October 27, 2009
Previously published on October 22, 2009
Anna Fridenberg died in 1940, leaving a will under which she established a perpetual charitable trust that ultimately provided for the distribution of net income for the support of a surgical floor at the Albert Einstein Medical Center. A corporate predecessor to Wachovia Bank served as executor under the will, and Wachovia served first as co-trustee, and eventually sole trustee of the charitable trust.
After the death of the individual co-trustee in 2005, Wachovia filed an accounting for 1978 through 2005, seeking commissions from principal for the time period from 1998 through 2005.
The state attorney general filed 12 objections to the accounting, but eventually withdrew all of them except the one to the additional commissions on the market value of the trust paid out of the trust principal. The attorney general's objection was based on a 1917 statute, in effect at the time of Ms. Fridenberg's death, that prohibited a trustee from receiving a second commission for trust services if the trustee received compensation for services as executor under the will that also established the trust. The attorney general relied on the decision of the Pennsylvania Supreme Court in In re Williamson's Estate holding that the repeal of the 1917 statute was not to be applied retroactively. The Orphan's Court sustained the attorney general's objection based on the Williamson case.
On appeal, the Superior Court reversed on the basis that: (1) the Pennsylvania legislature amended the law in 1953, 1972, 1982, 1984 and 2006, so as to permit compensation based on market value of the trust assets regardless of when the trust was created; and (2) subsequent cases had effectively ended the precedential authority of Williamson.
The court refused to address Wachovia's assertion that the attorney general was improperly challenging, rather than enforcing, state statutes because the court found that Wachovia had failed to raise the issue with the trial court or preserve it for appellate review. The court noted that the attorney general expressly refrained from challenging the facial constitutionality of the state statutes, and that it was the prerogative of the legislature to amend the trust laws to respond to significant historical changes in the nature of trust administration and investment, including the development of total return investing.
The court reversed the Orphan's Court, approved the additional fees, and remanded the case for further proceedings.
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