Opinion
No. 11-05-00080-CV
Opinion filed June 15, 2006.
On Appeal from the 39th District Court Stonewall County, Texas, Trial Court Cause No. 4366.
Panel consists of: WRIGHT, C.J., and McCALL, J., and STRANGE, J.
MEMORANDUM OPINION
This dispute concerns the construction of a trust agreement. The trial court determined that documents executed by the decedent, Oscar D. Galloway, created a valid trust which terminated upon his death and that the corpus of that trust passed to his heirs at law. We affirm.
I. Background Facts
Galloway owned and operated the Kent County General Store in Jayton, Texas, as a sole proprietorship. He also owned a farm, cattle, and other property. His total estate was valued at approximately $150,000. Appellant (Teresa Nuding) and Sherry Doss worked in the store with Galloway. Nuding had been a full-time employee for seven years, and Doss had been a full-time employee for three and one-half years.
Galloway was diagnosed with cancer in March 2001. He had discussions with Nuding and others in the community about the store's future operations. Nuding recommended a trust because they had used one for her father. Galloway asked Eloise Crockett to prepare the necessary documents. Crockett was a notary and had prepared Galloway's tax returns for a number of years. She had trust forms on her computer. Crockett prepared three drafts of the documents and reviewed those with Galloway. He never made any changes to her forms but did not execute them either.
Then in April 2002, Galloway instructed Nuding to contact Crockett to see if she could come to his house to execute the trust documents. Galloway signed them at his home on April 30, 2002. The documents included a "Revocable One-Party Living Trust Known as O T S Trust," an "Assignment of Property to Trust," a "Certificate of Trustees' Powers," and a deed. Galloway died approximately one month later. Galloway was single, had no surviving children, and died intestate. His heirs at law were his mother and siblings.
The trust instrument provided that, during Galloway's lifetime, the trust's net income was to be paid to him. It also provided the trustee with the discretion to pay for Galloway's medical expenses, maintenance, and welfare from the trust's corpus. The trust instrument further provided:
Upon death of the Grantor, the remaining Trust assets shall be distributed to the beneficiaries in the proportionate or allocable amounts as are specified in the Schedule of Beneficiaries as may then be in force.
There is no evidence that a schedule of beneficiaries was ever requested or prepared.
Nuding and Doss continued to operate the store for several months after Galloway's death. Galloway's sister, Betty L. Smith, took over the store in January 2003 and sold it to Doss and her husband. Smith, as Independent Administratrix of the Estate of Oscar D. Galloway, then filed suit against Nuding, individually and as Trustee of the O T S Trust, seeking a declaratory judgment, an accounting, and damages. The trial court conducted a bench trial and found that Galloway had created the O T S trust, that the corpus of the trust consisted of three lots in Jayton, and that the corpus passed to his heirs at law upon his death. All other claims for relief were denied.
II. Issues
Nuding contends that the trial court erred by finding the following: that the trust instrument was unambiguous; that it terminated on Galloway's death; and that the corpus passed to Galloway's heirs upon his death.
III. Standard of Review and Rules of Construction
The construction of a trust document is a question of law. Eckels v. Davis, 111 S.W.3d 687, 694 (Tex.App.-Fort Worth 2003, pet. denied); Hurley v. Moody Nat'l Bank of Galveston, 98 S.W.3d 307, 310 (Tex.App.-Houston [1st] 2003, no pet.). Our primary concern when construing a trust instrument is to determine the settlor's intent. Henderson v. Parker, 728 S.W.2d 768, 770 (Tex. 1987). That intent must be ascertained from the language used within the four corners of the instrument. Nowlin v. Frost Nat'l Bank, 908 S.W.2d 283, 286 (Tex.App.-Houston [1st] 1995, no writ). All terms must be harmonized to properly give effect to all parts. Hutton v. Methodist Home, 615 S.W.2d 289, 292 (Tex.Civ.App.-Fort Worth 1981, writ ref'd n.r.e.). If possible, the court should construe the instrument to give effect to all provisions so that no provision is rendered meaningless. Myrick v. Moody, 802 S.W.2d 735, 738 (Tex.App.-Houston [14th] 1990, writ denied).
If the language of a trust is unambiguous and expresses the intent of the settlor, it is unnecessary to construe the instrument because it speaks for itself. Hurley, 98 S.W.3d at 310. If, however, the meaning of the instrument is uncertain or is reasonably susceptible to more than one meaning, then it is ambiguous. Calhoun v. Killian, 888 S.W.2d 51, 54 (Tex.App.-Tyler 1994, writ denied).
IV. Is The Trust Instrument Ambiguous?
Nuding contends that the lack of a schedule of beneficiaries and the absence of any provision which expressly provides the time and circumstance when the trust is to terminate makes the trust instrument ambiguous. Nuding argues that these failures render the instrument susceptible to two meanings. First, that the corpus was to be distributed to Galloway's heirs at law. Second, that the trustees, Nuding and Doss, were to receive the corpus.
We disagree. The trust provided that, upon Galloway's death, "the remaining Trust assets shall be distributed to the beneficiaries in the proportionate or allocable amounts as are specified in the Schedule of Beneficiaries as may then be in force" (emphasis added).
The word "shall" is mandatory. In re Orsagh, 151 S.W.3d 263, 267 (Tex.App.-Eastland 2004, no pet.). Galloway provided for the termination of the trust at his death by placing a mandatory obligation on the trustees to then distribute the corpus. To whom the corpus was to be distributed was contingent. The word "may" is permissive. Tri-Star Petroleum Co. v. Tipperary Corp., 107 S.W.3d 607, 615 (Tex.App.-El Paso 2003, pet. denied). The trust clearly provides that a schedule of beneficiaries was a contingency by saying "as may then be in force." Nuding concedes that there is no extrinsic evidence that Galloway ever requested the preparation of a schedule of beneficiaries or that he prepared one himself.
Galloway's description of the schedule of beneficiaries as a contingency distinguishes this case from decisions such as Jordan v. Virginia Military Institute, 296 S.W.2d 952 (Tex.Civ.App.-San Antonio 1956, no writ). There, the testator's will referenced a list of assets which was attached to the will. However, no such list was attached at the time of the will's execution. Id. at 953. The court held that the provision of the will dependent upon the missing list was void because it attempted to incorporate a document not in existence by reference. Id. Galloway's trust instrument does not attempt to incorporate a document not in existence by reference. Instead, it provides for the possibility that a schedule of beneficiaries may exist at Galloway's death.
Moreover, even if Jordan is controlling, the only portion of the trust dependent upon the schedule is the trust's instruction to the trustee to whom the corpus is to be distributed. The absence of a schedule does not make the trust ambiguous, it makes that portion of the trust void. That would not void any other provision, including the portion terminating the trust at Galloway's death.
When Galloway created the O T S trust, he was the only beneficiary. Consequently, even though the trustee held legal title, Galloway held equitable title and is considered the real owner. Faulkner v. Bost, 137 S.W.3d 254, 258 (Tex.App.-Tyler 2004, no pet.). Because Galloway named no other beneficiary before his death, the corpus was subject to his estate's administration and was immediately vested in his heirs at law upon his death. TEX. PROB. CODE ANN. § 37 (Vernon 2003).
Nuding's brief challenges the logic of allowing the corpus to go to Galloway's heirs at law given the circumstances surrounding the creation of the trust. Certainly, one can wonder why Galloway created a trust for one asset to the exclusion of all others, why he executed the documents so shortly before his death, and why he did not include the store's inventory and equipment in the trust's corpus. The presence of these questions, however, does not make the trust instrument ambiguous. Intent must be drawn from the instrument, not the instrument from the intent. Huffman v. Huffman, 339 S.W.2d 885, 888 (Tex. 1960). The question is not what Galloway may have intended to write but what is the meaning of the words he actually used. Shriner's Hosp. for Crippled Children of Tex. v. Stahl, 610 S.W.2d 147, 151 (Tex. 1980).
Because the trustee was obligated to distribute the trust's corpus at Galloway's death and because there was no evidence of a schedule of beneficiaries at his death, the trial court correctly found that the trust instrument was unambiguous and that the corpus passed to Galloway's heirs at law upon his death. Nuding's first issue is overruled.
This holding also disposes of Nuding's second and third issues which challenge the legal and factual sufficiency of the evidence supporting the trial court's finding that the trust terminated upon Galloway's death and her fourth and fifth issues which challenge the legal and factual sufficiency of the evidence supporting the trial court's finding that the trust corpus passed to Galloway's heirs at law. Nuding relies extensively on extrinsic evidence of Galloway's intent, including statements made by him to others about his intentions for the store's continued operation. Extrinsic evidence may not alter the terms of the unambiguous trust instrument. See Farah v. First Nat'l Bank of Fort Worth, 624 S.W.2d 341, 345 (Tex.App.-Fort Worth 1981, writ ref'd n.r.e.) (the court must ascertain intent from the instrument itself and may not redraft it to conform to the court's perception of the testator's unexpressed intention). Cf. Skinner v. Moore, 940 S.W.2d 755, 758 (Tex.App.-Eastland 1997, no writ) (allowing consideration of attorney's testimony to establish scrivener's error but not allowing statements made to the attorney by the decedent to establish intent). Accordingly, Nuding's second, third, fourth, and fifth issues are overruled.
V. Conclusion
The judgment of the trial court is affirmed.