Security Trust & Safe Deposit Co. v. Martin , 10 Del. Ch. 330 ( 1914 )

The Chancellor.

The question raised in this case is a simple one, and has been settled by decisions in this State and elsewhere. Property was' given by will in trust to pay the clear yearly income to a grandson of the testatrix for life, and with power in the trustee to expend for the maintenance and education of the grandson during his minority such portion of the principal as the trustee should in his judgment deem best. At the date of the will the grandson was a minor, and about one and one-half years after attaining his majority he assigned his interest in the income as security for money which he borrowed and gave a power of attorney to his creditor to collect from the trustee the income until the debt should be paid. Both the cestui que trust and his assignee by their joint answer ask that the trustee carry out the bargain. There is no suggestion of unfairness in the arrangement. The trustee says through its counsel that the interest is hot alienable.

It is clear that there is an active trust, and the beneficiary has no right, title or interest, except to receive the income for life. There is in the will no restraint on the alienation by the beneficiary of his right to the income during his life. Neither is there a condition, or other limitation, or even a qualification, directly or indirectly stated or inferable, which would hamper the right of the beneficiary to do with his own as he pleases. There is no direction to pay the income into the hands of the beneficiary only; or a discretion or power in the trustee to withhold from him any part of the net income; or any circumstance whatever, in or out of the will, to show that it was what is called a spendthrift trust. Neither is it a trust for the maintenance and support only or a trust for maintenance of a person not sui juris, or a trust for a married woman. There is no occasion to consider in this case whether the interest of the beneficiary could be reached in this case by his creditors without an assignment by him.

The sole and simple question, then, is whether the beneficiary of a trust created to pay net income to him for his life, with a gift of the principal to others in remainder, may voluntarily assign his interest as security for the repayment of money borrowed by him. Text-book writers and courts have always and everywhere recognized that such an interest is alienable. Loring in his valuable work, “A Trustee’s Handbook,’’ states it thus on page 133:

"In the absence of restraint by the terms of the settlement or statute, the beneficial estate may be alienated as freely as any other property.” See, also, 1 Perry on Trusts, §386a, and 2 Perry on Trusts, §827a.

In this State this general principle has been repeatedly recognized. In the case of Newell v. Morgan, 2 Harr. 225, 230, the Court of Errors and Appeals said:

“The general principle in equity is, that a cestui que trust has, in most respects, the same power over the trust estate, as owners of legal estates are possessed of; and the trust estate is in general liable in the same manner as a legal estate, except in respect of dower. * * * The cestui que trust may alien it, and any legal conveyance or assurance by him has the same effect and operation upon the trust as it would have had at law upon the legal estate.”

A trust for the general benefit of a person sui juris, and not limited to maintenance only, vests in the beneficiary an interest transmissible through him and so would be assignable by him. Gray v. Corbit, 4 Del. Ch. 135. In general, all vested interests are transferable by the person entitled thereto. Kean’s Lessee v. Hoffecker, 2 Harr. 103, 112, 29 Am. Dec. 336; In re Nelson’s Estate, 9 Del. Ch. 1, 22, 74 Atl. 851; In re Twaddell, 110 Fed. 145 (U. S. District Court for Delaware). There are other citations which could be made to support the same propositions. Indeed, there is no case, or even a dictum, which has been cited, or found, to hold the contrary. A consideration of all the cases cited by counsel for the trustee shows that not one of them holds that a pure and simple equitable life estate, such as this one, is not assignable by the voluntary act of the beneficiary. Beyond question, then, the assignment made by McClymont to Martin was valid, and unless or until the debt is paid, the assignee is entitled to have from the trustee the net income of the trust estate, which would otherwise have been paid to McClymont. The costs should be put on the complainant.