It is established by the record that decedent left a large number of bills and the expenses of her last illness and burial. Said bills amount to $1,457.76. Other claims reported but not verified as prescribed by law amount to $3,750, and other claims known to plaintiff because of the public records amount to $4,100. It is claimed by defendants Mary Jane Herron and other alleged beneficiaries of said trust instrument that this indebtedness, except the record indebtedness and the claims reported but not verified, were incurred after the execution of the trust deed and for that reason cannot be collected from the proceeds of the property attempted to be conveyed
thereby. The claims reported but not filed are claims owned by two of the beneficiaries of said alleged trust. The instrument creates what the learned author, Pomeroy, terms an express passive trust: Pomeroy's Equity (4 ed.), §§ 153, 374, 988, 989. A trustee of such a trust holds only the naked legal title. The estate of such a trust is liable for the debts of the trustor: 3d Pomeroy, (4 ed.), 2153, § 989, note 4. The trustor was the sole beneficiary of the trust during her life.
"Where one creates a trust, retaining the beneficial interest in himself, he cannot prevent his creditors from coming at the income by a provision against anticipation. Nor will a conveyance on secret trust for the grantor be good against creditors, prior or subsequent": 2d Perry on Trusts and Trustees, (6 ed.) 1335, § 815a, notes 3 and 4.
It must be borne in mind in this connection that the instrument creating the trust was never recorded; that the trustor held every indicia of ownership. There was no change of possession or management of the estate. Such a deed, whether absolute or in trust, is constructively fraudulent as to subsequent, as well as existing, creditors: §§ 9874, 10171, 10172, O.L.
Cases holding that actual intent to defraud must be proven in order to set aside or annul a voluntary conveyance, whether absolute or in trust, are cases where the conveyance is promptly recorded: Seed v. Jennings, 47 Or. 464 (83 P. 872); People'sBank v. Rostad, 86 Or. 695 (169 P. 347). Under these authorities we are of the opinion that the allegation in the complaint that said trust deed was fraudulent as to creditors is proven by the record. A different question would be presented if the trust deed had been placed of record promptly. The instrument itself prescribes that it shall not be put on record. The record
contains a stipulation of the parties that said trust deed was not placed on record. It would be very unequitable to hold under those conditions that creditors of decedent could not collect their claims from her estate.
Both parties rely on Allen v. Hendrick, 104 Or. 202
(206 P. 733). The opinion in that case was written by Mr. Justice HARRIS and is characterized by his usual thoroughness. The trust was upheld because the trust property was delivered to the trustee and a present interest therein passed to the beneficiary. Both of those elements of interest are absent in the instant case.
The case of Kelley v. Snow, 185 Mass. 288 (70 N.E. 89), is also relied on by appellants. In this case the trust property was delivered. That case also involved personalty only. The case at bar involves realty only, the trust instrument was never recorded, possession of the land was never taken by the trustee. The difference in the two cases is material. In the instant case the trust instrument was valid between the trustor and trustee. It is invalid as to creditors. Withholding the trust instrument from recordation constituted a constructive fraud: 26 C.J. 1061, (§ 4) 3. Plaintiff's testatrix apparently recognized her lack of authority to execute deeds for her own benefit under the powers of attorney executed by her husband to enable her to sell and convey the property in order to liquidate their debts. Her husband, defendant Tom Garland, therefore later executed and delivered quitclaim deeds in favor of the trustee.
The learned circuit court held that the trust instrument passed no interest in the property to the beneficiaries other than trustor during the latter's life. We concur in this opinion. The quotation from
the trust deed, included in the statement herein, clearly discloses that the trustor was to receive all the benefits of the trust estate during her life, and that she was to have the sole and exclusive management during the same period. The trustee was not authorized to exercise any power over the estate, except in case the trustor became incapacitated and under that condition the estate was to be managed for her sole and exclusive benefit; consequently there was no interest in the trustor's estate passed or vested in the other beneficiaries. The trust instrument amounted solely to a testamentary disposition of her property. Several years later she executed a will making the beneficiaries of the trust instrument the beneficiaries of her will. The beneficiaries of a will take the property subject to the debts of the testator.
The learned circuit court annulled and set aside the trust instrument in its entirety. That instrument was executed in behalf of defendant Tom Garland by decedent as his attorney in fact. But later defendant Tom Garland executed several quitclaim deeds. His testimony is to the effect that these deeds were executed for the purpose of protecting some of the beneficiaries of the trust instrument; that the decedent and defendant Tom Garland were indebted to some of those beneficiaries and desired to protect them. The decree appealed from gives to defendant Tom Garland the benefit of his curtesy interest in the land described in the trust deed. In this we think the court below erred. It was a worthy act on the part of defendant to join his wife in protecting their creditors against loss. The execution of the deeds by defendant Tom Garland was voluntary, but his interest therein, so far as this case is concerned, was a prospective curtesy. Whether or not that curtesy would ever become consummate
was uncertain. We think that defendant Tom Garland by those deeds waived his curtesy interest in the land described therein.
The decree of the court below is affirmed in so far as it holds the trust instrument void as to creditors subsequent to as well as existing at the time said instrument was executed. It is modified in so far as it annuls the effect of the quitclaim deeds executed by defendant Tom Garland. A decree will be entered here accordingly. No party will recover costs or disbursements in this court. MODIFIED.
BROWN, J., did not participate in this opinion.
Rehearing denied November 19, 1929 ON PETITION FOR REHEARING (282 P. 442)
The appealing defendants have petitioned for a rehearing. An argument in favor of a rehearing has been presented by Trust Companies Association of Oregon as
Amicus Curiae. It must be remembered that defendant Portland Trust Co. did not appeal and will be considered satisfied with the decree of the circuit court:
Coast Engine Machine Works v. Barbee et al., decided July 16, 1929, ___ Or. ___ (
279 P. Free access — add to your briefcase to read the full text and ask questions with AI
It is established by the record that decedent left a large number of bills and the expenses of her last illness and burial. Said bills amount to $1,457.76. Other claims reported but not verified as prescribed by law amount to $3,750, and other claims known to plaintiff because of the public records amount to $4,100. It is claimed by defendants Mary Jane Herron and other alleged beneficiaries of said trust instrument that this indebtedness, except the record indebtedness and the claims reported but not verified, were incurred after the execution of the trust deed and for that reason cannot be collected from the proceeds of the property attempted to be conveyed
thereby. The claims reported but not filed are claims owned by two of the beneficiaries of said alleged trust. The instrument creates what the learned author, Pomeroy, terms an express passive trust: Pomeroy's Equity (4 ed.), §§ 153, 374, 988, 989. A trustee of such a trust holds only the naked legal title. The estate of such a trust is liable for the debts of the trustor: 3d Pomeroy, (4 ed.), 2153, § 989, note 4. The trustor was the sole beneficiary of the trust during her life.
"Where one creates a trust, retaining the beneficial interest in himself, he cannot prevent his creditors from coming at the income by a provision against anticipation. Nor will a conveyance on secret trust for the grantor be good against creditors, prior or subsequent": 2d Perry on Trusts and Trustees, (6 ed.) 1335, § 815a, notes 3 and 4.
It must be borne in mind in this connection that the instrument creating the trust was never recorded; that the trustor held every indicia of ownership. There was no change of possession or management of the estate. Such a deed, whether absolute or in trust, is constructively fraudulent as to subsequent, as well as existing, creditors: §§ 9874, 10171, 10172, O.L.
Cases holding that actual intent to defraud must be proven in order to set aside or annul a voluntary conveyance, whether absolute or in trust, are cases where the conveyance is promptly recorded: Seed v. Jennings, 47 Or. 464 (83 P. 872); People'sBank v. Rostad, 86 Or. 695 (169 P. 347). Under these authorities we are of the opinion that the allegation in the complaint that said trust deed was fraudulent as to creditors is proven by the record. A different question would be presented if the trust deed had been placed of record promptly. The instrument itself prescribes that it shall not be put on record. The record
contains a stipulation of the parties that said trust deed was not placed on record. It would be very unequitable to hold under those conditions that creditors of decedent could not collect their claims from her estate.
Both parties rely on Allen v. Hendrick, 104 Or. 202
(206 P. 733). The opinion in that case was written by Mr. Justice HARRIS and is characterized by his usual thoroughness. The trust was upheld because the trust property was delivered to the trustee and a present interest therein passed to the beneficiary. Both of those elements of interest are absent in the instant case.
The case of Kelley v. Snow, 185 Mass. 288 (70 N.E. 89), is also relied on by appellants. In this case the trust property was delivered. That case also involved personalty only. The case at bar involves realty only, the trust instrument was never recorded, possession of the land was never taken by the trustee. The difference in the two cases is material. In the instant case the trust instrument was valid between the trustor and trustee. It is invalid as to creditors. Withholding the trust instrument from recordation constituted a constructive fraud: 26 C.J. 1061, (§ 4) 3. Plaintiff's testatrix apparently recognized her lack of authority to execute deeds for her own benefit under the powers of attorney executed by her husband to enable her to sell and convey the property in order to liquidate their debts. Her husband, defendant Tom Garland, therefore later executed and delivered quitclaim deeds in favor of the trustee.
The learned circuit court held that the trust instrument passed no interest in the property to the beneficiaries other than trustor during the latter's life. We concur in this opinion. The quotation from
the trust deed, included in the statement herein, clearly discloses that the trustor was to receive all the benefits of the trust estate during her life, and that she was to have the sole and exclusive management during the same period. The trustee was not authorized to exercise any power over the estate, except in case the trustor became incapacitated and under that condition the estate was to be managed for her sole and exclusive benefit; consequently there was no interest in the trustor's estate passed or vested in the other beneficiaries. The trust instrument amounted solely to a testamentary disposition of her property. Several years later she executed a will making the beneficiaries of the trust instrument the beneficiaries of her will. The beneficiaries of a will take the property subject to the debts of the testator.
The learned circuit court annulled and set aside the trust instrument in its entirety. That instrument was executed in behalf of defendant Tom Garland by decedent as his attorney in fact. But later defendant Tom Garland executed several quitclaim deeds. His testimony is to the effect that these deeds were executed for the purpose of protecting some of the beneficiaries of the trust instrument; that the decedent and defendant Tom Garland were indebted to some of those beneficiaries and desired to protect them. The decree appealed from gives to defendant Tom Garland the benefit of his curtesy interest in the land described in the trust deed. In this we think the court below erred. It was a worthy act on the part of defendant to join his wife in protecting their creditors against loss. The execution of the deeds by defendant Tom Garland was voluntary, but his interest therein, so far as this case is concerned, was a prospective curtesy. Whether or not that curtesy would ever become consummate
was uncertain. We think that defendant Tom Garland by those deeds waived his curtesy interest in the land described therein.
The decree of the court below is affirmed in so far as it holds the trust instrument void as to creditors subsequent to as well as existing at the time said instrument was executed. It is modified in so far as it annuls the effect of the quitclaim deeds executed by defendant Tom Garland. A decree will be entered here accordingly. No party will recover costs or disbursements in this court. MODIFIED.
BROWN, J., did not participate in this opinion.
Rehearing denied November 19, 1929 ON PETITION FOR REHEARING (282 P. 442)
The appealing defendants have petitioned for a rehearing. An argument in favor of a rehearing has been presented by Trust Companies Association of Oregon as
Amicus Curiae. It must be remembered that defendant Portland Trust Co. did not appeal and will be considered satisfied with the decree of the circuit court:
Coast Engine Machine Works v. Barbee et al., decided July 16, 1929, ___ Or. ___ (
279 P. 264);
Davisv. Davis,
123 Or. 667 (
263 P. 914);
Adams v. Kennard,
122 Or. 64,
96 (
222 P. 1092);
Ontario Advancement Co. v. Stevens,
113 Or. 564 (
231 P. 127);
Johnson v. Prineville,
100 Or. 105,
118-9
(
196 P. 817);
Crumbley v. Crumbley,
94 Or. 617 (
186 P. 423);
Caro v. Wollenberg,
83 Or. 311 (
163 P. 94).
"It is the duty of every judicial tribunal to determine rights of persons or property which are actually involved in the particular case before it. As the supreme court had occasion to say in California v. San Pablo Tulare Railroad, 149 U.S. 308,314 (13 Sup. Ct. 876, 878, 37 L.Ed. 747):
"`The court is not empowered to decide moot questions or abstract propositions, or to declare, for the government of future cases, principles or rules of law which cannot affect the result as to the thing in issue in the case before it. No stipulation of parties, or counsel, whether in the case before the court, or in any other case, can enlarge the power, or affect the duty, of the court in this regard'": Panama R. Co. v.Johnson, 289 Fed. 964, 972.
We can not, therefore, consider the interests of any defendants excepting Mary Jane Herron, Ruth E. Peck, Vaughn Anstine and John Anstine who appealed.
In their behalf it is earnestly contended that the trust was valid and should have been sustained. The brief of learned counsel as amicus curiae is quite lengthy and manifests much industry examining and searching authorities. Much is written therein besides the points decided.
Stress is placed on the language and terms used in our opinion. Nothwithstanding the word "deed" is used in its broad sense as clearly appears from the context rather than in its restricted meaning as a conveyance
of real property, much labor and time is expended in order to prove that the writer of the former opinion was wrong in his conclusions as well as unfortunate in his choice of words. The former opinion mentions several times that the trust deed was not recorded. The context clearly shows reference is thereby made to the agreement expressing or declaring the trust. A deed is defined as "a written instrument under seal, containing a contract or agreement which has been delivered by the party to be bound and accepted by the obligee or covenantee." Bouvier's Dictionary. The trust agreement in the instant case answers the description perfectly.
The deed conveying the land from the trustor to the trustee was an ordinary conveyance without any conditions, qualifications or trust provisions. We learn that it was intended as a trust from extraneous evidence entirely. The reservations in the arrangements between the contracting parties in favor of the trustor were secret. The word "trust" or "trustee" does not appear in the conveyance. In the expression "that the trustor held every indicia of ownership" too much is expressed. But in this connection it must be admited that the conveyance to the trustee was impliedly excepted. The opinion states that the trustee held only the naked legal title. Every indicia of ownership was secretly retained by the grantor excepting the bare legal title. The record also discloses that not only did the trustor reserve secretly the right to revoke the trust, and to dispose of the property, but also that she did actually dispose of the property, after executing the deed and trust agreement, by her last will and testament which has been duly probated. Plaintiff is the duly appointed administrator of said trustor's estate with said will annexed.
Petitioners for rehearing seem to overlook the expression in the former opinion that the arrangement between the trustor and trustee is valid as between them, but invalid as to creditors.
As the case stands here it is a contest between Coston as administrator and Mary Jane Herron and the other beneficiaries of the alleged trust. In other words, shall the beneficiaries of the trust agreement be preferred to the creditors of the trustor? We think the decedent trustor intended that her creditors would be paid out of her property, otherwise she would not have executed her last will and testament as and when she did. If the position taken by appellants with regard to the trust agreement and deed be sound, would the decedent trustor have executed her last will and testament as and when she did? The beneficiaries of her alleged trust and the devisees and legatees of her will are identical. If they receive under the deed, shown to have been given in trust by the trust agreement, her creditors will remain unpaid. If those same parties receive under the will, as the writer believes beyond doubt the decedent Netta A. Garland intended, her creditors will be paid and her beneficiaries receive all that they are entitled to. The court should not be an instrument of injustice by preventing creditors from collecting from an estate the just obligations owing them by the decedent. Particularly is this true when the conduct of the decedent, as shown by her last will and testament, indicates that she intended her creditors to be paid. To hold otherwise is to do dishonor to the name of the decedent. The decedent was an attorney and would not have executed her will if her arrangement with defendant trust company had been sufficient to pass the property absolutely to that company for the benefit and use of the appealing defendants.
Oregon Laws, section 10169, voids all deeds of gift and conveyances, as well as all transfers or assignments, verbal or written, of goods and chattels, or things in action, made in trust for the person making the same as against the creditors, existing or subsequent, of such person. It is argued, however, that said section 10169 relates to personal property only. No reason has been assigned, or can be, why a secret trust in favor of the grantor of real property should not be void as to creditors as well as a secret trust in favor of the transferor of personal property. It is contended that in as much as the compilers for a long time have entitled this section "Transfers of Personal Property, When Void", therefore said section refers only to personal property, but both of the expressions "deeds of gift" and "conveyances" are applicable to the transfer of the title to real property and are not properly used in designating the transfer of personal property. The statute is question is an old one. It was passed January 16, 1854. It was section 11, title II, in the chapter entitled "An Act Relating to Fraudulent Conveyances," in the statutes of Oregon of 1855. Title I of said chapter is devoted to fraudulent conveyances dealing exclusively with land and the rents and profits of lands and charges upon land, or the rents and profits thereof. Title II deals with both land and goods and chattels. Section 11 is intended to cover every form of property, both real and personal. Title III of the chapter covers general provisions relating to titles I and II of said chapter. Section 32 of title III of said chapter reads as follows:
"The term `conveyance,' as used in this chapter, shall be construed to embrace every instrument in writing, except a last will and testament, whatever may be its form, and by whatever name it may be known in
law, by which any estate or interest in lands is created, aliened, assigned or surrendered."
In the same statute as compiled by Deady and Lane entitled General Laws of Oregon from 1843 to 1872, the corresponding section to said section of General Laws of 1855 reads as follows:
"The term `conveyance,' as used in titles II, III and IV of this chapter, shall be construed to embrace every instrument in writing, except a last will and testament, whatever may be its form, and by whatever name it may be known in law, by which any estate or interest in lands is created, aliened, assigned or surrendered": § 57, title IV, ch. 6, Misc. Laws, Gen. L. of Oregon, 1843-1872.
The word "conveyance" appears only once in said title III, and that is in section 45 thereof. Said section 10169 is identical with section 45 of said title III by Deady and Lane. The section defining the word "conveyance" as used in O.L. is § 10176 thereof. There has been no material change in the language of these sections since the enactment of the statute in 1854. Why the legislature should have specifically referred to the title relating to personal property when defining the word "conveyance," unless it intended that the word "conveyance" as therein used related to real property, has not been explained, nor can be. That said title is devoted mainly to personal property is not questioned. There is no doubt about the statute referring to personal property. That is not a controverted question. But that it was intended to refer to real property also is conclusively shown by defining conveyance as therein used as embracing "every instrument in writing, * * * by which any estate or interest in lands is created, aliened, assigned or surrendered." We must give the legislative assembly
credit for correctly expressing its intention. That credit is especially due to these sections because they have stood the test of time, no change having been made therein since they were enacted in 1854.
The language "deed of gift" also indicates that the section embraces real property in addition to personal property mentioned therein. Appropriate words are used in treating of personal property. This court in the only case in which it has construed said section 10169 interprets it as embracing real property as well as personal property: Leasure v. Forquer, 27 Or. 334, 339
(41 P. 665). It is claimed that the construction of said § 10169 in the case last cited is obiter dictum. The gist of the controversy in that case was the alleged fraudulent transfer of real property by Forquer. It was claimed in that case that Bosworth was holding the premises in secret trust for Forquer's use and benefit. The court held that Forquer had no interest in the land, having conveyed all his interest therein to Bosworth prior to contracting the indebtedness involved in the case. The claim by one party that Forquer had secretly retained an interest in the land he had conveyed, and the denial of that claim by the other party, was an issue in the case; consequently the construction of said § 10169 was directly before the court. The court clearly indicated that if the title to said land was vested in Bosworth in trust for Forquer the conveyance was void. The wrong intended to be prevented by said § 10169, O.L., is thesecret retention of an interest in the property conveyed or trasferred. The wrong done by such secret transaction is as injurious when involving realty as when involving personalty.
Cases of the nature of the instant case must be decided upon the peculiar facts of each individual case.
Courts will scrutinize with great care every set of facts which operates to prevent creditors from collecting debts from property owned by their debtors when such property is required to pay just indebtedness. All the instant case determines is that the facts disclosed by this record entitle plaintiff to administer the property in dispute as the property of trustor's estate. It was so used during trustor's life time. It was devised by will by the trustor after she had pretended to convey it to the trustee.
By executing her will after conveying the property to the trustee she exercised a power inconsistent with the disposition she attempted to make by the trust arrangement. The manner of conducting the trust property indicates she intended to provide for the distribution of her property after her death. If she intended to vest title in her beneficiaries at the time she executed the trust arrangement she would not thereafter make disposition thereof by will. There would have been no property to devise. Such conduct on the trustor's part is convincing that more than possession was deferred. It shows that decedent's interest in the property did not pass to the beneficiaries, and was not intended to pass until after the death of the trustor. The trust agreement was, therefore, testamentary in nature. If petitioners' position were tenable there would have been no property on which the will could operate.
Neither the benefit, control or possession of the property was delivered to the grantee in the conveyance. Headnote 1 inHaulman v. Haulman, 164 Iowa, 471 (145 N.W. 930), states the rule in such cases thus:
"The legal title to any property may be conveyed to a trustee to be held for the benefit of others: `but where enjoyment is deferred until after the death of the
grantor the legal title remains in him until his death and the instrument is to be treated as testamentary in character. Where, however, the conveyance transfers the title, dominion andcontrol of the property to the trustee at the time of its execution, a postponement of the enjoyment to some future time will not make the instrument testamentary in character.'"
It would be unwise for the court to do more in the instant case than to decide it. We decline, therefore, to enter into a discussion of the mooted questions very ably presented in the several arguments advanced in support of the petition for rehearing.
The petition for rehearing is denied.
REHEARING DENIED.
RAND, J., concurs in the result.
BROWN, J., did not participate.