Court Opinion

ID: 9868468
Source: CourtListenerOpinion
Date Created: 2023-09-26 18:36:33.425785+00
Date Added: 2024-06-11T07:45:50.655330
License: Public Domain

On Petition to Reheae.
We have endeavored to give to the complainant’s petition to rehear the careful and thorough consideration to which the petition and the questions involved are entitled.
The greater part of the petition to rehear is, however, devoted to a discussion of the legal effect of a construction which counsel erroneously assume the court gave to item eleven of the will. The petition states as the premise of the argument: “The court, both in its opinion and decree, adjudges that the income from the real property devised to the trustees is to be held mtact by the trustees and not disbursed to the beneficiaries for a fiat period of forty years.” (italics quoted) save only in the contingency stated in item twelve of the will.
There is no language in the opinion heretofore filed so construing item eleven. The opinion says: “Considering the rights of the widow and four children separately, it therefore appears that each of them is bequeathed or devised one-fifth of the total net income from the trust *25property, to be paid in monthly installments during the duration of the trust.” (Italics here.) The decree prepared by the clerk, and entered pursuant to the opinion, follows literally the language above quoted; and neither in the opinion nor decree is any distinction made between the income from the corporate stock bequeathed by item seven and the income from the real estate devised by item eleven, in so far as the time of payment to the beneficiaries of the trust is concerned.
Item eleven expressly provides that the “incomes” from the property therein devised “shall be used in making distribution between my wife and children or and their bodily heirs.” We have carefully reexamined the briefs of both parties filed on the original hearing, and find in none of them any contention that this distribution of income directed by item eleven was intended by the testator to be postponed until the termination of the trust. The opinion and decree of the chancellor do not indicate that such contention was made on the hearing before him. Neither in the briefs nor in the record was any reference made to income from the real estate having accumulated in the hands of the trustees, although referred to in the petition to rehear as “conceded.” Therefore, it hardly seemed necessary to expressly state in the opinion that the will contains no language sufficient to postpone the distribution of the income accruing from item eleven until the termination of the trust. In the absence of language clearly postponing such distribution, the will should not be given such construction, if to do so would work the destruction of the trust and the 'thwarting of the testator ’s primary intent, as argued in the petition. •
That the beneficiaries of the trust are given a present right to the net income accruing from all the property *26under the trust is the basis of the decree of the court that the equitable title to the trust property is vested in the beneficiaries.
Attacking the ruling of the court that the will vests an equitable estate in fee in the named beneficiaries, determinable as to each of them upon his or her death prior to the termination of the trust period, with remainder to the heirs of the ones so dying, the petition contends:
“The point of this petition is that neither the law of Tennessee nor of any other common-law jurisdiction knows or recognizes vested beneficial estates not subject to the claims of the creditors of the owner thereof; and that, if this be a spendthrift trust created for a period of torty years, as petitioner asserts and this Court has held, then it does not and cannot vest within the period fixed by the rule against perpetuities.”
The contention that the law of this State does not recognize “vested beneficial estates not subject to the claims of creditors of the owner thereof” is hardly tenable, in the face of the statute reviewed and made the real basis of the decision of the court in Jourolmon v. Massengill, 86 Tenn., 81, and subsequent cases. Code of 1858, sections 4282-4285; Shannon’s Code (all editions), sections 6091-6094; Henson v. Wright, 88 Tenn., 501; Porter v. Lee, 88 Tenn., 782; White v. O’Bryan, 148 Tenn., 18, 40-42. The exclusion of the claims of creditors .of the owners of equitable estates, under trust created by will or deed of record, is effected by the statute, regardless of the restrictions stipulated by the founder or creator of the trust. Porter v. Lee, supra, pages. 791-792. “If an active trust is created by deed duly registered, or will duly recorded, the chancery court has no jurisdiction to subject the interest of the beneficiary there*27under.” White v. O’Bryan, 148 Tenn., 18, 33-34. The statute which effects this result does not exclude from its application equitable estates which may be absolutely vested in the beneficiary. In Henson v. Wright, supra, the beneficiary of a trust was held to take “the absolute equitable interest,” to which the right of voluntary assignment and alienation attached as “incidents of ownership,” notwithstanding it was not subject to his debts at the suit of creditors by virtue of the statute above-cited.
Dealing more particularly with the direction of the testator that the beneficiaries of the trust created by the will shall not have the power to anticipate or assign the income from the trust, the petition contends that this characteristic of a spendthrift trust cannot prevail when the beneficiaries are given the absolute or a vested equitable interest in the trust property; and it is pointed out that in Jourolmon v. Massengill, supra, the leading Tennessee case sustaining the validity of spendthrift trusts, the beneficiary was held not to be vested with any interest in the trust property, nor in the income therefrom until paid to him by the trustee. Hence it is argued that the “spendthrift” provisions of the will of Mr. Tramell prevent the vesting of the equitable estates in the beneficiaries of the trust which we decreed on the original hearing.
In Jourolmon v. Massengill, the devise was to a trustee for the “use and benefit” of the testator’s son, with a specific limitation upon the son’s “use and benefit” intended to be provided for, by the additional provision: “nor is he to sell the same, nor any part thereof, but may use the rents and profits for his support and that of my wife, B. H. Massengill; but he shall have the right to dispose of the same by last will and testament. ’ ’ The court *28held that the purpose of the testator “was to provide for the support of'his son and his own widow at all events and in all contingencies. ’ ’ The son was given no absolute right to the income from the trust during his life, but took the limited right to use the income for the support of himself and his mother.
In the will of Mr. Tramell, there is no such limitation on the use by the beneficiaries of the income, but they are given the absolute right to demand and receive their proportionate shares from the trustees. Upon the death of one of the beneficiaries during the trust period, his administrators would clearly be entitled to demand his share of income in the hands of the trustees at the date of his death, which would not be true if the trust were only for the “support” of the beneficiaries. Dooley v. Penland, 156 Tenn., 284, 292.
If the restrictions against alienation by the beneficiaries and against the claims of their creditors, imposed by the will, are inconsistent with or repugnant to the absolute grant of the right to the rents and profits of the trust property, the estate of the beneficiaries would no be destroyed or limited thereby, but the restrictions would themselves be void and of no effect. Such seems to have been the uniform course of the judicial history of similar trusts, in jurisdictions not recognizing the validity of such restrictions.
This court, in Jourolmon v. Massengill, very clearly-expressed the opinion that such restrictions are not repugnant to the estate granted, either when “the trust is to apply the income to the support of the cestui que trust, or pay the income into the hands of such beneficiary.” Overruling an earlier case announcing a contrary rule, the court said:
*29“As to the first ground of objection stated, that the restriction is repugnant to the estate granted, we have already seen that that applies to.legal estates, and does not, and in the nature of things cannot, apply where the trust is to apply the income to the support of the cestui que trust, or pay the income into the hands of such beneficiary. In either case the income, when it comes to the beneficiary, is his absolutely,- and subject to alienation when it has thus come to his hands.” (86 Tenn., 102.)
We quote again from Jourolmon v. Massengill, (86 Tenn., 104-105):
“The statement of the English Courts that power of alienation and liability to creditors are necessary incidents of ownership of property is altogether too broad, and cannot be supported. When the legal estate is vested in the owner, considerations of public policy to prevent fraud and deceit, and to facilitate the transfer of title, would operate to make the rule generally true. But it is not always true in such cases. Our exemption laws and homestead laws all relate to property, the legal title to which may be vested in the owner, and yet under such laws large masses of property are, in pursuance tof a public policy, finding expression in legislation, exempt from liability for debts, and in case of the homestead, not subject to alienation by the husband alone. Public policy might, with much reason, determine that the owner of property could not impose on his own property, in his own hands, and for his own benefit, any restraint upon his own power of transfer, or the quality of non-liability to his own creditors. But where no act of the owner of the property imposes the burden or restricts the liability, but it was imposed by a vendor, testator, or donor, what rule of public policy is necessarily en*30countered in sustaining such restrictions, even when the legal estate is vested in the owner, all questions of notice out of the way?”
And referring to the case of Broadway Bank v. Adams, 133 Mass., 170, sustaining a spendthrift trust which directed payments of income to the beneficiary without limitation on his right to receive and use it, this court, with apparent approval (86 Tenn., 116), said: “This result was reached without regard to any statute, upon the general proposition that there was nothing in the nature or tenure of property, nor any principle of public policy, which prevented a donor from so giving his own that it should not be liable to the debts of his donee.’’
Perry on Trusts and Trustees (6 Ed.), section 386, makes the general statement: “The law does not allow property, whether legal or equitable, to be fettered by rstraints on alienation. Therefore, when an equitable interest is once vested in the cestui que trust, he may dispose of it, or it may pass to his assignees by operation of law, if he becomes a bankrupt.” But in a note appended to this general observation by the editor, the text is thus qualified: ‘ ‘ This statement, although generally true in the absence of restraint imposed by the creator of the trust, must be qualified by the established rule in many states, that valid restraints may be imposed upon a cestui’s power of anticipating income or of alienating it before it is due.”
So, while it is true that in the case of Jourolmon v. Massengill the will creating the trust was so worded as to withhold from the beneficiary any interest or estate in the trust property, except the power to dispose of it by will, this absence of equitable estate or interest in the beneficiary was not by the court deemed essential to the *31validity of the restraints imposed by the creator of the trust, and we are of the same opinion. Since the public policy expressed in legislative mandate effects the freedom of equitable estates, under a trust created by will or deed of record, from the claims of creditors of the beneficial owners, we can perceive no reasonable basis for a judicial declaration that the donor or creator of the trust may not stipulate against the anticipation or alienation of the equitable interest by the beneficiaries. We hold therefore that the restraint upon the power of alienation, contained in the will before us, is not repugnant to the provisions which we have heretofore held vest the equitable estate in the named beneficiaries of the trust.
Learned counsel for the trustees, in their reply to the petition to rehear, acquiesce in our conclusion as to the character of estates created by the will, and the time of their vesting, but frankly express concern “as to whether or not the restrictions upon alienation can be projected beyond the period limited by the rule” (against perpetuities). But they insist that if the court should be of opinion that ‘ ‘ the restrictions upon alienation are void in so far as they might apply to grandchildren born subsequent to the death of the testator,” they should merely be so decreed without affecting other aspects or features of1 the trust.
We are in accord with the statement of counsel that a partial invalidity of the restraint upon alienation imposed by the testator, in the particular stated, would not affect the other provisions of the trust. Dealing with the power of a testator to impose restraints upon future estates created by his will, Gray says: “The restraint on anticipation was either good, or if it was too *32remote, it should have been disregarded.” Gray, Rule' Against Perpetuities (3 Ed.), section 240. It follows that the determination of this question is not necessary to the decision of the issue now involved, the validity of the trust as affecting the widow and children of the testator, and we think the opinion heretofore filed should be, and it is, modified so as to leave open for future determination, if the occasion shall arise, the validity of 1he restraint upon alienation of the equitable estates which may vest by the terms of the will in persons unborn at the date of the testator’s death. But for a discussion of this proposition reference is made to the volume of Gray, above cited, sections 240-241, 432-438.
We held in our opinion filed on the original hearing, that since the heirs of the testator’s widow and children take the absolute equitable estate in fee, in the event of the death of the widow or children during the forty-year trust period, the will does not create any estate which can arise at a date later than the time of the death of the named beneficiaries, all of whom were in existence when the will was executed, and, therefore, the rule against perpetuities is not violated. And that this is true, notwithstanding the legal estate of the trustees, arising at the date of the death of the testator, may possibly continue more than twenty-one years after the death of all the interested parties in existence at the date of the death of the testator. In this holding we followed Eager v. McCoy, 143 Tenn., 693, which is well supported by authority, and we have no doubt of the soundness of that ruling. The authorities we cited in the original opinion are not referred to in the petition to rehear, and none to the contrary are cited, although the court, in Eager v. McCoy, recognized the existence in *33our cases of “some chance expressions apparently inimical” to that view.
The petition argues that if' the rule against per-petuities does not destroy the trust in issue, because of the provision for its continuance for the gross term of forty years, then there is no rule of law by which the prolongation of trusts can be limited, and that “Mr. Trameli could just as well have fixed in his will the period of three hundred years as forty years, in so far as the rule against perpetuities is concerned.” This is true, in so far as the rule against perpetuities is concerned, since, as the court rule in Eager v. McCoy, the common-law authorities are uniform in holding, that the rule against perpetuities has no application to the length or continuation of estates, equitable or legal, but is concerned only with the period within which future estates may arise. 143 Tenn., 693, 703.
We are referred to Davis v. Williams, 85 Tenn., 646, 649, wherein the court said: “A devise by which property is tied up and made inalienable beyond the period within a life or lives in being and twenty-one years, with a fraction of a year added for the term of gestation in cases of posthumous birth, is void as creating a perpetuity.” This language was used to support the statement immediately preceding the quotation that the will before the court would violate the rulé if construed to mean “that an equitable life estate for the grandchildren follows upon an equitable life estate for the children” of the testator. This conclusion of the court was correct, but only because the vesting of the fee-simple estate, under the suggested construction of the will, would have been postponed until the death of grandchildren of the testator who may not have been in existence at the date *34of bis death. This is made clear in subsequent paragraphs of the opinion in that case.
But the power of a testator or vendor to create a trust of indefinite duration is effectively limited by another well settled principle of equity jurisprudence, that “trustees take exactly that quantity of interest which the purposes of the trust require.” Ellis v. Fisher, 35 Tenn. (3 Sneed), 230, 65 Am. Dec., 52; Temple v. Ferguson, 110 Tenn., 84, 100 A. S. R., 791; Winters v. March, 139 Tenn., 496, 502. This rule was applied in Davis v. Williams, supra, wherein it was said: “The broadness of the devise to the trustee is unimportant; for it is a familiar law that the estate of the trustee will be limited to the purposes of the trust, and will altogether cease when the trust is accomplished.” A trust is therefore to be sustained as valid, or declared void, in so far as the rule against perpetuities is concerned, upon a consideration of the purposes for which the trust is created rather than the extent or duration of the legal title vested in a trustee. The legal fee-simple estate, with which trustees tire usually vested under trusts created by will or deed, is always held to terminate or fall upon the fulfillment of the objects of trust, as in the cases cited, or may be terminated by decree of a court of equity, under principles discussed in Vines v. Vines, 143 Tenn., 517. And no estate for years, however long, whether vested in a trustee or in a beneficial owner, can be0.0 said to equal in duration an estate in fee simple.
The petitioner again insists that the fees of his counsel should be taxed as a part of the costs of the suit, and charged against the estate as a part of the costs of administration, contending that his action does not assail the will, but seeks only its construction, for the benefit *35not only of himself, but of “every other beneficiary thereunder.” The purpose of petitioner’s suit, and the object of his briefs filed herein, has been to destroy the trusts created by the will, and to entirely defeat the contingent remainders denied to the testator’s grandchildren. If petitioner were successful, the decree would declare the intestacy of the testator in the property covered by items seven and eleven of the will, as in the decree of the chan-* eellor. "We do not perceive any justification for requiring the estate to pay the fees of petitioner’s counsel, incurred in such an effort.
The modification hereinabove made of the opinion heretofore filed will not necessitate any change in the decree already entered. The petition to rehear is accordingly denied.