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HomeMy WebLinkAbout02-10-05 IN RE: JOSEPH D. AND JANE W. BRENNER TRUST NO. 21-2003-879 IN THE COURT OF COMMON PLEAS OF CUMBERLAND COUNTY, PENNSYLVANIA ORPHfu~S' COURT DIVISION IN RE: JANE W. BRENNER TRUST UWO "B" NO. 21-2003-881 21-2004-087 IN RE: JANE W. BRENNER TRUST UWO "c" NO. 21-2003-881 IN RE: NANCY B. BLAKELY TRUST NO. 21-2003-883 AUDITOR'S REPORT AND RECOMMENDATION REGARDING ALL OBJECTIONS FILED TO THE HONORABLE JUDGES OF SAID COURT: The undersigned Auditor, being duly appointed by Your Honorable Court, has taken testimony in the above-captioned matters and makes the following report and recommendation. By separate Orders of Court, all being dated December 19, 2003, the Auditor was appointed to hear all objections filed with respect to the above-captioned matters. It is to be noted that the Auditor's appointment was reconfirmed and recommenced by the Order of Court dated October 8, 2004.' This bears note given the fact that the passage of a substantial period of time from the entry of the December 19, 2003 Orders of Court and the October 8, 2004 Order of Court was occasioned by the fact that the Objectors herein had commenced identical or mirror civil complaints, all lThe October 8, 2004 Order of Court was issued in the matter of Joseph D. Brenner, Sr., and Joseph D. Brenner, Jr., and Margaret B. Bushey v. Manufacturers and Traders Trust Company, a New York corporation, David C. Garity, an individual, and Curt R. Stauffer, an individual, 21-2004-087, Orphan's Court. raising substantially the same issues, as are presented in these matters.' The precise procedural history thereof will not be repeated herein. In accordance with the above-referred to Orders of Court, and upon proper notice, the Auditor scheduled and held the audit. The hearings took place over a period of four (4) days, commencing November 2, 2004, and concluding November 5, 2004. A transcript of the proceedings was made, said transcript consisting of 858 pages. Along therewith both Objector and Respondent, through their able counsel, introduced a total of one hundred and nineteen (119) exhibits.] Although the filings in the above-captioned matters, along with the pleadings filed in the above-referred to civil actions, coupled with the lengthy transcripts and numerous exhibits are voluminous, the issues posed by the objections filed herein, in their simplest terms, raise claims as to the breach of fiduciary duties on behalf of Manufactures and Traders Trust Company (hereinafter referred to as, "M&T"), David C. Gority (hereinafter referred to as, "Gority") and Curt R. Stauffer (hereinafter referred to as, 'Stauffer"). Specifically, determinations are 2See Footnote No.1, as well as the compa~ion cases cited the~ein. 3It is to be noted that Exhibit Nos. 37 and 38 were not utilized. All other exhibits, by agreement of Objector and Respondent, are deemed admitted and considered a part of the record of these proceedings. This is not withstanding the fact that numerous exhibits were not specifically mentioned nor referred to by any witness offering testimony in these proceedings or by eithe= the Attorney for the Respondent or the Attorneys for the Objector. Exhibit No. 119 was forwarded to the Auditor by letter dated December 22, 2004 from the Attorney for the Objector. Exhibit No. 119 is also deemed admitted and considered a part of the record of these proceedings. 2 required to be made with respect to the obligation of M&T Bank to deal honestly with its Co-Trustees and to act in the best interests of the Trusts, primarily with respect to decisions related to the TYCO stock. The basis of the objections filed is that M&T, as Trustee and/or Co-Trustee, through its employees, Gority and Stauffer, breached its fiduciary duties while administering the above-captioned Trusts and, as a result thereof, those Trusts suffered certain pecuniary losses. The objections are, in essence, claims seeking a surcharge for an alleged breach of fiduciary duty. A brief summary of the facts are in order. Commencing during the early 1990s, Joseph D. Brenner, Sr. (hereinafter referred to as, "Brenner, Sr.") and his wife, Jane W. Brenner, created several Trusts for the benefit of their children and grandchildren. In or about November 1994, Brenner, Sr. and Jane W. Brenner executed an Irrevocable Agreement of Trust for the benefit of their four (4) children, and, upon the deaths of their children, to their children in turn. Margaret B. Bushey (hereinafter referred to as, "Bushey"), and Joseph D. Brenner, Jr. (hereinafter referred to as, "Brenner, Jr."), being two (2) of the Brenner children, have acted as Co-Trustees since October 1997 of what is referred to as the "Grandchildren's Trust" (Joseph D. and Jane W. Brenner Trust - No. 21-2003-879). In November of 1994, Jane W. Brenner executed three (3) Trusts for 3 the benefit of Brenner, Sr., and the four (4) Brenner children. Since October 24, 1997, M&T and Brenner, Sr. have been Co- Trustees of the "Children's Trusts" (Jane W. Brenner Trust UWO "B" - No 21-2003-881; Jane W. Brenner Trust UWO "C" - No. 21- 2003-881; and Nancy B. Blakely Trust - No. 21-2003-883). Gority, a long-term employee of M&T and its predecessor entities, has had primary responsibility for working with Brenner, Sr., Brenner, Jr., and Bushey as Co-Trustees of the Grandchildren's Trust and the Children's Trusts. Beginning sometime in the fall of 2001, Stauffer was assigned to assist Gority with respect to the administration of the Trusts. For ease of reference, the above- captioned Trusts will be collectively referred to as the "Trusts" . It is important to note that at the inception of the Trusts, the sole asset or corpus of the Trust was AMP, Inc. stock. The AMP stock subsequently became converted to Tyco International LTD stock (hereinafter referred to as, "Tyco"). Discussions, recommendations, determinations and decisions made with respect to retaining or liquidating the Tyco stock have resulted in an interesting and challenging odyssey that resulted in the sale of all the remaining shares of Tyco stock in the Trusts on June 12, 2002. The filing of the within objections followed. For the reasons set forth hereinbelow, this Auditor has determined that M&T, as Co-Trustee, through its employees, Gority 4 and Stauffer, has not breached its fiduciary duties to the other Co-Trustees and to the Trusts. As such, a surcharge is not appropriate. Therefore, it is recommended that the accounts filed by M&T in all of the above-captioned matters be confirmed and, further, that distribution of funds are directed in accordance with those accounts as filed. FINDINGS OF FACT 1. Commencing in the early 1990s, Brenner, Sr. and Jane W. Brenner, his wife, established four (4) Trusts. 2. The Joseph D. and Jane W. Brenner Trust is referred to as the Grandchildren's Trust. The Trustees are M&T Bank, Bushey and Brenner, Jr. (Ex. R-2) 3. The Jane W. Brenner Trust uwa "B" and the Jane W. Brenner Trust uwa "C", and the Nancy B. Blakely Trust are referred to as the Children's Trusts. The Co-Trustees for all of these Trusts are Brenner, Sr., and M&T Bank. (Ex. R-l) 4. All of the Trusts were established with Farmer's Trust Company as the original Trustee. M&T is the present Trustee by virtue of it being a successor to the original Trustee, Farmer's Trust Company and of Keystone Financial, Inc., which had previously acquired Farmer's Trust Company. 5. The Trusts were originally funded exclusively with AMP Stock. (Tr. 431.) 5 6. All AMP shares held by the Trusts were converted to Tyco shares by virtue of AMP being acquired by Tyco International, LTD in 1999. 7. The Tyco stock (formerly AMP) was acquired by Brenner, Sr., during his tenure at AMP. (Tr. 248-249.) 8. Brenner, Sr., is currently 87 years of age. 9. Bushey described her father, Brenner, Sr., as a dynamic individual, being well-educated, charismatic and a well-known business person. (Tr. 19-20.) Brenner, Sr., is a college educated businessman who rose through the ranks to become the Chief Executive Officer of AMP, Inc., a well-known local business. (Tr. 247-248.) 10. Bushey is a highly educated and sophisticated individual who runs a part-time business. 11. Brenner, Jr., is a highly educated and sophisticated individual who is employed by an industry in the Carlisle area. 12. Brenner, Sr., previously served as a director of Farmer's Trust Company (now M&T) and currently serves as a director of Frog, Switch and Company, Inc., of Carlisle, Pennsylvania, a well-known local industry. (Tr. 72, 252.) 13. Brenner, Sr., is best described as having a hands on philosophy with respect to all of the Trusts, notwithstanding the fact that he is not a Co-Trustee to the Grandchildren's Trusts. 6 14. Brenner, Jr., and Bushey deferred to Brenner, Sr., with respect to all dealings with M&T Bank and all decisions made with respect to the retention or disposition of the Tyco stock in these Trusts. (Tr. 437-439, 442-444.) 15. In 1997 Jane W. Brenner died, whereupon Brenner, Sr., entered into a difficult time, same being manifest in a decline in personal hygiene and appearance. (Tr. 16-22.) 16. Shawnee Smith, an M&T Bank employee who worked with Brenner, Sr., since 1987 stated that matters involving Brenner, Sr.'s personal appearance (clothing) seemed to resolve themselves after he met a lady friend sometime before the summer of 2002. (Tr. 787-788.) 17. Although somewhat physically diminished by age, Brenner, Sr., was, throughout the entire proceedings that gave rise to the filing of the objections herein, competent to participate and to, in fact, make decisions with respect to the Trusts. Brenner, Sr., testified, without reservation, that he was and is competent to make financial decisions. (Tr. 291-293.) 18. Gority, a trust officer with M&T Bank and its predecessors for a period in excess of 20 years, has known Brenner, Sr., Brenner, Jr., and Bushey for a period in excess of 20 years. (Tr. 26-28, 429-431.) 7 19. Bushey had a social relationship with Gority, all through and by virtue of being members of a dinner club. (Tr. 456.) 20. Initially, Gority served as Trust Officer for the Trusts, providing both administrative and investment services. 21. Gority's duties and responsibilities became slowly those of an administrative officer after the acquisition of Farmer's Trust Company by Keystone Finanaical, N.A. Those same duties and responsibilities continued through the acquisition of Keystone Financial, N.A. by M&T. In addition, an investment officer was assigned to the Trusts, same being Curt Stauffer. (Tr. 585.) 22. Brenner, Sr., Brenner, Jr., and Bushey were provided with ample notification as to the successor trust companies, as well as the involvement of Stauffer. 23. In February of 2000, the Grandchildren's Trust was, with the approval and acquiescence of Brenner, Sr., partially diversified by the sale of a portion of the Tyco stock contained therein. This was done to increase the income flow to the beneficiaries of this Trust. The proceeds were utilized to purchase tax free municipal bond type investments. (Tr. 434-435.) 24. On August 20, 2000, Brenner, Sr., reaffirmed, in writing, his desire that all shares of Tyco stock be retained in the Trusts. (Ex. R-7 and Tr. 447-448.) 8 25. Commencing during the 1990s and through June Of 2002 Brenner, Sr. regularly came to the downtown Carlisle office of M&T, or its predecessors, to review the Trusts, to conduct banking matters related to the Trusts and to conduct personal banking business. 26. Brenner, Sr., did express concern and confusion as to the bank reporting statements issued for the Trusts by Keystone Financial, N.A. and M&T, successors to Farmer's Trust Company. The formatting of the bank reporting statements had been changed. 27. Brenner, Sr., did not like the new reporting statements. 28. M&T, as well as its predecessors, repeatedly counseled and advised Brenner, Sr., along with Brenner, Jr., and Bushey, as to its concerns with respect to holding Tyco stock only in the Trusts. 29. M&T, through Gority and Stauffer, on numerous occasions, urged Brenner, Sr., along with Brenner, Jr., and Bushey to diversify its holdings in the Trusts. 30. M&T held meetings with Brenner, Sr., and, when available, Brenner, Jr., and Bushey, on several occasions, most notably on January 2, 2001 and November 13, 2001. The main purpose of these meetings was to urge diversification and to suggest methods to accomplish same. These meetings were followed by comprehensive letters forwarded to Brenner, Sr., Brenner, Jr., 9 and Bushey detailing the contents of the meetings and reaffirming the recommendations made. 31. The January 2001 meeting was attended by Gority and M&T Regional Trust Manager Thomas O'Connell, along with Brenner, Sr., Brenner, Jr., Bushey and Brenner, Sr.'s accountant, Ray Keller. Concerns were expressed as to the concentration of Tyco stock and the need to diversify. (Ex. R-B, Tr. 449-450.) 32. Gority felt that the January 2, 2001 meeting had gone well and, as a result, Stauffer began to devise a plan to achieve diversification within the Trusts, all in a manner that would be deemed acceptable to Brenner, Sr. (Tr. 460-461.) The plan devised by Stauffer was reviewed by Stauffer's manager and superiors. 33. Stauffer's immediate supervisor, Dan McGee, participated in the review, noting that different techniques, including a stop loss strategy and related strategies be considered. (Ex. R-10, Tr. 605.) 34. On November 13, 2001, a meeting was held at M&T's offices, which meeting included Gority, Stauffer, Brenner, Sr., Brenner, Jr., and Bushey. The presentation included a detailed strategy for diversification as to the Trusts, including, among other things, maximizing the returns to the Trusts utilizing a systematic or programmed sale approach with respect to the Tyeo stock. (Tr. 606-609.) 10 35. Gority and Stauffer felt that the November 13, 2001 meeting went well and so advised their superiors. (Ex. R-12 and R-13, Tr. 465, 612.) 36. Brenner, Sr., Brenner, Jr., and Bushey did not like the November 13, 2001 presentation. Neither Brenner, Sr., Brenner, Jr., nor Bushey so advised M&T through Gority, Stauffer or any other party as to their feelings in this regard. (Tr. 223-225.) 37. The value of Tyco stock fell from about $55.00 per share in the later part of 2001 to $10.00 per share on or about June 2, 2002. 38. Tyco stock sale price fell for various reasons, same including, but not being limited to, the economy, accounting irregularities and the resignation and indictment of the Chief Executive Officer of Tyco. 39. In June of 2002 M&T Bank recommended that Tyco stock be off-listed and expressed concerns as to possible bankruptcy of Tyco. 40. From January 2002 to June 2002, Gority and Stauffer repeatedly advised Brenner, Sr., along with Brenner, Jr., and Bushey, to diversify the holdings of the Trusts. 41. M&T's concerns relative to the high concentration of Tyco stock in the Trusts heightened during the early part of June 2002. Concerns arose as a result of accounting irregularities, 11 the arrest of Tyco's Chief Executive Officer, Dennis Kozlowski, amid charges of tax fraud and other allegations of wrong-doing. 42. From January 2002 to June 12, 2002, M&T properly discharged its fiduciary obligation to the Trusts by keeping Brenner, Sr., along with Brenner, Jr., and Bushey well-informed of the market events and M&T's opinion regarding Tyco International, LTD and Tyco stock. 43. On June 7, 2002 Stauffer contacted Brenner, Sr., Brenner, Jr., and Bushey to specifically inform them of M&T's decision to no longer hold Tyco stock in any of its model portfolios. (Ex. R-19, Tr. 626-634.) 44. On June 7, 2002 Tyco stock closed at approximately $10.00 per share. 45. During the June 7, 2002 phone calls made by Stauffer, a meeting was suggested. Brenner, Sr., advised that he would coordinate the schedules of Brenner, Jr., and Bushey with respect to this meeting. Bushey advised Stauffer to leave it up to Brenner, Sr. to coordinate the meeting. (Tr. 626-634.) 46. On Monday, June 10, 2002, Stauffer spoke with Brenner, Sr. and scheduled a meeting for Wednesday, June 12, 2002, to discuss options and recommendations concerning the Tyco stock in the Trusts. 47. Stauffer was advised by Brenner, Sr., that only he would be attending the June 12, 2002 meeting and that only he 12 would be representing the interests of the Trusts. (Ex. R-19, Tr. 632-633.) 48. The June 12, 2002 meeting was attended by Gority, Stauffer and Brenner, Sr. John Klobusicky, Senior Investment Officer in Pennsylvania for M&T, participated by speakerphone. (Tr. 473-633.) 49. Gority and Stauffer offered an explanation as to concerns and advised as to options. The Bank recommended that one-third (1/3) of the Tyco shares held ~n the Trusts should be sold immediately, with a "stop loss" order to be placed at $9.00 per share on all remaining shares. (Ex. R-20, Tr. 640-650.) 50. Brenner, Sr., at the conclusion of the June 12, 2002 meeting, signed two (2) written authorizations. One authorization directed the immediate sale of one-third (1/3) of the Tyco shares in the Trusts in which he was the Co-Trustee (the Children's Trusts). The second signed written authorization authorized the use of a stop loss order on the balance of the shares at $9.00 per share, again pertaining to those Trusts in which he was the Co-Trustee. (Ex. R-21 and R-22, Tr. 307, 312.) 51. Brenner, Sr., fully understood and voluntarily signed both written authorizations. 52. Brenner, Sr.'s written authorizations constituted his consent. Given the totality of the circumstances, the consent was informed consent. 13 53. Gority and Stauffer properly and professionally explained the circumstances and their concerns with respect to the Tyco stock and, further, advised as to their recommendations at the June 12, 2002 meeting. This meeting lasted approximately one (1) hour. 54. Brenner, Sr., at no time immediately subsequent to the June 12, 2002 meeting and the placement of his signature on the two (2) authorizations, advised Gority, Stauffer or any other M&T employee or official that he did not understand or appreciate the explanations given nor the actions that he authorized. Brenner, Sr., did not suggest to anyone during or immediately following the June 12, 2002 meeting that he needed additional time to consider M&T's recommendations as made by Stauffer and Gority or, further, did he request time to speak with Brenner, Jr., Bushey or his accountant. (Tr. 305, 482-483.) 55. Immediately following the termination of the June 12, 2002 meeting with Brenner, Sr., Gority contacted and received approval via telephone from Brenner, Jr., and Bushey to sell one- third (1/3) of the stock in the Grandchildren's Trust and to place the stop loss order. (Ex. R-19, Tr. 430, 477-478, 490, 492, 645, 742, 771, 772.) 56. Neither Brenner, Sr., Brenner, Jr., nor Bushey requested that M&T reverse the stock sales that took place on June 12, 2002. 14 57. From June 10 through June 12, 2002, Bushey sold a substantial portion of Tyco stock held by her immediate family, said stock not being involved in the Trusts. Bushey requested and received assistance from M&T in this endeavor. (Ex. R-24, Tr. 101, 102, 105.) 58. Bushey did not advise Brenner, Jr. of her decision to sell the Tyco stock held by her immediate family. Brenner, Jr. had understood that both he and Bushey would advise each other as to any decisions that they made in their own right with respect to the sale of disposition of Tyco stock that they held outside the Trusts. 59. Brenner, Jr., during this period of time, did not sell any Tyco shares that he or his immediate family held privately. (Tr. 102, 188.) 60. Neither Brenner, Jr., nor Bushey signed and returned the confirming written authorizations prepared and forwarded to them by Gority. (Ex. R-25, Tr. 504.) 61. Brenner, Jr., and Bushey testified at the hearing that they continued to refuse to sign and return the written authorization confirming the actions that they verbally authorized on June 12, 2002. 62. Subsequent to the events that unfolded in June 2002, Stauffer left M&T Bank to be employed by PNC Bank. Stauffer was not discharged for any reason whatsoever by M&T Bank. M&T Bank, 15 through Daniel McGee, stated that it wanted Stauffer to remain and even made him a counteroffer, which was not accepted. 63. Gority, Stauffer and M&T Bank acted properly in all instances throughout its involvement with the Trusts. 64. The Trusts are irrevocable Trusts. The beneficiaries in all of these matters are the Trusts, along with the income beneficiaries and the remainder beneficiaries. 65. Amy Holsinger worked with Stauffer as an assistant at M&T Bank, starting in October 2001. She knew Brenner, Sr., by virtue of exchanging pleasantries and the like. (Tr. 769-770.) 66. Amy Holsinger testified that her desk was located approximately fifteen (15) feet from the office in which the June 12, 2002 meeting took place between Brenner, Sr., Gorityand Stauffer. Although the office door was closed, she could hear nothing unusual by way of loud or animated discussions. Brenner, Sr., seemed, in all respects, to be in a normal state of mind both entering and leaving the meeting. (Tr. 770-774.) 67. Shawnee Smith has been employed by M&T Bank and its predecessors since 1985, primarily as a customer or service representative. She first met Brenner, Sr., in about 1987 and developed a close customer relationship with him. She assisted with respect to safe deposit box entries, bank deposits and other courtesies. (Tr. 784-786.) 16 68. Shawnee Smith testified that, although Brenner, Sr. was physically slowing down due to age, he appeared competent in all respects in handling his financial affairs. (Tr. 789-790.) 69. Shawnee Smith testified that subsequent to Brenner, Sr.'s wife passing away, his personal appearance (clothing) slipped. Brenner, Sr.'s appearance improved after he met a lady friend sometime before the summer of 2002. (Tr. 787-788.) 70. Shawnee Smith was approached by Bushey sometime before June 2002. Bushey asked Shawnee Smith to advise her if Brenner, Sr. ever engaged in any type of transaction that would not be typical for him. (Tr. 793-794.) 71. Shawnee Smith observed no indication of diminished mental capacity on the part of Brenner, Sr., from approximately 1987 to 2004 when Brenner, Sr. closed out his safe deposit boxes and personal accounts at M&T. (Tr. 787-790.) 72. The shares of Tyco stock sold on June 12, 2002, as a result of the authorizations received were not sold improperly. 73. Neither Brenner, Sr., Brenner, Jr., nor Bushey immediately requested that M&T take steps to reacquire those shares. 74. Objectors have not established, through Dr. Joseph F. Brazel, or otherwise, that Brenner, Sr., had reduced mental capacity on or before June 12. 2002, such that Brenner, Sr. did 17 not appreciate and understand the advice and recommendations provided by M&T. 75. Dr. Joseph S. Brazel's diagnosis that Brenner, Sr. suffered from senile dementia, Alzheimer's type, prior to June 2002 was based upon observations only. No clinical tests, including the Wechsler test or any other evaluations were given. ( Tr. 51, 59- 6 0 . ) 76. Dr. Brazel did not communicate his diagnosis to Brenner, Jr., Bushey or any other member of the Brenner family. Dr. Brazel did not recommend that Brenner, Sr. stop driving his motor vehicle. Dr. Brazel did discourage Brenner, Sr. from driving his motor vehicle on the interstates. 77. Brenner, Sr., on or before June 12, 2002 was capable of making decisions regarding the disposition and sale of the Tyco stock in the Trusts. Neither Brenner, Jr., Bushey, nor Dr. Joseph F. Brazel, Brenner, Sr.'s personal physician, communicated to Gority, Stauffer, or any other employee or representative of M&T, or it predecessors, their concerns and/or diagnosis that Brenner, Sr. was suffering from a reduced or diminished mental capacity on or before June 12, 2002. 78. Gority testified that he never had a reason to doubt Brenner, Sr.'s capacity. Furthermore, Gority testified that he would never have participated in nor would he have allowed Brenner, Sr., to make decisions or sign documents if he had any 18 question as to his lack of sufficient mental capacity. (Tr. 429- 431.) 79. Brenner, Jr., and Bushey are designated as Attorneys in Fact or Agents for Brenner, Sr., by virtue of a General Power of Attorney executed by Brenner, Sr. Neither Brenner, Jr., nor Bushey acted on behalf of Brenner, Sr., under his General Power of Attorney by virtue of any matters involving the Trusts. 80. The testimony offered by the Objectors through James P. Quinlan and David L. Steele, which testimony addressed the appropriateness of the actions taken by M&T, was neither persuasive nor relevant. 81. Brenner, Sr., Brenner, Jr. and Bushey have requested that M&T transfer the Trusts to Orrstown Bank, of Carlisle, Pennsylvania. DISCUSSION The crux of the objections filed in all of the above- captioned matters is that M&T, as the Corporate Trustee, through its employees, Gority and Stauffer, breached its fiduciary duties while administering the Grandchildren's Trust and the Children's Trusts (collectively, the "Trusts"). As a result thereof, pecuniary losses, claimed to be substantial, resulted to the Trusts. Collateral issues raised involve determining whether or not Gority and Stauffer are jointly and severally liable for 19 M&T's conduct. The Objectors argue that M&T has breached its fiduciary duty to the Trusts and, further, that Gority and Stauffer, because of their individual actions and otherwise, are jointly and severally liable for M&T's conduct. M&T Bank, the Respondent, takes the position that M&T has acted properly in all regards with respect to the Trusts. Furthermore, M&T Bank, through Gority and Stauffer, has acted properly through the administration of the Trusts and, accordingly, neither Gority nor Stauffer are jointly or severally liable. In addition, M&T, in its brief, states that it is entitled to recover the costs of defending against the Objections filed herein. The standard of care imposed upon a Trustee under Pennsylvania Law is well established. A Trustee is obligated to exercise a standard of care which a man of ordinary prudence would practice in the care of his own estate. See In re Estate of Scharlach, 809 A.2d 376, 384 (Pa. Super 2002). Scharlach discusses the standard of care and refers to Section 7203 of the Probate, Estates and Fiduciary Code. See 20 Pa. Cons. Stat. Ann. S 7203. It is to be noted, however, that if a fiduciary has a greater skill than that of a person of ordinary prudence, then the fiduciary standard of care must be judged according to the standard of one having this special skill. Likewise, a professional fiduciary who "obtains the appointment as trustee by 20 representing that he or she has greater skill than a person of ordinary prudence... will be held to that higher standard." Estate of Pew, 655 A.2d 521, 542 (Pa. Super 1994) It is clear, under Pennsylvania Law, that M&T owed a higher standard of care than an individual of ordinary prudence. See In re Mendenhall, 398 A.2d 951, 952 (Pa. 1979). It is against the backdrop of these principles that the actions or inactions of M&T Bank, in the cases at bar, must be reviewed. As is clearly indicated in the Findings of Fact appearing hereinabove, M&T Bank has met the higher standard imposed by virtue of it being a professional fiduciary. M&T has not breached its fiduciary duty as owed to both the Trusts and the Co-Trustees. As such, a surcharge is not appropriate. The record of these proceedings most amply illustrates the extraordinary care exercised by M&T Bank in making certain that its fiduciary obligations were properly discharged. M&T Bank, and its predecessors, enjoyed a long-running relationship with Brenner, Sr., Brenner, Jr., and Bushey, all with respect to the discharge of its duties as Co-Trustee of the Trusts. As it was properly obligated to do so, M&T maintained a constant effort to affirm and reaffirm its concerns with respect to diversification of assets. M&T's concerns as to the concentration of Tyco stock, particularly considering the events that unfolded in 2001 and 2002, were well founded. Brenner, Sr., 21 Brenner, Jr., and Bushey are well-educated and sophisticated individuals, all being familiar with the workings of these Trusts and pertinent matters related thereto, particularly the function of M&T as Co-Trustee. It is clear that Brenner, Jr., and Bushey deferred to Brenner, Sr., with respect to all major decisions that were made concerning the Tyco stock. This is not withstanding the fact that Brenner, Sr., was Co-Trustee to the Children's Trusts only. Considerable effort was made by both parties to these proceedings to address the status of the mental capacity of Brenner, Sr., through the entire involvement of M&T and its predecessors. This is particularly so with respect to the events that rapidly unfolded during June of 2002, said events culminating on June 12, 2002, with the sale of the Tyco stock. It is this Auditor's opinion, based upon hearing all of the testimony presented and, further, after reviewing the transcript of the testimony and all exhibits, along with the briefs submitted, that Brenner, Sr., did, in fact, possess sufficient mental capacity to know, appreciate and understand the advice, opinions and recommendations that were given to him on June 12, 2002 by Gority, Stauffer and Klobusicky. Furthermore, it is clear that Brenner, Sr., understood and voluntarily executed the authorizations resulting in the immediate sale of one-third (1/3) of the Tyco stock holdings, along with the stop-loss order 22 involving the remaining shares, all with respect to the Children's Trusts, of which he was Co-Trustee. Brenner, Jr., and Bushey were not in attendance at the June 12, 2002 meeting due to the fact that they were not invited by Brenner, Sr. Their absence, by virtue of not being invited, is consistent with the past approach taken by Brenner, Sr., with respect to interacting with M&T and the Trusts. That approach, simply put, was that Brenner, Sr., was the individual in charge. The most persuasive evidence as to the mental competency of Brenner, Sr., was his own testimony. Clearly, Brenner, Sr., in his own words, was not physically capable at age 87 of doing all the things that he previously did and enjoyed. This is a natural part of the aging process and is perfectly understandable. However, Brenner, Sr., by his own testimony, stated that he was perfectly capable of handling his own financial affairs. Both under direct and cross examination, Brenner, Sr., exhibited a very clear ability to comprehend questions asked and to respond accordingly. As to cross examination, Brenner, Sr., more than held his own. It is important to note that Brenner, Sr.'s alleged incapacity was not communicated to M&T Bank through either Gority or Stauffer or any other individual. No communication as made by Brenner, Sr., Brenner, Jr., Bushey, or Dr. Joseph F. Brazel, Brenner, Sr.'s doctor. Shawnee Smith, an M&T Bank employee had 23 interacted with Brenner, Sr., since 1987. Although Shawnee Smith noted changes, those changes were primarily physical, being attributed to the normal aging process. Throughout their interactions, Brenner, Sr., exhibited a high degree of professionalism and knowledge, particularly with respect to his bank dealings. M&T Bank, and its predecessors, were constant and persistent with respect to expressing concerns to Brenner, Sr., Brenner, Jr., and Bushey as to the concentration of the Tyco stock in the Trusts and the need to achieve diversification. These concerns were accepted, at least in part, by Brenner, Sr., with respect to the Grandchildren's Trust. In February of 2000, with the approval and acquiescence of Brenner, Sr., the Grandchildren's Trust was partially diversified by a sale of a portion of the Tyco stock contained therein. Brenner, Jr. and Bushey authorized these actions. The proceeds were utilized to purchase tax free municipal bond type investments. The concerns as to the Tyco stock exacerbated in 2002 as a result of general adverse economic conditions, the deteriorating condition of Tyco International, LTD and the arrest of Dennis Koslowski, CEO of Tyco, on charges of fraud and other misdeeds. The recommendations made by Stauffer as to diversification and the like were reviewed by Stauffer's superiors, as well as multiple other employees of M&T Bank that were in management and 24 investment positions. Based upon a thorough review of this matter. it is clear that had M&T's recommendations been followed when initially made, the events culminating in the decisions made on June 12, 2002 could have been avoided. Based upon the Findings made herein, neither Gority nor Stauffer are jointly or severally liable for M&T's conduct. Notwithstanding the attempts to portray Gority and Stauffer as being unattached, uninvolved and/or overbearing, both of these individuals exhibited a high degree of professionalism with respect to properly discharging their fiduciary duties as to these Trusts. It can be clearly concluded that Gority and Stauffer acted properly and professionally throughout their involvement with the Trusts, Brenner, Sr., Brenner, Jr. and Bushey. Brenner, Sr., knew, appreciated and understood the advice, options and recommendations made by M&T, through Gority and Stauffer with respect to diversification and the like. Brenner, Sr. chose not to follow those recommendations until June 12, 2002. Brenner, Jr., and Bushey were most certainly concerned as to the well-being of their father, Brenner, Sr. They were also very concerned as to the financial soundness of the Trusts and the benefits that they and their children derived therefrom. Both Brenner, Jr. and Bushey clearly deferred to Brenner, Sr., 25 with respect to all decisions made concerning Tyco stock and the Trusts. Given that there has been no breach of fiduciary duty by M&T or on the part of Gority and Stauffer, there is no need to discuss damages. Clearly, a surcharge is not proper as to any of these Trusts. M&T is not entitled to recover the costs of its defense in these matters. The Auditor is not persuaded by the facts of this case, as well as the legal authority cited by Respondent, that such an award is warranted. CONCLUSIONS OF LAW 1. The objections filed in all of the above-captioned matters are proper for audit and, therefore, are properly before this Auditor for hearing, determination and recommendation. 2. M&T is a professional fiduciary and, thus, is subject to a higher standard of care. The actions of M&T Bank, with respect to its involvement as Co-Trustees in the above-captioned Trusts were appropriate and consistent with the required higher standard of care for a professional fiduciary. 3. M&T Bank did not breach its fiduciary duties to the above-captioned Trusts or to any of the Co-Trustees. 26 4. Gority and Stauffer are not jointly and severally liable for M&T's conduct. 5. A surcharge is not proper and, accordingly, there will be no award made in favor of the Objectors. 6. M&T is not entitled to recover the costs of its defense in these matters. 7. The accountings filed by M&T in all of the above- captioned matters should be confirmed with distribution of funds being directed in accordance with those accounts. RECOMMENDATION For the reasons appearing hereinabove, it is the recommendation of the Auditor that the objections filed in all of the above-captioned matters be dismissed. Furthermore, the accounts filed by M&T Bank, as to all of the above-captioned matters, should be confirmed with distribution of funds being made in accordance with the accounts as filed by M&T. As to the assessment of costs related to these proceedings, the Auditor recommends as follows: The Auditor's fee in the amount of $11,302.50, along with costs advanced in the amount of $1.50, which fee and costs total $11,304.00, be paid equally by Objectors and Respondents. This is appropriate given the circumstances and complexity of these matters, along with the 27 effective and strenuous presentations and advocacy on the part of the able counsel for both Objector and Respondent. Specifically, the following costs shall be paid by the parties as indicated within fifteen (15) days of the filing of this Report, as follows: Objectors (1/2 of the Auditor's Fee and Costs incurred) $5,652.00 Respondents (1/2 of the Auditor's Fee and Costs incurred) $5,652.00 A surcharge is not appropriate and, therefore, no award is made in favor of the Objectors. It is to be noted that the parties hereto have agreed, as between themselves, as to the assessment of costs incurred with respect to retaining the services of the Court Reporter for purposes of making a transcript of the audit hearing proceedings. In all other respects, each party to these proceedings is to bear their own costs and expenses, their being no award for payment of attorney's fees, costs and expenses being made in favor of either Objectors or Respondents. Date: February 10, 2005 Respectful submitted, ~o Bo or Eoquire Court Appoin e Auditor 1 West Main Street Shiremanstown, PA 17011 (717) 737-8761 28