Offutt v. Offutt

Sobeloff, C. J., delivered the opinion of the Court. The question presented by this appeal is whether, under the facts, the Chancellor had authority to determine that appellee, a beneficiary under his father’s testamentary trust, is entitled to receive an allowance greater than the $200.00 monthly which the trustees have paid him since he reached his twenty-first birthday in August, 1952. Appellee’s father confirmed in his will, probated in 1943, a pre-marital agreement which made provision for his widow and left the bulk of his estate in trust for the sole benefit of the appellee, his only son. The widow renounced the will’s provisions as to her and elected to take her statutory share of the estate.

Her suit was terminated by an agreement between the trustees and herself. She also signed in the capacity of mother and natural guardian of the appellee. By the terms of this agreement, the trustees were to pay to the widow $100.00 per month for the support ¹⁰⁴ and maintenance of the son, then thirteen years old, so long as he should reside in the Oakland, Maryland, home, and thereafter the sum of $150.00 per month so long as the appellee “may be actually maintained” by his mother. The right was reserved by the mother “to make application to the Circuit Court for Garrett County, in Equity, for additional maintenance for good and sufficient cause to be shown.” These provisions were the only modifications of the will material to the present appeal.

The settlement agreement was approved by the equity court. Thereafter in 1946, and again in 1948, appellee’s mother petitioned for and received orders of the court increasing the allowance for maintenance and support of the infant son. When áppellee became of age, he received $69,000, the proceeds of certain insurance policies on his father’s life, in which he was the named beneficiary, and various United States Government bonds issued in the' joint names of his father and himself. The trustees, taking into consideration the annual income yielded by this $69,000, set appellee’s monthly allowance under the trust at $200 per month.

The appellee filed a petition alleging that it was the duty of the trustees to secure the court’s approval of the allowances they paid him and stating that the amount being paid was insufficient. After ascertaining that the trust estate was about $369,000 with an annual income of approximately $10,000, the court granted him a monthly allowance of $300. From this order, the trustees appeal. I. The appellee has filed a motion to dismiss the appeal on a double ground: first, that the trustees did not secure court approval of the appeal under Article 5, Section 43, 1951 Code, and second, that the trustees have no interest in the matter.

Article 5, Section 43, 1951 Code, is as follows: “Any receiver, trustee or other fiduciary appointed by, or ¹⁰⁵ acting under the jurisdiction of any of the courts of equity of this State, shall have the right of an appeal to the Court of Appeals from any final decree hereafter entered or heretofore entered, provided the time for appeal from such decree has not expired, by which any preference or priority between creditors or other persons interested in the estate, is determined. Provided, however, that no such appeal shall be prosecuted without the consent and approval of the court having jurisdiction over the estate.” The trustees, however, do not base their appeal on this section. Plainly, the section is inapplicable because the decree does not determine “any preference or priority between creditors or other persons interested in the estate”, within the meaning and limited scope of the section. The trustees claim to be endeavoring only to perform their duties in the manner that the settlor intended.

In an appeal like this they are not required to secure the approval of the court. Cf. Harlan v. Gleason, 180 Md. 24, 30 . As to the second ground, the asserted lack of interest of the trustees, the answer is that they come here seeking the protection of the trust income and corpus from depletion by a court-ordered allowance that they do not deem necessary or desirable for the support and maintenance of appellee.

It is their position that they consider the allowance made by the court extravagant under the circumstances. The opinion in Warehime v. Graf, 83 Md. 98, 100 , used language which is apposite here: “It is doubtless true, that a trustee to sell appointed by the Court, cannot appeal from an order of the tribunal which appointed him; for the reason, that having no interest in the property, or in the proceeds of the sale, he is merely the officer and the hand of the Court. Lurman v. Fowler [Hubner], 75 Md. 273 . But this is not that case.

Here the executors were appointed by the testator, and by the terms of the appointment, are charged with the duty, not only of selling the property, but also of seeing to it, that ¹⁰⁶ the proceeds of the sale shall be so applied as to carry out the purposes of the testator. Part of the money arising from the sale is to remain in their hands in permanent trust, and the residue they are to distribute to persons whom the testator particularly names. In the discharge of their trust under this will it is, therefore, their duty to take such steps in this Court, as well as in the Court below, as will secure and protect the fund, so that the purposes of the testator shall be accomplished.” Where trustees are acting, not merely as the hand of the court, but in the exercise of a duty reposed in them by a settlor to administer the trust estate on the terms expressed, they cannot be said to lack an appealable interest. See 6 A. L. R. 2d 157 (Annotation).

The cases relied upon by the appellee involve situations such as a trust to sell real estate and to divide the proceeds therefrom — situations clearly distinguishable from a continuing trust such as we have here. Cf. MacNabb v. Sheridan, 181 Md. 245 , and cases therein cited. The motion to dismiss the appeal must be denied.

II

On the merits, we are confronted first by the appellee’s contention that once a court of equity assumes jurisdiction of a trust at the request of the trustees, they must thereafter have the sanction of the court for all of their acts. The trustees maintain that the Chancellor did not assume jurisdiction of the trust. No application was made under Article 16, Section 292, 1951 Code. Nor did the settlor by his will require that the trustees be subject tó court control. “If a settlor so provides, or a statute or court decree requires it, a trustee may be completely subject to court control, in the sense that he has no power to act except upon approval of the court of chancery.

He then becomes in effect an officer of the court, like a receiver.” 3 (Part 1) Bogert, Trust and Trustees, Sec. 563 (discussion of the effect in Maryland of complete court control), and the Maryland cases there cited. But this is not such a trust. ¹⁰⁷ The Chancellor pointed out that the trustees themselves invoked the jurisdiction of the court and recites events which occurred after the approval of the settlement agreement: “. . . the trustees have been making herein certain annual reports, and obtaining the customary-authorizations for changes in investments. They have annually filed petitions for and obtained court orders for special compensation for themselves as trustees and for legal services. . . When Mrs. Karin Offutt was holding over in the Second Street House, which was part of the trust estate, instead of bringing separate eviction proceedings, the trustees filed a petition herein and obtained an order requiring her to deliver possession. “In 1948, upon the petition of Mrs. Karin Offutt for an increase in the allowance for the support and schooling of Daniel, III, and after a hearing at which testimony was taken, Judge Huster passed an order requiring the trustees to pay her $2,500 per year for the support, maintenance, and education of Daniel E. Offutt, III.” This, the appellee contends, discloses that the court of equity assumed jurisdiction of the trust at the request of the trustees.

Even if we treat this as an assumption of jurisdiction, it does not follow, as argued by appellee, that the trustees must now seek the sanction of the court for all of their acts, that their discretionary powers conferred in the will are abridged and may be exercised only under the supervisory control of the court. A review of the Maryland authorities leads to the opposite conclusion. In Gottschalk v. Mercantile Trust and Deposit Co., 102 Md. 521 , this Court, holding that a court of equity in assuming jurisdiction has the right to designate the banks in which the trustee should deposit the current funds of the estate, took occasion to say: “The precise area and limits of the jurisdiction acquired by a Court of equity over the administration of a trust thus subjected to its supervision have never been fixed, but must necessarily depend to some extent upon the nature of the trusts and the character of the powers conferred upon ¹⁰⁸ the trustee. It may for instance be doubted if a Court of equity would, except under very special circumstances, compel a trustee to execute a power which the instrument conferring it declared should be exercised by him or not according to his own volition or at his own discretion.

Thus in Tempest v. Lord Camoys, 21 Chy. Div. 571, the will gave to two trustees power ‘in the exercise of their absolute discretion’ of selling real estate and investing proceeds in other real estate. It also gave them power ‘at their absolute discretion’ to raise money by mortgage for the purchase of real estate. The trust being in process of administration under the supervision of equity the Court refused to compel one of the trustees against his own judgment to unite with the other trustee in mortgaging the real estate, and with the proceeds of the mortgage and other trust funds making a proposed purchase of other real estate. “Nor does a Court of equity ordinarily