Hall v. Elliott

• Decision Date: 04 August 1964
• Docket Number: No. 417,417
• Citation: 236 Md. 196,202 A.2d 726
• Parties: Bessie L. HALL et al. v. Howard Henry ELLIOTT et al.
• Court: Maryland Court of Appeals

Page 196

236 Md. 196

202 A.2d 726

Bessie L. HALL et al. v. Howard Henry ELLIOTT et al.

No. 417.

Court of Appeals of Maryland.

Aug. 4, 1964.

B. Conway Taylor, Jr., Baltimore (Due, Whiteford, Taylor & Preston and William M. Nickerson, Baltimore, on the brief), for appellant Bessie L. Hall.

Clayton W. Daneker, Baltimore (Constable, Alexander & Daneker, Baltimore, on the brief), for appellants James S. Schuyler and others.

Robert C. Prem, Baltimore, for appellees Howard Henry Elliott and Mercantile-Safe Dep. & Tr. Co., Executors, etc.

Ward B. Coe, Jr., Baltimore (John F. King and Anderson, Coe & King, Baltimore, on the brief), for appellee Munsey T. Mowbray.

Paul E. Burke, Jr., Baltimore (William B. Somerville and Smith, Somerville & Case, Baltimore, on the brief), for appellees Charles A. Mowbray and others.

G. Van Velsor Wolf and William B. Stansbury, Jr., Baltimore (Mathias J. De Vito, Piper & Marbury and F. Duncan Cornell, Baltimore, and Mary Katherine Scheeler and Charles W. Held, Jr., Towson, on the brief), for appellees The Salvation Army and others.

Before BRUNE, C. J., and HENDERSON, HAMMOND, PRESCOTT, HORNEY, MARBURY and SYBERT, JJ.

HORNEY, Judge.

The principal question raised on this appeal is whether the specific legatees named in the will are entitled to indemnification out of the rest and residue of an estate for the shares of corporate stock they lost as a result of the widow electing to take against the will.

Reginald G. Mowbray (the testator) died on January 17, 1962, survived by his second wife, Munsey T. Mowbray. He had no children or descendants and his father and mother had predeceased him. His closest living relative was a brother, to whom (or to the brother's wife should he predecease the testator) he bequeathed a pecuniary legacy by the residuary clause of his will. At the time of his death, the testator owned real estate valued at $43,000 and personal property worth approximately $450,000, a large portion of which consisted of the capital stock of the James Walker Company, a marine supply corporation the testator founded in 1911, of which he was president when he died, and in which he held one hundred and six of the two hundred and ten outstanding shares of stock, estimated as worth $1400 to $2000 per share.

Before their marriage, the second wife and the testator entered into an antenuptial agreement, by the terms of which they mutually waived and released all claims or rights of dower and other marital rights in the estate and property of each other. Several years after their marriage, the testator executed a will in which he bequeathed ten of his one hundred and six shares of the Walker stock to his wife and bequeathed the remaining ninety-six shares (subject to the conditions specified in the will) in trust for the benefit of nine named longtime employees of the James Walker Company and stated in the will that his purpose in so doing was 'to recognize the loyalty and devotion' of such employees as his business associates over a period of many years. Some of the employees were already stockholders in their own right and the bequest of ninety-six shares assured them control of the company as a group. There were no other specific bequests. But in a three-tiered residuary clause, the testator devised and bequeathed the rest and residue of his estate to named relatives of himself and his first wife and to certain specified charities. Under the provisions of the first tier he bequeathed pecuniary legacies totaling $60,000 to the relatives with provisos that upon the happening of certain events, the bequests were to become a part of the residuary estate. By the second tier, if there was any excess after paying the specific and first tier residuary legacies, the testator bequeathed $5,000 to each of four designated charities and $10,000 to a fifth. And, by the third tier, the residue of the estate, if any should remain, was bequeathed in equal shares to two other charities. It was further provided that both the first and second tier residuary legacies should abate proportionately in the event the estate was insufficient to pay them in full. In such case there would be nothing for the third tier legatees to take. Throughout his life, the testator had contributed to and was actively interested in and closely associated with the charitable institutions of a religious nature mentioned in the second and third tiers of the residuary clause. The will further provided that all federal and state estate and inheritances taxes (including documentary stamp and stock transfer taxes) as well as all debts, funeral expenses and administration costs should be paid out of the estate.

With regard to the shares of stock bequeathed in trust for the employee legatees, the trustee was directed to divide and distribute the stock to the named employees in the proportions specified in the will, provided (1) that such employees should be alive and in the employ of the company at the time of the death of the testator and (2) that such employees within three months thereafter should execute an irrevocable agreement between themselves designed to carry out the testamentary plan. The trust agreement was duly executed. Under it, each employee legatee covenanted with the others and on behalf of their respective estates to offer the stock so held in trust for them, either upon death or during life, before selling it to an outsider, to the remaining trust beneficiaries then holding the stock bequeathed to them, at forty per centum of book value as shown on the financial statement of the company as of the end of a fiscal year.

The record, in addition to showing that the surviving widow had been apprised, before the antenuptial agreement was executed, of the desire and plan of the testator to bequeath the controlling interest in the James Walker Company to the employees, discloses that the testator knew that his second wife--though he was sure she would not--could set aside the antenuptial agreement if she chose to and renounce the will. The testator, however, probably because he believed that his wife would abide by the agreement and knew that even if she did not, he had sufficient estate to fully satisfy her claim and gratify his preference for the employees, made no provisions as to who should bear the loss in case the widow chose to annul the agreement and elect against the will.

After the death of the testator, the antenuptial agreement was annuled by a decree of the Circuit Court for Baltimore County because the testator had not fully disclosed his financial worth to his future wife and she had not been advised of her rights or represented by counsel. There was no appeal. Subsequently, the widow renounced the legacy to her of ten shares of stock and elected to take her statutory share of both the real and personal estates.

In this action brought by the executors of the will against all of the legatees and devisees for the construction of the will and for directions as to the administration and distribution of the estate and the cash dividends that had accumulated from the stock since the death of the testator, the decree provided, among other things, that, after the payment of estate taxes and inheritance taxes (except state inheritance taxes chargeable to the widow), debts, funeral expenses and administration costs, the widow should take $4,000 in cash and a one-half interest in all other assets, such as cash, and specific property, such as shares of stock, including fifty-three shares of the Walker stock; that the trustee for the benefit of the employee legatees should receive the remaining fifty-three shares subject to the restrictive terms and provisions of the will and trust agreement; that the accumulated dividends from the Walker stock should be paid in equal parts to the widow and trustee; that the first tier residuary legacies to the relatives should be paid in full without interest; and that payment of the remaining residuary legacies would be contingent on the adequacy of the residue to pay the widow's share of the estate and the first tier residuary legacies.

The findings of the lower court that all taxes (except state inheritance taxes due by the widow) should be paid out of the estate is not contested. Nor is it disputed that the accumulated dividends from the Walker stock should follow the distribution of the shares of stock. All of the employee legatees (except the one who was named as coexecutor) contend that the widow's share of the estate should be satisfied out of the rest and residue without disturbing the specific bequest of ninety-six shares of Walker stock bequeathed to them. All of the employee legatees who appealed (except one who does not claim reimbursement by way of sequestration) further claim that they are entitled to distribution of the ninety-six shares of stock in kind, or in the alternative, that the portion of their legacy which is allowed to stand should be supplemented by (a) sequestration of the ten shares of stock renounced by the widow and (b) indemnification out of the rest and residue of the estate for such shares as they will lose as a result of the widow having renounced the will. And all of the appellants (except one) further contend that if less than ninety-six shares of stock are distributed to them, then such shares should be distributed free of trust and the restrictions contained in the terms and provisions of the will and the trust agreement executed in compliance therewith. On the other hand, the widow (as well as some of the other appellees) contend that she is entitled to take her share of the estate (including the Walker stock) in kind. The first tier residuary legatees, contending that the gifts to them were in the nature of general pecuniary legacies and not residuary bequests, assert that the disappointed specific legatees are not entitled to indemnification from the residuum. Some of the other appellees concede that the appellants (by...