Arrowsmith v. Mercantile-Safe Deposit and Trust Co.

• Decision Date: 01 September 1987
• Docket Number: MERCANTILE-SAFE,No. 144,144
• Citation: 313 Md. 334,545 A.2d 674
• Parties: , 86 A.L.R.4th 221 Edith Anne ARROWSMITH et al. v.DEPOSIT AND TRUST COMPANY et al. ,
• Court: Maryland Court of Appeals

Page 334

313 Md. 334

545 A.2d 674, 86 A.L.R.4th 221

Edith Anne ARROWSMITH et al. v. MERCANTILE-SAFE DEPOSIT AND TRUST COMPANY et al.

No. 144, Sept. Term, 1987.

Court of Appeals of Maryland.

Aug. 8, 1988.

A. MacDonough Plant (Semmes, Bowen & Semmes, on brief), Baltimore, Stanard T. Klinefelter and Roger D. Redden (Robert C. Young and Kurt J. Fischer, on brief), Baltimore, William T. Kerr (John C. Heisler and Bregel, Kerr & Heisler, on brief), Towson, Scott M. Kleger (Ronald W. Fuchs, Edward J. Hutchins, Jr. and Eccleston and Seidler, on brief), Baltimore, for appellants/cross-appellees.

Frederick G. Savage (Estelle A. Fishbein, both on brief), Baltimore, for appellees.

Argued before MURPHY, C.J., and ELDRIDGE, COLE, RODOWSKY, McAULIFFE, ADKINS and BLACKWELL, JJ.

RODOWSKY, Judge.

This estates and trusts case presents three issues:

1. Where the exercise of a testamentary power of appointment is questioned under the rule against perpetuities, should the period of the rule be measured from the creation of the power, as provided by current Maryland law, or from the exercise of the power?

2. Can the doctrine of dependent relative revocation avoid the rule against perpetuities by including a perpetuities saving clause from an earlier exercise of a testamentary power of appointment into a later exercise of the power?

3. Should Maryland law be changed to recognize pledges to make charitable contributions as enforceable contracts where there is no consideration, including estoppel?

Because we shall not unsettle the settled law applied by the circuit court to issues one and three and because we agree with the circuit court's response in the negative on issue two, we shall affirm.

By an irrevocable deed of trust to Mercantile-Safe Deposit and Trust Company (Mercantile) of May 1, 1953, Frances Cook Arrowsmith (Frances) created in her son, George H.C. Arrowsmith (George), a testamentary power of appointment over assets valued at the time of the proceedings below at some $7 million. George married Molly Jackson in 1958. Three children were born of the marriage, Edith Anne in 1959, Jeffrey in 1961 and Stephen R. in 1962. George and Molly were divorced in 1965.

Apparently as a result of the divorce George executed a new will on April 15, 1966. That will was in terms revoked by the revocation clause of a will executed by George on December 30, 1976. The 1976 will was in terms revoked by the revocation clause of a will executed by George on July 29, 1982. The 1966, 1976 and 1982 testamentary instruments each undertake to exercise the power of appointment under the 1953 trust created by Frances. George died April 11, 1983, and the 1982 will was probated.

In item SECOND of his 1982 will, George appointed specific sums from the 1953 trust to specific charities and appointed the balance to a trust of which Mercantile and George's cousin, Francis N. Iglehart (Iglehart), were trustees. Iglehart prepared the 1976 and 1982 wills for George. The item SECOND trust provides $10,000 per year for George's former wife for her life or until she remarries. The balance of the corpus appointed from Frances's 1953 trust was to be held by George's trustees in equal shares for the children of George for their respective lives and thereafter each share was to be distributed per stirpes to the descendants of George's children. Income payable to the life beneficiaries was solely in the discretion of the trustees who also had a discretionary power to invade corpus. ¹

Mercantile, as trustee of the 1953 trust, perceived that George's exercise of the power of appointment from Frances in favor of the item SECOND trust under his 1982 will might well violate the rule against perpetuities. Frances's 1953 declaration of trust provided that, in default of appointment by George at his death, the 1953 trust was to be distributed absolutely to George's children. Mercantile petitioned for instructions as to how it should distribute. None of George's children have children so that the circuit court appointed counsel to represent all unknown and unborn persons who might have an interest in the item SECOND trust (the Unknowns).

Edith Anne, Jeffrey and Stephen Arrowsmith, the children of George, submitted, and the circuit court agreed, that the appointment to the item SECOND trust violated the rule against perpetuities. Applying Maryland case law, the court measured the period of the rule from the creation of the power in 1953. The circuit judge concluded that the life estates were not vested because distributions to the life tenants were discretionary under the item SECOND trust, and that the shares of George's children would not vest in any Unknowns until the respective deaths of Edith Anne, Jeffrey and Stephen. Because none of George's children were living in 1953 George was the measuring life. Inasmuch as George's children might survive him by more than twenty-one years, vesting might be postponed beyond the period permitted by the rule. On a question not presented for review in this appeal, the circuit court also found that the power of appointment had secondarily been exercised under item THIRD of George's will, the provision which governed disposition of George's personal estate. On that analysis twenty percent of the 1953 trust corpus was validly appointed to certain charities named in item THIRD of George's 1982 will. Item THIRD appointed the remaining eighty percent to the item SECOND trust, an exercise of the power which the circuit court held to be invalid. Consequently, the circuit court decreed that that eighty percent be distributed outright to Edith Anne, Jeffrey and Stephen pursuant to the default of appointment provision in the 1953 trust established by Frances.

Iglehart is one of the appellants. In his capacity as a co-trustee of the item SECOND trust he will suffer a reduction of commissions to the extent that the corpus of the 1953 trust is distributed by the trustees of that trust rather than placed in the item SECOND trust. Accordingly, Iglehart has standing to question whether George's exercise of the power of appointment violates the rule against perpetuities. Iglehart argued before the circuit court that the exercise of the power by George under his will should mark the beginning of the period with which the rule against perpetuities is concerned here. The trial court measured the period from the creation of the power in 1953. Iglehart appeals that holding.

The Unknowns did not question the basics of the operation of the rule against perpetuities but argued that under the particular facts of this case the rule has no application. In his 1966 will George had appointed the corpus of the 1953 trust in further trust for the lives of his children to whom he gave powers of further testamentary appointment, and, on default of appointment, he gave absolutely to their descendants. But George had limited the duration of the trust under his 1966 will to the lifetime of the last survivor of eleven specifically identified persons, all of whom were alive when the 1953 trust was created. This provision might also have operated to terminate the testamentary trust for George's children before the maximum period permitted under the rule against perpetuities. Apparently for that reason, and perhaps others, the perpetuities saving clause was not included in the 1976 and 1982 wills of George. The Unknowns contended that the circuit court should bring the 1966 saving provision forward into the 1982 will and that the doctrine of dependent relative revocation authorized that court, in effect, to cut and paste the various wills of George in the manner requested. The circuit court held that it could not save an appointment to the item SECOND trust from the perpetuities violation by applying dependent relative revocation. The Unknowns appeal from that holding.

A third issue has been briefed and argued on appeal because counsel for Edith Anne and Stephen are of the view that this case presents an appropriate vehicle for changing the Maryland law of contracts by holding that pledges to contribute to charity are per se enforceable. In Maryland Nat'l Bank v. United Jewish Appeal Fed'n, 286 Md. 274, 407 A.2d 1130 (1979), we required legal consideration, at least by way of estoppel, for contractual enforceability of those pledges despite a contention that courts should enforce those pledges as contracts because it would be good public policy to do so. In the instant case the circuit court necessarily rejected the merits of the same public policy argument. From that holding Edith Anne and Stephen appeal.

We granted a joint petition for certiorari prior to consideration of these appeals by the Court of Special Appeals.

I

The circuit court properly pinpointed the pertinent period for perpetuities purposes. It commenced with the execution of the 1953 deed of trust. Judge Oppenheimer, writing for this Court in Murphy v. Mercantile-Safe Deposit & Trust Co., 236 Md. 282, 287, 203 A.2d 889, 892 (1964), restated the Maryland law:

Under our decisions, the provisions of a will exercising a testamentary power of appointment given under a deed of trust must be considered as if contained in the deed of trust in determining whether or not the appointment violates the rule against perpetuities. The period of the Rule is calculated from the date of the deed of trust creating the power and not from the exercise of the power by the will. Gambrill v. Gambrill, 122 Md. 563 89 Atl. 1094 (1914); Hawkins v. Ghent, [154 Md. 261, 140 Atl. 212 (1928) ]; Ryan v. Ward, [192 Md. 342, 64 A.2d 258 (1949) ]; Fitzpatrick v. Mercantile-Safe Deposit & Trust Co., 220 Md. 534, 155 A.2d 702 (1959).

Iglehart's argument begins by recognizing that

in determining the validity of interests created by the donee in the exercise of a general power presently exercisable, the courts have usually computed the period (for the purposes of the requirement of vesting under the rule against...