Benadom v. Colby

567 A.2d 463, 81 Md. App. 222, 1989 Md. App. LEXIS 217
CourtCourt of Special Appeals of Maryland
DecidedDecember 27, 1989
DocketNo. 632
StatusPublished
Cited by2 cases

This text of 567 A.2d 463 (Benadom v. Colby) is published on Counsel Stack Legal Research, covering Court of Special Appeals of Maryland primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Benadom v. Colby, 567 A.2d 463, 81 Md. App. 222, 1989 Md. App. LEXIS 217 (Md. Ct. App. 1989).

Opinion

ROSALYN B. BELL, Judge.

This appeal and cross-appeal followed a decision rendered by the Circuit Court for Baltimore City. The case involves the construction of a portion of a trust, known as the Hodson Trust, and the deference due to the Trustees’ interpretation of those sections of that Trust. The Trustees 1 brought the action against 68 named defendants 2 and all minors, known and unknown, born and unborn (the Minors), who might have an interest in the income referred to in the Trust provisions at issue. The widow of Thomas Hodson III (Thomas III) and sole distributee of his estate intervened as a defendant with the consent of the other parties.

In 1976, after the death of Thomas III, a grandson of the settlor, the Trustees determined that the five percent income referred to in § 14(e) “reverted” to the Trust and became available for distribution to four colleges.3 Appellees/cross-appellants (these various parties will be described later) did not believe this was a correct determination. Hence, the Trustees sought a judicial construction of certain clauses in the Trust, confirming their interpretation which they contended was appropriate under the Trust. The trial court agreed with the Hodson III,4 as well as the [225]*225Minors and the descendants of Mary King Hodson Brown,5 appellees/cross-appellants, that the Trustees’ interpretation was incorrect, and concluded that the income should be distributed to the widow of Thomas III, Bette O. Hodson, with payments to have commenced as of September 1, 1985.6

In this appeal, the Trustees and the college cross-appellants contend:

—The court erred in construing § 14(e) of the Hodson Trust as meaning that the income referred to in that section did not revert to the Trust on Thomas Ill’s death, but vested in Thomas III absolutely and continues for the life of the Trust in Thomas Ill’s widow and her successors in interest.
—The court erred in rejecting the Trustees’ contention that their interpretation of § 14(e) was entitled to deferential review and should be confirmed since it was made in good faith and was not unreasonable.

The Hodson III appellees and cross-appellants also claim:

—The court erred in limiting the income interest under § 14(e) to $25,000 per year regardless of the number of beneficiaries receiving that income.

The Minors are cross-appellants with respect to the construction of § 14(e)-(f) of the Trust. They urge:

—The court erred in not construing § 14(f) of the Hodson Trust to mean that one-half of the income referred [226]*226to was distributable to the children of Mary King Hodson Brown, per stirpes7 until there is a failure of issue, but instead reverts to the Trust upon the death of each child of Mary King Hodson Brown.8
—The court erred in construing § 14(e) of the Hodson Trust to mean that the income referred to therein did not descend to the issue of Thomas Jr., per stirpes, until there is failure of his issue, but instead vested in Thomas III absolutely and continues for the life of the Trust in Thomas Ill’s widow and sole legatee, and her successors in interest.

We hold that the trial court erred in its decision regarding § 14(e) and the deference due to the Trustees. We hold that the trial court was correct in its ruling that the corresponding § 14(f) income reverts to the Trust after the death of each of the named children of Mary King Hodson Brown. Because we hold that the Hodson III appellees are not entitled to any income under § 14(e), we need not and will not address the issue of whether the court erred in limiting such income to $25,000 in accordance with § 14(H).9

[227]*227THE CREATION OF THE TRUST AND THE CONTROVERSY

The Hodson Trust, which generated in excess of three million dollars in 1988, was executed on February 17, 1920 by Thomas Sherwood Hodson, Sr. Thomas, Sr. had three children: Clarence, Thomas, Jr. and Mary King Hodson Brown. Clarence founded the Beneficial Loan Society in 1914. The Society became the Beneficial Corporation, a publicly traded corporation with the Hodson Trust as the largest single shareholder. Clarence became quite wealthy and used the corporate stock as the source of the Trust corpus. Clarence established the Trust to honor his father, Thomas, Sr., who was technically the settlor. The Trust reflected Clarence’s importance by naming himself, his wife and two sons (but not his daughter) as four of the seven Trustees. Moreover, the Trustees were a self-perpetuating group, enabling Clarence, through his family, to exert control over the Trust after his death.

Thomas, Sr. and Clarence were committed to promoting higher education in the State of Maryland; after his father died in 1920, Clarence devoted his efforts toward the founding of a new university to be known as Hodson University. Clarence formally amended the Trust in 1927.10 The amendments provided, inter alia, that if Hodson University was not founded by 1935, the funds were to be distributed to other colleges located in Maryland with which the Hodson family had connections, namely the college cross-appellants. The 1927 amendments also included subsection (n) of § 2; it provided in relevant part:

“2. It is hereby declared that the purposes for which said Trust is settled and established and the general powers of the Trustees thereof, are:
[228]*228“(n) To furnish funds (ultimately and principally) for the charitable cause of Education, in perpetuity, by providing for the incorporation of a University in Maryland, with a perpetual charter and to have affiliated schools, institutes or colleges; ...”

The 1927 amendments also included §§ 2(m), 2(m-l) and 2(m-2). Section 2(m) permitted the Trustees to file suit in a court having equity jurisdiction in Baltimore. Sections 2(m-1) and 2(m-2) provided:

“(m-1) The trustees should themselves decide all matters, unless grave doubts of legality arise, for it would be cumbersome and hazardous, if not disastrous, to attempt administration of a Trust estate by frequent petitions to and decrees of Court and would result in transferring mastery of the trust funds from trustees to courts, contrary to the Declaration of Trust.
“(m-2) It is not intended that any court shall generally administer the Trust, or prescribe the acts or duties of the trustees, or interfere with the trustees in the exercise of their discretion in administration of the Trust, in any manner whatsoever, except where doubts arise as to legality or practicability or true interpretation of some one or more provisions in the Declaration of Trust or Amendments thereto, or which may become doubtful or in controversy as to their proper interpretation, and then only if any cestui qui trust shall claim some advantage or interpretation of the trust terms, and if a majority of these trustees are unwilling or fail to interpret same or will not act without the instructions, guidance, or decree of a court of equity jurisdiction, except as to the points in doubt or controversy.”

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Cite This Page — Counsel Stack

Bluebook (online)
567 A.2d 463, 81 Md. App. 222, 1989 Md. App. LEXIS 217, Counsel Stack Legal Research, https://law.counselstack.com/opinion/benadom-v-colby-mdctspecapp-1989.