Pacific National Bank v. Windram
| Decision Date | 29 June 1882 |
| Citation | 133 Mass. 175 |
| Court | United States State Supreme Judicial Court of Massachusetts Supreme Court |
| Parties | Pacific National Bank v. Adelaide Windram & others |
Suffolk.
Decree for the plaintiff.
E. S Mansfield, for the plaintiff.
A. S Wheeler & J. H. Young, for the defendants.
The defendant, Mrs. Windram, after her marriage, being possessed in her own right of personal property, conveyed it to trustees by an indenture dated in March 1879. The trusts declared by the indenture are, that the trustees are to pay the net income to her semiannually during her life "upon her sole and separate order or receipt, the same not to be by way of anticipation," and to pay the principal to her children upon her death, or when, after her death, they arrive at the age of thirty years, except as to a sum not exceeding twenty-five thousand dollars, over which she retains a power of appointment by will.
After this settlement in trust, she jointly with her husband borrowed a large sum of money of the plaintiff, and, as security therefor, assigned and transferred to the plaintiff, by an instrument in which her husband joined, all her right and interest to and in the income of said trust fund accruing under the said indenture. The object of this bill in equity, which is brought under the Gen. Sts. c. 113, § 2, cl. 11, is to reach and apply, in payment of the plaintiff's debt, the income to which she became entitled under the indenture after the assignment to the plaintiff. The provision that the trustees are to pay the net income to her upon her sole receipt, and not "by way of anticipation," is clearly intended to restrain the power of the cestui que trust to alienate the income in advance; and the case therefore raises the question, whether such restraint of alienation is valid as against subsequent creditors or purchasers with notice.
It was decided in the case of Broadway National Bank v. Adams, ante, 170, that the founder of a trust for the benefit of another may by suitable provisions restrain the power of the cestui que trust to alienate the income by anticipation, and protect the income from the claims of his creditors until it is paid over to him. In that case, it was not necessary to consider whether a man could settle his own property in trust to pay the income to himself with a like restraint of alienation which would be valid. It seems to us that the two questions are quite different.
The general policy of our law is, that creditors shall have the right to resort to all the property of the debtor, except so far as the statutes exempt it from liability for his debts. But this policy does not subject to the debts of the debtor the property of another, and is not defeated when the founder of a trust is a person other than the debtor. In such case, the founder, having the entire jus disponendi in disposing of his own property, sees fit to give to his beneficiary a qualified and limited, instead of an absolute, interest in the income. Creditors of the beneficiary have no right to complain that the founder did not give his property for their benefit, or that they cannot reach a greater interest in the property than the debtor has, or ever had. But when a man settles his property upon a trust in his own favor, with a clause restraining his power of alienating the income, he undertakes to put his own property out of the reach of his creditors, while he retains the beneficial use of it. The practical operation of the transaction is, that he transfers a portion only of his interest, retaining in himself a beneficial interest, which he attempts by his own act to render inalienable by himself and exempt from liability for his debts.
To permit a man thus to attach to a valuable interest in property retained by himself the quality of inalienability and of exemption from his debts, seems to us to be going further than a sound public policy will justify. No authorities are cited in favor of such a rule. In England it is the settled rule that the founder of a trust in favor of a third person (except married women) cannot, by a clause restraining alienation, put the income out of the reach of the creditors of the beneficiary. See cases cited in Broadway National Bank v. Adams, ante, 170.
In Pennsylvania, where the English rule is rejected, and the same rule, as to the power of a founder of a trust in favor of a third person, adopted by us in Broadway National Bank v. Adams, is upheld, the courts yet hold that a person cannot so settle his own...
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In re Opinion of the Justices
...law disabilities. It has been said that, except ‘as to dealings with her husband, she is made a person sui juris‘ (Pacific National Bank v. Windram, 133 Mass. 175, 178), and that the ‘unity and identity of interest which by the common law existed between husband and wife have been impaired.......
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McFarland v. Bishop
...to the grantor, which is held subject to the rights of creditors and purchasers. [Brown v. McGill, 87 Md. 161, 39 A. 613; Bank v. Windram, 133 Mass. 175; Schenck v. Barnes, 156 N.Y. 316, 50 N.E. Low v. Carter, 21 N.H. 433; De Hierapolis v. Lawrence, 115 F. 761; Sloan v. Birdsall, 58 Hun 317......
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In re Tosi
...has been that a settlor cannot place property in trust for his own benefit and keep it beyond the reach of creditors. Pacific National Bank v. Windram, 133 Mass. 175; Jackson v. Von Zedlitz, 136 Mass. 342; Taylor v. Buttrick, 165 Mass. 547, 551, 43 N.E. 507; Forbes v. Snow, 245 Mass. 85, 89......
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Bucknam v. Bucknam
...As to this, the law of this Commonwealth is well settled. Broadway National Bank v. Adams, 133 Mass. 170, 43 Am.Rep. 504;Pacific National Bank v. Windram, 133 Mass. 175;Slattery v. Wason, 151 Mass. 266, 23 N.E. 843,7 L.R.A. 393, 21 Am.St.Rep. 448;Lathrop v. Merrill, 207 Mass. 6, 92 N.E. 101......