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Factual Background:

Grantor created a testamentary Trust for the benefit of his wife, and then to his ten children as the remainder beneficiaries.  The assets of the Trust consisted primarily of shares of common stock of a family company.  In 1998, the Trustee sold 180,000 shares of the stock from the Trust to each of the ten children.  The children paid for the shares by executing ten separate and identical promissory notes.  The notes provided for fixed annual payments to the Trust by the children.  As security for the promissory notes, the Trustee entered into Stock Pledge Agreements with each beneficiary, providing that the shares purchased by the children would be held as security by the Trustee until the children made full and final payment of the notes.  The Trustee, the company, and the beneficiaries entered into Stock Redemption Agreements, which stated that if a maker of a note failed to make the required payment when due, the company would redeem a sufficient number of that maker’s shares of the company’s stock to make the required payment.

When Grantor’s wife died, each of the children had a different amount outstanding on their notes.  The Trustee proposed offsetting the cash distribution from the Trust to equalize the share each beneficiary received.  The Trustees filed a Petition for Instructions regarding the propriety of making the equalizing distributions of cash.  Nine of the children consented to the proposed distribution and filed a motion for summary judgment in support of the Trustees’ position.  Grasso, the tenth beneficiary, filed a cross motion for summary judgment seeking denial of the Trustees’ plan of distribution.

St. Louis County Circuit Court, J. Gaertner, Held:

The circuit court granted the motion for summary judgment filed by the petitioners and denied Grasso’s motion for summary judgment.  The trial court allowed the cash distribution from the Trust to Grasso to be offset by Grasso’s indebtedness by promissory note to the Trust.

Grasso appealed, arguing that the spendthrift provisions of the Trust and the non-recourse provisions of the promissory note precluded any offset.

Court of Appeals, P.J. Odenwald, Held:

Affirmed.  The Trust provision mandating an equal distribution of assets supersedes the separate spendthrift provision of the Trust or the terms of the promissory note.  Because the grantor’s overall or primary intent was to treat the beneficiaries equally, it was proper for the Trustee to offset the cash distribution from the Trust by the amount of the outstanding indebtedness owed by each beneficiary to the Trust.  The nonrecourse provision of the promissory notes did not prevent the application of a retainer or set-off from the distributive share of the debtor; instead, it simply limited the Trustees’ remedies for nonpayment of the notes.  Moreover, the proposed distribution does not run afoul of the nonrecourse provision, as the Trustees are not attempting to collect the amounts owed under the notes by seeking to recover against the beneficiaries’ personal assets.