Madden v. Mercantile-Safe Deposit & Trust Co.

• Decision Date: 03 June 1971
• Docket Number: MERCANTILE-SAFE,No. 448,448
• Parties: Audrey H. MADDEN v.DEPOSIT AND TRUST COMPANY, Trustee u/w of William R. Hammond et al.
• Court: Maryland Court of Appeals

Page 406

262 Md. 406

278 A.2d 55

Audrey H. MADDEN v. MERCANTILE-SAFE DEPOSIT AND TRUST COMPANY, Trustee u/w of William R. Hammond et al.

No. 448.

Court of Appeals of Maryland.

June 3, 1971.

Harvey R. Clapp, III and Arthur W. Machen, Jr., Baltimore (Venable, Baetjer & Howard, Baltimore, on the brief), for appellant.

G. Van Velsor Wolf and Albert S. Barr, III, Baltimore (Piper & Marbury, Baltimore, on the brief), for John F. Kelly, guardian ad litem etc. and others.

Peter Madden, in pro. per.

No brief filed on behalf of Mercantile-Safe Deposit and Trust Co., Trustee, etc.

Argued before HAMMOND, C. J., and McWILLIAMS, FINAN, SINGLEY, SMITH and DIGGES, JJ.

SINGLEY, Judge.

Mrs. Audrey H. Madden, a widow born in 1890, made formal demand on Mercantile-Safe Deposit and Trust Company (the Mercantile), trustee of the residuary trust created by the will of her father, William R. Hammond, to deliver the assets of the trust estate to her, on the theory that she had become the owner of both the life and remainder interests in the trust estate, and was therefore entitled to terminate it. The Mercantile brought a declaratory action in the Circuit Court of Baltimore City, joining Mrs. Madden and all of her father's descendants, including those who were and were not sui juris, and those unknown or unborn, as parties defendant. From a decree holding that the trust could not be terminated, and that Mrs. Madden was not entitled to claim the corpus, Mrs. Madden has appealed. The appellees are her children and grandchildren.

The relevant facts are quite simple. Mrs. Madden's father, William R. Hammond, survivied his wife and died on 19 December 1909, when he was 46 years of age, leaving his daughter Audrey (now Mrs. Madden) then 19 years of age, as his only next of kin and heir at law, under Maryland Code (Bagby ed. 1911) Art. 93, §§ 123-4 and Art. 46, §§ 1-2. By the terms of Mr. Hammond's will, executed on 24 August 1908, some 19 days after his wife's death, and about 16 months before his own death, after bequests of $10,000 to each of his two brothers and of $5,000 to each of his two sisters, he left the residue of his estate, which amounted at the time to some $222,000, to Safe Deposit and Trust Company of Baltimore (now the Mercantile) as trustee, to pay an annuity of $800 to his mother, an annuity of $520 to his two sisters-in-law and to the survivor of them, with the remaining income to be paid for life to his daughter, now Mrs. Madden, who was named executrix of the will.

Mr. Hammond's mother died in 1937 and the two sisters-in-law died at some date unspecified, but concededly prior to the institution of suit. In 1947, the Pimlico Race Track, inventoried in Mr. Hammond's estate at $70,000, was sold for $1,115,000, so that at the time the proceeding was brought, the corpus of the residuary trust had a value of approximately $2,774,000.

Mrs. Madden, in support of her contention that she has a right to terminate the trust, relies on the language of the will and upon an entirely extrinsic event, to be discussed later. The will, after providing that the net income of the trust was to be paid to Mrs. Madden for life, continues

'* * * at her death she shall have the power of disposing of my entire estate and property as she may deem fit by a last Will and Testament; but, if my said daughter should die without having made a last Will and Testament then I give, devise and bequeath my estate and property to such persons as by the laws of the State of Maryland would be entitled thereto, in case I had died intestate.'

The will contains neither a spendthrift clause nor a provision permitting the invasion of principal.

On 30 June 1943, Mrs. Madden irrevocably released the power of appointment conferred upon her by her father's will, in the manner provided by Chapter 870 of the Laws of 1943, which has survived in somewhat different form as Code (1957, 1969 Repl. Vol.) Art. 93, § 11-108.

The crux of Mrs. Madden's argument is that she, as her father's only next of kin and heir at law at the time of his death in 1909, took a vested interest in the remainder of the trust estate, subject to divestiture only by an exercise of the power of appointment given her by the will. Once the power was irrevocably released a possible divestiture could no longer occur, and she argues that, as the holder of both the income interest and the remainder interest, there has been a merger of interests and she is legally entitled to terminate the trust, relying on Miller, Construction of Wills § 110 at 308-312 (1927) and on Manders v. Mercantile Trust & Deposit Co., 147 Md. 448, 128 A. 145 (1925). Compare, however, Kirkland v. Mercantile-Safe Deposit & Trust Co. of Baltimore, 218 Md. 17, 24, 145 A.2d 230 (1958); Wehrhane v. Safe Deposit & Trust Co., 89 Md. 179, 186, 42 A. 930 (1899), where the Court held that a merger which would contravene the 'peremptory provisions' of the will which created the trust could not take place.

The validity of this contention turns on several considerations which are discussed in Manders, among them the question whether, in the language of that case, 'all the parties who are or may be beneficially interested in the trust property are in existence and sui juris, and they all consent and agree to the ending of the trust,' 147 Md. at 457, 128 A. at 149. ¹ This leads us to a problem of construction: are Mr. Hammond's next of kin and heirs at law to be determined as of the date of his death, or as of the date when Mrs. Madden dies, without having exercised the power? If the former is the case, Mrs. Madden is the only person having a beneficial interest; if the latter, she is not.

A gift to 'such persons as * * * would be entitled thereto, in case I had died intestate' is clearly a gift to members of a class, which we have defined 'as a gift of an aggregate sum (1) to a body of persons uncertain in number at the time of the gift, (2) to be ascertained at a future time, and (3) who are all to take in equal or some other definite proportions; the share of each being dependent for its amount upon the ultimate number of persons,' Evans v. Safe Deposit & Trust Co. of Baltimore, 190 Md. 332, 58 A.2d 649 (1948) and the authorities cited at 338. See also, Geller v. Lust, 257 Md. 246, 249, 262 A.2d 510 (1970).

It has been generally held that in the absence of a clear intention of contrary intent, the time at which the membership of the class is fixed and determined, (subject, of course, to increase by the birth of additional members of class) and at which the respective interests of its members become vested, and assume the character of a tenancy in common, is at the death of the testator, Shank v. Sappington, 247 Md. 427, 433, 231 A.2d 712 (1967); Mercantile-Safe Deposit & Trust Co. v. Mercantile-Safe Deposit & Trust Co., 246 Md. 106, 115, 228 A.2d 289 (1967); Evans v. Safe Deposit & Trust Co., supra, 190 Md. at 341, 58 A.2d 649; Newlin v. Mercantile Trust Co., 161 Md. 622, 637, 158 A. 51 (1932). This is not always true, however.

There has probably been no decision of this Court more severely criticized than that in Demill v. Reid, 71 Md. 175, 17 A. 1014 (1889), Reno, Alienability and Transmissibility of Future Interests in Maryland, 2 Md.L.Rev. 89, 116-18 (1938); Reno, Further Developments as to the Alienability and Transmissibility of Future Interests in Maryland, 15 Md.L.Rev. 193, 215-16 (1955), largely because the case has been regarded as authority for the proposition that survival is implied as a condition precedent as regards a contingent gift to a class when the rule as regards a contingent gift to designated individuals in otherwise.

It should be clear by now that despite Schapiro v. Howard, 113 Md. 360, 78 A. 58 (1910) and Thom v. Thom, 101 Md. 444, 61 A. 193 (1905) which are sometimes regarded as having been controlled by Demill v. Reid, the result reached in Demill is not to be regarded as the consequence of the application of a rule of law, but rather of a rule of construction, which may be invoked when it has been established that a testator intended that the members of the class be identified at a time other than at his death, Baker v. Baylies, 231 Md. 287 at 291-293, 189 A.2d 820 (1963); Second Bank-State Street Trust Co. v. Weston, 342 Mass. 630, 174 N.E.2d 763, 769 (1961); Boynton v. Barton, 192 Md. 582, 64 A.2d 750 (1949).

As a consequence, the general rule that the members of the class are to be determined at the death of the testator cannot besubstituted for his intent and is invoked only to aid his intention, not to defeat it, Robinson v. Mercantile Trust Co. of Baltimore, 180 Md. 336, 341, 24 A.2d 299 (1942), and the class will close at a later date when 'some testamentary language or background circumstance also points to determination of class membership at a future time,' Second Bank-State Street Trust Co. v. Weston, supra, 342 Mass. 630, 174 N.E.2d 770 (applying Maryland law) cited with approval in Baker v. Baylies, supra, 231 Md. 292-293, 189 A.2d 820. Intention may be gleaned not only from language or surrounding circumstances but also from the totality of the scheme of disposition, Davis v. Mecantile-Safe Deposit & Trust Co., 235 Md. 266, 269, 201 A.2d 373 (1964).

Absent such language or circumstances, the class would have opened and closed at the death of Mr. Hammond, vesting the remainder in Mrs. Madden, despite the existence of the power of appointment, the exercise of which would have worked a divestiture, 1 Casner, Estate Planning 550 (3d ed. 1961); 3 Restatement, Property, Future Interests § 276 at 1424 (1940).

Although the law favors the early vesting of estates, Miller, Construction of Wills, supra, § 227 at 629-34; Hans v. Safe Deposit & Trust Co., 178 Md. 52, 62, 12 A.2d 208 (1940), the principle is not applicable here save possibly by way of analogy, Mercantile-Safe Deposit & Trust Co. v. Mercantile-Safe Deposit & Trust Co., supra, 246 Md. at 117, 228 A.2d 289, and the...