State Cent. Collection Unit v. Brent

• Decision Date: 01 September 1986
• Docket Number: No. 1341,1341
• Citation: 71 Md.App. 265,525 A.2d 241
• Parties: STATE of Maryland, CENTRAL COLLECTION UNIT v. Laura BRENT, et al
• Court: Court of Special Appeals of Maryland

Page 265

71 Md.App. 265

525 A.2d 241

STATE of Maryland, CENTRAL COLLECTION UNIT v. Laura BRENT, et al.

No. 1341 Sept. Term, 1986.

Court of Special Appeals of Maryland.

May 8, 1987.

Nicolette H. Prevost, Asst. Atty. Gen. (J. Joseph Curran, Jr., Atty. Gen., on the brief), Baltimore, for appellant.

Richard H. James, Baltimore, for appellees.

Argued before GILBERT, C.J., and ROSALYN B. BELL and KARWACKI, JJ.

GILBERT, Chief Judge.

Foreword

The State of Maryland, through its Central Collection Unit, seeks to "sack" a spendthrift trust provision, force the guardian of an incompetent to pass, and then intercept the corpus of a trust estate. That action was blocked by the Circuit Court for Baltimore County. Apparently believing it has been "clipped," the State asks that we review the instant replay and impose a penalty--reversal. The facts

Laura Brent has been a patient at the Springfield State Hospital since 1950. She was adjudicated mentally incompetent in 1952, and her brother, Raleigh Brent, one of the appellees, was appointed as her guardian.

From the date of Miss Brent's admission to the hospital until 1973, the income from a trust was sufficient to pay the sums charged for her medical care. Sometime thereafter, as a result of "a periodic review of [her] financial status" by the State, it was determined that Miss Brent should pay more than just the income from the trust. Accordingly, the rate charged her was increased. The increase was not paid by Miss Brent's guardian because he was already remitting the total income received from the trust, and he was without authority to invade the corpus of the trust that was set aside for her.

The State obtained a $59,793.55 judgment against the incompetent and her guardian. The State then set out to collect it. An attachment was laid in the hands of the trustee, Mercantile Safe Deposit & Trust Company. The trustee answered the garnishment by declaring that the trust it held for Laura Brent was a "Spendthrift Trust."

Dissatisfied with the garnishee's response, the State requested and obtained a hearing. After listening to and considering the arguments of counsel, the chancellor denied to the State the right to attach the corpus of the trust.

The law

Since Smith v. Towers, 69 Md. 77, 14 A. 497 (1888) (C.J. Alvey's dissent is found in 15 A. 92), Maryland has recognized the validity of spendthrift trusts. In Smith a testator devised real estate to his friend in trust for the testator's son Robert. The devise directed that the trustee collect the rents and profits from the realty and pay them "into ... [Robert's] own hands, and not into another, whether claiming by his authority or otherwise." Id. at 83, 14 A. 497. Upon Robert's death the trustee was commanded to convey the real estate to Robert's surviving children.

The Court, after discussing cases pro and con from other jurisdictions, said:

"[W]e are of opinion, that the founder of a trust may provide in direct terms that his property shall go to his beneficiary to the exclusion of his alienees, and to the exclusion of his creditors."

69 Md. at 90-91, 14 A. 497. Thus, the "spendthrift trust" became a substructure part of Maryland law, and there ninety-nine years later it remains.

The Court has had numerous occasions to revisit the subject of spendthrift trusts, and it has consistently reiterated its Smith v. Towers position. See, e.g.: Safe Deposit and Trust Company of Baltimore v. Robertson, 192 Md. 653, 65 A.2d 292 (1949); Medwedeff v. Fisher, 179 Md. 192, 17 A.2d 141 (1941); Bauernschmidt v. Safe Deposit & Trust Company, 176 Md. 351, 4 A.2d 712 (1939); Michaelson v. Sokolove, 169 Md. 529, 182 A. 458 (1936); Safe Deposit and Trust Company of Baltimore v. Independent Brewing Association, 127 Md. 463, 96 A. 617 (1916); Wenzel v. Powder, 100 Md. 36, 59 A. 194 (1904); Jackson Square Loan and Savings Association v. Bartlett, 95 Md. 53 A. 426 (1902).

The Medwedeff court made perspicuous that the spendthrift trust clause was not just applicable to income but, irrespective of what the view may be elsewhere, in Maryland the corpus of a trust may also be the subject of a spendthrift trust. 179 Md. at 197, 17 A.2d at 144.

Having very briefly sketched the Maryland history of spendthrift trusts, we turn to consideration of the matter sub judice.

Dr. Hugh Brent in 1931 executed a Trust Agreement with the then Safe Deposit and Trust Company as trustee. By the terms of the trust, the settlor directed that, upon his wife's demise, the trust he had created for her was to be divided into as many parts as the settlor had living children. The agreement provided in pertinent part:

"The Trustee shall make all payments provided for hereunder directly into the hands of the beneficiary or beneficiaries hereunder entitled to receive the same and not into the hands of another howsoever claiming, except that during the minority of any beneficiary hereunder the trustee may apply directly to his or her maintenance, education and support the payments to which he or she may be entitled to receive hereunder during his or her minority, without being required to account therefor to any Court of Law or Equity, or the Trustee may make such payments to which such minor beneficiary may be entitled to such person or persons as in the personal discretion of the Trustee may be acting in loco parentis to such minor beneficiary, the same to be applied by such person or persons so acting in loco parentis to the maintenance, education and support of such minor beneficiary, without being required to account therefor to any such Court, and the voucher of such person so acting in loco parentis to such minor beneficiary shall be a sufficient voucher and acquittance for the Trustee in respect thereto, and no assignment or order by any beneficiary of any part of the payments provided for him or her hereunder shall be valid nor shall the same be subject to attachment by garnishment or any other legal proceeding whatsoever while remaining in the hands of the Trustee hereunder." (Emphasis supplied).

The trustee and guardian take refuge behind the spendthrift trust clause of Dr. Brent's trust and assert that they are without authority to invade the corpus of the trust so as to meet payment of the judgment.

The State contends that the trust itself permits the cestui que trust to demand dispersal of monies from the corpus of the trust, and, therefore, it is entitled to attach the corpus in satisfaction of the judgment. The State points to the clause of the trust that provides "[T]hat at any time after the attainment by [my child] of the age of thirty-five (35) years and prior to the attainment by ... her of the age of forty (40) years, ... she shall have the absolute right and option in writing to the Trustee to request and direct the Trustee to convey, deliver and pay over unto ... her, free and clear of any and all further trust, any portion of the principal of ... her respective share of the trust fund up to but not to exceed, however, one-half of the principal of ... her respective share thereof as constituted ... and after the attainment by ... her of the age of forty (40) years, ... she shall have the absolute right and option at any time and from time to time to request and direct the Trustee to convey, deliver and pay over unto ... her, free and clear of any and all further trust, the whole or any portion of ... her respective share thereof remaining in the hands of the Trustee, and upon the receipt by the Trustee of such written request and direction as hereinbefore provided, the Trustee shall convey, deliver and pay over unto ... her the whole or such portion of the principal of ... her respective share of the trust fund as ... she may in such writing so request and direct to be paid over unto ... her within the limitations as hereinbefore expressed and set forth as in the case of any child between the ages of thirty-five (35) and forty (40) years, and the trust as to such portion or the whole thereof so conveyed, delivered and paid over unto ... her by reason of such request...