Marshall v. Marshall
1990 Tex. App. LEXIS 455, 1990 WL 26792, 786 S.W.2d 493 (1990)
Rule of Law:
To create a valid inter vivos trust by transferring property to a trustee, the grantor must effectively deliver the property to the trustee, intending for title to transfer and become currently operative.
Facts:
- On August 23, 1985, Thomas Marshall, Sr. (grantor) and his children, Thomas Marshall, Jr., Douglas Marshall, and Dana Jo Dunkerson (trustees), executed a trust indenture to create the Marshall Family Trust.
- The trust indenture stated it was irrevocable and would consist of 5,000 shares of stock in Marshall Health Care, Inc., specifically describing these shares in an attached Schedule A.
- The trust indenture included language stating that the grantor "does hereby transfer and assign unto the Trustees, the property listed in Schedule A."
- The 5,000 shares of stock in Marshall Health Care, Inc. were never endorsed by Thomas Marshall, Sr., nor were the original certificates surrendered to the corporation to obtain new certificates in the trustees' names.
- Dana Jo Dunkerson testified that her father, Thomas Marshall, Sr., offered her the stock, but she agreed that he could hold it for her.
- Thomas Marshall, Jr. testified that his father told him the stock certificates were in a bank safety deposit box to which Thomas Marshall, Jr. had a key.
- Thomas Marshall, Sr. denied that the stock certificates had ever been delivered to the trustees or placed in any safety deposit box for their control.
Procedural Posture:
- On November 15, 1985, Thomas Marshall, Sr. sought to dissolve the trust, contending that it was ineffective and void.
- The trustees (Thomas Marshall, Jr., Douglas Marshall, and Dana Jo Dunkerson) filed a petition for declaratory judgment in the trial court (court of first instance) seeking a declaration that the trust was valid and subsisting.
- The trial court found that the stock was never transferred to the trustees and concluded that no valid trust had been created.
- Thomas Marshall, Jr. and Dana Jo Dunkerson (the trustees) appealed the trial court's judgment to the Court of Appeals of Texas, Texarkana (appellants), with Thomas Marshall, Sr. as the appellee who also raised a cross-point.
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Issue:
Does an inter vivos trust for shares of stock become valid and effective when the grantor executes a trust indenture purporting to assign the stock to trustees but does not physically deliver the stock certificates or otherwise place them within the effective control of the trustees?
Opinions:
Majority - Cornelius, Chief Justice
No, an inter vivos trust for shares of stock does not become valid if the grantor fails to effectively deliver the stock certificates to the trustees, even if a written assignment is executed. The court affirmed the trial court's judgment, emphasizing that for an inter vivos transfer of property to create a trust, there must be either a written conveyance or possession of the property must be delivered to the donee. Citing Wells v. Sansing, delivery requires placing the property within the control of the donee with the intention that the transfer of title becomes currently operative. For shares of stock, transfer typically involves an assignment in writing on the certificate or in a separate document, and a delivery of the certificate to the transferee, or the surrender of the certificate to procure another in the transferee's name (referencing Tex.Bus. & Com.Code Ann. §§ 8.308, 8.309). While the trust indenture purported to assign the stock, the court held that physical delivery or placing the certificates within the control of the trustees was still a necessary condition for the assignment to be fully effective. The evidence regarding delivery was conflicting, and the trial court, as the trier of fact, found that the certificates were not delivered to the safety deposit box and thus not placed within the trustees' control. The appellate court concluded that there was sufficient evidence to support the trial court's finding of fact, and therefore, it would not substitute its own conclusions, consistent with the principle articulated in Pool v. Ford Motor Co.
Analysis:
This case clarifies that merely executing a written instrument purporting to transfer property to a trust, even with explicit assignment language, is insufficient if the actual delivery or effective transfer of control over the trust corpus to the trustees does not occur. It reinforces the fundamental requirement of delivery for the valid creation of an inter vivos gift or transfer of property, particularly for certificated securities. Future cases involving the formation of inter vivos trusts, especially those dealing with tangible or certificated personal property, will likely rely on this decision to emphasize the importance of physically transferring or relinquishing control over the assets to the named trustees. The ruling also underscores the significant deference appellate courts give to a trial court's findings of fact when supported by sufficient evidence.
