Jackson v. Fidelity and Deposit Co., Record No. 041308.

• Decision Date: 03 March 2005
• Docket Number: Record No. 041308.
• Citation: 269 Va. 303,608 S.E.2d 901
• Court: Virginia Supreme Court
• Parties: Greer P. JACKSON, Jr., Esq., Administrator, d.b.n, c.t.a., and Substitute Trustee for the Estate of Gertrude Pierce Worthington v. FIDELITY AND DEPOSIT COMPANY OF MARYLAND.

608 S.E.2d 901

269 Va. 303

Greer P. JACKSON, Jr., Esq., Administrator, d.b.n, c.t.a., and Substitute Trustee for the Estate of Gertrude Pierce Worthington v. FIDELITY AND DEPOSIT COMPANY OF MARYLAND.

Record No. 041308.

Supreme Court of Virginia.

March 3, 2005.

Monica McCarroll (Robert E. Eicher; Willians Mullen, on brief), Richmond, for appellant.

Renu Setaro (Mark S. Brennan; Heather M. Kofron; Wright, Robinson, Osthimer & Tatum, on brief), Richmond, for appellee.

Present: All the Justices.

G. STEVEN AGEE, Justice.

Greer P. Jackson, Jr., Esq., Administrator, d.b.n., c.t.a. and Substitute Trustee for the Estate of Gertrude Pierce Worthington (the "Trustee") appeals from the judgment of the Circuit Court of the City of Richmond which subjects the Trustee to garnishment for the debts of a spendthrift trust beneficiary. For the reasons set forth below we will reverse the judgment of the trial court.

I. BACKGROUND AND PROCEEDINGS BELOW

Gertrude Pierce Worthington (Gertrude) died testate on August 6, 2000. Gertrude's will divided her residuary estate, which was the bulk of her estate, into two testamentary trusts for her sons. Seventy-five percent of the residuary estate would be held in trust for Craig W. Worthington (Craig's Trust). The remaining twenty-five percent would be held in trust for Bradford N. Worthington (Bradford's Trust).¹

Bradford qualified as administrator of Gertrude's estate after the named fiduciaries declined to serve. Fidelity and Deposit Company of Maryland (Fidelity) executed a bond in the amount of $ 296,000 as corporate surety for the faithful discharge by Bradford of his duties as administrator.

Without approval by a court or authority under Gertrude's will, Bradford took estate funds to invest in his personal business, a breach of his fiduciary duties as administrator. Bradford failed to file fiduciary accountings as required by law or return the misappropriated funds to the estate. The Commissioner of Accounts for the City of Richmond filed a petition to remove Bradford as administrator of Gertrude's estate and to forfeit the bond. After a hearing, the trial court removed Bradford as administrator of the estate and ordered him to file a final accounting. The trial court stayed consideration of forfeiture of the bond until Bradford filed a final accounting and the Commissioner of Accounts filed a final report. The Trustee was appointed by the trial court as administrator d.b.n.c.t.a. of Gertrude's estate and trustee of the testamentary trusts.² Bradford never filed an accounting and Fidelity paid the amount of $127,808.60 to the Trustee as administrator of Gertrude's estate representing the entire amount of Bradford's defalcation and costs and making the estate whole. The trial court entered an order relieving Fidelity of its obligations as surety and awarding Fidelity a judgment against Bradford in the amount of $127,808.60, plus interest. Fidelity obtained a writ of fieri facias and instituted a garnishment proceeding against the Trustee to seize funds in Bradford's Trust in partial satisfaction of the judgment against Bradford.

Fidelity filed a motion to require the Trustee to show cause why he had not answered the garnishment summons. In response, the Trustee alleged that Gertrude's will created a spendthrift trust for Bradford's benefit and, therefore, trust funds could not be paid to a creditor of any beneficiary of such a trust.

The trial court conducted a hearing on the show cause motion and ultimately ruled "that a spendthrift trust was created for Bradford" under Gertrude's will.³ Nonetheless, the trial court held that Bradford's interest in Bradford's Trust in the hands of the Trustee could be garnished to satisfy Bradford's debt to Fidelity. The trial court based its judgment on two grounds. First, it opined that Gertrude intended Bradford's Trust to have less spendthrift protection than Craig's Trust. Second, the trial court concluded there was a public policy exception to spendthrift protection if that would "allow one beneficiary, through his or her misconduct, to deprive the other beneficiaries of their entitlements."

We awarded the Trustee this appeal.

II. ANALYSIS

A spendthrift trust is a trust created for the maintenance or benefit of a beneficiary which is secured against his improvidence, placing it beyond the reach of his creditors. See Alderman v. Virginia Trust Co., 181 Va. 497, 512-13, 25 S.E.2d 333, 340 (1943). Accord In re Wilson, 3 Bankr.439, 444 (Bankr.W.D.Va.1980)

. In Virginia, spendthrift trusts are authorized by statute. See Code § 55-19.

Spendthrift trusts, not repugnant to the law, are allowed to give effect to the will of the donor and not because of any special consideration for the donee.... Any conveyance whether by operation by law or by act of any of the parties, which disappoints the purposes of the settlor by diverting the property or the income from the purposes named, would be a breach of the trust.

Alderman, 181 Va. at 518, 25 S.E.2d at 342 (citation and internal quotation marks omitted).

Article VIII of Gertrude's will provides, in pertinent part, as follows:

To the extent permitted by law, the principal and income of any trust shall not be liable for the debts of any beneficiary or subject to alienation or anticipation by a beneficiary, except as otherwise provided. Neither Norman William Worthington, Craig William Worthington, or any other beneficiary of any other trust under this agreement shall have the right to anticipate, sell, assign, mortgage, pledge or otherwise dispose of or encumber all or any part of the trust estate nor shall any part of the trust estate including income, be liable for the debts or obligations of any kind of the Beneficiary or be subject to attachment, garnishment, execution, creditor's bill or other legal or equitable process.

Although the trial court determined this provision qualified Bradford's Trust as a spendthrift trust, it nonetheless entered judgment for Fidelity permitting it to garnish assets in Bradford's Trust while in the hands of the Trustee. Because Bradford was not mentioned by name in Article VIII, but was only included as "any other beneficiary of any other trust under this agreement," the trial court opined that

... this is a fairly strong indication that the testator wanted the assets of Norman Worthington and Craig Worthington to have more protection than the assets of Bradford Worthington.... Shielding Bradford Worthington's assets from garnishment would not do that.

Citing Blakemore v. Jones, 303 Mass. 557, 22 N.E.2d 112, 113 (1939), for the principle that "the interest of a beneficiary under a spendthrift trust may be taken to make good his liability for a breach of trust in his capacity as trustee," the trial court essentially ruled that public policy permitted the garnishment of the spendthrift interest under the instant circumstances.

The Trustee contends the trial court erred as a matter of law. He argues that the will's plain language contains no provision limiting the spendthrift protection accorded by Article VIII. Furthermore, the Trustee contends the applicable statute governing spendthrift trusts, Code § 55-19, contains no provision which supports the trial court's ruling.

Fidelity responds that Gertrude could not have intended to safeguard Bradford from the consequences of his own fiduciary misconduct because Craig's Trust is larger and contains a more detailed description of the fiduciary duties with regard to expenditures and actions on Craig's behalf.⁴ Further, Fidelity avers it is against public policy to grant anti-alienation protection to a beneficiary's trust interest for debts created by the beneficiary's defalcation as a fiduciary of that trust. We agree with the Trustee.

The scope of our inquiry is well settled.

In construing a will there are two inquiries to be made. The first is, What is the intention of the testator as expressed by him in the words he has used? This is the animating spirit, the essence, the soul of the will. The words are the clothing, the mere vehicle used, to convey his ideas. When we once ascertain the intention of the testator, that is the governing principle, and must prevail, unless it violates some rule of law.

Sheridan v. Krause, 161 Va. 873, 884-85, 172 S.E. 508, 511 (1934) (citations and internal quotation marks omitted).

Gertrude's intent is plainly and unequivocally expressed in Article VIII. All trust beneficiaries under her will, without limitation of any kind, are accorded the anti-alienation protection of the spendthrift provisions. The fact that Craig is mentioned by name, while Bradford is encompassed as "any other beneficiary of any other trust under this agreement," is a distinction of no meaning or significance. Neither the larger allocation of assets to Craig's Trust, nor the more extensive provisions for his care, limits the plain and unequivocal language of Article VIII establishing spendthrift protection for all beneficiaries. No provision of Gertrude's will negates or limits the spendthrift protection accorded Bradford's Trust or suggests that Gertrude's will means anything other than its plain language provides.

The trial court's conclusion to the contrary ignores the plain language of the will and is clearly error. A court has no authority to interpolate words into a will. See Gasque v. Sitterding, 208 Va. 206, 210, 156 S.E.2d 576, 580 (1967)

(words are not to be added or deleted in construing a will); Rady v. Staiars, 160 Va. 373, 376, 168 S.E. 452, 452-53 (1933) (same). It is the duty of the court to construe the will which the testator has made and not to speculate as to his intention, or to make a will for him. See Owens v. Bank of Glade Spring, 195 Va. 1138, 1148, 81 S.E.2d 565, 572 (1954).

Accordingly, the testator's clear intent expressed in Article VIII establishing spendthrift protection for Bradford's Trust can be abrogated in Fidelity's favor only if a rule of law requires...