Calhoun v. Markow

• Decision Date: 11 December 1933
• Docket Number: 30892
• Citation: 168 Miss. 556,151 So. 547
• Court: Mississippi Supreme Court
• Parties: CALHOUN v. MARKOW et al

151 So. 547

168 Miss. 556

CALHOUN v. MARKOW et al

No. 30892

Supreme Court of Mississippi

December 11, 1933

Division B

TRUSTS.

Creditors of cestui que trust could not reach income or corpus of estate created by trust which gave trustee power to invest and reinvest securities forming corpus of trust estate, at trustee's discretion, and provided that cestui receive income and half of corpus upon reaching forty, and remainder of corpus upon reaching forty-five, trust estate to go to children if she died theretofore.

HON. V J. STRICKER, Chancellor.

APPEAL from chancery court of Hinds county HON. V. J. STRICKER Chancellor.

Suit by Leonard Calhoun, trustee, against Mrs. Dora L. Markow and others, wherein defendants filed a crossbill. From a decree dismissing the bill, complainant appeals. Affirmed.

Affirmed.

Lotterhos & Travis, of Jackson, for appellant.

It is our understanding of the authorities that in a case like the present one where the trustee has no discretion in the expenditure of the monies but must pay the same over in cash to the beneficiary, and where there is no termination of the beneficiary's estate upon the attempted alienation, and further where the estate granted is more than a life estate and the donor has surrendered all control so that the absolute legal title is in the trustee and the donor has merely stated that the estate shall not be subject to debts, no spendthrift trust has been created and the creditors of the beneficiary are entitled to the same rights in the estate that the beneficiary herself enjoys.

1 Perry on Trusts (7 Ed.), secs. 386 and 386a; 2 Perry on Trusts, sec. 827a; Gray on Restraints on the Alienation of Property, secs. 105, 113, 114, 115, 116, 134, 166 and 167; Lynch v. Lynch, 161 S.C. 170, 159 S.E. 26.

The law is well settled that in those cases where income alone is involved and the trustee is directed to expend it for the support of the beneficiary, or some other provision is included so that the beneficiary is not entitled to receive the actual money, of course the creditors of the beneficiary cannot subject the estate because the beneficiary has no actual right to any income in money. But it is to be noted that under the present trust agreement no such discretion is vested in the trustee but be is directed at all events to pay the money to the beneficiary.

Leigh v. Harrison, 69 Miss. 929, 11 So. 604; Stern v. Hampton, 73 Miss. 555, 19 So. 300; Black on Bankruptcy, Hornbook Series, sec. 196.

Howie & Howie, of Jackson, for appellees.

The contention of counsel for appellee, Mrs. Dora L. Markow, is that this entire instrument must be looked to in order to gather the intention of the donor and to ascertain the purposes the donor had in mind at the time of the creation of the trust agreement. An examination of this trust agreement will show that the same is nothing more or less than a spendthrift trust created by a parent for her child.

Leigh v. Harrison, 11 So. 604, 69 Miss. 929; Stansel v. Hahn, 50 So. 696, 96 Miss. 616; Barnett's Appeal, 46 Pa. 392, 86 Am. Dec. 502; Mitchell v. Choctaw Bank, 65 So. 278, 107 Miss. 314.

Where the property is held in trust to receive the rents or income thereof, and to apply such rents or income to the support of the cestui que trust, who consequently has no present right of enjoyment or power of alienation, his interest in such property cannot be reached by his creditors.

1 Perry on Trusts, par. 386a; 38 Cyc. 238; Leigh v. Harrison, 69 Miss. 923, 11 So. 604, 18 L. R. A. 49.

Another argument advanced by counsel for appellant is that because the trust estate created for the benefit of appellee does not last for the life time of appellee, that the same is subject to the payment of her debts. We have been unable to find any case in Mississippi directly in point on this particular legal question, but there are decisions from other states holding that such estates are as free from the hands of the creditors as those estates created for a life time.

Broadway Nat. Bank v. Charles W. Adams, 133 Mass. 170; Bennett v. Bennett et al., 75 N.E. 339; Seymour v. McAvoy, 53 P. 946; Merchants Nat. Bank v. Crist, 118 N.W. 394; Siegwarth's Estate, 75 A. 842; Jackson Square Loan & Sav. Ass'n of Baltimore City v. Bartlett et al., 53 A. 426; Nichols v. Eaton, 23 L.Ed. 254; Suskin & Berry v. Rumley, 37 F.2d 204, 68 A. L. R. 768; West Tenn. Co. v. Townes, 52 F.2d 764; Muller v. Cox, 130 A. 811; First Nat. Bank of Canby v. Olufson, 232 N.W. 337; Damhoff v. Shambaugh, 206 N.W. 248.

May, Sanders, McLaurin & Byrd, of Jackson, for appellees.

Our theory of the case is that the trust involved is an active trust; that it is beyond the reach of creditors of the cestui que trust; that the cestui que trust has no power of alienation and has no vested interest in the income or the corpus of the property, but merely an expectation, which may be completely wiped away by her death prior to attaining the age of forty years.

Leigh v. Harrison, 69 Miss. 929; Stansel v. Hahn, 96 Miss. 616; Mitchell v. Choctaw Bank, 107 Miss. 314; Bank v. Oil Mill, 165 Miss. 314; 39 Cyc. 237; 26 R. C. L. 1269; Barnett's Appeal, 46 Pa. 392, 86 Am. Dec. 502; Nichols v. Eaton, 91 U. S. Sup. Ct., p. 716, 23 L.Ed. 254.

Argued orally by Fred Lotterhos, for appellant, and by J. H. Howie and W. B. Fontaine, for appellee.

OPINION

Ethridge, P. J.

On November 3, 1930, Mrs. Sophie Lasunsky executed a trust instrument to the Merchants' Bank & Trust Company, for the benefit of Mrs. Dora L. Markow, her daughter, reading as follows:

"This indenture made this the 3rd day of November, 1930, between Mrs. Sophie Lasunsky, of Jackson, Mississippi, party of the first part, and The Merchants Bank and Trust Company, a corporation organized and existing under and by virtue of the laws of the State of Mississippi, with its domicile and chief place of business in Jackson, Mississippi hereinafter called the 'Trustee,' party of the second part.

"Whereas, the party of the first part hereto desires to create a trust for her daughter, Mrs. Dora Markow, of the property and for the purposes hereinafter mentioned;

"Now, therefore, this indenture Witnesseth; That, in consideration of the premises, the mutual covenants herein contained, and of other good and valuable considerations, and of the sum of ($ 1.00) One Dollar to her in hand paid by the party of the second part at or before the execution and delivery of these presents, the receipt whereof is hereby acknowledged, the party of the first part has granted, conveyed, assigned, set over and delivered and by these presents does grant, convey, assign, set over and deliver unto said party of the second part, its successors and assigns, the following described property and securities, to-wit:--

County of Hinds, State of Mississippi, Road

Bonds Supervisors District Nos. 1 and 5,

Nos. 172, 173, 176, 177 and 178

$ 2,500.00

City of Jackson, Mississippi, special Street Im-

provement Bonds Nos. 38 and 39

2,000.00

City of Canton, Mississippi, 5% Funding Bonds

Nos. 20 and 21

2,000.00

Certificate No. 5311 for 20 shares The Building

& Loan Association of Jackson, Mississippi,

stock

2,000.00

1/2 interest in United States First Liberty Loan

Converted Bond No. A XXXX1151, for $ 10,-

000.00

5,000.00

Cash from Savings Account No. 1742 of The

Merchants Bank & Trust Co., Jackson, Miss.,

in the name of Mrs. Sophie Lasunsky

4,500.00

Total

$ 18,000.00

"Together with all of the estate and rights of the party of the first part.

"To have and to hold all and singular the above granted and described property and securities unto said party of the second part, its successors and assigns, in trust, nevertheless, for and upon the following uses and purposes, and subject to the terms, conditions, powers and agreements herein set forth;

"1. To receive, hold, manage, sell, invest and reinvest the same and every part thereof in the manner hereinafter specified, and to collect, recover and receive the issues, interest, income and profits thereof, hereinafter called 'Income,' and after deducting the commissions of the trustee as hereinafter provided, and the proper and necessary expense in connection with the administration of the trust, to pay the 'income' in quarterly installments of equal amounts, or as nearly equal as possible, unto my daughter, Mrs. Dora Markow, of Jackson, Mississippi (who was thirty years of age June 7, 1930) until my said daughter attains to the age of forty years on which date or as soon thereafter as practical, one-half of the hereinbefore described property and securities, either in their present form or reinvested form, shall be forthwith delivered to my said daughter as her sole and absolute property, and likewise when my said daughter attains to the age of forty-five years, the remaining one-half of said property and securities, either in their present form, or reinvested form, shall be forthwith delivered to my said daughter, as her sole and absolute property. However, until my said daughter attains to the ages herein mentioned she is to have no interest in the said property except to receive the income therefrom, and she is not invested with any power or authority to sell, pledge, assign or encumber the same or any part thereof, or any income therefrom, and neither said property nor the said income shall ever become in any way liable for any debts or obligations whatsoever which may become due or owing by my said daughter.

"If my said daughter shall die prior to attaining to the age of forty-five years, then all of the said trust property in the hands of said trustee shall belong to the then living child or children of my said daughter, and the trustee shall immediately distribute the...