LIBERTY TRUST COMPANY v. Weber

Markell, J., delivered the opinion of the Court. This is an appeal, by the trustee and the guardian ad litem for infants and possible future parties not in esse, from a decree terminating the trusts created by two trust instruments, dated October 30, 1929 and December 14, 1936, respectively, to The Liberty Trust Company, trustee. Harry E. Weber died on May 14, 1929. He had been married in 1902.

He was then president of the Third National Bank, which later was merged with other banks into The Liberty Trust Company, of which he became, and continued to be, a director until his death. He was also, and had been for some years, president of the George’s Creek Coal Company. Mr. Weber died intestate, leaving as his heirs-at-law and next of kin, his widow, Mary G. Weber, three sons, William W., John and James E. Weber, and one daughter, Mary V. Weber, then nineteen years old. James was then fourteen, John twenty-three, and William twenty-five.

All the children except William were unmarried and were living with their mother at Mr. Weber’s residence in Cumberland. ' William was then married to Frances Weber and was living in Pittsburgh. At dates not shown William was divorced from Frances and is now married to Adele B. Weber, who is forty-one and with whom he is living in Pittsburgh. He has no children by. his present wife and three by first wife, Lois, who is twenty-two, Joan nineteen and Ronald twelve. John is married, his wife is forty-one, they have five children, all. under twenty-one, the youngest five, and they live in Hyattsville, Md. Mary Virginia Weber in 1934 married Roy Thomas Bootman.

They have three children and live at Steubenville, Ohio. James is married, has one child and lives at New Hyde Park, New York. ⁴⁹⁷ Mr. Weber’s estate was very small. His widow and The Liberty Trust Company were administrators. The net estate, after payment of debts, consisted principally of (1) his house and (2) 5,870 shares of stock (par $50) of the George’s Creek Coal Company, which constitute 39.1 per cent of the corporation’s outstanding stock, and which had paid no dividends for some years.

In the Orphans Court the stock was appraised at one dollar per share. The widow’s one-third of the estate was too small to yield her a living income. On October 30, 1929 Mrs. Weber and her three adult children executed a trust deed and agreement with The Liberty Trust Company, which recited that it was the desire of the parties so far as possible to conserve the property and estate of Harry E. Weber and “to establish and create a trust fund of their interests in and distributive shares of the same for the use and benefit of Mrs. Weber” in accordance with the terms, conditions and provisions hereinafter set forth, and by which they conveyed to the trustee, forever in fee simple as to real estate and absolutely as to personal property, all their right, title and interest and all the right, title and interest of each of them in and to any and all the property and estate of Harry E. Weber and any and all real estate or personal property owned by him at the time of his death, and any distributive share therein which they had or might or could in the future have, in trust, to hold and manage the trust property and estate, collect all income, pay all necessary charges and expenses and taxes, and to borrow money on mortgage (which power was exercised to convert the house into apartments and thereby increase the trust income before the George’s Creek Coal Stock began paying dividends) and to pay the entire net income from the trust estate to Mrs. Weber for life, upon her death the trust to cease and terminate, and the trustee to pay or transfer the corpus to the said three children, to be divided equally, and if either then shall be dead, leaving issue, such issue to receive the parent’s share, and if either then shall be dead, ⁴⁹⁸ without leaving issue, then the deceased child’s share to be divided equally among the survivors, “or their * * * issue, per stirpes and not per capita”, if at Mrs. Weber’s death neither of the three shall be alive, and no children or descendants, the corpus to be paid or transferred to the persons then entitled to receive it as next of kin of Harry E. Weber. The trust agreement contains a spendthrift trust provision as to principal and income of the trust fund, which provides inter alia that no beneficiary shall have any power to sell, assign, transfer or in any manner to dispose of his or her interest in the trust fund or the income.

When the trust agreement was executed it was understood among the family that when James became of age he would be asked to execute a similar agreement covering his interest. On December 14, 1936 James (then twenty-one), and his wife and The Liberty Trust Company executed a similar trust deed and agreement, covering James’ interest, on substantially the same terms except that (1) Mrs. Weber’s one-third of the estate had already been conveyed by the 1929 deed and (2) if at Mrs. Weber’s death James shall be dead, leaving a widow, then the widow shall receive the share James would have been entitled to receive, and if then there is no widow but there is issue of James living, then the share he would have received if living shall be divided equally among such issue, children to stand in the place of their deceased parents and to take per stirpes and not per capita, and if then there is no widow, issue or descendants then the share James would have received shall be divided equally among his surviving brothers and sisters, children of deceased brothers and sisters to stand in the place of their deceased parents and to take per stirpes and not per capita. The George’s Creek Coal Company stock paid no dividends until 1944. The net income received by Mrs. Weber from the trust was, in 1931 $433.83; in 1932 $1,225.08, in 1933 $860.22, in 1934 $1,498.54, in 1935 ⁴⁹⁹ $1,300.00, in 1936 $1,325.00, in 1937 $1,294.31, in 1938 $1,300.00, in 1939 $1,300.00, in 1940 $1,300.00, in 1941 $1,325.00, in 1942 $1,300.00 and in 1943 $1,300.00.

In 1944 a dividend of fifty cents per share was paid on the George’s Creek Coal Company stock, in 1945 the same, in 1946 dividends amounting to three dollars per share, in 1947 seven dollars, in 1948 ten dollars, in 1949 fourteen dollars, in 1950 fifteen dollars and in 1951 fourteen dollars. From 1944 to 1951, inclusive, Mrs. Weber’s income received from the trust estate was, in 1944 $1,875.00, in 1945 $2,500.00, in 1946 $2,800.00, in 1947 $22,600.10, in 1948 $55,970.21, in 1949 $62,428.23, in 1950 $101,127.33, and in 1951 $78,203.47. For 1950 her federal income tax return shows total investment income, $107,841.; taxable income after deductions, $101,690.; and income tax payable, $59,063.; for 1951 total income, investment income, $84,698.; net taxable income, $79,379.; income tax payable, $44,920. The value of the shares of stock now held in trust is said to be “in excess of $750,000.” On December 31, 1951 Mrs. Weber and her three children who executed the first trust agreement, and their respective wives and husband, delivered to The Liberty Trust Company a notice that they “hereby revoke and terminate said Agreement of Trust executed October 30, 1929.” The notice stated, inter alia, “The settlors executed this Agreement of Trust voluntarily without consideration and exclusively for the benefit of Mary G. Weber.

At that timé the undersigned bélieved that the estate of Harry E. Weber was not of substantial value and his widow * * * did hot have sufficient income to live suitably on her share of the estate. The principal purpose of the Trust Agreement was to provide her with a reasonable income without her being subjected to financial distress or hardship. At the time of the execution of the. Trust Agreement the undersigned believed that the. shares of stock of, the George’s Creek .

Coal Company had a. nominal, valpe. As ⁵⁰⁰ you know, it has been subsequently ascertained that these shares had [!] a very substantial value. The large income from the trust is now far in excess of the requirements of Mary G. Weber who does not now require an income in excess of that provided by her original share in the estate. Accordingly, the purposes of the trust have been fulfilled and its further continuance is neither in the interest of the undersigned, but is in direct conflict with its original purposes and objectives.

At the time of the execution of the Trust Agreement the undersigned believed and understood that, if the financial condition of Mary G. Weber substantially . improved, the trust might be revoked and terminated.” On the same date a similar notice was delivered by James and his wife in respect of the second .trust- agreement dated December 14, 1936. On February 6, 1952 Mrs. Weber, her four children and their respective wives and husband filed in the lower court, in the case in which the court had assumed jurisdiction over the trusts, an amended petition praying (A) a decree declaring the two trust agreements “have been duly terminated and revoked” and (B) that The Liberty Trust Company be directed “to make .distribution of the trust estates to the settlors thereof as their interest may appear”. Copies of the notices dáted December 31, 1951 were filed as exhibits, and allegations were made substantially similar to those in the notices, with some differences. It was alleged that at the time of the execution of the trust agreements petitioners (the remaindermen) “each firmly believed and understood that the Trust Agreements were revocable and, if the financial condition of their mother substantially improved, the trusts might be revoked and terminated at any time and they would receive their inheritance.” Mrs. Weber alleged that she was induced to execute the said trusts under the belief that she could at any time terminate it [sic.,] if she no longer required financial assistance from her children and she was also led to believe that the execution of the trusts would preserve the corpus ⁵⁰¹ and income from the claims of creditors of herself and her then young children but she is now advised that the ‘spend-thrift’ provision in (said trust agreements is invalid and affords no protection from the claims of creditors”.

It is also alleged that “petitioners believed and assumed at the time said trust agreements were executed and at all times thereafter that the four children, the remaindermen, were entitled to share equally in the trust upon the death of the life tenant. It is also alleged that “petitioners are advised and aver that they are the absolute owners of the trust property and have the right to terminate the trusts under the circumstances set forth herein. Petitioners further allege that conditions have arisen that make the termination of the trusts desirable, if not imperative, for the welfare of each of the Petitioners.” The Liberty Trust Company answered the petition, saying it was “not in any way opposed to the revocation of the trust or trusts mentioned in said petition, provided it is finally established by judicial authority that said trust can be revoked, and the corpus of said trust distributed to the widow and children of Harry E. Weber, whose estate was placed in said trust or trusts by said widow and children, without said Trustee incurring any liability of any sort to the present grandchildren of the said Harry E. Weber, all of whom are infants, and without incurring any liability of any sort to any unborn grandchildren or other direct descendents or to the next of kin of the said Harry E. Weber; and said Trustee is desirous of cooperating with said petitioners in endeavoring to have said trust revoked, if this can properly be done without any violation of the rights and duties of said Trustee, but since the title to said trust property is now vested in said Trustee, said Trustee is advised and believes that it is its duty to have this entire question fully and fairly presented in these proceedings so that a final and conclusive judicial determination of the same can be made.” The Trustee also suggested that all grandchildren, entitled to contingent future interests under the trust ⁵⁰² agreements be made parties and a guardian ad litem be appointed for, infants and possible ■ unborn issue of the children of Harry E. Weber. By appropriate proceedings this was done, and now all descendants in esse of Harry E. Weber are parties, and W. Earle Cobey was appointed guardian ad litem for all infants and unborn future parties.

After. testimony and argument the lower court filed an opinion, carefully, reviewing the facts and the authorities, and a decree terminating the trusts and directing the Trustee to transfer the trust property, “to the original settlors (or at their direction) in accordance with their respective interests, in the estate of Harry E. Weber, that is to say unto Mary G. Weber two-sixths of said trust property and to each of the four children a one-sixth interest therein”. As suggested by the lower court,, the trustee and the guardian ad litem have appealed from this decree. In this court the full and able argument of counsel, oral and in the briefs, has covered a wide range, indeed practical!y the entire subject of termination of trusts. Needless repetition may be avoided if, without reviewing the history that lies, behind or the reasoning that underlies petitioners’, several contentions, we point out essential facts which are lacking in support of these contentions.

Petitioners’broadest contentions are,:. (I) That quoted from their petition [supra], “that [a] they are ,the absolute owners of the. trust property and., [6] have the right .to terminate the trusts under .the circumstances set forth, herein!’. . (II.) That, as a .matter of ,law or construction, the trust agreements are.. revocable by the parties, who executed them (whether all or . each, and whether at ’Will or (as stated in the “notices of termination’,’) if the financial condition of.Mrs.,Weber “substantially, improved”, or,;.upon' any. other, condition expressed by counsel in argument or,.by.:petitioners, in testimony as to their several-,unexpressed understandings, twenty-two- (or.fifteen) years ago,, of .the-never-discussed provisions of,the trust-agreements).?r: • ⁵⁰³ I. If (a ) were true in fact, (b) would be a substantially accurate statement of the law in Maryland. As stated by this court in Manders v. Mercantile Trust Co., 147 Md. 448, 457 , 128 A. 145, 148 , “The rule established by the foregoing cases, and supported by reason and the weight of authority, is that a court of equity may decree the termination of a trust when all the objects and purposes of the trust which are inconsistent with the full beneficial ownership and control of the cestui are fulfilled, all the parties who are or may be beneficially interested in the trust property are in existence and sui juris, and they all consent and agree to the ending of the trust.” After stating this rule, this court distinguished Gunn v. Brown, 63 Md. 96 , in which it refused to terminate a testamentary trust on application of a daughter, the sole beneficiary, because such termination would have removed restrictions against husbands and creditors which were a material part of the testator’s purpose.

Judge Bond in a separate opinion in the Manders case questioned whether the rule there stated might be too broad. It seems to have been stated as broadly or more broadly in earlier cases. Brillhart v. Mish, 99 Md. 447, 456-459 , 58 A. 28 ; Thompson v. Ballard, 70 Md. 10 , 16 A. 378 . The English courts hold that the owner or owners of the entire beneficial interest in trust property may demand termination of the trust and conveyance of the legal title.

Wharton v. Masterman, [1895] A. C. 186. In this country most courts hold that without the consent of the settlor a trust cannot be terminated by the beneficiaries before the time provided in the trust instrument, e.g., at the death of the sole owner of the equitable fee. Shelton v. King, 229 U. S. 90 , 33 S. Ct. 686 , 57 L. Ed. 1086 ; Claftin v. Claflin, 149 Mass. 19 , 20 N. E. 454 , 3 L. R. A. 370. The English cases are based on a man’s right to “do what he will with his own”; the American cases are based on the same right — of a settlor to impose restrictions, not unlawful, upon a beneficiary.

Scott on Trusts, §§ 330,337.3; Bogert on Trusts and Trustees, ⁵⁰⁴ §§ 993, 1002. It may well be argued that the decisions of this court are in accord with the English cases. We may assume that they go at least as far, but perhaps no further, than the Restatement, Trusts, § 337, “(1) Except as stated in Subsection (2), if all of the beneficiaries of a trust consent and none of them is under an incapacity, they can compel the termination of the trust. (2) If the continuance of the trust is necessary to carry out a material purpose of the trust, the beneficiaries cannot' compel its termination.” At all events we may assume, without deciding, that “if petitioners were the absolute owners (including all the settlors) of the trust property”, they would have the right to terminate the trust at will.

Of course, petitioners are not the absolute owners of the trust property. The mother has an equitable life estate, the children have each a vested remainder, subject to be divested upon his or her death before Mrs. Weber. Grandchildren, born or unborn, own contingent future interests which neither the courts nor the legislature can take froih them. Long v. Long, 62 Md. 33 ; they cannot terminate the trusts and appropriate to themselves the contingent rights of grandchildren.

In Re Holton Trust, 169 Md. 640 , 182 A. 425 ; Allen v. Safe Deposit and Trust Co., 177 Md. 26 , 7 A. 2d 180 .

II

In Maryland there never was any basis for a contention that, as a matter of law or construction, a reservation of a power of revocation should be implied in a voluntary deed creating a trust. Years ago it had been suggested by English équity judges that absence of a reservation of power to revoke might indicate, not intention to reserve what was not reserved, but undue influence and invalidity due to absence of advice to reserve power to revoke. In a few' states this difficulty was met, or seemed to be met, by implying a power to revoke. As long ago as Brown v. Mercantile Trust Co., 87 Md. 377 , 40 A. 256, 259 , such cases in other states were distinguished, or at least not followed, and in England the cases had already eventuated in á ⁵⁰⁵ rule that absence of a reservation of power to revoke or of advice on the subject “is a circumstance and a circumstance merely, to be weighed in connection with other circumstances.” In Brown v. Mercantile Trust Co., supra, 87 Md. at pages 393-394, 40 A. at page 258 , this court said that “* * * the rule now seems to be, the one stated by Lord Justice Turner, in Toker v. Toker, 3 De.

G. J. & S. 491: ‘That the absence of a power of revocation may be evidence that the party did not understand the transaction and so of undue influence. But whether it would be so or not, would depend upon all the circumstances of the case * * *. Again I think it is going too far to say that no voluntary settlement can be valid unless the settlor is advised there should be a power of revocation inserted in it. What the Court has to be satisfied of in these cases, I apprehend, is that the settlement, whether containing or not containing a power of revocation, is the free determined act of the party making it; and the absence of advice as to the insertion of a power of revocation, is a circumstance and a circumstance merely, to be weighed in connection with the other circumstances of the case.’ ” In Dayton v. Stewart, 99 Md. 643, 648 , 59 A. 281, 283 , this court said, “It is laid down in 1 Perry on Trusts, sec. 104, that ‘a trust once created and accepted without reservation of power can only be revoked by the full consent of all parties in interest; if any of the parties are not in being or are not sui juris, it cannot be revoked at all.

It is perfectly clear that where the settlor did not misapprehend the contents of the deed and there was no fraud or undue influence and no power of revocation was reserved, the settlor is bound, though some contingency was forgotten and unprovided for.’ It will not be necessary to look further than our own decisions for support of the doctrine, here enunciated, in adjudicated cases. In the case of Goodwin v. White, 59 Md. 503 , it was said by Judge Alvey, speaking for this court, ‘that every person whether man or woman, of sound and disposing mind, if under no legal dis ⁵⁰⁶ ability, has the absolute right of making any disposition of his or her property that he or she may think proper; provided it does not interfere with the existing rights of third persons. If the disposition of property be fairly made by a competent person, though entirely voluntary and without consideration, it is perfectly valid, and cannot be rescinded simply because the court may think it absurd or improvident that such a disposition should have been made.’ He enforces this by quoting from the case of Villers v. Beaumont, 1 Vern. 100, with approval, the observation of Lord Chancellor Nottingham to a like effect. This language has the greater significance here from having been used in a case in which a young woman was seeking to have set aside a deed which she had improvidently made and which was wholly gratuitous and voluntary; and a case which the court said was a hard one where relief was withheld with regret.” See also Von Buchwaldt v. Schlens, 128 Md. 405, 410-412 .

The law of Maryland is accurately stated in Restatement, Trusts, § 330, “(1) The settlor has power to revoke the trust if and to the extent that by the terms of the trust he reserved such a power. (2) Except as stated in §§ 332 and 333, the settlor cannot revoke the trust if by the terms of the trust he did not reserve a power of revocation.” III. A trust instrument can be terminated or set aside on any ground on which a conveyance not in trust can be set aside, e.g., fraud, duress, undue influence, breach of duty in a confidential relation, mistake. With the exception of duress, fraud, undue influence, and breach of duty in a confidential relation, petitioners have set up practically every known ground for setting aside a conveyance.

It has even been faintly hinted that Mrs. Weber was in some disqualifying confidential relation to her children. We cannot, however, construe the petition as charging the petitioners with taking advantage of each other or the evidence as showing ⁵⁰⁷ that the children knew appreciably less about business or about the trusts than the mother did. The principal ground on which petitioners rely, and on which the lower court acted is mistake, principally mistake in not inserting a provision reserving power of revocation. If by mistake the settlors omitted to insert such a provision, a court may without a preliminary decree of reformation give effect to the transaction as if it had been reformed, by decreeing that the trustee retransfer the trust property to the settlors.

Restatement, Trusts, § 332, (j). This manifestly is not true of other mistakes as to the terms of the trust instrument. The ordinary remedy for mistake in terms of an instrument is reformation, and unless the mistake was omission to insert provision for revocation, mistake as to any term or terms of the instrument may be ground for reformation but not for termination. This is true of two alleged mistakes found by the lower court.

In the opinion of the lower court, and in argument in this court, possibility of modification or reformation was mentioned. The petition does not pray reformation and we understand that petitioners disclaim any desire for reformation or modification. We shall, therefore, not discuss any question of reformation. The lower court, in its opinion, “as a result of the evidence including the testimony given at the hearing by Mrs. Weber and her four children”, made twelve findings of fact: “(1) The purpose of the trusts was to insure the support and maintenance of Harry E. Weber’s widow, Mary G. Weber, and to give her for that purpose the entire income from his estate, it being believed by all it would be barely sufficient.

(2) That both instruments were prepared by counsel chosen by and paid by her. (3) That the children, at the time they respectively signed, had had little or no business or legal experience; that they had no independent legal or other advice; that they did not understand fully the trust agreements. Nor did Mrs. Weber. (4) That neither the mother nor the children ⁵⁰⁸ intended the trusts to be irrevocable; they all regarded them as a family arrangement for the benefit of the mother, which could and should be terminated by their joint assent, especially if the real purpose had been accomplished, i.e., satisfactory provision for the mother.

(5) That the only consideration was the love and affection of the children for their mother, which led them to convey to the trustee their entire interests in their father’s estate; such interests were at that time their only assets. (6) That the language used in the trust instruments was not fully understood by the mother and children; that there were certain inequitable provisions which — had they' been understood by or explained to the settlors at the time — would have caused them to refuse to sign. Among these are: (a) The exclusion of James from any share in the two-sixth interest of his mother, (b) The exclusion of the spouses (of all save James) from any interest whatever, (c) The failure to include a right to revoke should all five settlors agree. (7) That most of the facts which would justify modification or revocation were not learned by the children until recently.

(8) That no prejudice has been caused to anyone by the failure until recently to take action to revoke. (9) That the revocation of the trusts will be of advantage to the existing infant contingent remaindermen, since their parents will be better able' to provide for and educate them during the years when it will be of most benefit. There will also be a considerable tax saving which will inure to the benefit of all settlors, but particularly to the benefit of the four children and their children. (10) That the provisions in the trust for the distribution of the corpus should a child pre-decease Mrs. Weber was not inserted at the request of Mrs. Weber nor any of the children; they did not understand the provisions; nor were these in accordance with what they would have then designated, had they been given an opportunity to express their various wishes to counsel who drew the original instrument.

(11) That the purpose of the ⁵⁰⁹ trusts have [sic.] been accomplished; that Mrs. Weber’s two-sixths of the present corpus will amply provide for her; and that the value of such two-sixths is at least twice the value of the whole estate at the time of the death of her husband and the creation of the trusts. (12) That there was no necessity for, and no intention to create, a spendthrift trust for the benefit of Mrs. Weber.” Of these twelve findings we find numbers (4), (5), (6), (10), (11) and (12), and likewise the decision and decree, not supported by evidence. The petition alleges that William proposed that the first trust be created. No one so testifies.

John testified that The Liberty Trust Company proposed that the deed of trust be executed. He does not recall whom he talked to at The Liberty Trust Company. “The only thing I recall was it was explained to me, or I should say my brothers and sister, that the income from the estate of my father would be insufficient to keep my mother if it should be divided up. Her attorney advised her to have us join in the trust agreement in which we would sort of — which would be sort of a family matter, as I understood it; that we would turn over any income from our share to help her out of that immediate situation. I had never read the agreement; it was never explained to me.

It possibly was read at the time it was signed; just prior to the time it was signed; it was never discussed to me by Taylor Smith or the Trust Company. I was told to sign it and I did.” Mr. A. Taylor Smith prepared it; he represented Mrs. Weber. “Q. Did you have any discussion with him about the trust instrument? A. None whatsoever. Q. Did you give him any instructions on how it should be prepared?

A. None whatsoever. Q. Was he present when you signed the trust instrument? A. He wasn’t. Q. Then is the court to understand that the sole purpose of executing the trust was for the benefit of your mother?

A. That is right. Q. Did you have any other purpose in mind? A. None Whatsoever. Q. You have said that the Liberty Trust ⁵¹⁰ Company proposed that you execute this trust agreement.

A. That is right. Q. How was that information communicated to you? A. Through my mother. Q. Did you have any conversation with any official of the Trust Company prior to the day you executed it?

A. No sir, I did not. Q. What did your mother tell you? (The Court) Isn’t she in court? Q. What