Greenwich Trust Co. v. Tyson

• Decision Date: 01 July 1942
• Citation: 129 Conn. 211,27 A.2d 166
• Court: Connecticut Supreme Court
• Parties: GREENWICH TRUST CO. v. TYSON et al.

27 A.2d 166

129 Conn. 211

GREENWICH TRUST CO.

v. TYSON et al.

Supreme Court of Errors of Connecticut.

July 1, 1942.

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Appeal from Superior Court, Fairfield County; John A. Cornell, Judge.

Action in the nature of a creditor's bill by the Greenwich Trust Company, trustee of the estate of Jessie M. Converse, deceased, against John H. Tyson and others to collect the amount of a judgment for plaintiff against named defendant from the assets of a trust created by such defendant. Demurrers to plaintiff's amended complaint were overruled, and from a judgment for plaintiff after trial of the issues to the court, all parties appeal.

Error, judgment set aside, and case remanded, with direction.

Before MALTBIE, C. J., and AVERY, BROWN, JENNINGS, and ELLS, JJ.

John Keogh, Jr., and Gerald R. Steinberg, both of South Norwalk, and Raymond T. Benedict, of Norwalk, for appellants-appellees Ruth T. Shoemaker and others.

William L. Tierney, Jr., of Greenwich, for appellants-appellees John H. Tyson and others.

William C. Strong and William S. Hirschberg, both of Greenwich, for appellee-appellant.

MALTBIE, Chief Justice.

In this action the plaintiff, having recovered a judgment against John H. Tyson, sought to satisfy it from the income and principal of a trust which he had created. While the writ contained a direction for the garnishment of various persons, including the trustee, the action was treated in the trial court and before us as one in the nature of a creditor's bill in equity. The trial court made a decree in the plaintiff's favor. The plaintiff, Tyson, William L. Tierney, the trustee, and the beneficiaries under the trust other than Tyson have all appealed. The case as tried presented three issues. The first was the right of the plaintiff to reach one-half of the principal of the trust fund under a provision that, if at the expiration of ten years from its date Tyson was living, the trustee should pay and deliver that half to him. Tyson was alive at the expiration of that period and became entitled to one-half of the principal of the fund, but it is stipulated that the trustee still holds it. There is no substantial dispute that, as the trial court held, the plaintiff has the right to avail itself of that portion of the fund. The second question was as to the right of the plaintiff to reach the income of the fund, which, under the agreement, might be paid to Tyson. The trial court held that it had the right to reach so much of that income as the trustee in his discretion did not deem to be required for the support and maintenance of the woman who was Tyson's wife at the time the trust was created and the support, education and maintenance of Tyson's children. The third question concerned the. plaintiff's right to reach the remaining one-half of the principal, as to which the trial court ruled against its claim.

Since the argument of the appeal before us, Tyson has died, and his death put an end to any right he might have either in, or to dispose of, the income or principal of the fund. His executor has been made a party in his place by order of the Superior Court. He and the other parties have stipulated that there is in the possession of the trustee some undistributed income from the fund, and further that this court may proceed to decide all the issues presented on the record and in so doing may take cognizance of the fact of Tyson's death to any extent to which it affects those issues. As regards the income of the fund, his death is material only to the extent that the question now is as to the plaintiff's right to reach the accumulated income now in the possession of the trustee exclusive of any right it might otherwise have had to reach any income accruing to him in the future. As regards the plaintiff's right to reach the half of the principal to which Tyson did not become entitled at the expiration of the ten-year period, his death fixed the right of the parties, as we shall later point out. This is an equitable proceeding and the facts determinative of the rights of the parties are those in existence at the time of final hearing. Duessel v. Proch, 78 Conn. 343, 350, 62 A. 152, 3 L.R.A., N.S., 854. As there was error in the judgment in one respect, we shall set it aside and remand the case for the rendition of another judgment. The hearing upon which that judgment will be entered will be the final hearing, and facts then in existence, including Tyson's death, will determine the ultimate rights of the parties. To decide the issues in disregard of his death would be to determine questions which in the last analysis would be academic. Taking that death into account, the conclusion to which the trial court came as to the plaintiff's right to reach the half of the principal to which Tyson had not become entitled would be correct. We shall therefore act under the stipulation and determine the issues in the light of Tyson's death.

We turn, then, to the question whether the interest of Tyson in the income of the trust, which the defendants claim to be a spendthrift trust, may be reached in equity in order to satisfy from it the plaintiff's judgment. Tyson transferred a large amount of property to the trust under an instrument dated November 12, 1931. The instrument contained the following provisions: The trustee was "to pay the net income therefrom or so much thereof as the Trustee may in its absolute discretion deem wise, to the Grantor, or to accumulate any part thereof, or to expend any part thereof directly for his support, or for the support and maintenance of his wife, or for the support, education and maintenance of his son Charles D. Tyson, or of other children if they be born to him, for a period of twenty years from the date hereof if he lives twenty years, or for so much of said twenty year period as he does live." If the grantor was alive at the expiration of ten years the trustee was to pay him one-half of the principal of the fund, the trust continuing as to the other half. If he was alive at the end of twenty years all the property in the fund, including accumulated interest, was to be paid to him and the trust terminated. Provisions were also made as to the disposition of principal and income should Tyson die either during the first or the second ten-year period; and, as regards the second period, which alone concerns us, the instrument stated that the one-half of the principal remaining in the fund should continue to be held in trust, the income to be paid to his widow, if she, but no children, survived him, until her death or remarriage and at that time the principal should be distributed in such manner as he might direct or will or, in default of direction, to his heirs-at-law; or if children, but no widow, survived him, the fund was to be divided into as many shares as there were children, the income of one share to be paid to each of them, and the principal to be paid to him, one-half when he reached the age of twenty-one and the remainder when he reached the age of forty, with further provisions by which the issue of any child who might die would take interests under the trust. The instrument also provided that the trustee should pay, without specifying whether from principal or income, a portion of the debts left by Tyson's father, whose estate was insufficient to meet them.

Two further provisions in the instrument should be noted: "In the sole discretion of the Trustee and during the lifetime of the Grantor only, the Trustee may pay obligations of the Grantor, when requested by the Grantor so to do, out of the principal of the trust fund. After the death of the Grantor, the Trustee may in its absolute discretion pay any debts of the Grantor out of the trust funds in its possession. Nothing herein shall be construed to give a right to the Grantor to have such obligations paid or to any creditor of the Grantor either before or after his death to demand such payment from the Trustee." "The Grantor, with the consent and approval of the Trustee, may amend or amplify this trust indenture but not in such manner as to change the provisions for the disposition of principal and/or income prior to his death."

The basis upon which rest trusts of a spendthrift nature is the right of a testator or donor to attach to a gift of property any condition he desires which is not contrary to law or public policy. In re Morgan's Estate, 223 Pa. 228, 230, 72 A. 498, 25 L.R.A., N.S., 236, 132 Am.St. Rep. 732; Smith v. Towers, 69 Md. 77, 89, 14 A. 497, 15 A. 92, 9 Am.St.Rep. 398. "As a general rule, a testator has the right to impose such conditions as he pleases upon a beneficiary as conditions precedent to the vesting of an estate in him, or to the enjoyment of a trust estate by him as cestui que trust. He may not, however, impose one that is uncertain, unlawful, or opposed to public policy." Holmes v. Connecticut Trust & Safe Deposit Co., 92 Conn. 507, 514, 103 A. 640, 642, L.R.A.1918E, 368; De Ladson v. Crawford, 93 Conn. 402, 410, 106 A. 326; Colonial Trust Co. v. Brown, 105 Conn. 261, 284, 135 A. 555. In Leavitt v. Beirne, 21 Conn. 1, 8, we recognized that to uphold the validity of trusts in the nature of spendthrift trusts might open the way to abuses, but we sustained them upon the ground that they afford a proper means of enabling a man to assure protection to relatives or other persons in whom he is interested, and to whom he desires to donate his property, against its waste through their own improvidence or the unfortunate influence of others. See Nichols v. Eaton, 91 U.S. 716, 727, 23 L.Ed. 254; 1 Bogert, Trusts & Trustees, § 222, p. 721. This being the basis and justification of such trusts, it necessarily follows that the conception of them involves the idea of bounty extended by a person to others in whose welfare he is interested. "The great current of modern authority in this country is to the effect that an equitable life...