Brown v. Macgill

Boyd, J., delivered the opinion of the Court. This is an appeal from a decree of the Circuit Court of Baltimore City, dismissing the bill of complaint filed by the .appellant against Sarah G. Macgill, Carroll S. Macgill, her husband, and James McEvoy, trustee. The bill alleges ithat on the 16th day of September, 1895, Sarah G. Macgill .■gave the appellant her note for the sum of two thousand •dollars, which she borrowed from him with the understanding and agreement that it should be payable when demanded •out of her separate estate, whether held in her own'name •or by the intervention of her trustee, James McEvoy, and that it was her intention and purpose to bind and charge her separate estate with the payment thereof. On the ,10th day of September, 1894, which was a day or two before Mrs. Macgill, who was the widow of George B. Graham, deceased, was married to Carroll S. Macgill, she executed ,a deed of trust by which she assigned and conveyed to James McEvoy, trustee, all property which she had derived from the estate of George B. Graham, and which she might receive from her daughter, Isabella Brown Graham, in trust, “to collect, receive and after making all proper deductions for taxes and other charges thereon, to pay over the net rents, profits, dividends, interest and income of all said property, real, personal and mixed, to her, the said Sarah G. Graham, during her natural life, into her own hands and not to another, whether claiming by her authority or otherwise, for her sole and separate use and upon her separate receipts withotit power of anticipation, and excluding all right or interest in or power over the same of any husband she may have or any liability for his debts, contracts or engagements.’’ It then provides for the disposition of the property after her death.

It is conceded that the debt was contracted by Mrs. Mac-gill with direct reference to her separate estate and that it was her intention to charge the same. The testimony on that point is ample under the decisions of this Court to charge any separate estate she had with this debt, unless there be other reasons for its exemption. ¹⁶³ It is contended, and the learned Judge below so held, that by reason of the provisions in the deed of trust above quoted she had no power to charge or pledge the property held by James McEvoy, trustee. That being her only separate estate, so far as disclosed by the record, we are necessarily called upon to determine the effect of those provisions. Cases involving the right to place restrictions upon the alienation of property have been numerous and have resulted in a great diversity of opinions between the Courts that have passed upon the question.

In England it has been persistently and steadfastly held that a gift or grant of a beneficial fee-simple or life estate, whether legal or equitable, carried with it the right of the donee or grantee, other than a married woman, to alienate the estate and charge it with his debts, and that all attempts to restrict these incidents belonging to such estates by forbidding payment of the income to any one other than the donee or grantee or prohibiting anticipation, were nugatory and without effect, except by way of cesser or limitation over of the estate. We will have occasion to consider the exception in favor of married women later on. In 23 Am. & Eng. Ency. 5, there is a very excellent note on the subject of Spendthrift Trusts, where it can be seen how widely the Courts of this country have differed on the main question.

But it would serve no good purpose to enter into a discussion of those cases, as this Court held'in the case of Smith v. Towers, 69 Md. 77 , that the founder of a trust may lawfully provide in direct terms that his property shall go to his beneficiary to the exclusion of the alienees and creditors of the latter, and accordingly it was determined that the rents and profits held by the trustee in that case, which the testator directed should be paid into the hands of his son and “not into the hands of another, whether claiming- by his authority or otherwise,” could not be reached by his creditors either at law or in equity before such rents and profits were paid to him. It was conceded that the English cases, as well as many in this country, were opposed to the views adopted ¹⁶⁴ by this Court, but it was held that the reasons on which was founded the rule that the right to sell and dispose of property is a necessary incident to the ownership of it, do not apply to the transfer of property in trust. It was said that “ the donor or devisor, as the absolute owner of the property, has the right to prescribe the terms on which his bounty shall be enjoyed, unless such terms be repugnant to the law * * * *. The creditors of the beneficiary have no right to complain because the founder of the trust did not give his bounty to them.” By the will before the Court in the case of Reid v. Safe Deposit and Trust Company, 86 Md. 464 , the testator left his property to trustees, who were succeeded by the appellee in that case, with directions that they should pay the net proceeds from time to time to his wife during her natural life, and especially so that the same shall not be liable for the debts or contracts of any future husband, or in any manner subject to his control, or to be taken in execution or attachment or otherwise, howsoever, and so that she shall not pledge or anticipate said property or said net proceeds of income or any part thereof.” We held that by virtue of those provisions the net income from the property in the hands of the trustee was not liable for her debts and that the testator had full power to make such provisions under the decision in Smith v. Towers .

But whether one who is the owner of property can thus place it beyond his own control and power of alienation— especially beyond the re^ch of his creditors—presents another question. The case of Warner v. Rice, 66 Md. 436 , goes very far towards denying such right. George Warner and others conveyed to a trustee certain property which had been left them by their father by a deed in which certain trusts were declared bj the grantors. The property of George Warner sought to be made liable to attachment in that case had by the deed been made subject to a declaration of trust as follows: ” In trust for the use and benefit of said George Warner and his immediate family, free from ¹⁶⁵ liability for any of his debts, contracts or engagements; and when, if so by said trustee found requisite, by him deemed proper, to apply the uses, rents, income and profits to the support and maintenance of said George and his said family during his, said George’s life,” etc. This Court held that the exemption attempted to be conferred upon the use of the property by that declaration was void and without effect, being contrary to law, and held the rents from Warner’s equitable estate in the ground rents attached, liable for the plaintiff’s debts.

It was said in that case that a beneficial legal estate in fee or for life could not be conveyed or devised to a person with a provision that it should not be alienated or subject to the debts of the legal owner, and it was also stated that, as a general principle, equitable estates cannot be effectually created with such provisos, except in the case of trusts created for .the protection and benefit of married women. In Baker v. Keiser, 75 Md. 332 , the cases of Smith v. Towers and Warner v. Rice , were discussed and it was said that in the latter case this Court “ emphatically declared that it was wholly against the policy of the law to allow property, whether legal or equitable, to be fettered by restraints upon alienation; and generally the Court said whenever property is subject to alienation by the owner, it is subject to his debts.” It was stated in that opinion that the majority of the Court concluded in Smith v. Towers that there was nothing in the decision of Warner v. Rice “which should restrain this Court from saying that the founder of the trust could by sufficiently clear language create a trust for a beneficiary without the power of alienation,” but the opinion concluded by saying that “This Court went as far as it could in Towers' case to effect the intention of the testator which was so expressly declared; but proper adherence to the policy of the law in the State will not allow the extension of the doctrine of the Towers case beyond the limitations of that decision, nor to a case not falling clearly within its reasons and reasoning.” But this case of Warner v. Rice is clearly distinguishable ¹⁶⁶ from that of Smith v. Towers , and of Reid v. Safe Deposit and Trust Company , inasmuch as in that case there was an attempt of the owner of the property to place it beyond the reach of his creditors and yet retain the enjoyment of it during his life, whilst in the other two cases the testators were creating trusts in favor of third persons. The theory upon which Courts have held restraints upon alienation, etc., valid, is that the cestui que trust only has what the donor' has given him—is the recipient of his bounty—and therefore if the donor has not given him the right to alienate the property or made it subject to the payment of his debts no one has the right to complain. As is well said in Broadway National Bank v. Adams, 133 Mass. 170 , “under our system, creditors may reach all the property of the debtor not exempted by law, but they cannot enlarge the gift of the founder of the trust and take more than he has given.” This is well illustrated in the Missouri cases.

In Lamport v. Haydel, 96 Mo. 439 , and in Partridge v. Cavender, 96 Mo. 452 , the doctrine had been distinctly announced that by the use of apt terms a testator could forbid the alienation of property in trust and could place it beyond the reach of the creditors of the beneficiary ; but in Bank of Commerce v. Chambers, 96 Mo. 459 , a husband who had released his curtesy in his wife’s estate, accepting in lieu thereof an income given him by her will, was regarded as a purchaser of such income and not a mere recipient of his wife’s bounty,. and therefore the income was held to be subject to the claims of his creditors, notwithstanding the provisions in the will to the contrary. In referring to Lampert v. Haydel that Court said that it, “ and the class to which it belongs, rests in a large part upon the distinct ground that a creditor is not defrauded and therefore has no cause of complaint, because the owner of the property in the free exercise of his will so disposes of it that the object of his bounty, who parts with nothing in return, has a sufficient income provided for and applied to his life support.” Even that class of cases should be carefully guarded and Courts should ¹⁶⁷ not be inclined to exempt property from its usual incidents of the right of alienation and liability for debts unless the language of the donor be free from doubt. But it is going too far and is too violently assaulting the policy of the law of this State, as indicated above, to permit a person to convey property owned by him to a trustee, and still retain full enjoyment of the income and revenues from it through the instrumentality of the trustee, and yet have the interest he retains for himself, worth it may be thousands or tens of thousands of dollars per annum, so fettered by his own act that it cannot be disposed of or be reached by his creditors. It is true that our Land Records are open to the public, and in contemplation of law what is properly recorded therein is presumed to be known by all, yet the fact remains that if a person has once owned property and continues to occupy it or use it just as he has always done, it would occur to but few persons if any, at least in ordinary transactions, that he must inquire, perhaps employ counsel to ascertain, whether there had been any change in the legal