2020 Tennessee Code
Title 26 - Execution
Chapter 4 - Bill to Subject Property
§ 26-4-101. Grounds for Complaint on Unsatisfied Execution — Discovery
The creditor whose execution has been returned unsatisfied, in whole or in part, may proceed in the court granting the judgment, or may file a complaint in a court of general jurisdiction against the defendant in the execution and any other person, to compel the discovery of any property, including stocks, choses in action or money due such defendant, or the defendant's interest in property held in a trust for the defendant, except when the trust is exempt from the claims of the defendant's creditors under §§35-15-501 —35-15-509 of the Tennessee Uniform Trust Code.
Code 1858, § 4283 (deriv. Acts 1832, ch. 11, § 1); Shan., § 6092; Code 1932, § 10353; Acts 1943, ch. 108, § 1; mod. C. Supp. 1950, § 10353; T.C.A. (orig. ed.), § 26-601; Acts 1988, ch. 854, § 2; 1989, ch. 364, § 1; 1992, ch. 951, §§ 2, 3; 1993, ch. 259, §§ 1-3; 2002, ch. 735, § 1; 2004, ch. 537, § 96; 2013, ch. 390, § 25.
Compiler's Notes. Acts 2013, ch. 390, § 55 provided that: (b) Except as otherwise provided in the act, on July 1, 2013:
- The act applies to all trusts created before, on, or after July 1, 2013;
- The act applies to all judicial proceedings concerning trusts commenced on or after July 1, 2013;
- The act applies to judicial proceedings concerning trusts commenced before July 1, 2013, unless the court finds that application of a particular provision of the act would substantially interfere with the effective conduct of the judicial proceedings or prejudice the rights of the parties, in which case the particular provision of the act does not apply and the superseded law applies;
- Any rule of construction or presumption provided in the act applies to trust instruments executed before July 1, 2013, unless there is a clear and express indication of a contrary intent in the terms of the trust; and
- An act done before July 1, 2013, is not affected by the act.
Textbooks. Gibson's Suits in Chancery (7th ed., Inman), §§ 33, 196, 353, 443, 456-458, 461, 578.
Pritchard on Wills and Administration of Estates (4th ed., Phillips and Robinson), §§ 165, 1017.
Tennessee Forms (Robinson, Ramsey and Harwell), No. 4-618.
Tennessee Jurisprudence, 3 Tenn. Juris., Attachment and Garnishment, §§ 71, 148; 12 Tenn. Juris., Executions, § 56; 13 Tenn. Juris., Fraudulent and Voluntary Conveyances, § 41; 16 Tenn. Juris., Judgments and Decrees, § 74; 24 Tenn. Juris., Trusts and Trustees, § 35; 25 Tenn. Juris., Wills, § 132.
Law Reviews.
Creditors' Rights in War Savings Bonds, 18 Tenn. L. Rev. 269.
Distinctive Features of the Tennessee Law of Trusts (Thomas H. Malone), 16 Tenn. L. Rev. 33.
Enforcement of Judgments in Tennessee, 22 Tenn. L. Rev. 873.
Enforcing Money Judgments in Tennessee (Lonnie C. Rich), 4 Mem. St. U.L. Rev. 65.
Judicial Reform at the Lowest Level: A Model Statute for Small Claims Courts, Part III, 28 Vand. L. Rev. 747.
Nontax Aspects of Estate Planning (Ronald Lee Gilman), 2 Mem. St. U.L. Rev. 41.
Preferences, Priorities, and Powers of the State in the Collection of Delinquent Revenue: Tennessee's Tax Enforcement Procedures Act (Donald J. Serkin), 8 Mem. St. U.L. Rev. 707.
Real Property — Direct Disabling Restraints on Alienation Annexed to Legal Life Estates, 41 Tenn. L. Rev. 364.
Selection and Removal of Fiduciaries (Robert L. McMurray), 26 No. 3, Tenn. B.J. 22 (1990).
Some Whys and Wherefores of Will-Drafting—Revised (Robert L. McMurray), 15-2 Tenn. B.J. 2.
Spendthrift Trusts in Tennessee, 35 Tenn. L. Rev. 319.
Survey of Tennessee Property Law, V. Trusts (Beverly A. Rowlett), 48 Tenn. L. Rev. 95.
The Collection of Debts from Insolvent and Fully-Mortgaged Debtors (John A. Walker, Jr.), 43 Tenn. L. Rev. 399.
The New Bankruptcy Code, Part II: The Interests of Secured Creditors Under the New Bankruptcy Code (Howard B. Pickard), 10 Mem. St. U.L. Rev. 215.
The Tennessee Court System — Chancery Court (Frederic S. Le Clercq), 8 Mem. St. U.L. Rev. 281.
The Tennessee Recording System (Toxey H. Sewell), 50 Tenn. L. Rev. 1 (1982).
Trusts — Duration and Indestructibility (James Kenneth Porter), 24 Tenn. L. Rev. 1021.
1. Constitutionality. 2. —Imprisonment for Failure to Answer or Deliver Property. 3. —Retrospective Provisions. 4. Purpose of Enacting Statute. 5. Construction and Interpretation. 6. —Complaint Alleging New Causes of Action. 7. —Corporations. 8. —“Discovery of Any Property” — Meaning. 9. —Not Exemption Statute. 10. —Nulla Bona Return in Another State. 11. —“Return Unsatisfied” — Example. 12. —Stocks and Choses in Action. 13. Construction with Other Acts. 14. —Bankruptcy. 15. —Bill in Chancery. 16. Prerequisites to Chancery Jurisdiction. 17. —Generally. 18. —Issue of Execution and Return Nulla Bona. 19. —Return Nulla Bona. 20. Property Subject to Subjection. 21. —Generally. 22. —Nonresident Debtor of Resident Judgment Debtor as Party. 23. —Tracing Assets — Example. 24. —Money in Custody of Police. 25. —Funds in Court. 26. —Clerk's Fees in Hands of Successor. 27. —Cost of Commissioner in Partition Suit. 28. —Federal Postal Savings. 29. Trust Assets. 30. —Generally. 31. —Unregistered Decree Creating Trust. 32. —Vested Interest in Beneficiary. 33. —Vesting — Intent of Testator. 34. —Active Trusts. 35. —Grantor as Beneficiary. 36. Contributions by Beneficiary. 37. Procedure and Practice. 38. —Parties. 39. —Answer. 40. Nulla Bona Return as Evidence.
Amendment of 1943 to statute permitting judgment creditor to bring suit for discovery of property except property held in trust under trust declared by will duly recorded or deed duly registered which amendment provides the property held under spendthrift trust shall be subject to claims of estate in all cases where state is judgment creditor, is invalid insofar as it is retrospective in character as violating due process clause and as impairing obligation of contracts. State v. Caldwell, 181 Tenn. 74, 178 S.W.2d 624, 1944 Tenn. LEXIS 346, 151 A.L.R. 1410 (1944).
Sections 26-4-101, 26-4-102 do not authorize imprisonment for debt, because such imprisonment for defendant's willful and contemptuous disobedience of the lawful orders of the court in refusing to answer, or in refusing to deliver up the property disclosed by his answer, is not imprisonment for debt. Cresswell v. Smith, 76 Tenn. 688, 1881 Tenn. LEXIS 65 (1881); Caughron v. Stinespring, 132 Tenn. 636, 179 S.W. 152, 1915 Tenn. LEXIS 58, L.R.A. (n.s.) 1916C403 (1915).
The 1943 amendment is invalid insofar as it is retrospective in character, as violating the due process provisions of the Constitution and the provisions of U.S. Const., art. 1, § 10 prohibiting the enactment of statutes impairing the obligations of contracts. State v. Caldwell, 181 Tenn. 74, 178 S.W.2d 624, 1944 Tenn. LEXIS 346, 151 A.L.R. 1410 (1944).
The beneficiary of a spendthrift trust who acquired title and interest in such property prior to the 1943 amendment took a vested estate under a rule of property which was beyond the reach of the legislature, and such trust property could not be subjected to the claims of the state under the provisions of the amendment. State v. Caldwell, 181 Tenn. 74, 178 S.W.2d 624, 1944 Tenn. LEXIS 346, 151 A.L.R. 1410 (1944).
In consequence of the decision in Erwin v. Oldham, 14 Tenn. 185, 1834 Tenn. LEXIS 61 (1834), that chancery had no inherent jurisdiction, without a statute, in the absence of fraud or trust, to aid a judgment creditor to reach the debtor's stocks, credits, and rights of action, ch. 4 of this title was enacted. Ewing v. Cantrell, 19 Tenn. 364, 1838 Tenn. LEXIS 64 (1838); Graham v. Merrill, 45 Tenn. 622, 1868 Tenn. LEXIS 55 (1868); Cresswell v. Smith, 76 Tenn. 688, 1881 Tenn. LEXIS 65 (1881).
The chancery court has jurisdiction, upon a bill filed by a complainant whose execution has been returned unsatisfied, to compel a judgment debtor to discover any specific property and to compel him to disclose where the property is, and, by process of attachment for contempt, to compel him to deliver up the property for the satisfaction of the complainant's judgment, and the bill may be filed against the debtor alone. Cresswell v. Smith, 76 Tenn. 688, 1881 Tenn. LEXIS 65 (1881); Webb v. Jones, 81 Tenn. 200, 1884 Tenn. LEXIS 24 (1884).
This section did not apply in the case of a supplemental complaint filed by a plaintiff asserting new causes of action against defendants other than those against whom he had earlier obtained a final judgment. Williams v. Sugar Cove Ltd. Pshp., 955 S.W.2d 75, 1997 Tenn. App. LEXIS 301 (Tenn. Ct. App. 1997), appeal denied, 1997 Tenn. LEXIS 514 (Tenn. Oct. 27, 1997).
On grounds of public policy, a municipality not being subject to respond as garnishee, the phrase “any other corporation” was limited to private corporations. Parsons v. McGavock, 2 Cooper's Tenn. Ch. 581 (1875). (See however §26-2-221, since enacted.)
“Any property,” includes everything that the term implies, and is not limited by the later phrase “due to such defendant or held in trust for him.” Cresswell v. Smith, 76 Tenn. 688, 1881 Tenn. LEXIS 65 (1881).
This section must be construed as taking from the chancery courts all jurisdiction to compel discovery by a debtor of his property not leviable at law in the cases therein excepted from subjection to his debts, but it does not affect the power to compel a discovery in the other cases in the section. Jourolmon v. Massengill, 86 Tenn. 81, 5 S.W. 719, 1887 Tenn. LEXIS 27 (1887); Porter v. Lee, 88 Tenn. 782, 14 S.W. 218, 1890 Tenn. LEXIS 21 (1890); McKeldin v. Gouldy, 91 Tenn. 677, 20 S.W. 231, 1892 Tenn. LEXIS 35 (1892); Tramell v. Tramell, 162 Tenn. 1, 32 S.W.2d 1025, 1930 Tenn. LEXIS 59 (1930), modified and rehearing denied, 162 Tenn. 1, 35 S.W.2d 574 (1931).
This section is not an exemption statute. State v. Caldwell, 181 Tenn. 74, 178 S.W.2d 624, 1944 Tenn. LEXIS 346, 151 A.L.R. 1410 (1944).
Statute permitting creditor, whose execution has been returned unsatisfied, to file bill to compel discovery of property including property held in trust for debtor except when trust is declared by will duly recorded, or a deed duly registered, is not an exemption statute. State v. Caldwell, 181 Tenn. 74, 178 S.W.2d 624, 1944 Tenn. LEXIS 346, 151 A.L.R. 1410 (1944).
This section is a rule of property and not an exemption statute. Howard v. United States, 566 S.W.2d 521, 1978 Tenn. LEXIS 553 (Tenn. 1978).
Such does not suffice where issued in another state on a judgment rendered there. Broughton v. Slusher, 2 Tenn. Ch. App. 305 (1902).
An execution with a return of no personal property and a levy upon an equity not subject to such levy is an execution “returned unsatisfied,” within the provisions of this section, and justifies the filing of a bill thereunder. House v. Swanson, 54 Tenn. 32, 1871 Tenn. LEXIS 412 (1871).
Under this section stocks in corporations, choses in action and money due or property in which it may be invested, may be reached by a judgment creditor after nulla bona return. Chalfant, Cox & Co. v. Grant, 71 Tenn. 118, 1879 Tenn. LEXIS 44 (1879). Consult Miller v. Lancaster, 45 Tenn. 514, 1868 Tenn. LEXIS 41 (1868).
The lien for federal taxation covers “all property and rights to property” (26 U.S.C. § 6321) and does not exempt the income of beneficiaries under spendthrift trusts. Howard v. United States, 566 S.W.2d 521, 1978 Tenn. LEXIS 553 (Tenn. 1978).
Where employee gave six weeks' notice of his resignation and was adjudicated a bankrupt three weeks later, sum credited to him in employer's retirement plan did not pass to bankrupt's estate and was not a mere “spendthrift trust” available to creditors under Tennessee law. Tennessee Valley Authority v. Kinzer, 142 F.2d 833, 1944 U.S. App. LEXIS 3523 (6th Cir. Tenn. 1944).
Even though trust was not established by recorded will or registered deed, pension plan was treated as a spendthrift trust excluded from debtor's estate in bankruptcy where the plan was not a self-settled trust created by the debtor but was funded exclusively by contributions from the debtor's employer, the debtor had no right to withdraw funds from the trust other than by meeting the eligibility requirements of one of the four benefit plans enumerated in the plan, the debtor had no control over the corpus of the trust, and the plan contained the requisite anti-alienation and anti-assignment provisions. In re Stansberry, 101 B.R. 508, 1989 Bankr. LEXIS 948 (Bankr. E.D. Tenn. 1989), overruled, In re Leamon, 121 B.R. 974, 1990 Bankr. LEXIS 2611 (Bankr. E.D. Tenn. 1990), overruled on other grounds, In re Leamon, 121 B.R. 974, 1990 Bankr. LEXIS 2611 (Bankr. E.D. Tenn. 1990).
Debtor's motion for summary judgment was granted, because the bankruptcy trustee's assertion that the distribution that the debtor received in a spendthrift trust pursuant to his mother's will was property of the bankruptcy estate was in error, because the debtor had no immediate right to payment of any portion of the trust corpus; therefore, the distribution was not the property of the bankruptcy estate under 11 U.S.C. § 541 and not subject to turnover pursuant to 11 U.S.C. § 542. Mostoller v. Wachter (In re Wachter), 314 B.R. 365, 2004 Bankr. LEXIS 1223 (Bankr. E.D. Tenn. 2004).
This act should be read in connection with statutes relating to bills in chancery. Edwards v. Hawks, 189 Tenn. 17, 222 S.W.2d 28, 1949 Tenn. LEXIS 396 (1949).
Where no discovery is sought or needed, a bill by a judgment creditor, with execution returned nulla bona, will not lie in chancery to reach an asset or debt which was leviable at law, where no obstacle or impediment was in the way of the enforcement of an execution by garnishment, and there was no lien, fraud, trust, nor equitable interest in the property. Bryan v. Zarecor, 112 Tenn. 503, 81 S.W. 1252, 1903 Tenn. LEXIS 118 (1904); Jennings Neff & Co. v. Crystal Ice Co., 128 Tenn. 231, 159 S.W. 1088, 1913 Tenn. LEXIS 43, 47 L.R.A. (n.s.) 1058 (1913).
Trustee of bankrupt to whom homestead had never been assigned was entitled to file a bill in chancery for an assignment of homestead rather than by filing bill for discovery of assets, if a bill to compel discovery of homestead was not necessary. Edwards v. Hawks, 189 Tenn. 17, 222 S.W.2d 28, 1949 Tenn. LEXIS 396 (1949).
It is not necessary to the maintenance of a creditor's suit to establish a lien on the debtor's interest in funds paid into court that it should be made to appear that an execution had been issued and returned “nulla bona,” if it is shown that the judgment debtor is really insolvent and has no property subject to execution, and if the question is not raised by motion to dismiss, demurrer, or plea in abatement. Scott County Nat'l Bank v. Robinson, 143 Tenn. 356, 226 S.W. 218, 1920 Tenn. LEXIS 24 (1920).
According to the plain language of T.C.A. §26-1-104, case law, and contents of a creditor's petition, the petition established a lien sufficient to sustain the ensuing proceedings, as there was no priority dispute with competing creditors, and nor did any interests of bona fide purchasers or encumbrancers exist to mandate greater scrutiny for determining the lien's effectiveness as against them; T.C.A. §26-4-101 conferred subject matter jurisdiction over the action upon the trial court which correctly denied the debtor's motion to dismiss the suit on this basis. Atkins v. Marks, 288 S.W.3d 356, 2008 Tenn. App. LEXIS 349 (Tenn. Ct. App. June 11, 2008), rehearing denied, 288 S.W.3d 356, 2008 Tenn. App. LEXIS 449 (Tenn. Ct. App. July 15, 2008).
Chancery will not inquire whether the execution was prematurely or improperly returned “nulla bona,” in a suit to reach and subject the debtor's equitable property. Esselman v. Wells & Ewing, 27 Tenn. 482, 1847 Tenn. LEXIS 110 (1847); Stark v. Cheathem, 2 Cooper's Tenn. Ch. 300 (1875); Turley v. Taylor, 71 Tenn. 171, 1879 Tenn. LEXIS 53 (1879).
Stocks, choses in action, and money due, and the property in which the money has been invested, may be reached in equity by judgment creditors. Chalfant, Cox & Co. v. Grant, 71 Tenn. 118, 1879 Tenn. LEXIS 44 (1879).
A fund due to a corporation which sold all of its property to another corporation, which fund has been thus assigned to the purchaser, was not subject to levy or attachment in an action at law against the seller, and hence a bill in equity against the seller and purchaser could be maintained by a judgment creditor of the seller to reach such fund. Jennings Neff & Co. v. Crystal Ice Co., 128 Tenn. 231, 159 S.W. 1088, 1913 Tenn. LEXIS 43, 47 L.R.A. (n.s.) 1058 (1913).
The rule in equity is that when a bill is filed to reach specific property involving inherent or statutory jurisdiction of equity, a lien is fixed upon the property upon filing of the bill without attachment. Cannon Mills, Inc. v. Spivey, 208 Tenn. 419, 346 S.W.2d 266, 1961 Tenn. LEXIS 301 (1961).
Upon a return of nulla bona against a resident judgment debtor, a bill will lie against him and his nonresident debtor, with an original or auxiliary attachment against the latter, who may be made a party by publication, and without personal service; and upon his default of appearance, judgment may go against him, and the attached property may be subjected to the payment of his indebtedness, and applied to the payment of complainant's judgment. McCrae v. Bank of West Tennessee, 46 Tenn. 474, 1869 Tenn. LEXIS 82 (1869).
The creditors of a firm have the right to follow the firm assets into land bought with the purchase money of other land in which the assets were first invested, and the partner making the investment cannot claim a homestead exemption in such land as against the firm creditors. Chalfant, Cox & Co. v. Grant, 71 Tenn. 118, 1879 Tenn. LEXIS 44 (1879).
Money taken by police officers from person of one arrested by them on criminal charge wholly disconnected with such money cannot be subjected to satisfaction of judgment against prisoner by bill of discovery. Carmack v. Nichols, 181 Tenn. 551, 181 S.W.2d 977, 1944 Tenn. LEXIS 276 (1944).
The rule that a creditor whose superior diligence discovers and uncovers property which could not be seized upon execution, acquires, by a creditor's bill, a lien on such property prior to other creditors, even though they may have judgments obtained prior to the judgment on which the suit was brought, applies where the fund uncovered is a fund in court. Scott County Nat'l Bank v. Robinson, 143 Tenn. 356, 226 S.W. 218, 1920 Tenn. LEXIS 24 (1920).
Fees earned by a clerk in the hands of his successor and not subject to orders of the court or in custodia legis, but held as agent to be handed over to the judgment debtor, are reachable on return of nulla bona. Mays v. Frazer, 3 Cooper's Tenn. Ch. 413 (1877).
Money due commissioner in partition proceeding is not exempt in the collecting officer's hands, on the principle of exemptions of salaries of public officers. State use of Porter v. Cobb, 72 Tenn. 481, 1880 Tenn. LEXIS 48 (1880).
In bill by judgment creditor seeking to reach deposit of judgment debtor in United States postal savings depository system chancellor had jurisdiction to issue declaratory judgment in favor of plaintiff. Bell-Dowlen Mills v. Draper, 169 Tenn. 112, 83 S.W.2d 247, 1935 Tenn. LEXIS 23 (1935), cert. denied, 296 U.S. 633, 56 S. Ct. 156, 80 L. Ed. 450, 1935 U.S. LEXIS 951 (1935).
Where judgment creditor filed bill in chancery court to reach deposit of debtor in United States postal savings depository system the chancellor was entitled to enjoin debtor from withdrawing deposit until plaintiff was able to proceed under federal law set forth in 39 U.S.C. § 767. Bell-Dowlen Mills v. Draper, 169 Tenn. 112, 83 S.W.2d 247, 1935 Tenn. LEXIS 23 (1935), cert. denied, 296 U.S. 633, 56 S. Ct. 156, 80 L. Ed. 450, 1935 U.S. LEXIS 951 (1935).
The trustee and beneficiaries in a spendthrift trust cannot, by mutual agreement, terminate the trust and defeat the purpose of the donor to give to the beneficiaries a support which shall be free from the claims of creditors. Vines v. Vines, 143 Tenn. 517, 226 S.W. 1039, 1920 Tenn. LEXIS 38 (1920).
To create a spendthrift trust, language specially exempting the interest of the beneficiary from the claims of his creditors is not necessary. White v. O'Bryan, 148 Tenn. 18, 251 S.W. 785, 1922 Tenn. LEXIS 77 (1922).
The creator of the trust may give to beneficiary a vested equitable interest and yet prevent his anticipation or alienation of that interest. Tramell v. Tramell, 162 Tenn. 1, 32 S.W.2d 1025, 1930 Tenn. LEXIS 59 (1930), modified and rehearing denied, 162 Tenn. 1, 35 S.W.2d 574 (1931).
When an active trust is created by some person other than the beneficiary and is declared by will duly recorded or deed duly registered, court of chancery has no power to subject the interest of the beneficiary. Mayberry v. Redmond, 169 Tenn. 190, 83 S.W.2d 897, 1935 Tenn. LEXIS 30 (1935).
Where a testator by his will sought to provide trusts for his children during their lives, which constituted “spendthrift trust,” the corpus of such trust cannot be subject to the debt of the cestui que trust so long as the latter lives, but they may be after his death. Patton v. Winters, 20 Tenn. App. 600, 101 S.W.2d 708, 1936 Tenn. App. LEXIS 51 (Tenn. Ct. App. 1936).
While the Supreme Court is fully committed to the “spendthrift trust” doctrine, such doctrine will not be extended to apply when the instrument fails to create a “trust” in unmistakable terms and to provide for a trustee. Sternberger v. Glenn, 175 Tenn. 644, 137 S.W.2d 269, 1939 Tenn. LEXIS 86 (1940).
A spendthrift trust is valid in Tennessee. Davis v. Mitchell, 27 Tenn. App. 182, 178 S.W.2d 889, 1943 Tenn. App. LEXIS 139 (Tenn. Ct. App. 1943).
Since the Supreme Court of the United States in Nichol v. Levy, 72 U.S. 433, 18 L. Ed. 596, 1866 U.S. LEXIS 949 (1867), held that the Act of 1832 was a “rule of property,” it follows that where the beneficiary of a spendthrift trust acquired a title and interest in property such title and interest must necessarily be adjudged a vested estate and beyond the reach of the legislature. State v. Caldwell, 181 Tenn. 74, 178 S.W.2d 624, 1944 Tenn. LEXIS 346, 151 A.L.R. 1410 (1944).
The exceptions to general principle of liability of a person's property for his debts created by the statutes of exemptions are for protection of debtor as distinguished from exception created under doctrine of spendthrift trust which is in consideration of right of donor or settlor to dispose of his property and control his bounty as he wishes within limits allowed by law. State v. Nashville Trust Co., 28 Tenn. App. 388, 190 S.W.2d 785, 1944 Tenn. App. LEXIS 79 (Tenn. Ct. App. 1944).
A spendthrift trust must be an active one, declared by will or deed duly recorded, and created by, or the property must have proceeded from, some person other than the beneficiary himself; such a record being notice to the public, prevents the beneficiary from misleading creditors, or obtaining false credit upon his apparent ownership of the trust property, and thus the real reason for sustaining such a trust is that, as the property comes from another, it takes nothing from the beneficiary's creditors. State v. Nashville Trust Co., 28 Tenn. App. 388, 190 S.W.2d 785, 1944 Tenn. App. LEXIS 79 (Tenn. Ct. App. 1944).
Tennessee law allows true spendthrift trusts only under this section. In re Elsea, 47 B.R. 142, 1985 Bankr. LEXIS 6643 (Bankr. E.D. Tenn. 1985); In re Faulkner, 79 B.R. 362, 1987 Bankr. LEXIS 1758 (Bankr. E.D. Tenn. 1987), overruled, In re Leamon, 121 B.R. 974, 1990 Bankr. LEXIS 2611 (Bankr. E.D. Tenn. 1990), overruled on other grounds, In re Leamon, 121 B.R. 974, 1990 Bankr. LEXIS 2611 (Bankr. E.D. Tenn. 1990).
The whole trust must be in “unmistakable terms”; notice to creditors is not separate from the creation of the trust. Baskin v. Commerce Union Bank, 715 S.W.2d 350, 1986 Tenn. App. LEXIS 2997 (Tenn. Ct. App. 1986).
Beneficiary of spendthrift trust must be limited to a right to receive income. In re Faulkner, 79 B.R. 362, 1987 Bankr. LEXIS 1758 (Bankr. E.D. Tenn. 1987), overruled, In re Leamon, 121 B.R. 974, 1990 Bankr. LEXIS 2611 (Bankr. E.D. Tenn. 1990), overruled on other grounds, In re Leamon, 121 B.R. 974, 1990 Bankr. LEXIS 2611 (Bankr. E.D. Tenn. 1990).
Debtor's pension plan held not to qualify as a spendthrift trust where anti-alienation and anti-assignment provisions were qualified by the debtor's right to apply for a loan from the trust fund. In re Faulkner, 79 B.R. 362, 1987 Bankr. LEXIS 1758 (Bankr. E.D. Tenn. 1987), overruled, In re Leamon, 121 B.R. 974, 1990 Bankr. LEXIS 2611 (Bankr. E.D. Tenn. 1990), overruled on other grounds, In re Leamon, 121 B.R. 974, 1990 Bankr. LEXIS 2611 (Bankr. E.D. Tenn. 1990).
All trusts meeting the appropriate formalities are functionally “spendthrift trusts” in Tennessee. In re Evans, 88 B.R. 813, 1988 Bankr. LEXIS 1285 (Bankr. M.D. Tenn. 1988).
An unregistered decree, creating an active trust and vesting and divesting title accordingly is not equivalent to a registered deed, and is ineffectual as against the creditors. White v. O'Bryan, 148 Tenn. 18, 251 S.W. 785, 1922 Tenn. LEXIS 77 (1922).
Where the trustee is required to convey under certain circumstances, and therefore to preserve the remainder for that purpose, he must take and retain legal title to the land, so that the beneficiary takes no interest in or title to the land subject to levy under execution, or that can be subjected by proceedings in equity to payment of his debts. Henson v. Wright, 88 Tenn. 501, 12 S.W. 1035, 1889 Tenn. LEXIS 71 (1890).
Where the testator devised two tracts of land to his executor in trust, with directions that the same were not to be sold for ten years, and that out of the net rents the executor was to pay to two sisters such sum per month for their support, as in his judgment he considered necessary, not to exceed $100 per month to each, the sisters took no vested interest in the estate, but would become vested with such funds only as the trustee, in his discretion, saw proper to pay them. Vines v. Vines, 143 Tenn. 517, 226 S.W. 1039, 1920 Tenn. LEXIS 38 (1920).
Where testator's father created a trust at his death in which the beneficiaries, including the testator, would receive only the income from the corpus, it was a spendthrift trust; however by prior court construction the trust ended on the death of the beneficiaries and by will they could devise their share of the corpus, hence at testator's death his share was part of his estate and was subject to debts created during his lifetime. Patton v. Winters, 20 Tenn. App. 600, 101 S.W.2d 708, 1936 Tenn. App. LEXIS 51 (Tenn. Ct. App. 1936).
A direct devise of a life estate in land containing provisions restricting the devisee from selling, transferring, pledging or encumbering the land or any income therefrom did not operate to create a “spendthrift trust” so as to bring such interest into the exception provided by this section but merely vested legal title in the devisee by direct devise. Sternberger v. Glenn, 175 Tenn. 644, 137 S.W.2d 269, 1939 Tenn. LEXIS 86 (1940).
Neither statute nor usual provisions creating a strictly spendthrift trust will prevent the immediate vesting of an equitable, transmissible estate in beneficiaries of the trust unless a contrary intention is manifested by the language of the will. Davis v. Mitchell, 27 Tenn. App. 182, 178 S.W.2d 889, 1943 Tenn. App. LEXIS 139 (Tenn. Ct. App. 1943).
Restrictions creating a pure spendthrift trust — that is, mere restraints upon alienation and anticipation, do not necessarily operate to prevent the vesting of an equitable estate in fee in the beneficiaries, whereas the contrary may be true of restrictions strictly limiting the use of the income or corpus to support, or vesting trustee with a discretion as to its application to the appointed purpose. Davis v. Mitchell, 27 Tenn. App. 182, 178 S.W.2d 889, 1943 Tenn. App. LEXIS 139 (Tenn. Ct. App. 1943).
Where the legal title to land or personalty is vested in a trustee, by deed or will, to be held during the life of a third person, to whom the net annual profits or rents for that duration are to be paid, and at his death he is authorized to dispose of it, or the same is to be conveyed by the trustee to other persons, an active trust is created, and the beneficiary for life takes no interest or title to the land or personalty subject to levy under execution, or that can be subjected by proceedings in equity to the payment of his debts, the deed being duly registered or the will being duly recorded. This is so as to the land or personalty, though there are no express provisions excluding creditors. The net annual profits or rents cannot be subjected in the hands of the trustee to the payment of the debts of the beneficiary, especially where the rights of creditors are excluded. Hooberry v. Harding, 3 Cooper's Tenn. Ch. 677 (1878); Jourolmon v. Massengill, 86 Tenn. 81, 5 S.W. 719, 1887 Tenn. LEXIS 27 (1887); Henson v. Wright, 88 Tenn. 501, 12 S.W. 1035, 1889 Tenn. LEXIS 71 (1890); Porter v. Lee, 88 Tenn. 782, 14 S.W. 218, 1890 Tenn. LEXIS 21 (1890); McKeldin v. Gouldy, 91 Tenn. 677, 20 S.W. 231, 1892 Tenn. LEXIS 35 (1892); J. S. Menken Co. v. Brinkley, 94 Tenn. 721, 31 S.W. 92, 1895 Tenn. LEXIS 58 (1895); Hart v. Bayliss, 97 Tenn. 72, 36 S.W. 691, 1896 Tenn. LEXIS 118 (1896); Colyar v. Wheeler, 110 Tenn. 58, 75 S.W. 1089, 1902 Tenn. LEXIS 38 (1902); Citizens' Nat'l Bank v. Watkins, 126 Tenn. 453, 150 S.W. 96, 1912 Tenn. LEXIS 71 (1912); Lee v. Villines, 129 Tenn. 625, 167 S.W. 1117, 1914 Tenn. LEXIS 152 (1914); White v. O'Bryan, 148 Tenn. 18, 251 S.W. 785, 1922 Tenn. LEXIS 77 (1922); Tramell v. Tramell, 162 Tenn. 1, 32 S.W.2d 1025, 1930 Tenn. LEXIS 59 (1930), modified and rehearing denied, 162 Tenn. 1, 35 S.W.2d 574 (1931); In re Faulkner, 79 B.R. 362, 1987 Bankr. LEXIS 1758 (Bankr. E.D. Tenn. 1987), overruled, In re Leamon, 121 B.R. 974, 1990 Bankr. LEXIS 2611 (Bankr. E.D. Tenn. 1990), overruled on other grounds, In re Leamon, 121 B.R. 974, 1990 Bankr. LEXIS 2611 (Bankr. E.D. Tenn. 1990).
The rule applies only in case of an active trust, where the estates of the trustees and beneficiary are distinct and not subject to merger, for otherwise it does not fall within the terms of the statute, and upon the merger in the beneficiary the land may be levied on at law. Porter v. Lee, 88 Tenn. 782, 14 S.W. 218, 1890 Tenn. LEXIS 21 (1890); Tramell v. Tramell, 162 Tenn. 1, 32 S.W.2d 1025, 1930 Tenn. LEXIS 59 (1930), modified and rehearing denied, 162 Tenn. 1, 35 S.W.2d 574 (1931).
Chancery courts have no power or jurisdiction to compel discovery of a debtor's property of an equitable nature, and to subject the same to his debts at the suit of his judgment creditor with a return of nulla bona, where the property is held in active trust for the debtor, created by some third person, and “declared by will duly recorded or deed duly registered.” Porter v. Lee, 88 Tenn. 782, 14 S.W. 218, 1890 Tenn. LEXIS 21 (1890); White v. O'Bryan, 148 Tenn. 18, 251 S.W. 785, 1922 Tenn. LEXIS 77 (1922); Tramell v. Tramell, 162 Tenn. 1, 32 S.W.2d 1025, 1930 Tenn. LEXIS 59 (1930), modified and rehearing denied, 162 Tenn. 1, 35 S.W.2d 574 (1931).
A will provided that the legal title of the interest given to a son should be vested in another son as trustee under a trust similar to that under which the trustee held the estate given to a certain daughter, and the clause vesting the daughter's interest provided that the trustee shall hold it for her use and benefit and pay to her the rents, incomes, and profits therefrom, without power in the daughter to anticipate or assign her portion of the rents, incomes, and profits; but same should be paid to her by the trustee during her natural life; and it was held that the intention of the testatrix was to incorporate, in the clause vesting the property in the son, the applicable terms of the trust created for the daughter, and created an active trust for the son. White v. O'Bryan, 148 Tenn. 18, 251 S.W. 785, 1922 Tenn. LEXIS 77 (1922).
The mere fact that the corpus of a trust is to be preserved for the possible benefit of contingent remaindermen is sufficient to create an active trust. White v. O'Bryan, 148 Tenn. 18, 251 S.W. 785, 1922 Tenn. LEXIS 77 (1922).
It is a fundamental predicate for the application of the exception provided by this section that there shall be a trust and that the trust shall be active. Sternberger v. Glenn, 175 Tenn. 644, 137 S.W.2d 269, 1939 Tenn. LEXIS 86 (1940).
An active trust can be created wherein the beneficiary takes no transmissible equitable interest in the estate and none in the income until it is paid to him. Davis v. Mitchell, 27 Tenn. App. 182, 178 S.W.2d 889, 1943 Tenn. App. LEXIS 139 (Tenn. Ct. App. 1943).
By virtue of this section an active trust within the purview of this section takes on the characteristics and immunities appertaining to a spendthrift trust, as that phrase is commonly understood, quite apart from any restrictions or lack of them in the instrument creating the trust, insofar as the rights of creditors are concerned, but neither the statute, nor the usual provisions creating a strictly spendthrift trust where present, will prevent the immediate vesting of an equitable, transmissible estate in the beneficiaries of the trust unless the language of the will expressly or impliedly manifests a contrary intention on the part of the testator. Davis v. Mitchell, 27 Tenn. App. 182, 178 S.W.2d 889, 1943 Tenn. App. LEXIS 139 (Tenn. Ct. App. 1943).
Will and codicil providing a trust for testator's children and grandchildren, with provisions protecting income and principal from their creditors, did not create a “spendthrift trust,” but rather a trust for support of beneficiaries where circumstances indicated that beneficiaries were not in need of such protection, and where creditors at the time of testator's death as well as time of execution of will, were otherwise barred from claiming the beneficiaries' interest. Davis v. Mitchell, 27 Tenn. App. 182, 178 S.W.2d 889, 1943 Tenn. App. LEXIS 139 (Tenn. Ct. App. 1943).
Besides this section's express requirements, the courts have added the requirement that a spendthrift trust must be an “active” rather than a “dry” trust, which basically means that the property must be under the control of the trustee rather than the debtor-beneficiary. In re Elsea, 47 B.R. 142, 1985 Bankr. LEXIS 6643 (Bankr. E.D. Tenn. 1985); In re Faulkner, 79 B.R. 362, 1987 Bankr. LEXIS 1758 (Bankr. E.D. Tenn. 1987), overruled, In re Leamon, 121 B.R. 974, 1990 Bankr. LEXIS 2611 (Bankr. E.D. Tenn. 1990), overruled on other grounds, In re Leamon, 121 B.R. 974, 1990 Bankr. LEXIS 2611 (Bankr. E.D. Tenn. 1990).
A trust enabling owner to enjoy the income exempt from his debts cannot be created by a grantor, he being the only beneficiary, either by a direct exemption of the property from his future debts, or indirectly, by leaving it discretionary with the trustee to allow him benefits from the property; and a deed creating a trust for the benefit of the grantor is void, upon its face, as to his creditors who may subject the land by bill in chancery, without other proof of fraud. Jourolmon v. Massengill, 86 Tenn. 81, 5 S.W. 719, 1887 Tenn. LEXIS 27 (1887); J. S. Menken Co. v. Brinkley, 94 Tenn. 721, 31 S.W. 92, 1895 Tenn. LEXIS 58 (1895); Citizens' Nat'l Bank v. Watkins, 126 Tenn. 453, 150 S.W. 96, 1912 Tenn. LEXIS 71 (1912).
An attempt by a person to put his own property into a trust for his own benefit beyond reach of his creditors cannot be sustained as a valid spendthrift trust, since it is violative of general principle that one's property is liable for his debts and is violative of law of fraudulent conveyances. State v. Nashville Trust Co., 28 Tenn. App. 388, 190 S.W.2d 785, 1944 Tenn. App. LEXIS 79 (Tenn. Ct. App. 1944).
One cannot create a spendthrift trust with his own property for his own benefit. State v. Nashville Trust Co., 28 Tenn. App. 388, 190 S.W.2d 785, 1944 Tenn. App. LEXIS 79 (Tenn. Ct. App. 1944).
Where son, with knowledge that father intended to place real estate in spendthrift trust for son's benefit, placed mansion and other substantial improvements on land and where, after state had recovered judgment against son, father placed the improved property in such spendthrift trust, state, as judgment creditor regardless of son's actual intent, could subject property to judgment to extent that it was enhanced by contributions of son. State v. Nashville Trust Co., 28 Tenn. App. 388, 190 S.W.2d 785, 1944 Tenn. App. LEXIS 79 (Tenn. Ct. App. 1944).
Expenditure by son of own money on realty owned by father who had indicated that he would place property in spendthrift trust in favor of son was fraudulent conveyance, regardless of actual intent, since inevitable effect was to hinder and delay his creditors, existing and subsequent. State v. Nashville Trust Co., 28 Tenn. App. 388, 190 S.W.2d 785, 1944 Tenn. App. LEXIS 79 (Tenn. Ct. App. 1944).
The clerk and master of the chancery court is the mere instrument to distribute a fund paid into court, in accordance with the court's orders, and is therefore neither a necessary nor a proper party to a creditor's suit to subject the interest of the judgment debtor in such fund to the payment of the creditor's claim. Scott County Nat'l Bank v. Robinson, 143 Tenn. 356, 226 S.W. 218, 1920 Tenn. LEXIS 24 (1920).
A responsive answer to a bill of discovery must be taken as true unless contradicted by two witnesses or by one witness with pregnant circumstances. Union Bank v. Chaffin, 24 Tenn. App. 528, 147 S.W.2d 414, 1940 Tenn. App. LEXIS 59 (Tenn. Ct. App. 1940).
In a suit to compel the discovery of all securities owned by the estate of the deceased and all securities of which his wife claimed to be the owner the mere statement of the wife that the securities were bought with her money could not be taken as true where her answer went on to show that she didn't know what she was talking about and where the record taken as a whole showed that she didn't have the money with which the securities were purchased. Union Bank v. Chaffin, 24 Tenn. App. 528, 147 S.W.2d 414, 1940 Tenn. App. LEXIS 59 (Tenn. Ct. App. 1940).
Return of nulla bona in the county where the judgment was rendered is sufficient to sustain a bill in any other county to subject the equitable interest in realty or personalty to the payment of the judgment. Embree v. Reeve, 25 Tenn. 37, 1845 Tenn. LEXIS 11 (1845); Riddle v. Motley, 69 Tenn. 468, 1878 Tenn. LEXIS 120 (1878).
The return of nulla bona has never been held to be the only evidence of the fact shown by such return. It has in fact been treated as a form, only material because it is made, by statute, sufficient evidence to sustain a bill. Turley v. Taylor, 71 Tenn. 171, 1879 Tenn. LEXIS 53 (1879).
Nulla bona return on execution issued to county where bill is filed seems almost certain to be efficacious to sustain a bill to subject an equitable interest to satisfaction of the judgment. Turley v. Taylor, 71 Tenn. 171, 1879 Tenn. LEXIS 53 (1879).
If a right is acquired, extinguished, or barred upon the expiration of a prescribed period that has commenced to run under any other statute before July 1, 2013, that statute continues to apply to the right even if it has been repealed or superseded.
