Matthews v. Van Cleve

Appellants brought their suit, a proceeding in equity, in the Circuit Court of Macon County, Missouri. The issues were duly made up, and upon a hearing of the cause the judgment of the court was in favor of the defendants, and plaintiffs thereupon appealed to the Kansas City Court of Appeals. That court transferred the case to this court, on the ground that the title to land is involved in the proceeding. A motion to remand having been overruled, the cause remains here for decision. The facts out of which this controversy arose are substantially as follows:

Benjamin N. Tracy, Senior, was the father of Milton C. Tracy, Bettie Tracy Roberts, Luther G. Tracy, Benjamin N. Tracy, Junior, and Aubrey D. Tracy. Benjamin N. Tracy, Sr., died, testate, in Macon County, in 1873. His will was duly admitted to probate in that county, and the estate was duly administered. His wife, Frances W. Tracy, is also dead.

The third paragraph of testator's will reads as follows:

"I devise and bequeath to my son, Ben N. Tracy and his heirs the following described real estate, to-wit: Twenty-six feet off of the east end of Lots One and Two in Block 87 in Macon City, Missouri; also Lot No. Thirty in College Addition to Macon City, Missouri, and Lot No. Six in Block 167 in the College Addition to said City of Macon; to have and to hold the same in trust for the use and benefit of my son, Milton C. Tracy and his heirs, the said trustee to have the sole management and control thereof, to collect the rents and pay the same to said beneficiary and his heirs, the said Milton to have no control or disposition of said estate and no power to encumber the same, but said trustee to have power to sell and convey the same or any part thereof for reinvestment in other property to be held by him or his successors in the same way."

Benjamin N. Tracy, Jr., on the death of his father, duly qualified as trustee of Milton C. Tracy, and acted in that capacity for a number of years. He was succeeded in the office of trustee by one Philip Trammel, who was succeeded by James W. Roberts (husband of the defendant Bettie Tracy Roberts), who resigned in 1912, and the plaintiff R.S. Matthews was then appointed trustee in his place, and acted in that capacity until the death of Milton C. Tracy, July 11, 1915.

This suit was originally brought by Milton C. Tracy and his said trustee, R.S. Matthews, against James G. Van Cleve, Edwin McKee and Edward J. Demeter, all of whom are judgment creditors of the said Milton C. Tracy, and Bettie Tracy Roberts and Charles H. Payson. Upon the death of Milton C. Tracy pending the suit, his heirs, Fred N. Tracy and Luther G. Tracy, were substituted as parties plaintiff in his stead.

It is alleged in the petition that by inheritance or purchase the title to all of the land involved in this action is now vested in the three plaintiffs and in the defendant Bettie Tracy Roberts. Mrs. Roberts, however, also claims in her answer to be the sole owner of these lands by virtue of the will of Milton C. Tracy. Further details as to the derivation of title are not necessary to an understanding of the issues of this case.

Charles H. Payson was made a party defendant because he also had a judgment against the decedent, Milton C. Tracy, and under his said judgment had caused an execution to be issued, and had levied the same upon the interest of Betty Tracy Roberts in said real estate. Further reference to this matter is unnecessary.

It is further alleged that for about fifteen years prior to his death, Milton C. Tracy was an invalid, confined to his home and unable to attend to any business; that the defendants Van Cleve, McKee and Demeter had each obtained separate judgments against said Milton C. Tracy, and thereafter had brought a creditors' bill, so-called, in the Circuit Court of Macon County, Missouri, whereby, as they claim, they had obtained a perpetual lien upon the portion of the property left in trust to Benjamin N. Tracy, Jr., for the use of the said Milton C. Tracy by the will of the testator. This proceeding was had during the latter years of the life of Milton C. Tracy, and at a time when his brother-in-law, James W. Roberts, was acting as his trustee. James W. Roberts was an attorney-at-law, and, it is alleged, undertook to enter the appearance of the said Milton C. Tracy to said action in the nature of a creditors' bill, and no process whatever was served upon the said Milton C. Tracy in that suit. Plaintiffs allege that the conduct of the said Roberts in so doing was unauthorized and fraudulent, and done in connivance with the said judgment creditors and without the knowledge, consent or approval of the said Milton C. Tracy, and that the judgment so rendered is, for that and other reasons in the petition alleged, null and void; that the original judgments in favor of said judgment creditors separately are barred by the Statute of Limitations, and that neither the original judgments nor the judgment obtained in the so-called creditors' bill proceeding constitute a lien upon the lands in question.

It further appears that by order of court, in an effort to preserve the trust estate, the trustee was authorized to borrow of one George W. Gilstrap, the sum of six hundred dollars, and to give a deed of trust upon the property in question to secure the same, which he did. The validity of this deed of trust is not attacked. It appears that a portion of the trust estate had been sold, and in violation of the terms of the will, the proceeds had been paid to the said Milton C. Tracy, or used in the payment of taxes against the trust property, so that at the time of the suit but a small part of the trust estate remained.

The answer of the defendants Van Cleve, McKee and Demeter admits that they severally obtained judgments against the said Milton C. Tracy, and that their judgments were afterwards consolidated in one judgment in the so-called creditors' proceeding, and the original judgments were thereupon released upon the record. They deny the allegations of fraud and collusion between themselves and Roberts, trustee, plead that their judgments were from time to time revived by writs ofscire facias until consolidated in the creditors' judgment aforesaid; aver that Roberts was duly authorized to enter the appearance of Milton C. Tracy to these various proceedings, both as his trustee and as his attorney; plead that no appeal was taken from the judgment rendered in the creditors' bill proceedings against Milton C. Tracy and James W. Roberts in January, 1907, and that all questions concerning the same are nowres adjudicata; that the existence of said judgment was well known to Milton C. Tracy for a long time prior to this death, and to the plaintiff R.S. Matthews at the time of his appointment as trustee; that Milton C. Tracy died testate; that his will was duly probated in the Probate Court of Macon County, Missouri, and that by the terms of his will the said Milton C. Tracy devised and bequeathed to the defendant Bettie Tracy Roberts the real estate here in question, which seems to have been practically all he had, and that by reason of the facts alleged plaintiffs are estopped to question the validity of the said judgment and lien obtained in said creditors' bill proceeding; that by his quiescence and silence the plaintiff Matthews had lulled defendants into a false sense of security, until it was too late to revive the judgments in their favor, and that plaintiffs are thereby estopped to question the validity of the judgments in the said creditors' bill proceeding.

Van Cleve, McKee and Demeter also filed their cross-bill, alleging the judgment obtained by them in January, 1907, against the said Milton C. Tracy and James W. Roberts, his trustee, in the creditors' bill proceeding aforesaid; that by the terms of said judgment it was to be a continuing lien upon the lands here involved, until the death of said Milton C. Tracy, and that thereafter the property was to be sold to satisfy said judgment; and praying that the land be sold to satisfy the judgment aforesaid, after the payment of six hundred dollars due the said George W. Gilstrap.

Bettie Tracy Roberts filed a separate answer, denying that either the defendants Van Cleve, McKee and Demeter or the plaintiffs, or any of them, have any interest in said real estate, and claiming to be the sole and exclusive owner thereof, apparently basing her claim upon the will of the said Milton C. Tracy. This defendant prayed for a judgment of the court divesting title from the plaintiffs and her co-defendants, and vesting the title to the entire property in herself.

The answer of the defendant Charles H. Payson admitted that he had obtained judgment against his co-defendant Bettie Tracy Roberts; that execution had been issued thereunder, and levy made upon her interest in the real estate in question, and denied that her interest in said real estate was subject to a lien in favor of the defendants Van Cleve, McKee and Demeter.

Plaintiffs' reply to the answer of Van Cleve, McKee and Demeter was in substance a general denial, coupled with an allegation that under the will of Benjamin N. Tracy, Sr., the title to the property left in trust to Milton C. Tracy vested, upon the death of said beneficiary, in the heirs of Benjamin N. Tracy, Sr., that none of his heirs were made parties to the said creditors' bill proceeding, nor to any proceeding in which the said Van Cleve, McKee and Demeter obtained any judgment, and therefore plaintiffs were not bound by said judgments.

Upon a hearing of the cause, the court dismissed plaintiffs' petition and adjudged the judgment and decree rendered on the 10th day of January, 1907, in favor of Van Cleve, McKee and Demeter, to be a valid lien upon the premises in question, and ordered a sale of said lands and directed that the proceeds should be applied, first, to the payment of the note held by the said Gilstrap, and the remainder to the payment of the several judgments in favor of said Van Cleve, McKee and Demeter. It seems to have been conceded that the property would not be more than sufficient to pay these sums, after paying the costs, and no judgment was rendered concerning the disposition of any possible surplus. The judgment is silent as to the defendants Mrs. Roberts and Payson.

Plaintiffs duly filed their motion for a new trial, and, their motion being overruled, they have appealed.

The questions arising in this case involve the construction of the will of Benjamin N. Tracy, Sr. Upon the proper interpretation of those portions of the will relating to Milton C. Tracy, the decision of this case hinges.

In this instance, as in all others relating to the construction of wills, the guiding rule of construction is that effect must be given to the lawful intent and purpose of the testator. All other rules of construction are merely to be used in aid of that rule.

It will be noted that the testator devised the property in question, and other property (to use the words of the will itself), "to my son Ben N. Tracy and his heirs . . . to have and to hold the same in trust for the use and benefit of my son, Milton C. Tracy and his heirs." The trustee is, (a) to have the sole management and control of the trust estate; (b) to collect the rents and pay the same to the beneficiary and his heirs; (c) to have power to sell and convey the lands embraced in the trust, or any part thereof, and (d) to reinvest the proceeds in other property to be held in trust in like manner. This was an active, not a passive trust. [Pugh v. Hayes, 113 Mo. 424; Higbee v. Brockenbrough, 191 S.W. 994; Maxwell v. Growney, 213 S.W. 427; Freeman v. Maxwell, 262 Mo. 13.]

It will be noted further that the will in express terms provides that the beneficiary is given no control or disposition of the trust property; and no power to encumber it. Thus, both by affirmative language as to the trustee and negative language as to the beneficiary, the control, management and disposition of the trust property is vested in the trustee, and in him alone. The language is clear, apt, emphatic and admits of no double construction. No other provisions of the will modify or in any way alter the meaning of the quoted clause.

The intention of the testator clearly was to create an active trust; to vest the legal title in the trustee, and to provide for the payment of the income only to Milton C. Tracy, and we hold that that is what he did.

The trust so created is what is called a spendthrift trust. There is much learning in the books respecting spendthrift trusts and much might be said concerning the varying doctrines concerning them to be found in the English law, in the Federal courts, and in the reports of our sister states, but, happily, there is no need to enlarge on those matters. Our own courts have long since adopted fixed principles concerning such trusts, and have consistently adhered to them.

In the case at bar, the beneficiary had no control over any part of the trust estate except the income, nor any control over that until it was paid to him. It was the clear intent of the testator that this income should be inalienable, that it should not be anticipated, and that it should not be subject to any debts or liens created by the beneficiary. The will, in set terms, provides that the beneficiary shall have "no power to encumber" the estate, and "no control or disposition" of it.

Is this devise then, valid or invalid as against creditors of the beneficiary, whether judgment-creditors or otherwise? We think it is valid. The beneficiary had only an equitable life estate in the income. Spendthrift trusts are of equitable origin, and are cognizable in courts of equity only. Equity is fond of enforcing trusts, and of effectuating the intentions of donors. In the case at bar, the intention of the donor is clear. It was his own property that he was giving away. It was to his own son — bone of his bone and flesh of his flesh — that he was giving gifts. His obvious purpose was to provide for that son against existing or anticipated misfortune, perhaps against the son's own improvidence or lack of business acumen, and the effect of the provision was, pro tanto, at least, not only to provide for the son but to guard the public against the possibility of the son's ever becoming a public charge. The provision was evidenced by a writing eligible to record and required by law to be recorded. As to antecedent creditors, no harm could come to them because their debts were contracted before the will became operative, and subsequent creditors became so, charged with notice of all of the provisions of the will. The purpose was lawful, the means proper, and the end laudable, for it is written:

"But if any provide not for his own, and specially for those of his own house, he hath denied the faith, and is worse than an infidel." [I Tim. 5, 8.]

Of more specific application, perhaps, are some of our own decisions. The following are a few of many that might be cited. [Lampert v. Haydel, 96 Mo. 439; Partridge v. Cavender,96 Mo. 452; Jarboe v. Hey, 122 Mo. 341; Heaton v. Dickson,153 Mo. App. 312; Kessner v. Phillips, 189 Mo. 515, l.c. 523; Graham v. More, 189 S.W. 1186; Higbee v. Brockenbrough, supra.] Further authority for the views herein announced may be found in the learned opinion of Mr. Justice MILLER in Nichols, Assignee, v. Eaton, 91 U.S. 716, and the cases there cited.

Accordingly, we hold that the clause of the will in question was valid as against creditors and all others, and being so, upon the death of the beneficiary, his entire interest in the trust estate died with him, leaving nothing to which the rights of creditors could attach, nor anything upon which judgment liens could operate.

But it is said that respondents, the judgment creditors, during the lifetime of the beneficiary, in a suit to which he and his then trustee were parties, were adjudged a lien upon the property in question, and that that judgment is in full force and effect. It is conceded, however, that only the beneficiary and his then trustee, Roberts, were parties defendant to the suit in which that judgment was rendered. What was the effect, then, of that judgment? It seems clear, on principle, that it could only have been effective against whatever interest the beneficiary, Milton C. Tracy, had in the trust estate, and that interest, as we have seen, was an equitable life-estate in the income only. That estate terminated at his death. Certainly the remaindermen, not being parties to that suit, are not bound by any judgment rendered in it. Their interests are not affected by it. As to them the situation is as if no such judgment had ever been rendered, and the beneficiary being now dead, it is the rights of the remaindermen, only, that are now to be determined. On a point so elementary no authorities need be cited. It follows that their judgment avails respondents nothing.

On the facts set out in our statement of facts, respondents say that appellants are estopped now to question the validity of the judgment rendered in the creditors' bill proceeding. We think there is no merit in this contention. In the first place, appellant Matthews, as trustee for Milton C. Tracy, the beneficiary, could not fritter away the title of the remaindermen to the trust property, by unauthorized admissions, nor could the beneficiary do so. In the second place, there is no virtue in this plea of estoppel, for the reason that, even if respondents had revived the judgments rendered in their favor in 1903, they would not have been benefited thereby, so far as the property here involved is concerned, because the interest of Milton C. Tracy in the trust testate, for the reasons stated, died with him. Estoppel arises only when one has been misled to his hurt, by the conduct of another. [De Lashmutt v. Teetor, 261 Mo. 412.]

Neither do we think there is any merit in respondents' plea oflaches. They are not shown to have been prejudiced by any delay on the part of appellants in asserting their rights in the premises. No rights requiring assertion accrued to appellants until the death of the beneficiary, and it appears from this record that the beneficiary died after the institution of this suit.

Having reached the conclusions already announced, there is no need to discuss other questions arising in this case. We conclude, therefore, that the learned chanceller was in error in holding that Milton C. Tracy under the will of his father took an equitable fee title in the real estate here in question, and was also in error in holding that the judgment in the creditors' proceeding, as of date January 10, 1907, constituted a lien upon that real estate. Appellants were therefore entitled to a decree declaring that judgment not to be a lien upon said lands, and their petition seeking that relief was erroneously dismissed. Since the holder of the six-hundred dollars deed of trust was not a party to this action, his rights are not in anywise adjudicated.

For the reasons stated, the judgment of the lower court should be reversed and this cause should be remanded for further proceedings consistent with this opinion.

It is so ordered. All concur.