702 Bradley v. Shaffer, 535 S.W.3d 242 (Tex. App.—Eastland 2017, no pet.)

Monday, September 3rd, 2018

Richard F. Brown

The following is not a legal opinion. You should consult your attorney if the case may be of significance to you.

Bradley v. Shaffer, 535 S.W.3d 242 (Tex. App.—Eastland 2017, no pet.) held that a trust did not violate the rule against perpetuities, that a mineral deed executed in violation of the trust’s spendthrift provision was void, and that the void mineral deed did not convey after-acquired title. The W. S. Shaffer Family Trust (“Trust”) held mineral interests in 1,765 acres of land in Taylor County, Texas. The Trust included a spendthrift provision. The term of the Trust was 20 years, but the Trust could continue after the initial term upon unanimous agreement of the beneficiaries. During the 20-year term, one of the Trust beneficiaries executed a mineral deed to Grantee conveying both the mineral interest held in the Trust by Grantor and any mineral interest held in the Trust that Grantor might acquire in the future. The trustees filed suit against Grantee seeking a declaratory judgment that the mineral deed was void. While the suit was pending, and prior to the expiration of the original 20-year term of the Trust, the beneficiaries of the Trust, including the Grantor of the mineral deed, executed a 20-year extension of the Trust. The original 20-year term lapsed during the litigation. The principal issues were: (1) whether the extension provision in the Trust violated the rule against perpetuities, and 2) whether the mineral deed was void under the spendthrift clause.

Regarding the first issue, the Court held that the extension provision in the Trust did not violate the rule against perpetuities. “Section 112.036 of the Texas Trust Code provides that ‘[a trust] interest is not good unless it must vest, if at all, not later than 21 years after some life in being at the time of the creation of the interest, plus a period of gestation.’” The “rule against perpetuities ‘relates only to the vesting of estates and interests, and not to their duration or ending.’” “It is immaterial that full possession and enjoyment of the property is postponed beyond the time period for the rule against perpetuities as long as the beneficial interests become vested within the applicable period.” The Trust also contained a remainder provision whereby an initial beneficiary’s vested interest passed to his surviving issue at his death. “[T]his trust immediately vested the settlors/initial beneficiaries’ interests in the trust at the time the trust came into existence.” The Trust’s remainder provision operated such that the subsequent takers became “substitutional takers” of a previously vested interest; once again, not in violation of the rule against perpetuities.

The Court held that the spendthrift provision of the Trust precluded the Trust beneficiary Grantor from assigning his beneficial interest; therefore, the mineral deed was void. “[A]ssignments of beneficial interests in trusts are invalid when they are subject to a spendthrift provision in the trust.” Grantee also claimed title under the doctrine of after-acquired title. However, “[t]he doctrine of after-acquired title does not apply to a void conveyance.”

The Trust did not violate the rule against perpetuities, the spendthrift clause was enforceable, and the purported conveyance of the minerals was void.

The significance of the case is the holding that a mineral deed executed in violation of a spendthrift clause in a trust is void and will not convey any present title, legal, or equitable, nor will it convey any after-acquired title. Under the rule against perpetuities, the inquiry is focused on the time for the estate to vest, not the duration of the trust.