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Shelley v. Shelley, 354 P.2d
282, 223 Or. 328 (1960)
Author: Anonymous
Facts: Trustee, Bank, and
the trust was created by Hugh Shelley. The trust provided that all the residue
of his estate was to held in trust for his third wife, but if she predeceased,
then his surviving son, provided that when he reached 30 distribute all or any
of the remainder if such are approved by either of settlor’s brothers in law.
If his son dies and leaves issue, then trust shall continue grandchildren until
the youngest reaches 21, then the trust terminates and is distributed equally.
Each beneficiary is restrained from alienating or assigning any interest and
cannot subject his liabilities, obligations, or judgments or claims by
creditors. Beneficiary Grant was married twice and had two children with each.
His 1st wife had an order of alimony. The second had a order for
alimony and support. After his marriage to present wife he disappeared. The
trustee bank invested the trust.
Issue: Whether a
spendthrift provision in trust can be given an effective bar to claims of
beneficiary’s children for support and divorced wife’s alimony?
Holding: Beneficiary’s
interest in income of trust, under spendthrift provisions, is subject to claims
of his divorced wife for alimony and support for his children to the extent
deemed reasonable under the circumstances.
Procedure: Circuit Ct
rendered judgment enjoining the trustee from disbursing assets and a garnishment
was brought. Df creditors obtained judgment against settlor ; Supreme Ct
affirmed decree and remanded case for modification.
Rule: A spendthrift
provision of a trust is not effective against the claims of the beneficiary’s
former wife for alimony and child support.
Rationale: The testator’s
privilege to dispose of property at his pleasure is not without limitation or
restriction. A court may impose on the privilege such restrictions as are
consistent with its view of sound public policy UNLESS the legislature has
expressed a contrary view. There is no Oregon statute which would bar the claim
before the court. A spendthrift provision is subject to claims for alimony and
support. Once the validity of spendthrift trust has been est. then the validity
of the restraint against the claims for support and alimony is more easily
reached.
Public policy requires that
the trust be subject to claims for support b/c parents have an obligation to pay
for their children. If the parent fails, society pays for their support.
Likewise, the duty to support a former wife should override the restriction
called for by a spendthrift provision. The duty of a married man to support and
protect his wife and children is inherent in human nature. It is not ordinary
indebtedness, it is a responsibility far superior to paying one’s debts. NO
part of a man’s property or income should be exempt from meeting this liability.
However, G.Shelley is not a
beneficiary of the income of the trust, and his right to receive any portion of
the corpus is at the discretion of the trustee. If he fails to support the
children out of assets other than income of the trust, his children have no
claim against the trust. Until the trustee exercises his discretion, G.S has
not realized interest and Pl cannot reach the corpus.
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