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Canfield v. Security First Nat. Bank of Los Angeles

District Court of Appeals of California, Second District, First Division
Mar 28, 1938
77 P.2d 857 (Cal. Ct. App. 1938)

Opinion

Hearing Granted by Supreme Court May 26, 1938.

Appeal from Superior Court, Los Angeles County; Thurmond Clarke, Judge.

Three actions in equity in the nature of creditors’ bills, by Pearl S. Canfield, by the Bank of America National Trust & Savings Association, and by Pauline C. Cato, against the Security First National Bank of Los Angeles and another, in the first and last of which Laura Elaine Canfield McMillen intervened, and in the second of which Laura Elaine Canfield McMillen was made a party defendant. The actions were consolidated for trial and a single judgment was rendered, from which plaintiffs appeal separately.

Modified and, as modified, affirmed. [Copyrighted Material Omitted]

J. M. Danziger, Charles A. Buckley, and Goodman, Bachrack & Brownstone, all of Los Angeles (Herman A. Bachrack, of Los Angeles, and R. M. J. Armstrong, of San Francisco, of counsel), for appellant Pearl S. Canfield.

Edmund Nelson, William C. Day, Theodore Weisman, Arthur T. Stollmack, Ralph E. Lewis, and Freston & Files, all of Los Angeles (Louis Ferrari, of San Francisco, of counsel), for appellant Bank of America.

Theodore Weisman and Arthur T. Stollmack, both of Los Angeles, for appellant Pauline C. Cato.

Newlin & Ashburn, of Los Angeles (A. W. Ashburn, of Los Angeles, of counsel), for respondent Security First Nat. Bank.

Lloyd Nix, of Los Angeles, for respondent Charles O. Canfield.


OPINION

YORK, Presiding Justice.

These are three actions in equity in the nature of creditors’ bills brought by judgment creditors of Charles O. Canfield against him as beneficiary of a trust created by the will of his father, Charles A. Canfield, deceased, and against the Security First National Bank of Los Angeles, as trustee of said trust, in an effort to reach the beneficial interest of said Charles O. Canfield, who is hereinafter referred to as beneficiary.

Appellant Pearl S. Canfield, the former wife of said beneficiary, on September 29, 1931, filed her equitable action (S. C. 60) which was based upon a stipulated decree of divorce awarding her $20,000, plus a monthly sum of $1,000 (later reduced to $800 per month) for her support until her remarriage or until the death of the beneficiary. Demurrers to her complaint were sustained without leave to amend, judgment of dismissal followed, whereupon she prosecuted an appeal therefrom. Upon said appeal the judgment of dismissal based upon the order of the court sustaining the demurrers was reversed, the court holding that appellant was entitled to reach the surplus income payable to the beneficiary from the trust over and above such portion thereof as was needed for the maintenance of beneficiary measured by the so-called "station in life" rule. Canfield v. Security First National Bank, 8 Cal.App.2d 277, 48 P.2d 133.

It will be noted that in said opinion the court did not add its approval to a holding that in California we recognize any such thing as "station in life." The court in that opinion uses quotations when it refers to the term "station in life," which is evidently something that has been built up by judicial decision in the several states, although as a general rule our California courts have been careful not to recognize any such thing. They have, however, made reference to "the mode of life" to which the beneficiary and his family have been accustomed, the manner in which he has been up, and the habits acquired by him. Magner v. Crooks, 139 Cal. 640, 643, 73 P. 585.

Upon filing of the remittitur, respondents answered, and on February 20, 1936, the cause came to trial on its merits and was consolidated with the Cato case (S.C. 61) and the Bank of America case (S.C. 59) which were filed respectively on September 13, 1935, and September 19, 1935. A single judgment embracing all three actions was rendered from which the three plaintiffs have separately appealed. Appellant Pearl S. Canfield at the time she filed her action on September 29, 1931, prayed for the sum of $23,883.34 plus interest, together with the further sum of $1,000 per month beginning on September 15, 1931, and continuing during the life of the beneficiary and until the remarriage of said appellant; the judgment herein awards her the sum of $79,958.66. Appellants Bank of America and Cato’s claims are represented by judgments in the amounts of $46,611.41 and $10,463.46, respectively, which sums with interest are awarded to them by the judgment herein.

The trial court found that appellants’ claims should be paid from the income of the trust and decreed that appellants have equitable liens thereon, but that such liens were in no way retroactive regardless of the date of commencement of the respective actions, and established a priority as between the three claimants, ranking appellant Canfield first, appellant Cato second, and Bank of America third. The court also found that the beneficiary required the sum of $30,000 per year for his maintenance in his "station of life"; that the said $30,000 should be exempt from appellants’ claims; and that such claims could be satisfied only from any surplus income from the trust in excess of that sum.

The questions here presented are briefly the following: (1) Whether, as a matter of law and evidence, the trial court was justified in finding and holding that $30,000 per year was necessary for the maintenance of the beneficiary according to his "station in life"; (2) whether the equitable liens adjudged by the court should have priority as between themselves, and whether such liens attached only by virtue of the present judgment or at a much earlier date; (3) if the liens attached at an earlier date, whether the trustee is liable to appellants for having paid the income from the trust to the beneficiary while an appeal was pending in the Canfield case.

The will of Charles A. Canfield, deceased, creating the trust, was executed in 1912 and the decree of distribution was entered on March 30, 1914. Said will which disposed of an estate valued at several million dollars contained a provision by which the testator bequeathed the sum of $1,000,000 less $100,000, either in cash or securities, to the Security Trust & Savings Bank for the benefit of the son Charles O. Canfield and his children. In the fifteenth clause of said will testator recited his reasons for creating the trust on behalf of his son and directed that:

The trustee "shall, during the lifetime of my said son, Charles O. Canfield, collect, recover and receive the rents, issues, dividends, profits and income of said share of my estate, investing and re-investing the principal thereof, * * * and after paying all taxes and lawful charges and expenses of the trust * * * to use, apply and pay over the net income remaining, as follows:

"(a) Out of said income to pay, in monthly installments, twelve hundred dollars ($1,200.00) per annum only to and into the proper hands of my son Charles O. Canfield, and not by way of anticipation, nor to any assignees of my said son, nor to or upon any order which my said son shall give, whether such assignment or order be the voluntary contractual act of my son or be made pursuant to or by virtue of any legal process in attachment, execution, bankruptcy, or otherwise.

"(b) Out of said net income, in addition to said annual income of twelve hundred dollars ($1,200.00), to pay and apply, as my said trustee shall deem advisable in the judgment of its president or general manager for the time being, and through such agencies as it may select, and from time to time, whatever sums my said trustee may deem proper for the support, maintenance and education of my grandchildren Orville (since deceased) and Laura Elaine Canfield (now McMillen) children of my said son (by a former marriage), in a manner suitable to their station in life, during their respective lives. * * *

"(c) If, in the judgment of my said trustee, to be exercised by its president or general manager for the time being, my said son shall hereafter prove himself worthy of being entrusted with the expenditure of a larger annual income or allowance than that above given him, my said trustee may, in such event, at any time, and in such proportions and at such time as to payments it shall deem advisable in the discretion of said officers, increase the said allowance and pay over such increase to my said son up to the full limit of the net income of the said trust estate and any unexpended income which may have accumulated in the hands of the trustee, notwithstanding the provision above made as to payments out of the income for the maintenance and education of my said grandchildren. * * *

"(d) It is my purpose and will, by the foregoing provisions as to the application of the income of said trust estate, to commit to my said trustee absolute discretion as to, and full power of control over, the application of all of the net income of said trust estate beyond the said sum of twelve hundred dollars ($1,200.00) per annum.

"It is my will and I do expressly declare that in the principal of the trust mentioned in this item of this my will my said son Charles O. Canfield shall have no interest or estate whatsoever, and that he shall have no interest or ownership in the income thereof other or further than, or different from the interest given him in and by this item. I do further expressly declare and provide that no interest of whatsoever nature given my said son shall be subject to, or subject to be taken for the payment of, any debts whatsoever contracted by my said son, either before or after my death and for any purpose whatsoever, and that my said son shall have no power or capacity to make any disposition whatsoever of any of said income by his assignment or by his order, voluntary or involuntary, and whether made upon the order or direction of any court or courts, whether of bankruptcy or otherwise; nor shall said interest be subject to any process of attachment issued against my said son, or to be taken in execution under any form of legal process directed against him or against the trustee, or the trust estate, the income thereof, or any part of said income. But the whole of the income of the trust estate mentioned in this item shall go and be applied by my said trustee solely for the benefit of my said son and of his said two children * * * free, clear and discharged of and from any and all obligations of my said son whatsoever. Upon and after the death of my said son these trusts shall continue for the benefit of my said two grandchildren * * * for and during the term of their respective lives."

It is then provided that upon the death of either grandchild, one-half of the corpus of the trust estate shall be divided among the children of such deceased grandchild, or in the absence of such issue shall go to the surviving grandchild. In the event that both grandchildren die without issue them surviving, then the corpus of the trust estate shall be divided among testator’s surviving daughters, who might have predeceased said grandchildren.

These provisions of the will create a spendthrift trust and provide that the whole income from the trust shall be devoted to the beneficiary and his daughter (respondent intervener), but they do not provide that any of the income shall ever go any remainderman. The testator left to the discretion of the trustee the amount of income that should be paid to the beneficiary in excess of the $1,200. The record shows that the trustee paid to the daughter a small sum annually and paid to the beneficiary for many years the remaining total net income from the trust, continuing to do so after the complaints herein were filed. It is also shown that the beneficiary received from the trust an income ranging from $50,000 to $101,000 per annum for the ten-year period of 1920 to 1930; and that he received a total of $150,304.77 from September 29, 1931, to February 29, 1936. All of said payments were made under the absolute discretionary power of said trustee.

Appellants make their claim to the surplus income, if any, of the trust under the terms of section 859 of the Civil Code, as amended by St.1935, p. 1459, which provides: "Where a trust is created to receive the rents and profits of real or personal property, and no valid direction for accumulation is given, the surplus of such rents and profits, beyond the sum that may be found necessary for the education and support of the person for whose benefit the trust is created, is liable to the claims of the creditors of such person, in the same manner as personal property which can not be reached by execution."

Respondents claim that section 859, supra, is operative only in the absence of a valid direction for accumulation of income and is therefore inapplicable here because the terms of the trust clearly contemplate an accumulation of surplus income and impliedly direct such accumulation, and that even though such direction was originally invalid in violation of section 724 of the Civil Code, its incorporation into a decree of partial distribution which has become final renders it valid as to all persons bound by that decree. In support of their claim, respondents maintain that this conflict between the decree of distribution and section 859 of the Civil Code was not before the court when it rendered its decision in Canfield v. Security First National Bank, 8 Cal.App.2d 277, 48 P.2d 133. This is not correct, as the will creating the trust was before that court as was also the decree of distribution by reference, which employed the identical language of the will. The opinion freely discusses the trust and its terms and, in upholding its validity as a spendthrift trust, sections 867 and 859 of the Civil Code are considered, as well as the fact that the corpus of the trust was originally made up of personal property, although it now includes real property in addition thereto. In that regard the opinion considers and discusses at length the applicability of the New York rule from the statutes of which state section 859 of the Civil Code is taken. Having considered in detail these various facts and circumstances, as well as other questions raised by the appeal from the judgment of dismissal, the appellate court held that Pearl S. Canfield was entitled to reach such surplus income from the trust which was in excess of the portion thereof needed for the maintenance of the beneficiary "measured by the ‘station in life’ rule"; said court holding by implication that there was no valid direction for accumulation stated in the terms of the trust. Respondents discuss questions of law which are not involved in the questions properly raised by this appeal in an apparent endeavor to convince this court that the decision rendered on the appeal from the judgment of dismissal (Canfield v. Security First National Bank, 8 Cal.App.2d 277, 48 P.2d 133) is unsound in its reasoning in all particulars. The only questions before that court were these, and these only: Was it error for the trial court to sustain the demurrers without leave to amend and thereafter enter its order dismissing said cause, and was the order sustaining the demurrers without leave to amend an erroneous order? In so far as these questions are involved and considered, said decision fixes the law of the case, which case is one of the causes before this court at this time.

In connection with their first point, appellants contend that the trial court disregarded the standards established by authority and reason for the determination of "station in life" of the beneficiary; that the allowance of $30,000 per year is unjustified and contrary to the law and the evidence; and that the court erred when it fixed such "station in life" as of the time of the commencement of the Canfield case rather than as of the date of the creation of the trust.

The courts have never in any case cited by any of the parties hereto attempted to establish a standard by which "station in life" might be measured, but have decided each case upon its own particular facts and circumstances. This so-called "station in life" rule has been built up by judicial decision rather than by statutory enactment. There is no such thing as "station in life" in existence in this state. No such provision is referred to in the trust created by the will of the testator with reference to the amounts to be paid to the beneficiary. The testator left to his only son by said trust the sum of $100 per month under any and all circumstances, but left it to the sole and exclusive discretion of the trustee, to be carried out in accordance with the expressed provisions recited in the trust, as to how much more, if anything, should be paid to his said son. This is a discretion that the court is not allowed to interfere with, and since there is no provision in the trust providing for approval by the court or by anyone else other than such trustee, any order of the trial court attempting to interfere with such discretion and to substitute its discretion for that of the trustee chosen by the testator is void. The court by the fiction of fixing a so-called "station in life" cannot rewrite the trust created by the will of the testator. In the many cases cited in the authorities wherein the so-called "station in life" rule has been set up, there is nothing recited in the facts which would show that a similar trust was there involved which left the amounts to be paid in excess of a certain amount to the sole and absolute discretion of the trustee.

The trial court by receiving evidence of friends and acquaintances of the beneficiary cannot build up any rule by which it can take from the trustee the discretion vested in it by the trustor. It necessarily follows that the order of the trial court fixing the amount which the trustee shall pay to the beneficiary, based upon anything other than the trustee’s own estimate thereof, is void. This is especially true when the trial court sets up a fixed amount as the proper sum to be paid in the coming years, as well as in the year in which the evidence was taken. The court could not tell with any degree of certainty what amount would be necessary for the support of the beneficiary in the years to come.

The main difference between the cases at bar and the facts stated in the cases cited in the decision of the appellate court in Canfield v. Security First National Bank, 8, Cal.App.2d 277, 48 P.2d 133, is this: The trust here shows upon its face a definite intent on the part of trustor to create a trust which would prevent his son from running up large debts, and which would not in any way encourage designing persons to extend excessive credit to the son for unnecessary things and in that way absorb possibly all of the income from the trust estate. The trustor’s purpose has been achieved in that the trustee has the discretionary right to fix the amount of the income from the trust to be paid to the beneficiary in excess of the sum of $100 per month. If, however, in the exercise of this discretion to expend the income there is any surplus over and above the sum which the trustee may decide is necessary for the maintenance and support of the beneficiary, such surplus income, if any, is liable to the claims of creditors of the beneficiary under the provisions of section 859 of the Civil Code, as amended, and therefore the decision in Canfield v. Security First National Bank, supra, that it was error to sustain the demurrers without leave to amend the complaint, is absolutely correct and was the only question that was before that court.

In Hamilton v. Drogo, 1926, 241 N.Y. 401, 150 N.E. 496, 497, in an opinion concurred in by all of the justices, including Mr. Justice Cardozo, now of the United States Supreme Court, the following appears: "In the present case no income may ever become due to the judgment debtor. We may not interfere with the discretion which the testatrix has vested in the trustee any more than her son may do so. Its judgment is final." However, at the time the decision in the cited case was rendered, section 684 of the New York Practice Act provided that a judgment creditor could reach 10 per cent. of the income from trust funds which were due and owing to the beneficiary over and above a certain fixed amount. We do not have a similar section in California, but this does not change the applicability of that portion of the opinion above quoted.

With respect to the second question presented by appellants, they maintain that the court erred in awarding them equitable liens on the surplus assets of the trust estate as of the date of the instant judgment, contending that such liens should have been allowed as of the date of the filing of their complaints herein. In this connection appellants Cato and Bank of America insist that all three liens should be deemed effective from the time that appellant Pearl S. Canfield filed her complaint on September 29, 1931, while the latter points out that by the filing of her "bill in equity," she acquired an equitable lien on such surplus assets as well as a priority over any other creditor who had not already filed such bill.

Respondents’ position in this regard is that a "creditor’s bill," although it ordinarily creates an equitable lien upon the debtor’s property, cannot extend to property or an interest in property which is not owned by or vested in the debtor at the time of service of process and does not reach interests later coming into existence; that an existing and enforceable right in the debtor being of the essence of a res to which the equitable lien of a creditor’s bill can attach, there could be no such lien in the present instance because the trust is strictly discretionary. We believe this is answered by the decision in Canfield v. Security First National Bank, 8 Cal.App.2d 277, 287, 48 P.2d 133, which holds that the beneficiary has an equitable interest in the trust estate and that pursuant to section 859 of the Civil Code, judgment creditors may reach the surplus income over and above the amount required for maintenance of beneficiary according to the "station in life" rule. Said decision also points out that because the trust is a discretionary trust, it does not deny to creditors the right to maintain an action to subject surplus income, if any, to their claims. Such decision is only a decision passing on the judgment that was entered because of the order sustaining the demurrers without leave to amend, and is res judicata only as to the question of whether the complaint stated a cause of action.

To return to appellants’ second contention, it is apparent that the court did err in awarding equitable liens as of the date of the judgment herein rather than as of the date of the filing of the respective equitable actions. Appellants’ contention is sustained by the decision in the case of Seymour v. McAvoy, 121 Cal. 438, 53 P. 946, 41 L.R.A. 544, in which a creditor having obtained a judgment on which execution issued and was returned unsatisfied, sought to reach the assets of a testamentary trust which vested in the trustee discretion as to payment of income to the beneficiary. At the trial a motion to bring in other judgment creditors was denied. Upon appeal it was held that, 121 Cal. 438, at page 441, 53 P. 946, 947: "A judgment creditor, by filing a bill in equity to subject equitable assets to the payment of his judgment, acquires an equitable lien on such assets and a priority over any other creditor who has not already filed such a bill. Other judgment creditors who have not filed such a bill are therefore not necessary parties to the action, and their presence is not necessary for the protection of the defendants. The court therefore did not err in refusing to bring in as parties other judgment creditors who had not themselves commenced any such suit."

In the more recent New York case of Spellman v. Sullivian, D.C. 1930, 43 F.2d 762 at page 763, which was based on a statute almost identical in its language to that of section 859 of our Civil Code, it was held: "By the commencement of his suit in equity, the judgment creditor acquires a lien upon the surplus income superior to the claims of general creditors of the beneficiary. Tolles v. Wood, 99 N.Y. 616, 1 N.E. 251. * * * A creditor’s bill is a suit to enforce an equitable ‘claim’ to property. From the moment that execution has been returned unsatisfied, the judgment creditor has a claim to the equitable assets of the judgment debtor. His claim is not merely one in personam against the debtor; he had that claim before judgment. He has a claim quasi in rem against surplus trust income and any other property not subject to execution at law, which claim he may assert and enforce by creditor’s bill."

In Jenkins Petroleum Process Co. v. Credit Alliance Corp., 1936, 10 Cir., 83 F.2d 532, 537, it was held: "One creditor may prosecute a creditor’s suit solely in his own behalf, and he acquires a lien as of the date of the filing of his bill superior to all liens subsequently acquired. [Seymour v. McAvoy, 121 Cal. 438, 53 P. 946, 41 L.R.A. 544; Spellman v. Sullivian (D.C.) 43 F.2d 762, 764; Freedman’s Savings & Trust Co. v. Earle, 110 U.S. 710, 716, 4 S.Ct. 226, 28 L.Ed. 301.] * * * In Freedman’s Savings & Trust Co. v. Earle, supra, the court said: ‘It is to be noted, therefore, that the proceeding is one instituted by the judgment creditor for his own interest alone, unless he elects to file the bill also for others in a like situation, with whom he chooses to make common cause; and as no specific lien arises by virtue of the judgment and execution alone, the right to obtain satisfaction out of the specific property sought to be subjected to sale for that purpose dates from the filing of the bill. "The creditor," says Chancellor Walworth, in Edmeston v. Lyde, 1 Paige (N.Y.) 637, 640, 19 Am.Dec. 454, "whose legal diligence has pursued the property into this court, is entitled to a preference as the reward of his vigilance." * * * As his lien begins with the filing of the bill, it is subject to all existing incumbrances, but is superior to all of subsequent date. As was said by this court in Day v. Washburn, 24 How. 352, 16 L.Ed. 712: "It is only when he has obtained a judgment and execution in seeking to subject the property of his debtor in the hands of third persons, or to reach property not accessible to an execution, that a legal preference is acquired which a court of chancery will enforce.""’

The trial court by its judgment of May 13, 1936, improperly limited to $30,000 the amount necessary for the support and maintenance of the beneficiary, without considering the fact that the amount to be paid rested in the sole and exclusive discretion of the trustee. By reason of the fact that theretofore all of the income from said trust had been fully expended by the trustee, or the trial court had at least so found, and such expenditures approved by the probate court, said trial court held that it was limited in making its order fixing the equitable liens of the appellants in these three cases to such surplus income received by trustee on account of the corpus of the trust estate on and after May 13, 1936, in excess of $30,000 per annum.

Pearl S. Canfield acquired an equitable lien as of September 29, 1931, the date when her action herein was filed, in the sum of $23,883.34, with interest, upon the surplus, if any, after the amounts fixed by the trustee in its discretion have been fully paid. In addition, said Pearl S. Canfield is entitled to an equitable lien upon the balance of such surplus income, if any, as of June 10, 1932, for the sum which accrued to her at the rate of $800 per month, with interest, during the period from September 29, 1931, to said June 10, 1932, on which latter date she filed her second action, the companion case herein No. S. C. 48. 77 P.2d 866.

Appellant Pauline C. Cato acquired an equitable lien upon such surplus (if any surplus there is after the said two liens of appellant Pearl S. Canfield have been fully paid) as of September 13, 1935, for the sum of $10,463.46 with interest, and appellant Bank of America acquired an equitable lien upon the balance of such surplus (if any remains after the aforesaid three liens are fully paid) as of September 19, 1935, for the sum of $46,611.41, with interest thereon. All of the above creditors’ claims are allowed pursuant to the terms of section 859 of the Civil Code, as amended, and therefore attach in the order and as of the date upon which each action in equity was filed.

Appellants next contend that the trustee became personally liable to them when it continued to pay income to the beneficiary after their equitable liens attached to the assets of the trust estate. It must be conceded that trustee, exercising its discretion under the terms of the trust, properly paid to beneficiary the total net income from said trust, and as result no surplus remained from which the equitable liens of appellants could have been paid. In support of their contention, appellants cite the case of Tolles v. Wood, 99 N.Y. 616, 1 N.E. 251. In that case it was held that an accumulated surplus in the hands of trustees at the time of the judgment which had accrued during the pendency of the action was applicable to the payment of and sufficient to discharge the creditor’s judgment. Apparently, the liability of the trustee was predicated upon the fact that this surplus was inalienable to the beneficiary and was not needed for his support. We believe the cited case is not in point, because in the cases before us no surplus accumulated at any time. Appellants also cite section 155 of the Restatement of the Law of Trusts at page 383, as authority for their stand on this point. So far as the restatement is concerned, it is effective only in so far as the cases therein cited may be of assistance; as none is given as authority for the cited section, no legal significance attaches thereto.

Under the circumstances here shown, the trustee did not become personally liable to appellants.

The judgment is affirmed, except that portion thereof which fixes the equitable liens of appellants as of the date of said judgment; and except that portion of said judgment which limits the amount that the trustee may pay to the beneficiary. All of the income theretofore received by trustee from the corpus of the trust had been expended by it and such expenditures approved by the probate court; therefore, the trial court was limited in making its order fixing the equitable liens of appellants in these three cases to such surplus income received by said trustee in excess of the amounts expended by the trustee under the provisions of the trust on and after the date of each of said judgments. Said judgment is modified as follows: Appellant Pearl S. Canfield acquired an equitable lien as of September 29, 1931, in the sum of $23,883.34, with interest, upon such surplus income from the trust estate, if any; in addition said Pearl S. Canfield is entitled to an equitable lien on any additional surplus income of said trust, if any, as of June 10, 1932, for the sum which accrued to her from September 29, 1931, to June 10, 1932, the date upon which she filed her second action, the companion case herein No. S. C. 48, at the rate of $800 per month, with interest; appellant Pauline C. Cato acquired an equitable lien upon the balance of such surplus (if any remains over and above the two said liens of appellant Pearl S. Canfield), as of September 13, 1935, for the sum of $10,463.46, with interest; appellant Bank of America acquired an equitable lien upon the balance of such surplus (if any remains after the aforesaid three liens have been fully paid), as of September 19, 1935, for the sum of $46,611.41, with interest thereon.

The trial court is hereby directed to enter judgment in conformity with these modifications, and as so modified, the judgment is affirmed.

I concur: DORAN, J.

WHITE, Justice (concurring).

I concur in the foregoing in its entirety, and for all of the reasons therein stated. In most of the states of the Union, including California, the right to create a spendthrift trust, within certain limitations, has been authorized by legislative enactment and upheld by judicial decision, manifestly upon the theory that a donor has the right to give his property to another upon any conditions he sees fit to impose, and that, inasmuch as such a gift takes nothing from the prior or subsequent creditors of the beneficiary to which they previously had the right to look for payment, they cannot complain that the donor has provided that the property or income shall go or be paid personally to the beneficiary and shall not be subject to the claims of creditors. McColgan v. Walter Magee, Inc., 172 Cal. 182, 155 P. 995, Ann.Cas.1917D, 1050. In the instant case, as in most if not all cases of spendthrift trusts, the father knew the infirmities of his son, and in the creation of this trust manifested parental affection as well as sound judgment. If the right of the trustor to confer discretion, either plenary or partial, upon the trustees could be interfered with through courts substituting their judgment for that of such trustees, the very objects of the spendthrift trust could be defeated by designing creditors or by collusion between such creditors and the beneficiary. From a practical standpoint, as well as for reasons of sound public policy, such trusts are not only legal, but extremely wholesome. They serve to permit a testator in many cases to so provide for a wife, son, or daughter, when in the absence of such trust and the protective elements thereof, the beneficiary might become a public charge. If a decision arrived at by a trustee invested with absolute discretion as in the instant case, may be modified or changed by a court according to the latter’s conception of the beneficiary’s "station in life," then no trustee, however broad might be the discretion conferred upon him, could act without recourse to and application for the court’s conception of the particular beneficiary’s "station in life." By the adoption of section 859 of the Civil Code, as amended, the Legislature has legalized trusts of the kind with which we are here concerned, and courts are without authority, under the guise of judicial interpretation, to nullify the legislative authorization of such trusts.


Summaries of

Canfield v. Security First Nat. Bank of Los Angeles

District Court of Appeals of California, Second District, First Division
Mar 28, 1938
77 P.2d 857 (Cal. Ct. App. 1938)
Case details for

Canfield v. Security First Nat. Bank of Los Angeles

Case Details

Full title:CANFIELD v. SECURITY FIRST NAT. BANK OF LOS ANGELES et al. (McMILLEN…

Court:District Court of Appeals of California, Second District, First Division

Date published: Mar 28, 1938

Citations

77 P.2d 857 (Cal. Ct. App. 1938)