Stinchcomb v. Mercantile-Safe Deposit & Trust Co.

Finan, J., delivered the opinion of the Court. In writing this opinion we find sustenance in the aphorism that, “No will has a twin brother,” 1 and hence the improbability that we shall soon again encounter a testamentary document of similar import. Mercantile-Safe Deposit and Trust Company (Mercantile), one of the appellees, as Substituted Trustee under the will of Frederick Schoenherr, deceased, filed a bill of complaint in the Circuit Court of Baltimore City for the construction of his will. This required the joining as defendants the remaindermen of the trust created by ⁴⁸⁴ items second through eleventh of the will.

Among the defendants were the executors of four estates, including the appellants as executors of the estate of the testator’s widow, Lillian Anita Staub, formerly Lillian Anita Schoenherr, and also unknown persons who might have an interest in the trust under the will. The remaindermen (appellees) contended that the remainders were vested in them and that the remainders included all of the corpus of the trusts including the appreciation in the corpus. The executors of the residuary legatee, the widow, who was also the life tenant, contended that, reading the will as a whole it should be construed to mean: (1) that the remainders were vested but subject to be divested by the death of a named remainderman prior to the death of the life tenant, and (2) that the appreciation in the principal of the trust following the sale of the stocks, which constituted the original principal, was not disposed of by the remainderman provisions of the trusts but fell into the residue of the estate and passed under the residuary clause of the will to the widow. The testator, Frederick Schoenherr, died childless in the City of Baltimore on September 3, 1924, survived by his widow, Lillian Anita Schoenherr, who, as we have already indicated, subsequently married Mr. Staub.

The testator had no brothers and only one sister, Mrs. Selma J. Wolff, one of the contingent remaindermen under item tenth of the will. Mr. Schoenherr’s will was dated March 18, 1924, and it is uncontradicted that at the time of its execution he was aware that he was suffering from a fatal illness. The will was drawn in New Jersey by a member of the bar of that state. At the time of Mr. Schoenherr’s death the principal assets of his estate consisted of shares of stock in two corporations in which he was the majority stockholder, The Interstate Shade Cloth Company (Interstate) and The Lapsley-Interstate Shade Cloth Company (Lapsley).

He owned 1,512 shares of Interstate stock, valued in the inventory of his estate at $109.00 per share or a total of ⁴⁸⁵ $164,808.00; he owned 4,170 shares of Lapsley stock, valued in the inventory of his estate at $39.00 per share or a total of $162,630.00, making the total appraised value of the Lapsley and Interstate stock of $327,438.00. The testimony reveals that the testator and Mr. Robert Wilson had been intimate friends since their early boyhood in Hoboken, New Jersey. During the year 1914, the testator, who had already made a successful start in business in Baltimore, backed Mr. Wilson in a similar venture in New Jersey. In 1918 the testator and Mr. Hehrlein became acquainted while in military service, and the latter went to work for the testator during that year.

It is apparent that all three of these gentlemen were fortunate in enjoying a most amicable and prosperous business association. Mr. Norman J. Freeman and Mr. James Bright Kelly, also objects of the testator’s bounty, were employees of the corporations for many years and each was referred to in the will as “my friend.” It is against such a background that the actions of the testator in making his will must be viewed. Hebden v. Keim, 196 Md. 45, 48, 50 , 75 A. 2d 126 (1950), and Slingluff v. Johns, 87 Md. 273, 280 , 39 A. 872 (1898). Item first of the will contains the usual directive that the just debts and funeral expenses of the testator be satisfied.

Item second demonstrates a strong desire on the part of the testator that the control and management of the two companies which he had built up over many years, namely Interstate and Lapsley, “be vested solely in my friend and business associate, Robert Wilson, upon the terms and conditions herein set forth * * In order to effectuate this purpose he directed his executors and trustees to deposit all of his Interstate and Lapsley stock with the Safe Deposit and Trust Company of Baltimore (now Mercantile-Safe Deposit and Trust Company) “in escrow” subject to an option in Robert Wilson to purchase these shares at their book value. The stock was to be held by the Safe Deposit and Trust-Company in escrow until the death of Mr. Wilson or un ⁴⁸⁶ til he had exercised the privilege of purchasing it, or until both of the companies should have failed for one calendar year to pay dividends of not less than six per cent, or until title to the shares of stock became vested in various named legatees. Mr. Wilson was given the right to vote the stock while it was held in escrow so as to exercise management control over the two companies. Item third of the will provided that Robert Wilson could only exercise his option to buy the stock by purchasing the testator’s holdings in both companies in their entirety.

Item fourth restated the conditions set forth in item second to the effect that the option to purchase the stock would remain open to Robert Wilson only as long as the companies declared an annual dividend of not less than six per cent. Item fifth directed that all dividends declared upon the stock held in Interstate and Lapsley should be paid from time to time, as and when declared, to the testator’s widow. Item sixth directed that the executors invest the proceeds of the sale of the testator’s stock in Interstate and Lapsley in such a manner that at least $50,000.00 would be invested in United States Bonds, “and the balance in bonds secured by first mortgages on improved real estate and high grade investment securities of municipalities or of companies having established records for the payments of interest or dividends.” By items seventh, eighth and ninth, the testator made provisions which are identical except as to the named legatee and the amount of the gift, for his three friends, Edward H. Hehrlein, Norman R. Freeman and James Bright Kelly. We set forth item seventh in full, as follows: “Seventh: Upon the death of my wife (provided my shares in said companies have not then been purchased by the said Robert Wilson or or otherwise disposed of pursuant to the provi ⁴⁸⁷ sions of this my will), I direct my executors and trustees or the survivors or survivor of them to set apart and hold five hundred shares of Interstate Shade Cloth Company and one thousand shares of The Lapsley-Interstate Shade Cloth Company, in trust for the benefit of my friend, Edward H. Hehrlein, of Passaic, New Jersey, to pay to the said Edward H. Hehrlein the dividends declared upon such shares of stock from time to time during the lifetime of the said Robert Wilson or until my said executors and trustees shall have sold my shares of said stock in said companies either to the said Robert Wilson or any other party pursuant to the terms of this my will.

Upon the death of the said Robert Wilson I direct my said executors and trustees and the survivor of them to deliver to the said Edward H. Hehrlein the said five hundred shares of Interstate Shade Cloth Company and one thousand shares of the Lapsley-Interstate Shade Cloth Company. If my said shares of stock in said companies shall have previously been sold, I then and in that event, direct my executors and trustees and the survivor of them to pay to the said Edward H. Hehrlein the proceeds of the sale of the stock herein bequeathed but without any accumulations of interest thereon. If my said shares of stock shall have been sold in the lifetime of my wife, I direct my executors and trustees, upon the death of my wife, to pay to the said Edward H. Hehrlein the proceeds of the sale of the stock herein bequeathed, but without accumulations of interest thereon.” Item eighth makes an identical disposition as item seventh, except the bequest is in favor of Norman R. Freeman, and in the amount of 250 shares of Interstate and 500 shares of Lapsley. Item ninth makes an identical disposition in favor of ⁴⁸⁸ James Bright Kelly except that it involves only 200 shares of Lapsley and no Interstate.

Item tenth provided that, “Upon the death of my wife and subject to the provisions of this my will, I give and bequeath all of the shares of stock owned by me (not heretofore disposed of by items seventh, eighth and ninth) in said Interstate Shade Cloth Company and The Lapsley-Interstate Shade Cloth Company or the proceeds thereof, if the said shares of stock shall have been sold (which in fact occurred) in the lifetime of my wife, unto my sister, Selma J. Wolff, and to the said Edward H. Hehrlein, share and share alike.” Item eleventh provided that if Mrs. Wolff and Mr. Hehrlein, or either of them, should have predeceased the testator’s widow then the shares of the person or persons so dying were bequeathed to Mr. Wilson. Item twelfth and the last provision with which we are concerned provided, “All the rest, residue, and remainder of my estate, real and personal wheresoever situate, I give, devise and bequeath unto my wife, Lillian Anita Schoenherr, absolutely.” After the testator’s death in 1924 his estate was duly administered by his executors and the Lapsley and Interstate stock transferred to his trustees. On February 21, 1929, Robert Wilson exercised the option extended to him under the terms of the will, paying $343,941.60 for the Lapsley stock or $82.48 per share and $293,993.28 for the Interstate stock or $194.44 per share. Accordingly, the proceeds of the sale of the stock in both companies amounted to $637,934.88 and this replaced the stock as the corpus of the trust created by the testator.

The original trustees invested the proceeds of the sale only in bonds, but after the present trustees were appointed, investments were made in both stocks and bonds. At this juncture we should comment on the fact that the phrases customarily used in connection with the establishment of a testamentary trust were all but ignored in the drafting of the will. The testator did not specify that there should be a corpus of a trust, a principal of ⁴⁸⁹ a trust, the income from a trust or principal, and no language was used to designate one party as a life tenant and other parties as remaindermen, nor did he provide for a gift of “corpus” or “principal” to anybody with or without using precise language designating remaindermen. He simply provided for the gift of the shares themselves, or the proceeds of the sale of the stock bequeathed to the designated beneficiaries.

However, despite the lack of precise and formal terms usually found in a testamentary trust, the testator did couple the use of the term “trustees” with that of “executors.” There were also provisions in items seventh, eighth and ninth containing language generally applicable to trusts, to the effect that upon the death of the widow if the shares of the stock in Interstate and Lapsley had not been disposed of, then the shares of stock themselves were to be held “in trust” until the death of Wilson or until the sale of the stock. It is also quite evident from the instructions concerning how the proceeds of the sale of stock should be invested, that the testator intended that the proceeds of such a sale were to be considered the corpus of a trust. The trustees over the years simply endeavored to give practical effect to what they believed the testator intended to accomplish. Thus, although not specifically provided for in the will, all of the dividends both cash and stock, paid by the various corporations in which the trust corpus was invested, were paid to the widow for her life, as the trustees interpreted item sixth of the will (and correctly so) as giving the widow the income from the trust for life.

As a matter of fact on this appeal none of the parties argue any contrary interpretations concerning the construction of the will until we reach the question of the disposition of the appreciation of the corpus. Mrs. Wolff, the testator’s sister, died March 9, 1941. She predeceased the widow and, under the provision of item eleventh, her one-half interest in the proceeds of the sale of the Lapsley and Interstate stock passed to Mr. Wilson. Robert Wilson died November 28,1959. ⁴⁹⁰ Mrs. Staub, the testator’s widow died on August 12, 1968.

At the time of her death the corpus of the trust had increased in value from $637,934.88 on the date of Wilson’s purchase of the stock in 1929, to $1,187,495.49. It is the disposition of the $549,560.61, representing the capital appreciation of the corpus, which has given rise to the present controversy. Shortly after the widow’s death in August of 1968, Mercantile wrote to her executors stating that they would pay to them the accrued income on the corpus up to the date of Mrs. Staub’s death, which amounted to $5,066.89, on the condition that her executors execute a release to Mercantile of all claims to any distribution of Mr. Schoenherr’s estate. Her executors refused to comply with this request and thereafter, Mercantile instituted the present proceeding for the construction of Schoenherr’s will.

The bill of complaint named as defendants the executors of the Staub estate, the executors of the Wilson estate, the executor of the Freeman estate, the executrix of the Kelly estate, Edward H. Hehrlein (presently living) and also unknown parties. No appeal was taken from the chancellor’s ruling that the various legatees named in items seventh through eleventh inclusive have fully vested remainders, 2 other than Mrs. Wolff and Mr. Hehrlein, the legatees designated in item tenth and eleventh. With regard to these later two, the chancellor found that each took a vested interest subject to divesture if either should predecease Schoenherr’s widow and that pursuant to item eleventh, upon the death of Mrs. Wolff, her interest passed to Robert Wilson as a fully vested remainder and that upon Wilson’s death, prior to the death of Mrs. Staub, this interest passed to Wilson’s executor. ⁴⁹¹ Thus, we find that the only issue before us on appeal is whether the remaindermen receive their designated shares in just the proceeds of the sale as paid to the trustees when Robert Wilson bought the stock in Interstate and Lapsley in 1929, or in addition thereto are to receive an aliquot portion of the capital appreciation. On the other hand, in the event the vested remaindermen were not to share in the capital appreciation, it would follow that this accretion would pass to Mrs. Staub’s estate by virtue of her designation as residuary legatee under item twelfth of the will.

The appellants launch a trifurcated attack contending: (1) that the use repeatedly by the testator of the phraseology that the remaindermen should receive the “proceeds of the sale,” with the added limitation, “but without any accumulations of interest thereon,” stated a definite intention on the part of the testator that the remaindermen should not share in any accretion of the corpus; (2) that the instructions given by the testator as to the manner in which the proceeds were to be invested demonstrated that he did not consider the possibility of capital appreciation passing to his friends and business associates and there being no specific disposition of such accretion of corpus, it should pass by the residuary clause to