Kramme v. Mewshaw

Pattison, J., delivered the opinion of the Court. Ann Eliza Mewshaw died testate on February 22nd, 1919, and by the second section of her will she created an active ⁵³⁸ trust by -devising toi her 'daughters, Ritta Frances Hammond, wife of Herbert Hammond, .and Annie Eleanor Phelps-, wife of Roland Phelps, and the survivor -of them, as trustees, certain real estate for the purpose of managing and paying the net income therefrom, or from the proceeds of sales of any or all of said real estate, after the deduction of taxes, expenses, -charges and commissions, to her son, Benjamin Franklin Meiwshaw, for life, with remainder to- the said Ritta Frances Hammond, Annie Eleanor Phelps, and her son, James Clinton Mewshaw, as tenants in common. The testatrix directed that the land -so devised in trust should be subject to a charge of $2,000 for the benefit of her daughter, Annie Eleanor Phelps, but, as this bequest was duly paid before the present -controversy aróse-, the provisions of the trust in reference ten it need mot be set forth. The trustees were given the power to sell and dispose of any or all of said property so devised to them in trust, without any obligation -on the part of the purchasers to see to the application of the purchase money; and with power to invest and re^ invest the net proceeds.

The testatrix was survived by her two daughters, the beneficiary for life, and the other child,' Jame-s Clinton Mewshaw, who are the only parties in interest under the trust declared by this second section of her will. The corpus of the trust embraced three separate parcels of real estate that were in Anne Arundel 'County and that consisted of a farm of one hundred and sixty acres, more or less, known as the “Waterford Earm”; another farm of fifty-six acres of land, more or less, called the “Jenkins Farm,” and -some improved land in the village of Brooklyn. The two trustees accepted the trust and administered it without the aid or supervision of 'equity. They first siold the larger farm 'and, .after the smaller farm failed to yield .any net revenue, the trustees made sale of it on August 13th, 1923, to J-obn Kramme for $25,000.

It is this second sale which has caused the present controversy, which arose in this manner. .One of the three remaindermen!, James Clinton Mewshaw, ⁵³⁹ filed a bill of complaint on December 31st, 1923, against tbe two trustees, alleging tbe1 creation of the trust under tbe will of Ann Eliza Mewshaw; the interest of the complainant and of his two sisters as the remaindermen, and that the trust was not being administered, under the jurisdiction of chancery. These axe introductory averments to the principal charges which were (first) that the “complainant feels that said trust should he under the jurisdiction of this honorable court, and that said”, trustees “should he directed to give a bond in such sum as this honorable court may deem proper, in accordance with the value of said trust estate^’; and (second) that the complainant had been advised of the sale of “Jenkins Farm” a,t $25,000; that the deed had not been executed and delivered to the purchaser; and that, “if said report is correct, it is thie opinion of this complainant that said sale is at a price which is entirely inadequate, as said real estate in the .opinion of this complainant is valued in excess of thirty thousand dollars.” Ou these meagre statements, the complainant prayed specifically (a) that the court of equity assume jurisdiction of the trust., (b) that the trustees bei required to. give a sufficient bond, and (e) that the trustees be required to show cause why the said sale should not be reported for ratification, and that pending the report of sale, they he enjoined from transferring the land to any proposed purchaser. There was., also, the prayer for general relief. The hill of complaint wasi verified' by the plaintiff, and on the day of its filing the chancellor passed .an order requiring the trustees to -show cause, on or before January 18th, 1924, why the equity court should not take jurisdiction and they give bond as trustees.

The trustees .answered separately, through their respective •solicitors, and each trustee verified her answer. Ritta Frances Hammond’s answer as trustee was that she .and her co-trustee were .administering; the .trust without the aid of chancery in order to save the expense, and that the complainant had no right to require the trustees to carry the ⁵⁴⁰ trust into- equity and to' give bond, because .she and her co-trustee bad, “in the best of faith and without any abuse of authority or of discretion, fairly executed the duties” of their trust. She admitted the sale of the Jenkins Ea.rm: for $25,000, and asserted that tire sale was made in good faith, in the axercise of a sound discretion, at a fair and reasonable price, and for the interest and advantage of the trust and all the parties in interest. The answer concluded with a defense by wa.y of .a. demurrer.

The answer of Annie Eleanor Phelps, trustee-, was similar in the facte set forth, but it did not contain a demurrer, and it indicated a willingness to comply with any order of the court with respect to a bond. On the request of her counsel tire demurrer of Mrs. Ham.mond was sat. down for hearing, but, before it took place, John Kramme filed a petition in the cause disclosing’ that he was the purchaser who had been referred to but not named in tire proceedings; and, -on his request, he was made a party defendant. His answer, with a reservation of a,11 his rights by way of demurrer, was a denial of the inadequacy of the price, and contained a narrative of circumstances! attending the purchase and conditions affecting the property that would have justified the sale. An outstanding feature of the answer w’ais the declaration that “the said J. Clinton Mewshaw waisi thoroughly conversant with all the proceedings, interviews and conversations which took place between this respondent and said trustees, and moreover 'the said J. Clinton Mewshaw agreed with your respondent prior to' the conclusion of said negotiations that, twenty-five thousand dollars cash was the fair market value of said real estate.” With the pleadings in this shape, the parties agreed that the case should be heard upon bill, answer (including all defenses allowed under the twentieth general equity rule) and testimony taken in opien court.

In conformity with this agreement, the causé was set for testimony in open court and hearing .as agreed. The court carefully considered the testimony, and wrote a lengthy opinion, in which he clearly set forth the grounds for his conclusion that the court should ⁵⁴¹ •assume jurisdiction of the trust and the sale should he set aside. The decree was passed on August 19th, 1924, and by it the .court assumed jurisdiction of the trust, enjoined the trustee® from any further proceedings with respect to the sale, which it set. aside; directed the trustees to reimburse the purchaser for .all moneys expended by him on account of the purchase, and to pay the costs out of the funds; of the trust estate. It will he seen that the decree granted all the relief prayed for, except that it did not require the trustees to give a bond in any penalty.

An appeal from the decree was taken by the purchaser, John Kramme; and then, after leave granted.by the court, Ritta Ebaneas Hammond took an appeal as trustee. There is no question that the trastees had the power, and that it was sound judgment, to; sell the farm. Whether jurisdiction should be .assumed and the sale upset turns on (1) the method of making the sale and (2) the inadequacy of the purchase price. 1. The subject matter for sale was -an unprofitable truck farm, under tenancy, ,a short distance outside of the limits of Baltimore, containing fifty-six .acres of land, more or les®.

It adjoin® several land development projects, and has a frontage of about eighteen hundred feet on the Annapolis Boulevard, a public highway from Baltimore to Annapolis, and is about a mile from the end of the street car line in the village of Brooklyn. It is improved by two. frame houses, at the front and back of tibe; farm, and by small outbuildings. Because of its location all of the land, except ten or twelve acres, is .suitable for a. lot development enterprise;. It was assessed for $11,000.

The trustee Annie Eleanor Phelps, when called upon by the order of the court to .show cause why the sale made by her and her sister as trustees to John Kramme .should net be set aside, said, in .an answer prepared for her by her .solicitor and sworn to by her, “that .said farm has always been unproductive, the rent received for the same being scarcely more than enough to pay taxes, insurance; and other expenses, and ⁵⁴² that every effort has been, made to sell said farm .at a larger price, bnt without avail, .and that the said trastee believed at the time of entering into- said contract of sale, that the-price agreed upon in the contract was a very good oue and that the sale was for the benefit of all persons interested in said trust estate.” The respondent made oath toi this answer-on January 12th, 1924. It was -a formal, deliberate and considered defence, which ,shie interposed under the most solemn-sanction known toi the law, yet in less than one month, she was called as the chief witness for the complainant, and she-testified that she had never made any effort to- dispose of the Jenkins Farm, nor gone to any real -estate dealer, nor-advertised it in any fashion, nor consulted any one in regard to its sale except her brother, the life beneficiary and her-sister. .She -did not have- the property appraised, and she did not .ask any one as to its value, and that she “really did' not know the value of the property.” When she was confronted with her conflicting statements-in the sworn answer, her halting and discrediting explanation was that she had left the answer to< her- solicitor or that she-had made the answer* “to clear” herself, .although she testified-' that she had changed her mind as to the advisability of the sale shortly after she had committed herself to the price. The evidence of a witness., who- thus presents herself to the court, can be given but slight weight, particularly when her testimony was in itself contradictory and denied. Efir instance, she testified -at one point in regard to the farm:“Fever asked a .soul to> purchase it or what it would bring..

A man several years ago told me it ought to bring $50,000, but; I thought it was no use- to- keep it a hundred years and'starve the man to -death, paying expenses on it, better- get half a loaf if you can’t get a whole loaf.” Bruner- R. Anderson, Esq., testified for the complainant that at the time the-trustees sold the Waterford Farm, Mrs. Phelps asked him tqtry to sell the Jenkins Farm, and, when ha inquired of her what she thought it was worth, her reply was $50,000, and the matter dropped there, as the price did not interest him.. ⁵⁴³ Again, Kramme, who is a real estate agent, testified that he had known for two years before his purchase that the prop■erty Was on the market, and that his information came from J. Clinton Mewshaw,' the brother. Kramme further swore ■that eighteen months before the sale he and J. Clinton Mew.sihaw were considering, buying the property together and developing it, and that he sent Mewshaw to¡ his sister, Mrs. Phelps, to see what price he could get on the property, and .he returned with the message that the trustees were talking about $50,000. About six mouths afterwards, Kramme testified he went to see Roland Phelps, and inquired of him if Kramme would he paid a commission, if he could find a pur- ■ chaser, and Phelps saw his wife, and stated that a commission would he paid and Kramme offered the property without .success. This testimony is all the more significant as it comes from witnesses while testifying on the call of the complainant.

The evidence on the record supports the view that the •trustees had desired to sell the property, but placed too high .a value upon it to get a, buyer. After Kramme’s unsuccessful ■efforts to find a, bidder, he went alone to sea the trustee Annie Eleanor Phelps, and began negotiations with her for .the purchase of the farm. He said that he represented a Hew York firm, which was untrue, hut immaterial. Kramme offered $20,000, hut Mrs. Phelps asked $30,000, aud Kramme left for the ostensible purpose of conferring with his client.

Ha returned and said this party would not give "$30,000, hut would give $25,000. Mrs. Phelps then wrote to> her eoi-trustee, Mrs. Hammond, a letter, under date of July 19th, 1923, which, in view of the conflicting statements of Mrs. Phelps, is important enough to justify its insertion, and' •.the reply of Mrs. Hammond: “Brooklyn, Md., July 19th, 1923. “Dear Ritta: “What do you think the Jenkins’ Parm should bring .and what would you he satisfied to sell for? “There is a man from Hew York will buy it, hut won’t give hut $25,000. I asked $30,000. I told him ⁵⁴⁴ I would' have to ask you, and also see the orphans’ court about it before making any deal.

As you and I both know that property is paying nothing, and from the looks of the crops on it this year it doesn’t look as if Ed would be able to pay bis rent, and you know what that means when he fails to pay it. “I thought if he would give the $30,000 that would bring in $1800 per year at 6 per cent., and be a nice little income. If it were mine I would do it quick. “I am sending another statement and check for you to sign. There is not money enough to pay me up to date in hank, so I am sending part as you will see by the date. Kindly attend to this and let me know your views on selling the farm. “Tours truly, “Kellie.” When Mrs. Hammond received the offer, she consulted her' husband, who thought it was a. good price.

She also, testified that she talked to her sister, whom .she knew would “ge-t the highest dollar she could,” and her sister told her that “if if was her’» ,she would sell it quick,” and that her husband, Mr. Phelps, who was a farmer and had lived long in the neighborhood of the property, thought it was a good price. In addition to this1, Mrs. Hammond testified that her conclusion as to* the adequacy of the price wasi based upon her knowledge of what property in the. vicinity of the “Jenkins Farm” had brought some six years before, when the last sales of similar property had been made hut when the neighborhood was not so thickly settled. She communicated her judgment in this reply to her sister’s letter: “Baltimore, Md. “Dear Kellie: “You asked me what I think the Jenkins Farm should bring, and also state you have a man from Kew York that will give you $25,000 for it. As regards what I think that matters very little.

There was a time when it would have brought possibly $35,000, but you said you could get $50,000, and that time has gone by maybe forever and maybe in a hundred years ⁵⁴⁵ henee. So as conditions exist, and you think it is doubtful about getting the rent, that of course is very hard on Prank’s income, cuts him down considerably. Therefore, use your own discretion and sell while selling is good. I am willing for sale if you are. “Very sincerely, “Ritta.” On the receipt from the cot-trustee of this authority to sell, Mm Phelps resumed the negotiations with Kx'amme, who consented to pay $25,000 clear of -all commisisdons-, and ’a written contract of sale was afterwards drawn up by the attorney for Mrs. Hammond and was executed by all the parties on Angnst 13th, 1923, which was about three weeks after the terms of the sale had been concluded.

By the contract $500 was to be paid in cash before the contract Was signed; $2,500 became due at the time possession was given, and the residue when the -sale was ratified, if ratification were found necessary or, if not, -o-n delivery of title -and possession. The purchaser paid the $500, but ha made no further payments for the reason that he did not get possession -of the property. During these unhurried negptdation-s between the purchaser and the trustees-, the court has no-t found anything but- the usual matching of wit against wi-t in the effort of the vendors to sell -as high, and the vendee to- buy as cheap-, -as possible. Motbing occurred in the course, of the transaction on which to base a charge that'the -sale was induced by fraud, deceit, misrepresentation, or other wrongdoing by the buyer, or wlas the result of any material dereliction -o-f duty on the’ part of the trustees, who acted throughout honestly -and in good faith.

The concealment of the identity of the buyer, by the reply that it was a Hew York firm, -did not affect the result and was a negligible falsehood. Continental Trust Co. v. Balto. Refrig. Co., 120 Md.