Lexplug logoLexplug

Jimenez v. Lee

Supreme Court of Oregon, In Banc
547 P.2d 126 (1976)
ELI5:

Rule of Law:

A trust is created when a donor transfers property to a person with the intent to vest beneficial ownership in a third party for a specific purpose, even if the words 'in trust' are not used. A trustee has a strict fiduciary duty to account for all assets and cannot expand their powers over trust property by retitling it under a different legal framework, such as the Uniform Gift to Minors Act.


Facts:

  • In 1945, Betsy Lee's paternal grandmother purchased a $1,000 U.S. Savings Bond registered in the names of Betsy, her mother, and her father, Jason Lee.
  • The grandmother explicitly stated that the bond was purchased to provide funds for Betsy's educational needs.
  • In 1956, one of Jason Lee's clients, Mrs. Adolph Diercks, made a gift of $500 for Betsy Lee's benefit, also intended for her education.
  • The $500 gift was deposited into a savings account held jointly in the names of Jason Lee and his three children.
  • In 1960, Jason Lee cashed the savings bond and closed the joint savings account.
  • Jason Lee then invested the proceeds from both the bond and the savings account into common stock, registering the shares in his name as 'Custodian under the Laws of Oregon for Betsy Lee.'

Procedural Posture:

  • Betsy Lee (plaintiff) sued her father, Jason Lee (defendant), in an Oregon state trial court.
  • The suit sought to compel the defendant to provide an accounting of assets allegedly held in trust for the plaintiff.
  • The trial court found that no trust existed and that the defendant held the assets as a custodian under the Uniform Gift to Minors Act.
  • The trial court issued a decree dismissing the plaintiff's complaint.
  • The plaintiff appealed the trial court's dismissal to the Supreme Court of Oregon.

Locked

Premium Content

Subscribe to Lexplug to view the complete brief

You're viewing a preview with Rule of Law, Facts, and Procedural Posture

Issue:

Does a trust arise when a donor transfers property to a parent for the stated educational needs of a child, thereby imposing on the parent a strict duty to account for all expenditures from the funds?


Opinions:

Majority - O’Connell, C. J.

Yes, a trust arises under these circumstances. A formal declaration using the word 'trust' is not necessary to create a trust relationship; the creation of a trust is determined by the donor's intent to vest beneficial ownership in a third person. Here, both donors clearly intended the funds to be used for the plaintiff's educational needs, which established a trust with the defendant as trustee. The defendant breached his fiduciary duty by attempting to convert the trust assets into a custodianship under the Uniform Gift to Minors Act, as this would improperly broaden his powers and lessen his duty to account. As a trustee, the defendant is held to a strict standard to maintain and render accurate accounts, and he failed to do so by commingling funds and attempting to offset the trust with improper expenditures, such as his own parental obligations and personal expenses. All ambiguities in a trustee's inadequate accounting must be resolved against the trustee.



Analysis:

This case reinforces the principle that the donor's intent is the paramount consideration in the formation of a trust, prioritizing substance over formal language. It establishes a clear distinction between the limited powers of a trustee of an educational trust and the broader discretionary authority of a custodian under the Uniform Gift to Minors Act (UGMA). The ruling serves as a significant precedent, placing a high burden on parent-trustees to maintain meticulous, separate accounts for trust funds and clarifying that they cannot use such funds to fulfill their own pre-existing parental support obligations. This decision strengthens beneficiary protections by holding trustees to a strict accounting standard, where any doubt created by poor record-keeping is resolved in the beneficiary's favor.

G

Gunnerbot

AI-powered case assistant

Loaded: Jimenez v. Lee (1976)

Try: "What was the holding?" or "Explain the dissent"