Christopher Haymond, Individually and as Trustee of the Testamentary Trust Created by the Last Will and Testament of Irene Nutter Haymond v. Stephanie Haymond and David Haymond

• Court: West Virginia Supreme Court
• Decided: February 28, 2024
• Docket: 22-621
• Status: Published

Opinion

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA

FILED January 2024 Term February 28, 2024 released at 3:00 p.m. C. CASEY FORBES, CLERK SUPREME COURT OF APPEALS OF WEST VIRGINIA No. 22-621

CHRISTOPHER HAYMOND, individually and as Trustee of the Testamentary Trust created by the Last Will and Testament of Irene Nutter Haymond, Defendant Below, Petitioner,

v.

STEPHANIE HAYMOND and DAVID HAYMOND, Plaintiffs Below, Respondents.

Certified Question from the Circuit Court of Ritchie County The Honorable Timothy L. Sweeney, Judge Case No. 20-C-30

CERTIFIED QUESTION ANSWERED

Submitted: January 10, 2024 Filed: February 28, 2024

J. Nicholas Barth, Esq. Joshua S. Rogers, Esq. BARTH AND THOMPSON Paige K. Vagnetti, Esq. Charleston, West Virginia DINSMORE AND SHOHL, LLP Morgantown, West Virginia Robert S. Fluharty, Jr., Esq. FLUHARTY AND TOWNSEND John R. Whipkey, Esq. Parkersburg, West Virginia BLOCK AND ASSOCIATES, LLC Counsel for Petitioner Pittsburgh, Pennsylvania Counsel for Respondents

JUSTICE WALKER delivered the Opinion of the Court. SYLLABUS BY THE COURT

1. “The appellate standard of review of questions of law answered and

certified by a circuit court is de novo.” Syllabus Point 1, Gallapoo v. Wal-Mart Stores, Inc.,

197 W. Va. 172, 475 S.E.2d 172 (1996).

2. “The paramount principle in construing or giving effect to a trust is

that the intention of the settlor prevails, unless it is contrary to some positive rule of law or

principle of public policy.” Syllabus Point 1, Hemphill v. Aukamp, 164 W. Va. 368, 264

S.E.2d 163 (1980).

3. A trust beneficiary’s attempt to transfer his or her interest in violation

of a valid spendthrift provision is void ab initio.

i WALKER, Justice:

When Irene Nutter Haymond created a testamentary trust for the benefit of

her grandchildren, she included a spendthrift provision precluding them from alienating or

encumbering their interests in the trust until the trust terminated. Even so, Petitioner

Christopher Haymond – Irene Haymond’s son and one of the co-trustees – convinced the

two grandchildren-Respondent beneficiaries to transfer their interests in trust property to

him in 1993. After the trust terminated twenty years later, Respondent beneficiaries

brought an action against Petitioner trustee to quiet title and for damages and an

accounting. In this certified question, we are asked to consider whether the attempted

conveyances are void ab initio or merely voidable. We conclude that a settlor’s intent in

including a spendthrift provision and placing those restraints on the property must control

and be given effect, and therefore render an instrument purporting to convey that interest

in violation of a valid spendthrift provision void ab initio.

I. FACTUAL AND PROCEDURAL BACKGROUND

The facts relevant to this certified question are undisputed. Irene Nutter

Haymond had two sons, Daniel Haymond, III, and Petitioner Christopher Haymond. In

her will, Ms. Haymond created a testamentary trust to which she devised approximately

four hundred acres of real property located in Ritchie County, West Virginia, together with

the underlying mineral rights, for the benefit of her grandchildren. The trust allocated fifty

percent to the children of her son Daniel and the remaining fifty percent to the children of

her son Christopher. Her sons were to act as trustees and pay the beneficiaries the income

1 of the trust until such time as the youngest grandchild-beneficiary turned thirty, at which

time the trust would terminate and the principal would be distributed to the beneficiaries

in their respective shares. Significantly, the trust contained a spendthrift provision stating,

“[t]he interest of beneficiaries in principal or income shall not be subject to the claims of

its creditors or others nor to legal process and may not be voluntarily or involuntarily

alienated or encumbered.”

In 1993, while Petitioner was still acting as co-trustee, he prepared deeds and

presented them to his daughter, Respondent Stephanie Haymond, and his nephew,

Respondent David Haymond, requesting that they transfer their respective interests in the

real property held in trust to him. Respondents signed the deeds, and Christopher paid his

daughter $100 in consideration and his nephew $3,000. The trust terminated in February

2014. The Respondent beneficiaries did not execute any instrument purporting to transfer

their interest after the trust’s termination.

In 2020, Respondents brought an action for declaratory relief and to quiet

title (Count I), sued Petitioner for breach of trust, conversion, and unjust enrichment (Count

II),1 and demanded an accounting of receipts, expenses, and distributions associated with

1 Though not at issue for purposes of this certified question, Respondents alleged in their complaint that Petitioner had leased the mineral rights while serving as trustee and received payments that were payable to the trust that were never paid into the trust.

2 the trust (Count III).2 Respondents filed a motion for partial summary judgment on the

pleadings as to Count I, contending that because the purported conveyances to Petitioner

were made in violation of the trust’s spendthrift provision, they were void ab initio.

Petitioner contends that the conveyances are merely voidable, and that the statute of

limitations and/or the doctrine of laches now precludes Respondents from voiding the

deeds.

Based on those arguments, the circuit court certified two questions. First, it

asked, “is a transfer by deed of real property in violation of a spendthrift clause void ab

initio or merely voidable?” And, if merely voidable, “were the Plaintiff[s] required to

institute a civil action asserting their claims that such deeds were void within a certain

period of time following their execution and delivery of such deeds to the Defendant?”

The circuit court answered the first question by finding that a transfer by deed of real

property in violation of a spendthrift provision was void ab initio. And should this Court

conclude that the transfer was merely voidable, the circuit court determined that the civil

action should be commenced “within the period of time provided by the factually

appropriate limitation of actions provisions, if any.”

2 Daniel Haymond, III, Petitioner’s co-trustee, died in 2013.

3 II. STANDARD OF REVIEW

Like other questions of law, “[t]he appellate standard of review of questions

of law answered and certified by a circuit court is de novo.”3

III. ANALYSIS

The certified questions posed accept the underlying premise that the

Respondent beneficiaries of the trust were subject to a valid spendthrift provision and that

these conveyances were made in violation of that provision. Still, Petitioner’s primary

argument runs counter to that premise, as he contends that as a matter of public policy, a

spendthrift provision may not be applied to restrict the alienation of real property. Stated

differently, Petitioner contends that a spendthrift provision may not be enforced to void

conveyances of real property, so that the conveyances at issue in this case cannot be void

ab initio. We address that threshold issue first.

Spendthrift trusts have long been recognized by this Court as those “created

with a view of providing a fund for the maintenance of another, and at the same time

securing it against his own improvidence or incapacity for self-protection.”4 But to create

a spendthrift trust we have not deemed it necessary that the beneficiary be denominated a

3 Syl. Pt. 1, Gallapoo v. Wal-Mart Stores, Inc., 197 W. Va. 172, 475 S.E.2d 172 (1996). 4 Hoffman v. Beltzhoover, 71 W. Va. 72, 74, 76 S.E.2d 968, 969 (1912) (quotation and citation omitted).

4 “spendthrift” or that the testator or donor give the reason for creating it.5 In 1993, the

Legislature codified the common law relative to spendthrift trusts at West Virginia Code §

36-1-18:

Estates of every kind in real or personal property, holden or possessed in trust, shall be subject to the debts and charges of the persons to whose use or for whose benefit they are holden or possessed, as they would be if those persons owned the like interest in the things holden or possessed, as in the uses or trusts thereof; but where the creator of the trust has expressly so provided in the instrument or conveyance creating the trust, real or personal property may be held in trust upon condition that the income therefrom shall be applied by the trustee to the support and maintenance of a beneficiary or beneficiaries of the trust in being at the time of the creation of the trust, other than the creator of the trust, for the life of such beneficiary or beneficiaries, without being subject to the liabilities of, or alienation by, such beneficiary or beneficiaries.

That provision was in effect at the time of the purported transfers and remained in effect

until 2011 when the Legislature adopted the West Virginia Uniform Trust Code. Though

different in form, West Virginia Code § 44D-5-502 does not differ fundamentally in

substance: “[a] beneficiary may not transfer an interest in a trust in violation of a valid

spendthrift provision, and, except as otherwise provided in this article, a creditor or

assignee of the beneficiary may not reach the interest or distribution by the trustee before

its receipt by the beneficiary.”

5 Id.

5 Despite that the 1993 statute specifically refers to real property interests as

subject to spendthrift provisions and that the West Virginia Uniform Trust Code likewise

permits spendthrift provisions to apply generally to “an interest in a trust,” Petitioner argues

that public policy prevents spendthrift provisions from limiting the alienation of real

property by beneficiaries. Specifically, Petitioner argues that this Court’s 1922 decision in

McCreery v. Johnston6 stands for the proposition that spendthrift provisions are

unenforceable against real estate interests because such restrictions on alienation are

against public policy.

In McCreery, the Court invalidated a spendthrift provision that indefinitely

precluded alienation of real property, articulating that “[i]t must be borne in mind that all

restraints upon alienation are against the policy of our law.”7 But in doing so, the McCreery

Court reinforced that spendthrift provisions are the exception to that public policy and are

enforceable “to the extent that they are necessary to accomplish some purpose which

justifies a departure from such policy.”8 In dicta, the Court clarified that had the restraint

on alienation been limited to the beneficiary-son’s lifetime it would have been

enforceable,9 and explained that the “rule against restraints” gives way to the right of the

6 90 W. Va. 80, 110 S.E. 464 (1922). 7 Id. at 84, 110 S.E. at 465. 8 Id. at Syl. Pt. 1, in part. 9 Id. at 85, 110 S.E. at 466.

6 owner of real estate to dispose of his or her property for the purpose of protecting the person

for whom the trust is created:

There are, of course, limitations upon this rule but they are carried no further than the necessity of the occasion warranting them requires. One of the exceptions in this jurisdiction, and in most other jurisdictions in this country, is that an owner of property may create what is popularly called a spendthrift trust for the benefit of some improvident relative or friend. . . . the right of the owner of property to dispose of it in such a way that will secure a maintenance to an improvident or impecunious relative, and save him from the effect of his own prodigality is firmly established in this state by our decisions.[10]

The enactment of West Virginia Code § 36-1-18 and later the codification of

the Uniform Trust Code found in West Virginia Code § 44D-5-502 reinforce the validity

of spendthrift provisions as applied to interests in real property and support the position

espoused in McCreery that spendthrift provisions are valid restraints on the alienation of

interests in real property held in trust.11 For those reasons, we reject Petitioner’s contention

that the deeds cannot be void ab initio because the spendthrift provision may not be

enforced to prevent the alienation of real property.

Having clarified that spendthrift provisions may properly be applied to

prevent the transfer of equitable interests in real estate, we turn to the effect of the attempted

10 Id. at 84, 110 S.E. at 466. 11 We emphasize that the trust at issue did not place restraints against alienation of the legal title to the property by the trustees, only the equitable interests of the beneficiaries.

7 transfer. Petitioner argues that as trustee, he may approve transfers proposed and agreed

to by beneficiaries. According to Petitioner, that those transfers were made to him at his

behest while acting as a co-trustee makes them merely voidable: “[a] party holding a

fiduciary relation to trust property can not either directly or indirectly become the purchaser

thereof, without rendering the sale voidable, at the mere pleasure of the beneficiaries[.]” 12

But Petitioner’s argument focuses too narrowly on to whom the conveyances

were made, i.e., a party like himself, who “[held] a fiduciary relation to trust property,”

where the voidability is premised on the potential for fraud and undue influence. In view

of a valid and enforceable spendthrift provision, regardless for the potential for fraud or

undue influence, any conveyance to anyone would have been void. While the trust in this

case gives the Petitioner trustee the authority to convey or otherwise encumber the trust

property for the benefit of the Respondent beneficiaries (such trust bearing the legal title

to that real property), it specifically does not permit the Respondent beneficiaries to transfer

their equitable interest in either the principal or the income: “the interest of beneficiaries

in principal or income shall not be subject to the claims of its creditors or others nor to

12 Gilmore Mfg. Co. v. Lewis, 105 W. Va. 102, 110, 141 S.E. 529, 532 (1928); see also Syl Pt. 6, Work v. Rogerson, 152 W. Va. 169, 160 S.E.2d 159 (1968) (“Where a fiduciary while actually holding such relationship acquires interest in property from a sale thereof, such sale is voidable although the fiduciary may have given adequate consideration and gained no advantage whatsoever.”); Newcomb v. Brooks, 16 W. Va. 32, 59 (1879) (“a purchase by a trustee, or party holding any fiduciary relation, of the trust-property or subject, although he may have given an adequate price therefor and gained no advantage whatever, is voidable at the pleasure of the cestui que trust, or party to whom such confidential relation is borne by the purchaser[.]”) .

8 legal process and may not be voluntarily or involuntarily alienated or encumbered.” By its

plain terms, the spendthrift provision precluded the transfer of the Respondent

beneficiaries’ equitable interests in the principal, and they had no legal title to transfer until

such time as the trust terminated.13

Petitioner argues that the conveyances should be voidable at the election of

the beneficiaries, but a beneficiary ill-advisedly consenting to a conveyance of their

interests is a primary purpose of a spendthrift provision. The effect of an attempted transfer

must then be void ab initio. To find the conveyance voidable would place the balance of

the effectiveness of the deed on the terms and circumstances of the transaction itself, be it

voidable for fraud in the inducement, mistake, or the like. But the effectiveness of the

transfer cannot be placed in the presumably injudicious hands of the beneficiaries when the

settlor of the trust forbade them, in their vulnerability, to make any kind of transfer under

any terms. The settlor predetermined that those transfers would be presumptively

imprudent and, accordingly, constrained the capacity of the beneficiaries to make those

transfers from the start.

We have held that “[t]he paramount principle in construing or giving effect

to a trust is that the intention of the settlor prevails, unless it is contrary to some positive

13 As noted above, Respondents did not re-execute deeds to transfer interests after the termination of the trust.

9 rule of law or principle of public policy.”14 And, as we have established, the settlor had

every right to restrain her property for the benefit of her grandchildren by preventing them

from transferring their interests until such time as the trust terminated and their legal title

vested. It is contrary to the intent of the settlor in including such a provision to render an

attempted sale as merely voidable.

Consistent with the logic we apply here, commentators recognize that “[a]

beneficiary’s attempted transfer of her interest under a spendthrift trust is generally treated

as void[.]”15 The United States Court of Appeals for the Tenth Circuit likewise succinctly

stated that “[t]he rule is well settled that an attempt to alienate the interest of a beneficiary

of a spendthrift trust is void and unenforceable[.]”16 It founded that conclusion on the

prerogative of the settlor to set terms, not the wishes of the beneficiary or the interests of

third parties:

[t]he doctrine of spendthrift trusts rests upon the right of a donor to give his property to another upon such conditions and restrictions against alienation as he shall see fit. As the property does not belong to the donee prior to the creation of the trust, and after the creation of the trust the donee’s interest is subject to the conditions attached by the donor, creditors or transferees

14 Syl. Pt. 1, Hemphill v. Aukamp, 164 W. Va. 368, 264 S.E.2d 163 (1980).

Myron Kove, George Gleason Boger, George Taylor Bogart, BOGERT’S THE LAW 15

OF TRUSTS AND TRUSTEES § 226 (2023).

16 Johnson v. Morawitz, 292 F.2d 341, 343 (10th Cir. 1961).

10 of the donee have no right to rely upon it for the satisfaction of their claims.[17]

Attempts to alienate interests in violation of a spendthrift provision are thus void ab initio:

“when it is clear that the testator intended to create a spendthrift trust the court will not

permit a beneficiary to dispose of the trust property or any part thereof in contravention of

the terms of the will.”18

Prevented from transferring their equitable interests by the explicit terms of

the spendthrift provision, and having no legal title to convey, the Respondent beneficiaries

here could not validly execute a deed transferring their interests. The instruments

purporting to transfer those interests before the trust terminated and vested in them legal

title are, and were always, void. Attempted transfers by beneficiaries in violation of a

spendthrift provision are similarly void from a statutory viewpoint. West Virginia Code §

36-1-18, in effect at the time of the attempted transfers, provided that real property may be

held in trust with the constraint that its alienability by the beneficiary is forbidden. More

pointedly, language of West Virginia Uniform Trust Code § 44D-5-502, in effect during

the life of the trust and now in effect, prohibits a transfer: “[a] beneficiary may not transfer

an interest in a trust in violation of a valid spendthrift provision.”19

17 Id. at 344. 18 Id. at 345. 19 Emphasis added.

11 That the Respondent beneficiaries would later acquire title at the termination

of the trust cannot serve to cure the void conveyance. Importantly, this Court has reiterated

that “a deed once void is always void.”20 We see no reason to alter that rule here in view

of the equitable doctrine of after-acquired title.21 The doctrine of after-acquired title –

better termed estoppel by deed – has been explained by this Court as the proposition that

“where a person conveys land by deed of general warranty, and has at that time no title, or

a defective title thereto, and thereafter acquires perfect title, he is estopped to assert the title

thus acquired against his former conveyance.”22

We observe that real property subject to a spendthrift provision was

necessarily conveyed by the settlor by deed to a trust and held – as a matter of public record

– in the name of the trust, not the beneficiaries. Since “[o]ne cannot be heard to say that

they did not know of matters which were open, obvious, and of public record[,]”23 the

doctrine of after-acquired title is ineffectual to cure a void deed executed in violation of a

valid spendthrift provision:

[t]he doctrine of after-acquired title is predicated upon the idea that an uninformed grantee should not be penalized if the

20 Heavner v. Hess, No. 21-0558, 2022 WL 4355106, at *17 (W. Va. Sept. 20, 2022) (memorandum decision). 21 We discuss the doctrine of after-acquired title in order to fully address the certified question and in doing so do not intend to imply that the doctrine would apply to the deeds executed in this case but for the spendthrift provision. 22 Wellman v. Tomblin, 140 W. Va. 342, 345, 84 S.E.2d 617, 619 (1954). 23 58 Am. Jur.2d Notice § 13 (2024).

12 grantor did not own the property at the time of the conveyance yet subsequently acquired it; conversely a grantee who is misled through his or her own want of reasonable care and circumspection may not rely on the doctrine because estoppel is denied where the party claiming it was put on inquiry as to the truth and had available means for ascertaining it.[24]

An unrecorded deed from settlor to the trust fares no better, since a simple title search

would expose that the beneficiaries have no title to convey.

Moreover, the equity-based doctrine of estoppel by deed cannot provide a

workaround to validate a deed that the Respondent beneficiaries not only lacked the legal

title to convey, but also – and crucially – lacked the capacity to convey. As we have

established, the spendthrift provision broadly stripped the Respondent beneficiaries of the

authority to alienate or encumber their interests in the principal (the realty) in any way,

which would plainly encompass a conveyance purporting to transfer anticipatory legal title

to the principal prior to the termination of the trust. To validate the then-prohibited

conveyance on the basis that the Respondent beneficiaries would eventually receive legal

title would skirt the spendthrift provision. In doing so, it would vitiate the intent of the

settlor by permitting the Respondent beneficiaries to indirectly convey through operation

of estoppel that which they were forbidden to directly convey as a matter of law. We are

thus unpersuaded that estoppel by deed has a place here where the settlor’s restraints on

the real property placed in trust – and not the beneficiaries’ warranties of good title – carry

24 23 Am. Jur.2d Deeds § 278 (2024).

13 the day. For the reasons set forth above, we now explicitly hold that a trust beneficiary’s

attempt to transfer his or her interest in violation of a valid spendthrift provision is void ab

initio.

IV. CONCLUSION

We answer the certified question posed by concluding that transfers by deed

in violation of a valid spendthrift trust are void ab initio and for that reason we need not

answer the second question.

Certified Question Answered.