OPINION BY MR. JUSTICE ALLEN M. STEARNE, June 27, 1951:
A corporate fiduciary presents a "test case" seeking to induce this Court to overrule a long line of cases extending for over a century and a half which established principles of fiduciary compensation. The appeals are an effort to induce a general revision of the compensation of trustees. It constitutes an almost perennial attempt by corporate fiduciaries to secure increased compensation and also interim commissions on principal.
The Philadelphia Orphans' Court decided that it was bound by the many decisions of this Court. It declined to award additional compensation requested by appellant, although expressing the opinion that the request appeared to them to be just and reasonable. It is urged by the able counsel for the trustee — but
Ella Williamson, testatrix, died February 15, 1930. Her will, dated January 5, 1925, probated by the Register in Philadelphia County, provided (tenth item) that after payment of various legacies a trust of $40,000 be erected with appellant as trustee, whereunder Margaretta C. Anthony was to receive the income for life and upon her decease the principal of the fund was to fall in and become part of the residuary estate. Under the twelfth item of the will the residue was directed to be held in trust by the appellant-trustee to pay the income to named great nieces and great nephews for their lives and upon the death of each to pay the principal to his or her descendants absolutely. The appellant and testatrix's nephew, Edward C. Dale, were named, and thereafter qualified, as executors of the will. The original record discloses that the first account of the executors was filed on October 30, 1930 and audited by President Judge LAMORELLE who filed his adjudication December 13, 1930. In the account a credit was taken by the executors of $5961.44 "commissions 3% on $198,714.69 principal" and $215.75 "commissions 5% on $4314.92 Income". By the schedule of distribution, approved June 13, 1932, $40,000 (in scheduled securities) was assigned to appellant as trustee for Margaretta C. Anthony (the trust herein accounted for) and to appellant as trustee of the residuary estate of $62,486.93 composed as therein indicated.
Appellant, as trustee for the Margaretta C. Anthony trust, filed its account stating in its petition for distribution
The account was audited by Judge KLEIN who said in his adjudication: "These proceedings have been undertaken by the accountant as in the nature of a test case, in an endeavor to change the long established rule in Pennsylvania which prohibits a trustee from charging commissions against principal, in the absence of the performance of extraordinary services, until the termination of the trust or the termination of the trustee's connection with the estate."
It is also stated in the adjudication: "By note attached to page 2 of the supplemental account annexed hereto the accountant requested additional credit for an item stated to be `not yet expended' and designated `compensation to Fidelity-Philadelphia Trust Company' in the sum of $3,000. It appears from the printed brief of counsel for the accountant, page 8, that the said sum of $3,000 `represents the aggregate of requests for compensation (a) with respect to services rendered in the Anthony Trust in the amount of $1,200 (as to which no credit was taken in the Anthony Account, reservation of the accountant's right to claim same having been recognized in the adjudication of the present Auditing Judge of even date herewith in that trust) and (b) with respect to services rendered to the Residuary Trust, less the principal of the Anthony Trust, in the amount of $1,800' (parenthesis supplied). The statement of proposed distribution requests the Auditing Judge to approve the trustee's request for such compensation."
Also: "In addition to the commissions claimed by the accountant at this audit, as recited above, the
The learned auditing judge expressed his opinion that while the trustee's request for additional compensation was "entirely reasonable" he declined to award it because of the many decisions of this Court to the contrary. He said: "As a court of first instance, we have no right to ignore the decision of the Supreme Court on an issue which has been so squarely decided. Until such decisions have been overruled by the Supreme Court itself, or the law changed by the Legislature, it is the law of this Commonwealth, and must be respected and followed: (citing cases)."
Upon exceptions, the court in banc refused to reverse the auditing judge's ruling that the established rule in Pennsylvania prohibits a trustee from charging commissions against principal in the absence of the performance of extraordinary services until the termination of the trust or the termination of the trustee's connection with the estate. Judge HUNTER, speaking for the court, said: "The Judges of this Court are of the opinion that the rule forbidding interim compensation should be abrogated, but agree with the Auditing Judge that until it has been overruled by the Supreme Court itself, or the law changed by the Legislature, it is the law of this Commonwealth, and must be respected and followed." (Italics supplied) Judge LADNER (now a Justice of this Court) wrote a concurring opinion joined in by Judge BOLGER. He stated that he joined in the result but did
The case has twice been argued before us. The first argument was upon the merits. The re-argument was limited to the question whether the Act of April 10, 1945, supra, repealing section 45 of the Fiduciaries Act of June 7, 1917, supra, operated retroactively.
The learned court below accurately stated the existing law relating to compensation of fiduciaries in Pennsylvania and concerning which there is no dispute. Contradistinguished from the early English cases, in Pennsylvania, fiduciaries have always been held to be entitled to fair and just compensation for services rendered. The Legislature, by the Act of June 14, 1836 P.L. 628 sec. 29, 20 PS, 3271, enacted that
While as a matter of convenience the compensation of a fiduciary may be arrived at by way of percentage, the true test is always what the services were actually worth and to award a fair and just compensation therefor: Montgomery's Appeal, 86 Pa. 230; Bosler's Estate, 161 Pa. 457, 29 A. 57; Harrison's Estate, 217 Pa. 207, 66 A. 354; O'Brien's Estate, 59 Pa.Super. 19; Miller's Estate, 132 Pa.Super. 437, 1 A.2d 523.
While ordinarily five percent has been held to be a reasonable allowance, to such rule there must be exceptions where the amount is small, or where it is large: Pusey v. Clemson, 9 S. & R. 204; Gyger's Appeal, 74 Pa. 48; Gilpin's Estate, 138 Pa. 143, 20 A. 713. It has been argued that the rule of percentage may work an injustice, for example: if five per cent commissions are allowed in an estate of $100,000, but only three per cent if it exceeds that amount, a fiduciary would receive $5,000 commissions on an estate of $100,000 but only $3,150 if perchance the estate would be valued at $105,000. But, as above stated, percentage is used only as a matter of convenience as an initial guide or thumb rule. The matter rests upon the discretion of the auditing judge: Strickler Estate, supra, and cases therein cited. See the large collection
Attempts have been made to have this Court decide that graduated commissions may be allowed to fiduciaries. We have declined to do this and have decided that there can be no graduated commissions diminishing in higher brackets: Gardner's Estate, 323 Pa. 229, 185 A. 804. Cf. Frick's Estate, 13 D. & C. 536 (GEST, J.).
We have repeatedly decided that except in extraordinary or unusual circumstances a trustee is to be compensated only at the termination of the trust or at the ending of the trustee's connection therewith: Bosler's Estate, 161 Pa. 457, 29 A. 57; Thouron's Estate, 182 Pa. 126, 37 A. 861; Penn-Gaskell's Estate (No. 1), 208 Pa. 342, 57 A. 714; Snyder Estate, 346 Pa. 615, 31 A.2d 132; Kennedy Trust, 364 Pa. 310, 72 A.2d 124. No interim commission on principal is originally allowable under the law so declared. Where, however, extraordinary services are rendered, or unusual labor is entailed, an immediate allowance is permissible: Thouron's Estate, 182 Pa. 126, 37 A. 861; Penn-Gaskell's Estate, (No. 1), 208 Pa. 342, 57 A. 714; Powers' Estate, 58 D. & C. 379.
The Legislature by the Act of March 17, 1864 P.L. 53, provided: "That in all cases, where the same person shall, under a will, fulfill the duties of executor, and trustee, it shall not be lawful for such person to receive, or charge, more than one commission. . . ." This provision was re-enacted by section 45 of the Fiduciaries Act of June 7, 1917, P.L. 447. Such statutory provision was enforced by the appellate courts: Hill's Estate, 250 Pa. 107, 95 A. 426; Spark's Estate, 127 Pa.Super. 364, 193 A. 449, affirmed in 328 Pa. 384, 196 A. 48. This section of the Fiduciaries Act was repealed by the Act of April 10, 1945 P.L. 189,
In modern trust administration, professional corporate fiduciaries perform an important function. It undoubtedly would be against public interest if, because of lack of profit, corporate fiduciaries were required to discontinue their service. Yet it must not be overlooked that in fixing compensation of fiduciaries we are required to consider the situation not only of great corporations doing an enormous trust business in large cities, but also the smaller corporations in less populous areas. The same rates of compensation equally apply to individuals and corporations. It should only be if absolutely necessary and in justness and fairness, that compensation of fiduciaries in trust estates should be presently increased, especially since during the past quarter of a century, which included a tremendous financial depression and two major wars, the net return of income to trust beneficiaries has been progressively diminishing and the value of corpus is so frequently found to have greatly shrunken, and in many cases disappeared. In extreme cases, in trusts of unusual duration, the entire principal could be greatly diminished or even consumed by the annual allowance of a trustee's commission upon principal. For example, the record in Curran's Estate, 310 Pa. 434, 165 A. 842, discloses that, in a charitable trust, testator directed the accumulation of income until the corpus (p. 436) ". . . shall yield annually thirty thousand dollars. . . ." A calculation will demonstrate that testator obviously contemplated a period of approximately 100 years before such result could be attained. Solely because of the wise action of the fiduciary in entering into an extremely profitable improvement lease, only 35 years elapsed before the desired result was accomplished. Had such beneficial lease not been taken, and had the fiduciary annually received one-half of one per cent
The principles relating to fixing the amount of compensation to fiduciaries as determined by this Court and the Legislature over the past 150 years, have become firmly established. It may well be that present conditions demand that the system requires general revision. If this be true, such radical change should be made by the Legislature and not by the Court. We decline to overrule the host of our decisions over such a long period. We agree with Judge LADNER that even before a change of such magnitude should be enacted by the Legislature, there should be a wide and searching investigation by a legislative committee concerning the entire subject matter, including not only the situation of all corporate fiduciaries but of individual fiduciaries as well.
Nor do the facts in the present case present an appropriate vehicle for overruling the cases hereinabove referred to even were we disposed to do so. The Act of April 10, 1945, supra, repealing section 45 of the Fiduciaries Act of 1917, supra, which prohibited the same individual from receiving commissions both as executor and trustee may not be applied retroactively. Appellant, the corporate fiduciary, accepted this trust in 1930 under the law as it then existed. It was paid in full (except for commission thereafter received by it on income it received and distributed). Such acceptance fixed the rights, liabilities, exemptions, defenses and expectations of both life tenant and remaindermen. Their rights were vested under what necessarily is an implied contract. Such rights having vested, and appellant having been paid in full, the imposition of additional compensation under a retroactive interpretation of this statute would be unconstitutional under the
Appeals dismissed; decrees affirmed at the cost of appellant.
Mr. Justice LADNER, having sat in the court below, did not participate in this opinion.
CONCURRING OPINION BY MR. JUSTICE BELL, July 3, 1951:
Mr. Justice STEARNE has written a very able exposition of the existing law and has decided that the Act of April 10, 1945, is not retroactive and therefore the decree of the Orphans' Court must be affirmed. With all of this I fully concur; but at that point we part.
This was a test case to secure increased compensation for a trustee who had also been executor, as well as to secure interim commissions on principal; incidentally involved were a number of related and important questions. These questions or problems have been vexing fiduciaries, laymen, the bench and the bar.
There has been a very great change in conditions in recent years, and it is trite but true to say that changing times and conditions sometimes require changes in our law. The adage of Sir Edward Coke is particularly appropriate: "Reason is the life of the law." I believe that if the reason for a rule or principle of law no longer exists and changed conditions have made it unwise or unjust, to continue it unchanged only brings the law into public disrepute. If the law is judicially made, it can, and if no property or contract
Because the questions presented in this case are of such great importance to the community, this Court should, in my judgment, avail itself of this opportunity to (a) change or modify several rules or principles which are now, because of changed conditions, producing inequity or injustice; and (b) erect certain new modern standards for the guidance of all parties who are or may be concerned.
Section 45 of the Fiduciaries Act of June 7, 1917, supra, provided that "In all cases where the same person shall, under a will, fulfill the duties of executor and trustee, it shall not be lawful for such person to receive or charge more than one commission . . .".
The first question to be decided is: Was the Act of 1945 which repealed Section 45 of the Fiduciaries Act, retroactive or prospective; and if prospective, to what did it apply?
"`It is a sound and well-settled principle of statutory construction that no law shall be construed to be retroactive unless clearly and manifestly so intended: Painter v. B. & O.R.R. Co., 339 Pa. 271; Farmers N. Bk. & Tr. Co. v. Berks Co. R.E. Co., 333 Pa. 390, 393; Taylor v. Mitchell, 57 Pa. 209. Cf. Article IV, Section 56, of the Statutory Construction Act of May 28, 1937, P.L. 1019 . . .': Com. ex rel. Greenawalt v. Greenawalt, 347 Pa. 510, 512, 32 A.2d 757.": In Re: Petition of Bowie Coal Company, 368 Pa. 102, 82 A.2d 24.
"When an act is changed or repealed . . . or when the words or meaning of a statute are not explicit or clear, the intention of the legislature is to be gathered not only by a consideration of the new act but also by examining the occasion, reason or necessity for the law; the circumstances under which it was enacted;
The next question that arises is: What compensation is a trustee entitled to and how is it to be computed? By the Act of June 14, 1836, P.L. 628, § 29, supra, "It shall be lawful for any court . . . to allow such compensation to . . . trustees . . . for their services, as shall be reasonable and just". This was merely a declaration of the standard or rule for determining compensation of fiduciaries, which rule has been by now so long and well established that it is universally recognized as the bedrock on which compensation must always be based: Montgomery's Appeal, 86 Pa. 230, 234, 235; Harland's Appeal, 5 Rawle 323, 330; Pusey v. Clemson, 9 S. & R. 203, 208; Taylor's Estate, 281 Pa. 440, 443, 126 A. 809; Harrison's Estate, 217 Pa. 207, 210, 66 A. 354; McCaskey's Estate, 307 Pa. 172, 182, 160 A. 707; Davidson's Estate, 324 Pa. 90, 96, 186 A. 796; Crawford Estate, 340 Pa. 187, 197, 16 A.2d 521; Reid's Estate, 250 Pa. 103, 95 A. 392. What is reasonable and just, or as it is sometimes expressed, fair and just compensation is a matter for the
In accordance with the objects sought by the repeal of Section 45 of the Fiduciaries Act, namely, to allow a trustee to receive increased or additional compensation, I would carry out the legislative intent and give recognition and effect to the vastly changed conditions which we all know have occurred in the last 15 years. To accomplish these objectives, I would allow the Orphans' Court to fix a trustee's compensation with only three qualifications or limitations: (1) that it must be reasonable and just; (2) that it can be awarded only under proper circumstances and at a proper time; and (3) that it is, of course, subject to review by the appellate courts. Compensation, popularly and frequently referred to as commissions — although compensation, not commissions, is the correct and proper standard: McCaskey's Estate, 307 Pa. 172, 182, 160 A. 707; Harrison's Estate, 217 Pa. 207, 209, 66 A. 354; Gardner's Estate, 323 Pa. 229, 238, 185 A. 804; Montgomery's Appeal, 86 Pa. 230, 234, 235 — is often determined or "arrived at as a matter of convenience by way of a percentage . . .": Montgomery's Appeal, 86 Pa. 230, 234; Harrison's Estate, 217 Pa. 207, 209, 66 A. 354; Bosler's Estate, 161 Pa. 457, 462, 29 A. 57; Taylor's Estate, 281 Pa. 440, 443, 126 A. 809. Notwithstanding these authorities, we decided in Gardner's Estate, 323 Pa. 229, 239, supra, that the court cannot fix the compensation by way of commissions on a sliding scale or on a graduated percentage basis. Since this is merely a convenient rule-of-thumb method of determining and fixing compensation, it seems to me that there is neither reason nor necessity for continuing the prohibition which Gardner's Estate unnecessarily and unwisely established.
How large can a trustee's compensation be? Every man, woman and child in America knows that what was reasonable and just compensation in 1900 or in 1910 or in 1920 or in 1938 is — because of the tremendous increase in the cost and expenses of everything — not just or adequate today. I would, therefore, remove, as far as future cases are concerned, the 3% ceiling which apparently was fixed in estates of $500,000. or over by our decision in Gardner's Estate, 323 Pa. 229, supra, and in Quigley's Estate, 329 Pa. 281, 198 A. 85; and I repeat I would allow the Orphans' Court initially to determine what was reasonable and just compensation in accordance with the standards herein established. In determining what is fair and just compensation, consideration should be given, in my judgment, not only (a) to the services rendered by the trustee (as hereinabove more particularly detailed); but also (b) to the number of trustees, if there be more than one, (not forgetting the interest and right of an individual trustee to reasonable and just compensation in accordance with his ability, services and responsibility); and (c) to the interests, rights and welfare of (life tenants and) remaindermen who, as compared with the fiduciaries, were undoubtedly the primary objects of testator's interest and concern.
The trustee likewise desires a modification of our long established rule which forbids interim compensation even during a long trust: Bosler's Estate, 161 Pa. 457, 29 A. 57; Snyder Estate, 346 Pa. 615, 622, 31 A.2d 132.
One other important question remains to be considered. The majority opinion interprets the effect of
While the question of whether any rights had vested in this case may be a close one (Cf. Nirdlinger's Estate (No. 2), 327 Pa. 171, 193 A. 30; Nirdlinger's Estate, 331 Pa. 135, 200 A. 656; Farmers N. Bk. & Tr. Co. v. Berks County R.E. Co., 333 Pa. 390, 5 A.2d 94; Levy's Estate, 333 Pa. 440, 5 A.2d 98; Demorest v. City Bank Farmers Trust Co., Trustee, 321 U.S. 36, 64 S.Ct. 384; Crawford Estate, 362 Pa. 458, supra) I would hold that if any rights had vested by an implied contract or by the payment of a commission to an executor-trustee for his services in that dual capacity, they would not be violated by awarding to such a trustee additional compensation if the compensation he had theretofore received was not reasonable and just.