The testator, in the ninth clause of his will, provided, “It is my will that every payment of income or principal hereinbefore directed or devised to be made, shall be made personally to the persons to whom they are devised or upon their order or receipt in writing, in either case free from the interference or control of the creditors of such persons and never by way of anticipation or assignment.”
By other clauses he left the residue of his estate in trust to pay to his widow and to his son Murray R. Ballou, in equal shares, the net income for life and upon the death of his son the income coming to him is to be divided equally amоng his surviving children or the issue then living of deceased children until the first child reached or would have reached, if living, the age of forty, but in any event not before twenty-one years after the son’s death, when the principal is to. be distributed in equal shares among the then surviving children and the issue then living of any deceased child.
The widow is still living, but Murray R. Ballou has died, leaving three children and the issue of a deceased child surviving, among whom full distribution has been made except as to Franklin B. Ballou, a son, who at the date of filing the petition was more than forty years of age.
But, as he had been adjudged a bankrupt before distribution, the defendant Collier, his trustee in bankruptcy, contends, that, although a discharge in bankruptcy had been granted he is entitled to the share coming to the bankrupt because a testator cannot nullify a bequest of an absolute legal interest in persоnal property by a provision that the legatee’s interest shall not be alienated, nor taken for his debts.
It is urged that the restriction is repugnant to the gift or bequest, and the English rule undoubtedly is, “that, if the property was given to the sons, it must remain subject to the incidents of property, and it could not be preserved from the creditors, unless given to some one else.” Brandon v. Robinson, 18 Ves. 429, 434.
It is nevertheless now pressed in argument that this court never has gone so far as to say that an equitable fee can be placed beyond the reach of creditors. The reasoning in Broadway National Bank v. Adams,
Said Chief Justice Morton speaking for the court: “We do not see why the founder of a trust may not directly provide that his рroperty shall go to his beneficiary with the restriction that it shall not be alienable by anticipation, and that his creditors shall not have the right to attach it in advance, instead of indirectly reaching the same rеsult by a provision for a cesser or a limitation over, or by giving his trustees a discretion as to paying it. He has the entire jus disponendi, which imports that he may give it absolutely, or may impose any restrictions or fetters not repugnant to the nature of the estate which he gives. 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 a trust, and take more than he has given.
“It is argued that investing a man with apparent wealth tends to mislead creditors, and to induce them to give him credit. The answer is, that creditors have no right to rely upon property thus held, and to give him crеdit upon the basis of an estate which, by the instrument creating it, is declared to be inalienable by him, and not liable for his debts. By the exercise of proper diligence they can ascertain the nature and extеnt of his estate, especially in this Commonwealth, where all wills and most deeds are spread upon the public records. There is the same danger of their being misled by false appearances, and induced to give credit to the equitable life tenant when the will or deed of trust provides for a
The trust in questiоn is not within the rule against perpetuities or open to the objection of the accumulation of property by corporations or ecclesiastical bodies of which the common law was exceedingly jealous. And whether income or principal is placed beyond the power of alienation or of attachment, the result to creditors of the beneficiary is merely a question of degree.
The owner, of course, cannot settle his property in trust, putting his right to the income which is reserved to himself for life beyond the reach of creditors. If, however, the founder is not the debtor, the property held in trust is not the debtor’s except in so far as the founder has provided. Pacific National Bank v. Windram,
We are manifestly'dealing with a rule of property which there is every reason to believe has been accepted and actеd upon by the bar, settlors and testators for thirty-three years, since the leading case stating the law governing the creation of equitable estates was decided. It therefore becomes necessary tо review our own cases subsequent to Broadway National Bank v. Adams in order to determine whether there has been any departure from the doctrine enunciated in that case, which has been referred to and followed in Pacific National Bank v. Windram,
In Claflin v. Claflin,
The gift comprised not only income, but principal; and it is significant that when referring to Broadway National Bank v. Adams, the court say, “The rule contended for by the plaintiff in that case was founded upon the same considerations as that contended for by the plaintiff in this.”
In Huntress v. Allen,
It is stated in the opinion that the exemption of the shares of the children from interference by creditors was valid and enforceаble.
In Dunn v. Dobson,
We have already referred sufficiently to Lathrop v. Merrill,
The opinion holds that “ accumulation ” meant the fund accumulated, and included both the original principal and the increase from arrears of income, and that the trustees were empowered in their discretion to pay a part or the whole to the nephew. “The reasons which induced the testator to place the share of this nephew beyond the control of himself and of possible сreditors do not appear. It may be significant that the case of Broadway National Bank v. Adams,
It would seem beyond question from this examination, - that if words are given their ordinary" meaning, a-trust of the nature under discussion has been repeatedly reсognized and conformed to until the legal principle involved has become a safe and well established rule affecting the practical administration of justice.
If, as the defendant Collier argues, a change is advisable, taking
We have not deemed it requisite to discuss cases from оther jurisdictions. The validity of such trusts is recognized by the great weight of American authority. Mason v. Rhode Island Hospital Trust Co.
The decree of the Probate Court, that the bankrupt is entitled to his share of the estate of his grandfather in the possession of the petitioner, should be affirmed.
Ordered accordingly.