Lowe v. Convention of the Protestant Episcopal Church

Boyd, J., delivered the opinion of the Court. James M. Seth, of Talbot County, departed this life leaving a last will and testament by which he bequeathed a large personal estate to his wife and his son-in-law in trust for his' two daughters, Mary Lowe and Sallie Covey, with remainder to their children. He directed that no part of the principal should be paid to his daughters during their lives, “ but shall remain in the hands of my said executors, who are also hereby specially constituted trustees for such uses, purposes and trusts, or in the hands of the survivor of them, and in the event of the death of both in the lifetime of my said daughters, in the hands of such person or persons as they, or the survivor of them, may by last will and testament nominate and appoint to be my said executors and trustees, or the survivor of them, or by such person or persons named by them as aforesaid, invested in their discretion in some safe and profitable manner during the natural life of my said two daughters,” etc. He then directed that the income, interest and profits should be paid to his daughters during their natural lives, and at their death to the children of his daughters, and provided for the child of any deceased child of either of his daughters taking his parent’s share. The trustees named in the will died without naming their successors, so far as disclosed by the record, and J. Frank Turner was appointed trustee by the Circuit Court for Talbot County, “ to execute the trusts created by the last will and testament of James M. Seth, deceased, in favor of Mary F. Lowe and her children.” ⁴¹¹ It is only the Lowe interest that is affected by this appeal, and it will be unnecessary to refer to other portions of the will.

Mr. Turner duly qualified and took control of the trust estate. He invested a large amount of the fund in mortgages, but did not obtain the sanction of the Court before doing so. On August ist, 1878, he loaned George W. Minnick three thousand dollars of the fund, secured by a mortgage on two properties—one in Kent County and the other in Easton, Talbot County—payable one year after date. On September 23rd, 1887, he executed at the foot of the mortgage on the record-books of Talbot County the following writing: “ I hereby release the dwelling and store-house in the town of Easton, Talbot County, Md., from the operation of the foregoing mortgage.

Witness my hand and seal, this 23rd day of Sept., A. D. 1887. J. Frank Turner, Trustee. [Seal].” He, as attorney for C. J. Bonaparte, then loaned Minnick three thousand dollars on a mortgage on the Easton property and a farm in Talbot County, which was subsequently released, and on December 16, 1891, Minnick and wife executed a mortgage to the appellee on the Talbot County property to secure the sum of three thousand dollars, payable five years after date. Some time afterwards the cestuis que trust endeavored to have Mr. Turner removed, which the Court refused to do, but on July 25, 1892, he voluntarily resigned. Before doing so, however, he entered into an agreement, under seal, with all the cestuis que trust, including the appellant, who was one of them, in which there was a list of seventeen mortgages held by Turner referred to (the names of the mortgagors and the amounts being stated), which, together with the cash on hand, amounted to forty thousand dollars.

Certain agreements were therein made, some of which we will have occasion to refer to more particularly. On July 25, 1892, the Court passed an order directing Mr. Turner to transfer and assign these mortgages and the money to “John H. Lowe as trustee for the said Mary E. Lowe and her children under the will of James M. Seth, as soon as he shall ⁴¹² have filed his bond as required by the decree appointing him.” He duly qualified and received the mortgages and cash from Turner, including the Minnick mortgage, which was the first named in the list, and which was assigned to the appellant by endorsement on the original mortgage. On December 28, 1892, the appellant took a new mortgage from Minnick and wife, with a note for the sum of three thousand dollars, payable five years after date, and ten interest notes, one payable every six months. On December 29, 1892, the appellant wrote a short release, as prescribed by the statute, on the mortgage originally given to Turner, and sent it, together with the note which it secured, to the clerk of the Circuit Court for Kent County, which release was duly recorded and the original kept by the clerk, as required by the statute.

In April, 1894, Minnick made a deed of trust for the benefit of his creditors, and by permission of the creditors his trustees sold the Talbot County property. The appellant sold the Kent County property under his mortgage, there having been a default. The Kent County property did not realize sufficient to pay the mortgage held by the appellant, and he now claims that under the circumstances the Turner mortgage is still valid against the appellee on the proceeds of sale of the Talbot County property, the release of his mortgage not having been filed in that county. A number of questions were argued, some of which are not very material under our view of the case.

The one that the above statement of facts would first suggest is, whether the discretion reposed in the trustees named in the will was vested in Mr. Turner by his appointment under the decree of the Court. We have no hesitancy in answering that in the negative. The trustees appointed by the testator were his wife and son-in-law, the survivor of them or “ such person or person? as they or the survivor of them may by last will and testament nominate and appoint to be my said executors and trustees, or the survivor of them, or by such person or persons named by them as aforesaid.” To such ⁴¹³ persons he gave power to invest “ in their discretion in some safe and profitable manner during the natural life of my said two daughters,” etc., but he did not authorize and cannot by us be declared to have meant that a trustee appointed in some other way—by the Court for example—should have such discretion. We are of the opinion that the case of Zimmerman v. Fraley, 70 Md. 561 , is conclusive of the question and that the cases of the Safe Deposit and Trust Company v. Sutro, 75 Md. 361 , and Druid Park Heights Company v. Oettinger, 53 Md. 46 , cited by appellee, are not applicable.

A Court of -Equity will not permit a trust to fail for want of trustees and will appoint one to carry out the trust, so far as it can, but it by no means follows that it will or can give him all the freedom from responsibility and the unlimited powers that a testator may confer upon those selected by himself. A trustee may act with the best intentions and the utmost good faith, and whilst his not seeking the aid and instruction of the Court may be no evidence to the contrary, yet if he wants to avoid responsibility for losses by reason of investments which may prove to be unprofitable or worthless, he should first obtain authority from the Court having jurisdiction over him, unless his discretion and powers are undoubted. In this case there is no evidence of any bad faith on the part of Mr. Turner, but it is clear that he took the risk of the investments being safe and he was not authorized to make or change them at his pleasure, even if bona fide done, without being responsible to the ccstuis que trust. Nor do we think that the form adopted by him to release the Talbot County property was sufficient to pass the legal title to it. 'Fhe mortgage was overdue, and hence there had been a default.

The legal title was therefore vested in the mortgagee, and such being the case, the attempted release made by him was not sufficient to reconvey it to the mortgagor. 'Fhe statute has adopted a short form for the release of a mortgage which can be executed either by writing it on the record in the office where the mortgage is ⁴¹⁴ recorded and having it attested by the clerk, or by endorsing it on the original mortgage and filing it in the office, in which event the clerk must retain it. The statute has not, however, authorized the release of a portion of the property from the operation of the mortgage by that method so as to pass the .legal title. But while that is true a Court of Equity can and should recognize such an act if otherwise a third person would be prejudiced thereby, for it would not be in accord with justice to permit a mortgagor to proceed against property so attempted to be released after agreeing under seal that he would not proceed against it in case of default, which is in effect the meaning of this writing, and thereby induce an innocent .person to purchase or lend money on the property. It should at least have the effect of an agreement to release or of a deed of release that has been signed but not acknowledged.

It would not be constructive notice, but would bind those having actual knowledge of the transaction. We, of course, only refer, in what we have just said, to the form of this attempted release and not to the question as to whether Mr. Turner could, as trustee, execute any release of a part of the property included in the mortgage to the detriment of the cestuis que trust, unless consented to or ratified by them. The appellant subsequently executed a release of this mortgage and filed it with the clerk of Kent County, as above stated. He contends that he purposely withheld the release from the Talbot County records, and that it was not intended to discharge the property in that county.

It was certainly a novel way to keep the mortgage operative on the Talbot County property—to endorse a release on the original mortgage and file it with the clerk of Kent County. But he surrendered the evidence of his debt with the mortgage—that is to say, he sent it attached to the mortgage to the clerk, and the law requires the clerk to “ retain such mortgage in his office and not permit the same to be again withdrawn.” In order to release the Kent County property from the effect of the mortgage it was not necessary to send the note or to release the whole