Hall v. Elliott ( 1964 )

Horney, J.,

delivered the majority opinion of the Court. Brune, C. J., and Henderson and Sybert, JJ., dissent. Dissenting opinion by Hendrrson, J., at page 216, infra.

The principal question raised on this appeal is whether the specific legatees named in the will are entitled to indemnification out of the rest and residue of an estate for the shares of corporate stock they lost as a result of the widow electing to take against the will.

Reginald G. Mowbray (the testator) died on January 17, 1962, survived by his second wife, Munsey T. Mowbray. He had no children or descendants and his father and mother had predeceased him. His closest living relative was a brother, to whom (or to the brother’s wife should he predecease the testator) he bequeathed a pecuniary legacy by the residuary clause of his will. At the time of his death, the testator owned real estate valued at $43,000 and personal property worth approximately $450,000, a large portion of which consisted of the capital stock of the James Walker Company, a marine supply corporation the testator founded in 1911, of which he was president when he died, and in which he held one hundred and six of the two hundred and ten outstanding shares of stock, estimated as worth $1,400 to $2,000 per share.

Before their marriage, the second wife and the testator entered into an antenuptial agreement, by the terms of which they mutually waived and released all claims or rights of dower and other marital rights in the estate and property of each other. Several years after their marriage, the testator executed a will in which he bequeathed ten of his one hundred and six shares of the Walker stock to his wife and bequeathed the remaining ninety-six shares (subject to the conditions specified in the will) in trust for the benefit of nine named longtime employees of the James Walker Company and stated in the will that his purpose in so doing was “to recognize the loyalty and devotion” of such employees as his business associates over a period of many years. Some of the employees were already stockholders in their own right and the bequest of ninety-six shares assured them control of the company as a group. There were no other specific bequests. But in a three-tiered residuary clause, the testator devised and bequeathed the rest and residue of his estate to named relatives of himself and his first wife and to certain specified charities. Under the provisions of the first tier he bequeathed pecuniary legacies totaling $60,000 to the relatives with provisos that upon the happening of certain events, the bequests were to become a part of the residuary estate. By the second tier, if there was any excess after paying the specific and first tier residuary legacies, the testator bequeathed $5,000 to each of four designated charities and $10,000 to a fifth. And, by the third tier, the residue of the estate, if any should remain, was bequeathed in equal shares to two other charities. It was further provided that both the first and second tier residuary legacies should abate proportionately in the event the estate was insufficient to pay them in full. In such case there would be nothing for the third tier legatees to take. Throughout his life, the testator had contributed to and was actively interested in and closely associated with the charitable institutions of a religious nature mentioned in the second and third tiers of the residuary clause. The will further provided that all federal and state estate and inheritance taxes (including documentary stamp and stock transfer taxes) as well as all debts, funeral expenses and administration costs should be paid out of the estate.

With regard to the shares of stock bequeathed in trust for the employee legatees, the trustee was directed to divide and distribute the stock to the named employees in the proportions specified in the will, provided (1) that such employees should be alive and in the employ of the company at the time of the death of the testator and (2) that such employees within three months thereafter should execute an irrevocable agreement between themselves designed to carry out the testamentary plan. The trust agreement was duly executed. Under it, each employee legatee covenanted with the others and on behalf of their respective estates to offer the stock so held in trust for them, either upon death or during life, before selling it to an outsider, to the remaining trust beneficiaries then holding the stock bequeathed to them, at forty per centum of book value as shown on the financial statement of the company as of the end of a fiscal year.

The record, in addition to showing that the surviving widow had been apprised, before the antenuptial agreement was executed, of the desire and plan of the testator to bequeath the controlling interest in the James Walker Company to the employees, discloses that the testator knew that his second wife — though he was sure she would not — could set aside the ante-nuptial agreement if she chose to and renounce the will. The testator, however, probably because he believed that his wife would abide by the agreement and knew that even if she did not, he had sufficient estate to fully satisfy her claim and gratify his preference for the employees, made no provisions as to who should bear the loss in case the widow chose to annul the agreement and elect against the will.

After the death of the testator, the antenuptial agreement was annuled by a decree of the Circuit Court for Baltimore County because the testator had not fully disclosed his financial worth to his future wife and she had not been advised of her rights or represented by counsel. There was no appeal. Subsequently, the widow renounced the legacy to her of ten shares of stock and elected to take her statutory share of both the real and personal estates.

In this action brought by the executors of the will against all of the legatees and devisees for the construction of the will and for directions as to the administration and distribution of the estate and the cash dividends that had accumulated from the stock since the death of the testator, the decree provided, among other things, that, after the payment of estate taxes and inheritance taxes (except state inheritance taxes chargeable to the widow), debts, funeral expenses and administration costs, the widow should take $4,000 in cash and a one-half interest in all other assets, such as cash, and specific property, such as shares of stock, including fifty-three shares of the Walker stock; that the trustee for the benefit of the employee legatees should receive the remaining fifty-three shares subject to the restrictive terms and provisions of the will and trust agreement; that the accumulated dividends from the Walker stock should be paid in equal parts to the widow and trustee; that the first tier residuary legacies to the relatives should be paid in full without interest; and that payment of the remaining residuary legacies would be contingent on the adequacy of the residue to pay the widow’s share of the estate and the first tier residuary legacies.

The findings of the lower court that all taxes (except state inheritance taxes due by the widow) should be paid out of the estate is not contested. Nor is it disputed that the accumulated dividends from the Walker stock should follow the distribution of the shares of stock. All of the employee legatees (except the one who was named as coexecutor) contend that the widow’s share of the estate should be satisfied out of the rest and residue without disturbing the specific bequest of ninety-six shares of Walker stock bequeathed to them. All of the employee legatees who appealed (except one who does not claim reimbursement by way of sequestration) further claim that they are entitled to distribution of the ninety-six shares of stock in kind, or in the alternative, that the portion of their legacy which is allowed to stand should be supplemented by (a) sequestration of the ten shares of stock renounced by the widow and (b) indemnification out of the rest and residue of the estate for such shares as they will lose as a result of the widow having renounced the will. And all of the appellants (except one) further contend that if less than ninety-six shares of stock are distributed to them, then such shares should be distributed free of trust and the restrictions contained in the terms and provisions of the will and the trust agreement executed in compliance therewith. On the other hand, the widow (as well as some of the other appellees) contend that she is entitled to take her share of the estate (including the Walker stock) in kind. The first tier residuary legatees, contending that the gifts to them were in the nature of general pecuniary legacies and not residuary bequests, assert that the disappointed specific legatees are not entitled to indemnification from the residuum. Some of the other appellees concede that the appellants (by application of the doctrine of sequestration) should be awarded the ten shares of stock renounced by the widow, but insist that the renunciation divested the employee legatees of one-half of the ninety-six shares by operation of law and that the divestiture was in the nature of an ademption. Finally, the executors of the estate contend that the shares of stock awarded to the employee legatees should be distributed to the trustee subject to the trust agreement and the restrictions with regard to their transferability.

The renunciation of a will by a surviving spouse and an election to take under Code (1963 Supp.), Art. 93, § 329 (b), more often than not, defeats the intention of the testator (or testatrix) to some extent, and, in such event, since it is necessary for other legatees (or devisees) to contribute all or part of their bequests to make up the statutory share to which the elector is entitled, the courts are required to determine which of the other beneficiaries are legally bound to make contribution. That, as previously stated, is the principal question presented by this appeal, and the solution of it depends primarily on the legal status of the other named beneficiaries as specific, general or residuary legatees, and on such indication as the testator may have given, if any, that certain legatees were preferred by him over others.

In Miller, Construction of Wills, § 126 (see also § 128), a specific legacy is defined “as a bequest of a particular thing, or money, specified and distinguished from all others of the same kind,” such as the bequest in this case of ninety-six shares of Walker stock to the employee legatees. And in Miller (see §§ 125, 128), a general legacy is defined as “one which is payable out of the general assets of the estate of the testator, being a gift of money or other thing in quantity, and not in any way separated or distinguished from other things of like kind.” Ordinarily, the bequest of a sum of money (i.e., a pecuniary legacy) is a general legacy. Matthews v. Targarona, 104 Md. 442, 65 Atl. 60 (1906); Gelbach v. Shively, 67 Md. 498, 10 Atl. 247 (1887). And the bequest of the rest and residue of an estate is a general legacy. Bristol v. Stump, 136 Md. 236, 110 Atl. 470 (1920). A specific legacy almost always has priority over other bequests. The assets available for other legacies must be exhausted to pay debts and costs before assets specifically bequeathed may be used for such purposes. And, if the assets of the estate are sufficient to pay all debts and costs, but not sufficient to pay all of the legacies, the specific legacies have priority over other legacies, the deficiency of assets falling upon such other legacies. Miller, op. cit., § 127. On the other hand, a specific legacy is subject to certain legal disqualifications and disadvantages, for if a specific legacy fails, the specific legatee is not entitled to be compensated out of the personal estate of the testator. In such case, the legacy is said to have been adeemed. Miller, op. cit., § 127, supra. See also England v. Vestry of Prince George’s Parish, 53 Md. 466 (1880); Devecmon v. Kuykendall, 89 Md. 25, 42 Atl. 963 (1899); Bristol v. Stump, supra.

The right of a renouncing spouse to take his or her share of the estate in kind has been the law in Maryland for many years. See Evans v. Iglehart, 6 G. & J. 171, 192-193 (1834), and Kuykendall v. Devecmon, 78 Md. 537, 543, 28 Atl. 412 (1894), construing Chapter 101 of the Laws of 1798.¹ The combination of the concepts that a specific legacy was subject to certain disabilities and liabilities and that a renouncing spouse was entitled to take his or her share of the estate in kind led to the earlier rule laid down by this Court in Darrington v. Rogers, 1 Gill 403 (1843) — and thereafter followed in Devecmon v. Kuykendall, supra; Cockey v. Cockey, 141 Md. 373, 118 Atl. 850 (1922); and Safe Deposit & Trust Co. v. Gunther, 142 Md. 644, 121 Atl. 479 (1923) — to the effect that the loss suffered by specific legatees (held not to be compensable from residuary legacies) by a spouse electing to take a statutory share was one resulting by operation of law and against which only the testator could provide indemnity.

But this is not an inflexible rule because sequestration, which is a corollary or facet of the equitable doctrine of election, has been applied by this Court whenever it was found proper to do so. Sequestration means that so much of a devise or legacy as does not pass to a renouncing spouse by virtue of the renunciation is made available by the courts to indemnify or compensate other beneficiaries whose legacies have been diminished as a result of the renunciation. Thus, in a case such as this where the widow was bequeathed ten shares of the Walker stock, she takes five shares by operation of law and the remaining five shares is available to compensate in part the legatees whose shares have been reduced by her renunciation. Generally, as pointed out in 1 Sykes, Probate Lam and Practice, § 180, “the order of distribution among the disappointed legatees is the reverse of the normal order in which legacies are abated [Dowell v. Dowell, 177 Md. 370]. Thus, if beneficiaries of both specific and residuary gifts suffer, the specific devisees and legatees are entitled to compensation first [Read v. Maryland General Hospital, 157 Md. 565] ; and if a specific legatee cannot be compensated out of property which has been renounced, he is entitled to compensation out of the residuary estate [Mercantile Trust Co. v. Schloss, 165 Md. 18] * * *."

Moreover, it has been held that when a widow is given an estate for life with remainder to others and she renounces, the court, depending on the intention of the testator, may immediately accelerate the remainders as if the widow had died, or, will delay acceleration and order the remainder of the fund or estate held in trust and the income to be used to alleviate the loss suffered by the other legatees and devisees. Hinkley v. House of Refuge, 40 Md. 461 (1874). See also Miller, op. cit., §§ 297, 298, and the cases cited therein. Obviously, the doctrine of sequestration is based on doing as little harm to the intention of the testator as is possible under the circumstances. If the renunciation causes a substantial distortion of the testator’s plan of distribution, and his intention is sufficiently clear that the beneficiaries whose legacies have been diminished should receive what the testator desired to give them, the courts apply this doctrine in an effort to carry out such intention. All the text writers seem to agree on this. See Restatement, Property, §§ 228, et seq.; 2 Pomeroy, Equity Jurisprudence (5th ed.), §§ 517, et seq.

Sykes, op. cit., § 180, supra, states that three basic approaches have been employed to compensate for the loss to beneficiaries caused by the renunciation of a spouse. In a minority of the states each legacy suffers its proportionate share of the total loss. In a majority of the states renunciation is analogous to any other shrinkage of the estate and the ordinary rules of abatement are applied. The author then goes on to say:

“A third view is that the solution of the problem should be left to the discretion of the chancellor to consider in each case the relationship of each legatee to the testator and any other relevant facts in order to arrive at the probable intention of the testator. The chancellor in effect rewrites the will as he thinks the testator would have rewritten it, if he had had the possibility of renunciation in mind [61 Har. Law Rev. 850], The Maryland rule seems to combine the last two approaches. Generally, the ordinary rules of abatement of legacies control [Webster v. Scott, 182 Md. 118; Marriott v. Marriott, 175 Md. 567], but the chancellor is not bound by them if the facts in the case indicate that they would not effectuate the testator’s intention. The chancellor will then endeavor to ascertain the primary intention as expressed in the will and carry it into effect as far as possible, with a minimum disturbance of the general plan [Mercantile Trust Co. v. Schloss, 165 Md. 18].”

Similarly, with respect to relieving some of the distortion between types of legacies and devises, Professor Reno in his article, The Maryland Order of Abatement of Legacies and Devises, 17 Md. L. Rev. 285, had this to say, at pp. 307, 308:

“The Maryland rule of treating [the depletion of the testator’s estate by the spouse’s renunciation] as a loss by operation of law is simple of operation, but its application may result in a ‘substantial distortion’ of the testator’s scheme of distribution. If equity will exercise its power of sequestration over the renounced interest, this distortion can be greatly reduced. Great flexibility exists in the equity court under this doctrine, but this is probably more desirable than the arbitrary application of the Maryland order of abatement to these cases. It should be noticed that the application of the doctrine of sequestration, whereby the specific legatees and devisees are reimbursed for their losses, tends to reach the same result that would be reached if the Maryland order of abatement had been applied. However, the very fact that flexibility exists permits the equity court to exercise its discretion in applying sequestration both as to amount and procedure. Thus, the testator’s plan of distribution can be carried out on a modified scale with little distortion between the types of legacies and devises.”

In Restatement, Property, § 228, supra, it is said at p. 937: “When an attempted succeeding interest is ineffective, the operation of that part of the limitation which purports to create prior interest is determined by the judicially construed intent of the conveyor.” Comment a to this section says that the rule as to the ascertainment of the intent of a conveyor (including a testator) recognizes that “a conveyor seldom envisages the failure of a part of his limitation,” and adds:

“Hence the judicially construed intent of the conveyor consists often of judicially crystallized conclusions as to what a conveyor, under the circumstances of the particular conveyance normally would have intended, if he had actually considered the possibility of the partial ineffectiveness of his expressed complete plan.”

Since sequestration is but one of the means of carrying out the intention of the testator where there has been a renunciation, and the assets available for sequestration are often nonexistent or inadequate to compensate a disappointed legatee, a majority of the courts have held that a beneficiary who has lost part of a specific legacy is entitled to be compensated out of assets which would otherwise go to some less preferred legatee than the specific legatee. In 5 Page on Wills (Bowe-Parker Revision) , § 47.46, it is said:

“Some states, probably a majority, hold that if a beneficiary who has lost a specific gift cannot be adequately compensated out of the property which has been renounced, he is then entitled to be compensated out of the residuary estate. Accordingly, in such jurisdictions, if beneficiaries of both specific and residuary gifts suffer, the specific devisees and legatees are entitled to be compensated first. This rule does not prevail where it appears that the testator did not intend the beneficiaries of specific gifts to have preference over residuary legatees.”

To the same effect, see § 12 of the annotation in 36 A.L.R. 2d 291, at p. 322.

Some years ago (in 1929 to be exact), this Court began modifying the earlier rule (applied in Darrington in 1843 and consistently followed through Gunther in 1923) by holding that a preferred legatee should be paid in full at the expense of less preferred legatees where it appeared the testator intended to prefer certain legatees over others.

In Read v. Maryland General Hospital, 157 Md. 565, 146 Atl. 742 (1929), where the husband of the testatrix, who had been given one-third of her estate for life, renounced the will and thereby became entitled to one-half of the estate, it was held that the fact that another one-third share given in trust after payment therefrom of several individual pecuniary legacies was reduced to one-fourth by the renunciation of the spouse, did not require the proportionate abatement of the individual legacies since the testator had not so intended.

In Johnson v. Stringer, 158 Md. 315, 324, 148 Atl. 447 (1930), the Court, after stating that “a renunciation by the widow makes only such changes in the will and in the intention of the testator as the law compels,” quoted and adopted the language of a Pennsylvania case (Disston’s Estate, 101 Atl. 804) that “in a case like the one before us, the effort must be to find and carry out the testator’s chief intent with a minimum disturbance of the general plan of the will.”

In Mercantile Trust Co. v. Schloss, 165 Md. 18, 166 Atl. 599 (1933), the testator, after giving a pecuniary legacy and certain leasehold property to a friend, bequeathed the rest and residue of his estate in trust for his widow for life. The widow renounced and thus became a tenant in common with the friend of the leasehold property. The Court, citing the prior cases as to intent, found a compelling intention on the part of the testator to give the friend the pecuniary legacy and leasehold property before anything was bequeathed to the wife and ordered that the loss of half of the leasehold property as well as all of the pecuniary legacy should be paid to the friend from the corpus of the remainder of the trust before it was accelerated so as to vest in the remaindermen. The suggestion that Schloss should be read as a case of sequestration is not sustainable, for that was not the holding in the case. The wife was given only a life estate and no order was passed to hold the remainder of the trust and use the income to indemnify the friend. Nor did the Court determine the present value of the amount of income from the renounced life estate which would have been necessary to provide indemnity and deduct that amount from the corpus of the estate.² In deciding the case, the Court recognized the rule of Darringtom, Devecmon, Cockey and Gunther, to the effect that loss to the beneficiary was a loss by operation of law against which only the testator could provide, but held that it did not apply to the facts of Schloss. In so doing, it pointed out that the friend was the first object of the testator’s bounty, “even to the exclusion of the widow,” and went on to say (at p. 30) :

“The renunciation of the widow does not change the intent as expressed in the will, and should not be allowed to defeat such declared intention, unless it be impossible to give it fulfillment. It was the declared intent of the testator that [the friend] should receive her legacy before those entitled to the remainder of the •trust fund; and, while the renunciation of the widow takes from her one-half of the [leasehold] property, she should be reimbursed from the remaining corpus of ' the trust before the remaindermen entitled to that corpus receive any part thereof.”

Clearly Schloss was a case of indemnification of a specific legatee at the expense of the residuary legatees. The text writers agree as to this. See Sykes, op. tit., § 180, supra, pp. 181-183, note 76; and Page on Wills, supra, § 47.46, p. 693, where Schloss is cited for the proposition that a beneficiary, who has lost a specific gift and cannot be adequately compensated out of the property which has been renounced, is entitled to be indemnified out of the residuary estate. See also § 14 [a] in 36 A.L.R. 2d 291, at p. 325, where in citing Schloss as having distinguished contrary Maryland decisions, it was said that the courts agree that the proper conclusion to the question of whether a specific legatee can require residuary legatees to compensate him “is that which most nearly coincides with what the testator intended”; and the same section at p. 326, where the annotators, in saying that some courts have “held compensation to disappointed specific devisees and legatees from residuary beneficiaries to be proper,” cite Schloss with a notation to compare Darrington, Devecmon, Cockey and Gunther.

In Marriott v. Marriott, 175 Md. 567, 3 A. 2d 493 (1939), where a widow renounced the will and elected to take her statutory share of the estate, it was held that the beneficiaries of specific legacies, to whom the will also bequeathed pecuniary legacies, were entitled to be paid in full out of the estate, after satisfaction of the widow’s claim, at the expense of the general or residuary legatees because the testator so intended. There, in citing cases from Connecticut (Shannon v. Eno, 179 Atl. 479) and Illinois (Pace v. Pace, 110 N. E. 878) and in approving the Pennsylvania rule (laid down in Gallagher’s Estate, 76 Pa. 296, and Lonergan’s Estate, 154 Atl. 387), it was said (at p. 577 of 175 Md.) that “if both specific and residuary legatees and devisees suffer because of the widow’s election against the will, the former must be made whole before the latter receive anything.” We think it is clear that Marriott stands for the proposition that specific legatees as well as general legatees are entitled to be compensated out of the residuum where (a) there is a residue; and (b) the manifest intention of the testator is to have such legatees paid in full. Moreover, in deciding Marriott, it is apparent that the Court read and applied Schloss as authority for the proposition that this was then the law of Maryland.³ In so doing, it is manifest that in Schloss and Marriott, this Court swung over to the majority rule wherever and whenever the intent of the testator justified it, and did it deliberately as a choice between two lines of authority.

There is nothing in Dowell v. Dowell, 177 Md. 370, 9 A. 2d 593 (1939), or Webster v. Scott, 182 Md. 118, 32 A. 2d 475 (1943), indicating a return to the earlier rule. In Dowell, it was pointed out that, unlike Schloss, there was no manifestation of an intent that the specific legacies were to be paid in full in preference to the residuary gifts. And in Webster, there was neither a residue nor an intention on the part of the testatrix that those receiving pecuniary legacies should compensate losses to specific legatees.

The suggestion by some of the appellees that there is an analogy between cases in which renunciation makes it impossible for a specific legacy to be given effect and cases in which a specific legacy is adeemed if the testator parts with the thing bequeathed after the will is executed, is not persuasive. In the first place, although in Elwyn v. DeGarmendia, 148 Md. 109, 128 Atl. 913 (1925), it was said that the existence of ademption is to be sought for in the facts as to the destruction or loss of the thing specified in the legacy, or loss of its identity as specified, rather than in a change of intention on the part of the testator, this Court has indicated that intention is a very decisive factor as to whether or not there has been an ademption in a particular case. For example, on the one hand, in Gardner v. McNeal, 117 Md. 27, 82 Atl. 988 (1911), where stock was adeemed by its sale and the proceeds reinvested, it was held that the legatee had no claim either to the reinvested proceeds or the value of the stock sold, but, on the other hand, in Johns Hopkins University v. Uhrig, 145 Md. 114, 125 Atl. 606 (1924), where, by reason of corporate reorganization there was a substitution of stocks specifically bequeathed to bonds, it was held that there was no ademption because the testator did not initiate or control the exchange. Miller, op. cit., § 141, states that a principle in connection with the general rule is that ordinarily proceeds of stock specifically bequeathed which is adeemed cannot be followed, but that where, as in Uhrig, the testator did not cause the exchange of one form of investment for another, this result does not ensue; and then adds that the law “seems to be applied in such manner as will accomplish the intention of the testator that the gift should pass to the named beneficiary, and not to a residuary devisee or legatee, and in order to avoid an intestacy which might occur if the gift were adeemed.” See also Seifert v. Kepner, 227 Md. 517, 177 A. 2d 859 (1962), wherein it was pointed out that even DeGarmendia had recognized the importance of the intention of the testator as had Uhrig and other earlier cases. The overriding consideration, in any event, is the intention of the testator, and on several occasions, it has been held that a specific legatee, who had been disappointed by a renunciation will be made whole, as nearly as may be, either by way of sequestration, as in Dowell, or by payments from the residue, as in Schloss and Marriott. Thus, if the intention of the testator is that either or both should be done, any similarity between an ordinary ademption case and an analogous situation in an ordinary renunciation case would be inconsequential and the intention would prevail.

While it may be true that the terms and provisions of the will and trust agreement under which the ninety-six shares of stock were to be distributed to the employee legatees had the effect of perpetuating the existence of the James Walker Company, it is nonetheless evident that the testator’s primary intention in doing such was to benefit those employees who, as his business associates for many years, had demonstrated their loyalty and devotion to him and the company he had founded. By requiring an employee legatee, who wished to sell during his life, and his estate to do likewise after his death, to first offer his stock to the other employee legatees at forty per centum of its book value, the testator was assuring that control of the company would remain in the specified employees so that they would receive the maximum benefits therefrom. Apparently, the testator believed that this factor coupled with the benefits which the employees would receive from their salaries, the dividends from the stock and the eventual sale thereof to the remaining preferred employees would exceed the benefits they would receive if the stock was given to them outright without any restrictions as to its sale. In any event, it is clear that these employees were first in his mind and that he preferred them over all legatees, including his wife and relatives and the charities in which he had been interested throughout his life, since all of his estate (except the specific bequests of his Walker stock to his wife and the employees) was to pass under the residuary clause wherein he provided that if the residuum should be insufficient to pay all debts, estate and inheritance taxes, and administration expenses, the first and second tier legacies were to abate proportionately without diminution of the specific legacies. Only if there was an excess in the residuum after the payment of debts, taxes and expenses, and the specific legacies as well as the first and second tier residuary legacies, were the legatees in the third tier to be benefited.

Thus it is apparent to us that the testator intended to prefer the employees over all other legatees. Such, insofar as intent is concerned, was the situation in Schlo'ss, and, for that reason, we think this case is governed by the Schloss and Marriott cases. In these circumstances it makes no difference whether the first, second or third tier legatees are regarded as residuary legatees or general pecuniary beneficiaries because the intention of the testator that their bequests were to be subordinate to the specific legacies given to the employees makes any technical difference between dissimilar kinds or types of legacies immaterial. In any event, where both specific and residuary legacies ■suffer, the specific legatees are entitled to be compensated first. Read v. Maryland General Hospital, supra, at p. 570 of 157 Md. And, if specific legatees cannot be compensated out of property which has been renounced, they are entitled to compensation out of the residuary estate. Mercantile Trust Co. v. Schloss, supra, at p. 29 of 165 Md. The situation here is contrary to that in Webster v. Scott, supra. In Webster, there was no intention that the pecuniary legatees were to make the legacies of the specific legatees whole. Here, there is such an intent and it must be given effect.

We conclude, therefore, that if a specific legatee whose legacy has been diminished by renunciation can be made whole by means of sequestration where, as here, it is shown that such was the intention of the testator (as has always been the law of this state), there is no reason why such a specific legatee cannot be made whole from the rest and residue, or from money and other property given to general legatees, where, as here, the testator so intended, and we so hold. It follows, since the renouncing widow is entitled to receive fifty-three shares of the Walker stock (forty-eight of the ninety-six shares bequeathed to the employees and five of the ten shares which the widow gave up by renouncing the will), that the employee legatees, in addition to receiving five of the renounced shares, are entitled to be indemnified out of the rest and residue of the estate to the extent of the value of the forty-three shares they were deprived of as a result of the widow having taken against the will. In this way, there is a possibility, since the widow indicated at the argument that she was willing to take the monetary value of her shares of the Walker stock and allow the employee legatees to have it, that the foremost part of the testamentary plan of the testator can be carried out to the letter.

The further contention of some of the employee legatees that if less than ninety-six shares of the Walker stock are distributed to them, then such shares should be distributed free of the trust and without the restrictions imposed by the will and trust agreement is without substance. While it is true, as it is said in the Restatement, Trusts (2d), § 335, that “if the purposes for which a trust is created become impossible of accomplishment or illegal, the trust will be terminated,” we see nothing illegal in the trust contemplated by the testator. Even if the widow should change her mind and refuse to allow the employees to take her shares at their monetary value, or buy them at some other valuation offered by the employees, the purposes of the trust would not be wholly defeated by the fact that the res had been reduced. Cf. Liberty Trust Co. v. Weber, 200 Md. 491, 90 A. 2d 194 (1952), mod. 200 Md. 523, 91 A. 2d 393 (1952). And see Kirkland v. Mercantile-Safe Deposit Co., 218 Md. 17, 22, 145 A. 2d 230 (1958) ; 3 Pomeroy, op. cit., § 991c; Bogert, Trusts (2d ed.), § 1008.

On appeal, the awarding of costs is in the discretion of this Court, and are usually awarded against the losing party. Maryland Rule 882 a. But in this action in equity brought by the executors for a construction of the will and for directions as to the administration and distribution of the estate to determine important questions of real difficulty and the appeal was necessary to finally decide to whom one-half of the net estate was distributable, we think the costs should be paid out of the estate. The situation here is distinguishable from that in Urquhart v. Alexander, 218 Md. 405, 147 A. 2d 213 (1958).

Decree affirmed in part and reversed in part and case remanded for modification of the decree in conformity with this opinion; the costs on appeal to be paid out of the estate.

1 . Under Code (1963 Supp.), Art. 93, § 329 (b), the decedent, if he or she is not survived by descendants or a father or mother, the spouse is entitled to “four thousand dollars * * * and one half of the residue of the lands as an heir and one half of the surplus personal estate remaining * * *, and no more.”

2 . This’ last suggestion was made by Professor Reno in 17 Md. L,. Rev. 285, but there was no argument in the briefs to support the suggestion and there was no holding in the case to that effect, and other authorities do not agree.

3 . The record in the Marriott case leaves no doubt that specific legatees and general legatees were treated as having identical rights in this respect. Therein it was stipulated that the named legatees were specific legatees who were claiming that there should be no diminution in the legacies bequeathed to them as a result of the widow taking her statutory share of the estate. On the contrary, the residuary legatees contended that the loss occasioned by the election of the widow should fall not only on them but on all other designated legatees (including the general pecuniary legatees) proportionately. The Orphans’ Court ruled against the specific legatees, and on appeal the brief of the trustee pointed out that “as to sharing the loss between (a) specific or general beneficiaries and (b) beneficiaries of the residue, there is a conflict of authorities, some holding — (a) specific or general beneficiaries should be made whole before any part of the estate falls into the residue; and others — (b) that the loss is caused by operation of law and must fall equally on all.” And the brief of the specific beneficiaries cited the majority rule throughout the United States, particularly the Pennsylvania rule, which this Court adopted in Marriott, relying heavily on Schloss.