Barnette v. McNulty
21 Ariz. App. 127, 516 P.2d 583, 1973 Ariz. App. LEXIS 831 (1973)
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Rule of Law:
Where a settlor reserves the power to revoke a trust but does not specify an exclusive method of revocation, the trust can be revoked by any manner that sufficiently manifests the settlor's intention to do so, including oral declarations to third parties.
Facts:
- In 1967, the appellant (wife) married Wilson M. Barnette, who owned a moving and storage business, Van Pack of Arizona, Inc.
- In March 1970, while hospitalized, Mr. Barnette executed a 'Declaration of Trust' form from a 'How to Avoid Probate' book.
- The declaration named Mr. Barnette as trustee of his Van Pack stock for the benefit of his wife, the appellant.
- The trust instrument reserved Mr. Barnette's right to revoke the trust during his lifetime and listed several acts that would be 'conclusive evidence' of revocation.
- The stock certificates were never formally transferred on the corporate books to Mr. Barnette as trustee.
- In the summer of 1970, the couple experienced marital difficulties and both parties initiated divorce proceedings.
- While consulting with two separate attorneys about the divorce and his will, Mr. Barnette stated that the corporation was his separate property and he wanted his son, not his wife, to inherit it.
- Mr. Barnette executed a new will that specifically referred to the Van Pack corporation as being owned solely by him, and he died shortly thereafter on July 23, 1970.
Procedural Posture:
- The appellant-plaintiff (wife) brought an action in the trial court disputing the testamentary disposition of stock in her deceased husband's estate.
- The trial court entered a judgment in favor of the appellee (the husband's estate).
- The appellant-plaintiff appealed the trial court's judgment to this intermediate court of appeals.
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Issue:
Does a settlor, who reserves a power of revocation in a trust instrument that lists non-exclusive methods, effectively revoke the trust by orally communicating his intent to revoke to third parties?
Opinions:
Majority - Howard, Judge
Yes. A settlor effectively revokes a trust when he sufficiently manifests an intention to do so, and the oral communications to his attorneys constituted such a manifestation. First, the court determined that a valid trust was created when Mr. Barnette executed the declaration, as a settlor can declare himself trustee of stock without formally transferring the shares on the corporate books. On the main issue of revocation, the court held that the methods listed in the trust document were 'conclusive evidence' but were not the exclusive means of revocation. Citing the Restatement (Second) of Trusts, § 330, the court reasoned that where a trust instrument does not specify an exclusive mode of revocation, the power can be exercised in any manner that clearly shows the settlor's intent. Mr. Barnette's statements to his two attorneys that the corporation belonged to him and that he wanted his son to inherit it were a clear manifestation of his decision to revoke the trust. The court also held that testimony regarding these statements was not inadmissible hearsay, as it was offered to prove the 'verbal facts' of revocation, not for the truth of the statements themselves.
Analysis:
This case clarifies the principle of trust revocation, establishing that a settlor's manifest intent is paramount when the trust instrument does not prescribe an exclusive method for revocation. It broadens the scope of permissible revocatory acts to include informal, oral declarations to third parties, moving beyond strict adherence to written formalities. This decision provides flexibility for settlors but may also increase litigation over what actions or statements constitute a 'sufficient manifestation' of intent, creating uncertainty for beneficiaries and trustees.
