Magdalena Sanchez McMordie, in Her Capacity as Beneficiary and Co- Trustee of the Hobart B. McMordie, II Asset Management Trust. v. Charles Harris McMordie, in His Capacity as Co-Trustee of the Hobart B. McMordie, II Asset Management Trust
07-14-00393-CV
| Tex. | Aug 28, 2015Background
- Trust created by Hobart B. McMordie, II (Nov. 1, 2004) naming Hobart and his wife Magdalena as co‑trustees and co‑beneficiaries; nephews (including Charles) are remainder beneficiaries on termination.
- Article VI.B: Trustees shall distribute income and principal as demanded by Hobart during his life; any undistributed income at year‑end is added to principal and “either Beneficiary may make demands anytime thereafter to receive said income.”
- Hobart died in 2010; trust became irrevocable; dispute later arose between Magdalena (beneficiary/co‑trustee) and Charles (co‑trustee) about rights to accumulated but undistributed income.
- Trial court: held Magdalena could demand accumulated income but could not unilaterally compel distribution; distribution required trustee concurrence.
- This appeal arose from cross motions for summary judgment; the appellate court modified the judgment to hold that (1) accumulated income remains subject to beneficiary demand even after being added to principal, (2) a beneficiary may demand payment anytime, and (3) trustees must distribute upon such demand.
Issues
| Issue | Plaintiff's Argument (Magdalena) | Defendant's Argument (Charles) | Held |
|---|---|---|---|
| Whether beneficiary can demand accumulated but undistributed income added to principal | Magdalena: Trust language permits "either Beneficiary" to demand receipt of undistributed income added to principal at any time | Charles: Once income is added to principal, it is subject to trustee discretion and a beneficiary cannot unilaterally compel distribution | Held for Magdalena: beneficiary may demand such income; it remains subject to demand despite being added to principal |
| Whether a beneficiary’s demand alone obligates trustees to pay | Magdalena: Phrase “to receive” shows intent that trustees must deliver upon demand | Charles: Distribution must be effectuated by trustees; a trustee can withhold distribution absent concurrence or discretion | Held for Magdalena: Court construed “to receive” to imply trustees must distribute upon beneficiary demand |
| Whether undistributed income loses its identity when added to principal | Magdalena: Addition to principal does not strip the identity for purposes of beneficiary demand | Charles: Once added to principal, it becomes principal and subject to trustee discretion | Held for Magdalena: Appellate court treated undistributed income as retaining identity for demand purposes despite being added to principal |
| Whether parol evidence / extrinsic affidavit testimony was admissible on interpretation | Charles: Affidavit evidence about parties’ positions and amounts was relevant to summary judgment | Magdalena: Trust unambiguous; interpretation limited to four corners; extrinsic evidence not relevant | Held for Magdalena: Trust was interpreted from its four corners; extrinsic affidavit evidence not considered for construing unambiguous provision |
Key Cases Cited
- Provident Life & Acc. Ins. Co. v. Knott, 128 S.W.3d 211 (Tex. 2003) (standard: summary judgment reviewed de novo)
- Coker v. Coker, 650 S.W.2d 391 (Tex. 1983) (instrument construction requires harmonizing all parts and avoiding rendering provisions meaningless)
- JAW The Point L.L.C. v. Lexington Ins. Co., 460 S.W.3d 597 (Tex. 2015) (words in an instrument are given their ordinary meaning unless contrary intent appears)
- First Nat'l Bank of Beaumont v. Howard, 229 S.W.2d 781 (Tex. 1950) (settlor’s lifetime arrangements inform interpretation of testamentary or trust provisions)