Carey v. Safe Deposit & Trust Co.

Mitchell, J., delivered the opinion of the Court. This ease embraces three appeals in one record from decrees entered in the Circuit Court No. 2 of Baltimore City, and one appeal from a decree entered in the Circuit Court of Baltimore City, involving four separate trust estates, in which the late George G. Carey was sole trustee, and in which the Safe Deposit & Trust Company of Baltimore is now substituted trustee. For a more convenient reference in this opinion.to each of the above appeals, we deem it expedient to set forth at the outset the titling of each trust, with a brief statement of the origin and nature thereof, and their status at the time of the death of Mr. Carey, and to designate them by consecutive numbers, 1, 2, 3, and 4, in the respective order in which they are hereinafter stated. Case No. 1: Rena Trust et al. v. Rena S. Beacham.

Appeal from Circuit Court No. 2 of Baltimore City. The funds of this case represent reinvestments of portions of the estate of Edwin H. Trust, given to his wife for life, and after her death to his children for life. On the death of his children the trust estate becomes the absolute property of his grandchildren. The fourth clause of his will reads as follows: “I authorize and empower my wife to sell, lease, assign or otherwise dispose of by deed or lease or other instrument of writing any part or all of that half of my estate which is given to her for life, in case she may deem it desirable or necessary to do so, and to reinvest the proceeds thereof in such safe securities as she may deem proper, upon and for the same uses as are hereinbefore mentioned with reference to the said half of my estate, and so that the purchasers or lessees shall not be bound to see to the reinvestment of the said proceeds.” The twenty-sixth rule report filed in the year 1932 by Mr. Glenn shows a deposit of $2,058.63 in the Title Guarantee & Trust Company in the name of Carey ⁵⁰⁴ & Glenn.

The ledger of Carey & Glenn shows uninvested corpus as follows: November 29, 1929 ................................. $1,500.00 May 29, 1930 ................................................ 1,650.00 July 29,1930.................................................. 1,120.00 March 24, 1931 .......................................... 2,050.00 July 21, 1932 ............................................ 3,025.00 George G. Carey was appointed trustee on August 2nd, 1930, and duly qualified. At the time of his death, the value of the principal of the trust estate was approximately $15,000. During the course of the administration of the- trust estate, the trustee deposited funds belonging to this estate in the savings department of the Title Guarantee & Trust Company, in an account standing in the name of Carey & Glenn. On March 24th, 1931, there was in this account, representing funds of this trust estate, the sum of $2,050, and on July 21st, 1932, this amount was increased, by a deposit of funds pertaining to this estate, to the sum of $3,025; the amount due by the trustee to the trust estate at the time of his death being the sum of $3,014.63.

In addition to the trust funds above mentioned, there were deposited from time to time in the account in the savings department of the trust company in the name of Carey & Glenn other trust funds and certain funds held by Carey & Glenn, or George G. Carey, as agents, and also some of the individual funds of Carey & Glenn. There never was a time when the amount of the funds in the account did not exceed the sum total of the trust funds and the agency funds. Following the death of George G. Carey, George G. Carey, Jr., was appointed administrator of the estate of his father, and .duly qualified. On the 9th day of February, 1933, George G. Carey, Jr., as administrator, deposited in the savings department of the trust company $3,014.63 to the credit of Trust v. Beacham; the said amount representing the amount of the funds belonging to said trust estate which had been deposited as above mentioned in the account in the savings department of the Title Guarantee & Trust Company, in the name of Carey & Glenn.

This sum of $3,014.63 was drawn from ⁵⁰⁵ the Carey & Glenn savings account, deposited in the checking account of Carey & Glenn, in the Baltimore Trust Company, and redeposited the same day in the savings department of the Title Guarantee & Trust Company to the credit of the trust estate of Trust v. Beacham. The affairs of the Title Guarantee & Trust Company were placed in the hands of the state bank examiner as receiver on February 17th, 1933. Case No. 2: Mary Elizabeth White v. Emault H. Williams. Appeal from Circuit Court No. 2 of Baltimore City.

In a deed from Mary Elizabeth White and Stevenson White, her husband, to George Hawkins Williams as trustee, dated April 3rd, 1871, Mary Elizabeth White conveyed her property to the trustee in trust to. pay her the income for life, and at her death reserving a right to dispose of the property by last will and testament, and, on failure to exercise this power of appointment, the trust property to be conveyed to the children of Mary Elizabeth White. On the death of George Hawkins Williams, Stevenson White was appointed trustee for his wife. On the death of Mr. White, George G. Carey was appointed trustee on September 15th, 1923. The property of Mrs. White consisted chiefly of her residence in Howard County, which was sold, and the proceeds of sale were reinvested for her benefit.

The account with the Title Guarantee & Trust Company was opened February 9th, 1933. The ledger sheet of Carey & Glenn shows that the estate consisted originally of two mortgages, one of $4,000 and one of $3,500, and was fully invested in 1926. At the time of Mr. Carey’s death, the value of the principal of the trust estate was approximately $8,800. During the course of the administration of this estate, the trustee deposited funds pertaining thereto in the savings department of the trust company in the name of Carey & Glenn; the amount of funds pertaining to this trust estate, as of May 31st, 1930, being the sum of $1,407.94, which sum was in said account at the time of the trustee’s death.

The facts with reference to the manner in which the funds in this estate were deposited, the sufficiency at all ⁵⁰⁶ times of the credit to the account of Carey & Glenn to cover the sum total of all trust and agency funds carried therein, the subsequent withdrawal, by the administrator of the estate of the trustee, of the amount properly due this estate from the said account of Carey & Glenn, its subsequent deposit in the Baltimore Trust Company, and redeposit on the same day in the savings department of the Title Guarantee & Trust Company to the trust estate of White v. Williams, are in every respect similar to those set forth in the trust estate of Rena Trust et al. v. Rena S. Beacham. In February, 1924, the firm of Carey & Glenn received a commission of $100 in connection with an investment in a six per cent mortgage of $4,000; and again, in December, 1926, the same firm received a commission of $87.50 in connection with an investment in a six per cent mortgage of $3,500 in the administration of the trust fund in this' case. Case No. 3: Ex parte, in the matter of the trust estate under the will of Marita Weems, for Agnes M. Woollen. Appeal from the Circuit Court No. 2 of Baltimore City.

The funds in this case arose under the will of Maria Weems, recorded in Anne Arundel County. The funds were deposited in the Title Guarantee & Trust Company, passbook No. 68, which dates back to 1920. Mr. Carey was appointed trustee on September 24th, 1930. At the time of his death, the value of the principal of the trust estate was approximately $112,000.

During the course of the administration of the trust estate, the trustee deposited trust funds in the name of the trust estate in the savings department of the Title Guarantee & Trust Company, and from time to time made withdrawals from said account. As a result thereof, there were the following balances on the following dates: August 1, 1931 ....................................... $17,804.87 October 1, 1931 .................................... 17,931.26 October 28, 1931 .............. 17,804.87 January 14, 1932 .................................... 7,804.87 March 31, 1932 .......................................... 8,012.12 April 1, 1932 ............................................. 8,236.12 ⁵⁰⁷ April 8, 1932 ................................................ 8,012.12 September 1, 1932 ................................. 8,258.12 October 1, 1932 ....................................... 8,399.01 October 5, 1932 ....................................... 8,258.12 this last amount being also the amount on deposit at the time of the trustee’s death. The difference of $10,000 between the balance as of October 28th, 1931, and the balance as of January 14th, 1932, was due to the fact that in January, 1932, the trustee withdrew $10,000 from the account and invested it in a first mortgage at six per cent. In connection with this mortgage, commissions of $250 were paid to the law firm of Carey & Glenn, of which Mr. Carey was the sole member.

Case No. 4: Marion E. Trust v. Rena Trust et al. Appeal from the Circuit Court of Baltimore City. The trust fund in this case arose originally out of the sale to Mr. Jacob Epstein of the property No. 216 West Baltimore street. A bill was filed in the above entitled cause for the sale of the property, and Marion E. Trust was appointed trustee. Under the will of Jacob Trust, the testator left the estate to his son for life, with remainder to his daughters.

On March 11th, 1915, Marion E. Trust was relieved of her duties and John Glenn, Jr., succeeded her. On June 7th, 1930, John Glenn, Jr., was relieved as trustee, and George G. Carey was appointed trustee on September 24th, 1930, and duly qualified. At the time of his death, the value of the principal of the trust estate was approximately $54,000. The amount originally deposited to the credit of this estate in the savings department of the Title Guarantee & Trust Company was the sum of $5,075.74, which amount varied from time to time only slightly until between the dates of May 2nd, 1932, and August 3rd, 1932, when the deposit appears to have been then reduced to the sum of $1,998.50 by a withdrawal by the trustee of the difference, for the purpose of investment in a six per cent, first mortgage to the credit of this estate.

In connection with this investment, a commission of $100 was paid the law firm of Carey & Glenn, of which said trustee was sole member; the balance on deposit to the ⁵⁰⁸ credit of the above account, at the time of the death of the trustee, being the said sum of $1,998.50. The bill of complaint in each of the foregoing cases alleges, in substance, the appointment and qualification of Mr. Carey as trustee: his deposit, from time to time, of uninvested cash principal in the savings department of ithe Title Guarantee & Trust Company, without complying with the requirements of Rule 22 of the Circuit Courts of Baltimore City: his subsequent death on December 8th, 1932, and the appointment of the substituted trustee in the respective courts under which the trusts are being administered ; the appointment of George G. Carey, Jr., as administrator of the estate of George G. Carey: the personal estate of the said George G. Carey being $39,405.40, with separate debts amounting to $48,700 : and the solvency of said estate. It further alleges that the respective claims have been filed against the estate of George G. Carey in the Orphans’ Court of Baltimore County, the situs of the administration of his estate: that the administrator has advised the claimant that its claim is disputed, and disclaimed any liability for the amount thereof; that the suit is being brought under the order of the court under which the trust is being administered; and, finally, each bill prays that a decree may be passed directing the administrator of George G. Carey to pay to the substituted trustee the respective uninvested amounts due, as herein-before set forth; and for general relief. Rule 22 of the Circuit Courts of Baltimore City is as follows: “Moneys and Securities Brought into Court.

All moneys or securities brought into court under any order thereof shall be deposited in such national bank or trust company of the City of Baltimore as the court may direct, to the credit of the cause wherein such order shall have been passed, and there remain subject to the order of the court. The original order signed by the judge of the court, together with the check of the clerk, in the usual form, shall be the authority of the bank or trust company for the payment of the money or delivery of a security deposited as aforesaid. The clerk shall procure a suit ⁵⁰⁹ able check or pass-book, in which shall be entered, under the appropriate head, all sums and securities deposited, and all sums and securities checked out. It shall also be his duty to record in said book the order of the court and his own check, by virtue of which any money or security may be withdrawn and the receipt for such order and check, which shall be signed by the person to whom the same shall be delivered and at the time of the delivery.

All checks shall be drawn payable to the order of the person or persons to whom such payment or delivery is directed to be made, or to the counsel of record. And whenever it shall appear probable that the moneys in the hands of any trustee, receiver, committee, or other officer of the court, or under its jurisdiction, will remain in his hands undisturbed for a period above ninety days from the receipt thereof, such officer shall, upon such receipt, report to the court the amount of such receipt or receipts, and the probable time that the same will remain undistributed, and thereupon the court shall make such order with respect to the disposition thereof as to it shall seem proper.” The answer of the respondent, which is similar in each case, except, of course, as to the amount involved, admits the several matters set forth in the bill of complaint, but nevertheless justifies the action of the trustee in noncompliance with Rule 22, above quoted, for the reason that ever since 1929 the judges of the two Circuit Courts of Baltimore City have refused to direct trustees of trust estates, administered under the jurisdiction of said courts, where to deposit money in their hands, or to designate the bank or financial institution in which said trustees should deposit trust funds, thereby placing upon the trustees themselves the duty and responsibility of deciding in which banks or financial institutions such funds should be deposited. The answer further sets forth the fact that the respondent’s decedent fully complied, from time to time, with Rule 26, applicable to the Circuit Courts of Baltimore City, and regularly made reports thereunder in accordance therewith: that said reports showed of what ⁵¹⁰ the trust estate in the hands of the trustee consisted, and correctly set forth the amount of cash in the hands of the trustee, and where the same was deposited, namely, in the savings department of the Title Guarantee & Trust Company; that said reports were regularly and duly referred by order of court to an auditor and master of the court for examination and report, and were passed upon and approved by said auditor and master; and that the equitable life tenants were aware, through notices sent them by the trustee, that the cash in the hands of the trustee was on savings deposit in said company, and no protest or objection of any kind was ever made by them to the trustee because of the depository. The case was heard upon bill, answer, and testimony, the learned chancellor decreeing the amount claimed in each case against the estate of George G. Carey, deceased, with interest thereon at the rate of three per cent, per annum from February 17th, 1933, and that, upon compliance with said decree, the estate of the deceased trustee be subrogated to all of the rights of the substituted trustee to the respective deposit accounts in the Title Guarantee & Trust Company.

It is from these decrees that the several appeals in this record are taken. Briefly, the legal questions involved in these several cases may be grouped as follows: (1) What liability, if any, devolves upon the estate of George G. Carey for permitting the trust funds pertaining to the trust estates under case designations 1 and 2 to be commingled with other trust and agency funds in the hands of said trustee, and with individual funds of said trustee, and carried on deposit in the firm name of Carey & Glenn; the amount to the credit of said account being at all times greater than the sum total of the trust funds and agency funds carried in said account? (2) To what extent, if any, was the error of commingling cured by the unscrambling of trust funds in Cases 1 and 2, and their deposit by the administrator of the deceased trustee, under proper trust designation, in ⁵¹¹ the Title Guarantee & Trust Company, before the failure of said company? (3) What liability, if any, devolves upon the estate of George G. Carey for having charged and received commissions in connection with mortgage loans of trust funds under his charge from borrowers of said funds, independent of compensation allowed him as trustee by order of court?

It might be added that this question involves commission collections as follows: Case No. 2, $187.50; Case No. 3, $250; Case No. 4, $100. (4) What liability, if any, devolves upon the estate of George G. Carey for permitting uninvested principal balances of all of the trust estates above designated to remain in the savings department of the Title Guarantee & Trust Company, although drawing interest at the rate of four per cent, down to June 1st, 1931, and thereafter at the rate of three and one-half per cent, per annum, for the respective periods shown by the record, all of which periods were more than ninety days? (5) What liability, if any, devolves upon the estate of George G. Carey for his failure, as trustee, to comply with Rule 22 of the Circuit Courts of Baltimore City, as promulgated by the Supreme Bench of Baltimore City, under all the facts in these cases? Queries Nos. 1 and 2 are directed to cases designated 1 and 2; query No. 3 is directed to cases designated 2, 3 and 4; and queries Nos. 4 and 5 are directed to all of the above cases.

We shall therefore dispose of these questions in the order above indicated. It appears from the undisputed evidence in the record that George G. Carey, the late trustee, was for many years a member of the bar of Baltimore City, and that for the greater part of his professional life he was engaged in the practice of law with John Glenn, Jr., under the firm name of Carey & Glenn. In connection with the general practice of law, the firm engaged extensively in the administration of trust estates, and specialized in investments secured by six per cent, first mortgages on real estate. Some ⁵¹² time during the year 1930 Mr. Glenn retired from the firm; he being at the time of his retirement sole trustee in cases hereinbefore designated Nos. 1, 3, and 4.

It is conceded that Mr. Carey was a man of highest integrity and purpose, and that, in commingling the funds of two of the trust estates in his charge, he had no ulterior or selfish motive; hence his irregularity in this respect should, in no manner, be construed to reflect upon his integrity. Especially is this true when the record shows that at all times the amount of deposits of trust and agency funds, carried in the commingled account, was equal to the sum total of said trust and agency funds. In 26 R. C. L. 1315, sec. 173, it is said: “A trustee must be careful to make the deposits in the name of the trust estate, and not to his personal credit, if he would avoid personal liability in case of failure of the bank. In such a case the good faith