175 A. 869 | Pa. | 1934
This appeal is from a decree made at the audit of the account of Peoples-Pittsburgh Trust Company, trustee under a trust agreement. The trust was terminated by appellant, pursuant to the terms of the deed.
On June 2, 1927, the settlor, Helen D. Roberts, now the appellant, paid $2,500 to the trust company as trustee, in trust (1) to invest, reinvest and keep invested in legal investments for trust funds or in such securities as she might direct from time to time; (2) to collect the income and, after deducting the administration costs, to pay the net income to her or as she might direct; on her death, during the continuance of the trust, to pay the principal to her executor or administrator; (3) she had the right to make additions in cash or securities to be held on the same trust; (4) the trustee's compensation was fixed at 5% on the income received, but no charge was to be made on the principal at termination. The deed provided: "It is understood and agreed that this trust shall continue until terminated upon thirty days' notice given in writing by either of the parties hereto, and the Trustee shall thereupon pay over, transfer and deliver unto me the said trust estate in cash for investments made by the Trustee and in the securities directed by me where I have exercised my option so to do, together with any income in hand or accrued thereon." As both parties appear to *547 have construed the provision to mean that the sum payable in cash is the amount of cash principal paid by the settlor to the trustee, and not the cash value of the investment, we accept that construction.
On July 2d, the settlor deposited an additional $2,000, and, in 1933, $500. Between December 3, 1931, and December 12, 1932, she withdrew $1,300 of the principal, leaving a balance of $3,700. The net income was paid to her. On May 4, 1933, she notified the trustee of her desire to terminate the trust and, not having directed any specific investment, demanded payment of the entire principal in cash. The trustee filed its account, showing a balance consisting of a participating interest of $1,200 in a $40,000 mortgage, and $2,500 in an $8,000 mortgage, in both of which the trust company was mortgagee. Both mortgages were then in default as to interest and taxes, and neither could be liquidated for the face amount. The auditing judge decreed payment of the $3,700 in cash, but, on exceptions, distribution in kind was ordered by the court in banc.
The basis of the decree was that the trustee's promise to pay in cash the amount claimed, was ultra vires.
The Peoples-Pittsburgh Trust Company, the trustee, has the powers, inter alia, conferred by the Act of May 29, 1895, P. L. 127 (cf. 15 P. S., sections 2481 et seq.), authorizing it ". . . . . . to take, accept and execute trusts of every description not inconsistent with the laws of this State or of the United States, and to receive deposits of moneys and other personal property and issue their obligations therefor, to invest their funds in and to purchase real and personal securities, and to loan money on real and personal securities."
The trustee does not deny, as, indeed, it could not deny, that it had power to accept the trust and make the investment for the benefit of the cestui que trust. It received and controlled the trust property. It invested in certificates of interest in the mortgages. As the mortgages are in default, it no longer desires to repay the principal as *548 agreed. To justify this breach of obligation, it now asserts the right to divide the contract into two contracts, and to select and deal separately with the provision providing for repayment of principal in cash, and contends that agreement was ultra vires.
It would seem clear that the contention must be rejected, unless the trustee can show that, in exercising its expressly conferred power "to . . . . . . accept and execute trusts of every description," the promise that it would now repudiate was "inconsistent with the laws of this State." The contract is not divisible: Lemmon v. East Palestine Rubber Co.,
In support of the trustee's contention, it is suggested that the contract might be considered as a contract of insurance and, therefore, prohibited. The cases relied on for this proposition do not support it; in Young v. *549
American Bonding Co.,
Reliance is placed on decisions from other jurisdictions in which it is held (to take Federal Land Bank v. Crookston Trust Company,
Appellant also replies to the ultra vires argument by referring to the well-settled rule in this State that, when a corporation has received the fruits of a contract, not malum in se or otherwise prohibited (see Com. v. Irwin Savings, etc., Co.,
We need not refer to the cases on this subject holding otherwise, cited, on behalf of the trustee, from other jurisdictions, because the law on the subject in this State is not only well settled, but in accord with the weight of authority throughout the states.3 We may, however, note that in Commercial Trust Co. of Pittsburgh v. First-Second Nat. Bank of Pittsburgh,
The decree is reversed, and the record is remitted to the end that a decree may be entered in accord with the *551 views here indicated, costs of the appeal to be paid by the appellee.