Smith v. Mercantile Trust Co.

Marbury, C. J., delivered the opinion of the Court. The question involved in this case is the proper disposition of the accumulated income of a trust established by the codicil to the will of Gabriel D. Clark, Jr. The testator was a native of Maryland, having been born in 1837 in the City of Baltimore. He attended preparatory schools in Baltimore, then graduated from Princeton University, and, after one term in the Harvard Law School, he continued the study of law in Baltimore, but apparently never practised. He was married in Baltimore to Emma Edmondson in 1869.

His only child, Gabrielle Edmondson Clark, was born in 1870. His wife died in 1872, and for the next seven years Mr. Clark traveled extensively. Sometime later, he married the second time, this wife being Josephine Goguen, a resident of Canada. In 1896, they acquired a residence on 72nd Street in New York, and there Mr. Clark lived until he died in 1910.

He was buried in New York. During the period from 1898 to 1909, there were thirteen deeds recorded in Baltimore which in each case recited that Mr. Clark, the grantor, was a resident of the City of New York. On October 13, 1908, he executed his last will and testament in New York, describing himself therein as “of the City of New York". On April 22, 1910, he executed a codicil, also in New York.

Mr. Clark was survived by his second wife, Josephine, who subsequently remarried a Mr. Martin, and by his ²⁶⁸ child, formerly referred to* Gabrielle Edmondson Clark, who married Chauncey Gambrill of Baltimore, in 1892. The only child of Gabrielle E. Gambrill, Helen Edmond-son Gambrill, now Helen Edmondson Smith, and the appellant herein, was born in 1894, so that she was approximately fourteen years old at the time testator executed his will. The will and codicil were admitted to probate in the Surrogate’s Court of New York County on October 13, 1910, and letters were issued to Wilton Snowden and Gabrielle E. Gambrill, Executors, by that court. The following year, an authenticated copy of the will and codicil, and a certificate of the New York probate were filed in the office of the Register of Wills in Baltimore City.

An administration account was filed in the Orphans’ Court of Baltimore to dispose of a $3,000 mortgage on realty located in Baltimore. The remainder of the estate, which was quite a large one, was distributed under the jurisdiction of the Surrogate’s Court of New York County. By the third clause of the will, the residence on 72nd Street in New York, and the furniture and household effects therein, were devised and bequeathed to the testator’s wife, Josephine, for and during her natural life. By the sixth clause of the will, the executors were directed to set aside out of the securities of the estate 200 bonds of the par value of $1,000 each, and bearing interest at 4% per annum, and to pay the gross income from the date of the testator’s death to his widow during her natural life, “and upon the death of my said wife to pay over the said Two Hundred bonds together with all arrearage of income thereon unto my daughter Gabrielle Edmondson Gambrill, for her own use and benefit forever.” (Emphasis supplied.) By the eighth clause of the will, all the rest, residue and remainder of the estate of every kind and nature and wheresoever situated, was given, bequeathed and devised to the testator’s daughter, Gabrielle, for her own use and benefit forever.

In the event of her death, leaving issue, before that of ²⁶⁹ the testator, the residue was left to her issue per stirpes. By the twelfth clause, the trustees (who were the same as the executors) were authorized to remove the stocks, bonds or securities set apart for the benefit of his wife as provided in the sixth clause of his will, “irrespective of any statutory provision, or the rules of any Court of Equity in regard to trust estates or funds, but I desire and do hereby direct that the trust estate hereinbefore created and declared shall be administered under the supervision and control of a Court of Equity either of the State of New York or of the State of Maryland.” By the codicil, the testator directed his executors to put aside such a number of bonds belonging to him at the time of his decease, the interest from which should be sufficient to enable them to pay all taxes and insurance on the 72nd Street house, and also all taxes levied or accruing against or upon the income he had settled on his wife, so that she should receive the income from the 200 bonds of $1,000 each, referred to in the sixth clause of the will, free of all encumbrances or deductions, and also live in the 72nd Street house, if she wished to do so, free of all expenses of taxes and insurance. The codicil then provided: “I also order and direct that the said bonds put aside for the purpose of paying said taxes and insurance, at the death of my wife, Josephine Agnes Clark, shall be paid over to my daughter, Gabrielle Edmondson Gambrill, for her own use and benefit, or in case of her death, to her heirs.” (Emphasis supplied.) The trustees, in pursuance of the permission granted by clause twelfth of the will, removed the securities from New York to Baltimore, and administered the trust under the jurisdiction of the Circuit Court of Baltimore City. In the course of this administration, it became apparent that the income from the bonds set aside under the codicil was more than sufficient for the purposes defined, and, in December, 1933, the widow, then Josephine A. Martin, filed a petition in the Circuit Court requesting that the surplus from the codicil fund be ²⁷⁰ distributed to her.

This petition was answered by-Helen Edmondson Smith, who stated that the time had not yet arrived for determining who might be entitled to the surplus from the codicil fund. A compromise agreement was then entered into on May 31, 1935, between Mrs. Martin, the trustees who were at that time the Mercantile Trust Company, and Wilton Snowden, Jr., Gabrielle Edmondson Gambrill, and Helen Edmond-son ' Smith, individually, and as guardian ad litem for Margaret Gambrill Smith and George Tyler Smith, infants. By the terms of this compromise agreement* Mrs. Martin was paid $2,800 from the accumulated income in the codicil fund, in full settlement of all claims to any share in said income on account of income taxes paid by her up to the tax year of 1934, and for the future years Mrs. Martin was to be paid the amount of the taxes heretofore paid by the Mercantile Trust Company, and, in addition part of her income taxes, all of this coming from the codicil fund. This agreement did not attempt to decide the disposition of any surplus income accumulated in the fund over and above that to be paid to Mrs. Martin.

Gabrielle E. Gambrill died on August 11, 1941, leaving her daughter, Helen Edmondson Smith, the appellant, as her only heir at law. Mrs. Gambrill left a will which made some special dispositions, and then gave all the rest and residue of her estate to the Mercantile Trust Company to pay the net income to her daughter, Mrs. Smith, for her natural life, and, after the death of Mr3, Smith, she directed that the trust cease and the corpus should be paid over absolutely to the Hospital for Consumptives of Maryland. At the time of her death, the Mercantile Trust Company, which was then the sole surviving substituted- trustee under Gabriel D. Clark’swill, had in its hands $42,861.36, representing the excess undistributed income from the codicil fund. Mrs. Gambrill’s estate was valued at $1,276,016.76.

In none of the inventories or the administration accounts filed by ²⁷¹ the Mercantile Trust Company was this excess income included as a part of the estate of Mrs. Gambrill. Mrs. Martin died on February 1, 1949, and, at her death, the surplus income in the codicil fund had increased to $58,786.96. After her death, the Mercantile Trust Company, trustee under the Clark will, distributed the corpus of the codicil fund to Mrs. Smith, but filed a bill of complaint in the Circuit Court, requesting the guidance of the court in determining who was entitled to the accumulated income from this fund. This bill of complaint was answered by Mrs. Smith and by the Hospital for Consumptives of Maryland, and, after a hearing, the chancellor declared that the accumulated income, up to the date of the death of Mrs. Martin, passed under the residuary clause of the will of Gabriel D. Clark, became part of the estate of Gabrielle E. Gambrill, and passed to the Mercantile Trust Company, trustee of her residuary estate.

From that decree, Helen Edmondson Smith appealed to this court. The primary question (although it may not affect the result) is whether the law of New York, the domicile of Mr. Clark, is applicable, or whether the law of Maryland is made applicable by Article 93, Sec. 350, of the Code of Public General Laws. The main question is whether the accumulation in the codicil fund follows the corpus of that fund, and is payable to the appellant, as the heir of her mother, or whether it passes through the two residuary clauses of Mr. Clark and of Mrs. Gambrill to the Mercantile Trust Company, as trustee of Mrs. Gambrill’s estate. It is provided by Sec. 350 of Article 93 of the Code of Public General Laws that: “Every will or other testamentary instrument executed without this State in the mode prescribed by law, either of the place where executed or of the testator’s domicile, or according to the forms required by the law of this State shall be deemed to be legally executed, and shall be of the same force and effect as if executed ²⁷² in the mode prescribed by the law of this State, provided, said last will and testament is in-writing and subscribed by the testator; and if the testator was originally domiciled in Maryland, although at the time of making the will or at the time of his death he may be domiciled elsewhere, the said last will ór testamentary instrument so executed shall.be admitted to probate in any orphans’ court of this State; and when admitted shall be governed by and construed and interpreted according to the law of Maryland, without regard to the lex domicilii, unless-the testator shall expressly declare a contrary intention in said will or testamentary instrument.” This same statute was an amendment to Sec. 319 of Article 93 as the same appears in the Code of 1888, and' the last part of it, which is that which provides that in some cases a will executed elsewhere may be interpreted according to the law of Maryland, was first passed by Chapter 151 of the Acts of 1894.

It was passed in its present form by Chapter 238 of the Acts of 1914, and it has been interpreted in several cases by this court. One of these cases was Lindsay v. Wilson, 103 Md. 252 , 63 A. 566 , 2 L. R. A., N. S., 408, decided in 1906, before the Act of . 1914 took effect. That case had to do with real estate located in Maryland. Another case, which is the one primarily relied on to justify the contention that the interpretation of the will before us should be under the law of this state, is University v. Uhrig, 145 Md. 114 , 125 A. 606 .

That case involved securities actually in Maryland in the possession of a resident. It has some similarities to the case before us in that the testator was a former resident of Maryland who had gone to California to live and had died while domiciled there. The Safe Deposit & Trust Company of Baltimore was executor, to administer that part of the estate outside of the State of California, while another executor was appointed to administer the assets within that state. The will was probated in California, and then a copy ²⁷³ was filed in Maryland under Secs. 351 and 354 of Article 93.

The court held that this was sufficient under Sec. 350 of Article 93 to justify the interpretation of the will under the Maryland law as to the Maryland assets. The importance of this was that there was a residuary bequest of more than one-third of the estate of the testator left to the Johns Hopkins University, and the California law prohibited such a bequest of more than one-third. In the recent case of Roach v. Jurchak, 182 Md. 646 , 35 A. 2d 817 , we had before us a case where a former resident of Maryland, domiciled in Pennsylvania, had left all his property, including his real estate in Maryland, to someone other than his widow and children. His will was admitted for probate in Pennsylvania, and then an authenticated copy was offered for record in the Orphans’ Court of Allegany County, Maryland.

The widow attempted to caveat, but we held that the will having been admitted in Pennsylvania, the probate had to be given full faith and credit here, and that Sec. 350 of Article 93 did not apply under the circumstances. It will be noted that all of these cases affect a situation where the testator had property in Maryland which was administered by exercutors or administrators in Maryland. We do not think that the Legislature intended by the enactment of Sec. 350 to cover property which was outside of the State at the time of the testator’s death. Mr. Clarke was domiciled in New York, and his assets were there, and in the ordinary course of events, the law of the State of New York would govern their disposition and determine who was entitled to them under his will.

To say that without any direction by the testator, his executors could prove his will in Maryland and thereby possibly change the rights of the parties taking under it, would be to leave to the judgment or caprice of the executors the determination of property rights. Of course a testator could direct that his personal bequests be construed according to the laws of his home state, or of any other state, and those who took under his will, with such a direction included, would take sub ²⁷⁴ ject to the law of such a state. Mr. Clark, however, did no such thing. He provided only that his trustees, both of whom were residents of Maryland, might remove the securities to Maryland if they thought it advisable to do so.

He provided that the trust should be administered under the authority of an equity court, and he left to his trustees the determination whether that court should be in New York or in Maryland, but he did not say that it was to be administered under the laws of Maryland, and we do not think that Sec. 350 is applicable to his assets which were in New York at the time of his death. The removal of the assets and the administration of the trust were obviously for purposes of convenience only. His testamentary estate was all administered on in New York, except for the auxilliary administration, taken out in Maryland to dispose of a small mortgage which he had in this State. It was not until later that the trustees brought the trust assets to Baltimore and 'placed them under the jurisdiction of the Circuit Court of Baltimore City.

It is the uniform policy that a trust left to be administered in a state other than that of the domicile of the testator, which is invalid by the domiciliary law, but valid by the law of the state where it is to be administered, is held valid by the courts of the domiciliary state. Vansant v. Roberts, 3 Md. 119 . Hope v. Brewer, 136 N. Y. 126 , 32 N. E. 558 , 18 L. R. A. 458; 19 Harvard Law Review 457. Restatement, Conflict of Laws, Paragraphs 295, 306.

Fletcher v. Safe Deposit & Trust Co., 193 Md. 400 , 67 A. 2d 386 . This principle, adopted both in Maryland and in New York, does not apply strictly to the case before us, but if the will had been originally probated in Maryland with the trusts created to be administered in New York, it cannot be doubted that this court would construe these trusts under the law of New York. There would seem to be no reason to depart from this general principle in this case, and we are unable to construe Sec. 350 as creating an exception to it. ²⁷⁵ The English decisions (not however controlling in this country) until changed by statutes held that accumulations in a fund, not used for the purpose for which it is left, “follow the fate of the principal, whatever that may be.” Hanson v. Graham, 6 Vesey 239, decided in 1801. Accumulations were valid in England, and in this country, under the common law, up to the limit fixed by the rule against perpetuities.

Woodford v. Thellusson, 4 Vesey 227. Gertman v. Burdick, 75 U. S. App. D. C. 48, 123 F. 2d 924 , 152 A. L. R. 645. However, a number of states restricted them to a lesser period or for only certain purposes. In New York, they were prohibited unless for the benefit of minors.

New York Real