192 Md. 342, 64 A.2d 258, 7 A.L.R.2d 1078
On April 16, 1928, John R. Ward of Baltimore City executed and delivered a deed of trust to the Baltimore Trust Company conveying stocks and bonds to the trustee.1 Although the record does not show the value of this personal property at the date of the deed of trust, the corpus of the estate had grown to approximately $32,500 by September 26, 1945.2 John R. Ward died on October 27, 1928, and Frank R. Ward, who received a life estate under the deed of trust, died on September 26, 1945.3
In 1934 the Baltimore Trust Company was removed as trustee by an order of the Circuit Court No. 2 of Baltimore City, and the Baltimore National Bank was appointed substituted trustee.4 The deed of trust granted the trustee full power to manage, sell, reinvest, and otherwise deal with the trust estate while collecting dividends and profits and paying the entire net income in monthly installments to the grantor during his natural life.5 It further authorized the grantor to withdraw up to $1,500 per year from the original principal by written instruments delivered to the trustee, with any withdrawn amounts reducing the principal accordingly.6
From and after the grantor's death the trustee was directed to pay net income in monthly installments to Frank R. Ward for life and thereafter to the lineal descendants per stirpes from time to time living of Frank R. Ward until the death of the last surviving child of Frank R. Ward who had been living at the grantor's death, at which point the trust would terminate and the corpus would be distributed in equal shares to the then-living children of Frank R. Ward and the issue per stirpes of any deceased child.7 The deed also contained a spendthrift provision applicable after the grantor's death and authorized the trustee to accept additional funds, with the grantor retaining an unlimited right to withdraw any additions during his lifetime.8
Frank R. Ward, a New Jersey resident, left a will devising his entire estate to his wife Olive Maria Ward, who survived him, and he was survived by three children: Ruth E. Ward, David E. Ward, and John F. Ward.9 Olive M. Ward served as executrix of Frank R. Ward's estate and as administratrix d. b. n. c. t. a. of John F. Ward's estate.10 By his will John R. Ward left all his property to Frank R. Ward, who survived him.11 In 1946 the Baltimore National Bank filed its bill of complaint in the Circuit Court of Baltimore City seeking construction of the deed of trust and naming all living parties who might have an interest as well as the administratrix d. b. n. c. t. a. of John R. Ward's estate.12
James J. Ryan was appointed guardian ad litem for persons not in being whose interests might be affected.13 Answers were filed by the guardian ad litem and the parties in being, testimony was taken, and the chancellor entered a decree holding some future interests valid and others void.14 The guardian ad litem appealed, and cross-appeals were filed by the other parties.15
Whether the period for determining the validity of future interests under the deed of trust is measured from the date of the deed's execution and delivery or from the date of the grantor's death?16
Under the rule against perpetuities an interest must vest within lives in being at the time of the instrument plus twenty-one years and the period of gestation.17 For a deed the measuring date is the execution and delivery of the instrument.18 If the settlor retains an absolute power to revoke or destroy the entire trust estate at will, the period is measured from the settlor's death because the future interests remain destructible until that time.19
Yes. The withdrawal provision in the deed of trust executed and delivered by John R. Ward on April 16, 1928, permitted only a non-cumulative annual withdrawal of fifteen hundred dollars from the original principal and did not allow immediate destruction of the entire estate.20 The grantor could not have eliminated the trust corpus in a single act or at any one moment; complete destruction would have required successive annual withdrawals spanning at least twenty-two years.21 Because the power was limited and gradual rather than absolute and immediate, the future interests are not regarded as destructible at the settlor's pleasure in the sense required to postpone the measuring date.22
The authorities establish that only a complete and presently exercisable power of revocation removes the interests from the operation of the rule measured at the deed's effective date.23 Here the spendthrift clause and the trustee's management powers remained in force, and the limited withdrawal right applied solely to the original corpus while additions could be withdrawn without limit.24 Consequently the validity of the future interests must be tested from April 16, 1928, the date the deed became operative, rather than from the grantor's death on October 27, 1928.25
The period for determining the validity of future interests under the deed of trust is measured from the date of the deed's execution and delivery.26
Whether the income interests to lineal descendants per stirpes after the death of Frank R. Ward constitute a single class gift?27
A gift to a class is treated as a single gift when the instrument directs distribution to a described group without dividing the estate into separate shares for distinct subgroups.28 The number of takers and the quantum of each share remain uncertain until the class closes.29 When a gift is to one class and is invalid as to any member, the entire gift fails.30
Yes. The deed directs the trustee to pay net income to the lineal descendants per stirpes from time to time living of Frank R. Ward until the death of the last surviving child of Frank R. Ward who was living at the grantor's death, thereby creating one class whose membership is defined by that single phrase and whose shares are determined only at termination.31
Although three children of Frank R. Ward were alive when the deed was executed, the instrument does not name them or allocate distinct portions to their respective lines, and no separate shares are carved out for the children of Ruth E. Ward, David E. Ward, or John F.
Ward.32 Because the gift is to a single class, the possibility that a lineal descendant born more than twenty-one years after the death of Frank R. Ward could enter the class renders the entire income gift void under the rule against perpetuities.33 The chancellor therefore erred in treating the interests as three separate class gifts since the controlling language does not fix the number of shares or close the class upon the death of any particular child of Frank R.
Ward.34
The income interests to lineal descendants per stirpes after the death of Frank R. Ward constitute a single class gift.35
Whether the remainders in the corpus following termination of the trust are valid?36
Remainders following a trust must vest in interest no later than twenty-one years after lives in being at the creation of the interest.37 A remainder limited to take effect upon the death of the last surviving child of Frank R. Ward who was living at the grantor's death may vest beyond the permitted period if that last survivor lives more than twenty-one years after the death of Frank R. Ward.38
No. The deed provides that the trust terminates and the corpus is distributed upon the death of the last surviving child of Frank R. Ward who was living at the death of John R. Ward.39 It was possible at the time of the deed's execution that a son of Frank R.
Ward could be born before John R. Ward's death, survive Frank R. Ward, and live more than twenty-one years thereafter, thereby postponing termination and vesting of the remainders beyond the period allowed by the rule.40 The remainders are therefore void.41
The same remoteness that invalidates the income interests to the single class of lineal descendants also invalidates the remainders in corpus that are limited to take effect only upon the death of the last qualifying child.42 No saving construction can rescue the remainders because the measuring lives and the twenty-one-year period are exceeded on the face of the instrument.43
The remainders in the corpus following termination of the trust are invalid.44
Whether the trust has terminated such that the property should be distributed directly to the estate of Frank R. Ward?45
When all future interests created by a deed of trust are void under the rule against perpetuities, the trust terminates and the corpus reverts to the settlor's estate or passes under the settlor's will to the person entitled to the residue.46
Yes. Because the income interests after the death of Frank R. Ward and the remainders in corpus are both void, the trust created by the deed of April 16, 1928, has no valid purpose remaining after the death of Frank R. Ward on September 26, 1945.47
John R. Ward's will left his entire estate to Frank R. Ward, who survived him; therefore the trust property belongs to the estate of Frank R. Ward.48
Distribution may be made directly by the substituted trustee to Olive M. Ward as executrix without the necessity of administration through the estate of John R. Ward.49 The spendthrift provisions and the trustee's management powers do not preserve the trust once the beneficial interests have failed.50
The decree of the chancellor is reversed and the case remanded for entry of an order directing immediate distribution to the estate of Frank R. Ward.51
The trust has terminated and the property should be distributed directly to the estate of Frank R. Ward.52