Sokol v. Nattans

Orth, C. J., delivered the opinion of the Court. I By motion timely filed, Ralph A. Nattans, Emanuel Hecht, Arthur Nattans, Roger Nattans, Albert Lowenthal, Jean Arthur Lowenthal, Elinor S. Multer, Aline H. Johnson, Barbara H. Cleveland, Paul W. Schatzkin, Arthur G. Schatzkin, Dorothy R. Schatzkin and Audrey N. Katz, appellees and cross-appellants, hereinafter referred to as appellees, moved to dismiss the appeal of Max Sokol and Louis Eliasberg, two of the Trustees under the Will of Arthur Nattans, deceased, appellants and cross-appellees, hereinafter referred to as appellants. Maryland Rule 1036 c. The ground for the motion was that the appeal was not allowed by law.

Rule 1035 b (1). Appellants filed an answer giving reasons why the motion should be denied and the appellees filed a motion ne recipiatur to the answer which appellants answered. At the request of this Court, a memorandum of law was filed by appellees and by appellants. The motions were heard by the Court en banc.

We deny the motion to dismiss the appeal and the motion ne recipiatur to the answer thereto. In determining the motion to dismiss the appeal, however, we have not considered any allegations of fact set out in the answer to the motion to dismiss which do not appear in the record submitted to us. II Arthur Nattans I died on 17 April 1905 leaving a Will and two Codicils thereto. The Will created a trust' of 396 shares of the 400 shares outstanding of Read’s Inc. The trust was to cease upon the death of the last survivor of the testator’s eight children, which event occurred upon the death of Arthur Nattans II on 24 September 1972. 1 The Will appointed three trustees and assured that there would be ⁶⁰² three trustees during the life of the trust by providing for the appointment of a successor trustee to take the place of any one of the trustees named or their successors who died or resigned their trust.

At the time the trust ceased, the trustees were Max Sokol, Louis Eliasberg and Arthur K. Solomon. On 3 June 1974 they filed in the proceedings in the Circuit Court for Baltimore City 2 a petition praying the passage of an order allowing them compensation and commissions and a final distribution allowance for their services. In the petition Solomon pointed out that in addition to being a trustee of the trust estate, he was also a beneficiary thereof. He declared he did “not desire to suggest any measure of compensation, but agrees to accept such compensation for his services as this Court shall determine to be reasonable and proper.” Sokol and Eliasberg suggested what their compensation should be.

In connection with the final distribution of the trust estate, they indicated they would be willing to accept an allowance equal to one-half of one per cent of the value of the corpus of the trust estate being distributed. With regard to income, they set out three alternatives for fixing compensation. On 12 June the chancellor wrote counsel for the parties giving his view as to the compensation to be paid. He directed counsel for the trustees to prepare an order in accordance therewith, to send a copy to counsel for all parties and to those parties not represented, and to submit the order to the court for execution after reasonable notice had been given.

The order was signed 5 July 1974. It allowed the trustees a commission payable out of income in an amount equal to 5% of the income of the trust from September 24, 1972 through June 15, 1974 as compensation for their labor and responsibility during that period. It denied the request for additional commissions. It authorized the trustees to pay out of income certain amounts “to their counsel for services rendered as set forth in the petitions for payment of counsel fees.” 3 ⁶⁰³ On 2 August 1974 the attorneys for Sokol and Eliasberg filed an “ORDER POR APPEAL BY MAX SOKOL AND LOUIS ELIASBERG, TWO OF THE TRUSTEES UNDER THE LAST WILL AND TESTAMENT OF ARTHUR NATTANS, DECEASED, PLAINTIFFS.” The order directed the Clerk to “Enter an Appeal to the Court of Special Appeals of Maryland from that portion of the Order entered in this action on July 5, 1974 that denied the request of the Trustees for a commission on corpus upon final distribution of the trust provided by Article 16, Section 199 (e).” On 15 August, Solomon, as a co-trustee, filed a “Notice of Disclaimer of Right to Appeal” in which he disclaimed and denied the right of Eliasberg and Sokol to appeal the order of 5 July 1974.

In support thereof, he attached a copy of a letter dated 10 July 1974 which he stated was mailed to Eliasberg and Sokol “on or about July 15, 1974.” According to the copy attached, the letter related that Solomon had been advised that the order denied commissions on the corpus of the trust, but authorized the payment of commissions of 5% on the income of the trust since 24 September 1972. It asserted that the amount of the commissions under that formula would exceed $50,000. It continued: “1 have also been advised that one or both of you may appeal Judge Ross’ decision. Although your success on appeal would financially help me, because I am entitled to 1/3 of any trustees’ commissions but 1 would be charged with the expense of only 1/7 of the commission, 1 think it ⁶⁰⁴ would be very unwise to appeal.

First, I think that Judge Ross’ decision was a very fair one. Second, our chances of success on appeal are very limited because of the manner in which Judge Ross’ opinion was written. He made a finding of fact as to the fair and reasonable compensation, and as your lawyers have undoubtedly told you, it is very difficult to reverse a trial judge’s finding of fact. As one of the three co-trustees, I therefore oppose the institution of any appeal, and I instruct the two of you not to file an appeal from Judge Ross’ Order of July 5.” 4 III The question presented for decision is simply whether, in the circumstances, the appeal as taken is allowed by law. 5 Appellees argue that two of three trustees may not prosecute an appeal in their fiduciary capacity without the joinder and consent of the third trustee.

They point to the rule of unanimity as set forth in Restatement, Trusts 2d, § 194 (1959): “If there are two or more trustees, the powers conferred upon them can properly be exercised only by all the trustees, unless it is otherwise provided by the terms of the trust.” 6 ⁶⁰⁵ Comment a to § 194 states in part: “If there are two or more trustees, action by all of them is necessary to the exercise of the powers conferred upon them as trustees. If one of them refuses to concur in the exercise of a power, the others cannot exercise the power.” Appellees refer to 3 Scott, The Law of Trusts, § 194 (3rd ed. 1967) and Bogert, Trusts and Trustees, § 554 (2d ed. 1960) for similar statements of the rule. They claim that the courts of Maryland have adhered to the rule of unanimity at least since Latrobe v. Tiernan, 2 Md. Ch. 474 , decided in 1851 and cite Wlodarek v. Wlodarek, 167 Md. 556, 558 . They assert that the rule was applied to dismiss an appeal in Donovan v. Miller, 137 Md. 555 and Kramme v. Mewshaw, 147 Md. 535 .

They distinguish Mathias v. Segaloff 187 Md. 690 as concerning receivers, which they believe the Court viewed as a different class from trustees. Appellants declare that this is a case of first impression. Their research “disclosed no reported case wherein a co-trustee was barred from pursuing his right of appeal from denial of compensation because of the failure or refusal of a co-trustee to join in such appeal.” They attribute the dearth of litigation on the question “to the fact that the recognized rule requiring trustees to act unanimously applies only to matters involving the fiduciary management of the trust estate and does not apply to cases, such as the present case, involving the exercise of no such fiduciary power and in which the trustees have a personal interest.” This is the keystone of their argument. They claim that the rule of unanimity is limited to trustees exercising fiduciary powers and discretion in the management of the trust.

They agree that Maryland has followed the rule of unanimity since Latrobe v. Tierman, supra, but maintain that the rule has never been applied in a reported case in this State or in ⁶⁰⁶ any other jurisdiction “in such a fashion as to preclude a co-trustee from litigating his claim for compensation because of the failure or refusal of a co-trustee to join in such action.” They refer to Schloss v. Rives, 162 Md. 346 , as permitting a trustee to petition for compensation and litigate his claim therefor in the face of opposition from a co-trustee of the trust who was also the principal beneficiary thereof. The unanimity rule was not mentioned, and appellants argue that an exception to that rule was recognized by the decision sub silentio. They .distinguish Donovan v. Miller, supra, on its facts which they ascertained by going to the original record and briefs. They also refer to the language of § 194 of the Restatement of Trusts, Second, and Comment a thereto, but they emphasize that it is the powers conferred upon trustees which can be exercised only by all of them, or in other words, that it is with respect to the exercise of powers conferred upon them as trustees that action by all is necessary.

They conclude that “Obviously the Restatement limits the requirement of unanimity to the exercise of fiduciary powers.” They cite foreign authority as indicating that “[i]n the rare cases where a co-trustee attempts to prosecute any legal action or appeal over the objection of a co-trustee, the Courts have generally allowed the appeal.” 7 They quote from a general discussion in Annot., 6 A.L.R.2d 147 , 148: “The interest which a trustee has in the subject matter of the trust estate is of a dual nature. He has a personal interest to the extent that he is entitled to a compensation for his services in the administration of the trust, and to this extent he is an interested person aggrieved by any adverse judgment or order, within the contemplation of the rule as to appeals. He is also an aggrieved party if the decree or order imposes upon him a personal ⁶⁰⁷ liability arising from the administration of the trust estate or from the duty to account therefor (citations omitted). . . His right to take an appeal is universally recognized where his personal rights are affected by the order or judgment ...” (Emphasis supplied) They opine: “An appeal from the denial of a commission on corpus upon the termination of a trust does not constitute the exercise of ‘powers conferred upon them as trustees’ within the scope of Sec. 194 [of Restatement of Trusts, Second], nor upon the facts and holdings of the Maryland cases that have enunciated [the rule of unanimity].” Appellees counter by asseverating that “[a]ppellants are estopped and precluded from asserting any personal interest in the award of compensation.” They support this argument by pointing out that “[w]hen the question arose as to where the burden should fall of lawyers’ fees in connection with the efforts made to obtain a termination commission, Appellants saw only the representative character of their claim, and persuaded the lower court, over objection, to allow such fees as proper charges against the trust assets.

The Appellants successfully opposed the contention that they had sought the commissions in their individual capacities, and so should pay their lawyers from their own pockets.” 8 Sokol and Eliasberg, appellees state, prosecuted the appeal in their fiduciary capacity as two of the successor trustees. “They are, therefore, estopped and precluded from asserting any personal interest in the award of compensation to them since such an assertion is directly contrary to the position which Appellants have taken throughout the course of these proceedings.” They cite Van Royen v. Lacey, 266 Md. 649 ; Stone v. Stone, 230 Md. 248, 253 ; Fisher v. Boyce, 81 Md. 46; Edes v. Garey, 46 Md. 24, 41 . Thus the issue is cleanly drawn. Appellees contend that all the trustees sought, as they must, compensation in their fiduciary capacity and, under the rule of unanimity, not less ⁶⁰⁸ than all may challenge the action of the chancellor thereon. Appellants claim that the rule of unanimity is not applicable in such circumstances, so that an appeal will lie by those trustees who feel aggrieved, although less than all.

IV (a) Whether the order here is considered a final order or an appealable interlocutory order, there is no statute dispositive of