Hahn v. Hutchinson

Opinion by

Mr. Justice Green,

The first clause of the will of the testatrix creates the interest given to her husband. The second clause creates the interest of the two daughters, but it is made “subject to all the provisions of the first clause.” Neither the interest of the daughter Jeanette Moffit, nor of the daughter Annie Margaret Hutchinson, commences or has any existence during the life of their father David Hutchinson. The daughter Annie Margaret has no right to any income from the estate until after her father’s death. For the purposes of the present contention it is only necessary to determine whether the power of David Hutchinson over the income of the estate is absolute in him and unclogged by any trust for others during the term of his own life, for it is only his life estate that is proposed to be sequestered for the benefit of his own creditor.

To dispose of this question it is only necessary to consider the extent and character of the actual interest which he takes under the first clause of the will. The words of the clause are: “ First. For the purpose of carrying out this my will, I give, devise and bequeath to my husband David Hutchinson, my entire estate, real, personal and mixed, in trust, he to have the entire control, so long as he may desire, of the same, and use so much of the income thereof as he may desire.” Then follows a provision that the income shall not be liable to any of his debts, present or future, except such as he may contract for improvements or repairs for the benefit of the estate. The remaining provisions of the first clause of the will are simply to make sure and stable his right to take the entire income of the whole estate, to own it, use it, control it, dispose of it, without any liability to account for it to any one, particularly to the children of the testatrix. To this end he is empowered to improve, sell, or incumber the real estate, “ with the same effect as if he were the owner,” except that in making deeds or mortgages he must execute them as trustee. He is also empowered to make a last will and testament, and thereby “ to alter, vary or change the amounts coming to the children,” under the will of the testatrix, and “ to designate the property and make a division of the same as he may deem best, and such division shall be binding and conclusive on all parties affected thereby.”

As the ownership of the income during the life of David Hutchinson is the only important subject of inquiry, it is not necessary to consider the rights and interests of the children or of others after his death.

It cannot be questioned, under all the authorities, that David Hutchinson is the absolute and uncontrolled owner of all the income of the entire property during all his life. He holds no portion of it in trust for his daughters or either of them. He is not bound to accumulate a single penny of it for them, or to hold any portion of it for them in any event. He is at perfect liberty to take the whole of it and do what he pleases with it, without any liability to account for it at any time. It is true the will says he is to take it in trust, but there is no trust specified, and as he alone has the absolute right to use and dispose of the whole of it, he is the only beneficiary of the so called trust, in other words he is the absolute owner of it. The following cases fully establish the correctness of this conclusion: Myer’s Appeal, 48 Pa. 26; Cox v. Rogers, 77 Pa. 160; Lininger’s Appeal, 110 Pa. 398 ; Goe’s Estate, 146 Pa. 431; Mercur’s Estate, 151 Pa. 49.

In Rife v. Geyer, 59 Pa. 393, it was said in the opinion, “ whenever the entire beneficial interest is in the cestui que trust, without restriction as to the enjoyment of it, there is no reason why it should not be considered as actually executed,” and we held that, in order to protect the estate from creditors, the legal estate must be in the hands of a trustee, and if the equitable estate became merged in the legal it could 'be immediately seized in execution by creditors.

In Beck’s Estate, 133 Pa. 51, we sustained a testamentary provision, in favor of a daughter, that her share should not be liable to be attached or seized for her debts, and held, that, while it was in the hands of the executor in transit it was protected, but also said that the trust would end as soon as the money was paid to the legatee.

In'the present case the income of this estate goes directly into the hands of the nominal cestui que trust, and it remains there because it is his own. If he is trustee at all it is for himself alone ; there can be no intervening person clothed with the title and having a duty to perform of preserving the trust in order to pay the fund over to another who is its equitable owner. All the title to the money, legal and equitable, is centered in the one person, and the payment to that one person is the only payment that can possibly be made. As a matter of course a person cannot declare a trust of his own property in his own favor, and, by making himself his own trustee, prevent his creditors from getting access to it. Yet there is no real difference between such a trust and this one.

The authorities cited by the appellee do not reach the state of facts which are present here. In Ashurst v. Given, 5 W. & S. 323, the trustee was clothed with the legal title to a large estate with which he was to carry on an extensive business, and he was entitled to nothing out of the property or the profits except a reasonable support for the service rendered. Other persons were to receive both the income and principal of the fund, except so much of the income as was necessary to support the trustee while performing his duties as such. In Overman’s Appeal, 88 Pa. 276, the present question did not arise. It was a case of a perfectly good spendthrift trust in which the executors were the depositaries of the legal title, and the children entitled to the income were the cestuis que trust. It is true that one of the executors was one of the children, but that fact could not destroy the legal title of the trustees. As the terms of the trust prohibited liability for all debts and obligations, they operated just as certainly against a liability created by a devastavit as against any other form of indebtedness.

In Dickerson’s Appeal, 115 Pa. 198, although the donor was himself the trustee, the trusts declared were not for his benefit, but for his children, as to whom it was perfectly competent to create a valid trust. The trustee took nothing under the trust.

The writer has carefully examined all the reported cases in which spendthrift trusts were sustained, but he has not found one, nor has any been referred to us, in which the trustee was also the cestui que trust, with the absolute ownership of the subject of the trust whether income or principal.

But in the case of Mackason’s Appeal, 42 Pa.-330, we held that one sui juris cannot, as against creditor’s, either prior or subsequent, settle his property in trust for his own use for life, and over to his appointees by will, and, in default of such appointment, to the use of his lawful heirs in fee; that property so settled is assets in the hands of the trustees for the payment of debts, whether contracted prior or subsequent to the execution of the deed of trust; and the devisees or appointees under the will of the settlor will be postponed to his creditors. In this case the deed was made to third persons as trustees, and they were to pay over the net income of the estate to the grant- or during his life, and to his appointees bjr will after his death, and in default of such appointment to such persons as would have taken the same under the intestate laws. The deed of trust contained an absolute prohibition of any kind of debts, liabilities or engagement of the cestui que trust. At the date of the deed the grantor was indebted, but all of that indebtedness was paid off by the trustees. Before his death he again became indebted to the amount of about $6,000, and these debts were unpaid at his decease. The trustees sold the property, invested the proceeds, paid him the income during his life, settled their account after his death, and the fund was then claimed by his creditors and his appointee. The court decided in favor of the creditors. Mr. Justice Thompson, in delivering the opinion, said: “ This statement brings us to the simple inquiry, can the owner of property so dispose of it, for his own use, benefit and support, as to put it beyond the reach of liability for his future debts, he being and continuing sui juris, and there appearing to be no reason therefor except to withdraw it from such liability, and thus retain the temporal ownership without its incidents ? This would be a startling proposition to affirm. It would revolutionize the credit system entirely; destroy all faith in the apparent ownership of property, and repeal all our statutes and decisions against frauds. . . . The proposition is that such a settlor may be the complete equitable owner of all his property — deal as much as he pleases with it, and it shall not be liable for his debts.”

The whole course of the reasoning is that a man shall not be the real owner of property with the full right to deal with it as he pleases, taking the full income of it to his own exclusive use, and keep the same free from the claims of his creditors. What he cannot do for himself in this regard cannot be done for him by another. When the grant comes from another and yet has these incidents, it is as obnoxious to the foregoing objections as when it arises upon his own grant to third persons as trustees for him.

Judgment affirmed.