Fidelity Trust & Safety Vault Co. v. Walker

76 S.W. 131, 116 Ky. 381, 1903 Ky. LEXIS 198

Opinion

Opinion op the court by

JUDGE O’REAR

Affirming.

W. H. Stites was entitled to one-eighth in remainder of a sum of about $75,000 bequeathed by one Gervas Lenox Taylor, of Dublin. Ireland. Mrs. Elizabeth Stites, mother .of W. H. Stites, was the life ienant. On July 18, 1895, W H. Stites, by a hill of sale, conveyed this interest to his mother, in consideration, it is alleged (and, for the purpose of this appeal, accepted), of $6,5S9.13 paid to him. On August 20, 1S95, Mrs. Elizabeth Stites, for what real consideration is not shown, executed- to appellant trust company a deed of trust conveying to it the said undivided one-eighth interest in remainder in said fund, to hold the same in trust as follows:

“First. Out of the principal of said share, when received,said second party shall pay the sum of three hundred ($300) dollars, with interest from July 18th, 1895, advanced to said W. H. Stites.

“Second. And shall pay to the personal representative of said Elizabeth Stites the sum of twelve hundred and twenty-four and sixty-one hundredths ($1,224.61) dollars without interest prior to her death.

“Third. The residue of said fund shall be invested by said second party as trust funds are invested under the laws of the State of Kentucky, and the net. income therefrom paid in 'equal monthly installments to said W. H. Stites, to be by him expended for the benefit of his children and family without any liability of accounting therefor, and on his death the principal shall pass in fee to his' children, the issue of any children who may die leaving children to take their parent’s share, with power in said W. H. Stites t'o appoint same among his children by will. Should he survive all of his present children, the said W. H. Stites may, if he so elect, demand and receive from the said trust company the principal of said fund, and, in default of his exercising said power, the same shall at his death pass to ■such persons as he by last will and testament may designate, and if he should leave no will, it shall then pass to his heirs at law under the statutes of descent of the State of. Kentucky.

“Provided, that at any time after said, life estate ends and said second party receives said fund, said W. H. Stites shall affirmatively show to said trustee that he is not indebted to any person in any sum whatever, the said income may be paid to him for his own exclusive use and benefit, if he shall so elect, and provided further, that if the income ’from said funds is less than fifty ($59)' dollars per month net, the said second party, if said W. H. Stites shall so elect, shall pay to him in trust or in fee as hereinbefore’ directed the sum of fifty ($5*0) dollars per month so long as said trust fund shall last, and charge the amount of . such payment over and above the income to the. principal.”

Prior to the transfer by TV. H. Stites to his mother on July 18, 1895, he was bound to appellee in the sum of about $1,700, evidenced by a judgment of a court of general juris diction of the State of Tennessee. After the death of Mrs. Elizabeth Stites, and the payment by appellant trust company of the sum reserved in the deed to be then paid to her estate, appellee brought this suit against the judgment debt- or, and caused an attachment to be served on appellant trust company as garnishee, attaching the interest of W. H. Stites in the fund mentioned in and set apart by the deed of August 20, 1895. The garnishee answered that it owed the principal defendant nothing, and had not the possession of any property of his. Appellee then, by amended petition, as allowed by section 227, Civ. Code, not being satisfied with the garnishee’s answer, set up the-execution of the deed and the antecedent transfer, and alleged that they were colorable, fraudulent and designed by W. H. Stites to cheat, hinder and delay his creditors. An issue of fact was tendered by the pleadings of the trustee as to the lona ftdes of the transaction. W. H. Stites’ children living when the deed was made, being his only children, were made parties to the suit, and made the same defenses as had been made by the trustee. They were all more than 21 years of age, and one of them, a daughter, was married. The case was tried out on the pleadings alone, the circuit court holding that the provisions of the dead nullified the trust as to all save W. H. Stites, and, as to his interest, subjected it, to the extent of $50 per month, to the payment of appellee’s judgment debt and the costs. Thereafter W. H. Stites (who was proceeded against as an absent nonresident) appeared in the county court of Jefferson c.ounty, tendered his resignation as trustee of his children under the deed, and nominated one of his sons, who was appointed by that tribunal in his stead. At the same time W. H. Stites renounced the trust in his behalf. Therefore the question for decision is not whether the recited consideration of the bill of sale from W. H. Stites to his mother'actually passed, nor whether the. intention of W. H. Stites in those transactions was or not mala fieles; for, in the absence of proof, and by reason of the decision having been upon demurrer to appellant’s pleadings, those facts, being well pleaded, are-to be considered as established in appellant’s favor.

What interest did W. H. Stites take under the terms of the trust deed from Elizabeth Stites to the trust company? What are the legal rights of appellants, W. H. Stites’ children, under that deed? The answers to these questions decide this case.

In the first place, it is to he observed that the total net income from the principal is to be paid over to W. H. Stites by the trustee. He can expend it upon himself and the other members of his family,- including his children, in such . manner as he pleases. No one — not the children, nor the trustee, nor any one else — is permitted, by the express prohibition of the deed, to call him to account for the manner in which he uses or disposes of this income. If the income is not $50 per month (and it is not, and will not probably be), then he is likewise empowered to consume the principal so as to produce to him an income of at least $50 per month from this fund. In the next place, W. H. Stites may by will dispose of the principal after his death, being restricted only to his own children and offspring, but being permitted to discriminate among them. Should he survive all his present children, he may then demand and receive as his own the principal, or he can dispose of it absolutely by will, or, if he dies intestate without having consumed it, it goes to his heirs at law. The only point of distinction' between the estate thus created in the fund, and the absolute estate therein, is that, if any of W. H. Stites’ children survive him, they would take the unexpended principal, sub ject to his power of appointment; that is, his right to discriminate among them, giving to one all or any part of the fund, as he might determine. The contingency must be extremely rare in which a father would wish to exclude all his children from any part of his estate. Nor can the suggestion in the deed that W. H. Stites is to use the income for his children and family, without any liability of accounting therefor, change the nature of the title in the income from an absolute one. It vests him with an unrestrained discretion, by which he may take to himself, as a member of his family, all of the income, or he might apportion its use among those of his family dependent upon him, and whom he is already morally .and legally bound to support. That is about Avhat people generally do with their own, anyhow. Under no construction could W. H. Stites’ children claim more of the income than his' “family.” In truth, the deed does not give the income to the “children and family of W.' H. Stites to be expended by him.”. It gives it to W. H. Stites. The expressed purpose for which it was to be expended was more in the nature of a request upon W. H. Stites as to the manner of its use. If it had given the whole fund absolutely to W. EL Stites at his mother’s death, to be applied by him for the maintenance of his family, could his children, and other members of his family, have excluded him from a personal use of it, or could they have required, by a chancery proceeding, that he apportion it equitably among thenl then, or annually so long as they lived? The language used rather signifies a reason for the gift, than implies an irrevocable dedication of the income to the use of particular persons. Especially is this so when any meaning and effect is given to the expression “without liability to account therefor.” That W. H. Stites could exclude his children from any sort of claim upon the Income by merely showing he was free of debts, makes the interest of his children more equivocal, if possible, while affording a not unreasonable test of the main purpose of the instrument.

In the very excellent brief of able counsel, appellants properly insist that every part of the instrument, and all of its provisions equally, if possible, be considered in arriving at the intent of the settlor, which must control so far as it is not repugnant to the law. Applying this rule, one can not escape the conclusion that the person whose interest was studiously sought to be conserved in every line and provision of the trust was that of TV. H. Stites. With the fullest possible right of personal enjoyment, with privilege of disposing of any surplus' at his death in the manner most natural and most likely to be desirable, little more could have been added to the completeness of his title. The interest of his children, if it can be said that they had any but a contingent one, was made to depend upon the natural instinct of their father to aid them as he might judge to be ■proper, having regard to his conception of his own interests and the natural claims of other members of his family. This, at last, is precisely the “interest” that all children naturally have in their parents’ property during the lifetime of the latter.' It can not be said then that the children took a legal estate in the income of this fund. If this were a proceeding by a creditor of W. H. Stites’ children to subject their interest in the fund, what part of it could the chancellor lay hold on, and say it was liable? In Pope’s Ex’rs v. Elliott, 8 B. Mon., 56, it was held that where the executors were not compelled to pay a sum of $25 per month to the support of a devisee, but were authorized to do so in their discretion, the interest of the devisee could not be subjected. In Cosby v. Ferguson, 3 J. J. Marsh., 264, a sum had been set apart in trust for the benefit of Cosby and his family, “the interest to be appropriated to the maintenance and use of himself and family during their lives.” Cosby’s interest was subjected to the payment of his debts. The court declined to pass on the question of what beneficial interest the children took. In Garner v. Wills, 92 Ky., 386, 13 R., 786, 17 S. W., 1023, the devise was to the testatrix’s children, with this provision for the support of her husband: “I desire that my children give to my husband each year a sum sufficient to support him in a comfortable manner, and furnish to- him a comfortable home and maintenance until his death.” It was also provided 'that, if the children failed to furnish the testratrix’s husband the home and support, the devise to them was to become void. It was held that the husband took no interest that could be subjected to his debts. In Webster v. Wathen, 97 Ky., 318, 37 R., 33, 30 S. W., 663, the testratrix gave her estate to Hettie Cunningham Wathen. This provision was made as to a sister, Euphemia: “I want her [Hettie] to give any presents to my sister, Euphemia Cunningham Webster, that she may need, and that my estate can afford. I want Hettie, as far as possible, to look after my sister Euphemia’s interest, and to protect her as far as lies in her power.” It was held that the will did not create a trust in behalf of Euphemia. In that case the court approved these cardinal tests of a trust created by will or deed: (1) The words of the testator must be mandatory; (2) the person intended to be benefited must be certain; (3) the subject to which the obligation relates must be certain. In Davidson’s Ex’rs v. Kemper, 79 Ky., 5, the court reviews the cases bearing on this subject, and thus stated the rule: “It will be observed that where, in the cases cited, the interest of the beneficiary has been subjected, there was an absolute ap propriation of a certain sum for the benefit of the cestui que trust, to be applied in some instances under the direction of the trustee, but in no case, as here, has it been left discretionary with the trustee as to whether the cestui que trust should have the use or benefit of any of the property held in trust.” All of these cases are necessarily founded upon the idea that these persons did not take an enforceable beneficial interest in the estate sought to be subjected. The trial court went upon the theory that this was a “spendthrift trust,” where the most complete enjoyment and most ample dominion over an estate is given to one, with an attempt on the part of the donor'to exempt it from liability for the debts of tiré beneficiary. As these creatures tend to beget idleness and irresponsibility and to shelter fraud, the policy of the law has been to discountenance them. As said by Waite on Fraudulent Conveyances, section 360: “It is opposed to a wise public policy that a man should have an estate to live on, but not an estate to pay his debts with, or that he should possess the benefits of wealth without the responsibilities.” This policy has been signified in this State by statute since 1797. . Section 2355, Kentucky Statutes, 1899, provides: “Estates of every kind held or possessed in trust, shall be subject to the debts and charges of the persons to whose use, or for whose benefit, they shall be respectively held or possessed, as they would be subject if those persons owned the like interest in the property held or possessed as they own or shall own in the use or trust thereof.”

We hold that W. H. Stites took the beneficial interest in the principal funds in the hands of the trust company as trustee, to the extent at least of the right to receive $50 per month therefrom in any event. It was therefore not improper to have subjected that interest so far as was neces sary to the payment of appellee’s judgment debt. These conclusions, we think, are supported by the following additional eases: Dravo v. Seebolt, 17 R., 1165, 33 S. W., 1106; Sale v. Thornberry, 86 Ky., 266, 9 R., 472, 5 S. W., 468; Enders’ Ex’r v. Tasco, 89 Ky., 17, 11 R., 592, 11 S. W., 818; Bland’s Adm’r v. Bland, 90 Ky., 400, 12 R., 532, 14 S. W., 423, 9 L. R. A., 599, 29 Am. St. Rep., 390; Parsons v. Spencer, 83 Ky., 305, 7 R., 329.

Judgment affirmed.

Petition for rehearing by appellant overruled.