Vito v. Grueff
160 A.3d 592
Md.2017Background
- In 1983 James Vito created an irrevocable family trust naming his four children (Candace, Judith, Michael, Timothy) as equal 25% beneficiaries; the trust’s preamble and Item Sixth expressly allocate 25% to each child.
- Item Tenth allowed the trust to be "revoked, altered or amended" by written instrument signed by holders of at least 75% interest (i.e., three of four beneficiaries).
- Over the years the beneficiaries executed several amendments. In October 2013 Judith, Michael, and Timothy (three beneficiaries) executed Amendment V purporting to remove Candace and reallocate shares so each remaining sibling would receive 33 1/3%.
- Candace had filed suit alleging fiduciary breaches and sought removal/accounting; the amendment was executed during that litigation and defendants argued the amendment deprived Candace of standing.
- The circuit court accepted the amendment and dismissed some claims; the Court of Special Appeals reversed in part, holding a majority cannot divest a minority beneficiary when contrary to settlor’s intent. The Court of Appeals granted certiorari and affirmed the Court of Special Appeals.
Issues
| Issue | Plaintiff's Argument (Vito/Candace) | Defendant's Argument (Michael/Judith) | Held |
|---|---|---|---|
| Whether a 75% beneficiary amendment clause permits three beneficiaries to divest the fourth of all trust interests | Item Tenth must be read in context; settlor intended equal shares so 75% cannot divest a beneficiary | Item Tenth’s plain, broad language authorizes 75% to amend any term, including removal of a beneficiary | 75% amendment power does not authorize divestment of a beneficiary where trust as a whole shows settlor intended equal shares; Amendment V invalid |
| Whether courts should interpret Item Tenth in isolation or by reference to the entire trust | Settlor’s intent controls; read the instrument as a whole to construe amendment power | Read Item Tenth objectively and give its plain meaning unless ambiguous | Court must ascertain settlor’s intent from the four corners; Item Tenth construed in context of preamble, Item Sixth, Item Eighth; plain meaning limited by overall testamentary plan |
| Whether beneficiaries can reallocate shares to themselves without explicit testamentary appointment power | Such reallocation contradicts settlor’s dispositive plan and is barred | Amendment complied with the amendment clause and is therefore valid | Maryland law of powers of appointment bars beneficiaries from appointing trust property to themselves absent explicit grant; self‑dealing reallocation invalid |
| Effect of Amendment V on trust operability (e.g., amendment threshold) and internal consistency | Amendment cannot contradict preamble/other provisions; otherwise it creates internal inconsistency and unworkable rules | Amendment was effective under Item Tenth and need not change other provisions | Amendment V produced internal inconsistency (preamble and Item Eighth still name four beneficiaries) and would render the 75% rule mathematically unworkable; supports invalidation |
Key Cases Cited
- From the Heart Church Ministries, Inc. v. African Methodist Episcopal Zion Church, 370 Md. 152 (2002) (trustees cannot alter beneficiaries’ interests absent reservation of power)
- Shriners Hosp. for Crippled Children v. Md. Nat’l Bank, 270 Md. 564 (1973) (equity may reform trusts but trustees may not alter beneficiary interests without authority)
- Probasco v. Clark, 58 Md. App. 683 (1984) (courts may modify trusts cautiously to effectuate settlor intent when unforeseen circumstances exist)
- Pfeufer v. Cyphers, 397 Md. 643 (2007) (testator’s expressed intent ascertained from the whole instrument controls disposition)
- Childs v. Hutson, 313 Md. 243 (1988) (broad dispositive language construed in context of overall testamentary plan; specific intent limits general powers)
- LeRoy v. Kirk, 262 Md. 276 (1971) (general terms in wills/trusts are qualified by surrounding provisions and intent)
- Frank v. Frank, 253 Md. 413 (1969) (Maryland rule: testamentary/general appointment powers do not permit appointments to donee absent explicit authorization)
- Bryan v. United States, 286 Md. 176 (1979) (reaffirming restrictions on appointing testamentary property to oneself)