109 F.2d 754 (7th Cir. 1940), 6938, Schwager v. Schwager
|Citation:||109 F.2d 754|
|Party Name:||SCHWAGER et al. v. SCHWAGER et al.|
|Case Date:||February 09, 1940|
|Court:||United States Courts of Appeals, Court of Appeals for the Seventh Circuit|
Irving K. Russ and Harry A. Kahn, both of Chicago, Ill., and B. G. Slater, of Milwaukee, Wis., for appellants.
Ralph M. Hoyt and George Ettenheim, both of Milwaukee, Wis., for appellees.
Before EVANS, SPARKS, and MAJOR, Circuit Judges.
MAJOR, Circuit Judge.
This is an appeal from an order of the District Court entered January 30, 1939, dismissing the Bill of Complaint for failure to state a cause of action. The plaintiffs are the divorced wife and children (two of whom are minors) of the defendant, Leon A. Schwager. The relief sought was support and maintenance from the income or principal of a spendthrift trust of which the husband is the designated beneficiary. The defendants, First Wisconsin Trust Company and Meyer Gronik are trustees under the spendthrift trust, and Meyer Gronik and Laura Schwager Gronik are contingent beneficiaries.
As the complaint was adjudged insufficient, it becomes important to state the material allegations thereof. Plaintiff, Theresa G. Schwager, (afterwards referred to as 'Theresa') was married to the defendant, Leon A. Schwager (afterwards referred to as 'Leon') on April 9, 1912, and they had three children, namely, David G., Belle C., and Julie T., (afterwards referred to as 'the children') the remaining plaintiffs. On June 2, 1931, Theresa obtained a divorce from Leon in the Circuit Court of Cook County, Illinois, the decree providing that he pay her for the support and maintenance of herself and the then three minor children, $100 per month to February 6, 1935, and $50 per month from February 6, 1935 to July 15, 1943. On October 9, 1935, upon petition of Theresa, the Circuit Court found Leon guilty of willful contempt for failure and refusal to make the decreed payments, and committed him to the county jail where he remained incarcerated until December 21, 1935, when he was released upon payment of $1500 on account of the arrearage, and his promise that he would appear when requested and pay the balance due within a short time. This he failed to do and has since remained out of the jurisdiction of the Cook County court.
On February 9, 1938, when the Bill of Complaint was filed, Leon was indebted to the plaintiff Theresa in the sum of $10,810 under the decree of the Cook County Court, where there is still pending and undisposed of a rule to show cause why he should not be held in contempt of court for failing and refusing to comply with such decree. The allegation is made that plaintiffs are all in indigent circumstances, while Leon enjoys a substantial income as the beneficiary under the spendthrift trust and, that he has no other assets or income out of which plaintiffs can satisfy said arrearage, or obtain support and maintenance.
The trust in question was created by Leon's mother, Bertha C. Schwager, in her last will and testament dated December 18, 1934, and whose death occurred February
10, 1935. The trust property is valued at approximately $50,000 and is in the possession of the trustee defendants.
There is attached to the Bill of Complaint and made a part thereof a copy of said will which, in view of the issues presented, requires a statement of its pertinent provisions. Paragraph 5(b), with reference to the trust fund, provides: '(b) The income therefrom shall be paid to my son Leon A. Schwager. This provision is made for the personal protection and welfare of said beneficiary and such income shall not be susceptible of assignment, anticipation, hypothecation or seizure by legal process. Whenever and if the trustees shall have notice or shall reasonably apprehend that the interest of such beneficiary has been or is threatened to be diverted from said defined purposes in any manner aforesaid or otherwise, the trustees shall withhold the income and principal which might otherwise be payable to the beneficiary hereof from distribution and shall apply the same in such manner as it shall deem expedient in such beneficiary's interest and/or to the support, maintenance, comfort, welfare and necessities of such beneficiary and the members of his family then dependent upon him for support, not, however, including his first wife or any of his children by her. ' The first wife and children referred to are the plaintiffs herein. The trustees are also authorized, in their discretion, to distribute to Leon such amounts from the principal as they shall deem expedient. Certain specific bequests were made to the children of Leon to take effect at the termination of the spendthrift trust. By Paragraph 15, the interest devised to such children was made contingent. After reciting the provisions made for Leon, and making reference to the marital difficulties existing between Leon and his wife, the express condition on which the children are permitted to receive 'any benefit whatsoever under this will' was stated. In substance, the condition requires that Theresa, within ninety days after the death of the testatrix, release Leon from any and all obligations on account of alimony and support, both past and future, and only in that event was the devise to the children to become effective, otherwise such provision 'for their benefit shall be ineffective and void. ' Under such circumstances, the property was bequeathed to parties other than the children. Provision is made for any wife or children which Leon may leave other than the instant plaintiffs. This paragraph concludes: 'It is my intent under this provision to cut off my said three grandchildren from any participation whatsoever in my property or its distribution unless their mother shall have effectively and completely eliminated for all time any and all possible right, claim or demand on her part or in her behalf or in behalf of any other person against the said Leon A. Schwager arising out of directly or indirectly any marriage obligation of the said Leon A. Schwager.'
The contested issues as stated by the plaintiff, 1 are:
First-- Is this spendthrift trust void as against the claims of the beneficiary's children or his divorced wife for their support and maintenance?
Second-- If not, may the children or former wife of the beneficiary obtain support and maintenance out of the income or principal of the trust under a proper construction of the trust instrument?
Counsel for both sides have been diligent in the preparation and submission of briefs relative to their respective contentions. It appears that no pertinent court decision of any State or Federal Court, nor text book have been omitted. They have all been read and studied, but obviously we must confine our discussion to a comparative few of the leading authorities cited and relied upon in support of the opposing contentions.
Our problem is more difficult by reason of the fact that there is no controlling statute nor reported court decision of the State of Wisconsin. We assume, under such circumstances, that we must determine the law of that state from the rule in other jurisdictions, taking into consideration any decision of Wisconsin concerning matters of a relevant nature. Both sides claim that their contention is sustained by the majority rule, while each concede there is a minority rule to the contrary.
Plaintiffs' argument is predicated upon two theories, (1) that the spendthrift trust is void as against the claims of the wife and
children, and (2), if not void, such support may be obtained under a proper construction of the trust provision. Under the first theory, it is argued that such a provision is contrary to public policy and, under the second, that the provision should be construed as showing an intent on the part of the testatrix to provide for such wife and children.
We think it may be said that no decision, other than those predicated upon a statutory provision, has permitted a wife or child to reach a spendthrift trust created by a third party for the benefit of the husband without relying in whole or in part upon an intention, express or implied, that the trust fund be thus employed. In this connection, it may also be said that the courts have extended themselves at great length to ascertain a favorable intent on the part of the settlor and, in fact, in some of the cases have indulged in a reasoning indicative of the desire sought to be achieved. In such cases the intent has been found because of a failure to express a non-intent.
It thus becomes important, in the beginning of our discussion, to appraise the situation with which we are confronted. Here, we have a mother executing a will in which she wishes to provide for her divorced son. Her will was written more than three years after the divorce. She was thus familiar with the marital difficulties existing between him and his wife and, that the latter had been awarded alimony and support. Being thus familiar with the situation, she deliberately concluded that she would not permit any of her money or property to pass into the hands of the divorced wife. We have heretofore set forth the language employed by her to accomplish this purpose, and shall not repeat. It is sufficient to state the language used is strong and convincing of an intention wholly contrary to that which we are now called upon to adopt. It is also too plain to admit of dispute that the situation presented was contemplated by the mother and is the one which she sought to guard against. Thus, no unexpected or new situation has developed such as is referred to in some of the cases.
Plaintiffs naturally, and with justification, place much stress upon a statement contained in 'Restatement of the Law of Trusts,' Sec. 157 (Amer. Law Instit. 1935): 'Although a trust...
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