Merrick v. Mercantile-Safe Deposit & Trust Co.

• Citation: 855 F.2d 1095
• Decision Date: 02 September 1988
• Docket Number: No. 87-3168,MERCANTILE-SAFE,87-3168
• Parties: 26 Fed. R. Evid. Serv. 1215 Richard L. MERRICK, Plaintiff-Appellee, v.DEPOSIT & TRUST COMPANY, Defendant-Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

Page 1095

855 F.2d 1095

26 Fed. R. Evid. Serv. 1215

Richard L. MERRICK, Plaintiff-Appellee, v. MERCANTILE-SAFE DEPOSIT & TRUST COMPANY, Defendant-Appellant.

No. 87-3168.

United States Court of Appeals Fourth Circuit.

Argued June 7, 1988.

Decided Sept. 2, 1988.

Nell Berelson Strachan (Venable, Baetjer and Howard, Baltimore, Md., on brief) for defendant-appellant.

Charles Edwin Iliff, Jr. (H. Thomas Howell, Semmes, Bowen & Semmes, Baltimore, Md., on brief) for plaintiff-appellee.

Before POWELL, Associate Justice (Retired), United States Supreme Court, sitting by designation, ERVIN and WILKINSON, Circuit Judges.

POWELL, Associate Justice:

The primary question presented is whether appellant, Mercantile-Safe Deposit & Trust Company ("Mercantile"), may be held liable to a beneficiary of the last will and testament of one of its trust customers, where liability is premised on Mercantile's failure to advise the testatrix of its knowledge that the proposed bequest would be legally ineffective. We must also consider whether the district court erred (i) in excluding from the jury's consideration evidence that the plaintiff's adult children benefited as a result of the settlement of related litigation, and (ii) in admitting certain expert testimony calculating plaintiff's loss. As we think Mercantile lawfully was found liable, and also agree with the rulings of the district court, we affirm.

I

Margaret Curry Chaplin, whose last will and testament is at the center of the controversy before us, held a testamentary power of appointment over assets left to her, in trust, by her father, Henry M. Curry. Though originally unrestricted, this power was significantly limited when, acting on the advice of tax counsel, Mrs. Chaplin executed a partial release in 1946. As amended by the 1946 release, Mrs. Chaplin's testamentary power of appointment could be exercised only in favor of her "descendants ... including adopted children...." In the event Mrs. Chaplin failed to exercise this power, her father's will required the trust assets to be distributed, upon her death, to her children.

Mrs. Chaplin had two children, Kitty Chaplin Spurry and Margaret ("Peggy") Chaplin Lively, both of whom were adopted. Peggy married Richard Merrick ("Merrick"), the appellee, in 1941. The union produced four children before Peggy abandoned the family in 1954. Within a month of the ensuing divorce, Peggy married Dean Lively, by whom she later had two more children.

Mrs. Chaplin's numerous wills indicate that she became estranged from Peggy following Peggy's divorce from Merrick. Between 1954 and 1972 ¹, Mrs. Chaplin executed at least twenty wills or codicils that, aside from nominal bequests, made no provision for Peggy or for Peggy's children by Dean Lively. Wills executed before 1954, by contrast, had provided that Mrs. Chaplin's two daughters would share her estate equally, with each receiving half the assets over which Mrs. Chaplin had appointive power and half of the residuary estate. Merrick, however, remained close to Mrs. Chaplin following the divorce, as did his children, over whom he retained custody. This relationship was reflected in Mrs. Chaplin's wills.

The evidence at trial established that Mercantile played a significant part in the planning and drafting of these wills. Mrs. Chaplin first became a customer of Mercantile's Baltimore office in the early 1950s, when Mercantile began managing her investments pursuant to agency agreements. Over the years, Mercantile frequently advised Mrs. Chaplin in the planning of her estate, and was consistently named as sole executor and as the sole trustee of her testamentary trusts. Tr. 11-12, 612, 616-17. It maintained a "confidential file" that contained copies of the 1946 release and of Mrs. Chaplin's various wills and codicils. Tr. 415, 628-29, 666-68. At various times, officers of Mercantile communicated with Mrs. Chaplin and with her attorney, T. Hughlett Henry, Jr. ("Henry"), concerning Mrs. Chaplin's testamentary provisions, and wrote to Henry specifically about provisions that Mrs. Chaplin wished to include in her wills. E.g., Tr. 11, 416-17; App. 390, 439.

In early 1965, Mrs. Chaplin requested Henry to prepare a will appointing the Curry trust half to Mrs. Spurry and half to Merrick. Tr. 53-54. Henry prepared a draft reflecting these instructions, but informed Mrs. Chaplin and Cecil Grasty, the Mercantile trust officer in charge of Mrs. Chaplin's account, that the appointment to Merrick might not be effective "because ... Mrs. Chaplin's power of appointment under her father's Will was limited by her own partial release 'to and among her descendants....' " App. 383; Tr. 55-58. With Mercantile's approval, Henry sought the views of Pennsylvania counsel and was advised by letter dated June 10, 1965, that the proposed appointment to Merrick would indeed violate the 1946 release as he was not a "descendant" of Mrs. Chaplin. App. 385, 387; Tr. 54-55. In view of this advice, the draft of the 1965 will was revised to appoint the Curry trust half to Mrs. Spurry and half to Merrick's children. Tr. 55. Mercantile's confidential file contained copies of the foregoing correspondence, including the opinion letter of Pennsylvania counsel. Tr. 418.

In April 1969, Mrs. Chaplin requested Paul Klender, a Mercantile trust officer who by then had replaced Cecil Grasty, to come to her home in Easton, Maryland, stating that she wished to make certain changes in her will. Tr. 426-27. In anticipation of this meeting with Mrs. Chaplin, Klender obtained from Mercantile's confidential file a copy of the then-current 1965 will, but he did not review the file or the correspondence generated in 1965 when that will was prepared. Tr. 418, 427. Merrick and Mrs. Spurry were also present at the 1969 meeting, and therefore knew that Mrs. Chaplin wanted the bulk of her estate, including trust assets over which she had appointive power, to be divided equally between them. Tr. 253, 358-59, 368-69. After reviewing each provision of the earlier will with Mrs. Chaplin, Klender recorded other changes requested by her and returned to Baltimore. Tr. 418, 605-06. Henry was not present. Tr. 11-12, 83, 359.

Upon returning to his office, Klender dictated a letter informing Henry of the changes proposed by Mrs. Chaplin. Klender's letter stated that these changes would "necessitate re-writing the entire will," and directed Henry to "proceed with the provision [sic] promptly." App. 390. Klender did not consult with any of Mercantile's attorneys or other estate planning personnel at Mercantile concerning the appropriateness of these changes. Tr. 416, 418. Based on Klender's letter, Henry drafted a will incorporating the requested provisions, and forwarded a copy to Klender for his review. See Tr. 96, 428; App. 418. With respect to Mrs. Chaplin's power of appointment, the new will--in accord with Klender's instructions--provided as follows:

SEVENTH: All the property, real and personal, over which I have power of appointment or disposition under the Last Will and Testament of my father, Henry M. Curry, ..., as modified by partial release of power of appointment executed by me, dated August 28, 1946, ..., and which at the time of my death is held in trust by Mellon National Bank and Trust Company, ..., hereby exercising said power of appointment as modified, I give, bequeath, devise and appoint in equal shares, in fee simple and absolutely and free of any trust unto my daughter, KITTY C. SPURRY, and to my son-in-law, RICHARD L. MERRICK.... In the event that my son-in-law, RICHARD L. MERRICK, shall not be living at the time of my death, I give, devise and bequeath the half-share of said property otherwise payable to him to such of his descendants, who are descendants of my daughter, Margaret, then living, in equal shares per stirpes. App. 394-95.

The will further recited that Merrick, though referred to as Mrs. Chaplin's son-in-law for the purpose of identification, was no longer married to Peggy. App. 411. Neither Henry nor Klender questioned the validity of appointing trust assets to Merrick, and Mrs. Chaplin executed her new will in their presence as subscribing witnesses on June 25, 1969. Tr. 419; App. 411-12. Klender duly placed a copy of the will in Mercantile's confidential file, where it remained until Mrs. Chaplin's death.

Mrs. Chaplin died on November 29, 1981. Tr. 107, 646. Her will was offered for Maryland probate by Mercantile, which was designated in the will as the sole executor and sole trustee of all testamentary trusts created thereby. See Tr. 646; App. 393, 395, 396, 398, 411. Mellon Bank, N.A. ("Mellon Bank") was advised of Mrs. Chaplin's exercise of her power of appointment over the trust created by her father's will. Mellon Bank questioned the validity of the exercise of the power because Merrick was not a "descendant" of Mrs. Chaplin as required by the 1946 release. In May 1982, Mellon petitioned the Court of Common Pleas of Allegheny County, Pennsylvania, for directions as to the appropriate distribution of the trust. Tr. 255; App. 423. Merrick, his four adult children, and Peggy's guardian ad litem were joined as parties. Mercantile was not a party. Tr. 255; App. 496.

Merrick conceded that he was not an eligible appointee. See Tr. 256; App. 473. See also Henry's Exh. 43. He and his children contended, however, that Merrick should be treated as if he had predeceased Mrs. Chaplin. This treatment would allow the share purportedly appointed to Merrick to pass to his children under the alternative provision of Mrs. Chaplin's will, a result they argued would do as little violence to Mrs. Chaplin's testamentary design as it was possible under the circumstances. App. 428, 458, 474; Henry's Exh. 43. On July 13, 1983, the Court of Common Pleas rendered a decision rejecting these contentions. It held instead that the entire appointment failed and that, in default of a valid appointment by Mrs. Chaplin, the...