Scheffel v. Krueger
146 NH 669, 782 A. 2d 410 (2001)
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Rule of Law:
A valid spendthrift provision in a trust is enforceable against a tort creditor's claim, even when the beneficiary's tortious conduct was also criminal, so long as the claim does not fall within a specific statutory exception.
Facts:
- In 1985, Kyle Krueger's grandmother established an irrevocable trust for his benefit.
- The trust contained a spendthrift provision stating that no principal or income could be reached by any legal process to satisfy a debt of the beneficiary prior to its receipt by him.
- The trust directed the trustee to pay all net income to Krueger and authorized payments of principal for his maintenance, support, and education at the trustee's discretion.
- Kyle Krueger sexually assaulted Lorie Scheffel's minor child, videotaped the act, and broadcast the video on the Internet.
Procedural Posture:
- Lorie Scheffel filed a tort suit against Kyle Krueger in New Hampshire Superior Court.
- The Superior Court entered a default judgment against Krueger, ordering him to pay $551,286.25 in damages.
- To satisfy the judgment, Scheffel initiated a trustee process action in Superior Court to attach Krueger's beneficial interest in a trust managed by Citizens Bank NH.
- The trustee, Citizens Bank NH, filed a motion to dismiss the action, arguing the trust’s spendthrift provision barred the attachment.
- The Superior Court granted the trustee's motion and dismissed the action.
- Scheffel, the plaintiff, appealed the dismissal to the New Hampshire Supreme Court.
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Issue:
Does a statutorily-sanctioned spendthrift provision in a trust prevent a tort victim from attaching the beneficiary's interest in the trust to satisfy a judgment?
Opinions:
Majority - Duggan, J.
Yes. A statutorily-sanctioned spendthrift provision in a trust prevents a tort victim from attaching the beneficiary's interest. The court's reasoning is based on a strict interpretation of the relevant New Hampshire statute, RSA 564:23. The statute plainly states that if a trust instrument includes a spendthrift provision, a creditor of a beneficiary cannot subject the beneficiary’s interest to the payment of its claim. The legislature provided only two specific exceptions: 1) when the beneficiary is also the settlor of the trust, and 2) when assets were fraudulently transferred into the trust. Since neither exception applies to Krueger, the spendthrift provision is enforceable as written. The court explicitly refused to create a public policy exception for tort creditors, holding that where the legislature has enumerated specific exemptions, the court must presume no others were intended and cannot substitute its own judgment for that of the legislature.
Analysis:
This decision solidifies the power of statutory spendthrift provisions in New Hampshire, emphasizing legislative supremacy over judicial public policy considerations. The court's refusal to create a common law exception for tort creditors, even in the face of egregious criminal conduct, signals that the protections afforded by such trusts are nearly absolute, limited only by the explicit exceptions in the statute itself. This ruling provides a clear and predictable framework for trustees and estate planners but places the burden on the legislature to amend the statute if it wishes to allow certain classes of creditors, such as tort victims, to pierce spendthrift trusts. The case serves as a strong example of strict statutory construction, where the plain meaning of a statute overrides equitable or public policy arguments.
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