Banghart v. Vieweg

Smith, J., delivered the opinion of the Court. We are here obliged to construe the will of the late Byron T. Banghart (Banghart) of Baltimore City. When a sale of the business previously carried on by The Baltimore Wholesale Grocery Company of Baltimore City (Baltimore Wholesale) was made, a question arose as to whether that sale was a termination of the trust created in Banghart’s will. Appellant, Andrew Brittain Bang-hart (Andrew), brought a declaratory judgment action in Talbot County, naming as parties defendant the trustees of the trust created under the will and the potential beneficiaries.

The chancellor (Clark, J.) held the trust did not terminate. We shall affirm that decree. By the second item of the will, 5135 shares of the common stock of Baltimore Wholesale and 1000 shares of its 6% preferred stock were left to certain trustees. They were to pay the income to a son, Byron Downard Bang-hart, for life, with the provision that if the son did not survive Banghart by 20 years, the trust was to continue until 20 years after the testator’s death, with the income going equally to the son’s wife and children.

He further provided that the son’s wife and children were to be the distributees of the trust estate upon termination. The second and last paragraph of that item said: ²¹⁶ “My Trustees shall, in their discretion, have full power to exercise their voting rights as pertains to the stock held in trust. I have named Five Trustees because the majority of them have been associated with me at the Baltimore Wholesale Grocery Company for a long period of time and they are fully acquainted with my methods of conducting said business. The decision of the majority of my Trustees shall govern in the exercise of the voting rights of the stock.

Upon the death or resignation of any one of the aforesaid Trustees, all powers and duties under this trust shall vest in the surviving or remaining Trustees as the case may be. I have full knowledge that some of the aforesaid Trustees are officers and employees of the Baltimore Wholesale Grocery Company, but that fact shall not bar them from acting as Trustee under this trust. If, hereafter, any one of the Trustees shall become an officer of the Baltimore Wholesale Grocery Company or a director of said company, this act shall not bar said officer or director from acting in his capacity as Trustee. The Trustees set out aforesaid in this Trust shall receive no remuneration for acting in their capacity as Trustees.

Further, the said Trustees shall incur no liability in the administration of this trust by reason of the keeping of the assets of said trust intact as stock.” The will was executed November 5, 1949. On May 16, 1950, Banghart executed the codicil which provokes this controversy. The second paragraph of the codicil stated: “Whereas, by my said Last Will dated November 5, 1949 in Item Second I have established a trust estate naming the said beneficiaries and appointing said trustees, with certain powers and duties to perform which are set out in detain [sic] in my said Will, I do hereby em ²¹⁷ power and give my said trustees in Item Second of my Will, the power to sell the corpus of said trust estate, in their discretion, at any time after the said trust estate has been in operation for a period of three years after my death. If, in their discretion, the said trustees shall exercise their power and sell the corpus of said trust estate, said sale shall be at the highest price obtainable and no sale shah be made at less than the book value of the stock forming the corpus of said trust.

After such sale, the trust shall terminate; and after the payment of the necessary costs of such sale, the net proceeds thereof shall be divided equally between my two sons, Byron Downard Banghart and Andrew Brittain Banghart.” The parties have stipulated: the trust assets are 5135 shares of the common stock and 1000 shares of the 6% preferred stock of Baltimore Wholesale; there were issued and outstanding as of December 26, 1968, 9631 shares of common stock and the trustees, therefore, own 53% of all outstanding common stock; as of the same date there were 1131 shares of 6% preferred stock outstanding and the trustees, therefore, own 88% of that stock, which is nonvoting; as of the same date there were 63,576 shares of 7% preferred stock, none of which was owned by the trustees and which stock is nonvoting; Banghart died September 23, 1950; on December 23, 1968, the directors and on December 26, the stockholders, approved a sale of the inventory, trucks, tractors, trailers, automobiles, and all accounts receivable of Baltimore Wholesale to P. A. & S. Small Company (Small) of York, Pennsylvania, for which Small executed a note to Baltimore Wholesale in the amount of $599,777.17 dated February 4, 1969; excluded from the sale was warehouse and office equipment together with lands owned by Baltimore Wholesale; and Baltimore Wholesale has not been dissolved and still exists as a corporate entity. Andrew contends that the sale to Small was an event ²¹⁸ which terminated the trust. He offered evidence which was intended to show that the testator intended the trust to terminate if Baltimore Wholesale disposed of all of its operating assets and ceased to conduct a wholesale grocery business. The evidence was admitted over objections.

The court reserved its ruling on the objections. When the chancellor gave his opinion he said relative to this evidence: