Chinnis v. Cobb
| Citation | 185 S.E. 638,210 N.C. 104 |
| Decision Date | 20 May 1936 |
| Docket Number | 596. |
| Parties | CHINNIS v. COBB et al. |
| Court | United States State Supreme Court of North Carolina |
Appeal from Superior Court, New Hanover County; Williams, Judge.
Suit by A. M. Chinnis against May Wright Cobb and others. From an adverse judgment, defendants other than May Wright Cobb appeal.
Reversed.
Motion to vacate an attachment levied on an interest in certain real property in the city of Wilmington, N. C., as the property of defendant May Wright Cobb.
The facts, as they appear from the pleadings and findings of fact of the court below, are substantially as follows:
All the defendants are nonresidents of North Carolina.
The plaintiff, a resident of Brunswick county, N. C., is the owner and holder of seven bonds of $1,000 each, executed by defendant May Wright Cobb, and secured by deed of trust executed by her and her codefendants, on certain real property in the city of Norfolk, Va. From foreclosure sale of said property in 1935, credits were applied on the bonds held by plaintiff, leaving a balance of about $5,000 due and unpaid. Katherine F. Wright, a resident of Virginia, mother of defendant May Wright Cobb, and grandmother of the other defendants, died March 17, 1935, seized and possessed of real and personal property, including the real estate in the city of Wilmington, N. C., an interest in which was sought to be attached in this action. The said Katherine F. Wright left a last will and testament which was duly probated and is now of record in New Hanover county. Item 3 of the will is as follows:
On November 8, 1935, this action was instituted, and at the same time warrant of attachment was issued and levied on the interest of May Wright Cobb in the Wilmington real property and publication of summons and warrant of attachment, under order, was begun. On December 7, 1935, the said will of Katherine F. Wright was duly recorded in New Hanover county.
No personal service was had on any of the defendants.
The defendants entered special appearance and moved to dismiss the action for want of prosecution bond, but upon sufficient finding this motion was denied. At the same time the defendants other than May Wright Cobb entered special appearance and moved to vacate the attachment.
The court below found that Katherine F. Wright left surviving her five children, including defendant May Wright Cobb, and that the other defendants are said May Wright Cobb's only children. The court further found that the undivided one-fifth interest of the property of the testatrix situated in North Carolina does not and has not for more than a year yielded an annual income as much as $500.
The court, further being of opinion that the said will did not create a valid spendthrift trust under the law of North Carolina, denied the motion to vacate the attachment and dismiss the action, and from this ruling defendants other than May Wright Cobb appealed.
Will devising property to trustee to be held in trust to pay income to beneficiary during her lifetime, with remainder over, such income to be used solely for beneficiary's support and maintenance, and to be free from claims of her creditors, created valid spendthrift trust, which equity would not disregard (C.S. § 1742).
Isaac C. Wright, of Wilmington, for plaintiff.
E. K. Bryan, of Wilmington, and Beverly C. Cobb, of New York City, for defendants.
The first question presented by this appeal is whether the will of Katherine F. Wright created a spendthrift trust under the law of North Carolina.
The prerequisites for the creation of a valid spendthrift trust have been stated as follows:
(1) The legal title must be vested in a trustee; (2) the gift to the beneficiary must be only of income, and he must take no estate, have no power of alienation, no right to possession, no beneficial interest in the property save the qualified right to support and an equitable interest in the income; and (3) the trust must be an active one. Kessner v. Phillips, 189 Mo. 515, 88 S.W. 66, 107 Am.St.Rep. 368, 3 Ann.Cas. 1005; 25 R.C.L. 356, 357; 65 C.J. 233.
It is not necessary that the cestui que trust be denominated nor in fact be a spendthrift. Perry on Trusts, § 386(a).
The court will not inquire into the reason or wisdom of the creation of a spendthrift trust. 65 C.J. 233. The trust is upheld, not out of consideration for the beneficiary, but for the protection of the right of a competent devisor to dispose of his property to whom and in any manner he sees fit, not repugnant to law. To hold otherwise would impair the testator's statutory right to dispose of his property to take effect after death. In re Morgan's Estate, 223 Pa. 228, 72 A. 498, 25 L.R.A. (N.S.) 236, 132 Am.St.Rep. 732; 65 C.J. 239.
In North Carolina the right to create a spendthrift trust is specifically recognized and the limitations upon and the incidents to its exercise are set forth in C.S. § 1742, as follows: "It is lawful for any person by deed or will to convey any property, which does not yield at the time of the conveyance a clear annual income exceeding five hundred dollars, to any other person in trust to receive and pay the profits annually or oftener for the support and maintenance of any child, grandchild or other relation of the grantor, for the life of such child, grandchild or other relation, with remainder as the grantor shall provide; and the property so conveyed shall not be liable for or subject to be seized or taken in any manner for the debts of such child, grandchild or other relation, whether the same be contracted or incurred before or after the grant."
This statute has been often considered and applied by this court.
In Lummus v. Davidson, 160 N.C. 484, 76 S.E. 474, 475, the devise to a trustee of a certain lot and building in the city of Charlotte was expressed to be in trust for the following purposes: "to collect the rents and profits arising therefrom and to pay the same over to my son," with certain deductions for taxes and repairs. This was held to be an active trust and the property not subject to levy and sale on execution.
While the Statute of Uses, 27 Hen. VIII, now in force in North Carolina and codified as C.S. § 1740, converted the beneficial use into the legal ownership and united the legal and equitable estates in the beneficiary, this rule applies only to passive or simple trusts and not to active trusts. Lee v. Oates, 171 N.C. 717, 88 S.E. 889, Ann.Cas.1917A, 514; Patrick v. Beatty, 202 N.C. 454, 163 S.E. 572.
An "active trust" is one where there is a special duty to be performed by the trustee in respect to the estate, such as collecting the rents and profits, or selling the estate, or the execution of some particular purpose. Tiedeman on Real Property, § 494; Perkins v. Brinkley, 133 N.C. 154, 45 S.E. 541.
In Underhill on Wills, § 773, quoted with approval in Lummus v. Davidson, supra, we find this language: "In other words, when any control is to be exercised or any duty performed by the trustee, however slight it may be, * * * the trust is active." Since it would be impossible for the trustee to perform the duties imposed upon him unless permitted to retain the legal estate in himself, equity will not permit it to be transferred to the beneficiary under the statute of uses.
An illustration of an active trust is found in Cole v Oxford Bank & Trust Co., 186 N.C. 514, ...
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