By the last will and testament of Jane S Whitelock, deceased, George Whitelock, her son, and Daniel B. Dorsey, her son-in-law, were appointed trustees of the trusts created by said will, with power, under the seventh article thereof, "in their discretion, from time to time, to sell, dispose of, assign and convey absolutely or otherwise the whole or any portion or portions of the property or securities in which the trust funds or any part thereof may then be invested," and to invest and hold the proceeds thereof upon the same trusts as the property sold had been held. Under the same article the testatrix expressly directed that the trusts sould be administered under the supervision of a court of equity. *Page 500
On the 22nd day of November, 1911, upon the petition of the trustees named in the will, the Circuit Court of Baltimore City passed the usual order, assuming jurisdiction of the trusts, and directing the trustees to administer the trusts under its direction and supervision.
On February 11th, 1913, Daniel B. Dorsey filed, in the proceeding for administering the trusts, a petition against his co-trustee. The appellant filed a demurrer to the whole of the petition, but the Court overruled it, with leave to answer. The appellant refused to answer and has appealed from the order.
The allegations of the petition, which by the demurrer are to be assumed true if well pleaded, state that a portion of the trust estate, held by the petitioner and his co-trustee, consists of twenty-six acres of land in Baltimore County, improved by a large dwelling house, the home of the testatrix in her lifetime, and a cottage. That for eighteen years immediately preceding the death of the testatrix the petitioner, the appellee, with his wife, a daughter of the testatrix, and their family, occupied this cottage, together with a small parcel of ground adjacent thereto, as a home. That the cottage had been entirely remodeled and improved by the testatrix for the benefit of the appellee's family. And a permanent right to the cottage and grounds had been offered to the wife of the appellee by her mother, upon the same terms as other of her children had been provided with homes by her. That the offer had been refused and the appellee and his wife had requested Mrs. Whitelock not to make such an arrangement, for the reason that it would be for the benefit of the estate to sell the tract of twenty-six acres, including the cottage, as a whole. That immediately after the death of Mrs. Whitelock the appellee agreed with his co-trustee that he should continue to occupy the cottage until January 20th, 1912, for an annual rental, that was agreed upon as proper, of three hundred dollars, and which afterwards was raised to four hundred dollars, with a proviso that the appellee was to vacate *Page 501 the property if the tract should be sold; and with the further proviso that if sixty days' notice was not given before the end of the term the appellee should occupy the premises for another year upon the same terms. That on the 19th day of November, 1912, after the appellee had occupied the premises during 1911 and 1912, and without any consultation between the trustees as to the lease, he received notice from his co-trustee to vacate the property on January 20, 1913, and a statement that the lease should not continue after that time. The petition further states that the rent that is being paid is the full rental value of the premises, and is greater than could be received from another tenant with the proviso as to vacating in the event of a sale. He further states that his occupancy of the cottage is a direct benefit to the estate, since it gives him opportunity at all times to supervise the remaining part of the tract. Realizing that he occupies the dual position of trustee and tenant, he prays the Court to adjust the differences existing between him and his co-trustee, and to pass an order authorizing him to continue for another year upon the same rental and terms as to vacating in the event of a sale as the tenancy now provides.
After the overruling of the demurrer three of the six children of the testatrix filed a petition asking to be made parties, and upon an order being passed to that effect, joined with George Whitelock as Trustee, and in his own right, in taking this appeal.
The position the appellants take is, that it is not a case of the validity of the original lease, it having expired, but whether a Court of Equity will compel its renewal against the discretion of the co-trustee and the protest of several of the beneficiaries with no beneficiary advocating it. Their contention is based, of course, on the fundamental principle that trustees cannot deal with trust property in a manner in which they might secure benefits from the property, inconsistent with their duties as trustees. Courts from the earliest times have unfalteringly frowned upon all attempts of trustees *Page 502 to acquire rights in property of which they were trustees. Out of which grew the rule that if trustees directly or indirectly purchase trust property, Courts will set the sale aside, however fair the transaction may have seemed, at the mere suggestion of the cestui que trust. Dorsey v. Dorsey, 3 H. J. 410;Davis v. Simpson, 5 H. J. 147; Richardson v. Jones, 3 G. J. 164; Rickets v. Montgomery, 15 Md. 50; Korns v.Shaffer, 27 Md. 83; Hoffman C. I. Co. v. Cumberland CoalCo., 16 Md. 506. It is a rule of universal application to all persons coming within the principle that no party can be permitted to purchase an interest when he has a duty to perform inconsistent with the character of purchaser. Ins. Co. v.Dalrymple, 25 Md. 266.
While the policy of the administration of equity in this State has been to adhere closely to the principle underlying this rule, nevertheless, it was recognized as early as Williams v.Marshall, 4 G. J. 379, that there should, and must, be exceptions to its rigid enforcement, when this Court said, "there are many exceptions to, or modifications of it" and "the trustee will in some cases be protected in his purchase; as if thecestui que trust be at full age at the time of the sale, and under no disability and with a full knowledge of the transaction lies by for an unreasonable time" * * * and "notwithstanding the broad language of the rule adopted in chancery, they are practically treated in that Court as voidable only, according to circumstances, and as the interest of the cestui que trust may require, and sometimes are not permitted to be disturbed." Read v. Reynolds, 100 Md. 284.
Notwithstanding this general rule, we are of the opinion that under the circumstances, as alleged in the petition, the trustee Whitelock should have answered with his reasons, other than technical, why his co-trustee should not occupy the property under a lease of such a temporary character. When we consider that the wife of the petitioner is one of the cestui que trust, interested in the proper management of the estate, that the property had been fitted up for her use and *Page 503 that she had occupied it for twenty years and that the full rental value was being procured for the benefit of the estate, these should all demand that some consideration should be extended the petitioner though he is co-trustee of the property. If a Court of Equity is administering a trust, in this case under an express direction, the Court has complete charge of every step. The trustees are merely the officers of the Court to carry out its orders. If trustees are named in a will with certain powers, not personal, thereunder, the moment they submit the administration to a Court of Equity, then it becomes necessary to have the sanction of that Court for all of their acts. Abell v.Abell, 75 Md. 64. If this authority is necessary then it follows that it cannot be a mere perfunctory authority, but that the Court is to exercise its judgment. Ordinarily where a trustee is vested with discretionary power he will not be disturbed in the exercise of it, but if the circumstances show that it is for the benefit of the estate not to permit him to exercise it arbitrarily, the Court will deny him the right. Gottschalk v.Mercantile Trust Co., 102 Md. 521.
We think the allegations of the petition presented such a set of circumstances as to call for an answer, and therefore the demurrer was properly overruled.
Order affirmed, cause remanded; the costs to abide the finaldisposition of the case. *Page 504