This case dealt with mineral interests that were held in a testamentary trust. More specifically, the case dealt with whether the extension provision of the trust violated the rule against perpetuities or, in the alternative, if the interest claimed passed through the doctrine of after acquired title. The court held that the beneficial interests in the trust vested at the time of the trust creation and, therefore, were not in violation of the rule against perpetuities. Additionally, the court held that the doctrine of after acquired title did not apply because the conveyance was invalid pursuant to the spendthrift provision in the trust.
W.S. Shaffer and E.S. Shaffer originally owned the minerals in interest in this case. In 1993, the W.S. Shaffer Family Trust was created, and the initial beneficiaries were the two surviving children of W.S. Shaffer and E.S. Shaffer, who each received a one-quarter beneficial interest in the trust, and the surviving grandchildren from two deceased children of W.S. Shaffer and E.S. Shaffer, who each received a proportionate share of their deceased parent’s one-quarter beneficial interest in the trust. Clarence Shaffer was an initial beneficiary, being one of the surviving children of W.S. Shaffer and E.S. Shaffer , and owned a one-quarter beneficial interest in the trust.26 The trust provided that upon the death of an initial beneficiary, the beneficial interest, “shall immediately vest and pass directly to his or her children.”27 Clarence died in 1999 and, as such, his interest passed to his children, Darell Shaffer and Darlene Shaffer. The trust granted the trustees with the power to sell or lease the mineral estate; however, the trust also included the following spendthrift provision:
7.22 LIMITATION OF AUTHORITY OF TRUSTEES AND BENEFICIARIES. No Trustee nor beneficiary of this Trust shall have any right or power to anticipate, pledge, assign, sell, transfer, alienate or encumber his or her interest in the Trust in any way; nor shall any such interest in any manner be liable for or subject to the debts, liabilities, or obligations of such Trustee or beneficiary or claims of any sort against such Trustee or beneficiary.28
The trust also contained an extension provision as follows: “This Trust shall be for a term of twenty (20) years from the latest date of execution by an initial Trustor. This Trust may be continued upon unanimous agreement of all beneficiaries hereunder….”29
Along with the beneficial interest in the trust, Darell Shaffer owned the surface estate to the subject property. By a 2004 Warranty Deed, Darell Shaffer conveyed the subject property to Terry W. Bradley. The Warranty Deed did not contain any reservation or exception pertaining to the minerals in the property. Thereafter, in a 2006 Mineral Deed, Darell expressly conveyed his beneficial interest in the trust, as well as any interest in the trust he may acquire in the future, to Bradley.30
In 2013, pursuant to the extension provision of the trust, the beneficiaries unanimously agreed to extend the trust for another 20 years. However, prior to this agreement, the trustees and Darlene Shaffer, the Appellees, filed suit against Bradley asserting that the conveyances to him were void insofar as the beneficial interest in the minerals.
In a motion for partial summary judgment, the Appellees asserted that the trust owned the mineral interests and, under the spendthrift provision, Darell Shaffer had no title or authority to convey his beneficial interest. Terry Bradley also filed a motion for summary judgment, claiming that the trust terminated pursuant to its terms and that Darell’s mineral interest passed to Bradley under the doctrine of after-acquired title. In its response to Bradley’s motion, the Appellees submitted a copy of the extension agreement, which was the first notice given to Bradley that the trust had been extended. Bradley’s subsequent response focused on the extension of the trust, claiming it violated the rule against perpetuities. The court granted the Appellees motion for partial summary judgment, and Bradley appealed.31
On appeal, Bradley alleged that the trial court erred because the extension provision violates the rule of perpetuities and that, because the extension provision violated the rule, the extension was ineffective and the trust terminated on June 23, 2013, under its own terms. Bradley also alleged that, upon the termination in 2013, Darrell Shaffer’s mineral interest passed to him through the doctrine of after-acquired title.32 In analyzing these issues, the court first looked at the trust provisions itself to determine whether Darell even had the capability to convey his interest in the minerals. In doing so, the court addressed the spendthrift provision of the trust and determined that, through the rule laid out in Faulkner v. Bost,33 spendthrift provisions are, in fact, valid, and any assignment of a beneficial interest in a trust is invalid when it is subject to a spendthrift provision. As such, the court determined that the conveyances to Bradley were invalid at the time they occurred insofar as the minerals in the property.
The court then looked to see whether the trust violated the rule against perpetuities. The rule against perpetuities requires that interests must vest within 21 years of a life in being. The court stated that, contrary to Bradley’s argument, the rule only requires that the interests vest within the 21 years, not that the duration of trusts is limited to 21 years.34 The beneficial interest in the minerals vested in Darell’s father, Clarence Shaffer, at the time the trust was created. Furthermore, the trust contained a remainder provision, which passed Clarence’s interest to his children. The court held that the remainder provision was not a violation of the rule against perpetuities because Darell became a substitutional taker of the already vested interest from his father.35 Therefore, the court held that the trust was not in violation of the rule against perpetuities because the beneficial interests vested within the statutory period and that the extension did not affect the vesting of an interest, only the duration of the trust.
Lastly, the court addressed Bradley’s argument that he obtained title to the minerals through the doctrine of after-acquired title. The court pointed out that Bradley did not offer any argument as to the applicability of the spendthrift provision of the trust and quickly disposed of his allegation, relying on Pascoe v. Keuhnast,36 which stated that the doctrine of after-acquired title does not apply to a void conveyance. The court held that the conveyance of an interest subject to a spendthrift provision is void, and therefore, Bradley did not acquire the interest through the doctrine of after-acquired title.37
In conclusion, the court held that the conveyance of interests in a trust subject to a spendthrift provision are void; furthermore, the rule of perpetuities does not invalidate a conveyance when the beneficial interest vests prior to the time period required by the rule. This case has not been appealed to the Texas Supreme Court. This case is important for attorneys and landmen because it displays the importance of investigating conveyances from a beneficiary of a trust to determine if the trust contains a spendthrift provision and reaffirms that when analyzing whether trust provisions violate the rule against perpetuities, the question is when the beneficial interest vests, not the duration of the trust.
25 Bradley v. Shaffer, No. 11-15-00247-CV, 2017 WL 5907319 (Tex. App.—Eastland Nov. 30, 2017, no pet. h.).
26 Id. at *1.
29 Id. at *2.
31 Id. at *3.
33 Faulkner v. Bost, 137 S.W.3d 254, 260 (Tex. App.—Tyler 2004, no pet.).
34 Bradley, 2017 WL 5907319 at *5.
35 Id. at *6.
36 Pascoe v. Keuhnast, 642 S.W.2d 37, 40 (Tex. App.—Waco 1982, writ refused n.r.e.).
37 Bradley, 2017 WL 5907319 at *6.