Patton v. Winters

DeWITT, J. This appeal presents the question of liability of property held in trust for the use and benefit of W. M. Winters to be subjected to the payment of his debts after his death. He died testate on December 26, 1934. The bill in this cause was filed by his daughter as executrix to have this question determined. The chancellor decreed that this estate, formerly so held in trust, could not be subjected to the debts. It is insisted that this was error. ■ The testator, W. M. Winters, made no express provision for the payment of his debts but did direct that his funeral expenses be paid. The omission of provision for the payment of his debts is immaterial, for, if the property involved could be subjected to such payment, the law would compel such payment regardless of such omission. This trust estate was created by the will of G. W. Winters, father of W. M. Winters, and said will was construed in the case of Winters v. March, 139, Tenn., 496, 202 S. W., 73, 74. A close consideration of the opinion in that case is necessary to a determination of the issue here presented. The creation of the trust was made by the sixth item of the will of G. W. Winters, which is as follows: “All the rest and residue of my estate of which I shall die seized and possessed, or to which I shall be entitled at the time of my decease, real, personal or mixed, I leave in trust to the firm of Winters & Hardison as trustee for my said wife and three children, share and share alike, the income derived therefrom by said trustees to be paid over to my said wife and children as their necessities may demand, and in the event that their condition is such that it is unnecessary to encroach upon the income therefrom, then I direct that said trustees invest the income so as to bring in an income.” Although the interests of the beneficiaries were not expressly made exempt from payment of their debts, the trusts created were spendthrift trusts. Chapter 11, sec. 1, Acts 1832, Code sec. 10353. The trust estates were protected from creditors during the continuance of the trusts, since there could be no income without the trustee’s possession of the corpus. But the trustee took exactly what the pur *602 poses of the trust required, and no more. Ellis v. Fisher, 3 Sneed, 231, 65 Am. Dec., 52. In Winters v. March, supra, the controlling proposition upheld was that the aforesaid sixth item did not create a perpetuity and was therefore valid. The touchstone was the duration of the trust. The rules were applied .that the duration of a trust depends upon the purposes of the trust; and when the purposes have been accomplished the trust ceases. There was no attempt at perpetuity. The court said: “The trust will cease as to each cestui que trust at death. Each devisee is entitled to receive the portion of the income from his share as his necessities may demand and, of course, the necessities of each end at death. The will does not provide for any devise over of the residuum of the estate after the death of the beneficiaries, hence the share of each beneficiary will go at death to his or her devisee, dis-tributee, or heir, as the case may be. Temple v. Ferguson, 110 Tenn., 84, 72 S. W., 455, 100 Am. St. Rep., 791; Ellis v. Fisher, supra; Smith v. Metcalf, 38 Tenn. (1 Head), 64; Rogers v. White, 33 Tenn. (1 Sneed), 68. “It is insisted, however, that if the will does not create, a perpetuity, the testator died intestate as to the remainder, after vesting a life estate in trustees for complainants, and having both the life estate and remainder, the former became merged in the latter, and therefore the trust fails. The will does not create a life estate in the beneficiaries. The testator devised his property to them, without qualification, except that it is left in equal shares and in trust. ’ ’ The contentions here made that W. M. Winters took no estate in the corpus of his share, or that if he took any it was only a life estate, are in the very face of the foregoing declarations by the Supreme Court. First, the second sentence of the first paragraph quoted shows that by the omission of any limitation over upon the death of the beneficiaries the share of each beneficiary will go at death to his or her devisee, distributee, or heir, as the case may be. This language means that each beneficiary took, subject to the trust, an estate in fee simple; and that it might pass by will or by descent or distribution if the beneficiary should die intestate. Only upon the basis of a fee simple could such an estate pass to devisees, legatees, distributees, or heirs. Second, the court, in the second paragraph quoted, defined the estate of the beneficiaries in even clearer terms — leaving no room for doubt that instead of a life estate, each beneficiary took under the will an estate without qualification, except that the shares were equal and in trust. The trust having ceased upon the death of W. M. Winters, the trust property passed to his executrix in possession, to be adminis *603 tered in accordance with bis will and tbe law. In such transmission was it protected from claims of creditors incurred by bim during tbe existence of tbe trust? It is insisted tbat freedom from sueb protection would mean tbat wbat tbe cestui que trustent could not do directly during bis lifetime could thus be done indirectly. But the purpose of tbe spendthrift trust bad been accomplished when be died. Tbe corpus bad been immune because of tbe necessity for producing an income. This necessity was oyer. Neither in tbe will of G-. W. Winters nor tbat of W. M. Winters was there any trust created for those who would take this property after tbe death of W. M. Winters. Only by adhering to tbe proposition tbat at bis death the property became free of tbe trust, except perhaps for purposes of liquidation; can this question be clearly and properly solved. Tbe beneficiary could create tbe debts, but they could not be paid out of tbe trust estate. It was no longer held for tbe purposes of the trust when tbe beneficiary bad died. Held in fee simple and tbe trust baying ceased, tbe property became liable for tbe debts. Tbe beneficiary was under no obligation to preserve tbe immunity by any testamentary provision, and this was not done by bim. Tbe case is in a different category from those cases in which it was sought to subject to tbe claims of creditors property held under spendthrift trusts while tbe cestui que trustents were still alive. Jourolman v. Massengill, 86 Tenn., 81, 5 S. W., 719; White v. O’Bryan, 148 Tenn., 18, 251 S. W., 785; Tramell v. Tramell, 162 Tenn., 1, 32 S. W. (2d), 1025, 35 S. W. (2d), 574. Different also is tbe case of Staub v. Williams, 5 Lea, 458, because the devise in tbat case was to trustees for tbe use and benefit of sons of the testatrix, with liberty in tbe trustees to convey tbe property to each of the sons, or to tbe heirs at law of any deceased son, or in such other mode as tbe trustees might deem proper; and tbe intention was expressed tbat there be a just and equal distribution of her property among her children, or those representing them. Tbat suit also was brought to subject tbe interest of a beneficiary during bis lifetime. A case quite analogous in principle is In re Estate of Hall, 248 Pa., 218, 93 A., 944, 2 A. L. R., 855, bolding tbat under a devise' in trust to pay net income to testatrix’ son until be arrives at a specified age, in such manner tbat tbe sum shall not be liable for bis debts, and shall not be assigned or anticipated by bim, and then to convey tbe principal to bim free from any trust or limitation whatever, tbe principal is not protected in transmission to the beneficiary, but an assignment by bim of a portion of tbe principal may be enforced against tbe property in tbe bands of tbe trustee at tbe termination of tbe trust. As in tbe instant case, there was neither express nor implied provision for protection in transmission to tbe beneficiary of tbe corpus at tbe end of tbe trust. *604 The decree appealed from is reversed insofar as it declared that the trust estate bequeathed to W. M. Winters by G-. W. Winters and disposed of by the will of W. M. Winters, is not liable for the debts of W. M. Winters. A decree will be here entered accordingly. The costs of the appeal will be adjudged against the executrix and the surety on her appeal bond, it appearing to be proper that this is a case in which the costs should be paid out of the estate. The cause will be remanded to the chancery court of Davidson county for further proceedings not inconsistent with this opinion. Faw, P. J., and Crownover, J., concur.