Court Opinion

ID: 9666007
Source: CourtListenerOpinion
Date Created: 2023-08-24 01:02:02.136835+00
Date Added: 2024-06-11T18:15:22.052960
License: Public Domain

STEAKLEY, Justice
(dissenting).
I am unable to join in judicially sanctioning a device which, to my mind, is no more, in substance, than a contrived use of the trust principle to effect a testamentary disposition during lifetime. In my view, the instruments executed by Virginia B. Miller were patently designed for distribution of her properties at death, and the transfers purportedly effected were not genuinely effective prior to her death. I recognize, of course, that a person may dispose of property while living by means of effective inter vivos transactions. But there can be no inter vivos trust when the legal and equitable ownership continues to rest in the settlor. This is the circumstance here when the instruments employed by Virginia B. Miller are viewed in their true effect. In the trust acknowledgments to herself, she expressly retained the plenary power and right to mortgage or otherwise encumber the properties; to receive and enjoy all income therefrom by reason of the reservation to herself as trustee of the right to accumulate the income or pay it to herself as an individual; to amend or revoke the trusts in whole or in part; and to designate a new beneficiary. She provided further that the sale or other disposition by her of the whole or any part of the properties would constitute a revocation of the trusts and that the death of the named beneficiary during her lifetime would revoke the designation. As trustee she did no more than hold the properties in name as such; she had no significant acts to perform, or responsibilities to discharge or discretion to exercise. See McMurray v. Stanley, 69 Tex. 227, 6 S.W. 412 (Tex.Sup.1887). There was nothing she could do as trustee that would constitute a breach of a fiduciary duty to anyone, including her death beneficiary. See Restatement (Second) of Trusts § 2 and § 25 (1959). Huckaby as the named beneficiary would enjoy a use and benefit only upon her death and then only if, prior thereto, a new beneficiary was not named, or the declarations were not revoked, or the properties were not sold or otherwise consumed.
The quitclaim deeds by which a present transfer was sought to be effected were operative only in conformity with and pursuant to the declarations of trust. Under the living trusts, Virginia B. Miller was settlor, beneficiary and trustee. The cumulative effect of the powers and rights retained by her is such that there was no separation of the legal and equitable interests in the properties during her lifetime. *195She retained beneficial ownership notwithstanding the seeming conveyances, and each transaction was a ceremony without present substance, an act that was meaningless in effect and hence a nullity. See Annot., 32 A.L.R.2d 1270 (1953).
The majority professes to find a presently operative trust plan in the naked designation of Huckaby as successor trustee in event of legal incapacity. It says that this “indicates an act in praesenti.” But two features of the successor trustee designation are quite obvious: the contingency upon which it rests may never occur; and there are no directions to the successor trustee indicative of the wishes of the so-called settlor in the administration of the trust should she become incompetent. This is too frail to constitute a lifetime disposition and too slender a thread with which to validate and hold together the otherwise ineffective inter vivos transactions.
The device under review is comparable in effect to a living trust where one person is named sole beneficiary and sole trustee. The assets are held free of any trust under these circumstances. It is as stated in the Restatement (Second) of Trusts § 99, comment 5 (1959):
[Tjhere 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.
The court of appeals in Betker v. Nalley, 78 U.S.App.D.C. 312, 140 F.2d 171 (1944), considered a deed in trust of similar effect except that the owner was not named as trustee. The court said:
It is significant that no duty is specified, in the deed of June, 1930, to be performed by the trustees during the lifetime of the grantor, except to hold the two parcels. Moreover, this holding was to be for her use and benefit. * * *
The only thing the grantor parted with irrevocably was the remainder of the trust property, if there should be any remainder after her death; and the only possibility that any discretion or power might have to be exercised by her trustees after her death arose from the possibility that she might elect not to dispose of the entire trust property before her death. Even in that event they were to be mere channels through which title would flow for the purpose of distribution. It seems obvious, therefore, that the deed of June, 1930, was ineffective to create a trust.
I am not unmindful of the provision in the Texas Trust Act, Tex.Rev.Civ.Stat.Ann. Art. 7425b-7 (1960), that an owner of property may declare in writing that he holds it as trustee for another person; and that revocable declarations of trusts are recognized as valid under the law of our State. But as pointed out by Professor Johanson, the statutes do not reach the issue of whether a trust will be recognized if the settlor — trustee reserves broad controls exercisable either in his capacity as settlor or as trustee. Johanson, Revocable Trusts and Community Property: The Substantive Problems, 47 Tex.L.Rev. 537 footnote 71 at 556 (1969). Clearly, the provisions of the Texas Trust Act are not a mandate for validation of all arrangements in such form, and judicial sanction should not be given to an arrangement without substance or effect as an inter-vivos transfer.
I would declare the instruments of no force and effect.
WALKER, GREENHILL and DANIEL, JJ., join in this dissent.