Bank of Union v. Heath

Hoke, J. On careful perusal of the will of B. D. Heath, and particularly of the clauses above set forth, and more directly pertinent to the inquiry, it appears, in item 13, that it is the purpose and will of the testator that the bulk of his large estate shall be divided into equal .shares and a share each given to his surviving widow and his numerous children, payable imdue course of administration, except that the executors, as trustees, shall invest and hold the shares of the minors until they become twenty-one, expending the income meantime for their support and maintenance, and except as otherwise provided in the subsequent clauses of the will. The first of these qualifying provisions is item 14, wherein B. W. Heath, one of the sons, is given his share in absolute ownership, but owing to “his failure up to this time from a financial standpoint,” it is not to be paid to him at once and in toto, but “one-fifth shall be paid as soon as practicable and one-fourth of the remainder at the end of every two years until the whole sum is paid: Provided, that in any event the income arising from his share shall be paid to him annually.” True, in this item of the will there is a proviso that “If, owing to his habits and general conduct and demeanor, the executors do not deem it to the best interest of the legatee to make these payments to him, then they are authorized to withhold the payment of all or such part of the principal as they deem best, and until such time as they deem [62] it best to pay it over to him, but in any event the income arising from bis share shall be paid to him annually,” but while this may confer upon the executors some discretion in the matter, it is merely as to the time of payment; there is here no limitation over, no authority is conferred to use or expend it, principal or interest, for any other purpose; and, as stated, it is clear throughout that with the indefinite exception noted, the testator in this item constituted and intended to constitute his son, B. W. Heath, the vested owner of his share of the estate. Under item 15 of the will, the powers conferred upon the executors under specified conditions are more extended. It is therein provided-that if, at the time of the testator’s death, or on their coming of age, any of the sons are then incompetent by reason of intemperance, bad habits or other cause, or if the daughters at that time are married to a man who is incompetent, and the executors and trustees so determine, the income or profits of their 'portion shall be paid over for the support of such child and his family until they consider it prudent to.pay them the principal, and they in their judgment are authorized to withhold the principal altogether and pay same to their surviving widows and children, if there be such, etc.. Under this item 15, and the conditions referred to, it is not necessary now to determine whether or to what extent the interests of the beneficiary may be made available to creditors, but there is manifestly substantial difference made ánd intended in the powers herein conferred upon the trustees and those which were given in item 14, and it is clear, we think, that the takers under item 14 will not be affected by the provisions of the subsequent item, number 15. We must approve, therefore, the interpretation suggested in the thoughtful brief of one- of the counsel of appellees, that the will of B. D. Heath in these portions of the will affecting the bulk of his estate, created and intended to create three distinct classes of beneficiaries — those taking under item 13, to be paid in due course of administration and on coming of age; those taking under item 14, and those under item 15 of the will. The position is emphasized by the terms of the first codicil, applicable, as follows: “In item 14, in which is described conditions on which B. W. Heath is to be paid his part, I want the same conditions applied and carried out as to my sons, Harry M. Heath, Gilbert B.-Heath, and W. Joe Heath.” The last two being the interests involved in this litigation. This last clause is of itself sufficient to bring the shares of the two present defendants, G. B. and W. J. Heath, under the provisions of item 14, and affords a satisfactory indication of the reasons influencing the mind of the testator concerning them. When the principal will was executed, in 1904, B. W. Heath had arrived at years of discretion and had been engaged in business for himself, and his father, in eon63 sideratioiL of these facts, and having had opportunity to observe and weigh his capacity and disposition, himself determined upon the limitation he deemed proper in reference to his interest. And at the time of the execution of the codicil, five years later, like conditions were ■no doubt presented as to the three sons, Harry M., G. B., and "W". J. Heath, and for like reason the father and testator himself determined the status of their interest, leaving the shares of the other children to the discretion of his executors, as set forth in item IS. This in our opinion being the correct construction of the will in question, the authorities as they prevail in this jurisdiction are in full support of his Honor’s ruling that the shares and interest of these two beneficiaries, G. B. and W. J. Heath, are available to their creditors, and the judgment as entered must be upheld. Vaughan v. Wise, 152 N. C., 31; McMichael v. Hunt, 83 N. C., 344; Pace v. Pace, 73 N. C., 118; Mebane v. Mebane, 39 N. C., 131; Dick v. Pitchford, 21 N. C., 480. In Dick v. Pitchford, 21 N. C., 480 (1 Devereux & Battle’s Equity), it was held that: “A deed for land and slaves upon trust, to apply annually the rents and profits to the use and benefit of the cestui que trust, for his life, ‘so that they shall not be sold or disposed of or anticipated by him,’ without giving the estate over in case of an attempted sale or anticipation, does not prevent an assignment of his interest by the cestui que truest; and the assignee has a right to an account of the rents and profits from the time of the assignment; hut in such case, if there be ulterior contingent trusts, he has no right to call upon the trustee for the surrender of the possession of the trust property.” This principle was approved -and applied to the case of creditors, claimants, in Mebane v. Mebane, supra, wherein it was held: “A. devised certain property to a trustee, in trust to apply the proceeds to the maintenance of his son, and with a proviso that no part of the property should be subject to the debts of his said son: Held, that this proviso was inoperative, and the creditors of the son had a right to have their claims paid out of the property. “By the use of no terms or art can property be given to a man, or to another for him, so that he may continue to enjoy it, or derive any benefit from it, as the interest, or his maintenance thereout or the like, and at the same time defy his creditors and deny them satisfaction thereout. “The only manner in which creditors can he excluded is to exclude the debtor also from all benefit from, or interest in, the property, by such a limitation, upon the contingency of his bankruptcy or insolvency as will determine his interest and make it go to some other person.” [64] And, delivering the opinion, Ruffin, 0. J., said: “Then, there is no doubt that the donee, Anderson, has, upon the principles and precedents mentioned, the absolute right to assign his interest in these gifts, and that his assignee would have the right to take the estates under his own control. That being so, it follows that the interest of the cesiui que trust, whatever it may be, is liable in this Court for his debts; for it would be a shame upon any systenl of law if, through the medium of a trust or any kind of contrivance, property, from which a person is absolutely entitled to a comfortable, perhaps an affluent, support, and over which he can exercise the highest right of property, namely, alienation,- and which, upon his death, would undoubtedly be assets, should be shielded from the creditors of that person during his life. There is no such reproach upon nor absurdity in our law; for we hold that whatever interest a debtor has in property of any sort may be reached by his creditors, either at law or in equity, according to the nature of the property. Terms of exclusion of the donee’s creditors, not amounting to a limitation of the estate, can no more repel the creditors than a restraint upon alienation can tie the hands of the donee himself. Liability for debts ought to be, and is, just as much an incident of property as the jus disponendi is; for, indeed, it is one mode of exercising the power of disposition.” In Pace v. Pace, supra, Rodman, J., said: “It is settled that by" no form of words can property be given to a man or to another, in trust for him, so that he shall not have the right to dispose of his estate in it unless there be in the instrument of gift a proviso that upon an attempted alienation it shall go over to some third person.” In McMichael v. Hunt, supra, Chief Justice Smith refers with approval to Donnell v. Mateer, 40 N. C., 7, in terms as follows: “The case decided in this Court, Donnell v. Mateer, proceeds upon the same principle. The legacy there in question was in these words: ‘I leave $300 in 'the hands of my executors to pay out to her (his daughter) as they see that she needs, if my estate will afford it.’ Ruffin, C. J., says: ‘The testator intended perhaps to entrust his executors with a vague sort of discretion as to the time of payment, but not with the discretion of withholding payment altogether. The daughter had the absolute right to demand the whole sum at some time, and therefore it is a vested transmissible legacy.’ ” A similar decision was made in the more recent case of Vaughan v. Wise, supra, where full citations from our previous decisions on the subject are given. These earlier cases in support of what has been termed the English Doctrine have been modified to some extent by our statute in relation to spendthrift trusts. C. S., 1742. A perusal of the law, however, will disclose that such trusts are only permissible [65] for a restricted amount, “an annual income not to exceed $500 net,” and by correct interpretation to be applied to the support of the beneficiary for his life only, and has no application to the interests involved in this litigation, coming under item 14 of the will. Fowler v. Webster, 173 N. C., 442. In many of the other States their courts uphold and apply what is known as the American Doctrine, and which under most conditions is not so exigent in favor of the claims of creditors, and the Supreme Court of the United States has expressed approval of this view. But, as heretofore stated, under the law as it obtains in this State, the interest of these defendants, created under item 14 of the will, is clearly subject to just claims of their creditors, and the judgment of the court below to that effect is Affirmed. ClaeksoN, J., not sitting.