Smith v. Darby

• Decision Date: 21 January 1874
• Parties: GEORGE W. SMITH, JR., and M. S. BARBER, Executors, v. FRANCES M. DARBY, Guardian and next friend of JOHN MCD. MCKEE and others.
• Court: Maryland Court of Appeals

39 Md. 268

GEORGE W. SMITH, JR., and M. S. BARBER, Executors, v. FRANCES M. DARBY, Guardian and next friend of JOHN MCD. MCKEE and others.

Court of Appeals of Maryland

January 21, 1874

APPEAL from the Circuit Court for Washington County, in Equity.

The bill in this case was filed by the appellee as guardian of the children of Leander McKee, deceased, against the appellants as executors of John McKee, deceased, to enforce against them a trust alleged to have been created by their testator in his life-time, in favor of said children. The note or single bill referred to in the opinion of the Court is as follows:

$4000.

One year after date, I promise to pay to John McKee, the sum of four thousand dollars, with interest from date, the interest payable semi-annually; the said sum of money aforesaid being held by the said John McKee in trust for the children of Leander McKee, deceased, to wit: John McD., Isabella and Wm L. McKee, and the interest thereof to be invested by him, the said John McKee, for the children aforesaid. This 17th day of April, 1866.

WM. M MCDOWELL, [SEAL.]

The Court below (PEARRE, J.,) adjudged that the principal sum of $4000 was, by John McKee, in his life-time, made and created as a trust fund in his own hands for the benefit of the children of Leander McKee, deceased, the interest thereon to be received by him semi annually and invested for the benefit of said children until the oldest attained the age of twenty-one years. And the Court thereupon decreed the said trust to be established against the executors of the said John McKee, deceased, and that they should be charged with the said sum of $4000, together with the interest thereon payable semi-annually from the 17th of April, 1866, and also with interest upon such semi-annual interest, to be accounted for after the expiration of thirty days from the times when the semiannual interest became payable, and under the terms of the trust declared, should have been invested. From this decree the executors appealed.

The cause was argued before BARTOL, C.J., STEWART, BOWIE, GRASON and MILLER, J.

George W. Smith, Jr., for the appellants.

There is not sufficient evidence in this cause to establish a trust. It is well settled that, whether a trust is perfectly created or not, is a question of fact in each case, and Courts in determining the fact will be governed by all the circumstances surrounding each particular case. The appellee, to establish a voluntary trust, without consideration, must show that John McKee created this trust, by a clear and explicit declaration, duly executed, and in tended to be final and binding on him. Perry on Trusts, Secs. 96 to 100, inclusive; Ex parte Pye, 18 Vesey, 140.

The note, or single bill, dated the 17th April, 1866, is the only evidence in this cause of a declaration of trust, and it does not show a clear and explicit declaration, duly executed and intended to be final and binding on him. He simply agreed that said note should be drawn in the manner it was, payable to himself, not payable to John McKee, trustee, and retained it in his possession, and, after the lapse of eighteen months, destroyed or cancelled it, and gave it up to its maker, taking a common promissory note in its stead. Uniacke vs. Giles, 2 Moll., 267, cited by Hill on Trustees, side page 110.

McDowell says, that McKee and witness went to Mr. Hamilton, "and Mr. McKee stated the kind of paper he wished drawn, and the object he had in view." This is the only evidence of any declaration of a trust, which, coupled with the acceptance of said note, is relied upon to establish a trust in this cause. The circumstances in this case abundantly show that McKee did not regard this as a complete trust, by which he had separated, absolutely, $4000 from his estate, because he exercised control over it as his own individual property, and was not satisfied in his own mind how he could complete the trust; this is shown by his changing the notes, and also by his letter to McDowell in 1868, and by his never communicating the trust to the cestui que trust. If, therefore, the trust was not regarded as complete by McKee, it will not be enforced.

A Court of Equity will take no notice of a contract merely voluntary, and which remains in fieri.

After McKee had failed to complete the trust, as he originally designed, he kept the fund as a part of his own estate, and provided for said infants in his will, giving to them a sum greater than said fund would amount to.

If, then, the trust was not complete, or if the alleged donor, at the time he took said note, did not intend to part absolutely with $4000, and to separate the same entirely from his estate, then the decree below must be reversed. Swan vs. Frick, 34 Md., 139; Ellison vs. Ellison, 6 Vesey, 656; Ex parte Pye, 18 Vesey, 140; Antrobus vs. Smith, 12 Vesey, 39; Perry on Trusts, secs. 99 and 100, and notes; Pennington vs. Gittings, 2 G. & J., 208; Jones vs. Lock, 1 Ch. App., 25, (Law Reports.)

But even conceding that this trust has been duly declared, it has been fully satisfied and redeemed by the bequest, afterwards made by the alleged donor to said infants in his last will. This is a bequest of $6000 to said infants, payable in 6 per cent. paper, and is precisely of the same character as the alleged trust. It is, in the language of the law, ejusdem generis. The bequest is larger and more beneficial to the donees than their claim in this case, and has been paid to them. It is laid down as law in 2 Story Eq. Juris., Sec. 1105, that "where the thing substituted is ejusdem generis, and is clearly of much greater value and much more beneficial to the donee than his own claim, there the presumption of an intended satisfaction is generally allowed to prevail." 2 Story Eq. Juris., Secs. 1099 to 1110, inclusive; Pym vs. Lockyer, 5 Mylne & Craig, 29, 35.

But it is objected that the testator did not stand in loco parentis to these children, and therefore such presumption of satisfaction does not apply in this case. It is not necessary for a person, who stands in loco parentis, to assume all the duties of a parent; the only question is, did he intend to provide a portion for these children, or merely to bestow a gift; did he intend to provide for them a portion out of his estate, which their deceased father would have received if living? If he intended a portion or provision, then he is regarded as standing in loco parentis. Pym vs. Lockyer, 5 Mylne & Craig, 29; Ex parte Pye, 18 Vesey, 140; 2 Leading Cases in Equity, 294, side; Powys vs. Mansfield, 3 Mylne & Craig, 359.

The circumstances of this case show conclusively that John McKee, the grandfather, put himself in the place of the deceased father in making provision for these children. If the donor's son, Leander, had been living, he would have received this portion of his father's estate, and it would have been left for the father to provide for these infants out of the portion so received; but Leander, the father, being dead, the grandfather came in loco parentis in providing for these children, and in doing so did not intend to give them a double portion. All the circumstances of the case lead to the conclusion that John McKee desired these children to receive such portion of his estate as their father would have received if living.

The Court below, by its decree, requires that the interest in the said fund shall be computed from the 17th day of April, 1866, compounding the interest every six months, up to the 17th day of April, A. D., 1873.

If John McKee held this fund in trust, he held it in the same manner as any trustee would hold a trust fund, and is only liable to the extent that trustees ordinarily would be. Trustees are not charged with compound interest on the ground of negligence or even mismanagement. Tebbs vs. Carpenter, 1 Maddock's Ch. Rep., 290; The State of Conn. vs. Jackson, 1 John. Ch., 13; Atty. Genl. vs. Alford, 31 Eng Law & Eq., 466.

There is no negligence or misfeasance charged in the bill as to the management of the trust, and a Court of Equity can only decree on the allegations of the bill. Ringgold vs. Ringgold, 1 H. & G., 75.

The trustee cannot be held for compound interest, as there is no proof that he received the interest semiannually, except as to the first or second year, as shown by McDowell's testimony before the auditor. Darne vs. Catlett, 6 H. & J., 475; Diffenderffer vs. Winder, 3 G. & J., 311.

This is not a trusteeship, where the trustee has betrayed his trust, grossly violated his duty, or been guilty of unreasonable negligence, and cannot be dealt with according to the rules of strict, if not rigorous, justice. Diffenderffer vs. Winder, 3 G. & J , 371.

Francis M. Darby and Attorney General Syester, for the appellee.

The evidence in this case establishes a trust in favor of the children of Leander McKee, as against the estate of John McKee. John McKee declared himself trustee of $4000, to be held for the benefit of these children. See Wheatley vs. Purr, 1 Keen, 551; McFadden vs. Jenkyns, 1 Hare, 463, and, affirmed by Ld. Chancellor LYNDHURST, 1 Phillips, 153; Morgan vs. Malleson, 10 Equity Cases, ( L. Reports,) 475; Collinson vs. Pattrick, 2 Keen, 123; Fortescue vs. Barnett, 3 M. & K., 36.

The foregoing cases furnish examples as to what will amount to a declaration of a trust; and they establish also that a voluntary trust, once created, is irrevocable. Collinson vs. Pattrick, 2 Keen, 123. A trust in respect to personalty may be made by parol. McFadden vs. Jenkyns, 1 Hare, 463, and 1 Phillips, 153; Morgan vs. Malleson, 10 Equity Cases, (Law Reports,) 475.

A party creating the trust may retain possession of the property impressed with the trust; and no change or transfer of possession of property...