The case of Wetmore v. Truslow, 51 N. Y. 338, does not touch the present case. It was not a suit to reach surplus income, but the whole, on the ground that the beneficiary was also a trustee.
My conclusion is, that as to the income of the real estate, the surplus income, beyond what is necessary for the suitable support of the debtor and those dependent upon him, in the manner in which they have been accustomed to live, is clearly applicable, under § 57, to the claims of his creditors. That as to the surplus income of the personal property, it is likewise so applicable. If it is alienable by the debtor, the cases concede that it can be reached. If inalienable, it is so only by virtue of § 63; and if § 63 applies to trusts of personalty, then § 57 also applies and subjects the surplus income to the claims of creditors.
The further point is made, that conceding the surplus income to be so applicable, no action can be maintained for its application until after it has accumulated in the hands of the trustees.
I find no authority for this proposition, except a single Special Term decision, Hann v. Van Voorhis, 15 Abb. Pr. (N. S.) 79, nor any reasonable ground upon which it can be sustained. It is only where the surplus is sought to be reached, as property of the debtor, or as a debt due from a third person, by supplementary proceedings, that such doctrine has been held, and as has already been shown by the cases cited, those very cases concede that a different rule would prevail in a suit like the present one. In Sillick v. Mason, 2 Barb. Ch. 79, the income of the beneficiary from the trust fund was $2,500 per annum. The order was that $2,000 per annum was sufficient for his support. That $1,000 be allowed to him out of a half year's income due when the bill was filed, and $1,000 out of each half year's income thereafter to accrue. The surplus was to be retained to abide the final decree, and was, of course, applicable to the claim of the creditor. In Clute v. Bool, 8 Paige, 83, the Chancellor held that such an income was inalienable, and said, for that reason that it could not be reached by a creditor before it was due, and he intimates that the intent of the 57th section was, that such surplus as might accrue from time to time, should be liable to the claims of creditors, after it was ascertained that it was not wanted and had not been applied to his support as it became due, whether it remained in the hands of the trustees or had been received by the cestui que trust. But no such point was decided in the case. The income was only $400, and the creditor claimed the whole of it, and there was no allegation that it was more than sufficient for the debtor's support. It is manifest from the statement of the proposition, that if the views of the Chancellor were correct, the provision of the 57th section would afford no substantial protection to creditors and would simply announce a principle without affording any means of giving it practical operation. But such a construction is not admissible. The section does not say that the surplus not spent by the cestui que trust shall be liable for his debts, but the surplus beyond the sum that may be necessary for his support and education. It is clear that when a case arose, the Chancellor himself did not adhere to his dictum in Clute v. Bool, for in Sillick v. Mason, he fixed the sum necessary for support and directed the retention of the surplus of future instalments of income. This was recognized by V.-C. Sandford and by Judge Woodruff as the proper course in the cases cited, and by Bosworth, J., in Genet v. Foster, 18 How. Pr. 50, also in Moulton v. De Macarty, 6 Rob. 533, and there is no case, except Hann v. Van Voorhis, holding that the provisions of § 57 can be carried into effect in any other manner. The cases which require that the income should have been realized are all cases of supplementary proceedings. Hann v. Van Voorhis was a motion for an injunction at Special Term, and was decided on the strength of Campbell v. Foster, the judge apparently considering that that case decided that no part of the income could be reached by a judgment creditor unless it had accumulated beyond the wants of the cestui que trust, and was in surplus by accumulation arising from the failure of the latter to spend or appropriate, or from some other cause. For the reasons already stated, I think Campbell v. Foster does not so decide, and that such would not be a reasonable interpretation of the statute.
Ruger, Ch. J., in
99 New York, 616. - 1885.
No serious dispute arose on the argument over the main questions of law involved in the controversy, and the following propositions may, therefore, be assumed as established for all of the purposes of this discussion:
I. When a trust has been created by one person for the benefit of another, which provides for the payment of the income of the trust fund to the beneficiary, a judgment creditor of such beneficiary is entitled to maintain an action in equity to reach and recover the surplus income beyond what is necessary for the suitable support and maintenance of the cestui que trust, and those dependent upon him. Code of Civil Pro., §§ 1871, 1879; Williams v. Thorn, 70 N. Y. 270; Graff v. Bonnett, 31 Id. 9; Craig . Hone, 2 Edw. Ch. 570.
2. This rule applies as well when the income is derivable from a trust of personal property as that from real estate. Hallett v. Thompson 5 Paige, 583; Williams v. Thorn, supra; § 57, art. 2, tit. 2, chap. 1, Part 2, R. S., p. 2182.
3. The disposition of such an income cannot be anticipated by the cestui que trust or encumbered by any contract entered into by him providing for its pledge, transfer or alienation previous to its accumulation. § 63 R. S., p. 2182; Graff v. Bonnett, supra; Williams v. Thorn, supra; Scott v. Nevius, 6 Duer, 672.