dissenting. While I agree that the chancellor’s decree should be affirmed as modified, I must dissent because, in my view, it should be modified in a different way. As the majority opinion says, the chancellor’s amended order held that the “assignments” from E.H. Owen and his wife, attached as exhibits to the trust, were void as to the creditor, Halliburton Company.
If the majority opinion holds that this case is primarily governed by Ark. Code Ann. § 4-59-203 (1987), I agree. That code section provides:
Every deed of gift and conveyance of goods and chattels in trust to the use of the person so making such deed of gift or conveyance, is declared to be void as against creditors existing, and subsequent purchasers. (Emphasis added.)
Clearly, under this statute it is the conveyance, not the trust itself, which is declared void as against creditors. In the case at bar, the words of conveyance were contained in the trust instrument itself.
Paragraph (1) of the trust provided:
Trust Property. For good and valuable consideration, the Trustor does hereby grant, bargain, sell, assign, transfer, and deliver to the trustees the property listed in Exhibit A attached hereto, to have and hold such property and any other property which the Trustees may, pursuant to any of the provisions of this Agreement, at any time hereafter hold or acquire, for the uses and purposes and upon the terms and conditions set forth.
The wife of the Trustor joins in this conveyance for the sole purpose and does hereby release and relinquish all her property rights, dower and homestead to said Trustees in the property described in Exhibit A.
“Exhibit A” was merely a list of property conveyed into the trust by the first paragraph of the trust itself. The attachment contains no words of conveyance and is not actually an “assignment.” Therefore, we should, on our de novo review, modify the order to reflect that the conveyance contained in the first paragraph of the trust, together with exhibit A, is void as against the appellant, Halliburton Company.
Appellant advances only two arguments in support of its contention that the trust itself, as opposed to the conveyance into the trust, is void: (1) that the chancellor erred in failing to find that the trust was fraudulent, and (2) that the court erred in failing to declare that the trust was illusory. The majority correctly notes that the chancellor made no finding of fraud, and then holds that no such finding is necessary. If the majority holds that the trust itself is void because it is illusory, I cannot agree. Section 99 of the Restatement (Second) of Trusts (1959) provides:
Beneficiary as Trustee.
1. One of several beneficiaries of a trust can be one of several trustees of the trust.
2. One of several beneficiaries of a trust can be the sole trustee of the trust.-
3. The sole beneficiary of a trust can be one of several trustees of the trust.
4. If there are several beneficiaries of a trust, the beneficiaries may be the trustees.
5. The sole beneficiary of a trust cannot be the sole trustee of the trust.
In a comment to subsection 5 the drafters of the Restatement notes:
Where one person has both the legal title to property and the entire beneficial interest, he holds it free of trust. There is no separation of the legal and beneficial interests, and there are no duties running from himself to himself, and no rights against himself. He is in a position where he can dispose of the property as freely as any owner can do, since there is no one who can maintain a proceeding against him to prevent him from so doing, and if he transfers the property there is no one who can make him accountable for the proceeds or can reach the property in the hands of the transferee. He cannot himself maintain an action against the transferee since he can not base an action upon his own voluntary act in making the transfer.
This would be an “illusory” trust in the sense that appellant urges, i.e., the trust itself would be invalid. Under these circumstances the legal and equitable estates would be merged. See G.T. Bogert, Trusts, § 30, at 96 (6th ed. 1987). In the case at bar, E.H. Owen was neither the sole trustee nor the sole beneficiary, although, as the majority correctly notes, Owen’s wife and daughter were only contingent beneficiaries. As Bogert points out, “If T and X are appointed trustees for T alone, there has been no disposition to treat the act of trust creation as void. The diversity of the character of the legal and equitable titles and the obligation of the cotrustees to the beneficiary have been held to obviate any difficulty.” Bogert, supra, § 30, at 97.
While I am not sure that it is necessary to discuss spendthrift trusts in this opinion, I have no quarrel with the applicability of § 156 of the Restatement of Trusts. That section, however, does not suggest that it is either necessary or appropriate to declare void the trust instrument itself, as opposed to the conveyances into the trust.
I am persuaded that the chancellor did not err in refusing to declare the entire trust instrument void. Therefore, I respectfully dissent.
Cracraft, J., joins in this dissent.