Lynch v. Lynch

• Citation: 159 S.E. 26,161 S.C. 170
• Decision Date: 09 June 1931
• Docket Number: 13169.
• Parties: LYNCH v. LYNCH et al.
• Court: South Carolina Supreme Court

159 S.E. 26

161 S.C. 170

LYNCH v. LYNCH et al.

No. 13169.

Supreme Court of South Carolina

June 9, 1931

Appeal from Common Pleas Circuit Court of Florence County; E. C Dennis, Judge.

Suit by Willie S. Lynch, Jr., against W. S. Lynch, Essie B. Lynch and others. Decree for plaintiff, and defendant Essie B. Lynch appeals.

Affirmed.

The decree of Judge Dennis is as follows:

Seeking a judicial construction of a deed executed by J. C. Lynch to W. S. Lynch, trustee, on March 12, 1929, for the recited consideration of $5, and an injunction restraining the sheriff of Florence county from selling any of the lands therein described under an execution issued on November 25 1929, and levied on December 18, 1929, to satisfy several judgments recovered by Essie B. Lynch against W. S. Lynch at various times between January 6, 1927, and November 23, 1929 the plaintiff by his complaint alleges that, under the express terms of the deed, as soon as the property therein conveyed was levied on under an execution and advertised for sale to enforce a debt of W. S. Lynch, all interest of W. S Lynch, either as trustee or otherwise, immediately determined, and the property thereupon became vested in fee simple in the plaintiff, Willie S. Lynch, Jr. This contention is based upon the following provision of the deed found immediately after the description of the property conveyed:

"And the above described land is to be held by W. S. Lynch, Trustee, for the use and benefit of himself and my grandson, Willie S. Lynch, Jr., to occupy or rent same, or should the said W. S. Lynch so desire, he may sell and dispose of same either at private or public sale and re-invest the funds derived from the sale thereof, subject to the same conditions, or should it become necessary in his opinion, he may use the funds derived therefrom, either from rents, sale or mortgage, for the use of himself and my said grandson, or solely for himself, but should the same be not disposed of at the time of the death of the said W. S. Lynch or should there be remaining any funds from the sale of the property hereinabove described, then it is to go to my said grandson, Willie S. Lynch, Jr., his heirs and assigns forever. And should any creditor undertake to enforce the collection of any debt of whatsoever nature against this property or any interest therein which W. S. Lynch acquires hereunder, then and in such case, the property shall immediately pass to my said grandson, Willie S. Lynch, Jr., his heirs and assigns.

"Together with all and singular the Rights, Members, Hereditaments and Appurtenances to the said Premises belonging or in anywise incident or appertaining.

"To have and to hold, all and singular the said Premises before mentioned unto the said W. S. Lynch, Trustee, his Successors, heirs and assigns, forever, subject to the terms and conditions hereinbefore set forth."

In order to prevent a sale before a final determination of the rights of the parties, after due notice to all defendants, plaintiff moved before me for an injunction staying further proceedings, looking to a sale of the property during the pendency of the action. None of the defendants either appeared or filed any return at the time appointed for the hearing of plaintiff's motion except the defendant Essie B. Lynch, who by way of return interposed a demurrer alleging that the complaint states no cause of action, in that a proper construction of the deed set forth in full in the complaint shows that it grants to W. S. Lynch absolute fee-simple ownership of the property therein described, subject to levy and sale to enforce the payment of his debts.

Without objection, the demurrer was presented and argued on its merits, along with the motion of the plaintiff for an injunction pendente lite, and, since a proper disposition of the motion for injunction and the demurrer, the matters now presented for determination, will be so largely decisive of the case, the questions involved had been given most careful consideration.

Defendant first contends that the deed must be construed by the rules governing spendthrift trusts, and that, since the estate granted to W. S. Lynch, properly construed, should be held to be a fee simple, it is incapable of protection against the claims of creditors by means of a spendthrift trust.

Though under what has been called the English rule, which was also the rule of the common law, followed in some of the American states, property cannot be withheld from subjection to the claims of creditors of the beneficial owner by the creation of a trust for his benefit, in the absence of some provision of defeasance, technically called "cessor," upon attempt of a creditor to subject the property to his debt, yet what is called the American rule has been adopted in most of the American states, apparently including South Carolina, and the validity of spendthrift trusts, either with or without a provision for a cessor, has been sustained, not out of any special anxiety of the law for the protection of the impecunious beneficiary, but rather to protect the donor's right of property and the right to choose the object of his bounty. There is an interesting discussion of the subject, with a review of the authorities, in the concurring opinion of Mr. Justice Cothran in the case of Spann v. Carson, 123 S.C. 371, 116 S.E. 427. See, also, Nichols v. Eaton, 91 U.S. 716, 23 L.Ed. 254; Sherman v. Havens et al., 94 Kan. 654, 146 P. 1030, Ann. Cas. 1917B, 394; Smith v. Towers, 69 Md. 77, 14 A. 497, 15 A. 92, 9 Am. St. Rep. 398, and note; Garland v. Garland, 87 Va. 758, 13 S.E. 478, 13 L. R. A. 212, 24 Am. St. Rep. 682, and note; Bland's Adm'r v. Bland, 90 Ky. 400, 14 S.W. 423, 9 L. R. A. 599, 29 Am. St. Rep. 390, and note. It seems to be settled, however, that to be valid spendthrift trusts must successfully meet these requirements; the interest of the donee cannot exceed an equitable life estate in the income of the property, without title or right to the possession of the property itself; the legal title must be vested in a trustee, and the trust must be an active one.

Applying those tests, it is quite evident that the deed of J. C. Lynch does not create a spendthrift trust, nor do I think there was any effort to create one. The conveyance being to W. S. Lynch as trustee for himself and Willie S. Lynch, Jr., such beneficial interest as W. S. Lynch himself took was a legal estate, since no person can be both beneficiary and trustee for himself at the same time. Board of Directors v. Lowrance, 126 S.C. 89, 104, 119 S.E. 383, and the very first prerequisite is lacking, not to mention others equally obvious. Indeed, plaintiff expressly disclaims any attempt to create a spendthrift trust or any reliance upon such an interpretation of the deed.

Plaintiff relies, not upon the doctrine of spendthrift trusts, but upon the totally different and distinct doctrine of "cessor" or defeasance upon the happening of a specified contingency. Although a cessor is sometimes employed to terminate a spendthrift trust-- indeed, under the English rule a cessor is necessary to give such a trust any validity--yet the two doctrines are wholly separate and distinct.

In the case of Van Osdell v. Champion, 89 Wis. 661, 62 N.W. 539, 540, 27 L. R. A. 773, 46 Am. St. Rep. 864, the distinction between spendthrift trusts and cessor is thus indicated: "The authorities are very generally agreed that property cannot be conveyed, devised, or bequeathed with a restriction against it, or any portion of it, going to assignees in bankruptcy or in any form to creditors, although a grant may be made which shall be determinable by way of cessor, or by limitation of the estate over to another upon the occurrence of a certain event; such as insolvency, bankruptcy, or the occurrence of any other act or event arising or growing out of the conduct or neglect of the grantee or devisee. The bounty of a grantor or testator may, however, be secured to another by means of a trust--a 'spendthrift's,' as it is sometimes called; so that the periodical income of the estate cannot be anticipated by the cestui que trust, but may be paid to him from time to time, beyond the power of creditors to intercept or reach it."

In the case of Kessner v. Phillips, 189 Mo. 515, 88 S.W. 66, 68, 107 Am. St. Rep. 368, 3 Ann. Cas. 1005, it is said: "The English rule, which has been adopted in most of the states of this Union, is that it is against the policy of the law for the grant to be so limited that a donee shall have the possession and enjoyment of the property, but shall not have the power of alienation, or that the property shall not be liable for his debts. Under the English law it is competent to make the estate determinable, as upon the bankruptcy of the donee, in which event the estate is to revert to the donor, or to some person specified in the grant. In such case the creditor is deprived of the estate by the act which deprives the donee thereof. But where no such provision for the determination of the estate is contained in the grant the property will pass to the assignee in bankruptcy."

In the separate concurring opinion in Spann v. Carson, 123 S.C. 394, 116 S.E. 427, 435, in the course of a discussion of spendthrift trusts, it is said: "It is no reply to the conclusion I have arrived at to invoke the doctrine announced in Symmes v. Cauble, 85 S.C. 435, 67 S.E. 548, which has been technically referred to as the doctrine of 'cessor'; that is a provision that, if the interest of the beneficiary should be attempted to be subjected to his debts, it should 'cease' and vest in another. That arrangement is perfectly valid, but it does not follow that it is exclusive."

That property may be withheld from the claims of creditors under the law...