Keith v. First National Bank & Trust Co.

• Decision Date: 30 October 1934
• Citation: 256 Ky. 88
• Court: United States State Supreme Court — District of Kentucky
• Parties: Keith et al. v. First National Bank & Trust Co.

256 Ky. 88

Keith et al. v. First National Bank & Trust Co.

Court of Appeals of Kentucky. Criminal, Common Law and Equity Division.

Decided October 30, 1934.

1. Trusts. — Beneficial interest in trust property may be subject to beneficiary's debts, though testator or grantor provides otherwise (Ky. Stats., sec. 2355).

2. Trusts. — Fact that trust instrument vests discretion in trustee as to management and control of trust estate does not prevent creditors of cestui que trust from subjecting estate to payment of his debts (Ky. Stats., sec. 2355).

3. Trusts. — Creditor's right to subject property of cestui que trust to payment of latter's debts is superior to beneficiaries' rights under trust instrument (Ky. Stats., sec. 2355).

4. Trusts. — Cestui que trusts may voluntarily apply trust property to payment of their debts by assignment, conveyance, or mortgage to their joint creditors or another for creditors' use and benefit, especially where all cestui que trusts are living and sui juris and trust instrument contains no restrictions on alienation nor any grant or devise over to another in such event (Ky. Stats., sec. 2355).

5. Trusts. — Surviving beneficiaries of trust in realty, conveyed to trustee by trust deed, containing no restrictions on alienation or

grant over to another if beneficiaries attempt to convey property to their creditors or subject it to their debts, had right to dissolve trust and transfer estate to creditors voluntarily (Ky. Stats., sec. 2355).

6. Trusts. — Chancellor's consent is unnecessary to terminate trust as to either life tenants or remaindermen when all of them are living and sui juris.

7. Trusts. — Every kind of trust estate may be subjected to debts and charges of beneficiaries, who may voluntarily surrender or mortgage trust property to pay their joint creditors, if all beneficiaries are living and sui juris (Ky. Stats., secs. 2341, 2355).

Appeal from Kenton Circuit Court

M.L. HARBESON for appellants.

ROUSE & PRICE for appellee.

OPINION OF THE COURT BY JUDGE RATLIFF.

Affirming.

In June, 1913, Uriah Shinkle and his wife, Mary Shinkle, executed their deed of trust to the Covington Savings Bank & Trust Company, conveying to it certain real estate in the city of Covington, Ky., to be held in trust for the benefit of the trustors during their life with remainder to certain other designated persons and providing that the property shall vest absolutely in one of the beneficiaries upon the happening of certain contingencies.

The pertinent parts of the trust deed are as follows:

"The net income from said property shall be paid:

"[a] To Uriah Shinkle during his life

"[b] To Mary Ann Shinkle after the death of Uriah Shinkle during her life.

"[c] To Sarah Ann Shinkle Keith after the death of Mary Ann Shinkle during her life, for the sole use of herself and her son, Boardwell W. Keith Jr. except as provided hereafter in subsection [e]

"[d] To Broadwell W. Keith Jr., upon the death of the other beneficiaries named, in the event said Broadwell W. Keith Jr. has not attained the age of twenty-one, but in the event of his being of the age of twenty-one, at the time of the respective deaths of the other beneficiaries named, or upon his attaining said age except as is provided in subsection [e] then this trust shall be dissolved, by the Trustee herein or its successor in trust, conveying and transferring to said Broadwell Jr., the whole of this trust estate absolutely and in fee simple, after the payments of the debts and charges against same.

"[e] In the event of the death of Broadwell W. Keith the husband of my daughter, Sarah Ann Shinkle Keith, before the death of my said daughter and in the event of the death of the beneficiaries named in subsections [a] and [b] or in the event of the permanent separation of my daughter and said Broadwell W. Keith and said Trustee must be satisfied that said separation is permanent, then said Trustee may dissolve said trust and may turn over the same, after the payments of debts and charges to said Sarah Ann Shinkle Keith. The purpose and object of the grantors being to prevent Broadwell W. Keith the husband of Sarah Ann Shinkle Keith from having any control, management or benefit from this property in any way, shape or form."

In October, 1930, and after the death of Uriah Shinkle and his wife, trustors, the other beneficiaries, Sarah Ann Shinkle Keith, and her son, Broadwell Keith, Jr., who was then 21 years of age, and Broadwell Keith, Sr., husband of Sarah Ann Keith, and the trustee executed a deed of trust or mortgage to the First National Bank & Trust Company of Covington, Ky., to secure the bank for an indebtedness in the sum of $7,500. In December, 1933, the mortgagee, First National Bank & Trust Company, brought this action to foreclose the mortgage and sell the property in satisfaction thereof.

A personal judgment was not resisted, but the trustee, Broadwell Keith, Sr., Sarah Ann Shinkle Keith and her son, Broadwell Keith, Jr., the latter two being the only living beneficiaries of the trust, sought to defeat the bank's lien on the property on the ground that the trust is an active and continuing trust, that the mortgage was void and unenforceable, and that the property could not be sold to satisfy the indebtedness during the continuation of the trust, and that none of the events prescribed by the deed of trust had happened upon which the trust could terminate.

The circuit court held that the mortgage created a valid lien on the property and ordered it sold to satisfy the judgment. From that judgment the trustee and the beneficiaries of the trust have prosecuted this appeal.

It is conceded that both of the donors of the trust, Uriah Shinkle and his wife, Mary Shinkle, are dead; that Sarah Ann Shinkle and her husband are yet living and are not separated, and that ...