That is the only point decided in Campbell v. Foster. The action was brought by a receiver of the property of the judgment debtor appointed in supplementary proceedings. The complaint set out a trust of personal property, created by the father of the judgment debtor, to pay the income to her, that it was more than sufficient for her support, and prayed that out of the surplus income derived, and to be derived from the trust estate, there be paid to the plaintiff, as receiver, a sum sufficient to satisfy the judgment. A demurrer to this complaint was sustained. Judge Wright rests his opinion on two grounds: First. That under §§ 38 and 39, 2 R. S. 174, the income is absolutely exempt; but, second, if he is wrong in that, the interest of the cestui que trust is inalienable under § 63, and cannot pass as property of the judgment debtor to a receiver. In this latter holding he only followed the decision of this court in Graff v. Bonnett, 31 N. Y. 9, where it was held in a similar action that it would not pass to a receiver until it had actually become due and payable, and perhaps not until it has been in some way determined that there will be a surplus. The same point was decided in Scott v. Nevius, 6 Duer, 672, but in both of those cases the right of the creditor in a proper action to have the amount necessary for the support of the debtor ascertained, and to compel the application of the surplus, is fully recognized.
1 See Code Civ. Proc., § 1879. - Ed. 2 Sec §83, N. Y. R. P. L. - Ed.
Woodruff, J., in his opinion in Scott v. Nevius, holding that an interest of the beneficiary in such a trust cannot pass to a receiver in supplementary proceeding, says: "If there was already an accumulation in the hands of the executors, it might doubtless be reached by an order in this proceeding or by a proceeding under § 294. But it has been held, that it cannot be anticipated. But this does not import that on a proper bill, filed, such surplus may not, by proper directions, be secured to the creditor. On the contrary, the court may order a reference, to ascertain and fix the amount necessary for his support, and direct the executor to pay over the surplus for the satisfaction of the judgment."
Locke v. Mabbett, 2 Keyes, 457, and s. c. 3 Abb. Ct. of App. Dec. 68, also decides that the surplus income cannot be reached by supplementary proceedings, but expressly leaves open the question whether it can be reached by action in equity. The learned judge in Campbell v. Foster, while holding that § 63, which renders the income inalienable, applies to trusts of personal estate, fails to advert to the fact that, if § 63 applies, § 57 must also, by the same reasoning, be applicable, and that that section expressly enacts that the surplus income shall be liable to the claims of creditors 1
The argument of Judge Wright, that §§ 38 and 39 absolutely exempt the whole income from the claims of creditors, has been answered in many cases. It is obvious that the construction which he gives them would make them practically repeal § 57. Such a construction is by no means necessary. By § 38 jurisdiction is conferred upon the Court of Chancery in creditors' suits, to compel the discovery of any property belonging to the judgment debtor or held in trust for him, and to prevent the delivery or payment thereof to him. If the section had ended there, it is obvious that a literal interpretation of it would enable a creditor to stop all the income of a beneficiary under one of these trusts.
The exception is therefore added: "Except when such trust has been created by, or the fund so held in trust has proceeded from, some person other than the defendant himself." This does not necessarily conflict with the provision subjecting surplus incomes to the claims of creditors. Section 39 authorizes the Court of Chancery to decree satisfaction of the judgment out of any personal property held in trust for the debtor, "with the exception aforesaid." This exception was necessary. In its absence it might be held, that in case of a trust of personal property, satisfaction might be decreed out of the principal. But it is not inconsistent with the special provision, in case there is a surplus of income.
1 See § 78, N. Y. R. P. L. - Ed.
That these sections (38 and 39) do not present any obstacle to reaching surplus income under § 57, has been held in all the cases, except Campbell v. Foster, ever since the adoption of the Revised Statutes. In Craig v. Hone, 2 Edw. Ch. 569, 70, V.-C. McCoun says, the object of § 38 was to prevent express trusts proceeding solely from the bounty of some third person, from being overthrown by these creditors' bills. It was enough to say that all beyond necessary support should be liable to the creditors of the cestui que trust. In Hallett v. Thompson, 5 Paige, 583, the Chancellor says, that § 38 was intended to protect the beneficial interest of the cestui que trust only to the extent of a fair support out of the trust property. In Rider v. Mason, V. C. Sandford says, that §§ 38 and 39 are to be taken in connection with the statute of uses and trusts, and thus construed, limited to the portion of the trust fund necessary for the support of the debtor and his family. In Sillick v. Mason, 2 B. Ch. 79, these sections were not considered an obstacle to a decree in favor of the creditor for satisfaction out of the surplus income arising from real and personal property. In Scott v. Nevius, 6 Duer, 672, Judge Woodruff says, that § 38 forms no impediment to such a decree. In Graff 'v. Bonnett, 31 N. Y. 9, the right of creditors to reach the surplus is expressly recognized, and Hogeboom, J., in the prevailing opinion, construing §§ 38 and 39, holds that they do not conflict with that right. In Campbell v. Foster, the report of the case states that six judges affirm on the ground that the fund cannot be reached. But in view of the opinion in the case which discards as immaterial the question whether the surplus could be reached by a proper suit, and the weight of authority in support of the proposition that it can, I think the report must be understood as meaning that the six judges held that the fund could not be reached in the proceeding then before the court. Davies, J., who was one of the judges, concurring in the decision in Campbell v. Foster, says, in the case of Locke V. Mabbett, 2 Keyes, decided at the same time with Campbell v. Foster, that it is doubtful whether under §§ 38 and 39 such a fund can be reached, but he does not intimate that it had been so decided.