74 A. 626 | Md. | 1909
The appeal in this case was taken from a decree of Circuit Court No. 2 of Baltimore City dismissing a bill filed by the appellant. The purpose of the bill was to procure the construction of a deed of trust and of a will executing a power of appointment conferred upon the testatrix by the deed; and also to have certain proceedings of the Orphans' Court of Baltimore City declared void and the releases given in pursuance thereof cancelled and set aside.
The deed of trust was made in favor of the appellant's wife for her life by her father, on the eve of her marriage, and it gave to her an unrestrained power of testamentary appointment of the corpus of the trust estate. By her will, made after her marriage, she gave her entire estate absolutely to her husband. After her death the Orphans' Court undertook to administer upon the property which had passed under the deed and the appointment, consisting of railroad bonds, as if it had been her own property, and distributed it one-third to the appellant as her surviving husband, and the remaining two-thirds to her two surviving children, for whom he was made guardian. The bonds were delivered to the appellant, one-third in his own right and the residue as guardian for his children, and he executed releases therefor to the administrators of his wife's estate and the trustees under the deed of trust.
Within two and a half months after receiving the bonds and executing the releases, the appellant filed his bill in the present case insisting that upon his wife's death the entire corpus of the trust estate became his individual property in his own right under the operation of the deed of trust, by virtue of the devise in his favor in her will, which constituted an exercise of the power of appointment conferred on her by the deed; and that the whole of the proceedings by *461 which two-thirds of the property had been awarded to his children were erroneous and void, and that he was entitled to have them annulled and set aside.
After hearing the case the learned judge of the Court below held that, through the execution of the power of appointment by his wife in her will, the appellant became entitled in his own right to the whole of the property conveyed to the trustees by the deed of trust, but the bill was dismissed because the judge was of the opinion that the appellant had forfeited his right to relief in equity by his acquiescence and co-operation in the various steps by means of which two-thirds of the property had been awarded to his children.
An outline of the material facts, appearing in the record, sufficient for the purposes of this opinion, may be stated as follows:
On June 19th, 1905, Ross R. Winans, an American citizen residing in Baltimore, but then temporarily in Paris, executed in the latter city a deed of trust to himself and Ferdinand C. Latrobe, also of Baltimore, conveying to them railway mortgage bonds of the par value of $284,000, upon trust, first, "to receive the interest and income thereof and apply the same to the use of Beatrice Winans (the grantor's daughter) during her life, free from the disposal or encumbrance or the control of any husband and as her separate estate; * * *" and, secondly, "upon the further trust, upon the death of the said Beatrice Winans, to dispose of the capital of the fund hereby created in such manner and to and among such person or persons and in such amounts as the said Beatrice Winans may by a valid will and testament duly executed appoint, and upon such limitation by way of trust or otherwise as in the discretion of the said Beatrice Winans may be lawfully devised."
There were other alternative trusts to take effect if Beatrice Winans died intestate, but as they never became operative it is unnecessary to notice them here. The deed also contained provisions for changes in the investment of the *462 corpus of the trust fund and the filling of vacancies which might occur in the trusteeship.
The deed of trust was made in contemplation of the marriage, which occurred a few days after its execution, of Beatrice Winans to the appellant, the Prince of Bearn and Chalais, who is a French citizen engaged in the diplomatic service of his country. A marriage settlement was also made between the Prince and his intended wife prior to their marriage. The object of the deed of trust and marriage settlement were to provide for Miss Winans after her marriage a suitable income and to secure to her the separate enjoyment of her estate.
On June 29th, 1905, after Miss Winans had become the Princess of Bearn and Chalais by her marriage to the appellant, she executed a will in Paris giving him her entire estate. The will, omitting the formal parts, was in the following language: "I give and bequeath to the Prince de Bearn, my husband, the totality of all my property, personal and real, that I may leave at my decease, without exception; consequently I institute him as my universal legatee. I institute equally the Prince de Bearn, my husband, to be my testamentary executor."
On October 17th, 1907, the Princess de Bearn (nee Winans) died at St. Petersburg, Russia, where her husband was serving as secretary of the French Embassy. She left two children surviving her.
On November 7th the appellant wrote from St. Petersburg to Mr. Winans at Baltimore that his wife Beatrice had made a will in his favor, and asked whether he should forward it to America or send it to Mr. Winans' lawyer. In the letter the appellant said:
"Naturally, my intention is to keep Beatrice's fortune for her children, and turn it over to them at their majority, but I want to fulfill all the formalities, to have it deposited under my name and to be able to touch the income quarterly as formerly." *463
Mr. Winans, in response to the appellant's letter, cabled him on November 17th, 1907, to take the will to Mr. Jacobus in Paris, who would have it legally probated and direct the trustees as to the transfer of the securities, and also prepare releases for them. Mr. Jacobus was an American lawyer attached to an advocate's office in Paris, but was not a member of the French Bar. Both he and Mr. Kelley, to whose office he was attached, had been employed by Mr. Winans to represent him in the preparation of the deed of trust and the marriage settlement.
Mr. Winans also at the same time wrote to Jacobus informing him that the will would be brought to his office by the appellant, and telling him where to find the deed of trust, and requesting him to settle up the matter as soon as he could. In Mr. Winans' letter was enclosed one from Mr. Latrobe to Mr. Jacobus informing him that the trustees were ready to transfer the securities "to whoever under the will and the laws of France may be entitled to receive the same."
The appellant on receipt of Mr. Winans' cablegram took the will to Mr. Jacobus in Paris, informing him that he had brought it at Mr. Winans' request. Mr. Jacobus read to him the letters from Mr. Winans and Mr. Latrobe, and discussed the situation with him at some length. He told the appellant that, as his wife had left two children, they were under the French law entitled to a "reserve" of two-thirds of her estate, and he was entitled, under her will, to only one-third of it, and advised that the will be sent to America for probate. The appellant stated that he had understood the effect of the deed of trust to be to confer on his wife the power to dispose of the whole of her estate, but, on being advised by Mr. Jacobus that his wife, having become French through her marriage to him, her estate must be divided according to the French law, he replied that he would leave the matter to Mr. Jacobus and Mr. Winans, as he knew that the latter would do the proper thing.
Jacobus wrote to Mr. Winans on December 6th, 1907, informing him that he had received the will from the appellant *464 and sent it to him by registered mail. He also stated as a first impression that, as the Princess de Bearn had become a French citizen by her marriage, her children had an interest in her estate and promised to examine the matter more closely and give him exact advice later. On December 30th he wrote again to Mr. Winans that further examination had convinced him that the Princess could not dispose of more than one-third of her entire estate because of the fact that she left two children, and quoted to him in support of that view two sections from the French Civil Code restraining the donation by persons of their own property by will. Those sections, when translated, read as follows:
Section 893. "No one can dispose of his property gratuitously except by a donation inter vivos or by a will under the terms hereinafter established."
Section 913. "Donations either by instrument inter vivos or by will cannot exceed the half of the property of the donor if he leaves at his decease an only child; they cannot exceed one-third of his property if he leaves two children, or one-quarter if the leaves three children or more."
Jacobus in the same letter informed Mr. Winans that under the French law the father was the guardian of his minor children and as such had the right to receive and receipt for any property coming to them, and suggested that he and Mr. Latrobe have the French law proven to the Baltimore Court and have it appoint either the appellant or some residents of Baltimore guardians for the appellant's children and let their estate be paid over to the guardian who could execute releases to the trustees.
In reply to the foregoing letter Mr. Latrobe wrote to Jacobus on January 10th, 1908, that Mr. Winans preferred that the appellant should be made guardian of his children and would adopt his (Jacobus') suggestion and when the will was probated apply to the Court to order the payment to the appellant as guardian of his two children their two-thirds of the estate, but that the appellant would have to give a proper guardian's bond. In the same letter Jacobus was requested *465 to prepare two releases to Winans and Latrobe as trustees under the deed of trust, one from the appellant for the one-third of the trust estate coming to him in his own right and the other from him as guardian for his children's two-thirds.
After this correspondence the will of the Princess de Bearn, which had been offered for probate in the Orphans' Court of Baltimore City, was on the 10th of February, 1908, formally admitted to probate and letters of administration c.t.a. upon her estate were granted to Ross R. Winans and Ferdinand C. Latrobe who duly qualified. Those gentlemen then proceeded to administer the estate just as if the railroad bonds, constituting the corpus of the trust estate under the deed of trust, had been the property of the testatrix in her own right. They included those bonds in the inventory returned by them of her personal estate in which they were appraised at $332,880. They charged themeselves with them in their account and the net proceeds thereof, remaining after paying the costs of the administration including a commission of $8,578.15 allowed to the accountants, and certain income paid to the appellant pending the administration was distributed, "under the laws of France" as recited in the account, one-third to the appellant in his own right and the remaining two-thirds to him as the guardian of his two children. Mr. Winans sent his half, of the net commissions allowed to the administrators, to the appellant, but Mr. Latrobe retained his half.
During the period covered by the administration amicable relations existed and friendly correspondence took place between the appellant and Messrs. Winans and Latrobe, and he made no objection to them to the course which they were pursuing but left the conduct of the entire transaction to them, saying to them, through Mr. Jacobus, that he desired to be guided in the matter by their advice.
When however toward the close of the administration Jacobus presented to the appellant for execution a guardian's bond, which Mr. Latrobe had prepared and forwarded to *466 Paris, he demurred and said that the French law did not require a guardian to give bond and if he was to be guardian after that law none ought to be asked of him. He subsequently said to Mr. Archibald, to whose office Jacobus was attached, that he had concluded to follow the advice of a friend with whom he had conferred and take the bond back to America and "talk it over with his father-in-law" (Mr. Winans). The appellant testified that the friend whom he had consulted was Mr. Duquaire, a retired French advocate and an old family adviser, who had told him that the French law required no bond of a guardian but that he could not tell him what he must do in the present situation and advised him to leave it to Mr. Winans.
The appellant then came to Baltimore arriving there after the distribution account of the estate had been stated in the Orphans' Court. He first visited Mr. Winans to whom he stated that he had been informed that it was not necessary to settle the estate according to the French law and that he was entitled to the whole of it, or in any event he ought not to be asked to give a bond as guardian when none was required by the French law. Mr. Winans expressed surprise at the appellant's attitude saying that he had all along supposed that he and Mr. Latrobe were proceeding in entire accordance with his (the appellant's) wishes and had from time to time explained to him through Mr. Jacobus what they were doing and understood that he agreed with Mr. Jacobus that the plan of settling the estate under the latter's advice was the only proper one. The appellant replied that he had not understood the matter and thought it would be wise to have a consultation with lawyers in New York knowing something about international law. Mr. Winans then said that the estate was then so nearly settled that he did not know whether any change could be made in it, and informed the appellant that he would have to see Mr. Latrobe about that.
After that the appellant had several interviews with Mr. Latrobe stating his views on the subject of the estate and his *467 own rights therein substantially as he had done to Mr. Winans. According to the appellant's account, when he stated his views to Mr. Latrobe the latter replied that the trustees had acted according to the directions of Mr. Jacobus who had explained to the appellant what was being done. Mr. Latrobe suggested to the appellant that if he wanted to discuss the matter he might go to see the Chief Judge of the Orphans' Court who would explain it to him. The appellant assenting to the suggestion, Mr. Latrobe took him to the Orphans' Court and introduced him to CHIEF JUDGE BLOCK, stating at the same time what his difficulty was. JUDGE BLOCK informed him that the settlement had been carried out according to the French law and that it was practically impossible to change it, and suggested to him to follow the advice of Mr. Latrobe as he was a lawyer. On the return from the Court to Mr. Latrobe's office the appellant reiterated his desire to have the opinion of New York lawyers on the case when Mr. Latrobe assured him that everything had been done according to the French law under the advice of Jacobus and further said that if the settlement of the estate were delayed he knew Mr. Winans would withdraw from the administration and that everything would be tied up, perhaps for many years. The appellant thereupon ceased his opposition and executed the bond and the estate was distributed in accordance with the account stated in the Orphans' Court.
Mr. Latrobe's recollection of his interviews with the appellant was not very distinct as to details. He remembered the visit to the Orphans' Court but said that the interview with JUDGE BLOCK consisted only of "passing pleasantries of the day" and there was no explanation of the settlement of the estate then made to the appellant. But in a letter subsequently written to the appellant by Mr. Latrobe he said of this visit to the Orphans' Court: "I also had your own verbal assurance, after we had together visited the Orphans' Court of Baltimore City where the Chief Judge had explained *468 to you the distribution, that you were satisfied and accepted the decision of the Court."
JUDGE BLOCK'S recollection of the visit to his Court agreed with that of Mr. Latrobe and he was positive that he had not undertaken to explain to the appellant the nature of the settlement of the estate or asserted its correctness.
After the settlement of the estate, in accordance with the administration account, had been consummated and releases given to Messrs. Winans and Latrobe, the appellant was advised by counsel in New York that the settlement had been erroneously made that he could obtain relief from it by a proper proceeding in equity. He applied to Mr. Winans and Mr. Latrobe to consent to open up the case, and upon their declining to do so he filed the present bill against Messrs. Winans and Latrobe as trustees under the deed of trust and administrators c.t.a. of his wife's estate, making defendants also of his infant children.
The bill, after alleging the facts of which we have given a resume, averred that the appellant, in his ignorance of the law had been induced to abstain from opposing the distribution of the trust property made by the Orphans' Court as part of his wife's estate, by improper influence and persuasion exerted upon him by Mr. Latrobe who was the managing trustee and the legal adviser of his co-trustee, and by the form and appearance of independent advice from the Judge of the Orphans' Court procured by Latrobe to be given to him. It prayed for a construction of the deed of trust, a declaration that the will of his wife constituted a valid exercise of the power of appointment conferred upon her by the deed, and a determination that under the deed and the appointment he became entitled, at her death, to the entire property held by the trustees under the deed. It also prayed that the proceedings of the Orphans' Court attempting to dispose of the property as part of her estate be declared void and that the releases given by him to Winans and Latrobe as trustees and administrators be cancelled and for an account from Mr. Latrobe of the sum retained by him as commissions, *469 and for general relief. The bill acquitted Mr Winans of any thought or desire of gain or advantage to himself in the premises and disclaimed any intention to charge either him or JUDGE BLOCK with any purpose to injure or mislead the appellant.
The answers of the adult defendants while admitting most of the facts of the narrative of events contained in the bill, did not concede the legal operation and effect attributed by the bill to the deed of trust and the will of the appellant's wife, but asserted that those instruments under the circumstances of the case had the opposite effect, and that the administrators appointed by the Orphans' Court had come lawfully into possession of the property covered by the deed and that the proceedings of that Court in relation to the property were not void. They further alleged that the entire disposition of the property was made with the full knowledge and assent of the appellant and in accordance with what the defendants were led by his conduct and statements to believe were his wishes. Mr. Latrobe in his answer denies that he dissuaded the appellant from consulting another lawyer before completing the distribution of the property or that he advised or procured him to ask advice or explanation of the distribution from any Judge of the Orphans' Court or that any such advice or explanation was ever given in his presence to the appellant. Both answers denied the right of the appellant to the relief prayed for in his bill.
We agree with the learned Judge below that, under the deed of trust and the will of the appellant's wife, he became entitled in his own right at her death to all of the property then held by the trustees under the deed. Sec. 323 of Art. 93 of the Code of this State provides that:
"Every devise or bequest purporting to be of all real and personal property belonging to the testator shall be construed to include also all property over which he has a general power of appointment, unless the contrary intention shall appear in the will or codicil containing such devise or bequest." *470
It is also well settled in this State that in such cases the appointee takes title not under the will making the appointment but directly from the donor of the power and "in like manner as if the power and the instrument executing it had been incorporated in one instrument." Conner v. Waring, 52 Md. 732-3; Price v. Cherbonnier,
It is the intent of the donor of a power that governs in its construction (Nevin v. Gillespie,
Even if we were to hold that because the property consists of personalty, its disposition should be governed by the law of France, of which country the testatrix had become a citipen, the French law, in the absence of proof to the contrary, will be presumed to be the same as ours. McClellan v. Kennard,
It being thus apparent that the appellant, upon the death of his wife and the probate of her will, became entitled in his own right to the bonds held by the trustees under the deed, it necessarily follows that the return by them of the bonds to the Orphans' Court as part of his wife's estate and the attempted distribution thereof by that Court as part of her estate were without warrant of law and of themselves operated to confer no title to the bonds upon the persons to whom the distribution was made. So far as the one-third *471
of the bonds awarded to the appellant in his own right is concerned, no injury was done by the distribution, for he was in any event entitled to them under the execution of the power. In so far, however, as the two children may be regarded as having received the two-thirds of the bonds wrongfully awarded to them, they must be treated as having received them subject to the trusts of the deed and as in equity bound to refund them to the appellant, unless he has deprived himself of his right to equitable relief by his acquiescence and concurrence in the settlement of the estate and the distribution of the bonds.Hanson v. Worthington,
The illegal proceedings in the Orphans' Court, under which two-thirds of the fund were awarded to the children of the appellant, together with his failure to oppose them or his acquiescence in them at the time of their occurrence, ought not, in our opinion, to be held to amount to a gift or donation from him to his children of the portion of the fund awarded to them. It is obvious from the whole case that those proceedings were not taken by the trustees or acquiesced in by him with the intention to effect a gift to the children. The proceedings so far as they had relation to the children were plainly intended to secure the award to them of only that to which they were wrongly supposed to be entitled in their own right as a matter of law, and not as a gift from their father.
The appellant did, it is true, in his letter announcing the death of his wife to her father, express an intention on his part to keep his wife's fortune for her children and turn it over to them at their majority. That statement merely declares the future disposition which he intended to make of property which he then supposed to be his own, and it was never acted upon on the assumption that it gave authority to the trustees to make a gift of the fund as his agents or for his account. They acted throughout upon the mistaken view that the children were entitled under the French law to two-thirds of the fund. *472
We do not regard as sound the appellees' contention that it was necessary or at least proper for the trustees to invoke the aid of the Orphans' Court in the distribution of the trust fund because it was liable for the debts of the appellant's wife or the payment of the collateral inheritance tax. In the case ofPrice v. Cherbonnier,
Nor do we think that, under the testamentary system in force in this State, when the donee of a general power of appointment over personalty executes the power by will and appoints an executor, he is ordinarily the proper person to administer and discharge the fund. Such is certainly not the case when the instrument conferring the power conveys the fund to trustees and directs them to dispose of it to the person appointed by the donee of the power. The only cases cited by the appellees as direct authorities upon this branch of the case are English ones. We have examined them, and in every instance, with one exception, there were special circumstances affording reasons for approving the payment of the fund to the executor of the donee of the power.
Courts of equity, and not the Orphans' Courts of this State are the tribunals having jurisdiction over trusts and their construction and administration. Woods v. Fuller,
They adopted the erroneous plan of following the suggestion of an adviser who proved to be unfamiliar with the laws of this State applicable to the discharge of the duties which it was incumbent upon them to perform. They were wrongly advised and as a result made unauthorized payments of portions of the trust funds in their hands. They acted in entire good faith and in accordance with what they supposed to be the wishes of the appellant, but, as was said in Owings v. Rhodes, supra, at pages 416-417:
"The rule is well settled in this State and in England that when there has been an unauthorized payment of funds held in a fiduciary capacity the loss must fall on him who thus makes the payment, and not on an innocent party. Referring to such payments made by executors, LORD REDESDALE said: `I have no doubt the executors meant to act fairly and honestly, but they were misadvised; and the Court must proceed not upon the improper advice under which an executor has acted, but upon the acts he has done. If under the best advice he could procure he acts wrong, it is his misfortune, but public policy requires that he should be the person to suffer.' Doyle v. Blake, 2 Sch. Lef. 243. This rule has received the sanction of the Courts of equity in Maryland, and numbers of cases might be cited in which it has been rigidly enforced. Green v. Putney, 1 Md. Chy. 262; Murray v. Feinour, 2 Md. Chy. 418."
Although we regard the conduct of the trustees in the case before us, in making the distribution of the trust fund upon the advice of Mr. Jacobus, instead of doing it under the direction of a Court of equity, as within the operation of the doctrine thus announced in Owings v. Rhodes, they will for *474 reasons to be hereinafter mentioned not be called on to suffer any pecuniary loss therefrom.
In order to ascertain to what extent, if at all, the appellant by his intercourse and transactions with the appellees Winans and Latrobe forfeited or impaired his right to the relief for which he now asks it is essential to determine, at the start, in what attitude they stood toward each other. The appellant claims that those appellees continue to be trustees under the deed until they pay over the trust fund to him as the appointee under the power conferred upon his wife by the deed, and that therefore they stand in a fiduciary relation to him, and he is and has been entitled to receive from them the treatment due from trustees to their cestui que trust.
They, on the other hand, insist that upon the death of the appellant's wife all of the purposes of the trust created by the deed were accomplished, and it came to an end and they became simply custodians of the fund, and that they tendered themselves ready to deliver it to the parties entitled to it, and did in fact deliver it with the appellant's full assent and approbation to the persons to whom both he and they were advised by counsel that it belonged. They further contend that the payment and distribution of the fund thus made to him and his children constituted a compromise or settlement binding upon him, even if in making it the parties acted under a mistaken view of their legal rights.
It has repeatedly been held by this Court to be the firmly settled law that where an estate is given to trustees in trust to pay the income to a person for life and at his or her decease merely to hold the same for the use of other named persons, the trust ceases upon the death of the life tenant, because its purposes have been accomplished. In such case where the trust property consists of realty, the Statute of Uses executes the use and vests the legal title in the party to whom the estate was limited at the expiration of the life estate, and a somewhat similar result occurs when the estate consists of personalty, unless there be an apparent intention *475
to the contrary, although the Statute of Uses is, strictly speaking, not applicable to personal property. Long v. Long,
The authorities agree however that in such cases so long as there remain any active duties to be performed by the trustee the trust continues. In Long v. Long, supra, where the devise was of real estate, it was held that a direction in the will, that the shares given in remainder should be equally divided, merely meant that the interests of the remaindermen should be equal and required no active agency of the trustee to ascertain those interests and therefore did not keep the trust alive or prevent the estate in remainder from vesting.
Whether a devise of personalty in trust for one person for life with remainder to another manifests an "apparent intention" that the trust shall continue after the death of the life tenant depends upon the terms of the will creating the trust. When that intention can be plainly gathered from the will the trustee can only be discharged from his trust by paying over the fund to thecestui que trust in remainder. Hanson v. Worthington, supra;Denton v. Denton,
Turning now to the deed creating the trust in the present case we find that it conveys the bonds to the trustees to be held by them "upon the trusts hereinafter declared." It then specifies, first the trust "to receive the interest and income *476 thereof" and makes disposition of it as therein directed to the daughter Beatrice during her life. In the next paragraph it provides: "And upon the further trust upon the death of the said Beatrice Winans to dispose of the capital of the fund hereby created in such manner and to and amongst such person or persons and in such amounts" and "upon such limitation" as Beatrice might by her will direct. Other alternative trusts then follow each in a separate paragraph, with which we are not now concerned.
A fair construction of that instrument, according to its general tenor and the ordinary meaning of the language used in it, requires us to hold that the grantor did not intend the active duty of the trustees to cease upon the death of his daughter but intended also to impose upon them the further active duty of disposing of the capital of the trust fund, upon her death, to such persons and in such manner as she might by her will appoint. If the trustees under this deed had been required under the provisions of the Code to give bond for the due execution of their trust, and then, after faithfully discharging their duties so long as the life tenant lived, had at her death paid over the capital of the trust estate to a stranger or squandered it, can it be doubted that such wrongful payment or diversion of the fund would have amounted to a breach of trust for which their bond would have been liable?
The fiduciary relation of trustees and cestui que trust between Winans and Latrobe and the appellant must be regarded as having existed during the occurrence of the transactions between them relative to the disposition of the corpus of the trust fund and the propriety of the transactions must be determined in the light of that relation. In view of the existence of that relation between the parties we do not think that the legal principles and propositions, governing settlements and compositions of disputed claims, which are so fully and ably expounded upon the brief of the distinguished counsel for the infant defendants, should be so applied to this case as to hold that the acts and conduct of the appellant preclude *477 him from recovering the portion of the trust fund which was erroneously distributed to his children and having the releases which he gave therefor set aside. Without reviewing in detail the acts and conduct of the several participants in the erroneous distribution made of two-thirds of the trust fund we have come to the conclusion that taken together they show that the parties, instead of resorting to a competent tribunal for direction, mutually relied upon mistaken advice and fell into a common error by means of which much valuable property undoubtedly belonging to the appellant was withheld from him and awarded to his children who had no right to it. That property is still in existence and within reach of the Court and it is but equitable that it should be restored to him.
The mistake thus made was it is true in a certain sense one of law, although in its most important feature it was one of private right of ownership which was said by LORD WESTBURY, in Cooper v. Phipps, L.R., 2d Eng. Ir. App. 149, to be a matter of fact although it was the result of matter of law. The general rule, often recognized by this Court, undoubtedly is that money paid, with a full knowledge of all the facts of the case, under a mistaken conception of the law cannot be recovered back in an action at law. Nor will equity afford relief in such cases in the absence of special circumstances entitling the party to equitable aid. Nor will contracts resting upon a proper consideration fairly made with a full knowledge of the facts under a mistake or ignorance of the law, be set aside in equity in the absence of special grounds of equitable relief.
In the present case there was no payment of money by the appellant under mistake of law, and the fact of the existence of the fiduciary relation to which we have referred opens all contracts and transactions, resulting to his disadvantage, made between him and his trustees relative to the trust estate, to the inspection and review of a Court of Equity. In Pomeroy inEquity, where transactions between trustees and cestui quetrust are treated as forming an exception to the *478 rule concerning mistake of law, the established doctrine of equity in reference to them is well stated, in 3rd Edition, Vol. 2, page 1494, as follows:
"Sec. 848. A particular application of the foregoing rule requires a special mention. Where an ignorance or misapprehension of the law, even without any positive, incorrect or misleading words or incidental acts, occurs in a transaction concerning the trust between two parties holding close relations of trust and confidence, injuriously affecting the one who reposes the confidence, equity will in general relieve the one who has thus been injured. The relations of trustee and cestui que trust,
guardian and ward, and the like, are examples. The relief is here based upon the close confidence reposed — upon the duty of the trustee to act in the most perfect good faith, to consult the interests of the beneficiary, not to mislead him and not even to suffer him to be misled, when such a result can be prevented by reasonable diligence and prudence." Citing Ex parte James, L.R. 9 Chy. 609; Hall v. Cotterson,
And in Perry on Trusts an equally well-established principle of equity is thus stated: "But all agreements or contracts between trustee and cestui que trust are looked upon with suspicion by the Court and are closely scrutinized; therefore, in order that the release, confirmation, waiver or acquiescence may have any effect, the cestui que trust must have full knowledge of all the facts and circumstances of the case; he must also know the law and what his rights are, and how they would be dealt with by the Court."
Although the trustees in the present case acted in good faith, it is apparent from the record that the appellant reposed great confidence in them, and, on the representations of their counsel, Mr. Jacobus, who generally formed the channel of communication between them, he acceded to the incorrect and to him highly injurious scheme of distribution of the trust estate adopted by the trustees and acquiesced in its successive steps until the question of the guardian's bond arose. Having by that time grown stronger in the belief *479 that he was entitled to the entire estate, he came to Baltimore, and had the interviews with his trustees to which reference has already been made. The evidence as to what took place at those interviews is conflicting, but it satisfies us that he was, to some extent, dissuaded by Mr. Latrobe, who was the managing trustee, from delaying or resisting the consummation of the distribution as originally proposed, and was induced, in part at least, to concur in it by an apprehension produced by Mr. Latrobe's statements that the opposite course on his part would give offense to the other trustee, who was father-in-law.
Upon the whole case as presented by the record, we think its disposition should be controlled by the principles announced by this Court in Hanson v. Worthington, supra. In that case the executor and trustee, under a mistaken construction of the trust, had wrongfully paid over the trust fund to the residuary legatees instead of to the ones who were legally entitled to it, and had taken releases from all of the legatees. Subsequently and after the lapse of a number of years the legatees to whom the trust fund should have been paid filed a bill against the trustee and the legatees who had wrongfully received the trust fund, asking for a correction of the error and a redistribution of the trust fund in a legal manner. One of the defenses set up to the bill was that the plaintiffs had lost their right to relief by their laches or their acquiescence and concurrence in the settlement and distribution of the fund.
The Court in that case, after determinining that the defences of laches or acquiesence and concurrence in the wrongful distribution had not been made out, said upon the case at large:
"The bequest in the will is admitted to be valid, and the accounts exhibited show conclusively that it has not been paid to the parties entitled, owing to a mistake of the executors in the construction of the will. Those accounts show also the manner in which and the persons to whom the fund has been improperly paid. The parties who have received *480 wrongfully, as well as the executor and trustee, are alive and in Court subject to its decree; and we see no sufficient reason why the Court may not do simple justice by an equitable adjustment of the claims of the parties and a correction of the errors which have been committed."
Applying the principles thus laid down to the present case we are of opinion that the appellant is entitled to a decree setting aside the distribution of the fund made by the Orphans' Court and cancelling the releases given by him in his own right and as guardian to the trustees and administrators, and that he is further entitled to have the two-thirds of the trust fund which were distributed to his two children, awarded and paid over to him absolutely and to hold the same in his own right.
Inasmuch however as the appellant did not use the requisite diligence to definitely ascertain his legal rights to the trust fund until after the trustees had in good faith, though erroneously, completed the distribution, and so acted toward them as to lead them to believe that he concurred in their views, we will not require them to account for or refund to him either the costs incurred in and about the distribution or the commissions allowed to them as administrators in the Orphans' Court, but will permit Mr. Latrobe to retain his portion of such commission, it being conceded that Mr. Winans gave his portion thereof to the appellant prior to the institution of this suit. For the same reason we will direct the costs of this case to be paid out of the portion of the fund awarded to the appellant before turning the same over to him.
We will accordingly reverse the decree appealed from and remand the cause for further proceeding in conformity with the views expressed in this opinion.
Decree reversed and cause remanded for further proceedings,the costs in this Court and below be paid out of the trust fund. *481
