glauser Estate, 350 Pa. 192, 196, 38 A.2d 64, 66-67 (1944); Restatement (Second) of Trusts, §174. Today we add that one who procures his appointment as trustee by representing that he has greater skill than that of a man of ordinary prudence will be held to have such skill as he had represented. See Restatement (Second) of Trusts, §174. In the present case, the corporate trustee held itself out as an expert in the handling of estate and trust accounts. It represented itself as being possessed of greater knowledge and skill than the average man. It was therefore under a duty to exercise a skill greater than that of an ordinary man, and the manner in which investments were handled must accordingly be evaluated in light of such superior skill.² E.g., Liberty Title & Trust Co. v. Plews, 142 N. J. Eq. 493, 60 A.2d 630 (1948); Union Commerce Bank v. Kusse, 251 N.E.2d 884 (Ohio Probate Ct. 1969).

We are fully aware of the principle well-settled in this area of the law that one who seeks to surcharge a fiduciary for breach of trust must bear the burden of proving the particulars of his wrongful conduct. Maurice Estate, 433 Pa. 103, 249 A.2d 334 (1969); Lerch Estate, 399 Pa. 59, 159 A.2d 506 (1960). The rationale of the court below was that appellants had failed to discharge their burden of proof and therefore their claims for surcharge could not be sustained. Since that court, in ascertaining whether appellants had met their burden, misconstrued the duty of care incumbent upon the appellee, and since the question of the propriety of surcharging a fiduciary rests in the first instance with the Orphans’ Court Division of the Court of Common Pleas, we remand to the court below for reconsideration in light of this opinion.

We do note that the record in no way supports appellants’ claim that the trust was improperly administered during the period in which the corpus was invested in the common trust fund. Additionally, we dismiss as meritless appellants’ argument that IYB should have consulted the settlor or the beneficiaries regarding investment policy. Consequently, reeonsideration by the court below can be limited to that period commencing September 22, 1948, until and including that time in August 1963 when the entire trust portfolio was liquidated.³

Decree vacated in part and the matter remanded to the court below for proceedings consistent with this opinion.⁴ Costs to abide the event.

1 For instance in Reyburn's Estate, 43 Pa. D. & C. 85 (Phila. O. C. 1942), Linnard’s Estate was improperly cited for the proposition that there is no presumption of greater competence in a trust company than in an individual.

2 As early as 1917 the Orphans’ Court of Lancaster County recognized that “[m]ore today is required of trust companies than the one-time ordinary care, diligence and good faith. Extraordinary care is now expected of them. . . .” Rudy Estate, 35 Lanc. L. Rev. 1 (Pa. O. C. 1917). In a similar vein, this Court in Lohm Estate, 440 Pa. 268, 269 A.2d 451 (1970), found it reasonable to require an attorney to comply with a greater standard of care than a layman, but a lesser standard of care than an attorney experienced in estate tax matters.

3 Since the court did surcharge appellee on two transactions during this period, even though applying a lesser standard of care than that required, these determinations obviously need not be reconsidered.

4 Appellee has filed with this Court a motion to quash the appeal because of appellants’ failure to comply with Rule 41 and Rule 44 of the Rules of the Supreme Court of Pennsylvania. Rule 39 provides that if defects in an appellant’s Brief or Record are substantial, the appeal may be quashed. We do not find the alleged defects to be of a substantial nature and accordingly the motion to quash is denied.