Mayor of Annapolis v. West Annapolis Fire & Improvement Co.

Singley, J., delivered the opinion of the Court. Only the most naive city dweller would find credible a rumor that a company of his city’s fire department proposed to sell its firehouse and move its trucks and equipment to a new firehouse which it planned to build somewhere in the county. Yet this is precisely what has happened in Annapolis, and neither the Mayor and Al ⁷³² dermen of the City of Annapolis (the City) nor Mary M. Proskey, together with a group of nine of her neighbors and two neighborhood associations (referred to collectively as the Residents), all appellants here, have been able to stop the contemplated hegira. As is so frequently the case, it is the factual background which bridges the credibility gap.

There came a time in 1911 when the West Annapolis Fire and Improvement Company (the Fire Company) was incorporated, having no capital stock, “* * * the more effectually to protect the property of the Citizens of Anne Arundel County, especially that portion thereof known as West Annapolis and the territory lying adjacent and contiguous thereto, from loss and damage by fire and for the general improvement and betterment of said portion of Anne Arundel County * * ‡ ft Less than a year later, one Elizabeth Giddings conveyed a lot at the corner of Severn Avenue and Randall Street to the Fire Company, apparently as a gift. The habendum clause of the deed provided, in part: “* * * that should [The West Annapolis Fire and Improvement Company] * * * cease to use said lot and the building thereon erected as headquarters for the Volunteer Fire Association, then the said lot of land shall immediately revert to the said Elizabeth Giddings.” The Fire Company built a firehouse on the lot, now known as 501 Melvin Avenue, and in 1924, purchased the adjoining lot as well as the reversionary interest reserved in the 1912 conveyance. During this entire period, and for some years thereafter, West Annapolis was an unincorporated, largely residential community, lying outside the corporate limits of Annapolis. The next development occurred in 1951, when West Annapolis, including the area where the Fire Company ⁷³³ is located, was annexed by the City.

In anticipation of this change, on 30 December 1950, the Fire Company leased its firehouse to the City at a nominal annual rent of $1.00, the City assuming responsibility for maintenance and repairs. The lease was for a term of one year, and automatically renewed itself from year to year. There was a further provision that the lease would terminate if the Fire Company ceased “to be an active fire fighting unit of the City of Annapolis” or ceased to “operate as such in and from the buildings and premises * * * demised.” The Fire Company was not paid for the equipment which it owned at the time of the annexation. Thereafter, the Fire Company became a part of the City’s fire department.

There was testimony that from 1952 through 30 June 1969, the City made annual payments to, or for the account of the Fire Company for the purchase of equipment which amounted in the aggregate to $82,772.00. 1 The appropriation for the fiscal year ended 30 June 1970 was $6,334. The City was understandably concerned when it learned in December of 1969 that the Fire Company had contracted to sell its firehouse and the adjoining lot to the Anne Arundel County Board of Education, after having previously entered into negotiations for the purchase of a site for a new firehouse, some three miles distant, outside the corporate limits of Annapolis. 2 The residents of West Annapolis were equally concerned, but for different reasons: the firehouse had for years served as a community center and the Fire Company had been supported by the voluntary contributions of residents of the West Annapolis area, entirely from 1911 to 1951, and in large part from 1951 to 1969. As a result, two equity suits were brought in the Cir ⁷³⁴ cuit Court for Anne Arundel County: one by the City, which sought to impress certain of the equipment and apparatus with a trust in its favor. 3 The other suit, instituted by the Residents, sought a declaration that the assets of the Fire Company constituted a charitable trust, held for the benefit of residents of West Annapolis, and prayed that the sale of the firehouse be annulled and that the removal of the trust assets be enjoined. The cases were consolidated for trial.

From decrees dismissing both bills of complaint, and from an order that the 1970 appropriation of $6,334 be paid to the Fire Company, these appeals were taken. In a nutshell, the chancellor found no evidence that the funds paid to or for the account of the Fire Company were paid on condition that the Fire Company would not relocate or with the understanding that equipment purchased in the Fire Company’s name would be treated as the property of the City, and dismissed the City’s bill. Declaratory relief was denied the Residents because there was no evidence that the relocation of the Fire Company would mount up to a departure from its stated corporate purpose. The City’s Appeal The City argues that the court below erred, first, in not imposing a trust in favor of the city on equipment which had been paid for by the City, but titled in the name of the Fire Company; and second, in not requiring the return of $6,334 which would have been paid the Fire Company for the fiscal year ended 30 June 1970, but had been paid into court during the pendency of the litigation.

Five aldermen or former aldermen testified, and it was stipulated that the City’s mayor and as many as 12 aldermen or former aldermen would testify, if called, ⁷³⁵ that they would never have voted in favor of the appropriations made tc the Fire Company had they known that the Fire Company was planning to move from the city and take its equipment. The court below found as a fact that the grants had not been made subject to a condition that the Fire Company would never relocate, or that the equipment would be treated as the property of the City, and observed, “ [a] n unspoken assumption on the part of the Aldermen that this would be so is not enough.” There was a further finding that the annual appropriations had been made to insure that the Fire Company was properly equipped to fight fires in its area. 4 That it was an effective fire fighting unit is not disputed and thus the court concluded that the Fire Company was entitled to retain the equipment and the funds, including funds appropriated for fiscal 1969-1970, see Rescue Fire Co. v. County Comm’rs, 188 Md. 354, 359 , 52 A. 2d 733 (1947). Since the City was unable to prove the existence of an express trust, it can only prevail if the circumstances gave rise to an implied trust, Springer v. Springer, 144 Md. 465, 475 , 125 A. 162 (1924). “Implied trusts may be either resulting or constructive trusts. A resulting trust arises upon the presumed intention of the parties where the terms of the disposition or accompanying facts establish that beneficial interest is not to go with legal title.” Siemiesz v. Amend, 237 Md. 438, 441 , 206 A. 2d 723 (1965).

And while it is true that where a purchase price is paid by one person, and title is taken in the name of another, it is presumed that the person taking title holds the property in trust for the person who paid the purchase price, ⁷³⁶ “[t]his presumption, however, does not arise where the legal title is taken in the name of some person for whom the purchaser is under a legal or moral obligation to provide. In such case the presumption arises that the conveyance was intended as an advancement to the nominal purchaser.” Dixon v. Dixon, 123 Md. 44, 57 , 90 A. 846 (1914). Here, the bulk of the funds paid by the City to the Fire Company were paid under legislative mandate, see, e.g., Ch. 718 of the Laws of 1955 and Board v. Baden Vol. Fire Dep’t, 257 Md. 666 , 264 A. 2d 844 (1970).

As a consequence of the legal obligation, the presumption does not arise, and the City has the burden of proving the establishment of the trust by plain, unequivocal and convincing evidence, Fasman v. Pottashnick, 188 Md. 105, 109-10 , 51 A. 2d 664 (1947) ; Sands v. Church of the Ascension, Etc., 181 Md. 536 , 30 A. 2d 771 (1943). This the City has failed to do. To the extent that funds were not required to be paid by law, they can be regarded as the discharge of a moral obligation to pay for the services of the Fire Company. The City fares no better with its argument that a constructive trust was established. “Equity creates such a trust where a person holding title to a property is subject to an equitable duty to convey it to another person on the ground that he would be unjustly enriched if he were permitted to retain it.

Such a trust may arise because the property was acquired through duress, fraud, undue influence or mistake, or through a breach of fiduciary duty, or through wrongful disposition of another’s property. [citing cases].” Siemiesz v. Amend, supra, 237 Md. at 441-42 . The City’s difficulty stems from the principle that a constructive trust, if it is to be established, must ordinarily ⁷³⁷ be established from circumstances surrounding the inception of the transaction, and not from the effect of subsequent events, Corbett v. Hospelhorn, 172 Md. 257, 275 , 191 A. 691 (1937). There is not even an intimation of conditions imposed on the Fire Company, or of promises made by it, at the time money was