Sherman v. Havens

• Decision Date: 06 March 1915
• Docket Number: 19737[d1]
• Citation: 146 P. 1030,94 Kan. 654
• Parties: SHERMAN v. HAVENS ET AL.
• Court: Kansas Supreme Court

146 P. 1030

94 Kan. 654

SHERMAN v. HAVENS ET AL.

No. 19737^[d1]

Supreme Court of Kansas

March 6, 1915

Syllabus

The doctrine of “spendthrift trusts” approved by the majority of the American courts by which it is settled that it is lawful for a testator or grantor to create a trust estate for the life of the cestui que trust, with the provision that the latter shall receive and enjoy the income at times and in amounts either fixed by the instrument or left to the discretion of the trustee, and that such income shall not be subject to alienation by the beneficiary, nor liable for his debts, accords with the general policy which this state has always followed respecting the right of creditors and debtors. It deprives the creditor of no security to which he has the right to look, and it recognizes the right which the owner of property has to dispose of it either by an absolute gift or by a conditional one, and to make provision for the object of his bounty, provided he gives the use only without the absolute title, and therefore the testator’s intention in this respect, when clearly expressed, will be carried out.

A will contained the following clause: “To my brother, Arthur B. Havens, should he survive me, an annuity of one thousand dollars, and I direct my said executor trustees to pay him two hundred and fifty dollars quarterly in advance from my death until his; but should he predecease me, and in any event after his death, such annuity fund to be added to the trust estate hereinafter created for my said daughter Elizabeth and her issue.”

Held, that proper construction of the will does not disclose an intention on the part of the testator to secure to his brother the life enjoyment of the income of the trust estate exempt from the brother’s creditors.

Without deciding that a letter written by the testator three years after the execution of the will was admissible in evidence for the purpose of showing the circumstances under which the will was executed, it is held that nothing contained in either the will or the letter shows that it was the testator’s intention to protect the income from waste or dissipation, or to prevent the legacy from being subject to payment of the brother’s debts.

Section 228, Code Civ. Proc. (Gen. St. 1909, § 5821), authorizing creditors to proceed by garnishment against “any person” who shall be indebted to, or have any property real or personal in his possession or under his control belonging to, the debtor, is sufficiently broad in its terms to authorize an action in garnishment against an executor or administrator after an order of final distribution.

It being one of the agreed facts in the present case that the estate of the testator is solvent and able to respond to the quarterly payments due to the beneficiary, and that they have made such payments to him in advance and recognized the provision, no order of distribution was necessary in order to authorize them to make the payments, and such quarterly payments are subject to attachment before final settlement.

Under section 247, Code Civ. Proc. (Gen. St. 1909, § 5840), the allowance by the court of $25 attorney’s fee for the plaintiff was proper.

Appeal from District Court, Leavenworth County.

Action by Nellie A. Sherman against Arthur B. Havens and others. From a judgment for plaintiff, defendants appeal. Affirmed.

L. O. Carter, of Kansas City, and Arthur M. Jackson, of Leavenworth, for appellants.

B. F. Endres, of Leavenworth, for appellee.

OPINION

PORTER, J.

The plaintiff is a judgment creditor of the defendant, Arthur B. Havens. The executors of the will of Paul E. Havens, brother of the defendant, are garnishees in a proceeding to reach, and apply in payment of plaintiff’s judgment, the income of a trust estate bequeathed by the will to the defendant.

Two questions are involved: First, does the will properly construed disclose an intention on the part of the testator to create a "spendthrift trust" in favor of his brother; in other words, to secure to his brother the life enjoyment of the income of the trust estate exempt from the creditors of his brother? Second, if a proper construction of the will discloses such intention, can it be made effectual?

It seems more appropriate to consider the second of these questions first, because, in determining what is essential to the creation of a spendthrift trust, it becomes necessary to refer to the history of the law in relation to such estates.

Paul E. Havens, the testator, was a brother of the defendant, and died on the 6th day of May, 1913, leaving a last will dated February 18, 1908, which has been duly probated. The following is the clause of the will upon which the defendant and the garnishees base their contention that it was the testator’s intention to create a spendthrift trust:

"To my brother, Arthur B. Havens, should he survive me, an annuity of one thousand dollars, and I direct my said executor trustees to pay him two hundred and fifty dollars quarterly in advance from my death until his; but should he predecease me, and in any event after his death, such annuity fund to be added to the trust estate hereinafter created for my said daughter Elizabeth and her issue."

Since the decision in Brandon v. Robinson, 18 Ves. Jr. 429, 433, the English courts have uniformly followed the rule of the common law that a donor creating a life estate cannot take away its incidents, among which are the powers of voluntary and involuntary alienation. In England, however, as well as in those states where the English rule has been adopted, it is held that, if the gift or devise contains a condition of cesser upon the bankruptcy or insolvency of the beneficiary, or upon an attempted alienation, the restraint is valid. Brandon v. Robinson, supra; McKinster v. Smith, 27 Conn. 628; Tillinghast v. Bradford and another, 5 R.I. 205; 26 A. & E. Ency. of L. 138.

The grounds upon which the English decisions rest are two: First, that the right of alienation is a necessary incident to an equitable estate for life; and, second, that it is contrary to public policy that one should have the right to enjoy the income of property to the exclusion of his creditors.

In Sparhawk v. Cloon, 125 Mass. 263, the opinion contains an exhaustive discussion of the subject, and it is there stated that from the time of Lord Eldon the rule has been in the English Court of Chancery that, when the income of a trust estate is given to any person (other than a married woman) for life, the equitable estate for life is alienable by, and liable in equity to, the debts of the cestui que trust.

The English rule has been rejected by most of the state courts in this country and by the Supreme Court of the United States. Nichols, Assignee, v. Eaton et al., 91 U.S. 716, 23 L.Ed. 257; Shankland’s Appeal, 47 Pa. 113; Broadway National Bank v. Adams, 133 Mass. 170, 43 Am. Rep. 504; Lampert v. Haydel, 96 Mo. 439, 446, 9 S.W. 780, 2 L. R. A. 113, 9 Am. St. Rep. 358; Smith & Son v. Towers, 69 Md. 77, 14 A. 497, 15 A. 92, 9 Am. St. Rep. 398.

The rule adopted by the majority of the American courts is that:

"It is lawful for a testator or grantor to create a trust estate for the life of the cestui que trust, with the provision that the latter shall receive and enjoy the avails at times and in amounts either fixed by the instrument or left to the discretion of the trustee, and that such avails shall not be subject to alienation by the beneficiary nor liable for his debts." 26 A. & E. Encyc. of L. 139.

The argument upon which the American authorities are based is that a creditor of the donee has no right to look to the property of another man for the payment of his debts.

"As to past debts such creditors are no worse off after their debtor becomes the donee of a spendthrift trust than they were before, and as to future debts it is their own folly if they choose to rely upon a fund which by the very terms of its donation it is impossible for them to reach, of which fact they are advised actually or constructively by the registry laws of the United States. Moreover, it is not deemed against public policy for a testator to provide a support for a spendthrift child, since it is the interest of the public that such child shall not become a public burden. The rights of creditors are not deemed any more sacred than the right of property involved in the execution of the trust, or the right which a testator has that the will he made should be carried out, and not one that the court makes for him." 26 A. & E. Encyc. of L. 141.

See, also, Nichols, Assignee, v. Eaton et al., 91 U.S. 716, 23 L.Ed. 257; Steib v. Whitehead, 111 Ill. 247; Partridge v. Cavender, 96 Mo. 452, 9 S.W. 785; Moore’s Estate, 198 Pa. 611, 612, 48 A. 884.

In Nichols, Assignee, v. Eaton et al., supra, Mr. Justice Miller said:

"Nor do we see any reason, in the recognized nature and tenure of property and its transfer by will, why a testator who gives, who gives without any pecuniary return, who gets nothing of property value from the donee, may not attach to that gift the incident of continued use, of interrupted benefit of the gift, during the life of the donee. Why a parent, or one who loves another, and wishes to use his own property in securing the object of his affection, as far as property can do it, from the ills of life, the vicissitudes of fortune, and even his own improvidence, or incapacity for self-protection, should not be permitted to do so, is not readily perceived." 91 U.S. 727, 23 L.Ed. 257.

It cannot be doubted that by the great weight of authority in this country it is settled that the founder of such a trust may secure the enjoyment of it to the objects of his bounty by providing that it shall not be alienable by them or become...