Juliano v. Juliano

Powers, J., delivered the opinion of the Court. This intrafamilial suit was brought in the Circuit Court for Allegany County by three siblings, Antoinette Juliano, Mary T. Juliano, and Lawrence A. Juliano, against their brother, James F. Juliano. The case was instituted by the filing, in equity, of a pleading entitled, “Bill of Complaint Praying Jurisdiction Of Trust And Accounting”. The complaint alleged that the parties were children of Guiseppi Guiliano, 1 who died on 18 June 1970, predeceased by his wife.

It alleged that in July 1967, the father established a verbal trust of his property, with James as Trustee, and the five children as beneficiaries. The complaint set out the father’s real estate in Cumberland which made up the trust estate: 302 South Cedar Street (title held jointly with Mary); 411-13 South Cedar Street; and a lot on West Third Street, all of which were sold, allegedly by James, as Trustee, in 1967 and 1968, for prices aggregating $20,750. It was alleged also that rental income and social security income were received in the amount of $4,400. Terms of the verbal trust as alleged in the complaint included the distribution to be made at the father’s death.

It was alleged that the three daughters were to share equally in the proceeds of sale of the property at 411-13 South Cedar Street; that Mary Juliano was to receive the proceeds of sale of the jointly owned property at 302 South Cedar Street; and the remainder of the corpus was to be divided equally among the five children. The complaint prayed that the court assume jurisdiction over the stated Trust; order James F. Juliano to make an account of the Trust funds; order James to make distribution to the benficiaries according to the terms of the Trust; and for general relief. Included in the same bill of complaint was an unrelated cause of action, asserted by two of the plaintiffs, Mary and Lawrence, against James, arising out of their service as employees in a store owned and operated by James. The ³ prayer related to that claim was for a declaratory decree as to the amount due each of them from James.

The two aspects of the case were, of necessity, handled separately by the Chancellor below, and we shall discuss them separately here. When the complaint was dismissed, as to each of its two aspects, the plaintiffs appealed. The Trust James Juliano filed an answer to the complaint, in which he denied that there was a trust, and that he was a trustee. He denied also that the net proceeds of the sales of real estate were in the amounts alleged, and said that he stood ready to prove the disposition of the proceeds.

He admitted that his father had, in 1967, executed a power of attorney to him, but denied that the properties were sold by him under a power of attorney. 2 The answer also asserted that the alleged trusts were oral, and involved real property or the proceeds of sale of real property, with no writing or memorandum manifesting the same, and are unenforceable under the Statute of Frauds. In addition, the answer stated that if there was a trust to be distributed at the death of the father, the plaintiffs were guilty of laches because their bill of complaint was filed well over three years later. Thereafter James Juliano filed a motion, under Maryland Rule 502, for a separate trial of issues of law raised by the defenses of the Statute of Frauds, and laches. The court signed an order directing a separate trial on those issues, and postponing the remaining issues to a later date to be fixed by the court.

The separate trial was held on 30 June 1975, before Judge Stuart F. Hamill, sitting as the Circuit Court for Allegany County. The trial consisted almost entirely of statements or explanations by counsel of their respective contentions, and references to the law. No evidence was offered. The basic ⁴ facts appear to have been accepted to be as alleged, for the purpose of the issues then before the court.

Appellants’ counsel requested and was granted two weeks in which to prepare and file a memorandum. Judge Hamill filed a written' Opinion on 22 July 1975, and an Order dismissing the bill of complaint. Obviously realizing that he had overlooked the other aspect of the case, the Chancellor, exercising his revisory power under Maryland Rule 625, filed a Revised Opinion on 11 August 1975, accompanied by an Order in which he dismissed the claims based on the alleged oral trust set forth in the bill of complaint. He further ordered that the case be set for trial on the issues based upon the alleged employment contracts.

Briefly summarized, the lower court held that the alleged express oral trust, being a trust respecting land, was void under Code, Real Prop. Art., § 5-105, which says: “Except as provided in § 5-107, every declaration of trust, or amendment to it, respecting land shall be manifested and proved by a writing signed by the party who by law is enabled to declare the trust, or by his last will in writing, or else it is void.” The court also stated it as the law that the inhibitions of the statute apply with equal force to alleged trusts involving the proceeds from the sale of real property. No doubt because of the exception referred to in § 5-105, the court aptly explained in the Revised Opinion: “It should be noted that by the terms of Code, Real Property, Section 5-107, implied trusts, namely resulting and constructive trusts, are removed from the operation of the Statute of Frauds. However, the Bill of Complaint does not assert that the alleged transaction by and between Guiseppi Guiliano and the respondent constituted either a resulting or constructive trust, nor does their Bill of Complaint assert a basis for the imposition of either form of implied trust.” ⁵ The Chancellor said that if there was an express trust, it terminated upon the death of the father, which was on 18 June 1970.

The bill of complaint was filed on 3 January 1974, more than three and one half years later. Applying the statute of limitations of three years applicable at law, the Chancellor held that the plaintiffs were barred by the equitable doctrine of laches from asserting the trust claim. The court noted that laches would also bar a claim for a constructive or resulting trust. The Statute of Frauds The most important, as well as most difficult, question we must decide is whether the alleged express oral trust is void, under Real Prop.

Art., § 5-105. Generally, the law of trusts in Maryland is that the Statute of Frauds does not require a writing except where the subject matter of the trust is an interest in land. Dove v. White, 211 Md. 228 , 126 A. 2d 835 (1956); Grimes v. Grimes, 184 Md. 59 , 40 A. 2d 58 (1945); O’Connor v. Estevez, 182 Md. 541 , 35 A. 2d 148 (1943); Mushaw v. Mushaw, 183 Md. 511 , 39 A. 2d 465 (1944). Yet, where the subject matter of the trust is both land and the proceeds from the sale of the land, the question of whether the Statute of Frauds applies to the proceeds is not as clear.

The answer hinges on whether the proceeds of the sale of the land are considered personalty or whether the money is deemed to be an extension of the land itself making the entire oral trust unenforceable. G. Bogert, Trusts and Trustees, § 66, at 441 (2d ed. 1965); I A. Scott, Law of Trusts, § 52.1, at 379-81 (3d ed. & Supp. 1977). It is clear that where the parties allege that the oral trust covered only the realty and did not mention the possibility of a sale of the land, “no contention [may be made] that the trust can be enforced against the holder of the proceeds of a sale of the land.” G. Bogert, supra, § 66, at 441. The holder’s situation is tantamount to his still possessing the land since there is no assertion that a separate trust was intended to cover the proceeds.

The trust is unenforceable because the requirements of the Statute of Frauds for a trust involving ⁶ land “extend to all substitutes for the original res, either real or personalty.” Id. at 441-42. However, in the cases where the oral trust articulated both a present trust in the land and a future trust in the proceeds from the sale of the land, and in fact a sale occurred resulting in the trustee holding the proceeds, the courts and authorities are split as to whether an enforceable trust exists with respect to the proceeds. Most of the states which have ruled on the question consider the two trusts severable 3 and, therefore, their enforceability must be viewed separately. As long as the trust concerns the actual land, it is unenforceable unless the trust is established in writing.

I A. Scott, supra, at 379. Once the land is sold then the trust involves personalty and no longer must meet the requirements of the Statute of Frauds. The trustee is deemed “to have ‘abandoned the shelter’ of the Statute by selling the land.” G. Bogert, supra, § 66, at 442-44. The rationale for this view is that the oral trust is not enforceable as long as the res of the trust is land, since the law, as manifested by the Statute of Frauds, is drafted to-prevent the enforceability of oral trusts involving only land.

Once the land is converted into personalty it would be an injustice to expand the protection of the statute since the trust no longer involves land but rather the res is personalty. Id. at 444. 4 ⁷ Advocating this position, Professor Bogert states: “On principle it would seem that the oral agreement in the case assumed had two parts — a present trust of land and a promise to hold in trust personal property if and when acquired. The enforcement of the real property trust is not in question because no land is now held. The personal property which it was promised would be held in trust has now been acquired by the promisor.” Id. at 445.

Moreover, in his treatise, Law of Trusts, Professor Scott writes: “By the weight of authority it is held that in this situation the undertaking of the trustee is severable; that insofar as his undertaking relates to the land itself it is unenforceable because of the failure to comply with the Statute of Frauds; but that insofar as his undertaking relates to the proceeds it is not within the Statute of Frauds and is enforceable.” I A. Scott, supra, at 379-80. If what the text writers appear to consider the weight of authority were the law in Maryland, the alleged oral trust in the proceeds of sale of real estate would, if proved, be enforceable. The appellants alleged an oral agreement in which the appellee agreed to hold in trust their father’s land, convert the land into cash, and, at Mr. Guiliano’s death, distribute the corpus to the beneficiaries. In essence, the appellants in their bill of complaint raised two separate trusts =- the real property trust and the trust involving the proceeds of the sale of the land.

The oral trust for the land, ⁸ of course, is void. However, once the appellee sold the land, he would become liable on his promise to hold in trust the proceeds of the sale — the second trust. That is; when the' trust no longer involved land, the Statute of Frauds would . not apply. However, these views have not been expressed or accepted as the law in Maryland.

As stated earlier* the courts are divided on the enforceability of trusts involving proceeds from the sale of land. While some courts 5 have enforced the trust of the proceeds, others 6 have not, construing the Statute of Frauds “to mean that the original character of the trust res determines whether the trust is within the statute, and that an express promise to hold all substitutes for the original in trust is of no effect.” G. Bogert, swpra, § 66, at 445. The law implies a duty to hold the successor property in trust, and whether the trust in the substitute property is enforceable or unenforceable turns on whether the trust in the original property was binding or voidable. Id.

This appears to be the view of the law adopted by the Court of Appeals of Maryland. Messick v. Pennell, 182 Md. 531 , 35 A. 2d 143 (1943), involved a situation quite similar in one aspect to the present case. In that case, George E. Hardman, a few months before he died in 1941, deeded his 86 acre farm to his daughter, Rhoda, who later became Mrs. Pennell. Rhoda had remained on the farm with her parents, while the other children, three sisters and two brothers, left home and sought their own careers.

After their father died the other children became aware of the transfer of the farm to Rhoda. The three sisters brought suit against Mrs. Pennell and her husband. They alleged the land was conveyed to Mrs. ⁹ Pennell by their father in order to avoid the necessity of making a will and in order that the property might be sold and the proceeds distributed among the surviving children. In essence, the complainants contended that the