Kiser v. Lucas

Parke, J., delivered the opinion of the Court. Mary Read Clarke engaged the services of her solicitor ⁴⁸⁹ to prepare a deed of trust. After receiving her instructions, the solicitor prepared the document and took it to her residence for execution. In the form in which it was drawn the grantor assigned to designated trustees certain specified personal property to be converted, and the proceeds invested so that the net income would be paid to the settlor for life, and then, accounting from her death, to pay out of said income (a) to her mother the monthly sum of $200; (b) to her adopted son, then seventeen years of age, the monthly sum of $200 to be increased and continued as by the deed of trust provided; and (c) to her cousin, Corinne P. Lucas, during her life, the monthly sum of $100.

If the net income should not be sufficient to pay these monthly sums, the payment to the cousin was to be made in full and the portions of the mother and son were to be correspondingly reduced, but if there should be any surplus income it was to fall in and become a part of the principal. After these provisions, two paragraphs followed. They were in this form: “At the death of my mother and at the death of my cousin the whole net income of the Estate shall be paid to my adopted son. “The monthly income to my son of Two Hundred Dollars ($200) or a larger amount in the event of the death of my mother or cousin shall continue until he reaches the age of thirty years, at which time one-half of the principal of the Trust Estate, if both my mother and cousins are then dead, shall be paid to my son free and discharged of the Trust. If, however, one or both of my mother and cousin are still alive I desire that my Trustee shall set aside a sufficient amount to produce the annuities to them and that one-half of the Trust Estate after such deduction shall then be paid to my son, and further amounts of the principal shall be paid to him thereafter upon the death of my mother and cousin until said amounts paid to him shall reach a total of fifty per cent (50%) of the whole Trust Estate.” ⁴⁹⁰ The document then declared that the residue of the trust estate should remain in trust and the net income be paid to the son for life, and, upon his death, to any of his children until the youngest should reach the age of twenty-one years, when the trust estate should be divided among said children or their issue per stirpes, subject to the exercise by the son of the power by will to divide the principal of said trust estate and the income thereof during the minority of any child in unequal amounts among his issue, provided that the principal of the trust should not be divided or paid over until the youngest of the children of the son should reach the age of twenty-one years.

Should the son die without issue in the mother’s lifetime, the net income was to be paid to the mother for life, and upon the death of the son without issue and of the mother, the trust was to terminate and be paid in equal portions to the settlor’s three cousins, Julia, Corinne, and Katie Lucas, and their personal representatives. In addition to this summary, there were other provisions which do not require statement for an understanding of the problem at bar. When the settlor was made acquainted with the contents of the typewritten document, she stated that it was not drawn as she had directed; and the solicitor, after discussing the matter with her, informed her that the mistake could be corrected. The correction was then made by the solicitor writing at the close of the paragraph which gave the legacy for life to Corinne P. Lucas the additional clause: “While she is unmarried and lives with my mother.” No other change was made in the body of the document.

Indicating the new clause by italics, the effect of the alteration is to make the provision read: “And in the same manner to pay to my cousin, Corinne P. Lucas, during her life the monthly sum of one hundred dollars ($100). While she is unmarried and lives with my mother.” The settlor verified this alteration by placing her initials opposite the written words, and there was, also, included in the acknowledgment before the notary a' ⁴⁹¹ certification that the interlineation was made before the settlor executed the instrument. The trust deed was executed on January 12th, 1925, and a formal acceptance of the trust was indorsed at the foot of the deed on the following day. On the day of its execution the settlor’s mother, her adopted son, and her three cousins, who were beneficiaries according to the terms of the trust, were alive.

The two trustees assumed the administration of the trust. One of the trustees was the draftsman of the deed of trust, but he resigned after more than a year’s service, and the remaining corporate trustee continued to act. The settlor’s mother died on October 13th, 1933. The settlor died on July 4th, 1934, and she was survived by her adopted son, who was of age, married, and has living an infant daughter and son.

Corinne P. Lucas, a cousin, had never married, and she and the two other cousins survived. On October 8th, 1934, these parties in interest were brought into court by a bill of complaint filed by the trustee for the purpose of having a court of equity assume jurisdiction of the trust, and, because of doubt in respect of the proper construction of the grant, determine whether the annuity to Corinne P. Lucas should be paid to her until her death or whether the prospective annuitant should not be paid the annuity because she was not living with the settlor’s mother, who had died, and the entire net income of the trust should be paid to the adopted son, accounting from the death of the settlor. With all the parties in interest before the court, the matter was heard and considered. The opinion of the chancellor indicates that he weighed carefully the questions involved.

He rejected the contention of the adopted son that the interlineation had created a condition precedent to the existence of a right in Corinne P. Lucas to the annuity, which defeated the annuity because of the death of the mother of the settlor before the settlor died. The chancellor’s conclusion was that the annuity given was for life upon the condition subsequent that she ⁴⁹² remain unmarried and live with the mother of the settlor; and that a part of the condition having become impossible of fulfillment by act of God, the annuity was for life so long as the annuitant remain unmarried. The decree directed that the trustee pay to Corinne P. Lucas, from the net income received from the trust estate, the monthly sum of $100 for life, and so long as she remains unmarried, accounting from the death of the settlor. No appeal was taken from this final decree of June 6th, 1935.

The decree was on the merits and was by a competent court which had jurisdiction of the subject-matter and over the parties, and, so, having been neither set aside nor reversed upon appeal, is conclusive upon the parties and their privies of all questions put in issue by the pleadings. Vollum v. Beall, 117 Md. 617, 622 , 83 A. 1095 ; Emmert v. Middlekauff, 118 Md. 399, 403, 404 , 84 A. 540 ; Christopher v. Sisk, 133 Md. 48, 50, 51 , 104 A. 355 ; Wiley v. McComas, 137 Md. 637, 639, 640 , 113 A. 98 ; Walzl v. King, 113 Md. 550, 556 , 77 A. 1117 ; Stouffer v. Wolfkill, 114 Md. 603, 609 , 80 A. 300 ; Elkton v. Sweet, 141 Md. 614, 618 , 119 A. 510 . Compare Orrick v. Fidelity & Deposit Co., 113 Md. 239, 251 , 77 A. 599 . As between the parties, the decree must, therefore, be accepted as conclusive that, by the terms of the grant, Corinne P. Lucas is entitled to the monthly payment of $100 out of the net income of the trust estate so long as she lives and remains unmarried.

Having been a party to the bill of complaint to have this inquiry settled by a construction of the grant, the adopted son would unquestionably be bound by the decree of construction so long as the deed of trust is effective. Supra. The son, however, filed a bill of complaint against the acting trustee and Corinne P. Lucas, on August 15th, 1935, in which it is averred that neither the original draft of the deed of trust nor its modification by the interlineation mentioned expressed the true intention of the settlor, which was asserted to be that the monthly payment of the sum of $100 to Corinne P. Lucas was in compensation ⁴⁹³ for her services as a companion to the mother of the settlor, and that the payment was not to be made unless the services were rendered. The failure of the deed of trust to express this asserted intention is ascribed to the solicitor of the settlor, and, on the theory of mistake in changing the original terms, the relief prayed is that “the deed of trust be reformed by inserting appropriate language to indicate that the $100 a month is a compensation for services as companion to the mother of the grantor, and to continue only so long as the said services were actually rendered.” It is objected that this bill of complaint cannot be entertained because the decree in the first bill of complaint makes the equity of the second bill res judicata.

The difficulty with this position is twofold. The first bill of complaint was instituted by the trustee on the theory that the deed of trust was a complete instrument whose terms required construction for the guidance and protection of the trustee. The equity of the second cause, however, was in the allegation by the son that the deed of trust was defective in failing to express the intention of the settlor through the mistake of her solicitor in its drafting. It appears from the record that the testimony, in the first cause, of the solicitor who drew the original deed of trust and made the alteration, was taken subject to exception, and that the portion of the testimony which related to the statements and (declarations before and at the time of the execution of the declaration of trust was later excluded.

While this testimony is the evidence which the son depends upon to establish mistake under the allegations of the bill of complaint at bar, the chancellor excluded it on the theory that the construction of an entire instrument was the subject-matter of the litigation, and not the rectification of a document which, because of mistake, imperfectly declared the trust intended by the settlor. The effect of the chancellor’s ruling is to limit his decision to the construction of the deed of trust as it was executed, since, on the issue made by the plead ⁴⁹⁴ ings, the point of mistake was not submitted. A question cannot be said to be res judicata when it was neither attempted to be raised nor could have been raised according to the pleadings as they were presented to the chancellor. Supra; Caird v. Moss, L. R. 33 Ch.

Div. C. A. 22, 28-30, 35; Northern Assurance Co. v. Grand View Building Assn., 203 U. S. 106, 107 , 27 S. Ct. 27 , 51 L. Ed. 109 . Although it would appear that there was no adjudication of the subject-matter of mistake, the questions of election and waiver and its effect on the rights of the son remain. Supra.

Under the first proceedings in equity, the jurisdiction of the court of equity was invoked for the purposes of the construction of the declaration of trust and of obtaining general relief. The trust was not wholly executed, but was largely executory and active. When equity assumed jurisdiction for the purpose of construction, it would retain its jurisdiction until the trust was at an end, whether the trust continued under the instrument by which it was created or under this instrument after its reformation to correct a mistake. Ætna Indemnity Co. v. Baltimore S. P. & C. R. Co., 112 Md. 389, 397 , 76 A. 251 ; Coggins. & Owens v. Carey, 106 Md. 204, 216-219 , 66 A. 673 ; Conner v. Groh, 90 Md. 674, 683, 684 , 45 A. 1024 ; Maryland Home Insurance Co. v. Kimmell, 89 Md. 437, 441, 442 , 43 A. 764 ; Second National Bank v. Wrightson, 63 Md. 81, 85 ; England v. Gardiner, 154 Md. 510, 513, 514 , 142 A. 625 ; Code, art. 16, secs. 173, .179. So, in the original proceedings begun by the trustee, the son, who, with the other living beneficiaries was made a party defendant, could have by answer set up mistake in the declaration of trust, and, if proved, have a rectification decreed, since this was wholly a matter in equity.

The point is taken that the mistake was not known by the adopted son until the testimony of the solicitor was given; but, if it be conceded that the son did not earlier know, or should not have earlier known, the facts, he did know them when the solicitor testified in the first cause, and it was then not too late for steps to have been taken in the ⁴⁹⁵ original cause to have obtained a stay until the question of rectification had been presented, heard, and determined. Supra; Code, art. 16, sec. 17; Miller’s Equity Procedure, pp. 241, 242; Darnell’s Chancery Pl. & Pr. (6th Ed.) ¹⁶²⁸; 53 C. J. 992, 993, sec, 149; Godwin v. Da Conturbia, 115 Md. 488 , 80 A. 1016 ; Selder v. Winegar,, 70 Colo. 574 , 203 P. 667 ; Gilbert v. Williams, 157 Mich. 226 , 121 N. W. 739, 740 ; Williamson v. Brown, 195 Mo. 313 , 93 S. W. 791 ; Hook v. Craighead, 32 Mo. 405 ; Gallup v. Bernd, 132 N. Y. 370 , 30 N. E. 743 ; Moore v. Moore, 151 N. C. 555 , 66 S. E. 598 ; Jones v. Dappen, 27 Colo. App. 21 , 146 P. 118 .

So, during the course of the first suit, the adopted son was clearly advised that he must make a choice between his rights under the deed of trust as executed by the settlor and his rights under a reformed deed of trust. He could not at one time insist that his rights were conferred and vested under the declaration of trust as executed, and, if the decree were adverse, at a later time attempt to retrieve his failure, by setting up the same claim of right under the declaration of trust after it had been rectified by correcting the instrument because a mistake in its preparation had made it fail to express the real intention of the donor. In short, the son had to elect whether he would continue to assert his rights under the executed instrument or under a reformed declaration of trust. He chose to test his rights according to the provisions of the executed declaration of trust, and lost.

His conduct was a waiver of a right dependent upon the terms of a reformed instrument. Peters v. Bain, 133 U. S. 670, 695 , 10 S. Ct. 354 , 33 L. Ed. 696 ; Washburn v. Great Western Ins. Co., 114 Mass. 175 ; Thomas v. Joslin, 36 Minn. 1 , 29 N. E. 344 ; Steinbach v. Relief etc. Co., 12 Hun (N. Y.) 640, affirmed 77 N. Y. 498 , 33 Am. Rep. 655 ; Miller on Construction of Wills, sec. 333; Bower’s Estoppel by Representation, pp. 225-227, 232-241, 340-342.

The donee may have not known, until the testimony of the solicitor, of the circumstances which he claims, require a reformation to correct a mistake, but this initial igno ⁴⁹⁶ ranee does not make his later decision to put his entire reliance upon the terms of the deed of trust any the less a decisive act, which, taken with a knowledge of his rights and of the fact, constituted an election and waiver. Sanger v. Wood, 3 Johns. Ch. (N. Y.) 416; Washburn v. Great Western Ins.

Co., 114 Mass. 175, 176 ; Connihan v. Thompson, 111 Mass. 270, 272 ; Butler v. Hildreth, 5 Metc. (Mass.) 49, 50-53. If it be assumed that the plaintiff is not barred by waiver from prosecuting the second suit, the first question is whether or not a voluntary assignment of personal property by a settlor for her use and benefit during life, and then over upon a further trust for the use and benefit of donees as in the declaration of trust provided, will be reformed, after the settlor’s death, at the instance and for the benefit of one of the donees, and adversely in respect to another. According to Pomeroy on Equity (4th Ed.) sec. 2100, the rectification in such a case is not generally awarded, but is enforced in some jurisdictions to correct a disposition which is clearly proved to have failed through mistake to carry out the donor’s intention.

On principle it would seem that if a mistake exist within the rule, it should be cured even if the settlor be dead, provided he died without having confirmed the grant in the form in which it was executed, and all the conditions exist for the reformation of the deed of trust. The rule is soundly stated in Kerr on Fraud and Mistake (6th Ed.) at pages 621, 622: “A voluntary deed cannot be reformed, except wth the consent of the settlor, if it fails to carry out the intention of the parties. If the case be that he has made a mistake, no amount of evidence, however conclusive, proving that he made a mistake, will justify the court in compelling him to introduce a clause into the deed, which he does not choose to introduce, although at the time of the execution he might have wished to have done so. On the other hand, the court will exercise caution in rectifying a voluntary settlement upon the evidence of the settlor alone.

But if a man executes a voluntary deed declaring certain trusts ⁴⁹⁷ and happens to die, and it is proved from instructions or otherwise that the deed was not prepared in the exact manner which he intended, the deed may be reformed and those particular provisions necessary to carry his intention into effect may be introduced.” See 21 Halsbury’s Laws of England, pp. 12, 20, sec. 36; pp. 23, 24, sec. 44; 3 Sebón’s Judgments and Orders (7th Ed.) 2237. Although there is weighty authority to the contrary (a), the rule accepted in this jurisdiction is as stated in the quotation given, and the court will not adopt another. Milligan v. Pleasants, 74 Md. 8, 12, 13 , 21 A. 695 ; Coale v. Merryman, 35 Md. 382 ; Lewis v. Lewis, 140 Md. 524, 527 , 118