Smith v. Michael

Boyd, C. J., delivered the opinion of the Court. This is an appeal by the executors of the last will and testament of James Smith, deceased, from a decree of the lower Court taking jurisdiction of the estate, appointing them trustees, requiring them to give bond and account in that Court, and to turn over to themselves as trustees the funds belonging to the estate. The testator, after leaving his farm to his wife for life and after her death to his daughter, the appellee, and giving the personal property on the farm to his wife absolutely, made the following provision in his will: “Item—All the rest and residue of my estate real, personal and mixed which I now hold or may hereafter acquire I will and direct shall be held by my executors hereinafter named and kept safely and profitably invested in good interest-hearing securities, mortgages or otherwise as they may deem best- and the interest thereon to be paid over to my said wife Harriet E. Smith during her life and after her ¹³ death the whole amount thereof with any interest then due thereon to he equally divided between my two children William Alexander Smith and Annie F. Michael share and share alike.” Mrs. Michael filed a bill in equity in which she set out the provisions of the will and alleged that the executors qualified and filed an inventory showing that the entire personal estate amounted to $28,542.75, of which $902.75 represented the personal effects specifically devised to the widow; that they had settled an account showing a balance in their hands of $26,356.19, which was according to the account turned over to the widow for life. It is then alleged, that under the will the property on the farm, appraised at $902.75, and one-third of the residue belonged absolutely to the widow, and the balance, $16,968.96, was to be held by the executors and invested as provided in the will—the interest to be paid to the widow during her life, and at her death to be divided between her and her son William A. Smith.

It then states that she is advised that the said sum of $16,968.96 is held by the executors in trust, and that the said trust should be administered under the orders and direction of the Court and a trustee or trustees to be appointed. A demurrer to that bill was filed and sustained, but the Court retained jurisdiction and granted leave to the plaintiff to amend the bill. An amended bill was filed, in which it was also alleged that it was the duty of the defendants to have applied to the lower Court, or to the Orphans’ Court, for directions with reference to the administration of the trust, but they failed and neglected to make such application; that they had ignored the plain directions of the will in distributing the whole fund to the widow for life; that the action of the said defendants in causing such a distribution of the estate has grown out either of ignorance or design, and is liable to cause confusion and possibly to make litigation necessary on the part of the plaintiff to protect her rights; that the defendants, instead of investing said estate with such ear marks as to make its identification easy and possible, have ¹⁴ been investing tbe same in the name or names of one or the other of them as individuals; that when said executors have fully administered said estate in their capacity of executors it should be paid into the hands of a trustee. It then goes on to allege that the plaintiff apprehends and therefore charges that the assets of said trust are in danger of being lost, wasted or misappropriated.

After an answer was filed and testimony was taken, the lower Court passed a decree assuming'jurisdiction over the trust, appointing the executors trustees, to hold the fund distributed to them by the second account, requiring them to give bond in the penalty of $33,000.00, and to file a detailed statement of the funds in their hands showing the investments, etc., and ordering that the “executors forthwith account with and turn- over to themselves as trustees under this decree all funds belonging to said estate.” After the demurrer to the original bill had' been sustained, and before, the amended hill had been filed, the executors filed the second account spoken of above in the Orphans’ Court, in which they were allowed for the personal property turned over to the widow ($902.75) and one-third of the residue ($8,484.48) left the widow' absolutely—showing a balance of $16,968.96. It is stated in that account that the balance was to be held by them during the life of said Harriet E. Smith, that the income was to be paid to her and after her death to be equally divided between the son and daughter, and it also states that “their first account was in error in stating that the fund of $26,356.19 was turned over to the widow- for life which was not, and never had been done.” The Court below was of the opinion that Section 10 of Article 93 of the Code was applicable, and as that is strenuously denied by the appellants, we will at once consider that question. It begins by providing that: “Whenever, under the provisions of a will, it shall be necessary for an executor or an administrator cum testamenta annexo to retain in his hands the personal estate, or any part thereof, after all just claims are discharged, as where money or some other thing is ¹⁵ directed to be paid at a distant period, or upon a contingency, any Court of Equity in the city or county, or the Orphans’ Court shall have the power, on the application of such executor or administrator, or of a party interested, to decree or give directions thereto; and it shall be the duty of such executor or administrator to apply to the said Court of Equity or the Orphans’ Court.” It then goes on to give the Court to which application is made certain powers over it. Unless the provisions in the will, providing for the investment by the executors, etc., prevents we can see no reason why this section does not apply to this case.

It is certainly necessary for the executors to retain in hand the personal estate left after all just claims (including the widow’s) are discharged, and if that provision in the statute is to be limited by the clause, “as where money or some other thing is directed to be paid at a distant period, or upon a contingency,” the expression must receive a reasonable construction. It does not necessarily mean a fixed distant period, and if a will in express terms 'or by necessary implication, requires the executors to hold the pi*operty during the life of a tenant for life, it is difficult to understand why the section does not apply. A life tenant rnay live for twenty, thirty or more years—until a very distant period. It was said in Gunther v. State, 31 Md. 30 : “It is obvious the main design of the section, and the object to be attained by the exercise in every case of the power thus conferred, is the preservation of the fund so as to secure it to those who, under the will, or by law, shall be entitled to receive it upon the arrival of a prescribed' period, or the hap-. pening or non-happening of the designated contingencies.” There may be some apparent conflict between the cases in this State as to the application of the law embraced in this section, but they can be easily reconciled when the facts which controlled those decisions are considered.

It may be well to examine some of them. In Gunther v. State, supra, there was a legacy of $2,000.00 to an adopted son of the testator, “should he attain the age of twenty-one years.” In that case a guardian was appointed for the minor, and the Orphans’ ¹⁶ Court passed an order empowering the administrator c. t. a. to transfer the legacy to the guardian. The Court said: “It is made the duty of the executor or administrator having the money or property in hand, to apply to the Court for direction in the premises, and on such application the Court is clothed with ‘full power to decree or direct in what manner it shall he disposed off to effect the contemplated purpose; hut the mode or disposition for safe keeping and security is not prescribed, but left, in each case, to the sound discretion and judgment of the Court.” It went on to say: “We have no doubt the simpler, better if not safer practice in all cases to which the section under consideration applies, would be to order the executor or administrator himself to retain the funds, and invest them in some safe security to be designated by the Court, but we are not prepared to say the mode here adopted is wholly without sanction of law, and the order in question utterly void for want of jurisdiction in the Court to pass it.” It held that payment to the guardian under the order relieved the administrator’s bond from further liability. In Reiman v. Peters, 2 Md. 104 , it was said that a bequest of an annuity to a widow during the term of her natural life, “if she so long remains my widow, but not otherwise,” came within the operation of this section.

In Brady v. Brady, 78 Md. 461 , the bequest was to the widow for and during.her natural life, with power to receive, take and collect the rents, issues and profits, and after her death to pay a legacy of $16,000.00 to the testator’s son. The Court held that the administrator c. t.' a., should have invested the estate, or have retained the investment as made, if safe and reliable, so as to secure the issues and profits to the widow for life and the principal after her death, to pay the son’s legacy. It was then added: “If the administrators had complied with the provisions of Article 93, section 10 of the Code, they would have found complete protection, and have followed the plainly expressed' intention of the testator.” In that will it was provided that the $16,000.00 to be paid to the son three years after the death of the testator’s wife, and other provisions ¹⁷ looking to that payment showed that the administrators were to hold the property and pay the legacy after the life estate had expired. In State v. Hewlett, 48 Md. 138 , the testator gave the residue of his estate to James W. Hewlett in fee, upon the condition that he should pay Jack Q. Hewlett, the sum of $5,000 upon the arrival of the latter at the age of twenty-five years, and that sum was declared to he a lien or charge upon the residue of the estate, so given to James W. Hewlett.

The Court held that section 10 of Article 93 had no application. Chief Judge Babtoh, in speaking for the Court, said: “Without quoting the word's of the section at length, it is sufficient to say that it applies only where hy the will, ‘money or some other thing’ is directed to be paid at a distant day, or upon a contingency, and where in the meantime, the legacy is not disposed of, hut must, hy the terms of the will, or otherwise, remain in the hands of the executor, or the administrator c. t. a.” He then went on to say that the will did not direct that the residue, or any part of it, should remain in the hands of the executors. That case was manifestly not within this section, as the executor was not required to hold either money or property for the benefit of Jack Q. Hewlett, but the residue of the testator’s estate was to be turned over to James W. Hewlett, subject to the charge in favor of Jack Q. Hewlett. The case of State v. Robinson, 57 Md. 486 , is somewhat peculiar, and differs in some important particulars from some later cases where different results were reached.

The testator gave to his wife absolutely the household furniture and fixtures, the cash on hand and the bills receivable of which he died seized, and gave to her a leasehold house and lot on Hollins street and two leasehold lots on Baltimore street, in the City of Baltimore, together with the improvements, rents, issues and profits thereof during her life. Ho sold the Baltimore street property in his lifetime, and a part of the purchase money which remained due at his death was collected by the executors and invested in United States bonds. The Court held that the purchase money so collected passed ¹⁸ to the widow, under the term “bills receivable of which I shall die possessed,” but that the executors’ bond was liable for the proceeds of sale of the Hollins street property, which sale was made by them under an order of the Orphans’ Court. Those proceeds of sale were not invested by the executors, but they charged themselves with them.

If they had invested them, and distributed the