60 A.2d 366 | Pa. Super. Ct. | 1948
Argued March 23, 1948. The income beneficiaries, life tenants of a trust under the will of Margaret E. McCarty Jones, deceased, have appealed from the refusal of the learned auditing judge to require the trustee to compensate them for loss of income resulting from two nonlegal investments by the trustee and the disapproval of their claim for counsel fees. The losses resulted in the trustee being surcharged in the respective amounts of $6650 and $6140.
The learned auditing judge, in dismissing appellants' exceptions to his failure or omission to compensate them for loss of income, said: "At no time, in no manner, was claim made by anyone, for interest not reported in the accounts. No basis was provided for computation, if a *131 surcharge had been sought. The request now made is in disregard of the requirements of our rules of court, and comes too late." The general rule applicable in such cases, stated in 65 C.J. Trusts, § 711(2), is as follows: "As a general rule a trustee is chargeable with interest where he makes improper investments in violation of his trust or fails to use proper care in selecting investments, . . ."; and in Restatement, Trusts, § 210:
"(1) If the trustee purchases with trust funds property which it is his duty not to purchase, the beneficiary can
"(a) charge him with the amount of the trust fund expended in such purchase, with interest thereon; . . ." (Emphasis added.)
The record discloses that exceptants obviously were contending for both loss of principal and income. The broad statement of the auditing judge that "At no time, in no manner, was claim made by anyone, for interest . . ." is not supported by the facts; and, so far as no basis for computation having been provided "if a surcharge had been sought," it is well established that the income which it is estimated would have been obtained from a proper investment of the funds for which the trustee has been surcharged may be figured upon the basis of interest or of an average trust income on legal investments. Trusts and Trustees, Bogert, vol. 3, part 2, page 446, § 708; Ihmsen's Appeal,
The statement that "The request now made is in disregard of the requirements of our rules of court, and comes too late" has reference to the rule requiring objections *132 to an account filed to be in writing. Written objections had been filed by the guardian and trustee ad litem for the minor remaindermen and, as stated by the auditing judge, "The exceptants were permitted to join in the objections by the ad litem . . . and joined in the argument thereon." It was stipulated by and between counsel representing all parties in interest "re objection to the first account" of the trustee that ". . . the sole [remaining] question to be judicially determined in regards to this investment [for which accountant was surcharged in the sum of $6140] is whether or not, by the terms of the mortgage indenture, the trustee was exempted `from responsibility for performing the ordinary duties of trustees' . . . and further if the Court find that by the terms of the mortgage indenture the trustee was so exempted whether or not the trustee in this estate should be surcharged for the subsequentloss incurred on the investment." (Emphasis added.)
To hold that "subsequent loss incurred on the investment" applied only to principal, places, in our opinion, an entirely too narrow interpretation upon the language used. It is broad enough to cover both loss of principal and loss of income and is additional evidence in support of appellants' contention that it was clearly understood by all parties in the court below that they were contending for loss of income as well as for loss of principal.
Hemphill's Appeal,
In Landis v. Scott,
The first and second assignments of error will be sustained, and the fourth assignment will be sustained in part.
The third assignment is to the failure and omission of the auditing judge to allow a counsel fee to counsel for the life beneficiaries out of the corpus of the trust estate. It has repeatedly been held that "The allowance or disallowance of counsel fees rests generally in the judgment of the court of the first instance and its decision will not be interfered with except for palpable error: Foulke's Estate,
The objections in which the income beneficiaries joined were filed by the guardian ad litem for the minor remaindermen. He was allowed a counsel fee for the services rendered by him in procuring a surcharge, and his services were largely paralleled by those of the attorneys for the appellants. In Long's Estate,
"In Harrison's Est., supra, the court distinguishing the case from Kennedy's Est.,
The third assignment will be overruled.
The first and second assignments of error are sustained, the third assignment is overruled, the fourth assignment is sustained in part, and it is ordered that each of the appellants be awarded the additional sum of $2175; the decree as modified is affirmed; costs to be paid by accountant.