Duvall v. McGee
2003 Md. LEXIS 329, 375 Md. 476, 826 A.2d 416 (2003)
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Rule of Law:
Under Maryland law, a tort-judgment creditor may not satisfy a judgment by invading the principal or income of a spendthrift trust, as such a claim is considered a debt rather than a legal duty that would create a public policy exception to the trust's protections.
Facts:
- James Calvert McGee was convicted of felony-murder for his participation in a robbery that resulted in the death of Katherine Ryon.
- McGee is the beneficiary of a spendthrift trust established by his deceased mother, valued at approximately $877,000.
- The terms of the trust prohibit McGee from assigning his interest and shield the trust's principal and income from the claims of his creditors.
- Robert Ryon Duvall, as the personal representative of Katherine Ryon's estate, filed a civil suit against McGee for battery and conversion.
- Duvall and McGee settled the lawsuit, resulting in an entry of judgment against McGee for $100,000 in compensatory and $500,000 in punitive damages.
- As part of the settlement, Duvall agreed not to attach or garnish any of the periodic payments made from the trust to McGee.
Procedural Posture:
- Robert Ryon Duvall, representing Katherine Ryon's Estate, sued James Calvert McGee in the Circuit Court for Anne Arundel County, a state trial court.
- The parties settled, and a consent judgment for $600,000 was entered against McGee.
- Duvall served a Writ of Garnishment on the Trustee of McGee's spendthrift trust to satisfy the judgment.
- Both Duvall and the Trustee filed cross-motions for summary judgment in the Circuit Court.
- The Circuit Court granted the Trustee's motion for summary judgment, ruling that a tort creditor could not invade the trust.
- Duvall, as appellant, appealed the trial court's decision to the Court of Special Appeals, Maryland's intermediate appellate court.
- Before the intermediate court heard the case, the Court of Appeals of Maryland, the state's highest court, issued a writ of certiorari to hear the case directly.
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Issue:
Does Maryland law permit a tort-judgment creditor to satisfy a judgment by invading the principal of a spendthrift trust held for the benefit of the tortfeasor?
Opinions:
Majority - Bell, C.J.
No. Maryland law does not permit a tort-judgment creditor to satisfy a judgment by invading the principal of a spendthrift trust. The court affirmed that while exceptions to a spendthrift trust's protections exist for certain claims, these are limited to obligations that constitute a legal 'duty,' not a 'debt.' Prior cases created exceptions for alimony, child support, and taxes on public policy grounds, reasoning that these are pre-existing duties rather than debts voluntarily entered into by a creditor. A tort judgment, however, creates a creditor-debtor relationship, making the estate a 'mere judgment creditor.' The court rejected the argument that the involuntary nature of a tort creditor's claim is sufficient to create a new public policy exception, noting that this would be a significant change in the law best left to the legislature. Furthermore, the court found the public policy against criminals profiting from their crimes to be inapplicable, as McGee's interest in the trust was established by his mother and is unrelated to the crime he committed.
Dissenting - Battaglia, J.
Yes. Maryland public policy should permit a tort-judgment creditor to invade a spendthrift trust. The primary rationale for upholding spendthrift trusts—that creditors are on notice and assume the risk—is inapplicable to tort victims, who do not choose to become creditors. Ms. Ryon had no opportunity to assess McGee's finances before he participated in the robbery that led to her death. To equate a tort victim with a voluntary contract creditor is without merit. The obligation to make a victim whole is a fundamental public policy duty, just as compelling as the duties to pay alimony, child support, or taxes. It is against public policy to allow a beneficiary to enjoy the income from a trust without discharging his tort liabilities.
Analysis:
This decision solidifies the strong protection afforded to spendthrift trusts in Maryland, narrowly construing the public policy exceptions to the spendthrift doctrine. By adhering to a strict 'duty' versus 'debt' distinction, the court refused to expand judicial exceptions to include involuntary creditors like tort victims. This ruling places the burden on the state legislature to create any new categories of creditors who can access spendthrift trust assets. The decision signals to future litigants that claims must be framed as a pre-existing legal duty, like familial support, to have any chance of piercing a spendthrift trust's protective shield.
