National Bank of Commerce v. Smith , 17 R.I. 244 ( 1891 )

In our opinion of November 28, 1891, ante, page 258, we held that the annuity to the testator's widow was a lien upon the trust estate superior to any lien arising under the trust in favor of creditors. We see no reason to change our opinion as then expressed.

That annuity is given to the widow during her life; and it must, therefore, continue during her life, unless she consents to its earlier termination, or unless it is in the power of the court, upon a proper bill for that purpose, to terminate the trust and the lien of the annuity on the trust estate under the will, by the application of the property to the payment of the debts. Assuming that such a bill could be maintained, the present bill prays for no relief against the widow, nor does it contain any allegations upon which as against her we can give the claims of creditors priority over the annuity. As the annuity, unless terminated in one or the other of the ways mentioned, must continue, and constitutes a lien on the trust estate, the trust cannot be wound up and its affairs settled during the life of the widow. Whether, technically, the trustees have power to pay the annuity to the widow or not is immaterial, for if they do not pay it, the court, upon the application of the widow, would be bound to decree the sale of so much of the trust estate as might be needed for its payment, and what the court would be bound to decree, it will sanction if done by the trustees.

Money is required, also, for the payment of taxes, insurance, repairs, and other expenses incident to the proper care and management of the trust estate. The money required for these purposes can be raised only by sales of the trust property. In making sales, however, it is the duty of the trustees to regard the interests of creditors as well as of the annuitant, and if, as is conceded, the debts are largely in excess of the value of the trust property, and the expenses of carrying the property exceed the income from it, prudent management would dictate the retention of that part of the property which is productive, and the sale, as soon as practicable, of the unproductive portions.

For this reason, and also as it is alleged that, upon a proper accounting, it will be found that the trustees have in their hands money which will be applicable to the payment of the annuity and expenses of the trust, we will, pending the taking of the account, enjoin the sale of the fourteen shares of the stock of the R.I. Hospital Trust Co., reserving to the trustees the right to move for a modification or dissolution of the injunction, should the exigencies of the trust require.

The case does not show that either the city of Providence or Frederick S. Hodges were cognizant of the application of the purchase-money paid by them respectively for the real estate purchased of the trustees, other than to the payment of the annuity and other charges under the will upon the trust estate, and if not, we do not think that they are to be held liable for its application, even if, as the complainants allege, it has been misapplied. For if we assume that the provision in the will that no purchaser shall be obliged to see to the application of any purchase-money is to be limited, as the complainants insist, to sales by the trustees during the ten years nest after the death of the testator, the power of the trustees to sell is not limited to a particular or definite purpose, but extends to the purposes of the trust generally. In such oases a purchaser is not bound to see to the application of the purchase money. The rule is well stated in Bispham's Principles of Equity, § 277, as follows: that "whenever a trust or charge is of a definite or limited nature, a purchaser must himself see that the purchase-money is applied to the proper discharge of the trust; but whenever the trust is of a general or uncertain nature, he need not see to it." And see Clyde v.Simpson et al. 4 Ohio St. 445; Elliot v. Merriman, 2 Atk. 41, case 30; Barnardiston Ch. 78; 1 White Tudor Lead Cas. Eq. *59, and notes; Hill on Trustees, *342. We think the bill should be dismissed as against the city of Providence and said Hodges.

We do not think that the complainants are entitled to any prior or superior rights to other creditors of the trust estate by reason of having obtained judgments at law against the trustees individually.

A decree was entered dismissing the bill as against the city of Providence and Hodges. The complainants then filed a motion to amend the bill of complaint. This motion was opposed by the respondent trustees.

April 30, 1892.