Liberty Nat. Bank v. Hicks

173 F.2d 631, 9 A.L.R. 2d 1355, 84 U.S. App. D.C. 198, 1948 U.S. App. LEXIS 2006
CourtCourt of Appeals for the D.C. Circuit
DecidedDecember 13, 1948
Docket9598
StatusPublished
Cited by24 cases

This text of 173 F.2d 631 (Liberty Nat. Bank v. Hicks) is published on Counsel Stack Legal Research, covering Court of Appeals for the D.C. Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Liberty Nat. Bank v. Hicks, 173 F.2d 631, 9 A.L.R. 2d 1355, 84 U.S. App. D.C. 198, 1948 U.S. App. LEXIS 2006 (D.C. Cir. 1948).

Opinions

PER CURIAM.

The case is this: Appellee, John Hicks, 3rd, was first married to Harriet Ann Hicks. There were three children. Sometime in 1937 marital troubles arose; Hicks and wife separated; and the latter began proceedings for divorce and support for herself and the children. Before the suit was tried, counsel for the respective parties entered into negotiations looking 'to an amicable property settlement. The negotiations resulted in the execution by John Hicks of two trust agreements. In one a Wisconsin bank was named trustee; in the other, a District of Columbia bank. As we are not concerned with the Wisconsin trust, no further notice need be taken of it or its conditions. The District of Columbia trust made in 1938 embraced a number of shares of stock (said to be worth $60,-000) of a Wisconsin corporation, which, upon execution of the trust, were delivered by Hicks to the trustee. Hicks reserved to himself for life the income of the trust, and the trust instrument provided that it should terminate on his death, at which time all the assets, including undistributed income, should be distributed as follows: one-half to Hicks’ three children, share and share alike; provided, however, that if any of the children should predecease Hicks, leaving issue, such surviving issue should take the share of his parent. In the event none of the children nor issue of any survived, the one-half of the trust property set apart for them, on Hicks’ death, should be distributed as directed by Hicks’ will, and the other half should in any case be distributed according to his will, or lacking a will, to his heirs-at-law according to the statutes of descent in the District of Columbia. The agreement recited that the trust was created by the donor (Hicks) after full consideration and advice, and was not to be altered, amended, or revoked.

It contained two provisions which, in the main, furnish the grounds on which Hicks relies to maintain this suit to set the trust aside. These are as follows:

“The provisions herein made are intended for the personal protection and welfare of the beneficiary hereof and shall not be susceptible of assignment, anticipation, hypothecation or seizure by legal process.

“The Trustee may in its discretion advance to and/or use and apply for the benefit of the beneficiary * * * such amounts out of the principal serving the income of such beneficiary as the Trustee shall deem necessary by reason of accident, illness, insufficiency of income or other adversity, for the maintenance or other necessities or comforts of the beneficiary. Such advances shall be charged to the beneficiary receiving the same and shall be liquidated out of income subsequently distributable to such beneficiary. * * * ”

On March 12, 1941, Harriet Ann Hicks and John Hicks, 3rd, were divorced in Washington, and on February 6, 1942, John [633]*633Hicks married Eloise Reese Hicks, and one child was born of that marriage. Sometime thereafter Hicks executed an instrument in writing revoking and annulling the trust, and in line therewith notified the trustee-bank that in order to secure the future of his present wife and child he had given to the former, one-half the corpus of the trust, i. e., the one-half he had reserved the right to dispose of by will. He thereupon requested the bank to deliver to her and to him, the entire corpus. The bank refused. Whereupon Hicks and his present wife brought this suit to have the trust as a spendthrift trust declared void as against public policy.

The District Court, without opinion, gave judgment for Hicks and his present wife on the pleadings. We are of the view that this was wrong and that the judgment must be reversed.

As we have shown, the trust was created as the result of a property agreement prior to divorce, and afforded the means whereby Hicks, in anticipation of separation and divorce, undertook to discharge a part of his obligation of support to his three infant sons. In doing so he inserted in the trust-instrument certain provisions for the protection and enforcement of his reserved life estate which he now claims are against public policy and void. And as the result of this he now insists the whole trust and all its provisions are equally void and of no effect.

In considering this proposition, it should be boxme in mind that no creditor of Hicks is suing to impeach the trust. He alone, it is, who is seeking to take back as his own one-half of certain shares of stock which more than 10 years ago, by irrevocable agreement in writing, he transferred and delivered in trust to his children, as well as the other half of the shares which under the terms of the trust were to be distributed according to his will or, lacking his will, to his heirs at law.

In short Hicks’ present position is that because he attempted in the trust agreement to free his reserved life interest from liability for his debts and to give to his trustee power, in its discretion, to use the capital of the trust for his benefit in an emergency, the whole trust is illegal; or, if not illegal, that it shows an intent to give the children only what is left at his death; thereby making the provision in favor of the children testamentary in character and, hexxce, subject to revocation at his pleasure. At this point it may not be amiss to say that, if these groxinds of illegality in the trust were being urged by a creditor of Hicks, we would have a more difficult problem. But coming alone from Hicks they present the questions in a different aspect.

In Hurt et al. v. Gilmer et al., 59 App.D. C. 282, 40 F.2d 794, 795, we had a case in which one Craddock assigned and delivered to a trustee certain securities on condition that the income therefrom shoxxld be paid to one Fannie Hurt, during her life. Upon the death of Fannie, the trustee was to convert the property into cash and distribute the proceeds to her three sisters, unless any of the sisters should then be dead “leaving children surviving, in which event such surviving children shall be entitled to the shares thereof to which the deceased parent would have been entitled if then living.” Thereafter all of the living beneficiaries joined with the settlor in attempting to break the trust and to deliver the property to Fannie free of the trust. There we said:

“In our opinion the ruling of the lower court was right. The trustee, by accepting the trust, became obligated to each beneficiary who acquired under its terms an interest or estate, whether vested or contingent in the trust property. This classification included Fannie P. Hurt, who was granted a vested life estate in the property; and her three sisters, who were graxxted a contingent estate in remainder conditioned upon their surviving her; and also the born and unborn children of the sisters of Fannie P. Hurt who predeceased her leaving children living at the time of her decease. The identity of such children as might ultixxiately take under the trust, like that of the surviving sisters who similarly might take thereunder, could not be known until the death of Fannie P. Hurt, but that fact did not prevent the vesting of such interest upon the happening of the contingencies upon which they were made to depend.”

[634]*634The principle decided in the above case is that a trust once validly constituted may not thereafter be terminated without the consent of all the cestuis que trust. This includes not only those specially named but those then unborn who may take on the expiration of the trust according to the terms.

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Bluebook (online)
173 F.2d 631, 9 A.L.R. 2d 1355, 84 U.S. App. D.C. 198, 1948 U.S. App. LEXIS 2006, Counsel Stack Legal Research, https://law.counselstack.com/opinion/liberty-nat-bank-v-hicks-cadc-1948.