MOORE, J.
George A. Olsen Jr. and Hanh T. Williams appeal a summary judgment finding that assignments of interest in a mineral lease in their favor were absolute nullities and that the interest belonged to the succession of Fred L. Houston, who prior to his death executed the initial assignment. For the reasons expressed, we affirm.
Fred L. Houston and his wife granted a mineral lease ("the Tenneco lease") over 40 acres of land they owned in DeSoto Parish in July 1974. Tenneco, or its assignees, drilled 10 wells on the three units affecting the tract; the lease has been highly productive. At some point, J-W Operating became the owner and operator of these wells and units. In 2001, Mrs. Houston died, and Houston became sole owner of the tract and the lease.
In August 2005, Houston formed an inter vivos trust called the Fred L. Houston Trust. He placed various assets, including the Tenneco lease, in the trust corpus. The instrument declared the trust "irrevocable and may not be revoked at any time under any circumstances[,]" including "any action to * * * modify or negate Settlor's intended effect of protecting the properties
In April 2006, an entity called Noble House Investments Inc., through its president, George A. Olsen Jr., sent a letter to Houston ("to the attention of" Ms. Williams), offering to buy the trust's interest in the Tenneco lease for $34,000. Four days later, on April 26, Houston signed, in his personal capacity, an assignment (the "Noble House assignment") of royalty interest in the Tenneco lease to Noble House for "good and valuable consideration." Notably, the Noble House assignment made no mention of the trust. By letter agreement that same day, Noble House promised to assign to Ms. Williams "50% of the interest purchased as soon as the new division orders are complete." Noble House executed an assignment (the "Williams assignment") to that effect on August 8, 2006. Noble House also assigned all its remaining interest to Olsen (the "Olsen assignment") on September 12, 2007.
Houston died on September 23, 2008. Under the trust instrument, the corpus, including the Tenneco lease, immediately vested in his estate. Armand Roos was confirmed as testamentary executor of the succession. Apparently, he notified J-W Operating that the trust, and now the succession, claimed the Tenneco lease.
J-W Operating filed this petition for concursus in April 2011, naming as defendants Olsen, Ms. Williams and Houston's succession. It alleged that it had suspended royalty payments in August 2009 because of the dispute over ownership; in the 19 months since, the Tenneco lease had accrued royalties of $67,240.98, which were placed in court registry.
Olsen and Ms. Williams filed general denials, urging in essence that even if, by the Noble House assignment, Houston conveyed a thing he did not own, the assignment was only a relative nullity. The assignment included a warranty against eviction; upon Houston's death, the Tenneco lease reverted to his estate, and the succession was bound to honor the warranty. Each demanded recognition of his or her 50% interest.
Roos answered on behalf of the succession that the Noble House assignment was an absolute nullity; he demanded recognition of the succession's 100% interest.
Olsen and Ms. Williams then filed various exceptions, including no right of action, urging that Roos was not a party entitled to assert the trust's claim of relative nullity, and no cause of action, urging that after-acquired title cured the relative nullity before suit was filed. The district court denied these exceptions by judgments dated August 23, 2011.
Olsen filed a cross-motion for partial summary judgment, seeking an award of 50% interest in the Tenneco lease. He reiterated that upon Houston's death, the Tenneco lease was transferred from the trust to the estate, thus creating after-acquired title under La. C.C. art. 2452. He also argued that the Noble House assignment was not a quitclaim deed, and hence included a warranty against eviction. In support, he attached his own affidavit that Houston said he (Houston), and not the trust, actually owned the Tenneco lease, and that he (Olsen) relied on this without a title exam.
Ms. Williams did not file her own motion for summary judgment, but she opposed Roos's.
After the matter was submitted on briefs, the court found that the Noble House assignment violated a rule of public order, that of protecting the settlor's intent as set forth in the trust document, Albritton v. Albritton, 600 So.2d 1328 (La. 1992), particularly the spendthrift provisions, and the sale of the corpus would divest the beneficiary of his interest. The court declared the Noble House assignment, as well as the Williams and Olsen assignments, absolute nullities. It granted Roos's motion for partial summary judgment and denied Olsen's. The court also denied Olsen and Ms. Williams's motion for new trial or reconsideration, as well as Roos's motion to amend the judgment.
Olsen and Ms. Williams filed separate motions for suspensive appeal. They have joined on brief, advancing five assignments of error.
By their first assignment of error, appellants urge the district court erred in finding that the purported transfer of trust property by Houston was an absolute nullity when it was not an attempt to transfer his beneficiary interest in the trust. By their second assignment, they urge the court also erred in finding that the subsequent acquisition by Houston of the lease he attempted to sell did not cure the relative nullity created by his attempted assignment of the lease.
They argue, in essence, that the Noble House assignment was only a relative nullity, cured by subsequent acquisition. An absolute nullity is one that violates public order, La. C.C. art.2030, and includes a contract that would violate a state statute, Lieber v. Caddo Levee Dist., 27,267 (La.App. 2 Cir. 8/23/95), 660 So.2d 188, writ denied, 95-2355 (La. 12/8/95), 664 So.2d 427.
Roos responds that the Noble House assignment, and the later assignments, were absolutely null and could not be cured. In support, he cites the doctrine of "trust indestructibility," Albritton v. Albritton, supra, and McLendon v. First Nat'l Bank of Shreveport, 299 So.2d 407 (La.App. 2 Cir.1974), and argues that the Noble House assignment simply violated the core concept of the trust, namely, the beneficiary cannot alienate trust property. We agree.
Louisiana has a strong public policy in effectuating and protecting the settlor's intent as set forth in the trust document. Id.; Richards v. Richards, 408 So.2d 1209 (La.1981). In Albritton v. Albritton, supra, the court expressly rejected the notion that even in the absence of vices of consent, the beneficiary could enter into an agreement affecting the trust. The court stated:
The court further found that such modifications were contrary to the rules of order for trusts, La. R.S. 9:9021 and 9:2025:
Under the scheme of the trust code, even the settlor has no power to modify the trust he has created unless he expressly reserves the power to do so. The consent of all the settlors, beneficiaries and trustees is not effective to make any disposition in trust unless the trust instrument so provides. Id. at 1332, citing Oppenheim & Ingram, 11 La. Civ. L. Treatise — Trusts, § 294 (1977). The Albritton court held that the notion of trust indestructibility is "inherent in our Louisiana trust law," and announced an imperative rule of public order. "Any violation of these rules is an absolute nullity." Id.; Badon's Employment Inc. v. Smith, 359 So.2d 1284 (La. 1978); E.L. Burns Co. v. Cashio, 302 So.2d 297 (La.1974).
We recognize that the Noble House assignment is not quite the same as destroying the trust; however, the "extension of trust" in Albritton, supra, was intended only to prolong the trust, and yet the supreme court rejected it under the principle of trust indestructibility. In both cases, the fundamental concept is to honor the settlor's intent, regardless of the later
With this conclusion, we pretermit any consideration of the doctrine of after-acquired title. A contract that is absolutely null may not be confirmed. La. C.C. art. 2030; Baker v. Maclay Properties Co., 94-1529 (La.1/17/95), 648 So.2d 888. These assignments of error lack merit.
By their fifth assignment of error, Olsen and Ms. Williams urge the court erred in finding that the trust created by Houston, for Houston as sole beneficiary, was entitled to spendthrift protection. They contend that Houston cannot "hide behind" his trust, even if it is a spendthrift trust. They concede that Louisiana law allows spendthrift trusts, La. R.S. 9:2002, "to guard against the improvidence of the beneficiary and to preserve the income for his support, in such manner that he cannot dispose of it nor can it be taken by his creditors," 5-44 Page on Wills, § 44.31 (©2013). They contend, however, that a trust cannot be considered spendthrift "to the extent of the trust property donated to the trust by the beneficiary," R.S. 9:2004, comment (c). This is called a "self-settled trust," and a "settlor cannot create a spendthrift trust for his own benefit," Kurzweg v. Marple, 841 F.2d 635 (5 Cir. 1988).
Roos responds that R.S. 9:2004 and Kurzweg prohibit a debtor from creating a self-settled spendthrift trust to defraud his creditors, but nothing prohibits a person from placing assets in a spendthrift trust to prevent himself from unintentionally (or intentionally) alienating his property contrary to his best interest, Page on Wills, supra.
The trust code expressly authorizes the spendthrift trust:
Comment (c) states that a settlor cannot create a spendthrift trust for his own benefit, citing Restatement of Trusts 2d, § 156 (1959). We recognize the common law principle expressed in the Restatement; however, it broadly applies "where a person creates for his own benefit a trust with a provision restraining the voluntary or involuntary transfer of his interest" (emphasis added). By contrast, La. R.S. 9:2002 states that a restraint upon voluntary alienation is valid, and only restraints upon involuntary alienation are subject to limitations such as stated in R.S. 9:2004. The Noble House assignment was obviously a voluntary alienation of the trust corpus; as such, it is valid under R.S. 9:2002, and not subject to seizure by a creditor under R.S. 9:2004.
This conclusion is fortified by certain extrinsic evidence pervading the record. The trust instrument designated Ms. Williams as trustee; the summary judgment evidence shows that she contacted Olsen who, at her suggestion and through his company, Noble House, obtained the Noble House assignment from Houston, and later split the Tenneco lease with Ms. Williams. The trust code expressly states:
Ms. Williams's scheme to purchase this valuable asset
By their two remaining assignments of error, Olsen and Ms. Williams contest the district court's denial of their exceptions of no right and no cause of
Roos responds that as the dative independent executor of Houston's succession, he stands in the position of Houston, both as seller and trust beneficiary, and thus had both a right and cause of action.
Absolute nullity may be invoked by any person or may be declared by the court on its own initiative. La. C.C. art.2030; Albritton v. Albritton, supra; Skannal v. Jones Odom Davis & Politz LLP, 48,016 (La.App. 2 Cir. 9/25/13), 124 So.3d 500. For the reasons already discussed, the district court correctly found that the Noble House assignment was an absolute nullity. Roos obviously had a private right and cause of action to assert absolute nullity. La. C.C. art.2030; Total Benefit Servs. v. City of New Orleans, 2002-0697 (La.App. 4 Cir. 4/11/02), 819 So.2d 1067, writs denied, 2002-1039 (La.4/16/02), 813 So.2d 413, 2002-1238 (La.5/8/02), 815 So.2d 828. These assignments of error lack merit.
For the reasons expressed, the judgment is affirmed. All costs are to be paid by the appellants, George A. Olsen Jr. and Hanh T. Williams.