By Fred Franke
Franke, Sessions & Beckett LLC
In probably the last decision before the “new” Maryland Trust Act fully kicked in, the Court of Appeals addressed how courts traditionally determined settlor’s intent under the Maryland common law. Vito v. Grueff, No. 75, September Term, 2016 (filed May 22, 2017).
Although the Vito court seemed to rely on the trust construction rules that governed testamentary trusts, the trust in question was an intervivos trust established by a father of four children. The trust granted a seemingly broad power of appointment exercisable by a majority of the children. Three of the children exercised the power of appointment to terminate the fourth child’s rights in the trust.
Essentially, the court looked at the trust as a whole – not just the clause granting the power of appointment – to determine that the settlor intended to benefit all four of his children. Accordingly, the broad power of appointment could not be interpreted to authorize terminating one beneficiary’s interest in the trust regardless of how that particular clause was written.
The Vito court used the so-called plain meaning rule to ascertain the intent of the settlor to reach its result. This meant that the court looked at the “four corners” of the trust to understand the settlor’s expressed intentions, read in light of the surrounding circumstances when the document was made.
This approach governs will interpretation and, under traditional Maryland common law, the interpretation of testamentary trusts. Much more evidence of settlor intent could be used when ascertaining a settlor’s intentions under an intervivos trust. Shriners Hospital for Crippled Children v. Md. National Bank, 270 Md. 564 (1973). Basically, the Vito court reached the correct results using the wrong analysis.
The Maryland Trust Act swept away the confusion that has always arose from two different standards for establishing settlor intent. Under Maryland Estates & Trusts Art. § 14.5-415, a court may reform the terms of a trust, even if unambiguous, to conform the terms to the settlor’s intentions upon a showing by clear and convincing evidence that the written trust document does not properly express the intention. (Emphasis added). The state of mind exception to the hearsay rule permits settlor declarations and conversations to be considered. D.A.R. v. Goodman, 128 Md. App 232 (1999); YIVO Institute for Jewish Research v. Zaleski, 386 Md. 654 (2005). This new rule governs testamentary and intervivos trusts.
Wigmore called the plain meaning rule “simply the meaning of people who did not write the document” because it precluded a broad range of extrinsic evidence. Wigmore would have approved of the new Maryland approach which moves the inquiry beyond the written document.