Arrowsmith v. Mercantile-Safe Deposit & Trust Co.

RODOWSKY, Judge. This estates and trusts case presents three issues: 1. Where the exercise of a testamentary power of appointment is questioned under the rule against perpetuities, should the period of the rule be measured from the creation of the power, as provided by current Maryland law, or from the exercise of the power? 2. Can the doctrine of dependent relative revocation avoid the rule against perpetuities by including a perpetuities saving clause from an earlier exercise of a testamentary power of appointment into a later exercise of the power? 3.

Should Maryland law be changed to recognize pledges to make charitable contributions as enforceable contracts where there is no consideration, including estoppel? Because we shall not unsettle the settled law applied by the circuit court to issues one and three and because we agree with the circuit court’s response in the negative on issue two, we shall affirm. ³³⁷ By an irrevocable deed of trust to Mercantile-Safe Deposit and Trust Company (Mercantile) of May 1, 1953, Frances Cook Arrowsmith (Frances) created in her son, George H.C. Arrowsmith (George), a testamentary power of appointment over assets valued at the time of the proceedings below at some $7 million. George married Molly Jackson in 1958. Three children were born of the marriage, Edith Anne in 1959, Jeffrey in 1961 and Stephen R. in 1962.

George and Molly were divorced in 1965. Apparently as a result of the divorce George executed a new will on April 15, 1966. That will was in terms revoked by the revocation clause of a will executed by George on December 30, 1976. The 1976 will was in terms revoked by the revocation clause of a will executed by George on July 29, 1982.

The 1966, 1976 and 1982 testamentary instruments each undertake to exercise the power of appointment under the 1953 trust created by Frances. George died April 11, 1983, and the 1982 will was probated. In item SECOND of his 1982 will, George appointed specific sums from the 1953 trust to specific charities and appointed the balance to a trust of which Mercantile and George’s cousin, Francis N. Iglehart (Iglehart), were trustees. Iglehart prepared the 1976 and 1982 wills for George.

The item SECOND trust provides $10,000 per year for George’s former wife for her life or until she remarries. The balance of the corpus appointed from Frances’s 1953 trust was to be held by George’s trustees in equal shares for the children of George for their respective lives and thereafter each share was to be distributed per stirpes to the descendants of George’s children. Income payable to the life beneficiaries was solely in the discretion of the trustees who also had a discretionary power to invade corpus. 1 ³³⁹ Mercantile, as trustee of the 1953 trust, perceived that George’s exercise of the power of appointment from Frances in favor of the item SECOND trust under his 1982 will might well violate the rule against perpetuities. Frances’s 1953 declaration of trust provided that, in default of appointment by George at his death, the 1953 trust was to be distributed absolutely to George’s children.

Mercantile petitioned for instructions as to how it should distribute. None of George’s children have children so that the circuit court appointed counsel to represent all unknown and unborn persons who might have an interest in the item SECOND trust (the Unknowns). Edith Anne, Jeffrey and Stephen Arrowsmith, the children of George, submitted, and the circuit court agreed, that the appointment to the item SECOND trust violated the rule against perpetuities. Applying Maryland case law, the court measured the period of the rule from the creation of the power in 1953.

The circuit judge concluded that the life estates were not vested because distributions to the life tenants were discretionary under the item SECOND trust, and that the shares of George’s children would not vest in any Unknowns until the respective deaths of Edith Anne, Jeffrey and Stephen. Because none of George’s children were living in 1953 George was the measuring life. Inasmuch as George’s children might survive him by more than twenty-one years, vesting might be postponed beyond the period permitted by the rule. On a question not presented for review in this appeal, the circuit court also found that the power of appointment had secondarily been exercised under item THIRD of George’s will, the provision which governed disposition of George’s personal estate.

On that analysis twenty percent of the 1953 trust corpus was validly appointed to certain charities named in item THIRD of George’s 1982 will. Item THIRD appointed the remaining ³⁴⁰ eighty percent to the item SECOND trust, an exercise of the power which the circuit court held to be invalid. Consequently, the circuit court decreed that that eighty percent be distributed outright to Edith Anne, Jeffrey and Stephen pursuant to the default of appointment provision in the 1953 trust established by Frances. Iglehart is one of the appellants.

In his capacity as a co-trustee of the item SECOND trust he will suffer a reduction of commissions to the extent that the corpus of the 1953 trust is distributed by the trustees of that trust rather than placed in the item SECOND trust. Accordingly, Iglehart has standing to question whether George’s exercise of the power of appointment violates the rule against perpetuities. Iglehart argued before the circuit court that the exercise of the power by George under his will should mark the beginning of the period with which the rule against perpetuities is concerned here. The trial court measured the period from the creation of the power in 1953.

Iglehart appeals that holding. The Unknowns did not question the basics of the operation of the rule against perpetuities but argued that under the particular facts of this case the rule has no application. In his 1966 will George had appointed the corpus of the 1953 trust in further trust for the lives of his children to whom he gave powers of further testamentary appointment, and, on default of appointment, he gave absolutely to their descendants. But George had limited the duration of the trust under his 1966 will to the lifetime of the last survivor of eleven specifically identified persons, all of whom were alive when the 1953 trust was created.

This provision might also have operated to terminate the testamentary trust for George’s children before the maximum period permitted under the rule against perpetuities. Apparently for that reason, and perhaps others, the perpetuities saving clause was not included in the 1976 and 1982 wills of George. The Unknowns contended that the circuit court should bring the 1966 saving provision forward into the 1982 will and that the doctrine of dependent relative ³⁴¹ revocation authorized that court, in effect, to cut and paste the various wills of George in the manner requested. The circuit court held that it could not save an appointment to the item SECOND trust from the perpetuities violation by applying dependent relative revocation.

The Unknowns appeal from that holding. A third issue has been briefed and argued on appeal because counsel for Edith Anne and Stephen are of the view that this case presents an appropriate vehicle for changing the Maryland law of contracts by holding that pledges to contribute to charity are per se enforceable. In Maryland Nat’l Bank v. United Jewish Appeal Fed’n, 286 Md. 274 , 407 A.2d 1130 (1979), we required legal consideration, at least by way of estoppel, for contractual enforceability of those pledges despite a contention that courts should enforce those pledges as contracts because it would be good public policy to do so. In the instant case the circuit court necessarily rejected the merits of the same public policy argument.

From that holding Edith Anne and Stephen appeal. We granted a joint petition for certiorari prior to consideration of these appeals by the Court of Special Appeals. I The circuit court properly pinpointed the pertinent period for perpetuities purposes. It commenced with the execution of the 1958 deed of trust.

Judge Oppenheimer, writing for this Court in Murphy v. Mercantile-Safe Deposit & Trust Co., 236 Md. 282, 287 , 203 A.2d 889, 892 (1964), restated the Maryland law: Under our decisions, the provisions of a will exercising a testamentary power of appointment given under a deed of trust must be considered as if contained in the deed of trust in determining whether or not the appointment violates the rule against perpetuities. The period of the Rule is calculated from the date of the deed of trust creating the power and not from the exercise of the power by the will. Gambrill v. Gambrill, 122 Md. 563 , ³⁴² 89 Atl. 1094 (1914); Hawkins v. Ghent, [ 154 Md. 261 , 140 Atl. 212 (1928)]; Ryan v. Ward, [ 192 Md. 342 , 64 A.2d 258 (1949)]; Fitzpatrick v. Mercantile-Safe Deposit & Trust Co., 220 Md. 534 , 155 A.2d 702 (1959). Iglehart’s argument begins by recognizing that in determining the validity of interests created by the donee in the exercise of a general power presently exercisable, the courts have usually computed the period (for the purposes of the requirement of vesting under the rule against perpetuities) from the time of the exercise of the power by the donee rather than the time of its creation by the donor. [Jones, The Rule Against Perpetuities as Applied to Powers of Appointment in Maryland, 18 Md.L.Rev. 93, 101 (1958) (footnote omitted).] Under Frances’s 1953 trust the power of appointment is, however, restricted in that George had no power to appoint “to or for the benefit of himself, or his estate, or his creditors, or the creditors of his estate.” Iglehart submits that the number of persons to whom, or for whose benefit, George could appoint without violating the quoted restriction is so great that this Court, as a matter of policy, should apply the same beginning point to this testamentary power as is applied to general powers presently exercisable.

He points out that the quoted restriction on exercise of the power does no more than express the restriction which would be implied by law to an otherwise unqualified power. See Balls v. Dampman, 69 Md. 390 , 16 A. 16 (1888). Indeed, the United States Court of Appeals for the Fourth Circuit has described “a Maryland ‘general’ power” as what would be termed “a special power elsewhere.” Martin v. United States, 780 F.2d 1147, 1148 (1986). This argument focuses exclusively on the scope of eligible beneficiaries under the power and ignores the fact that the power was not presently exercisable.

We agree with the following evaluation by Professor Jones: When the application of the rule against perpetuities is involved, the courts have usually applied the “relation back” theory and viewed the appointment by the donee as ³⁴³ if it were a part of the instrument by which the donor created the power. This, in effect, requires that all interests created by the donee in the exercise of the power must be so limited that they are certain to vest within the period allowed by the rule counting from the time the donor created the power. Applied to testamentary powers, either general or special, or to special powers, either presently exercisable or testamentary, this rule seems sound since in all such cases the creation of the power by the donor has placed a clog on the title which cannot be removed until the donee exercises the power; the creation of the power thus ties up the property within the policy of the rule against perpetuities. [Jones, supra, at 101 (footnotes omitted).] Further, and not without significant weight in our decision, is the fact that the law relating to the rule against perpetuities in Maryland is presently sufficiently complex. It will require stronger reasons than presented here for this Court to add to the complexity by altering an established aspect of the rule on which the bar must rely in estate planning.

II The Unknowns seek the same objective as Iglehart but through the doctrine of dependent relative revocation. No reported Maryland appellate decision has ever applied it. In 2 W. Bowe & D. Parker, Page on the Law of Wills § 21.57, at 446 (rev. ed. 1980), the authors describe the doctrine as operating in general to invalidate the revocation of a will where it is shown that the revocation was conditioned on the occurrence of certain facts which never came to pass or upon the existence or nonexistence of circumstances which were either absent or present contrary to the condition. The courts very frequently apply the same doctrine where the revocation is carried out because of a purely mistaken frame of mind rather than a conditional frame of mind; but the courts still persist in calling it a conditional ³⁴⁴ revocation.

The end result in this type of case is perhaps proper, but it would be much better to recognize it for what it is, a mistake, and then proceed to formulate the proper rule. A mistaken frame of mind is really quite different from a conditional frame of mind, and it involves a needless and highly fictional process to pretend that an act unconditionally done by a person who never doubts the truth of the erroneous beliefs which motivate him is in reality done conditionally. Before reviewing those judicial decisions on which the Unknowns rely for application of the doctrine here, we set forth a statutorily based argument which Edith Anne and Stephen Arrowsmith advance but which we need not decide in this case. Md. Code (1974), § 4-105(a) of the Estates and Trusts Article (ET) reads in part as follows: A will, or any part of it, may not be revoked in a manner other than as provided in this section.

(a) Subsequent will.—By provision in a subsequent, validly executed will which (1) revokes any prior will or part of it either expressly or by necessary implication, or (2) expressly republishes an earlier will that had been revoked by an intermediate will but is still in existence ET § 4-106 provides: If a testator makes a subsequent will intended to revoke a prior will, the destruction or other revocation of the subsequent will does not revive the prior will unless the will is still in existence and is republished with the same formalities as are required for the execution of a will in this subtitle. Without regard to the effect, if any, that dependent relative revocation may have on wills revoked in Maryland by act to the document, e.g., by burning, cancelling, tearing or obliterating the same, Edith Anne and Stephen submit that ET §§ 4-105 and 4-106 block utilization of the perpetuities saving clause from George’s 1966 will because the 1966 and ³⁴⁵ 1976 wills were revoked by express and, in terms, unconditional, revocation clauses in later wills with no republication of the saving clause as required by §§ 4-105(a)(2) and 4-106. We shall assume, arguendo, that revocation within the meaning of §§ 4-105(a) and 4-106 does not include an expressly conditional revocation so long as the condition remains unsatisfied. We shall further assume that an impliedly conditional revocation, even if the condition is a legal fiction based on mistake, similarly would not revoke a prior will within the meaning of the above-quoted statutes, so long as the implied condition remains unfulfilled. 2 As reflected in the decisions relied upon by the Unknowns, even those courts which recognize the doctrine have not applied it in the manner requested by the Unknowns.

Plucking the perpetuities saving clause from the 1966 will and inserting it in the 1982 will is inconsistent with the theoretical justification for the doctrine. Warren, Dependent Relative Revocation, 33 Harv.L.Rev. 337, 343 (1920) refers to Onions v. Tyrer, 1 P.Wms. 343, 2 Vern. 741 (1717) as “undoubtedly the most celebrated case of dependent relative revocation.” The testator’s earlier will devised realty to trustees. A later will, containing a revocation clause, devised the same land to different trustees on the same uses. Under the law at that time the formality with which the second will was executed was ³⁴⁶ sufficient for a revocation but insufficient to devise realty.

The chancellor “was of opinion, that the former will stood good; for the latter will being void, and not operating as a will, would not amount to a revocation____” Id., 2 Vern. at 742. To Warren the result appears correct because the two wills were so much alike that, had the testator known of the true legal situation, he would have preferred the first will to an intestacy. Warren, supra, at 343-44. The Unknowns rely on another English decision which has been cited by American courts, In re Bernard’s Settlement, 1 Ch. 552 (1916).

The donee of a power of appointment under a marriage settlement had by will exercised the power by appointing the corpus in trust to be held in equal shares for each of her six daughters until the earlier of the daughter’s marriage or attaining age twenty-one at which time each daughter was to take outright. By a codicil the donee provided that the trust share for one particular daughter would, instead, be held for that daughter’s lifetime, with a gift over. This modification violated the rule against perpetuities. It seemed obvious to the chancellor that “the intention of the testatrix is only to revoke the previous appointment for the purpose of giving effect to the increased security which she thought her daughter would have by the protecting clauses that she has added in the codicil.” Id. at 561.

He could not conclude “that the testatrix intended to revoke her bounty under her previous appointment in all respects____” Id. Accordingly, the court held that “the original appointment made by the will remains operative.” Id. The American decisions are similar. Justice Traynor considered the doctrine in a case involving a New Yorker who had moved to California.

Under a will executed in New York and naming a New York resident as executor, the testator gave specific cash bequests to individuals and the residue of his estate to a church. Anticipating that his New York executor would not qualify in California, the testator executed a California will which revoked all prior wills and changed the executor but made the same gifts. ³⁴⁷ Three days later the testator died, thereby triggering a California mortmain statute which invalidated the bequest to the church. The Supreme Court of California applied dependent relative revocation. In re Kaufman’s Estate, 25 Cal.2d 854, 155 P.2d 831 (1945).

It reasoned as follows: The record makes clear the intention of the testator. He did not change his testamentary purpose but only minor details in its execution. The five cash legacies with residue to appellant church constituted the whole of his unaltered testamentary purpose. Since the second will was virtually identical with the first in the disposition of the testator’s estate, it is clear that the first will was revoked only because the second duplicated its purpose and that the testator would have preferred the first will to intestacy as to a substantial part of his estate.

When a testator repeats the same dispositive plan in a new will, revocation of the old one by the new is deemed inseparably related to and dependent upon the legal effectiveness of the new. [Id. at 860, 155 P.2d at 834 (citations omitted; emphasis added).][ 3 ] We have also been referred to Charleston Library Soc’y v. Citizens & S. Nat’l Bank, 200 S.C. 96 , 20 S.E.2d 623 (1942). Miss Mary Jane Ross, late of Charleston, was “a lady of large means ... and ... doubtless a person of much culture and refinement.” Id. at 98 , 20 S.E.2d at 624 . By an 1892 will she devised the family homestead for use as a branch of the Charleston Library and she created an endowment fund for its maintenance. By a 1921 codicil the testatrix expressly revoked the clause providing for the library and instead sought to create a trust for a museum housing her art collection.

That gift failed under the rule against perpetuities because the collection was not of museum quality so that the trust was not a charitable one. ³⁴⁸ When the Library Society claimed the bequests in opposition to residuary legatees, the court applied dependent relative revocation to sustain the overruling of a demurrer, saying: The codicil of 1921 should be regarded as a dependent relative revocation, or conditional revocation. The substituted provision for the museum having failed, the original provision for the Library becomes restored to full force and effect, in so far as the demurrer is concerned. [Id. at 126, 20 S.E.2d at 635 .] To the same effect see Blackford v. Anderson, 226 Iowa 1138, 1157 , 286 N.W. 735, 746 (1939) (“The basis for the doctrine ... is that there was never any revocation of the earlier instrument, or real intention to revoke, because of a mental misconception of the effect of his act, on account of mistake, or ignorance, or some other error.”); LaCroix v. Senecal, 140 Conn. 311, 317-18 , 99 A.2d 115, 118 (1953) (“[W]hen it developed that the gift under the codicil to the defendant Aurea was void, the conditional intention of the testatrix to revoke the will was rendered inoperative, and the gift to Aurea under the will continued in effect.”). These cases demonstrate that the doctrine’s underlying theory of conditional revocation limits the relief which a court can grant. If a later will which expressly revokes earlier wills itself fails in whole or in part, the doctrine requires a court to decide whether the decedent would have preferred the prior will to the result under the later will, which may be partial invalidity or intestacy.

If a codicil which expressly revokes part of a will itself fails in whole or in part, the doctrine requires a court to decide whether the decedent would have preferred the unmodified will to the result under the invalid codicil. If the court is satisfied that the decedent would have preferred the earlier disposition to the result under the later invalid