Scholler Trust

169 A.2d 554, 403 Pa. 97, 1961 Pa. LEXIS 424
CourtSupreme Court of Pennsylvania
DecidedMarch 23, 1961
DocketAppeals, Nos. 272, 274, 275, 276, 277 and 278
StatusPublished
Cited by32 cases

This text of 169 A.2d 554 (Scholler Trust) is published on Counsel Stack Legal Research, covering Supreme Court of Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Scholler Trust, 169 A.2d 554, 403 Pa. 97, 1961 Pa. LEXIS 424 (Pa. 1961).

Opinion

Opinion by

Mr. Justice Cohen,

'These are appeals from the decree of the Orphans’ Court of Philadelphia County dismissing exceptions to an adjudication sustaining the charitable nature of a trust.

The Scholler Foundation was created by the inter vivos deed of trust dated June 22, 1939 of Frederick C. Scholler, who was unmarried and without issue. His five brothers had died without issue prior to 1939 and his only close relative, a maiden sister, died a year later. When the trust was created the settlor was, for all practicable purposes, the only shareholder of Scholler Brothers, Inc. which in turn owned Scholler Brothers, Ltd., a Canadian subsidiary, and [99]*99Trisco Products, Inc. (Scholler Corporations). The settlor served as president of the Philadelphia Textile Institute Foundation, vice-president of the LaSalle Foundation and a director of Northeastern Hospital.

The important provisions of the deed of trust can be summarized as follows:

The settlor first recited his desire “to create a fund, the income of which shall be used .for the benefit of mankind; to set up a charitable entity to which I may ultimately transfer all my shares of stock in [the Scholler Corporations] . . .” so that the income derived from these shares and from other property added to the trust “will be used for the benefit of mankind. . . Therefore, in his words, he established, “a charitable trust to be known as The Scholler Foundation. . . .”

Under the next heading entitled “Transfer of Property” the settlor provided that “In furtherance of my general purposes above described,” he was transferring certain assets to the trustees “. . . to pay and distribute the same for such of the following charitable purposes as the Trustees . . . shall determine. . . .”

The purposes are then described in the following paragraph: “In general, without in any way restricting the charitable purposes for which same may be distributed, for the alleviation of poverty and destitution, for the promotion of scientific research, including research in the various branches of chemistry, for assistance to persons under a physical disability, for enabling needy students to obtain college educations, for the benefit of colleges, universities, churches, hospitals, [and similar charities], and for such other charitable, (literary), [educational and public] .purposes as in the discretion of the Trustees may seem desirable, the distributions, however, not to be limited geographically to the United States of America; (and specifically for the purpose of providing hospitaliza[100]*100tion, medical care, and educational, literary, and recreational facilities for employees and/or former employees of Scholler Brothers, Inc. and/or Scholler Brothers, Ltd. and/or Trisco Products, Inc. and their families, and/or employees of any other corporation, a majority interest in the voting stock of which is subsequently acquired by The Scholler Foundation, or by Scholler Brothers, Inc., or Scholler Brothers, Ltd., or Trisco Products, Inc.)”1 (Emphasis supplied)

There follow long provisions entitled “Covenants by Trustees” and “Powers of Trustees.” The board of directors of his companies were made distinct from the trustees of the Foundation by requiring that after the settlor’s'death a majority of the trustees must be neither directors nor employees of the companies. Then, the deed of trust provided that increases in officers’ salaries had to be approved by the trustees of the Foundation. The deed contains an elaborate formula for a limitation on bonuses paid to officers and employees. The trustees were required to vote for directors nominated by the existing board, provided that the nominations were in good faith. However, the trustees would not be bound by this requirement if the companies operated at a loss for two years or failed to pay prescribed dividends and, in addition, the directors could be removed for incompetence.

These sections of the deed also include a covenant not to sell any stock of a Scholler corporation except upon a two-thirds vote of the trustees and a majority vote of the directors of all Scholler corporations. Other covenants require that a Scholler corporation would not adopt or retain any bylaws which would contravene the provisions of the deed.

[101]*101The next section of the deed of trust, entitled “Revocability” states that, “This trust shall be irrevocable and none of the terms or provisions hereof may for any reason be altered, amended or revoked in any particular. . . .” The final section entitled “General Provisions” contains various miscellaneous provisions including the following severability clause: “The provisions of this Deed of Trust are severable, and if any of the provisions thereof shall for any reason be held to be invalid, such decision shall operate only to eliminate the particular invalid provisions, and the then remaining provisions of the Deed of Trust shall not in any manner be affected thereby.”

The Scholler Foundation was classified by the Treasury Department, in a ruling dated February 19, 1947, as a bona fide charity created and operated “exclusively for charitable purposes” and hence entitled to exemption from taxation under the United States Internal Revenue Code. However, in 1951, when the trustees proposed to transfer to the Foundation the stock of Scholler Brothers, Ltd., a Canadian subsidiary of Scholler Brothers, Inc., they were required to obtain a charitable classification for the Foundation from the Canadian tax authorities. Application was made for such designation but the Canadian authorities questioned certain provisions of the trust under the heading “Transfer of Property.” In particular, objection was made to the latter part of this section which referred to distribution in favor of employees of Scholler Corporations. In response to these objections the deed of trust was amended on August 17, 1951. A second amendment, which made further minor deletions to satisfy additional objections by the Canadian authorities, was adopted on March 17, 1952 2

[102]*102Scboller died on October 5, 1957 domiciled in New Jersey. By bis will dated July 16, 1954 he left tbe residue of bis estate to tbe Scboller Foundation.

In January 1959, persons claiming to be first cousins and beirs of tbe settlor filed a petition in tbe Orphans’ Court of Philadelphia to compel tbe trustees to file an account, alleging that tbe trust was not charitable and violated tbe rule against perpetuities. Tbe trustees filed an account and a bearing was held. Testimony was introduced over objections by tbe appellants, concerning, inter alia, tbe administration of tbe trust and tbe background of tbe amendments of 1951 and 1952.

After an adjudication sustaining tbe trust as charitable, tbe administrator ad litem and beirs filed exceptions which were dismissed by tbe court en banc. These appeals followed.

We are convinced that tbe court below was correct in its ruling that tbe settlor created a valid charitable trust. Since tbe intention of tbe settlor is tbe guide primarily to be followed in construing a deed of trust, Scott’s Trust, 322 Pa. 1, 184 Atl. 245 (1936), we have scrutinized tbe entire record for evidence of such intent. An examination of tbe deed of trust shows that tbe settlor repeatedly used typical and traditional charitable trust phraseology.

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Cite This Page — Counsel Stack

Bluebook (online)
169 A.2d 554, 403 Pa. 97, 1961 Pa. LEXIS 424, Counsel Stack Legal Research, https://law.counselstack.com/opinion/scholler-trust-pa-1961.