Caruthers v. Buscher

Wilner, J., delivered the opinion of the Court. This is an appeal by the Personal Representatives of the late Joseph D. Buscher from the sustaining of exceptions to their Second Account by the Circuit Court for Montgomery County, sitting as an orphans’ court. The issue is whether the Personal Representatives were authorized to make payments on the mortgage that encumbers the property 2112 Firethorn Road. To resolve it, we must construe Mr. Buscher’s Will, and, in light of that construction, consider the relationship between two sections of the Estates and Trusts article — § 4-406, dealing with “exoneration”, and § 7-401, describing the authority of personal representatives. ⁶⁶³ I. BACKGROUND Joseph D. Buseher was a distinguished Maryland attorney.

He died on July 8, 1975, a resident of Montgomery County, leaving a Will dated June 2,1975. The pertinent provisions of that Will are as follows: (1) Paragraph FIRST directs the personal representatives, among other things, “to pay out of my estate all of my just debts.” (2) Paragraph SECOND, captioned “Special Bequests, Intentions and Testator’s Declaration of Policy”, contains a number of specific gifts to friends and relatives. Subparagraph (g) disposes of Mr. Buscher’s interest in two condominium units in Florida. It provides: “I give, devise and bequeath, in fee simple, my interest in condominium unit No. A-8 located in Chateau Belleair, 2205 Belleair Road, Clearwater, Florida, including all of my personal property therein, to DONALD P. WRIGHT, subject to his assuming the encumbrance thereon.

I also give, devise and bequeath my one-half interest in condominium unit No. B-12 located in said Chateau Belleair, in fee simple, to DONALD P. WRIGHT, who is the owner of the other one-half interest. If said DONALD P. WRIGHT should predecease me, then all of my interest in condominium unit B-12 shall vest, in fee simple, to MRS. DOLOROS V. WRIGHT, her heirs and assigns.” (Emphasis supplied.) Subparagraph (i) disposes of the property at issue here. It provides: “My real property and improvements thereon located at and known as 2112 Firethorn Road, Middle River, Baltimore County, Maryland, I give and devise, in fee simple, to MRS.

DOLOROS V. WRIGHT and her son, DONALD P. WRIGHT, or the survivor of them.” 1 ⁶⁶⁴ (3) Paragraph TENTH divides the residue of the estate (after a number of other specific bequests in paragraphs SEVENTH, EIGHTH, and NINTH) equally among Mr. Buscher’s brothers and sisters, one of whom is appellee, Earl Buscher. (4) The last paragraph designates appellants Donald S. Caruthers and Donald P. Wright as personal representatives. The bulk of Mr. Buscher’s estate consists of improved real estate, all of which is encumbered. In addition to the interests in the two Florida condominium units, there are four properties in Baltimore City, two (including 2112 Firethorn Road) in Baltimore County, and one in Montgomery County.

Of all of this, only the two condominium units and 2112 Firethorn Road are the subject of specific devise; the rest fall into the residuary estate. The encumbrances on the three properties specifically devised were in existence prior to June 2, 1975 — the date of the will. In the course of their administration of the estate, Messrs. Caruthers and Wright filed a First Account, in which they acknowledged certain disbursements for 2112 Firethorn Road, part of which consisted of payments on the mortgage; however, no exceptions were filed to that account.

On January 19, 1977, they filed their Second Account. This showed, as to 2112 Firethorn Road, income from July 8,1976 through January 7, 1977, of $1,680, and expenses, for the same period of $2,745. On March 4, 1977, Earl Buscher filed exceptions to the Second Account, 2 objecting to the allowance ⁶⁶⁵ for expenses incurred with respect to 2112 Firethorn Road. Pointing out that the devisee of that property, Mr. Wright, was also a “co-executor”, the exceptant “suggested that to charge these disbursements to the estate which benefits the co-executor is a violation of his fiduciary obligations to the residuary beneficiaries.” He therefore requested that those disbursements be disallowed “to the extent that they exceed the receipts which are included among the assets of said estate.” The Second Account, as noted, did not specify the disbursements made on account of the property, but showed only total income and total expenses, resulting in an excess of disbursements over income of $1,065.

At the hearing on the exceptions, somehow the allowances made on the First Account were considered along with those on the Second Account, even though the exceptions clearly related only to the Second Account.* * 3 Apparently, in the First Account, the personal representatives reported income of $2,756 and disbursements of $1,922, producing a surplus of $834. Taking the two accounts together, the net deficit is only $231. The court sustained the exceptions to the Second Account to the extent of the payments of principal and interest on the mortgage (for which allowance was sought in that account) and overruled all others. 4 We are advised that of the allowances sought in the Second Account with respect to 2112 Firethorn Road, $627 was for payments on the mortgage. In furtherance of its decision, the court directed the personal ⁶⁶⁶ representatives to reimburse the estate for the amount of those mortgage payments, and enjoined them from making any further such payments.

The personal representatives have appealed from both aspects of the order, asserting that (1) they were not wrong in making the mortgage payments, and (2) in any event, if there is to be reimbursement, it should come from Mr. Wright as devisee of the property and not from Wright and Caruthers as personal representatives.

II

EXONERATION Until 1969, Maryland followed the common law with respect to exoneration. At common law, the personal estate of a testator was the natural and primary fund for the payment of debts. This meant that, even when real estate was expressly charged with the payment of a debt {eg., subject to a mortgage), no resort could be had to the realty for the payment of the debt unless and until the personalty was exhausted. Thus, absent exoneration by the testator (exoneration of the personalty), an encumbrance on real estate would be paid from the personalty in the estate; and, to the extent the personalty was sufficient, the real estate would pass free of the encumbrance.

All of this was explained by the Court of Appeals in Tobiason v. Machen Exec., 217 Md. 207 (1958). Exoneration, the Court said, may be accomplished “by the express terms of the will or by reasonable and satisfactory implication therefrom.” It is clear from Tobiason , however, that the phrase “reasonable and satisfactory implication” was to be narrowly construed. Quoting from Miller, Construction of Wills, § 387, the Court noted that “very clear expressions are required in order to fasten the incumbrance on the property”, and that a devise of real estate “subject to a mortgage” was not a sufficiently clear expression. 5 The doctrine was firmly imbedded in the law, and a testator is “presumed to have known the law, as it existed when he made his will and that he made his will in reference to it; that is to say, both the common law and the statutory law, including ⁶⁶⁷ the interpretation which the latter would receive from the courts.” Finally, the Court observed that it was not unmindful of the fact that the common law doctrine of exoneration was not considered a popular one, but that it was so well established that, if it were to be changed, the Legislature would have to change it. Despite this invitation by the Court of Appeals, joined in by the Maryland Law Review several months later, 6 no effort was made to enact legislation abrogating or modifying the common law rule until 1969.

In late 1968, the Second Report of the Governor’s Commission to Review and Revise the Testamentary Law of Maryland (generally known as the “Henderson Commission”, after its Chairman, retired Chief Judge William L. Henderson) was presented to the General Assembly. Attached to the Report — indeed, comprising the Report — was draft legislation to rewrite entirely the testamentary law of the State, then codified primarily in Article 93 of the Code, along with the Commission Comments explaining each section of the proposed new law. The Commission accepted the Court’s ten-year old invitation, and recommended a substantial modification of the common law doctrine of exoneration. This appeared as proposed § 4-406, which was adopted by the General Assembly without change.

With but minor style changes, it now appears as § 4-406 of the Estates and Trusts article, as follows: “Unless a contrary intent is expressly indicated in the will, a legacy of specific property shall pass subject to a security interest or lien on the property which existed at the time of execution of the will or which is a renewal, extension, or refinancing. If a security interest or lien is created or attaches initially after the execution of the will, the legatee is entitled to exoneration.” (Emphasis supplied.) Since the mortgage in question existed prior to the execution of the Will, Mr. Wright is not absolutely entitled ⁶⁶⁸ to exoneration. The question, therefore, is whether a “contrary intent” — i.e., an intent to exonerate the real estate — “is expressly indicated”? What quantum of evidence must appear in the Will in order to establish the contrary intent?

To answer this, the parties would have us searching through assorted dictionaries, Words and Phrases, and various cases in which one or the other of these words — “expressly” or “indicated” — have been used or defined. This does not appear to be necessary, as there are sufficient guides within the Estates and Trusts article itself from which we may glean the legislative intent. Section 1-210 (d) of the article establishes certain rules for the distribution of shares per stirpes, “unless a contrary intention expressly appears” in the will. In Sollers v. Merc.-Safe Dep. & Trust, 262 Md. 606 (1971), the Court twice viewed the quoted phrase as meaning “in the absence of a clear expression of contrary intention”. 262 Md. at 610 .

The expression of the contrary intention, under that language, must therefore be “clear”. The very words at issue here — “expressly indicated” — appear numerous times throughout the article, in essentially the same context as they appear in § 4-406. 7 One of the more significant is § 4-405, which deals with what happens when, after the execution of a will, changes occur with respect to securities that are the subject of a specific legacy under the will. It provides: “Unless a contrary intent is expressly indicated in the will, if securities are the subject of a specific legacy and after the execution of the will other securities of the same or another entity are distributed to the testator because of his ownership of the original securities, whether as a result of a partial liquidation, stock dividend, stock split, merger, consolidation, reorganization, recapitalization, redemption, exchange, or other ⁶⁶⁹ transaction, and if these securities are part of the estate of the testator at his death, the specific legacy includes the additional or substituted securities.” (Emphasis supplied.) The Comment to this section, drafted by the Henderson Commission and adopted by the General Assembly, is as follows: “Under prior Maryland law shares of stock received by a testator as a dividend after execution of a will did not pass to the specific legatee of the original stock. Hicks v. Kerr, 132 Md. 693 , 104 A. 426 (1918).

Consistent with the notion of having all provisions of a will speak as of the date of the testator’s death, unless a contrary intention expressly appears, the new statute adopts this notion with respect to stock dividends received by the testator between the time of execution of the will and the time of his death. The word ‘expressly’ has been added near the end of the sentence to indicate that such determination should not be left to the sometimes elusive reasoning which has characterized quests for the ‘testator’s intention’in the courts. See Sykes, § 86.” (Emphasis supplied.) 8 This Comment, though obviously not part of the statute itself, is nevertheless highly significant in that, first, it equates the words “expressly indicated” with “expressly appears”, thereby making relevant the Court’s view of the latter expression in Sollers , and second, it focuses on the word “expressly” as indicative of an intent not to leave the determination “to the sometimes elusive reasoning which has characterized quests for the ‘testator’s intention’ in the courts.” A further interpretative guide appears with respect to ⁶⁷⁰ § 4-407, dealing with the exercise of a power of appointment. That section provides: “Subject to the terms of the instrument creating the power, a residuary clause in a will exercises a power of