245 P. 803 | Cal. Ct. App. | 1926
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *657 This is an appeal from a judgment in favor of the defendants in an action to quiet title to certain real property in Los Angeles County, California.
The facts are undisputed, the evidence consisting mainly of recorded documents in the chain of title to the property, from which it appears: That on June 12, 1897, Gerhardt H. Kallmeyer, being the owner of the real property in controversy, executed a deed to his wife, Sarah Jane Kallmeyer, *658 one of the defendants herein, conveying the same to her and her successor or successors "to have and to hold all and singular the said premises, together with the appurtenances unto the said party of the second part, in trust, to farm or let the said land and out of the income derived therefrom to pay all taxes and assessments of every kind and nature and all expenses and other charges which in the judgment of the said party of the second part may be proper or necessary in the care of the said lands, and to pay the residue of the income derived from the said lands to Emily Lawton, the daughter of the grantor and grantee herein, for and during the term of the natural life of the grantee herein, and upon the death of the grantee herein, then the said premises hereby conveyed to her in trust for the benefit of the said Emily Lawton shall vest in and become the property of the said Emily Lawton, if she shall then survive, and if she shall not survive the said lands shall vest in and become the property of the children of said Emily Lawton share and share alike."
At the time of the execution of the aforementioned deed Emily Lawton had two children, Alfred Homer Lawton and David Edward Lawton, who are defendants in this action, and she has never had any other children.
On January 31, 1914, the two children, Alfred and David, each being over twenty-one years of age, executed to their mother, Emily Lawton, a quitclaim deed, purporting to release and convey to her all their estate, right, title, and interest, use, benefit, privilege, and demand in and to the property described in the trust deed from Gerhardt Kallmeyer to Sarah Jane Kallmeyer.
On January 22, 1914, Sarah Jane Kallmeyer executed an instrument purporting to be a release of said trust and purporting to remise, release, surrender, assign, and set over to Emily Lawton all of the estate, right, title, and interest, use, benefit, privilege, and demand which she, as trustee, had in the premises.
Upon the execution of the quitclaim deed from Alfred and David to their mother, Emily Lawton, and the purported release of trust by the trustee, Sarah Jane Kallmeyer, to her daughter, Emily, the said Emily borrowed three thousand five hundred dollars from R.P. Shields and secured payment *659 thereof by a mortgage upon the property in controversy.
On or about August 25, 1917, the said Emily Lawton was adjudicated a voluntary bankrupt, and thereafter the property involved was sold by her trustee in bankruptcy to the said R.P. Shields, and a deed was executed to him by said trustee on February 20, 1919, purporting to convey all the right, title, and interest of the said Emily Lawton in the property.
Shields executed a satisfaction of his mortgage and thereafter executed a deed conveying the property to the plaintiffs.
In May, 1920, Sarah Jane Kallmeyer executed to plaintiffs a quitclaim deed of the property.
Some of the defendants were in possession of the property at the time of the commencement of this action and refused to surrender the possession thereof to plaintiffs, who brought this action to quiet their title and to recover possession of the property. It was resisted by the defendants upon the theory that the trust created by the first instrument mentioned herein was still valid and subsisting and that the subsequent instruments herein mentioned were without force and effect. The trial court adopted this view and held that the plaintiffs had no right or title to the property.
[1] The first question presented is as to the nature of the estate of Sarah Jane Kallmeyer under the trust deed. The appellants contend it was a life estate in trust with remainders over to Emily Lawton or her children. Respondents maintain that it was the legal title to the fee, subject to the beneficial interest of Emily. If their position be correct, the estate to Emily or her children after the death of Sarah Jane Kallmeyer was a limitation upon a fee. It is to be observed that the trust deed provided that "upon the death of the grantee herein, then the said premises hereby conveyed to her in trust for the benefit of the said Emily Lawton shall vest in and become the property of the said Emily Lawton, if she shall then survive, and if she shall not survive, the said lands shall vest in and become the property of the children of said Emily Lawton, share and share alike."
It would seem upon reason and authorities to be hereafter considered that this instrument created a legal estate for life in Sarah Jane Kallmeyer, with beneficial interest in *660 Emily Lawton and contingent remainders to Emily Lawton and her children, one or the other of which would become vested upon the termination of the life estate.
In Morffew v. San Francisco S.R.R. Co.,
The opinion from which quotation has just been made, states further: "And the will does not impose upon the widow any other duty which requires for its discharge an estate in the land greater than for her life. So that there is no enlargement of her life estate to be implied from the necessities of the trust. And the life estate in the trustee being created by express words in the will, with limitation over, it is not enlarged to a fee by the power of sale. (Kennedy v. Kennedy, 159 Pa. St. 327 [28 A. 241]; Foos v. Scarf,
"It is suggested by respondents that the trustee took the fee in virtue of the provision of section
In Keating v. Smith,
An examination of the trust instrument in the instant case discloses that the only duties of the trustee were to farm and let the property, pay taxes, expenses, etc., and then pay the net income over to the beneficiary of the trust during the life of the trustee, and, therefore, a legal estate for life was sufficient for the full and free execution of this trust.
In Barnett v. Barnett,
[2] The case last cited is interesting upon our problem because in the instant case, it will be observed, that while the granting clause in the trust deed to Sarah Jane Kallmeyer conveys to her "and her successor or successors," the deed further provides that upon the death of the grantee, the property shall vest in Emily Lawton, and, as stated in Bodine v. Arthur,supra, this addendum or proviso to the conveyancing clause, by a well-settled rule of construction, must control the conveyancing clause or premises even to the extent of destroying the effect of the same.
A case presenting a principle similar to the one presented by the instant case is Estate of Aldersley,
But a most persuasive authority, indeed a controlling one upon this court, is the decision in the Estate of Fair,
The case of Fatjo v. Swasey,
[3] Respondents advance the argument that as the trust instrument gives the trustee the power to "let" the land, she had the right to lease it and this required her to take an estate in fee. We cannot agree with this position. In 28 Am. Eng. Ency. of Law, 2d ed., 1008, the rule is stated: "In the absence of express power from the instrument, the trustees cannot grant a lease or provide for a renewal to extend beyond the life of the trust estate, but such a lease, if made, may be sustained to the extent of the trust estate." The case of South End WarehouseCo. v. Lavery,
[4] The title of plaintiffs' predecessor in interest, if any, was acquired more than three years after the conveyance of the contingent interests of Alfred and David to their mother, pursuant to proceedings duly and regularly had in the matter of the voluntary bankruptcy of Emily Lawton, in which proceedings he purchased, according to the stipulation of the parties hereto, "all the right, title, interest and estate of said Emily Lawton in and to the property mentioned and described in the complaint." This sale was duly confirmed by the referee in bankruptcy. Emily Lawton's right, title, and interest in the property at the time of this sale consisted of her beneficial interest during the lifetime of Sarah Jane Kallmeyer, the trustee, and the contingent remainders granted to herself and to her sons, Alfred and David, who had conveyed to her. There can be no question that the contingent interests of Alfred and David Lawton passed to their mother, Emily Lawton, by their deeds to her, and such interests, together with the original contingent interest of Emily Lawton, passed to plaintiffs by reason of the conveyance hereinbefore recited. "Future interests pass by succession, will and transfer in the same manner as present interests." (Sec. 699, Civ. Code.) See, also, Le Breton v. Cook,
Conceding that the trust deed granted contingent remainders not only to Alfred and David Lawton, but to any other children of Emily Lawton who might survive her, there were no other children at the time this action was brought and plaintiffs concede that there is a legal possibility of their interest in the property being defeated, in part, by the birth of other children of Emily Lawton who might survive her and whose contingent interests are not involved and cannot be affected by this proceeding. *666
We have cited authorities to show that the contingent remainders held by Emily Lawton were alienable and passed to plaintiffs by the successive transfers appearing in the record. Another question presented by the appeal is whether her beneficial interest in the property during the life of her mother also passed through the trustee in bankruptcy to plaintiffs. We think it did.
"Where one for whom property is held in trust becomes a bankrupt, his entire interest in the trust estate passes to the trustee in bankruptcy, and such ownership draws with it the right of possession." (7 Cor. Jur. 118.)
"If an equitable tenant for life becomes bankrupt or insolvent, all his interest goes to his assignees, and the trustee must hold it subject to their disposition; unless the property is so given that it goes over upon the bankruptcy of the cestui que trust." (2 Perry on Trusts, 6th ed., sec. 555.)
"Therefore, when an equitable interest is once vested in thecestui que trust, he may dispose of it, or it may pass to his assignees by operation of law, if he becomes a bankrupt." (Id., sec. 386.)
Section 867 of the Civil Code provides: "The beneficiary of a trust for the receipt of the rents and profits of real property, or for the payment of an annuity out of such rents and profits, may be restrained from disposing of his interest in such trust, during his life or for a term of years, by the instrument creating the trust."
In Fatjo v. Swasey,
In Blackburn v. Webb,
It is apparent that there is no provision in the trust deed under consideration here which inhibits Emily Lawton from transferring her beneficial interest thereunder. She could sell, assign, convey, or encumber such interest for any purpose *667 she saw fit, and under the circumstances here and the authorities heretofore cited, it passed to her trustee in bankruptcy and through him to the plaintiffs.
"The beneficial interest of a bankrupt in property held in trust for him passes to his trustee in bankruptcy." (1 Remington on Bankruptcy, sec. 973, p. 545.)
A case similar to the instant one is found in Loomer v.Loomer,
"It needs no argument to show that, upon the adjudication in bankruptcy of Lyman and Andrew, all their remainder, title and interest passed to the trustee in bankruptcy. (National Bankruptcy Act [Act July 1, 1898, c. 541, sec. 70a, 30 Stats. 565, U.S. Comp. St., 1901, p. 3451].) It is, however, contended that their rights to the income under the trust did not so pass. Whatever may be said upon the much-mooted question as to the legality of so-called spendthrift trusts, it is clear that the trust in question possesses none of the attributes of the trusts so described. The beneficial interests are absolute, and left wholly unrestrained and under the control of the beneficiaries. Such equitable estates, we have repeatedly held, are alienable, and may be subjected to the rights of creditors upon attachment and execution. (Ives v. Beecher,
"As between the trustee in bankruptcy and the claimant Hubbell, to whom, on February 19, 1903, he conveyed the right, title and interest of the two bankrupts in and to the lands in question, we understand that there is no dispute *668 as to their respective rights. The trustee claims that share of the income to which the two bankrupts would have been entitled on February 19, 1903, had they not been adjudicated bankrupts; and Hubbell claims such share of subsequently accruing income and their undivided shares in remainder in the real estate itself. These claims are well founded."
It follows from the foregoing discussion that the plaintiff in the instant case succeeded to all the rights of Emily Lawton ascestui que trust under the deed of trust, as well as all interest in remainder granted to her and to her children, Alfred and David.
[5] One other question remains to be determined and that relates to the termination of the trust. Appellant contends that the trust is terminated because its purpose has ceased — that its object was to pay the income from the property to Emily Lawton — and since her beneficial interest has passed to plaintiffs, there is no useful purpose to be served by continuing the trust in force and effect. This argument loses sight of the fact that the trustee was to manage the property, rent or lease the same, pay taxes, assessments, and charges, and thus preserve it for the contingent remaindermen. While the contingent interests of Emily Lawton and Alfred and David Lawton have passed to plaintiffs, there remain outstanding contingent interests of children who may yet be born to Emily Lawton and survive her at the time of the death of the trustee. Such interests have not passed to plaintiffs and the trust continues for their protection. The case of Fletcher v. Los Angeles Trust Sav. Bank,
We conclude, therefore, that the trust created by the deed from Gerhardt H. Kallmeyer to Sarah Jane Kallmeyer is not terminated. *669 [6] But it is also argued that the trustee, by the execution of the instrument transferring all her right, title, and interest in the property to Emily Lawton resigned as trustee and terminated the trust. The foregoing discussion disposes of the last contention. The trust was not terminated by the consent of the trustee and the beneficiaries, because some of the possible beneficiaries may later come into existence.
As to the discharge of the trustee, we quote the following from Perry on Trusts (6th ed., vol. 1, sec. 274, p. 470): "If a trustee once accepts the office, he cannot by his sole action be discharged from his duties. Having once entered upon the management of the trust, he must continue to perform its duties until he is discharged in one of three ways: first, he may be removed and discharged, and a new trustee substituted in his place, by proceedings before a court having jurisdiction over the trust; second, he may be discharged, and a new trustee appointed, by the agreement and concurrence of all the parties interested in the trust; and, third, he may be discharged, and a new trustee appointed, in the manner pointed out in the instrument creating the trust, if it makes any provisions upon that subject. Mere abandonment of the trust will not vest the trust property in the hands of his cotrustee, nor relieve a trustee from liability."
[7] The judgment appealed from is reversed with directions to the trial court to enter a decree that the defendant Sarah Jane Kallmeyer is the owner and holder of the legal title to the property in controversy for the period of her natural life, as a trustee, however, to pay the net income therefrom to plaintiffs, who are the owners and holders of the beneficial interest in said property during the lifetime of the said trustee, and that the plaintiffs are the owners and holders of the contingent interests in remainder after the termination of said legal life estate, which were granted to Emily Lawton and Alfred and David Lawton by the deed from Gerhardt H. Kallmeyer to Sarah Jane Kallmeyer.
Nourse, J., and Sturtevant, J., concurred. *670