Bierau v. Bohemian Building, Loan & Savings Ass'n

Hammond, J., delivered the opinion of the Court. This appeal calls upon us to decide whether a decedent effectively created a trust during his lifetime as to a free share account in a building association. If he did, the money is the property of his two minor daughters, born out of wedlock; if not, it is a part of his estate. The Chancellor, in a proceeding for declaratory relief, held that a trust had been created.

The appellant, the administratrix of the estate of Joseph E. Filip, the decedent, says first, that unless the account was in the nature of a savings bank deposit, subject to the rules which govern such deposits, it is an asset of the estate because the evidence shows that the changes in the account amounted to a testamentary dis ⁴⁵⁹ position which violates the statute of wills; and second, that the evidence fails to sustain the appellee’s burden of proving a valid inter vivos trust of the savings bank type, effective before death. The thrust of the second point is sought to be driven home by an argument that savings bank trusts are essentially testamentary in nature because of the complete control reserved, which permits revocation, in whole or in part, at any time or from time to time, and, therefore, in view of the real chance of fraud after death, the courts should refuse to effectuate informal attempts to transfer in this manner funds on deposit, and should require literal compliance with the formalities and terms which have come to be recognized. We think that there is no necessity to decide what the result would be if the account involved were not to be governed by the rules which apply to savings type accounts. The courts hold that there is no rational basis for distinguishing free share accounts in building and loan associations from a savings account where trusts are concerned, despite the fact that there is not, in the first case, the debtor and creditor relationship which exists between the bank and the depositor.

In Wetzel v. Collin, 170 Md. 383 , this Court, in discussing an account in a building association in the trust form generally employed by savings banks, said: “The account was entered as a subscription to eight shares of stock of the association, which would be fully paid up when the deposits or payments amounted to $1,000.00. To all intents and purposes it was as much a savings account as if made in a savings bank.” The Court then went on to decide that the usual trust form was effective to cause the surviving beneficiary to become the absolute owner of all of the money on deposit. Other Maryland cases which have treated accounts in building associations as if they were in banks, are: Gimbel v. Gimbel, 148 Md. 182 ; Kozlowaka v. Napierkowski, 165 Md. 620 . The rule is the same generally.

Zimmerman v. Nauhauser (N. J.) 183 A. 820 ; Evinger v. MacDougall (Cal.) 82 P. 2d 194 ; Fleck v. Baldwin (Tex.) 172 S. W. 2d 975 . ⁴⁶⁰ The appellant’s argument, presented with skillful analysis and with a basic appeal.to reason and logic, that the strict requirements of the statute of wills and the reasons which brought thosé requirements into being, dictate that inter vivos trusts of deposits of money must be scrutinized with the greatest strictness, and denied effect, unless all the formalities are complied with to the letter, comes far too late in the life of the law, at least in Maryland. A number of States have refused to hold such trusts valid or enforceable, and others have limited their effect. In Maryland, where the requisite intent and execution of that intent are found from the facts, they have long been given full recognition and effect. The case turns then on whether Filip intended to, and did, transfer present equitable interests to his daughters or whether he intended the money on deposit to belong, only after his death, to them.

If there was an intention to transfer an interest during his lifetime, shown clearly by the evidence, this intent will not be frustrated because the requirements of the statute of wills were not complied with. Lord Eldon, in Ex-parte Pye v. Ex-parte Dubost, 18 Vesey 145, said that where a decedent during his lifetime, had declared himself to be trustee of certain stock, it formed no part of his estate. This case is commented on in Cox v. Sprigg, 6 Md. 274 . In Gardner v. Merritt, 32 Md. 78, 83 , deposits made by a grandmother in the name of her grandchildren, subject to the order of the grandmother or her daughter, the mother of the children, were held to'be the property of the infants.

The Court said: “* * * that the right of the donees is enforceable, as a trust, against this defendant '* * *” (the mother) and added: “ Tn'every case the general purpose and intention of the donor, and not the use of one particular term or another, will decide the question of whether a party does or does not take in a fiduciary character.’ ” In Smith v. Darby, 39 Md. 268 , it was held that a note to the order of the decedent was held by him as trustee for his grandchildren because of ⁴⁶¹ his parol declaration to that effect, which was held to be sufficient since the trust was a personal estate. In Taylor v. Henry, 48 Md. 550, 560 , the Court refused to recognize a joint deposit in a savings bank as a completed gift or as a trust, but said: “* * * where a person intends to give property to another, and vests that property in trustees, and declares a trust upon it in favor of the object of his bounty, by such acts, the gift is perfected, and the author of the trust loses all dominion over it; and in such gift of mere personal estate, the declaration of trust may be made and proved by parol, without the aid of writing. * * * In all such cases, the declaration of trust is considered in a court of equity as equivalent to an actual transfer of the legal interest in a court of law; and, if the transaction by which the trust is created be complete, it will not be treated as invalid for want of consideration. * * * For the purpose of establishing such trust, however, the evidence must be clear and unmistakable both of the intent and the execution of that intent.” Those principles were recognized as applicable to trusts of savings accounts and the rules which govern such trusts were delineated with clarity and exactness in Milholland v. Whalen, 89 Md. 212 . They have been reiterated many, many times in decisions of this Court and may be stated as follows: the usual entry “A in trust for A and B, joint owners, balance at the death of either to belong to the survivor” is, unexplained, a sufficient declaration of trust, since it indicates an intention to establish the trust, but this may be rebutted. 1 The mere use of the word “trustee” is not of itself sufficient to create a trust. If there was no intention to create a trust, none will be held to exist no matter what words are used. 2 Yet, if there exists in ⁴⁶² the mind of the depositor an intent that he or some other shall be trustee and he expresses that intent, although the words “in trust” or “trustee” are not used, the intention will prevail and the trust will be declared to have been created.

In every case, the real purpose and intention of the donor, and not the particular use of one particular term or another, will decide the question of whether there was a trust. 3 A savings bank trust may be created by parol and may be proven by parol. 4 The creator of the trust may reserve the right to withdraw part or all of the deposit at any time, or from time to time. A withdrawal amounts, in legal contemplation, to no more than the exercise of the power of revocation which will not affect the validity of the trust. The right to withdraw may be given to the trustee-beneficiary and the other beneficiary separately, or jointly, or may be reserved to the creator alone, and there will be no difference in legal result. 5 If written evidence is relied on to show the intent to create the trust, its expression may take varied forms and be found in various entries. There may be no entry in the passbook but an appropriate entry on the records of the depository, and this will not be fatal to the validity of the trust.

Sturgis v. Citizens National Bank, 152 Md. 654 . There may be an entry indicating a trust in the passbook but not on the signature card or ledger account. Again, the intention will prevail. Whittington v. Whittington, 205 Md. 1 , 106 A. 2d 72 .

If written instructions to the bank show an intention that a trust be created, one will be found and enforced, although the bank had ⁴⁶³ refused to honor the instructions and no entry showing a trust is in the bankbook or the bank records. Hancock v. Savings Bank of Baltimore, 199 Md. 163 . The trustee may be either the creator-beneficiary or another. In Milholland v. Whalen, supra, the Court said at page 215 of 89 Md.: “The legal title may be transmitted to a third person, or it may be retained by the donor, but in either case the equitable title has gone from him, and unless the declaration of trust contains a power of revocation it leaves him powerless to extinguish the trust.” In Bauer v. Harman, 161 Md. 131 , where a mother opened an account in her name, in trust for self and daughter, joint owners, subject to the order of either, balance at death to belong to the survivor, testimony showed that the account had been opened in this form and a Liberty Bond delivered to the daughter upon the express trust that the daughter would attend to the details of the investment, collect the income and pay it to the mother for life, and upon the mother’s death, distribute the fund as she had been directed.

The trust was enforced. See also Price v. Price, 162 Md. 656, at 662, 663 , where a parol trust made by a father to his son as trustee, was upheld. Other jurisdictions sustain the view that one other than the depositor may be trustee or co-trustee of a savings bank type trust. In Hellman v. McWilliams, Supreme Ct. of Calif., 1886, 11 P. 659 , a depositor assigned to one Heilman the amount due him from a bank, to be held in trust for the minor children of the depositor, who reserved to himself the right to withdraw such sums as he might deem proper for his own use.

The assignment and the agreement were verbal. The trustee collected the money under a power of attorney. The Court held that there was shown, with reasonable certainty, an intent to create a trust for the minor children and that nothing in the arrangement vitiated its validity. See also Bank of American National Trust & Savings Association v. Hazelbud (Calif.) 68 P. 2d 385 , where under its customary form, the bank was made trustee of a savings account.

The depositor reserved the right ⁴⁶⁴ to withdraw and the balance at. death was to go to his sister.. The trust was enforced. To .the. same effect is Falcone v. Palotta, 29 N. Y. S. 2d 918, Affd. 29 N. Y. S. 2nd 719. In Davis v. Ney 125 Mass. 590 (1878), a depositor in a savings bank assigned her deposits to the treasurer of the bank so as to give him title to the funds.

The transfer was upon oral agreement that the treasurer should pay her, during life, such sums as she wanted and upon, her death, should pay the balance, over to her son. Pursuant to this agreement, the treasurer paid her considerable sums and at her death,, paid the balance to the son. It was argued that this arrangement violated the statute of wills and was void. The Court held that a trust had been created, that parol evidence was admissible to establish the fact that the assignment, while absolute in its terms,: “was in reality upon certain trusts or agreements, which, if proved, a court of equity might compel him to execute.” The Court continued that while there was no power, as. such to revoke: .“* * * the donor was entitled by the agreement to such portion of the fund as she required during her life.

Such a provision, like a power of revocation, is not inconsistent with the creation of a valid trust.” The fact that the trust form may be used to enable payment of bills or for convenience of withdrawal, may, or may not, as the creator intended in fact, limit the terms of the trust. The power to withdraw for the payment of bills may be the sole purpose of a trust, or may indicate only an