Brown v. Mercantile Trust & Deposit Co.

40 A. 256, 87 Md. 377, 1898 Md. LEXIS 149

• Court: Court of Appeals of Maryland
• Decided: April 1, 1898
• Status: Published

Opinion

Page, J.,

delivered the opinion of the Court.

This proceeding was instituted to set aside a declaration of trust made by the appellant to the Mercantile Trust and Deposit Company of Baltimore (referred to hereinafter as “ The Trust Company.”)

The complainant alleges in the bill that he inherited a considerable fortune from his father, the late George Brown, and being utterly unacquainted with business affairs, but anxious to have certain parts of his personal estate placed in the hands of some corporation who would manage the same profitably for him, but also believing that any such arrangement as he contemplated making would be subject to revocation, and being then possessed of stocks and securities aggregating in value the sum of $ 140.000, delivered the same on the 29th of June, 1894, to the Trust Company ; that said delivery was made for his personal use and convenience, and was understood by him to continue and be of force only so long as he might consider it desirable, and it remained unrevoked, but not to be permanently binding on him, and such was his belief at the time of making such delivery; that the Trust Company desiring to make declaration of the purpose of such delivery of the stocks and securities, which had been purely voluntary and without consideration, executed of its own volition the declaration of trust; a copy of which was filed with the bill: that by the terms of the said declaration, the entire income, less compensation to the trustee, is to be paid over to the complainant during his life ; and no present interest passed to others until his death ; that such declaration is entirely testamentary and can be annulled and set aside by a Court of Equity; “ that the delivery of the stocks and securities were delivered to the Trust Company at a time when he believed that he had sufficient income to pay all his obligations and support his family, but that owing to the failure of some of the corporations in which he had investments to pay their accustomed dividends, he became embarrassed ” and therefore now desires to have the said trust dissolved and set aside ; that he has informed the Trust Company that he has revoked the trust, but it declines to return to him the stocks, etc., unless so directed by the Court; and he therefore prays that the said stocks and securities may be decreed to belong absolutely to him, and that the Trust Company may be ordered to “ deliverj reassign and transfer ” them to him.

The declaration of trust referred to in the bill bears date the 29th of June, 1894. It declares that, whereas George Brown “hath at the execution of these presents,” delivered to the Trust Company certain stocks, bonds and securities (which are specifically set out and described in the paper) ; and inasmuch as the title to said stocks, etc., passed by the delivery, it was deemed important that some permanent record should be preserved of the terms upon which said transfers were made, and the duties assumed and the trust to be performed by said corporation in respect thereto, etc. The Trust Company is to ta^<e charge of and keep the stocks, etc., and to collect the income and profits thereof, and after deductions of lawful and necessary expenses of the administration (including as compensation for its services as trustee a commission of three per cent, on said income, and no charge for reinvestment) to pay over as collected to the appellant, the whole net income during his life ; and from and after his death, one-third of said income to his widow, and to divide the remaining two-thirds thereof among his childred living at the time of his death (the child or children of any deceased child to take the share its or their parent would have been entitled to if living), until the youngest of said children shall arrive at the age of twenty-one years, when said trustee is to divide two-thirds of the corpus of the estate equally among them, share and share alike (the child or children of any deceased child to take the share its or their parent would have been entitled to if living). Upon the death of the widow, the one-third of the corpus held for her to be divided in like manner. In case his wife did not survive him, the whole income to be equally divided among his children and the corpus in like manner when the youngest child attains the age of twenty-one years. The Trust Company is given power without the orders of any Court to make changes of investment “ at its discretion,” and to make sales and transfers as often as it deems best, for this purpose or for any other purpose, without any obligations upon purchasers to see to the application of the purchase money, with power to reinstate the proceeds of sale in any secutities, real or personal, and without any accountability for losses, “.save from the gross negligence of any one or more of its servants or officers.” But changes in investments and sale are to be made during the life of the said George Brown, “only with his assent, to' be evidenced by a memorandum in writing.” The trustee is to render quarterly accounts of the trust during the life of George Brown, and such other as he may at any time require, and upon the expiration of the trust the trustee is to be entitled to a commission of two and a-half per cent, in distribution of the principal.

All the adult appellee defendants have answered admitting the facts set forth in the bill; except the Trust Company, which, after admitting the delivery of the securities and the making of the declaration of trust, and the attempt of the complainant to revoke the trust, and its refusal to comply with the demand to return the property, avers that it accepted the stocks and securities and executed the said declaration in good faith and believes it to be its duty to decline to comply with the demand of the complainant, but being a mere trustee, submits itself to such decree as the Court shall deem proper to pass.

It will be observed there is no charge made in the bill, and, as will appear hereafter, none was set up in the proof, that the appellant had had any actual fraud or imposition practised upon him in the procurement of the paper. The grounds upon which it is contended that the declaration of trust should be set aside, are stated by the counsel for the appellant in the brief filed by him, as follows :

1st. That confidential relations existing between the appellant and appellee, being that of principal and agent, rendered the declaration of trust prima facie void.

2nd. The appellee is therefore bound to show “ to the full satisfaction of the Court, that it was the free, unbiassed act” of the appellant, and that he “ voluntarily and deliberately performed the act knowing its nature and effect.”

3rd. That the appellant executed the paper under an entire misapprehension of the provisions, and under the belief that he had the right at any time to revoke it.

4th. That the absence of the power of revocation is fatal to its validity, under the circumstances.

5th. That the paper is in its nature a testamentary disposition of his personal property, which he is at liberty ta revoke at any time during his life.

It may be seriously questioned whether the facts of this case bring it within the well-established rule, applicable to cases where a gift or conveyance of property is made to one standing in a confidential or fiduciary relation to the donor. That rule is designed in some degree as a protection to the parties against the effects of overweening confidence and self delusion, and the infirmities of hasty and precipitate judgment. 1 Story Eq. Jur. 307. Where such relations do exist, and a benefit is obtained, the burden is on the donee to establish to the full satisfaction of the Court that the deed or instrument was the free, unbiassed act of the donor. But it is sometimes difficult to lay down with precision what is meant by the expression “ confidential relations ” or “ relations in which dominion may be exercised by one person over another.” Cook v. Lamotte, 15 Beav. 299, cited in Whitridge v. Whitridge, 76 Md. 73. Such a relation will undoubtedly be presumed in certain cases ; as for instance, in that of a guardian and ward, parent and child, attorney and client, and also in that of principal and agent, and may exist in many other situations.

' But it will not and cannot reasonably be presumed that the mere fact of the relation of principal and agent for limited or special purposes, necessarily raises a controlling presumption of undue influence on the part of the agent over the principal, particularly in matters outside of the special purposes for which the agent has been .employed. Whether such close and confidential relations existed between the parties so situated as to enable the one to dominate and control the .other would be a question of fact dependent upon the circumstances of each case. Cowee v. Cornell et al., 75 N. Y. 100. In Brooke v. Berry, 2 Gill, 83, and in Todd v. Grove, 33 Md. 191, the agency extended to the transaction of all the business, and the management of all the affairs of the principal, and this being so, when the gift was obtained, it. was held that the facts brought these cases clearly within the rule of equity governing transactions between parties standing in a confidential relation. But in Eakle v. Reynolds, 54 Md. 305, where the proof showed that the donee had “ occasionally transacted business for the donor and that he had during the last sickness of the donor, who was his uncle, the general management of the farm, under the general directions of the donor, it was held that the facts did not show that the relations of the parties were such as to imply dominion or control either over the property or person of the donor.” Now the sole proof upon which it is contended here that such confidential relations existed between the appellant and the Trust Company, is the evidence of Mr. Gill, the president of the Trust Company, to the effect that Mr. Brown “ had employed us (the company) to sell securities for him ” and that the stocks, etc., were under “ our joint custody in the Trust Company.” Now it would be going very far to assume that because Mr. Brown had availed himself of the security furnished by the vaults of the Trust Company (whose business was partly that of a safe deposit company) to protect and keep his property; and (when a change of investment became necessary) had selected the company to make sale of such of his securities as he wished to dispose of, that a relation of confidence therefore existed between the parties, so close as reasonably to imply that the company possessed power to dominate his judgment and actions. And apart from -this, can it be successfully contended that the grantee received such a benefit as ought to bring the case within the rule ?

Under the declaration of trust the company gets a benefit of three per cent, commission on the net income, and in the final distribution two and one-half per cent, on the principal. In no case we have been referred to has it been' held that a provision for reasonable commissions was a benefit conferred by the grant such as will bring the case within the doctrine, applicable to parties standing in confidential relations. Judge Miller, with the concurrence of Judge Robinson, in his opinion in Williams v. Williams, said the law regards such commissions as compensations for services rendered, and not as a benefit granted by the deed. 63 Md. 409. This was part of a dissenting opinion, it is true, but there is nothing in the opinion of the Court in conflict with it, and the utterance of so able and experienced a Judge, concurred in as it was by the late Chief Judge Robinson, is undoubtedly entitled to great consideration.

Moreover, in Todd v. Grove, 33 Md. 193, in the opinion adopted by this Court, the words of Sir G. J. Turner, delivered in Rhodes v. Bate (1 Chancery App., 256), were cited approvingly as follows : “As to the nature of the benefit, the injury to the party by whom the benefit is conferred, cannot depend upon its nature. This general principle, however, must, as it seems to me, admit of some limitation, It cannot, I think, reasonably be said, that a mere trifling gift to a person standing in a confidential relation, or a mere trifling liability incurred in favor of such a person, ought to stand in the same position as a gift of a man’s whole property or a liability involving it would stand in.”

But, however this may be, we will now examine the case on its merits, as disclosed by the proof. There is no sufficient evidence in the case, in our opinion, that the appellant executed the paper under a misapprehension of its provisions. The appellant states that he thought he could revoke it; but it is apparently with care that he abstains from affirming that he understood there was sucha power reserved to him in the paper, in terms. He further states that he signed the declaration, but never read over “ that part of it about the children. ” Mr. Gill, on the other hand, says, “ he read the paper and said he could not sign it without conferring with his lawyer,” that “ he left the office with the deed in his pocket,” and, a day or two later, returned “ to have some alterations made,” which were accordingly made. Except as to reading the paper this testimony of Mr. Gill is wholly uncontradicted. It is not claimed that Mr. Brown is incapable of attending to business, and if he be not, it is inconceivable that he should retain such an important paper in his possession for “ a day or two ” without reading it, and knowing all its contents.

But is contended, the declaration of trust is invalid because it contains no power of revocation. The ancient doctrine was, that a voluntary settlement made without fraud was binding on the settlor, although the settlor had not reserved a power of revocation. In Bill v. Cureton, 2 Mylne & Keen, 510 (decided in 1835), it was stated that this doctrine had then never been disputed, and had been the subject of repeated decisions from the cases of Villers v. Beaumont (1 Vernon, 100), in the year 1682, and of Brookbank v. Brookbank (1 Eq. Ca. Abr. 168), in 1691, down to the modern cases of Ellison v. Ellison, 6 Ves. 656; and Pulvertoft v. Pulvertoft, 18 Ves. 84; Petre v. Espenasse, 2 Mylne & Keen, 502. This doctrine has been much relaxed by the modern decisions, and the rule now seems to be, the one stated by Lord Justice Turner, in Toker v. Toker, 3 De. G. J. & S. 491: “ That the absence of a power of revocation may be evidence that the party did not understand the transaction and so of undue influence. But whether it would be so or not, would depend. upon all the circumstances of the case * * *. Again I think it is going too far to say that no voluntary settlement can be valid unless the settlor is advised there should be a power of revocation inserted in it. What the Court has to be satisfied of in these cases, I apprehend, is that the settlement, whether containing or not containing a power of revocation, is the free determined act of the party making it; and the absence of advice as to the insertion of a power of revocation, is a circumstance and a circumstance merely, to be weighed in connection with the other circumstances of the case.” This case was cited approvingly by this Court in Whitridge v. Whitridge, 76 Md. 83, also the case of Huguenin v. Basely, 14 Ves. 273, where the same doctrine is announced. Henry v. Armstrong, 18 Ch. Div. 558; Phillips v. Mullings, L. R. 7 Ch. App. 244; Hall v. Hall, L. R., 8 Ch. Ap. 430; Viney v. Abbott, 109 Mass. 300; Russell's Appeal, 75 Pa. St. 288. See also Goodwin v. White, 59 Md. 509. The cases cited by the counsel for the appellant are not in conflict with these principles. In Rick's Appeal, 105 Pa. St. 536, the Court say, “There is a line of English cases which hold that in the absence of any motive for an irrevocable gift it is unreasonable that a voluntary conveyance should be without a power of revocation * * * *. “ The absence ” (the Court proceeds citing from Hall v. Hall, supra), “ of a power of revocation in a voluntary deed not impeached by any undue influence, is of course material, when it appears that the settlor did not intend to make an irrevocable settlement or where the settlement is of such a nature, or was made under such circumstances as to be unreasonable and improvident unless guarded by a power of revocation. Our own well-considered case of Russell’s Appeal, 75 Pa. St. 269, sustains the same view. It was there said, ‘the absence of the power of revocation in the deed and failure of counsel to advise it, are circumstances, with others, to show that the act was not done with deliberate will.’” To the same effect is Garusey v. Munday, 24 N. J. Eq. 246; and Aylsworth v. Whitcomb, 12 R. I. 299.

Now, let us examine the facts of this case as disclosed in the record.

The grantor, George Brown, at the time of the making of the declaration of trust, was forty-seven years of age. There is nothing to show that he is deficient in ordinary intelligence, though it is admitted he has had no business education and is utterly unacquainted with business affairs. He inherited a considerable fortune from his grand-father, and at the time of the making the declaration of trust, he was possessed of one hundred and forty thousand dollars in stocks and securities and also was the owner of the Brooklandwood tract of land in Baltimore County, containing about 1,700 acres, on which he had expended in permanent improvements and betterments about thirty thousand dollars, ($30,000). A considerable portion must have been owed by him when the declaration was made, for he “ was much disturbed about the amount of money he was spending for improvements going on at Brooklandwood.” He told Mr. Gill he “had already expended a large amount of money and would have to sell more securities.” The evidence implies strongly, he had already been compelled to sell part of the securities, and his disturbance clearly arose from the apprehension that the remainder would be lost to him, unless some steps were taken to preserve it. He visited Mr. Gill on several occasions, and it was during one of his visits that Mr. Gill suggested to him to make a deed of trust of the remainder of his personal property, “ that thereby he would save a considerable sum of money for his children.”

“ He said it was his desire to make this deed of trust.” There is nothing in the record, but what we have thus stated, and the terms of the declaration itself, that indicate the purposes of the declaration of trust, except the very loose and vague statement of Mr. Brown himself, that he put his property in the hands of the company “ for his own use.”

It is clear that it was made for the purpose of protecting his property from his own improvidence. He was disturbed about his expenditures, and was without the capacity to abate them. If he thought only of himself, he was solicitous lest he should soon be without other means than his landed estate. If his children and wife were in his thoughts, as Mr. Gill suggested, the deed of trust would enable him to save “a considerable sum of money” for them. The terms of the trust itself bear out this view. It secures to Mr. Brown the enjoyment of the income for life, and full provision is made for his wife and children after his death. That he intended the trust to continue after his death is clear from the fact that no change of investment could be made “ during his life without his assent;” and further, that the Trust Company was during his life to render accounts to him quarterly and at such other times as he should require ; and if it was so to continue, he could have had no other purpose than to protect and preserve his property for the benefit of those who should survive him. To have inserted a power of revocation in an instrument like this, under these circumstances would have been clearly out of place. A spendthrift trust revocable at the whim or caprice of the donor could afford no security whatever; it would have been, as counsel said, absurd. In Henry v. Armstrong, supra, the plaintiff being about to go into business on the Stock Exchange, executed a deed of his real and personal estate in trust, for the separate use of his wife for life, with remainder to his children or their issue as therein mentioned. He brought the action to set it aside, on the ground he had executed the deed in ignorance of its true purport and effect. Kay, J., said, "As I understand it, the law is that anybody of full age and sound mind, who has executed a voluntary deed by which he has denuded himself of his own property is bound by his own act, and if he himself comes to have the deed set aside * * * he must prove some substantial reason why the deed should be set aside. Now, the grounds on which the plaintiff relies in this case are that he did not fully understand the purport of the deed, and that it is irrevocable * *. It is very common that a man should execute such a deed when he goes into business and the ordinary way is that the deed should be drawn without any power of revocation, because if there is a power of revocation, and he falls into difficulties or becomes bankrupt, the assignment of his property would be practically useless. Such a power would be in this case entirely inconsistent with the objects I am told the plaintiff had in executing the deed. ” For like reasons we are clearly of the opinion, that in view of the appellant’s character and unfitness for business of any kind, his inability to care for his own estate, and his past experience in taking care of his affairs, it was eminently wise and prudent that he should take steps to be protected against himself; and we think the clear purpose of the parties in executing the declaration of trust was to do this, and save something after his death for his children. It could not have been intended that the trust should be revocable at the donor’s pleasure, for the reason that a power of revocation, in such an instrument, would have been clearly out of place and wholly inconsistent with the objects of the trust, and would have l-endered the act nugatory and worthless.

The appellant further contends, that the trust is in its nature testamentary and revocable. The declaration of trust sets forth that the stocks, bonds and securities had passed out of the possession of Mr. Brown and had been delivered to the company. The transaction, therefpre, was complete, and all present interest had become vested in the trustee. To sustain his position the counsel for the appellant has cited (mostly from Pennsylvania) the following cases: Frederick's Appeal, 52 Pa. St. 328; Turner v. Scott, 51 Pa. St. 126, Gingrick's Appeal, 17 At. Rep. 23; Rick's Appeal, 105 Pa. St. 5 28, and Flester v. Young, 2 Kelly, 46. We will briefly examine these cases. In Frederick's Appeal it was held that the act of the donor by the true construction of the deed was a mere power of attorney, that the “manifest intention of the grantor was to promote his own convenience and protect his own interests, and that the utmost that can be made of it is that it was a mere covenant for posthumous gifts, and as such midum pactum.”

In Turner v. Scott, decided prior to the last mentioned case, the grantor reserved the possession and use of the land during his life, and provided in express terms that the deed should in no way take effect until after his death. The Court held that “whatever the forms of the instrument, if it vests no present interest, but only appoints what is to be done after the death of the maker, it is a testamentary instrument.” In Rick's Appeal the Court said, “it is said, however, in the case on hand, a present interest passed to the appellant. This scarcely rises to the dignity of an argument.” In Hester v. Young, the instrument in question provided that no title was to pass until after the death of the donor. These cases, therefore, only decide that voluntary deeds where no present interest passes are testamentary in their character and are revocable at the will of the donor.

But that is not this case; here the present interest did pass, as we stated, to the donee. In such a state of facts the law in Pennsylvania is clear. In Stocket v. Ryan, 176 Pa. St. 71, decided in 1896, when the deed was made for the purpose of preserving the grantor’s estate, for his own benefit during life and of disposing of it among his family, in accordance with his wishes, after his death, the Court said, “ Where a deed conveys, as this one does, a present interest for life to the grantee, the fact that it contains provisions to take effect by way of contingent remainders upon the death of the grantor during the life o'f the grantee, does not convert it into a will or make it testamentary.” Such limitations cannot be revoked by the grantor, and to sustain this position a number of Pennsylvania cases are cited, including Lines v. Lines, 142 Pa. St. 149, and Mattocks v. Brown, 103 Pa. St. 16.

In Maryland it is clear, that if the obvious purpose of an instrument in any form is not to take place until after the death of the person making it, it shall operate as a will. Cover v. Stem, 67 Md. 453; Cary v. Dennis, 13 Md. 17. In Mayor and C. C. v. Williams, 6 Md. 254, this question arose in the following manner: The plaintiff Williams brought suit .against the defendant to recover damages assessed in favor of the owner of a city lot, resulting from opening a street. 'The real controversy was between the plaintiff and one Banks. The plaintiff claimed under a deed from Hannah Kitty Chase by which she conveyed the lot to the plaintiff in trust for the benefit of herself for life, and from and after her death for such uses and trusts as are declared in her last will. It was contended among other things that the deed was a testamentary paper and had been revoked by Mrs. Chase. It was so claimed because it limited the estate to the use of the grantor for life, and then in trust for the uses in the will and codicil, which could only take effect beneficially, after the decease of the grantor, as they would by will. But the Court held that it could not be so regarded. In its opinion, the case of Thompson v. Brown, 3 Myl. & K. 32, is cited. There the deed was for the purpose of securing to the grantor dividends of stock, for his own use during his life and disposing of the stock to others after his death ; it also contained a power of revocation ; but it was held not to be a testamentary paper. In the following cases in Maryland such trusts have been maintained: Thompson v. Ballard, 70 Md. 10; Latrobe v. Carter, 83 Md. 279; Duffy v. Calvert, 6 Gill, 487. See also Bunch v. Nicks, 50 Ark. 367; White v. Hopkins, 80 Ga. 154; Wilson v. Carrico, 140 Ind. 523.

(Decided April 1st, 1898).

For these reasons the decree must be affirmed.

Decree affirmed.