Gray v. Harriet Lane Home for Invalid Children

Collins, J., delivered the opinion of the Court. This case involves two appeals from a decree of Circuit Court No. 2 of Baltimore City construing the will of Jennie Beck, who died January 3, 1921. On April 12, 1947, the Harriet Lane Home for Invalid Children of Baltimore City, a Maryland eleemosynary corporation (hereinafter called the Home), filed a bill of complaint in Circuit Court No. 2 of Baltimore City against Jennie Beck Gray, individually and as executrix of the estate of William C. Beck, deceased, the heirs of Jennie Beck, the Safe Deposit & Trust Company of Maryland, as executor and trustee under the will of Jennie Beck, deceased, and the State of Maryland, asking that Court to take jurisdiction under the will of Jennie Beck without assuming jurisdiction of the further administration of the aforesaid trust. It also asked, among other things, that the court grant to the Home relief by its judgment or decree directing absolute distribution of the funds, passing under the will, to the Home and fixing the purposes by which, the places at which, and the method in which said funds may be used and any conditions or limitations attached thereto. ²⁵⁶ Jennie Beck, by her will dated May 11, 1915, after making certain specific bequests, devised and bequeathed her entire net estate to the Safe Deposit & Trust Company of Baltimore, Trustee.

She refers to this entire estate as her “trust estate” or as the corpus of her trust estate. She directed the trustee to. pay, from the net income thereof, certain sums to or for the benefit of her brother, William C. Beck, for his life, and to hold, the surplus income in a separate fund, which she called the “invested income” account of her estate. On the death of her brother which occurred on March 9, 1947, the trustee was directed to transfer and deliver the corpus of the' trust estate to the Home, “said Corpus to be held by the Board of Managers of said Harriet Lane Home for Invalid Children as an endowment fund for the use and benefit of the two wards which have been heretofore built and established, and which are known as ‘The Contagious Units’,—one for the treatment of diptheria and. the other for the treatment of scarlet fever. The said fund is to be held by the Board of Managers of said Corporation, and is to be known as the ‘Jennie Beck Memorial Endowment Fund’, and the income accruing therefrom is to be used by the said Board of Managers of said corporation to pay for the care and treatment of deserving free patients in said contagious units, to the end that two-thirds (2/3) of the number of beds in each of the said two wards of said contagious units shall be used for the reception, care' and treatment of free, patients, said free patients to be received, cared for and treated under the same conditions and in the same manner as those patients in said wards in said contagious' units from whom the Harriet Lane Home for Invalid Children shall receive remuneration for care and treatment.” The trustee was also directed to pay to the Home on the death-of the brother the balance of the invested income account after the payment of the brother’s funeral expenses and several small bequests, “to be used by said corporation in such manner as the ²⁵⁷ Board of Managers of said corporation shall deem fit and proper, but to the end that the two wards which have been heretofore built and established and are known and designated as ‘The Contagious Units’ one for the treatment of diptheria patients and one for the treatment of scarlet fever patients, shall be open for the reception of patients under the same terms and conditions as are now in force in regard to the other wards of said Harriet Lane Home for Invalid Children aforesaid. * * * I hereby request that the Harriet Lane Home for Invalid Children shall erect on the walls of each of the said two wards of said contagious units, proper memorial tablets, setting forth the purposes of the fund herein provided, and the donor thereof.” Jennie Beck executed a codicil to her will on March 11,1919.

Except for the fact that this codicil republished the original will, it has no bearing on this case. The total amount involved in this proceeding is approximately $271,000. After hearing before the Chancellor a decree was filed decreeing that the trust under the will of Jennie Beck, deceased, and the trust created by William C. Beck terminated upon the death of William C. Beck on March 9, 1947, and, upon compliance with the terms of ¡the decree, the Safe Deposit & Trust Company should have no further rights, obligations or duties with respect to the trust or with respect to the use of the property constituting the trust. The trustee was directed to pay over and deliver to the Home all securities, cash and other properties included in the so-called “corpus schedule”, the “invested income schedule”, and the “William C. Beck Schedule”, less certain commissions and expenses.

The so-called “endowment fund” or “corpus fund” or “Jennie Beck Memorial Fund.” was to be kept intact and not used or expended for any purposes whatsoever. The Chancellor further ordered that the sum of $10,257.61, which the Home had used to pay a social worker, should be paid out of the invested income into the hands of the Home and credited to the corpus of the “invested income fund”. ,|t was also ordered that the trustee’s termina ²⁵⁸ tion fee and the counsel fee for the attorney representing the Trustee be paid out of the “Corpus Fund”. Although not confining the use of the income from the “endowment fund”, the corpus of the “invested income account”, and the income therefrom, literally to immediate purposes set out in the will of Jennie Beck, the Chancellor made certain limitations upon the use of those funds. From that decree Jennie Beck Gray, the niece of the testatrix and the daughter of William C. Beck, individually and as executrix of the estate of William C. Beck, deceased, appeals to this Court.

A cross appeal is also taken by the Home. Jennie Beck Gray contends here that the two wards specified in the will must be kept open with two-thirds of the beds free; that appropriate provisions should be included in the decree to make certain that the testatrix’s directions will be followed and her purposes accomplished; and that the Court costs and other expenses should be charged against the “invested income” account. The Home in its cross appeal contends, among other things, that although if the Court so decrees it will carry out the provisions of the will of Jennie Beck as specifically stated therein, it is not restricted in the use of the income to the purposes mentioned because its use for such purposes would involve waste and impair the fulfillment of the testatrix’s general intention. It also contends that independent of the construction of the will, any restrictions on the use of the bequests were removed by an agreement signed by William C. Beck on January 22, 1921.

It contends also that the payment made by the Home for the social worker was correct and that the court costs and'counsel fee were properly directed to be paid out of the corpus of the endowment fund. It also contends that the heirs have no sufficient interest to be affected by the decision as to entitle them to an appeal and that their appeal should therefore be dismissed. The facts of the case for the purposes of this opinion are substantially as follows. The Home was incorporated on December 24, 1883, as a non-profit corporation, and ²⁵⁹ since 1912 has constituted the children’s division of Johns Hopkins Hospital.

It was completed on the Johns Hopkins Hospital grounds in 1912 and consisted of a main building and three pavilions south of the main building. By agreement the buildings of the Home were connected to the heating and lighting plants of the Johns Hopkins Hospital. This agreement provided for the care of inmates, provisions for staffs, nursing, and admission of patients. The Home was to pay Hopkins $1.40 per day per patient and a minimum monthly payment of $900.

On January 24, 1948, the Hopkins released the Home from all past obligations under the previous operating agreements, providing the Home paid its annual income less expenses to Hopkins. The original agreement has been modified from time to time. The three pavilions in the Home were originally known as the East, Middle and West Pavilions and later known as Observation Wards I, II and III. Ward I was originally used for the treatment of child patients with scarlet fever and Ward III for the treatment of child patients with diphtheria.

The Home was formally opened in November 1912. The East and West pavilions became known as the “Contagious Units” and then as “Observation Wards I and III”. Betwen 1912 and the early part of 1916 these two wards were closed from time to time because of lack of funds. During the period from 1915 to 1916 when opened, they were used for the treatment of patients with scarlet fever and diphtheria.

It seems clear that these two wards known together as the “Contagious Units” are the wards and “Contagious Units” referred to in the will of Jennie Beck. On May 11, 1915, Jennie Beck executed her last will and testament here in question. At that time she evidently knew of the uses to which Observation Wards I and III were being put. At that time these wards were closed because of lack of funds with which to operate them.

Under the direction of Dr. John Howland, a member of the staff of the Home, funds were solicited in 1916 for the reopening and operation of these two wards. ²⁶⁰ They were used for the treatment of all contagious diseases in the period from the spring of 1916 until 1921. Jennie Beck, on March 11, 1919, by codicil, republished the original will. She died January 3, 1921. On January 22, 1921, an agreement was entered into between William C. Beck, the trustee, and the Home under which Beck was paid an additional monthly sum and purported to release and deliver to the Home any right, title or interest he might hereafter have in the estate of his sister.

On March 5, 1921, William C. Beck executed a deed of trust to the Safe Deposit & Trust Company whereby he delivered certain securities in trust to pay the income to him for life and after his death and as an addition to the gift of Jennie Beck, to transfer and deliver the trust estate to the Home absolutely and free of all trusts to be used in the same manner as set out in the will of Jennie Beck. The testimony in the case shows that many changes have occurred since the 1915-1921 period in the seriousness and methods of treatment of diseases and in economic conditions. Diphtheria and scarlet fever in the 1915-1921 period were among the most dreaded diseases with a high mortality rate and often with serious after effects. Today methods of treatment and immunization have removed diphtheria as a serious menace.

Scarlet fever, under modern methods of treatment, is regarded as a mild disease. Today in Baltimore City the mortality rate from diphtheria is about one-eighth of what it was in the 1915-1921 period and from scarlet fever about one-thirty-third of what it was in that period. The number of cases of diphtheria has dropped to one-fifth of the number in the 1915-1921 period. The number of cases of scarlet fever has not decreased but the disease is now so mild under modern treatment that only a small percentage of the cases are hospitalized.

There is testimony in. this case from reliable medical authorities that diphtheria is greatly decreasing. On the other hand infantile paralysis, meningitis, and rheumatic fever and other such contagious and infectious ²⁶¹ diseases of children are a great menace to them today. The prevention and treatment of these diseases, fatal to many children and leaving many crippled, are unsolved. There is great need for facilities and funds for their treatment.

There is also authoritative medical testimony in this case that applying funds exclusively to diphtheria and scarlet fever would be “an unfortunate use of something that might be very valuable”. There is evidently a “crying” need for funds for treatment and prevention among children of infantile paralysis, meningitis, pneumonia in connection with whooping cough and the medical problems presented by these diseases are much greater than those from diphtheria and scarlet fever. The contagious units referred to in the Jennie Beck will were open wards at the time of her will and at the time of her death. Medical testimony in this case shows that open wards are now considered unacceptable for the care of patients with contagious diseases.

Medical testimony shows that although in the 1915-1921 period open wards were utilized for contagious diseases, such is not an approved practice today. Separate rooms are necessary because children are so prone to infection that when put in the same room with other children having the same disease they pick up other bacteria from them. Also the same contagious disease very often involves a number of different types of bacteria so that patients apparently with the same contagious disease in an open ward will cross infect each other. Because of this, the treatment of contagious diseases has been discontinued in Wards I and III and has been transferred to seven large rooms located in the central part of the Home.

Three of these rooms are located on the third floor devoted to children over two and four are located on the fourth floor and are devoted to infants under two. Testimony is offered to prove that these rooms are entirely adequate and much more adequate than the wards and also more economical to run. ²⁶² After the transfer of treatment of contagious diseases to these new rooms in the Home, Wards I and III were remodeled and are used for other purposes. They are now divided into small rooms and are not suitable for contagious diseases. A substantial sum would be required to convert them into large rooms which would not then be satisfactory.

Ward' I is at present used for a general dispensary to treat out-patients. Ward III is used for the study and treatment of children involving no risk of infection or contagion. If these two wards were converted back for the treatment of contagious diseases great waste and expense would be caused and the new quarters might not then be suitable for the treatment of contagious diseases of children. Testimony was offered to show that as part of the rebuilding plan of the Hopkins Hospital the Home plans to build a new building near or on the same site now occupied by Wards I and III with substantial space for the care of children with infectious diseases under modern methods and at the least cost.

Limiting the use of the funds here in question to Wards I and III as they existed at the time of Jennie Beck’s death would seriously handicap the future development of the Home and the treatment of children’s diseases. As to the provisions in the will that the income from the endowment fund be used to pay for the treatment of deserving free patients in the contagious units to the end that two-thirds of the number of beds be used for the treatment of free patients, testimony is offered to show that at the time of Jennie Beck’s death the cost per patient day of maintenance was, of course, much lower than that cost today. In 1921 the income from the endowment fund was about $8,500. Now it is about $7,500.

The average cost of maintaining a bed in 1921 was much lower, than at present. Therefore the income from the endowment fund is not enough by any means today to maintain the same number of beds as in 1921. The Home’s out-patient department handles an average of 120 infant patients per day and an additional clinic for ²⁶³ private patients averages 80 per month. The Home’s net deficit for the year ending June 30, 1947, was $182,-488, and the Johns Hopkins Hospital’s net deficit for the same period was $503,173.

We see no force in the contention of the Home that Jennie Beck Gray, individually and in her capacity as executrix of the estate of William C. Beck, has no such interest in either of said capacities as entitles her to be heard on appeal. Article 5, Section 30, of the Annotated Code of Maryland 1939, provides in part that “An appeal shall be allowed from any final decree * * * by any one or more of the persons parties to the suit, * * In this case the Home by its bill of complaint made Jennie Beck Gray, both individually and as executrix, a party to this case. She participated in the proceedings below and has the right of an appeal. This right has been often recognized by this Court.

Hammersley v. Bell, 134 Md. 172, 181 , 106 A. 339 ; State Tax Commission v. Western Maryland Railroad Co., 188 Md. 240, 245 , 52 A. 2d 615 . It has been frequently held by this Court that where property is given to a corporation for such uses or application as are within the scope of its corporate purposes, and there was no intention on the part of the testatrix to create a trust, the gifts cannot be declared void on the ground that they were in trust for indefinite purposes or in conflict with the Rule against Perpetuities. Baltzell v. Church, 110 Md. 244, 268, 274 , 73 A. 151 ; Home for Incurables v. Bruff, 160 Md. 156, 178 , 153 A. 403 ; Brandt, Inc., v. Y. W. C. A., 169 Md. 607, 612 , 182 A. 452 . In the case of Curtis v. Maryland Baptist Union Ass’n, 176 Md. 430 , 5 A. 2d 836 , 121 A. L. R. 1516, relied on by Jennie Beck Gray, a bequest was stricken down for the reason that the Maryland Baptist Union Association had no power expressed or implied to establish the Orphans’ Home provided for in the bequest to it.

It is not questioned here by any of the parties that the Home is such a corporation as is authorized to accept the gift here bequeathed. There also seems to be no question here that the trust terminated on the death ²⁶⁴ of William C. Beck. A person cannot be both the trustee and the cestui que trust. In order to create a trust the legal estate must be separated from the beneficial enjoyment.

A trust