Court Opinion

ID: 7916875
Source: CourtListenerOpinion
Date Created: 2022-09-08 22:12:08.382045+00
Date Added: 2024-06-11T16:32:51.441974
License: Public Domain

Cowan, J.
(dissenting): This is a proceeding in equity and should be determined by equitable considerations. It is conceded that the testator created a spendthrift trust, such as has been recognized and enforced in Kansas for many years. The purpose of such trust was to give income to the spendthrift beneficiary but not to grant such beneficiary control over the income or the corpus of the property, since the creator thereof felt the beneficiary himself was incapable of handling such property. With this in mind, the creator of the trust appointed a trustee who had absolute control over the property and the income to the end that the spendthrift beneficiary could not encumber, mortgage or dispose of the corpus of the trust estate or the income therefrom. The last thing the testator desired was to have the spendthrift beneficiary manage the property. He foresaw what the result would be.
Some time after the death of the testator, through arrangement with the spendthrift beneficiary of a similar trust and with the aid of the district court, the spendthrift beneficiary of this trust was appointed trustee in direct violation of the terms of the trust and contrary to the principle of spendthrift trusts. Protection of testamentary trusts should be the prime duty of courts of equity. Under the terms of the instant spendthrift trust, the trustee was required to pay taxes and other charges against the property before paying any of the income over to the spendthrift beneficiary. But here, after the appointment of the spendthrift beneficiary as trustee, this provision of the trust was violated and taxes and other charges in a large sum accumulated against the corpus of the estate. To pay *422these charges, the spendthrift beneficiary, in his own name, borrowed $5,000 from Highbargin, and, to secure the loan gave a mortgage individually and not as trustee upon the property in controversy. Highbargin had full knowledge of the terms of the will (either actually or constructive) and was aware that the mortgage was invalid under the terms of the spendthrift trust.
This mortgage, upon default, was foreclosed against the individual spendthrift beneficiary without making the trustee a party, and, of course, the judgment actually had no effect upon the corpus of the estate. When Highbargin attempted to take possession of the property under this ineffectual judgment, the spendthrift beneficiary then, as trustee, sought an injunction against Highbargin. In that action the district court held that the application for injunction should be denied on the ground that plaintiff trustee had an adequate remedy at law and gave as an additional reason for its action that the spendthrift beneficiary had been permitted to treat the property as his own for years, and, hence, the terms of the trust were of no effect. While the judge of the district court was different in person from the judge who appointed the spendthrift-beneficiary as trustee, yet the district court is and was a continuing body. So we have, then, the same district court which made the violation of the trust possible using its own dereliction of duty as a ground for destroying the trust. A private litigant would not be permitted to take advantage of his own wrong. To me it seems equally vicious that a district court should take advantage of its own violation of the duties resting upon it, to destroy the testamentary trust.
It is clear that in the majority opinion effect is given to such judgment as res judicata. I cannot agree with the majority in its application of that commendable doctrine to the facts in this case. In the first instance, the trial court found that injunction should be denied for the reason that there was an adequate remedy at law. When it reached that conclusion, whatever else it determined was unnecessary to its decision. Therefore, the judgment was not res judicata. (50 C. J. S. 232, note 74.) Again, the granting or denying of an injunction is purely a matter of judicial discretion and the exercise of such discretion does not constitute res judicata. (Freeman on Judgments, 5th ed., p. 1360, § 646.) In the recent case of Steinkirchner v. Linscheid, 164 Kan. 179, 188 P. 2d 960, it was held by this court that in proceedings brought by the wife a-° *423the guardian of an insane husband to sell a homestead, the judgment was void because the wife’s individual interest might be antagonistic to her duty as guardian of the insane husband. The void judgment was held subject to collateral attack. The principles there involved were lack of adequate notice and representation by one without a personal conflicting interest. Both of these elements are essentials of due process. The same doctrine should be applied here. In the injunction suit brought by the spendthrift beneficiary as trustee, the interests of the trustee and the beneficiary were conflicting and judgment so obtained should be declared void and subject to collateral attack since the estate was not represented by. a disinterested party. Highbargin, of course, was not an innocent purchaser but had full knowledge (actual or constructive) of all the facts and knew the lack of power of the spendthrift beneficiary to give the mortgage and the lack of independent representation for the trust estate. Hence, he is entitled to no special consideration by a court of equity.
But I wish to place my disagreement upon a much broader ground. The application of the doctrine of res judicata is not inflexible. It is a rule of convenience and necessity but, like all such rules, is not to be applied go rigidly as to defeat the ends of justice. Equity will enjoin the enforcement of a judgment where to do otherwise would be clearly inequitable or would amount to the furtherance of a fraud. So here in a proceeding in equity, the judgment should not be enforced by giving to it the weight of the doctrine of res judicata, since to do so would be to destroy the very thing equity should preserve, namely, the spendthrift trust. In 30 Am. Jur. 908, § 162, it is said:
“The doctrine of res judicata is a principle of universal jurisprudence, forming a part of the legal systems of all civilized nations. It is not, however, to be applied so rigidly as to defeat the ends of justice; there are exceptions to it based upon important reasons of policy. There is also support for the rule that judgments relied upon as creating an estoppel are’to be construed with strictness.” (Emphasis supplied.)
In 50 C. J. S. 13, a similar pronouncement with regard to res judicata is found in these words:
“. . . On the other hand, the doctrine should not be applied so rigidly as to defeat the ends of justice.”
If there ever was an instance where the ends of justice required an exception to the application of the doctrine of res judicata, this *424is one. It is peculiarly the duty of courts of equity to enforce and supervise trusts. The testator died in the belief that the spendthrift beneficiary could not obtain control of the property while the trust existed. The spendthrift beneficiary in this instance, with the approval of the district court, has defeated the very terms of the trust and then the district court has used its own dereliction of duty as ground for holding that the trust was terminated by the conduct of the spendthrift beneficiary before the date fixed in the will for the end of the trust estate.
In this action the plaintiff offers to do equity. Highbargin has been offered back his original loan, plus interest, upon his accounting for the rents and profits received. This is clearly equitable. He is entitled to no more. He will not be injured by such treatment. The decision of the majority in this case is recognition in principle of spendthrift trusts but denial in practice. Application of the doctrine of res judicata was never intended to effect such an injustice.
Judgments have been denied the force of res judicata where they were obtained by collusion or fraud. There are enough circumstances in this case to warrant the inference that the judgment relied on was the result of collusion. The trust estate was not represented by a disinterested person. Highbargin was not an innocent purchaser for value but was cognizant of all the facts and circumstances tending to make his judgment invalid. The district court was fully aware of the prior action of the same court in violating the intent and purpose of the spendthrift trust. When the district court previously appointed the spendthrift beneficiary as trustee, it is evident to me that there was collusion, and the subsequent judgment against the trustee was but the culmination of the collusive arrangement countenanced and furthered by the action of the district court.
The action of the spendthrift beneficiary is not to be commended, and, if it were the protection of his interests alone which is involved here, I would not be dismayed by the result. But the creator of the trust is not here and has not been able for some time to defend the trust. Courts of equity are charged with the solemn duty to protect such testamentary trusts and carry them out. Instead of that, we have had here clear violations of the terms and principles of the trust by the-court in the interest of one who had full knowledge of all the facts and circumstances, and one who, if he did not enter the collusive agreement to destroy the trust, at least furthered it by his actions. Under the circumstances, I cannot consent that *425such an arrangement should be given effect by a very rigid and inequitable application of the doctrine of res judicata. Such an application defeats the ends of justice. I, therefore, respectfully dissent.
Harvey, C. J., concurs in the foregoing dissent.