COLLINS, J., delivered the opinion of the Court.
This is an appeal from an order of the Circuit Court for Cecil County overruling the exceptions of Alice L. McDaniel, appellant, to an account filed by James W. Hughes, as trustee.
For a proper understanding of this case, it is necessary that the facts be recited in detail. In 1920 Marshall D. McDaniel, now deceased, who was an excessive drinker of alcoholic liquors, sold his remainder interest, then contingent, in a tract of land known as Shady Beach, consisting of 1,368 acres near North East in Cecil County, Maryland, for $500.00. He later sought to get back his estate. After extended litigation he succeeded in doing this. In order not to make a similar mistake, in January, 1932, he made a deed of trust of this estate, including that part known as the Cameron Farm consisting of 125 acres, more or less, to his brother, Alexander H. McDaniel, of Wilmington, Delaware, reserving unto himself the power to dispose of it by will. Within
On May 23, 1939, Alexander H. McDaniel, the trustee, received an offer of $8,400.00 for the Cameron Farm from the Arundel Corporation and on July 12, 1939, he received offer of 8,640.00 from John J. Monaghan Company, realtors, of Wilmington, Delaware. On July 26, 1939, he filed a petition through Albert Constable, solicitor, in which he stated that there were no assets in his hands and that he had been obliged to advance from his own funds money for the support of the cestui que trust. He also recited the aforesaid offer from Monaghan and asked authority of the court to make the sale. Attached to that petition was an affidavit from three real estate men in Cecil County stating that in their opinion this tract of land was worth $6,000.00. A show cause order was signed by the chancellor and a copy served on Marshall D. McDaniel and Alice L. McDaniel, his wife. Marshall and Alice answered this petition through Henry A. Warburton and James W. Hughes, solicitors, reciting, among other things, that the offer set forth in the petition was in fact the offer of Alexander H. McDaniel and that as trustee he should not be authorized or permitted to sell any part of the trust estate to himself. As a result of that answer the chancellor refused to order the sale.
On October 23, 1939, Marshall and Alice, by Henry A. Warburton and James W. Hughes, solocitors, filed a petition reciting that they had received from Albert E. Fletcher a bona fide and definite offer of $10,000.00 for the Cameron Farm; that it would be to the benefit and advantage of said trust estate to accept said offer, as there was a mortgage on the tract, of which the Cameron
On January 17, 1940, an order was signed by the chancellor reciting that Alexander McDaniel had asked leave to retire and resign the trust. The chancellor ordered that Alexander be released and discharged and he appointed James W. Hughes and Albert Constable as trustees, in the place and stead of Alexander "to perform the trust reposed in said retiring Trustee under the Deed of Trust aforementioned insofar as they have not yet been performed by the retiring Trustee." On January 19, 1940, Hughes and Constable, as trustees, filed a report that they had accepted the offer of $10,000.00 by Fletcher for the Cameron Farm and had received $1,500.00 as part of the purchase price. This sale was ratified by the court, after order nisi, on April 10, 1940. On July 21, 1941, Hughes and Constable, as trustees, filed a petition in which they set out the ratification of the sale to Fletcher, that Fletcher had not paid the balance of $8,500.00 due, and that they had advised Fletcher that it would be necessary for him to comply with the terms of sale not later than July 1, 1941, but he had not so complied. They asked the court to pass an order "in the premises as may be meet and just." A show cause order was passed on that petition ordering Fletcher to show cause on or before August 15, 1941, "why the sale mentioned in said petition and ratified on April 10, 1940, should not be set aside upon such terms as this court may prescribe."
The testimony shows that on October 9, 1941, the certificate of incorporation of the Cecil Land Corporation was approved by the State Tax Commission. On October 20, 1941, Constable and Hughes, as trustees, conveyed the Cameron Farm to Fletcher. On the same day Fletcher and wife executed a deed of this farm to
Alexander McDaniel, called as a witness by the appellant, testified that while he was trustee he had negotiations with the Arundel Corporation which had paid the sum of $22,000.00 to the life tenants and to him as trustee for gravel dug from the farm. Arundel stopped digging in 1935 or 1936, several years before Alexander resigned as trustee.
John A. Engar, called as a witness by the appellant, testified that he was a superintendent of floating equipment of the sand and gravel department of the Arundel Corporation. He also testified that his company paid Fletcher, Robinson and Hughes, trustees, between April 30, 1942, and May 31, 1948, $55,149.85 for sand and gravel.
Walter F. Cooling, produced as a witness by the appellee, testified that in 1941 both he and Fletcher were employed by the Conowingo Power Company. Fletcher told him of the proposed purchase of the Cameron Farm and offered him a half interest if he would raise the sum of $8,500.00. Cooling was unable to get this money and Fletcher tried elsewhere. Fletcher approached Cooling again and told him he had a certain time in which to make settlement. Ermon Taylor, the father-in-law of Cooling, Argus Robinson, and Dr. Wallace Johnson, were approached about the property. Fletcher then called a meeting where financial arrangements were made for the formation of the Cecil Land Corporation. Cooling said he put $1,400.00 in it and received a one-sixth
Argus F. Robinson, at the time of the hearing in this case, was president of the Peoples Bank of Elkton. He testified that early in 1941, when he was cashier of the bank, Fletcher approached him with the idea of participating in the purchase of the Cameron Farm and wanted help in financing. He was told that Fletcher had made a deposit on the property and needed money to complete the purchase because a man in New York, who was to finance the deal, had died. Five people were interested as a group in the purchase and Fletcher suggested that Hughes buy the remaining interest and Hughes was retained by this group to form the corporation. At the beginning of the transaction there was no idea that Hughes would participate. Each of the six participants paid $1,000.00 for the stock and advanced the corporation $400.00. He said at a subsequent date in 1949 a portion of the property was sold to John J. Prial and others. Mr. Mosebach, the present attorney for the appellant, represented Prial at that time. Mr. Mosebach made an objection to the title. The matter was discussed with Marshall and Alice McDaniel in the presence of the notary, Fletcher and himself, and the McDaniels executed a quit claim deed of the farm. The McDaniels seemed very willing to do this. The consideration of the deed was $1.00 which was not paid, but later the trustees paid the McDaniels $100.00 as a gift. The transaction with the McDaniels was not hurried in any respect. They chatted a few minutes before actually signing the quit claim deed. The profits from
James W. Hughes, testifying as a witness for the appellant and in his own behalf, told of the difficulty in getting Fletcher to complete the purchase of the farm for $10,000.00. He said that in September or October of 1941 Fletcher and Robinson told him an attempt was being made to organize a local company to purchase the property. He was invited to become a stockholder to the extent of a one-sixth interest, five-sixths of the stock of the corporation having already been subscribed. Robinson was of the opinion that the farm could be divided and sold as water front lots. He testified that he was employed to prepare the charter of the Cecil Land Corporation while he was co-trustee of the McDaniel estate and that he contributed $1,400.00 to the corporation. He said he knew when he prepared the articles of incorporation that Fletcher intended to convey to the corporation. Several months after the corporation purchased the property it was decided to open negotiations with the Arundel Corporation. Prior to that time he had had no contact with Arundel. As a stockholder of the Cecil Land Corporation, he shared in the monies received from Arundel. He further testified that the McDaniels were in constant communication with him and Albert Constable, the other trustee, and were fully informed of all that was taking place. They were aware of and entirely agreeable to the transaction when made and made no objection whatever to it. The sale to Fletcher was made "on the rather strong urging" of Marshall and Alice. This sale was entirely bona fide. No one else had any interest in it at that time. He did not have any interest in the transaction as a purchaser of any interest until the group considering the incorporation had decided to carry out the program, and asked him to prepare the papers for them and finally asked him to purchase the remaining one-sixth interest in that corporation. He did not participate in any way in the financing previous to that time. This was more than a year after the sale had
Albert E. Fletcher, being in Wilmington, Delaware, would not come to Cecil County to testify. His deposition was taken in Wilmington. In the deposition he said he made the offer of $10,000.00 for the property and the deposit of $1,500.00, intending to purchase the property for himself. The party in New York, who was to finance him, died. No one in Maryland knew anything about it until he received a letter from Hughes stating that the court had waited a year and he had to decide definitely about the property. He then started to talk to people in Maryland about it, first with Walter Cooling. He then tried to get a loan at the Peoples Bank from Argus Robinson and was turned down. He finally negotiated with Cooling and Robinson personally for the sale of the property to the Cecil Land Corporation. He said at the time the show cause order was served on him he received a call from Alexander McDaniel and was advised that Alexander could finance the deal for him. He refused Alexander's offer because Alice McDaniel did not want anything to do with Alexander. He said that he, Robinson and Cooling considered forming the corporation for the purchase of the land. After that time he contacted Hughes about forming the corporation, which was the last resort. He had wanted it for himself but "it didn't work out." Hughes was the last one to take an interest in the corporation. He further testified that Alice had told him there was gravel around the farm but that no one knew how much. Before he obtained the deed, but after the sale was ratified by the court, there had been negotiations with Arundel. Alice McDaniel had told him about the Arundel Corporation and about its offer of $7,500.00 for the farm. He further testified that he was present with Robinson and the notary when the quit claim deed was executed. The McDaniels seemed very willing to sign it. No persuasion was necessary. He mentioned at one time to Hughes that "it would be nice if we could put them down for a
A trustee is not permitted to place himself in such a position that the interest of the beneficiary and his own personal interest do or may conflict and the question of whether or not such a position has resulted in a benefit or loss to the beneficiary is not permitted to be inquired into. Mangels v. Tippett, 167 Md. 290, 173 A. 191. The law applicable to this case is stated in the former case between the parties hereto, 202 Md. 626, supra, where it is said: "It is an elementary principle of law that in the execution of a trust the trustee is bound to comply strictly with the directions contained in the instrument defining the extent of his authority and the nature of his powers and duties. Moreover, a trustee is prohibited from placing himself in any position where his self-interest will or may conflict with his duties as trustee, or from using the advantage of his position to gain any benefit for himself at the expense of the beneficiary of the trust. It is accordingly an accepted rule in equity that the presumption is against the validity of any purchase by a trustee from the beneficiary or any other transaction with the beneficiary which might result in a benefit to the trustee. Pairo v. Vickery, 37 Md. 467, 485; Cleveland Clinic Foundation v. Humphrys, 6 Cir., 97 F.2d 849, 121 A.L.R. 163, 172; Magruder v. Drury, 235 U.S. 106, 35 S.Ct. 77, 82, 59 L.Ed. 151. Of course, it is possible for the trustee to overcome the presumption of invalidity. The transaction will be sustained by a court of equity if the trustee shows by convincing evidence that the beneficiary had full information and complete understanding of all the facts concerning the property and the transaction and gave free consent, and that the amount paid was fair and adequate, and that he made the beneficiary a perfectly honest and complete disclosure of all the information which he had concerning the property, and that he has obtained no undue or inequitable advantage, and especially, but not necessarily, if it appears that the beneficiary acted in the tranaction upon independent information and advice of some intelligent
As to this rule, it was said by Judge Parke in the Case of Harlan v. Lee, 174 Md. 579, 199 A. 862: "* * * * the rule is not applicable if the purchase be made to protect the interests of the cestuis que trustent; (Spindler v. Atkinson, 3 Md. 409, 423, 424), or with the agreement of the cestuis que trustent, if these be fully advised of their interest and rights and have adequate knowledge or information of the relevant and material circumstances of the matter (Schockett v. Tublin, 170 Md. 117, 126-127, 183 A. 521; 3 Bogert on Trusts and Trustees, sec. 484, p. 1521) or if the cestuis que trustent be barred from their right to avoid the sale by subsequent ratification, acquiescence, or laches (Mason v. Martin, 4 Md. 124, 134-137; Hoffman Steam Coal Co. v. Cumberland Coal & Iron Co., 16 Md. 456, 508; Read v. Reynolds, 100 Md. 284, 292, 293, 59 A. 669; Love v. Rogers, 118 Md. 525, 532, 533, 85 A. 771; Whitelock v. Dorsey, 121 Md. 497, 502, 88 A. 241; Hammond v. Hopkins, 143 U.S. 224, 12 S.Ct. 418, 36 L.Ed. 134), or if the fiduciary be authorized by staute, by instrument creating the trust, or
Under all the evidence here the appellant and her husband were the motivating forces in casuing the farm here in question to be sold to Albert Fletcher. At that time the trust estate was without productive assets and, as stated by the appellant and her husband in their petition to sell the farm, there was a mortgage on the property, of which this farm was a part, in the amount of $7,500.00. Alexander McDaniel was obliged to advance his own money for the support of appellant and her husband. As stated by the chancellor in his opinion, this money was needed to pay off an over-due mortgage. Before the resignation of Alexander McDaniel as trustee, he filed the petition which stated that said offer from Fletcher was received after an advertisement of the 125 acres. The then chancellor ordered that the offer of Fletcher be accepted. Fletcher, after interviewing and negotiating with many people, had been able to raise all except one-sixth of the balance of the purchase price. Hughes was then solicited and until that time he had no intention of being in any way concerned with the purchase. Hughes so testified without contradiction and he is substantiated by Robinson and Fletcher. It is very porbable that, if Hughes as the last subscriber had not put up the $1,400.00, someone else would have done so. The appellant contends that Hughes should have forfeited the sale to Fletcher and operated a gravel business for the trust. As pointed out by the chancellor, the war began shortly after the conveyance to the corporation. The large profits which were made were "hindsight". After having been ratified by the court, this sale could not be forfeited unless Fletcher failed to pay the purchase money, which he apparently would have been able to do regardless of the contribution made by Hughes. There appears to be no conflict here between the position of the beneficiaries of the trust and Hughes. Hughes merely assisted in carrying out the
Furthermore, the appellant here does not seek to avoid the sale. In fact, she and her husband both ratified it.
Order affirmed, with costs.