Jones v. Endslow

Powers, J., delivered the opinion of the Court. The question in this case is whether the will of Charles S. Archer, Sr. created a trust, and, if so, did the trustee take a fee simple title to real estate, with power to sell. Mr. Archer died on 10 July 1963. He and his wife, who predeceased him by six weeks, owned a farm of some 122 ⁵⁸⁰ acres in Harford County, and a relatively small amount of personal property.

They had four children, Daniel Trainor Archer, James Howard Archer, Katherine Archer Endslow, and Charles S. Archer, Jr. All were adults, and all had children. Over a period of a year or more before September, 1961, there had been family discussions regarding the wishes of the parents for the disposition of their property. All of the children except Trainor, the oldest, took part in these discussions. The parents expressed their concern for Trainor, who was in poor health and had limited earning ability, an invalid wife, and a handicapped son.

In addition, there were one or more judgments against Trainor, and he owed other debts. The parents contemplated giving all of their property to Trainor outright, but Charles, who was a member of the bar, employed by a bonding company in Baltimore, expressed his disapproval, and said that if the other three children were to be disinherited, he wanted the parents to get an outside lawyer to prepare their'wills. The family discussions continued. The primary wish of the parents was to be assured that Trainor would always have a home and a living.

As part of that assurance, they felt that it was necessary to protect Trainor against his own shortcomings. Charles suggested a “spendthrift trust”, and advised the family that, to avoid embarrassment to Trainor, such a trust could be created without using the specific words, and that it was not necessary to designate a trustee in the will. This suggestion was approved by the parents, and by Howard and Katherine. Charles was asked to prepare the wills.

He did so. They were executed on 6 September 1961, with Howard and Katherine as witnesses. Charles was also present. Upon the death of Mrs. Archer, Mr. Archer, Sr. became the sole owner of their property.

His will, admitted to probate in the Orphans’ Court for Harford County, provided, after a clause leaving everything to his wife: “If my devoted wife, Viola Mary Archer, should pre-decease me, then I give, bequeath, devise and ⁵⁸¹ convey all my real, personal and mixed property, wheresoever situated, as follows: First, to my oldest son, Daniel Trainor Archer, if he is living at my demise, for life, the income therefrom to be paid into his hands and not into the hands of another. Second, upon the death of my oldest son, Daniel Trainor Archer, I give all my real, personal and mixed property, wheresoever situated, as follows: 1. One-fourth (1/4) of my entire estate to my grandson, William T. Archer, son of Daniel Trainor Archer, for his full and sole enjoyment. 2. One-fourth (1/4) of my entire estate to my son, James Howard Archer, for his full and sole enjoyment, if living, otherwise his one-fourth (1/4) share shall be divided among his children, share and share alike.” There followed paragraphs identical with No. 2, leaving one fourth each to Katherine and to Charles, and an additional paragraph appointing Charles executor.

With the closing of the administration of the personal estate in November 1964, a petition was filed in the Circuit Court for Harford County signed by Charles, individually and as executor, and by Katherine, Trainor, Howard, and by Trainor’s son William, described as constituting all of the heirs and persons named in the will of the decedent, and stating: “That under the Last Will and Testament of Charles S. Archer, Sr., a spendthrift trust consisting of all of the real, personal and mixed property in the estate was created for the benefit of Daniel Trainor Archer, one of the within named petitioners. A copy of the probated Will is filed herewith.” The petition then recited that the will failed to provide for the appointment of a trustee to administer the trust and ⁵⁸² prayed that the court pass an order “appointing a trustee or trustees to administer said Spendthrift Trust”. The court appointed C. Stanley Blair, a member of the bar, who had acted as attorney for the estate. By common acquiescence, the trustee permitted Trainor, who lived on the farm, to collect any income it produced, and retain what was left after paying taxes and insurance premiums, without accounting for these items through the trustee.

The trustee invested the money from the personal estate, and paid the income to Trainor. In 1969 Mr. Blair filed a petition stating that he desired to resign as trustee and asking that he be released and discharged. At the same time there was filed a petition by all of the same individuals who originally petitioned for the appointment of a trustee, asking the court to appoint Charles S. Archer, Jr. as substitute trustee in the place of Mr. Blair. The court entered an order appointing Charles S. Archer, Jr. “to act as trustee of the Spendthrift Trust provided for in the Last Will and Testament of Charles S. Archer, Sr.”.

Charles has continued to act to the present time, following the same procedure initiated by his predecessor. The case before us arose when, on 6 March 1972, Charles, as trustee, entered into a contract with Samuel T. Jones and Sarah S. Jones to sell the farm for the sum of $98,000. On 28 March 1972, Katherine, joining her son and two daughters as plaintiffs, filed a bill of complaint against Charles as trustee and included as defendants, Trainor, Trainor’s son William, Howard, and Mr. and Mrs. Jones. A later amendment added Charles in his individual capacity.

The bill of complaint recited the history of the property, the estate, and the trust. It alleged that Daniel Trainor Archer holds a legal life estate in said property and that there is no need for a trustee. It alleged that Charles, as trustee, entered into a contract with Mr. and Mrs. Jones, and said that Charles exceeded his authority and violated his duties as trustee in selling the farm and in selling it for a sum that was grossly inadequate and on terms not advantageous to those having an interest in it. The ⁵⁸³ complaint also alleged that because of his activities and poor judgment Charles should be removed as trustee.

The plaintiffs prayed that the sale be enjoined, and that they be awarded monetary damages against Charles. The court issued an interlocutory injunction against consummation of the contract of sale. Testimony was heard before the chancellor on 19 April 1972, 20 December 1972, 23 February 1973, and 22 June 1973. On 29 August 1973 the chancellor filed a memorandum opinion, which was implemented by a decree filed on 17 September 1973.

The decree adjudged that by his will the testator simply created a legal life estate in all of his residuary estate and property for the benefit of Trainor; permanently enjoined consummation of the contract of sale; found that Charles had properly performed his duties as trustee; and denied the claim of Katherine and her children for damages. Appeals from that decree were filed by Charles S. Archer, Jr. and by Mr. and Mrs. Jones. The evidence showed that around the middle of 1971, members of the family began to discuss selling the farm. Trainor wanted it to be sold because he was not able to make a go of it and was sustaining losses.

He preferred that it be sold and the proceeds invested in some other way. Katherine testified at one of the hearings that she did not not want to see it sold but, if it were to be sold she would like to see it remain in the family. In a letter, addressed apparently to all three brothers, dated 17 August 1971, Katherine thanked them for their offer of terms for an agreement to sell the property to her son. She proposed, in considerable detail, that the son would be willing to buy the farm for $85,000, with 57c or $4,250 in deposits, and with an additional sum of $12,750 in cash at settlement, in approximately six months, leaving $68,000 to be paid over a period of five years or ten years, bearing interest at the rate of 67c.

An attorney retained by Charles as trustee responded to Katherine, advising her of the terms of an offer from another source at the same price but with slightly higher payments. The letter advised that if she or her son wished to purchase the property on exactly the same terms, they could do so. On 30 ⁵⁸⁴ August 1971, Katherine wrote to Charles expressing her thought that there was no need for urgency. She mentioned that Trainor seemed obsessed with the idea of selling and realized that Charles had been under great pressure to do so.

She pointed out that the intent of the will, as repeatedly told to her by her mother, was that Trainor would have a home and a roof over his head until his death. She went on to say that since the interest resulting from the sale should amply provide such security, she certainly would not stand in the way of selling. She said further that she had learned of an appraisal of the property, and felt that it was worth about $90,000. She said: “Charles, you are the trustee by our approval, but you have the obligation to get the highest market price in this sale.” Katherine suggested that her son be given an option for six months to purchase the farm for $90,000 with 10% deposit and settlement 90 days thereafter, with a total of 30% down at settlement.

She added, “No one can ever rightfully criticize if you sell at appraisal price.” Some correspondence was exchanged between counsel for Charles and counsel for Katherine and, after a brief withdrawal of an offer to sell, another offer was made to Katherine. She responded in a letter directly to Charles, dated 12 October 1971, in which she stated: “I am interested in seeing the property remain in the family and being improved creditably to the memory of our parents. So long as there is a member of the family interested I shall not approve the sale of the property to another.” She then made a “final counter offer”, based on additional appraisal data which she referred to, and offered $87,000, with settlement to be on 15 May 1972. By letter of 1 November 1971, counsel for Charles as trustee wrote to Katherine advising her that the trustee intended to sell the property forthwith; asserting that the trustee had authority to do so without the approval of any beneficiary or of the court; and suggesting to Katherine that she take such steps as she deemed requisite to enjoin the ⁵⁸⁵ sale.

Counsel’s letter went on to say that the offer of $87,000 as the sale price was acceptable but that the settlement terms and other conditions were not. One of the conditions previously stated by Katherine which counsel rejected was that her son’s wife should not be involved in the transaction. The same appraiser whose preliminary data had indicated to Katherine an approximate value of $90,000, submitted his written appraisal dated 23 December 1971 in which he gave the value of the farm as $84,300. In his memorandum opinion the chancellor, looking at the language of the will, observed that it appears to provide for Daniel Trainor Archer a life estate in all of the real, mixed and personal property of the testator.

He went on to say that he would have little difficulty in holding that there was no trust, were it not for the language, “income to be paid into his hands and not into the hands of another”. He commented that even assuming that the intention of the testator was to create a spendthrift trust, there is no indication that the subject matter of the trust was to be other than the life estate itself or the income interest in the land. In spite of the difficulty, however, the chancellor concluded that the will does not provide for a trust, spendthrift or otherwise. The decree which followed the filing of this memorandum opinion did not leave open any possibility of a spendthrift trust.

It is, of course, the decree and not the opinion of a court which governs. Hudson Bldg. Supply Co. v. Stulman, 258 Md. 304 , 265 A. 2d 925 (1970). The chancellor commented further on the evidence showing that Katherine appeared to acquiesce in the power of sale over the property up until the last moment and then withheld her consent.

He said, “[T]he Court does not believe that the conduct of the parties can in any way alter or increase the powers vested in the Trustee by virtue of the instrument.” We fully agree. Short of estoppel, which was not shown, or other binding action, a party is free to change his legal position. All of the testimony in the case shows that it was the desire of the testator to leave his property in such a way as to be sure that Trainor would, as long as he lives, receive the ⁵⁸⁶ entire benefit of it, including a place to live and the means of producing an income. It was just as much a part of that intention that what he wanted to create for Trainor would be protected against any claim by a creditor and against Trainor’s own folly or ineptitude.

That accomplished, the final desire of the testator was to be sure that upon Trainor’s death, each of his children would receive an equal share of the family property, with Trainor’s son William standing in his stead. All of the members of the family agree that this was the intention of their parents. They agree, also, that Charles, as the draftsman of the will, purposely avoided the words “spendthrift” and “trust”, and the designation of a trustee, all of which would have expressed that intention more clearly, but that it was his opinion, and his advice to the testator, that the words he used were sufficient to accomplish that intention. The intention of the testator in this case may be ascertained beyond doubt from the will, read in the light of the surrounding circumstances.

To construe the will as creating simply a conventional life estate is not to construe, but to reject and nullify the testator’s words, “the income therefrom to be paid into his hands and not into the hands of another”. Those words closely parallel words used in the will construed in Smith v. Towers, 69 Md. 77 , 14 A. 497 (1888), the first case in Maryland involving what has come to be known as a spendthrift trust. Because we conclude that the only way to accomplish the testator’s purpose is through a trust, the device by which equitable title may be separated from legal title, and that the trust must continue for the duration of Trainor’s life, subject to the restraints on alienation which are known, for convenience, as a spendthrift trust, we hold that the will of Mr. Archer, Sr. created such a trust. In Smith v. Towers, supra, the Court of Appeals said, at 83-84: “The testator devised certain real estate to his friend John R. Fountain in trust to collect the rents ⁵⁸⁷ and profits, and to pay the same to his son Robert, ‘into his own hands, and not into another, whether claiming by his authority or otherwise,’ and upon his death to convey said real estate to such children of his son Robert as may be living at the time of his death. “Upon the construction of this clause of the testator’s will two questions arise: First, did the testator mean to give the income of the property to his son to the exclusion of his creditors, and secondly, if so are the terms and provisions of the will effectual to carry out this intention.

There can be no difficulty whatever as to the first point. He not only gives the legal estate to the trustee, but he directs in express terms that he shall pay the income into the hands of his son and not into the hands of any other person, whether claiming by his authority, or in any other capacity. Here then, is an express provision, that the income shall be paid to his son, and an express prohibition against paying it to any other person. If the income in the hands of the trustee is liable to the claims of creditors, the trustee it is plain could not carry out the trust.

So construing this will as we do, and it is not we think susceptible of any other construction, the testator meant beyond all question that the income should be paid into the hands of his son, to the exclusion of all other persons,