Glass v. Carpenter

• Decision Date: 18 November 1959
• Docket Number: No. 13509,13509
• Parties: Julian W. GLASS, Jr., et al., Appellants, v. Fred G. CARPENTER et al., Appellees.
• Court: Texas Court of Appeals

Page 530

330 S.W.2d 530

Julian W. GLASS, Jr., et al., Appellants, v. Fred G. CARPENTER et al., Appellees.

No. 13509.

Court of Civil Appeals of Texas, San Antonio.

Nov. 18, 1959.

Rehearing Denied Dec. 16, 1959.

John D. Wheeler and H. W. Moursund, San Antonio, Golden, Croley, Howell, Johnson & Mizell, Dallas, Walter Stout, L. M. Bickett, San Antonio, Denver Perkins, Gonzales, for appellants.

Fischer, Wood, Burney & Nesbitt, Corpus Christi, for appellees.

BARROW, Justice.

This is a suit filed by Julian W. Glass, Jr., and Robert S. Randolph, in their capacity as trustees, against various parties defendant, alleging the assertion of claims by beneficiaries of four trusts known as Henderson trusts, and also that Elizabeth P. Henderson, alleged life beneficiary in all four of the trusts, had died on or about November 21, 1957. Plaintiffs also sued for construction of certain provisions of said trust instruments, to determine the law applicable thereto, and to determine the powers, responsibilities, duties and liabilities of the trustees, and also sought the consideration and approval of the accounts of said trustees. Plaintiffs also seek a declaratory judgment with reference to certain matters involved in the suit. The suit was also brought against one Frank J. Perry, seeking to declare an instrument in writing to be null and void, said instrument being in the nature of an assignment executed by Elizabeth P. Henderson to Frank J. Perry, dated September 10, 1957, and on its face purporting to convey to said Perry all her right, title and interest, including all sums due and to become due her, in and under the four Henderson trust agreements, on the grounds of fraud, undue influence and lack of consideration, and also on the ground that such assignment was contrary to and prohibited by each of the four trust agreements.

Two of these trust agreements, one executed by Frank C. Henderson, and one executed by Elizabeth P. Henderson, in which her husband, Frank C. Henderson, joined, were dated December 13, 1941, and two of these trust agreements, one executed by Frank C. Henderson, and one by Elizabeth P. Henderson, in which her husband, Frank C. Henderson, joined, were dated December 27, 1941.

The defendant Frank J. Perry, by his answer, joined in issue the matter of the validity or invalidity of the assignment by general denial, and by cross-action alleged that the four trusts terminated upon the death of Elizabeth P. Henderson, the survivor, and sought recovery of such property as might be found to be that of Elizabeth P. Henderson in the four trusts.

Motions for severance were granted, and the court entered an order to the effect that the only issue to be tried in the separate case is the validity or invalidity of the instrument dated September 10, 1957, purporting to be an assignement from Elizabeth P. Henderson to Frank J. Perry. In connection with the order of severance, the defendant and cross-plaintiff Frank J. Perry announced in open court that he recognized that Elizabeth P. Henderson and Frank C. Henderson conveyed all such titles as they or either of them had at that time to all the properties described in the four trust instruments. An order was entered in accordance therewith.

The cause was submitted to a jury upon the issues of fraud, undue influence and lack of consideration, with respect to the assignment from Mrs. Henderson to Frank J. Perry. The jury returned a verdict in favor of Frank J. Perry, and the court rendered judgment that the assignment did convey all the right, title and interest of Elizabeth P. Henderson in and to the four trust estates. This appeal is from that judgment.

Each of the four trust instruments expressly provided that upon the death of the survivor of either Frank C. Henderson or Elizabeth P. Henderson, the trustees should divide the then principal and the accumulated income of the trust estates among certain beneficiaries named in the instruments in stated portions or percentages.

Each and all of the four trust instruments conveyed the property therein mentioned to Fred C. Hall, J. Wood Glass and Harold Rorschach as trustees. Fred C. Hall died in September, 1951, J. Wood Glass resigned as trustee in February, 1952, and his son, Julian W. Glass, Jr., was appointed trustee at his request. Later in 1952 J. Wood Glass died. In 1954, Harold Rorschach resigned as trustee, and appellant, Robert S. Randolph, was appointed trustee by the only remaining trustee, Julian W. Glass, Jr. Frank C. Henderson died in August, 1943, and Elizabeth P. Henderson died November 21, 1957.

The Frank C. Henderson Trust No. 2 contained the following provision:

'As a part of the consideration herein, the trustees agree by pay * * * to grantor, during his natural life time, the sum of $25,000 per year at such times and in such amounts during each annual period as may be convenient to the grantor.'

All of the trust agreements contained provisions that the trusts should continue and not terminate, during the life of the survivor of Frank C. Henderson or Elizabeth P. Henderson.

The written assignment from Elizabeth P. Henderson to Frank J. Perry, executed on September 10, 1957, insofar as is pertinent, reads as follows:

'I Elizabeth P. Henderson, for value received do hereby assign, transfer and convey to Frank J. Perry all my right, title and interest, including all sums due and to become due in and pursuant to the following trust agreements, namely:' (Then follows a description of the four trust agreements.)

By their first point appellants contend that the judgment is fundamentally erroneous because the estate of Elizabeth P. Henderson was a necessary and indispensable party to the suit. Appellee, Perry's, cross-action was against appellants, Glass and Randolph, as trustees and no one else, seeking to recover property alleged to be in their hands as such trustees, and which he alleged passed to him under the assignment.

It is well settled in this State that an assignor is not a necessary party to a suit brought on the assignment by the assignee against the obligor on the claim assigned. San Antonio & A. P. Ry. Co. v. Cockvill, 72 Tex. 613, 10 S.W. 702; Peck & Hills Furniture Co. of Texas v. Long, Tex.Civ.App., 68 S.W.2d 288; First State Bank & Trust Co. v. First Bank of Truscott, Tex.Civ.App., 32 S.W.2d 494; Senter v. Garland, Tex.Civ.App., 298 S.W. 614; El Paso & S. W. Co. v. Hudspeth, Wallace & Harper, Tex.Civ.App., 255 S.W. 772.

Appellants cite the opinion of the Supreme Court in Royal Petroleum Corporation v. McCallum, 134 Tex. 543, 135 S.W.2d 958. That case is not in point. It was a suit by the assignor to cancel the assignment, in which the plaintiff dismissed one of the assignees. The Court held that in such suit to cancel, all parties to the instrument sought to be cancelled, as well as all parties whose rights will be affected by the cancellation are necessary parties, whereas, in the instant case none of the appellants are parties to the assignment and none of their rights are affected thereby. The point is overruled.

Appellants urge that the assignment is invalid as to the interest, if any, of Elizabeth P. Henderson in each and all of the trust instruments, for the reason that such assignment by her is prohibited by and contrary to the terms of the trust instruments, when these instruments are construed generally as to all the rights, duties, powers and obligations of the trustees. Under the pleadings of the parties and the severance order, which we have considered, we have reached the conclusion that we can and should construe the trust instruments to the extent necessary to determine the validity of the assignment.

The general rule throughout the American jurisdictions is that a settlor may create a trust in favor of some third party and prohibit the assignment by such party of the beneficial interest in the trust. This rule prevails in Texas. See, Texas cases cited in 19 A.L.R. p. 27. However, the rule is otherwise in cases where the settlor creates a trust and makes himself the beneficiary thereof. In 54 Am.Jur. 134-135, Trusts, Sec. 166, the rule is stated as follows:

'Public policy does not countenance devices by which one frees his own property from liability for his debts or restricts his power of alienation of it; and it is accordingly universally recognized that one cannot settle upon himself a spendthrift or other protective trust, or purchase such a trust from another, which will be effective to protect either the income or the corpus against the claims of his creditors, or to free it from his own power of alienation. The rule applies in respect of both present and future creditors and irrespective of any fraudulent intent in the settlement or purchase of a trust. It applies even where one seeking to settle or purchase a trust in his own benefit is a spendthrift in fact, and irrespective of the sex or marital or contemplated marital status of the beneficiary.'

Numerous cases have been cited and annotated in 119 A.L.R. 35-39. The reason for the rule has been well stated in Pacific National Bank v. Windram, 133 Mass. 175, as follows:

'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...