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 ( 2015 )

ACCEPTED
07-14-00393-CV
SEVENTH COURT OF APPEALS
AMARILLO, TEXAS
8/28/2015 2:00:49 PM
Vivian Long, Clerk
NO. 07-14-00393-CV
IN THE COURT OF APPEALS FILED IN
7th COURT OF APPEALS
FOR THE SEVENTH DISTRICT OF TEXAS AT AMARILLO
AMARILLO, TEXAS
8/28/2015 2:00:49 PM
MAGDALENA MCMORDIE, VIVIAN LONG
CLERK
in her capacity as Beneficiary and Co-Trustee
of the Hobart B. McMordie, II Asset Management Trust
Appellant/Cross Appellee,
v.
CHARLES HARRIS MCMORDIE,
in his capacity as Co-Trustee
of the Hobart B. McMordie, II Asset Management Trust
Appellee/Cross-Appellant.
FROM THE 251ST DISTRICT COURT
RANDALL COUNTY, TEXAS
THE HONORABLE ANA ESTEVEZ, JUDGE PRESIDING
CAUSE NO. 66,482-C
MOTION FOR REHEARING
TABLE OF CONTENTS
TABLE OF AUTHORITIES ................................................................................... iii
SUMMARY OF ARGUMENTS PRESENTED ....................................................... 1
SUMMARY OF POINTS RELIED UPON............................................................... 3
ARGUMENTS AND AUTHORITIES ..................................................................... 4
I. The Court Should Reconsider its Memorandum Opinion Because it Takes
into Account Only Mrs. McMordie’s Rights as Beneficiary, Without
Acknowledging the Corresponding Issue of Charles’ Powers and Duties as
Trustee ....................................................................................................... 5
II. The Court Should Reconsider its Memorandum Opinion Because it
Disturbs Hobart’s Express Intent, Displacing the Language of the Trust
and Rendering Certain Trust Provisions Meaningless ............................... 9
A. The Court reads an unintended mandatory distribution standard into
the Trust and ultimately disturbs Hobart’s express intent................. 9
B. The Court’s construction of the Trust fails to give effect to all
provisions of the Trust, instead rendering several Trust provisions
wholly meaningless in disregard for Hobart’s express intent ......... 16
CONCLUSION ........................................................................................................ 18
Appendix A – Memorandum Opinion, dated July 24, 2015
Appendix B – Trust
MOTION FOR REHEARING Page ii
TABLE OF AUTHORITIES
CASES:
Doherty v. JP Morgan, 2010 WL 1053053
(Tex. App.—Houston [1st Dist.] 2010, no pet.) ........................................................ 6
First National Bank of Beaumont v. Howard
229 S.W.2d 781, 783 (Tex. 1950)............................................................................ 13
Mathis v. Carter, No. 07-07-0390-CV, 2009 Tex. App. LEXIS 283
(Tex. App.—Amarillo January 15, 2009, no pet.) ..................................................... 9
McMordie v. McMordie, --S.W.3d--, 2015 WL 4536614
(Tex. App.—Amarillo 2015) ..................................................................................... 1
Penix v. First National Bank of Paris, 260 S.W.2d 63
(Tex. Civ. App.—Texarkana 1953, writ ref’d) .......................................................... 6
State v. Rubion, 308 S.W.2d 4 (Tex. 1957) ............................................................... 9
RULES AND STATUTES:
Tex. Gov’t Code Ann. § 311.016 (Vernon 2005) .................................................. 5
Tex. Prop. Code Ann. § 111.004 ............................................................................... 5
Tex. Prop. Code Ann. § 113.001 ............................................................................... 5
Tex. Prop. Code Ann. § 113.002 ............................................................................... 5
Tex. Prop. Code Ann. § 116.001 ....................................................................... 14, 15
U.S.C. § 2056(b)(7) .................................................................................................. 13
MOTION FOR REHEARING Page iii
SUMMARY OF ARGUMENTS PRESENTED
As stated by the Court in its Memorandum Opinion, “when construing all
written instruments, we interpret the trust document by attempting to garner the
intent of the person who created it, as that intent is expressed within the four corners
of the document. That process obligates us to harmonize the terms of the instrument,
give effect to all of its parts, and avoid rendering any provision meaningless.”1 The
Court’s Opinion however, neither garners the intent of Hobart B. McMordie, the
Trust’s creator, nor does it harmonize the terms of the Trust. Instead, the Court has
replaced the judgment of the Trial Court with a decision that (i) does not take into
account critical principles of trust construction or administration; (ii) renders
meaningless certain trust provisions; and (iii) disregards Hobart’s deliberate and
specific wishes concerning disposition of his property during his lifetime and
following his death.2
The result of the Court’s Opinion is to create a third class of Trust property
which, until demanded, exists as neither income nor principal, and then ascribe an
income-like (mandatory) distribution standard to that property. In doing so, the
Court preserves only Mrs. McMordie’s right to demand without regard for the
Trustees’ reciprocal power or duty of distribution. Under this ruling, the Court
1
Memorandum Opinion, dated July 24, 2015, pg. 4 (internal citations omitted), attached hereto as
Appendix A.
2
See McMordie v. McMordie, -- S.W.3d --, 2015 WL 4536614 (Tex. App.—Amarillo 2015).
MOTION FOR REHEARING Page 1
appears to disregard not only basic principles of trust construction and
administration, but also Hobart’s intent as the settlor of the Trust. If the accumulated
but undistributed income is classified as neither income nor principal, but is treated
like income upon demand, how should it be treated between the time of its
accumulation and the time at which it is demanded? If treated like principal, as
intended by Hobart, then the discretionary distribution standard alone would
preclude Mrs. McMordie from receiving Trust property solely upon demand. But if
treated like income, as suggested by the Court, this property is subject to a mandatory
distribution standard which would have necessarily required Hobart to distribute
same to Mrs. McMordie anytime she demanded, leaving this amorphous class of
Trust property vulnerable to claims by Mrs. McMordie’s creditors and taxable at her
death. Would Hobart have intended such a result? Absolutely not.
The Court should withdraw its Memorandum Opinion and enter a new opinion
affirming the Trial Court’s declarations in Charles’ favor—which include those
requested by Charles and granted, as well as those requested by Mrs. McMordie and
denied, and reversing the Trial Court’s denial of Charles’ requested declarations and
its granting of two declarations requested by Mrs. McMordie.
MOTION FOR REHEARING Page 2
SUMMARY OF POINTS RELIED UPON
Pursuant to Texas Rule of Appellate Procedure 64.2, Appellee/Cross-
Appellant identifies the following as the points relied upon in support of this Motion
for Rehearing:
1. The Court erred in reversing and modifying the judgment of the Trial Court
because it determined Mrs. McMordie’s right to receive accumulated but
undistributed income by considering only her right to demand while
declining to consider the reciprocal issue of the Trustees’ powers and
duties to distribute same in contravention of the Texas Trust Code.
2. The Court erred in reversing and modifying the judgment of the Trial Court
because its modification failed to give effect to the intent of Hobart as
Trustor—instead ignoring certain Trust language, reading language into
the Trust, and rendering certain provisions of the Trust meaningless.
MOTION FOR REHEARING Page 3
ARGUMENTS AND AUTHORITIES
On July 24, 2015, this Court erroneously reversed the Trial Court’s judgment
“to the extent it held that a beneficiary’s demand for receipt of undistributed income
[ ] did not obligate its trustees to comply with and satisfy that demand,” and modified
the Trial Court’s judgment to read that the language within Article VI, Paragraph B
of the Trust stating that “either Beneficiary may make demands anytime thereafter
to receive said income” means “(1) the undistributed income remains subject to the
demand of a beneficiary even though previously added to the trust principal, (2) the
beneficiary has the right to demand payment of undistributed income whenever he
or she cares to, and (3) the trustees must distribute that income upon a beneficiary’s
demand.”3 To create a third class of trust property and fashion an unintended,
unilateral right to receive a distribution of that property however, is contrary not only
to well established principles of trust construction and administration, but also to the
express intent of Hobart, the Trust’s creator.
Appellee/Cross-Appellant therefore urges this Court to consider Mrs.
McMordie’s rights as Beneficiary in conjunction with the Trustees’ powers and
duties as intended by the Trust Code and withdraw its Memorandum Opinion so as
to give due effect to both the language of the Trust and Hobart’s express intent.
3
See Appx. A, Memorandum Opinion, dated July 24, 2015, pg. 9.
MOTION FOR REHEARING Page 4
I. THE COURT SHOULD RECONSIDER ITS MEMORANDUM OPINION
BECAUSE IT TAKES INTO ACCOUNT ONLY MRS. MCMORDIE’S
RIGHTS AS BENEFICIARY, WITHOUT ACKNOWLEDGING THE
CORRESPONDING ISSUE OF CHARLES’ POWERS AND DUTIES AS
TRUSTEE.
Trusts, by their very nature, do not confer unilateral powers upon a beneficiary
to receive trust distributions upon demand.4 The receipt of demanded distributions
occurs as a result of the synchronicity of a beneficiary’s right to demand and a
trustee’s power (or duty) to distribute.5 As evidenced by the plain language of the
Texas Trust Code, a beneficiary plays no role in administrative matters arising in
connection with a trust, including the matter of trust distributions. It is the trustee(s)
and the trustee(s) alone who are charged with exercising specific powers and duties
in carrying out the purpose of the trust.6 The administrative role of a beneficiary is
statutorily contemplated to be a passive one – nowhere does the Trust Code (or the
Trust) charge a beneficiary with the power or the duty to act, whether in the context
of receiving a distribution or any other matter of trust administration. Accordingly,
distributions of trust property must naturally flow through the trustee as the
administrator of the trust. Even a mandatory distribution cannot be effectuated by a
4
Pursuant to Section 111.004 of the Trust Code, a beneficiary is defined as “a person for whose
benefit property is held in trust” while a trustee is defined as “the person holding the property in
trust.” TEX. PROP. CODE ANN. § 111.004. Indeed, for the beneficiary to access the trust property
held by the trustee, the trustee must act to make that trust property available to the beneficiary. The
beneficiary cannot unilaterally access trust property.
5
Id.
6
TEX. PROP. CODE ANN. § 113.001, et seq.; TEX. PROP. CODE ANN. § 113.002.
MOTION FOR REHEARING Page 5
beneficiary alone—a trustee must exercise his or her duty to distribute that which is
demanded.7 Indeed, a beneficiary does not have a right to receive trust property upon
demand unless the trust confers upon the trustee the corresponding power or duty of
distribution. For example, as noted by the Court in its Opinion, “Hobart, himself,
had the authority to demand and receive payment of either or both the trust income
and principal at his discretion.”8 But the right to receive which inured to Hobart
during his lifetime was not derived solely from his “authority to demand,” as the
Court suggests9—it was the product of both his right to demand as well as the
Trustees’ duty to distribute. Therefore, Mrs. McMordie’s receipt of Trust funds upon
demand is wholly dependent on the Trustees’ reciprocal power (or duty) to distribute
that which is demanded.
As framed by the Court in its Opinion, “[t]he controversy before [the Court]
7
In Doherty v. JP Morgan, a trust distribution which provided that the trustee “shall also distribute
to [the beneficiary] such amounts of principal as she may request to provide for her comfort, health,
support, or maintenance” was held to be mandatory and not discretionary. Doherty v. JP Morgan,
2010 WL 1053053 (Tex. App.—Houston [1st Dist.] 2010, no pet.); see Tex. Gov’t Code Ann. Sec.
311.016 (Vernon 2005) (“The following constructions apply unless the context in which the word
or phrase appears necessarily requires a different construction or unless a different construction is
expressly provided by statute: (1) ‘May’ creates discretionary authority or grants permission or a
power. (2) ‘Shall’ imposes a duty.”) But in Penix v. First National Bank of Paris, the court ruled
that the trustee was within his discretion to withhold certain trust income despite the language of
the trust which stated that “[income] shall be used for support, maintenance, and schooling.” Penix
v. First National Bank of Paris, 260 S.W.2d 63 (Tex. Civ. App.—Texarkana 1953, writ ref’d).
8
Appx. A, Memorandum Opinion, pg. 4.
9
In discussing Hobart’s right to receive distributions during his lifetime, the Court seems to
suggest that Hobart’s right to receive was a direct result of his right to demand. However, this is
incorrect. Hobart’s right to receive was a result of both his right to demand as well as the Trustees’
duty to distribute (as mandated by the language “The Trustees shall distribute” (emphasis added)).
MOTION FOR REHEARING Page 6
involves a twofold issue. The first question concerned whether [Mrs. McMordie]
was entitled to any income accumulated by the [T]rust but undistributed during the
life of Hobart”10—in other words, whether Mrs. McMordie had the right to demand
the subject Trust property. “The second query pertained to whether that accumulated
income was payable to [Mrs. McMordie] upon her ‘demand’”—in other words,
whether Mrs. McMordie had the right to receive that which was demanded as limited
by the Trustees’ power or duty to distribute same.11 While it acknowledges the dual
nature of this analysis, the Court declines to address the second query concerning
the Trustees’ effectuation of a distribution, instead determining Mrs. McMordie’s
right to receive the distribution based on her right to demand alone. Such a one-sided
determination of beneficiary rights is not only inappropriate, but far exceeds the
passive role ascribed to beneficiaries by the Trust Code in matters of trust
administration such as distribution.
Had the Court considered not only Mrs. McMordie’s right to demand a
distribution, but also Mrs. McMordie and Charles’ shared power or duty as Trustees
to distribute as dictated by the Trust Code, the Court would have reached a different
conclusion as to whether Mrs. McMordie possessed the right to receive same.
Specifically, the Court would have engaged in an analysis as to whether the Trust
10
Appx. A, Memorandum Opinion, pg. 3.
11
Appx. A, Memorandum Opinion, pg. 3.
MOTION FOR REHEARING Page 7
instilled in the Trustees the power or the duty to distribute the accumulated but
undistributed income demanded by Mrs. McMordie. Instead, the Court assumed
(without conducting such an analysis) that the Trust charged the Trustees with the
duty to distribute, basing this conclusion solely on an analysis of the Trust language
relating to Mrs. McMordie’s right to demand without even considering whether the
Trustees had a corresponding (discretionary) power or (mandatory) duty to
distribute. In particular, the Court interpreted the phrase “to receive” as indicative of
Hobart’s intent to subject the Trustees to a mandatory distribution standard. But in
reality, “to receive” is nothing more than a redundant amplification of Mrs.
McMordie’s right to demand—indeed, what else would Mrs. McMordie have been
demanding if not the receipt of the accumulated income? To say that the phrase “to
receive [said income]” “necessarily implies an obligation on the trustees to deliver
it once demanded” improperly foregoes any analysis of the Trustees’ power or duty
to make such a distribution as intended by the Trust Code.
Accordingly, the Court should reconsider its Memorandum Opinion for the
purpose of determining Mrs. McMordie’s right to receive the accumulated but
undistributed income in the context of not only Mrs. McMordie’s right to demand
as Beneficiary, but also her and Charles’ power or duty to distribute same in their
capacity as Trustees.
MOTION FOR REHEARING Page 8
II. THE COURT SHOULD RECONSIDER ITS MEMORANDUM OPINION
BECAUSE IT DISTURBS HOBART’S EXPRESS INTENT, DISPLACING
THE LANGUAGE OF THE TRUST AND RENDERING CERTAIN TRUST
PROVISIONS MEANINGLESS.
The primary focus in interpreting the provisions of a trust is the intent of the
settlor.12 Indeed, as stated by the Court itself, a trust should be interpreted “by
attempting to garner the intent of the person who created it, as that intent is expressed
within the four corners of the document.”13 In doing so, the Court is obligated to
“harmonize the terms of the instrument, give effect to all of its parts, and avoid
rendering any provision meaningless.”14 The result of the Court’s Memorandum
Opinion however, is to overlook the express intent of Hobart, as the Trust’s creator,
not only displacing the express language of the Trust, but rendering certain Trust
provisions meaningless.
A. The Court reads an unintended mandatory distribution standard into the
Trust and ultimately disturbs Hobart’s express intent.
As discussed above, a beneficiary’s right to receive is only as broad as the
trustee’s power or duty to distribute. Therefore, when Hobart intended for the
Beneficiaries’ right to receive to be unobstructed by the Trustees’ discretion, he
included language mandating reciprocal action by the Trustees both during his
12
See State v. Rubion, 308 S.W.2d 4 (Tex. 1957).
13
Appx. A, Memorandum Opinion, pg. 4 (citing Mathis v. Carter, No. 07-07-0390-CV, 2009 Tex.
App. LEXIS 283, at *2-3 (Tex. App.—Amarillo January 15, 2009, no pet.) (mem. op.)).
14
Id.
MOTION FOR REHEARING Page 9
lifetime (“[t]he Trustees shall distribute the income and principal…as demanded”15)
and after (“the Trustees shall distribute all the income at least annually”16). This
remains true even at the Trust’s termination (“the accumulated and undistributed
income and principal shall be distributed to the nephews of [Hobart]…and shall not
be distributed to the family of [Magdalena]”17). Similarly, where the Trustees are
charged with other duties, the Trust deliberately mandates their action (“any
undistributed income on hand in the Trust at the end of each calendar year shall be
added to the principal of the Trust for that year”18). Indeed, where Hobart intended
for the Trustees to be bound to act (either by effectuating a distribution, or
otherwise), the Trust so specifies with clear language.
But the Trust provision at issue does not contain a corresponding mandatory
duty on the part of the Trustees to comply with a Beneficiary’s demand. Indeed, that
provision simply states:
Any undistributed income on hand in the Trust…shall be added to the
principal of the Trust for that year and either Beneficiary may make
demands anytime thereafter to receive said income.19
The only rights, powers, or duties addressed by this particular Trust provision are
(1) the Trustees’ duty to add undistributed income to principal at year’s end and (2)
15
Trust, VI.B (emphasis added), attached hereto as Appendix B.
16
Appx. B, Trust, VI.B (emphasis added).
17
Appx. B, Trust, VI.C (emphasis added).
18
Appx. B, Trust, VI.B (emphasis added).
19
Appx. B, Trust, VI.B (emphasis added).
MOTION FOR REHEARING Page 10
the Beneficiary’s right to demand same. As to the latter, without the Trustees’
correlating power or duty to distribute, this specified right to demand cannot confer
upon the Beneficiary an automatic right to receive. As noted by the Court, “because
[Hobart] said nothing about a trustee exercising discretion when stating that a
beneficiary could demand to receive the accumulated income, we must forego the
opportunity to add something that he omitted.”20 But the Court’s Memorandum
Opinion fails to follow its own edict.
The disputed Trust provision is silent as to a Trustee exercising discretion in
distributing demanded accumulated income and a Trustee being bound by a duty to
distribute same, but the Trust (as a whole) is not so silent. Article V of the Trust
confers upon the Trustees thirty-three distinctly enumerated powers, one being
“[t]he power on any partial…distribution of the Trust Estate, to apportion and
allocate the assets of the Trust Estate in cash or in kind, or partly in cash and partly
in kind, or in undivided interests in the manner deemed advisable at the discretion
of the Trustees….” Nowhere does the Trust vest powers solely in a beneficiary. But
the Court here stripped the Trustees of the sole authority to manage and administer
the Trust and instead vested unfettered rights in Mrs. McMordie, as the sole
surviving beneficiary.
The Court disregarded both the express language of the Trust and the absence
20
Appx. A, Memorandum Opinion, pg. 7.
MOTION FOR REHEARING Page 11
of controlling language in the disputed provision, instead imposing a mandatory
distribution standard where no such standard exists. Indeed, the effect of the Court’s
Opinion is to “add something that [Hobart] omitted”—namely, the duty of the
Trustees to distribute accumulated income upon demand—rewriting the subject
provision to read (added language in bold and all caps):
Any undistributed income on hand in the Trust…shall be added to the
principal of the Trust for that year and either Beneficiary may make
demands anytime thereafter to receive said income, WHICH THE
TRUSTEES MUST DISTRIBUTE.
By the imposition of an otherwise absent mandatory distribution standard, the
Court’s Memorandum Opinion has disturbed Hobart’s undeniable intent. If the
standard determined by the Court applies, Hobart would have been required, during
his lifetime, to acquiesce to any demand by Mrs. McMordie for such accumulated
but undistributed income, and thus his power as a Trustee would be illusory. Given
that Mrs. McMordie lacked the unqualified right to demand (or receive) any Trust
income or principal during Hobart’s lifetime21, it is inconceivable that he would have
intended to grant her the unlimited right to receive this third category of Trust
property, either during his lifetime or after. Hobart's intent is supported by the
negative estate and gift tax ramifications implicated by the Court’s Opinion.
Generally spouses may transfer an unlimited amount of property to each other during
21
Appx. A, Memorandum Opinion, pg. 4.
MOTION FOR REHEARING Page 12
life or at death. However, if property is transferred in trust from one spouse to
another, Internal Revenue Code Section 2056(b)(7) sets forth certain requirements
for a transfer in trust to a spouse to qualify for the marital deduction.22 One such
requirement is that the transferee spouse be the only beneficiary.23 Based on the
Court’s Opinion, Mrs. McMordie and Hobart would both have had a right to demand
undistributed income during Hobart’s life. Since Mrs. McMordie was not the sole
beneficiary of the Trust during Hobart’s life however, the terms of the Trust would
necessarily fail Section 2056(b)(7), thereby exposing Hobart (and now the Trust) to
potential gift tax liability. It is unquestionable that Hobart intended for Mrs.
McMordie’s right to receive accumulated but undistributed income to remain subject
to a discretionary distribution standard, effectuated only upon the Trustees’ exercise
of their power to distribute same.24
Perhaps more disconcerting is the effect of this Court’s Opinion on Mrs.
McMordie’s ability to drain the Trust of income and accumulated income (turned
22
26 U.S.C. § 2056(b)(7).
23
Id.
24
In the event of ambiguity in the settlor’s intent, the manner in which the settlor provided for the
beneficiary during his lifetime is relevant in determining what the settlor intended to be provided
from the trust. See First National Bank of Beaumont v. Howard, 229 S.W.2d 781, 783 (Tex. 1950).
At no point during Hobart’s lifetime was Mrs. McMordie granted an unlimited right to receive
Trust property—any receipt of Trust property by Mrs. McMordie was the result of Hobart’s
demand and his and Mrs. McMordie’s joint exercise of their duty to distribute as Trustees. Even
the limited right to demand accumulated income did not grant Mrs. McMordie an unlimited right
to receive such income. Accordingly, Mrs. McMordie’s rights should not be expanded beyond that
provided by Hobart during his lifetime.
MOTION FOR REHEARING Page 13
principal). By giving Mrs. McMordie such unfettered access to this category of Trust
property, the Court is thwarting Hobart’s express intent that only his family “shall”
receive the Trust property at the Trust’s termination.25 Through its ruling, the Court
is encouraging the depletion of Trust principal otherwise classified as “undistributed
income” to the detriment of Hobart’s ultimate intended heirs.
The Court’s decision also creates considerable issues not only in the
administration of this Trust, but in the administration of all trusts governed by Texas
law. The Texas Trust Code incorporates the Uniform Principal and Income Act in
Chapter 116.26 Section 116.002 of the Texas Uniform Principal and Income Act
defines both “income” and “principal,” but nowhere does it include a definition of
“undistributed income.” In fact, the only definition of “undistributed income” set
forth in the Trust Code is found in Section 116.103(a) which defines such income as
follows:
“Undistributed income” means net income received before the date on
which an income interest ends. The term does not include an item of
income or expense that is due or accrued or net income that has been
added or is required to be added to principal under the terms of the
trust.27
Section 116.103 makes clear that, under Texas law, trust property is treated as either
income or principal, but not both. Accordingly, “net income that has been added or
25
Appx. B, Trust, Article VI.C.
26
TEX. PROP. CODE § 116.001, et seq.
27
TEX. PROP. CODE § 116.103(a).
MOTION FOR REHEARING Page 14
is required to be added to the principal under the terms of the trust” is undeniably
classified as principal and not income, and should therefore be distributed as such.28
Therefore, as contemplated by the Trust Code, the “undistributed income” demanded
by Mrs. McMordie is principal, subject to a discretionary distribution standard. But
this Court disagrees, instead creating a third amorphous category of Trust property—
principal that is to be treated like income—that has heretofore never existed under
Texas law. How are the Trustees to manage this issue?
By way of example, if the Trust did not distribute $100,000 in income at the
end of 2004, that amount of money would have been added to the principal of the
Trust (“[a]ny undistributed income on hand in the Trust at the end of each calendar
year shall be added to the principal of the Trust for that year….”29). The Trustees
would be required, by the terms of the Trust and Texas law, to manage the Trust in
accordance with their fiduciary obligations, and per their broad powers, could have
invested a portion of the principal that included such funds in real property, mineral
property, stocks, bonds, or a litany of other options. The Trustees could have
borrowed money and encumbered such funds as security for the loan. These are but
a few examples, all of which illustrate that Trust property is either income or
principal, not both, and it cannot retain an identity as “undistributed income” ad
28
Id.
29
Appx. B, Trust, Article VI.B (emphasis added).
MOTION FOR REHEARING Page 15
infinitum. But that is the import of the Court’s ruling.
Now, eleven years later, according to the Court’s ruling, Mrs. McMordie can
demand this same $100,000 and the Trustees must distribute it to her. But how can
that $100,000 retain the same character? Must the Trustees include interest, and if
so, at what rate? Does the statute of limitations limit Mrs. McMordie’s demand
rights? What if the $100,000 was invested and is now worth five times as much? Is
she to receive all fruits of the undistributed income? What if the $100,000 was
invested and lost completely? Or what if that $100,000 is a parcel of real property,
or mineral interest? What if that $100,000 is not divisible or subject to partition?
What if there is inadequate liquidity in the Trust to satisfy the demand? How are the
Trustees to determine how and what to liquidate? It defies logic to assume that the
choice of six words in the Trust—“either Beneficiary may make demands anytime
thereafter”—was intended to supersede the longstanding import of the Texas Trust
Code by usurping the powers of the Trustees and creating administrative nightmares
that could plague the Trust, and perhaps all Trusts governed by Texas law, for years
to come.
B. The Court’s construction of the Trust fails to give effect to all provisions
of the Trust, instead rendering several Trust provisions wholly
meaningless in disregard for Hobart’s express intent.
Moreover, this Court’s Memorandum Opinion has the effect of rendering
certain of Hobart’s deliberate Trust language wholly meaningless. First, by the
MOTION FOR REHEARING Page 16
Court’s logic, a Trustee mandate would (by default) be read into any demand
permitted by the Trust that is not expressly subject to the Trustees’ discretion—
obfuscating the meaning of the word “shall” in nearly every usage. Second, the Court
disregards Hobart’s distinct temporal construction of the Trust—declining to address
the fact that the right to demand accumulated income existed only during Hobart’s
lifetime (i.e., when “either Beneficiary” was living) and was extinguished upon his
death (i.e., when only one Beneficiary remained). If income would never accumulate
during Mrs. McMordie’s tenure as sole Beneficiary (given her entitlement to a
distribution of “all the income at least annually” following Hobart’s death), why
would she continue to possess a right to demand accumulated income? Third, by
applying a mandatory distribution standard to the accumulated income, the
discretionary standard deliberately incorporated by Hobart in the distribution of
principal is eviscerated. If Mrs. McMordie is unilaterally permitted to access
principal in the form of accumulated income on her own volition, the support
standard crafted by Hobart himself is rendered meaningless. Fourth, by this same
granting of access to principal in the form of accumulated income, the Spendthrift
Provision is robbed of effect, leaving this Trust property subject to claims by Mrs.
McMordie’s creditors and taxable at her death. Such a result could not have been
intended by Hobart.
Accordingly, the Court should reconsider its Memorandum Opinion for the
MOTION FOR REHEARING Page 17
purpose of harmonizing each provision of the Trust and giving effect and purpose to
thereto.
CONCLUSION
As originally pointed out in Appellee/Cross-Appellant’s Briefing, through her
request for declaratory relief, Mrs. McMordie asked the Court to supplant the
unambiguous language of the Trust with an unlimited right to unilaterally receive—
solely by demanding—the income that accumulated (but was not distributed) during
Hobart’s lifetime. This Court agreed to do so, in contravention of Hobart’s stated
intent and in disregard for the plain language of the Trust. The Court’s Memorandum
Opinion rewrites the language of the Trust—effectively eviscerating basic principles
of trust construction and administration which permit distributions (both mandatory
and discretionary) only upon the concurrence of a beneficiary’s demand and a
trustee’s exercise of his corresponding power or duty to distribute that which is
demanded.
Accordingly, the Court should reconsider its Memorandum Opinion dated
July 24, 2015, and thereafter enter a new opinion affirming the Trial Court’s
declarations in Charles’ favor—which include those requested by Charles and
granted, as well as those requested by Mrs. McMordie and denied, and reversing the
Trial Court’s denial of Charles’ requested declarations and its granting of two
declarations requested by Mrs. McMordie.
MOTION FOR REHEARING Page 18
Respectfully submitted,
/s/ David J. Drez III
David J. Drez III
State Bar No. 24007127
david.drez@wickphillips.com
Meredith L. Perry
State Bar No. 24075622
meredith.perry@wickphillips.com
WICK PHILLIPS GOULD & MARTIN
LLP
100 Throckmorton Street, Suite 550
Fort Worth, Texas 76102
Telephone: 817.332.7788
Telecopier: 817.332.7789
Scott W. Sherwood
State Bar No. 18255250
Sherwood and Sherwood
303 Euclid Street
Panhandle, Texas 79068
Telephone: 806.537.3591
Telecopier: 806.537.3592
ATTORNEYS FOR APPELLEE/
CROSS-APPELLANT CHARLES
HARRIS MCMORDIE
CERTIFICATE OF COMPLIANCE
Pursuant to Texas Rule of Appellate Procedure 9.4, I hereby certify that absent
the caption, table of contents, index of authorities, signature, proof of service,
certificate of compliance and appendices, the computer program used to prepare this
document prior to its conversion to a portable document format calculates the
number of words in the foregoing motion as 4,439.
/s/ David J. Drez III
David J. Drez III
MOTION FOR REHEARING Page 19
CERTIFICATE OF SERVICE
A true copy of the foregoing document was served on the following counsel
of record via electronic filing, on this 28th day of August, 2015:
Slater C. Elza
Jennie C. Knapp
UNDERWOOD LAW FIRM, P.C.
P.O. Box 9158
Amarillo, Texas 79105
/s/ David J. Drez III
David J. Drez III
MOTION FOR REHEARING Page 20
APPENDIX A
In The
Court of Appeals
Seventh District of Texas at Amarillo
No. 07-14-00393-CV
MAGDALENA SANCHEZ MCMORDIE, IN HER CAPACITY AS BENEFICIARY AND
CO-TRUSTEE OF THE HOBART B. MCMORDIE, II ASSET MANAGEMENT TRUST,
APPELLANT
V.
CHARLES HARRIS MCMORDIE, IN HIS CAPACITY AS CO-TRUSTEE OF THE
HOBART B. MCMORDIE, II ASSET MANAGEMENT TRUST, APPELLEE
On Appeal from the 251st District Court
Randall County, Texas
Trial Court No. 66,482-C, Honorable Ana Estevez, Presiding
July 24, 2015
MEMORANDUM OPINION
Before QUINN, C.J., and HANCOCK and PIRTLE, JJ.
This appeal involves the interpretation of a trust agreement (that is, the Hobart B.
McMordie, II Asset Management Trust) via an action for declaratory judgment. The
litigants, Magdalena Sanchez McMordie (Magdalena) and Charles Harris McMordie
(Charles), were co-trustees who disagreed about what the provision in question meant.
The final judgment before us arose from cross-motions for summary judgment. Neither
litigant was completely satisfied with the outcome, and both appealed. After reviewing
the briefs, record, and authorities, we modify the judgment.
Background
Magdalena’s husband, Hobart B. McMordie, II, executed the Hobart B.
McMordie, II Asset Management Trust on November 1, 2004. The corpus of the trust
was comprised of Hobart’s property. Additionally, he and his wife Magdalena Sanchez
McMordie were designated its beneficiaries and original co-trustees. Alternate trustees
were also specified if a trustee failed to serve. Those alternates consisted of Marie
McCormick and Charles.
Hobart died in 2010. At that point, the trust became irrevocable by its own terms.
His death also caused Marie McCormick to become a co-trustee with Magdalena.
Charles succeeded Marie in 2013. Thereafter, the dispute at bar arose. The portion of
the trust document underlying the dispute appears at Article VI, paragraph B. It
provides that:
The Trustees shall distribute income and principal of the Trust at such
times and in such amounts as demanded by HOBART B. McMORDIE
during the term of the Trust. Any undistributed income on hand in the
Trust at the end of each calendar year shall be added to the principal of
the Trust for that year and either Beneficiary may make demands anytime
thereafter to receive said income. If MAGDALENA SANCHEZ survives
HOBART B. McMORDIE, the Trustees shall distribute all the income at
least annually to her and shall, at Trustees' sole discretion, distribute
principal to her to provide for her health, support and maintenance in the
standard of living to which she is accustomed at the death of HOBART B.
McMORDIE . . . . Any distribution to a Beneficiary . . . whether income or
principal, shall be the separate property of such Beneficiary. The
Trustees, at the request of either Beneficiary, shall sell or convert any
unproductive property in the Trust and make such property productive of
income within a reasonable time after such request.
2
The trust terms further specified that it was to terminate upon the “death of the
last surviving Beneficiary.” When that occurred, Hobart’s nephews (or their
descendants should they predecease the last beneficiary) were to receive the trust
corpus. Charles happened to be one of the nephews.
The controversy before us involves a twofold issue. The first question concerned
whether Magdalena was entitled to any income accumulated by the trust but
undistributed during the life of Hobart. The second query pertained to whether that
accumulated income was payable to Magdalena upon her “demand.” Charles’s reading
of the trust document purportedly led him to believe that “no” was the appropriate
answer to both issues. Magdalena disagreed.
Upon entertaining cross-motions for summary judgment, the trial court effectively
declared that the accumulated income did not become principal of the trust and that
Magdalena had a right to demand the previously accumulated income. Yet, her right to
demand the accumulated income did not come with the right to receive that income
upon demand, according to the trial court. Apparently, it could be paid only if both she
and Charles, as co-trustees, agreed to its distribution.
Authority
Needless to say, we review summary judgments de novo. Provident Life &
Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). And, given that the
controversy encompasses little more than the interpretation of a writing (that is, a trust
agreement), we need not defer to the trial court’s construction of the instrument.
Indeed, interpreting a document constitutes a question of law that we resolve de novo.
3
Mathis v. Carter, No. 07-07-0390-CV, 2009 Tex. App. LEXIS 283, at *2-3 (Tex. App.—
Amarillo January 15, 2009, no pet.) (mem. op.).
Next, and as done when construing all written instruments, we interpret the trust
document by attempting to garner the intent of the person who created it, as that intent
is expressed within the four corners of the document. Id. That process obligates us to
harmonize the terms of the instrument, give effect to all of its parts, and avoid rendering
any provision meaningless. Id.; accord Coker v. Coker, 650 S.W.2d 391, 393 (Tex.
1983) (stating the same). The rules of construction also mandate that we accord to the
words used in the instrument their ordinary and generally accepted meaning, unless the
writing evinces a contrary intent. JAW The Point L.L.C. v. Lexington Ins. Co., 460
S.W.3d 597 (Tex. 2015). With that said, we turn to the trust instrument and dispute
before us.
Reading Article VI, paragraph B we make several initial observations. First,
Hobart, himself, had the authority to demand and receive payment of either or both the
trust income and principal at his discretion. The directive that the “Trustees shall
distribute income and principal of the Trust at such times and in such amounts as
demanded by Hobart B. McMordie during the term of the Trust” evinces no other
reasonable interpretation. (Emphasis added). Magdalena had no power to demand
distribution of both the income and principal.
Second, not all the income earned by the trust in any particular year had to be
distributed. This is illustrated by the phrase stating that “[a]ny undistributed income on
hand in the Trust at the end of each calendar year shall be added to the principal of the
4
Trust for that year . . . .” If all the income had to be distributed, then there would be no
undistributed income as contemplated by the passage.
Third, Magdalena had the right to demand that she receive undistributed income;
Hobart did not have the sole power to do that. We garner as much from the phrase that
“either Beneficiary may make demands anytime thereafter to receive said income.”
(Emphasis added). Because Magdalena was one of the two beneficiaries named in the
instrument, she fell within the category of “either Beneficiary.”
Fourth, that a demand for undistributed or accumulated income could be made
even though the income had been added to the principal evinces that Hobart intended
for the undistributed income to maintain its character as income, at least for purposes of
“either” beneficiary making a demand to receive it. In other words, its inclusion in the
principal did not somehow strip a beneficiary’s ability to demand receipt of it.
Fifth, we further note an absence of any deadline in the verbiage describing
either beneficiary’s right to demand receipt of undistributed income. Indeed, Hobart
used the phrase “anytime thereafter” when specifying the period in which such a
demand for its receipt could be made. Again, we must afford words their ordinary
meaning, and “anytime” means “anytime” or “whenever.” Anytime Definition,
DICTIONARY.COM, http://www.dictionary.reference.com/browse/anytime (last visited July
15, 2015). In turn, “thereafter” means “afterward” and refers to the point in time when
undistributed income for the year is added to the trust principal. Thereafter Definition,
DICTIONARY.COM, http://www.dictionary.reference.com/browse/thereafter (last visited July
15, 2015). Combining these definitions leads us to reasonably infer that Hobart
intended not only that the right to demand receipt of the accumulated income had no
5
end but also that the right could be exercised once the income had been undistributed
and added to the principal.
With those observations in mind, we next turn to Charles’s argument that despite
a beneficiary’s demand for payment of the accumulated income, it could not be
distributed unless both trustees acquiesced. Obviously the trial court agreed with
Charles when it held that “[n]o beneficiary can unilaterally compel the distribution of
undistributed income solely by making demand.” (Emphasis in original). Yet, in drafting
the trust instrument, Hobart did not simply say that the beneficiaries could demand the
income. He wrote that once the income was accumulated, a beneficiary “may make
demands anytime thereafter to receive said income. (Emphasis added). The ordinary
or generally accepted definition of “to receive” encompasses such concepts as “to come
into possession,” Receive Definition, MERRIAM-W EBSTER, http://www.merriam-
webster.com/dictionary/receive (last visited July 15, 2015), and to “be given, presented
with, or paid.” To Receive Definition, OXFORD DICTIONARIES,
http://www.oxforddictionaries.com/us/definition/american_english/receive?q=to+receive
(last visited July 15, 2015). If one trustee could ignore the demand and block
distribution, as suggested by Charles, then the beneficiary would lack the ability to
“come into possession of” or “be given, presented with, or paid” the income demanded.
To the foregoing, we add another observation. It pertains to the absence of any
reference to the trustees having discretion in responding to the demand. Such a
limitation appeared elsewhere in Article VI, paragraph B. For example, Hobart specified
that the distribution of principal once he died was to lie within the “Trustees’ sole
discretion,” This circumstance suggests that had Hobart wanted to condition the
6
delivery of the accumulated income upon the exercise of the trustees’ discretion, he
knew how to do that. And, because he said nothing about a trustee exercising
discretion when stating that a beneficiary could demand to receive the accumulated
income, we must forego the opportunity to add something that he omitted.1 See
Weaver v. Jamar, 383 S.W.3d 805, 811 (Tex. App.—Houston [14th Dist.] 2012, no pet.)
(stating that a court cannot rewrite a document under the guise of interpreting it).
Hobart’s directive connotes much more than simply demanding; it includes
receiving once the demand was made. And, the entitlement to receive that income
necessarily implies an obligation on the trustees to deliver it once demanded. Adopting
Charles’s interpretation of the passage would effectively strip the phrase “to receive” of
meaning, and we cannot approve of that outcome if the rules of construction are to be
followed. Consequently, Hobart’s directive saying that “either Beneficiary may make
demands anytime thereafter to receive said income” means 1) the undistributed income
remains subject to those demands despite being added to the principal, 2) the
beneficiary has the right to demand payment of undistributed income whenever he or
she cares to, and 3) the trustees must distribute accumulated income upon a
beneficiary’s demand. To the extent the trial court held otherwise, it erred. To the
extent that the error permits a trustee to thwart Hobart’s intent, it is harmful.
Via his last issue, Charles contends the trial court erred in sustaining objections
to portions of his affidavit tendered in support of his motion for summary judgment. The
1
We also reject the argument that once added to the principal, the income became principal
subject to distribution at the trustees’ discretion. As previously discussed, while accumulated income was
added to the trust principal, it nonetheless remained identifiable as income for purposes of distribution
upon the demand of a beneficiary. If this was not so and if it simply became principal, then there would
be no “undistributed income” to fulfill the demand by a beneficiary. In other words, undistributed income
maintained a separate identity from principal in general with regard to a beneficiary’s demand to receive
that income.
7
trial court apparently excluded the affidavits, or portions thereof, because they consisted
of legal conclusions.2 To show that it erred, though, Charles merely posited before us
that:
The portions of the affidavit that Mrs. McMordie objected to constituted
competent summary judgment evidence such that they should not have
been excluded from the summary judgment record. It is inconceivable
how affidavit testimony concerning the parties’ competing requests for
declaratory relief and the bases on which same are requested is an
irrelevant legal conclusion . . . . Additionally, the factual statement
contained in Paragraph 10 of the affidavit concerning the amount of Trust
income received by Mrs. McMordie is relevant to establish that all income
has been distributed to her . . . . Accordingly, the Trial Court’s Final
Judgment sustaining Mrs. McMordie’s objections to the affidavit should be
reversed.
Missing from this argument is discussion about why “testimony concerning the parties’
competing requests for declaratory relief and the bases for same” and “the factual
statement . . . concerning the amount of Trust income received by” Magdalena are
relevant to the meaning of Article VI, paragraph B. No one contended that, nor did we
find, the provision was ambiguous. Thus, its interpretation had to be conducted by us
through viewing only the words contained within four corners of the trust instrument.
What others may have thought it meant or what income Magdalena received from the
trust mattered not given that they fell outside the words contained within the four
corners of Hobart’s trust.
In sum, we overrule Charles’s issues. We sustain Magdalena’s issue attacking
the trial court’s interpretation of Article VI, paragraph B so as to prevent Magdalena from
receiving the undistributed income upon her demand for it. We also reverse the trial
2
We do not see in the record where Charles objected to the court’s ruling on the objections to his
summary judgment evidence. The failure to do so generally waives any complaint. Beinar v. Deegan,
432 S.W.3d 398, 403 (Tex. App.—Dallas 2014, no pet.); Southwestern Bell Tel. Co. v. Combs, 270
S.W.3d 249, 273 (Tex. App.—Amarillo 2008, pet. denied).
8
court’s judgment to the extent it held that a beneficiary’s demand for receipt of
undistributed income under Article VI, paragraph B of Hobart B. McMordie, II Asset
Management Trust did not obligate its trustees to comply with and satisfy that demand.
We modify the judgment to read that the language within paragraph B, Article VI stating
that “either Beneficiary may make demands anytime thereafter to receive said income”
means 1) the undistributed income remains subject to the demand of a beneficiary even
though previously added to the trust principal, 2) the beneficiary has the right to demand
payment of undistributed income whenever he or she cares to, and 3) the trustees must
distribute that income upon a beneficiary’s demand. So modified, the judgment is
affirmed.
Brian Quinn
Chief Justice
9
APPENDIX B
034436
DECLARATION OF TRUST
STATE OF TEXAS
KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF ROBERTS
THAT J, HOBART B. McMORDlE, II, a resident of Roberts County, Texas, and a
citizen of the United States, hereby create til is Trust as more fully set out hereunder:
ARTICLE r - NAME
The Trust shall be called the HOBART B. McMORDIE, II ASSET MANAGEMENT
TRUST, ("the Trust") and I revoke aU previous trust signed by me whether or not recorded in
the official public records of Roberts County, Texas.
ARTICLE IT - TRUST PROPERTIES
J, HOBART B. McMORDJE, II. individually, and as Trustee of the HOBART BRUCE
McMORDlE 2 ASSET MANAGEMENT TRUST as amended, the original of which is dated
the 6th day of April, 1998, herein refeITed to as "Trustor," hereby GRANT, CONVEY,
ASSIGN, TRANSFER and DELIVER to the Trustees named hereunder, as original Trustees,
TO HA VB AND TO HOLD all of my interest in aU of my estate and property owned by me
individually or held as trust property in the HOBART BRUCE McMORDIE 2 ASSET
MANAGEMENT TRUST dated the 6th day of April. 1998, as amended; including, but is not
limited to, the property described On Schedule "A" (whether held by me individually or in the
HOBART BRUCE McMORDIE 2 ASSET MANAGEMENT TRUST dated the 6th day of April,
199B, as amended), attached hereto and made a part hereof. the receipt of which is hereby
acknowledged by tile Trustees aU of which is located in tbe United States. Such property and
any property subsequently contributed to the Trust by HOBART B. McMORDIE or by anyone
else shall constitute the trust estate, and sball be held, managed, administered and distributed by
the Trustees as provided herein.
ARTICLE ill - PURPOSE
The purpose for the Trust during its term is to provide for the orderly distribution of the
trust estate and property upon my death.
ARTICLE IV - TRUSTEES
I appoint HOBART B. McMORDIE, II and MAGDALENA SANCHEZ McMORDlE
of AmariI/o, Texas. as original Co-Trustees ("Trustees"). If either original Co-Trustee fails or
ceases to serve. for any reason. I appoint MARIE McCORMICK as successor Co-Trustee in his
or her stead. If thereafter, any Co-Trustee falls or ceases to serve, for any reason, I appoint,.
my nephew, CHARLES HARRIS McMORDIE, as a successor Co-Trustee.
ARTICLE V - POWERS OF TRUSTEE
A. In the administration of the Trust, the Trustees shall have the following powers,
exercisable without court approval and in the absolute discretion of tile Trustees, upon such
terms and conditions as the Trustees shall deem advisable, in addition to, and without limitation
upon any other powers granted by the Texas Trust Code or amendments tl,ereto. 1)10 TIjls(ees......... _. ,...•
1/'-') II' .)~) ICo )\:1'//
, I, I.···~ i
\_'>.:,~'" "~:.,::~-;' J d
shall not be subject to the restrictions imposed against Trustees as provided for in Section
J13.052, 113.053 and 113.054 of tile Texas Trust Code, or amendments thereto, provided said
Trustees deal with my estate prudently and for adequate consideration.
1. The power to continue to hold any and ill property received by tile Trustees or
subsequently added to the Trust Estate or acquired pursuant, to proper authority, including
shares of Trustees' own stock and stock in any corporation controilmg, controlled by, or under
common control with the Trustees, if and as long as the Trustees, in exercising reasonable
prudence, discretion, and intelligence, consider Ulat tile retention is in the best interests of a,e
Trust.
2. The power to make, execute and deliver oil, gas and other mineral leases, division
orders, ratification of leases and pooled units, and to accept bonus, rentals and royalties
(including shut-in royalties), and treat all of a,e same as income as provided for herein.
3. The power to make, execute and deliver rights of way grants and easements for pipelines
and roads, and other surface uses.
4. The power to make demand for, cIaim and bring suit to recover damages of every Idnd
and character to the surface estate or the mineral estate of lands subject to or affected in any way
by the Trust.
5. The power to develop any oil, gas or other mineral fee simple estate by e~llloring,
drilling, testing, completing, equipping or producing a well or wells for oil, gas or other
minerals.
6. The .power to buy and sell stocks, bonds and other securities, on account, induding
option puts and calls, futures options, commodities, and gold, silver and precious metals.
7. The power to acquire or invest in an undivided interest in any property) real or personal,
and to invest funds belonging in any other Trust or estate, whether administered by the same or
different Trustees or fiduciaries, and whether created by Trustors or any other person. inter
vivos or by Will, receiving for the invested funds an undivided interest and right of participation
in the investment item.
8. The power to exercise, respecting securities held in the Trust Estate, all the rights,
powers, and privileges of an owner, including, but not limited to. the power to vDte, give
proxies, and to pay assessments and other sums deemed by the Trustees necessary for the
protection of tile Trust Estate; to partiCipate in voting trusts, pooling agreements, foreclosures,
reorganizations, consolidations, mergers, and liquidations and in connection therewith to deposit
securities with and transfer title to any protective or other committee under such terms as Ule
Trustees may deem advisable~ to exerCIse or seU stock subscription or conversion rights; to
accept and retain as an investment any securities or other property received tilrough the exercise
of any of the foregoing powers, regardless of any limitations elsewhere in tile Trust relative to
investments by the Trustees.
9. The power to hold securities or oUler Trust property in the name of the Trustees as
Trustees under this Trust Agreement or in the Trustees' own name or in the name of a nominee
or in such conditions where ownership wlll pass by delivery.
10. The power to continue and operate, to sell or to liquidate, as the Trustees deems
advisable, at the risk of the Trust Estate, any business or partnership interests received by a,e
Trust Estate.
11. The power to sell for cash or on deferred payments and on such tenns and conditions: as
are deemed appropriate by the Trustees, whether at public or private sale, to exchange, and to
convey any property of the Trust Estate.
12. The power on any division of the Trust Estate into separate shares or Trusts, to apportion
and allocate the assets of a,e Trust Estate, in cash or in kInd, or partly in cash and partly in
kind. or in undivided interests 1n the manner deemed advisable in the discretion of the Trustees;
after any division of the Trust Estate. the Trustees may make joint investments with funds from
some or all of a,e severa! shares or Trusts, but the Trustees shall keep separate accounts for
each share or Trust.
13. The power to abandon any Trust asset or interest therein in the discretion of the Trustees.
14. The power to grant an option illvolving disposition of a Trust asset and to take an option
for the acquisition of any asset by the Trust Estate.
15. The power to lease any real or personal property of the Trust Estate for any purpose for
terms within or extending beyond a,e duration of the Trust.
Hobart S, McMordie, 11 Asset MmUlgement Trosf
16. The power to manage. control. improve, and repair real and personal property belonging
to tlle Trust Estate.
17. The power to partition. divide. subdivide. assign. develop. and improve any Trust
property; to make or obtain the vacation of plats and adjust boundaries or to adjust differences
In valuation on exchange or partition by giving or receiving consideration; and to dedicate land
or easements to public use with or without consideration.
18. The power to make ordinary and extraordinary repairs and alterations in buildings or
other Trust property, to demolish any improvements. to raze party walls or building. and to
erect new party walls or buildings as the Trustees deems advisable.
19. The power to borrow money for any Trust purpose from any (,erson. firm or corporation.
including one acting as Trustees hereunder. on the terms and conditIOns deemed appropriate by
the Trustees and to obligate the Trust Estate for repayment; to encumber the Trust Estate or any
of its property by mortgage t deed of trust) pledge, or otherwise, using whatever procedures [0
consummate the transaction deemed advisable by tl,e Trustees; to replace. renew and extend any
encumbrance and to pay loans or other obligations of tile Trust Estate deemed advisable by tl,e
Trustees.
20. The power to make loans. adequately secured and at a reasonable rate of interest. to the
executor of the estate of the Trustor. The Trustees shall be without liability for any loss
resulting therefrom.
21. The power to enter into oil. gas. liquid or gaseous hydrocarbon. sulfur. metal and any
and all otiler natural resource leases on terms deemed advisable by the Trustees. and to enter
into any poolin~, unitization, repressurization. community and other types of agreements relating
to the exploration. development, operation. and conservation of properties containing ll}inerais
or other natural resources; to drill. mine. and otherwise operate for the development of oil, gas?
and other minerals; to contract for the installation and operation of absorption and repressuring
plants; and to install and maintain pipelines.
22. The power to procure and carry at the expense of tile Trust Estate insurance of the kinds,
fonns. and amounts deemed advisable by the Trustees to protect the Trust Estate and tile
Trustees against any hazard.
23. The power to enforce any deed of trust, mortgage. or pledge held by the Trust Estate and
to purchase at any sale tilereunder any property subject to any such hypothecation.
24. The power to extend the time of payment of any note or other obligation held in the Trust
Estate, including accrued or future interests. in the dIscretion of the Trustees.
25. The power to compromise, submit to arbitration, release with or without consideration.
or otherwise adjust claims in favor of Of against the Trust Estate.
26. The power to commence or defend at the e"'Pense of the Trust Estate any litigation
affecting the Trust or any property of tile Tmst Estate deemed advisable by the Trustees.
27. The power to pay all taxes. assessments. compensation of the Trustees. and all other
expenses incurred in the collection. care. administration· and protection of tile Trust Estate.
2B. The power to employ an attorney. investment advisor. accountant. broker. tax specialist
or any other agent deemed necessary in the discretion of the Trustees; and to pay them from the
Trust Estate a reasonable compensation for all services performed by any of them.
29. The power to terminate, in the discretion of the Trustees. any separate Trust held for a
Beneficiary. if the fair market value of the separate Trust, at any time, becomes less than One
Thousand DoJlaTS ($1.000) and. regardless of the age of the Beneficiary. to distribute the
principal and any accrued or undistributed net income to the Beneficiary. or to his guardian.
conservator, or other fiduciary.
30. The power on any partial or fillal distribution of the Trust Estate. to apportion and
allocate the assets of the Trust Estate in cash or in kind. or partly in cash and partly in kind. or
in undivided interests in the manner deemed advisable at the discretion of the Trustees and to
sell any property deemed necessary by dle Trustees to make the distribution.
31. The power to do all tile acts. to take all tlle proceedings. and to exercise all the rights,
powers. and privileges which an absolute owner of the property would have. subjeet always to
the discharge of Trustees' fiduciary obli~ations; the enumeration of certain powers in the Trust
Agreement shall not limit the general or Implied powers of the Trustees; The Trustees shall have
all additional powers that may now or hereafter be conferred on the Trustees by law or that may
be necessary to eoable the Trustees to administer the Trustees in accordance with the provisions
of the Trust Agreement. subject to limitations specified in the Trust Agreement.
32. The power to mal,e application for. aeq,uire and pay premiums for life, healdl. accident
or medical and hospitalization insurance covenng any Beneficiary or any third party in whom
Hobarr B. McMDrliie, 11 Asset Matlagemenr Trust
the Trust would have an insurable interest. The Trustees shall also have the power to make
demand for, claim and bring suit for recovery of expenses owed to health care providers, and
the!ower to make demand for, claim and bring suit to recover life insurance benefit.< of every
kin and character and to allocate such benefits as principal or income, and distribute them in
accordance with all the power; of the Trustees generally set out herein.
33. The power to sell, exchange, assign, transfer, and convey any real property, or any
interest in real property, or any interest in personal and real property which is considered a
mixed interest, held in Trustor's probate or nonprobate estate, at public or private sale, with or
without notice, at sucb time and price and under such terms and conditions as the Trustees may
deem reasonable and prudent.
B. Any Trustee may resign without the necessity of any court accounting. Any
successor Trustee must accept the trusteeship and shall be responsible only for those assets which
are actually delivered to such Trustee. The successor Trustee, on executing an acknowledged
acceptance of the trusteeship and upon receipt of those assets which are actually delivered to
such successor Trustee by the prior Trustee, .hall be vested without further act on the part of
anyone with all of the estate~, titles, rights, powers, duties, immunities and discretions granted
to the prior Trustee.
C. Tile Trustees may rely upon the written opinion of a competent attorney, any facts
stated in any instrument in writing and believed true, or any other evidence deemed sufficient.
The Trustees sball be saved hannless from any liability for any action the Trustees may take,
or for the failure of the Trustees to talce any action, if done in good faith and without gross
negligence.
n. To make it a matter of record of who and where the qualified and acting trustees
of the trust created bereby are from time to time as trustees cbange, each change of trusteeship
shall be evidenced by a sworn statement of the acting trustees and their addresses filed in the
need Records of each county and state where real property of the Trust is situated and in
Robert.<, County, Texas.
ARTIClE VI - BENEFICIARIES AND nlSTlYBtmoN
A. The Beneficiaries of the Trust are HOBART B. McMORDIE. II and
MAGDALENA SANCHEZ McMORDIE, each referred to herein as "Beneficiary".
B. The Trustees shall distribute the income and prinCipal of lbe Trust at such time.
and in such amount.< as demanded by HOBART B. McMORDIE durin£ the term of the Trust.
Any undistributed income on hand in the Trust at the end of each calendar year sbalLlle added
I!J the principal of the Trust for that year and either Beneficiary may make demands anytime
thereafter to receive saJd income. If MAGDALENA SANCHEZ survives HOBART B.
,
McMORDIE. the Trustees shall distribute all the income at least annuaUy to her and shall, at
Trustees' sale discretion, distribute principal to her to provide for her bealth, support and
maintenance in tlle standard of living to which she is accustomed at the death of HOBART B.
McMORDIE taking into consideratioo her other sources of income and principal. Income is
defined herein to include all royalties. bonus payments, IRA distributions or Retirement Plan
distributions and any other distribution of funds of similar characteristics. Any distribution to
a Beneficiary of the Trust, whether income or principal, shall be the separate property of such
Hobatt B. MtMordie, 11 Asset Management T'mrl
Beneficiary. The Trustees. at the request of eiU,er Beneficiary. shall sell or convert any
unproductive property in the Trust and make such property productive of income within a
reasonable time after such request
C. Upon the termination of the Trust as set out below, the accumulated and
undistributed income and principal shall be distributed. discharge of the Trust, to the nephews
of HOBART B. McMORDffi, II, whose names are CHARLES HARRIS McMORDffi, FRANK
F. McMORDffi, ill and JOHN HOBART McMORDffi, share and share alike, per capita and
not per stirpes. However, should either CHARLES HARJUS McMORDffi, FRANK F.
McMORDlE or JOHN HOBART McMORDffi die before the Trust terminates with descendants,
then their share shall, upon termination of the Trust, be distributed to the descendants, per
stirpes and not per capita of the named decedent and shall not be distributed to the family of
MAGDALENA SANCHEZ McMORDlE, allowing a reasonable period of time for the Trustees
to wind up the affairs of the Trust before making the aforesaid distribution.
ARTICLE vn - TERMlNATION
The Trust shall terminate upon the death of the last surviving Beneficiary.
ARTICLE vm - CONTINGENT mUST
If any share of Trust property is otherwise provided to be distributed to a person who has
not attained the age of twenty-five (25) years or to a person wbo has been adjudicated
incompetent by a court of proper jurisdiction (such persons are referred to under this Article as
the "Beneficiary"). Trustor direct the Trustees to hold such share in a separate Trust (the
"Contingent Trust") for the benefit of such Beneficiary. When such Beneficiary under the age
of twenty-five (25) years attains the age of twenty-five (25) years or when an adjudged
incompetent Beneficiary is adjudicated mentally competent to receive his or ber share, whichever
shall last occur, all remaining accumulated and undistributed income and principal of such Trust
shall be distributed to such Beneficiary and such Trust shall terminate. Prior to the termination
of such Trust. the Trustees sball utilize such amounts of Trust income and principal as the
Trustees, in the Trustees' absolute and uncontrolled discretion, deems desirable from time to
time to provide for the health, support, maintenance or education of such Beneficiary, directly
and without the interposition of any guarrurul. Any distribution to a Beneficiary of the Trust,
whether income or principal, shall be the separate property of such Beneficiary. If such
Beneficiary dies before the termination of the Trust, his or her Trust shall terminate and the
principal and all accumulated and undistributed income held for sucb Beneficiary in Trust shall
be distributed to his or her then living descendants, per stirpes and not per capita; and if none,
to the then living brothers and sisters of such Beneficiary, sbare and share alike; and if none,
to the then living desceodants of my brother, FRANK F. McMORDffi, per stirpes and not per
capita.
Hobm1 B. McMordfe. 11 Asset Manasement Tmst
ARTICLE IX • TEXAS TRUST
This is a Texas Trust, made and executed in this state, and is to be governed and
construed according to its laws and shall continue to be 50, though conducted and administered
elsewhere.
ARTICLE X • COMPENSATION OF TRUSTEES
All reasonable necessary expenses incurred by the Trustees in the performance of the
duties of a Trustee, in administering tile Trust shall be paid by tile Trust and the Trustees shall
receive the statutory compensation for services performed payable from either income or
principal Dr both.
ARTICLE XI· REVOCATION
The Trust shall be revocable and may be revoked, altered, modified or amended by both
Primnry Beneficiaries during their lifetime. Upon the death of the first Primary Beneficiary who
dies, the Trust shall become irrevocable.
ARTICLE XII • DESCENDANTS DEFINED
Reference in this Trust to "descendant" Dr "descendants" shall mean our lawful lineal
blood descendants of the first, second or any other degree of ancestor designated; proVided,
however, that such references shall include, with respect to any provision of this Trust,
descendants who have been cooceived at any specific point in lime relevant to such provision
and who thereafter survive birth; and provided further that an adopted child and such adopted
child's lawful lineal descendants by blood or adoption shall be considered under the Trust as
lawful lineal descendants of the adopting parent or parents. Notwithstanding the foregoing, a
descendant who is over the age of eighteen (18) years when legally adopted is not the child of
his or her adoptive pareot for all purposes herein.
ARTICLE XIII • PER STIRPES DISTRIBUTION
If a distribution in the Trust is directed to he made to any person's descendants "per
stirpes," the division into stirpes shall begin at the generation nearest to such person that has a
living member.
ARTICLE XIV • PERPETUITmS CLAUSE
Notwithstanding the directions heretofore given the Trustees as to the distribution of
income and principal under the terms of the Trust, any trust established by this Trust Agreement
shall terminate, if it has not previously terminated, twenty-one (21) years after the death of the
last surviving descendant of my parents, NELLIE JONES McMORDIE and FRANK F.
McMORDIE, SR., living at the date thIs Trust is executed.
ARTICLE XV • NllMBER AND GENDER
While tile Trust may somelimes use the singular term "Trustee" or a singular pronoun,
such is done for drafting convenience, and it is Trustor's intent to include the plural. It is also
Trustor's intent that where the masculine gender may have been used, it shall include the
feminine and neuter gender.
Hobart B. McJdordie, II Asset ManaSCTlumt Trust
ARTICLE A'VI - SPENP'I'HRIFT TRUST
The Trust sball be a Spendthrift Trust, as cootemplated by Section 112.035 of the Texas
Trust Code. to the extent necessary to protect the principal of the Trust Estate, the Trustees or
Beneficiary may apply to a court of competent jurisdiction, if necessary, for appointment of a
Trustee or Co-Trustee pursuant to Section 112.034(c) and Section 112.054 of tile Texas Trust
Code. Should any provision of the Trust be judicially construed and declared to invalidate the
spendthrift provisions of the Trust, the provision subjecting the remaining provisions of the
Trust, as supplemented by any and all necessary provisions of the Texas Trust Code, shalJ
continue to remain in force and effect and operate as a Trust subject to the full enforceability
of this Spendthrift Provision, In order to fulJy effectuate this Spendthrift clause, I direct that
any beneficiary of distributions of income or principal may waive or disclainl such distributions
or may elect to take such distributions in cash at any time or from time to time or in any other
manner so that they shall not be subject to attachment, sequestration, garnishment or other legal
process. Notwithstanding any other provisions of the Trust pertaining to distributions of income
or principal, if any beneficiary becomes subject to any order of a court of competent jurisdiction
for the freezing, attachment, or turnover of distributions, the Trustees shall become vested with
discretion whether to make or not to make any further distributions of income or principal but
may instead retain such distributions until the benefiCiary is no longer subject to such orders or
until such time as the Trustees. in the Trustees' sole discretion, detennines that such
distributions should be made,
ARTICLE XVII - HEADINGS
The headings above the various provisions of the Trust have been included only in order
to malce it easier to locate the subject matter covered by each provision and are not to be used
in construing the Trust or in ascertaining our intention with regard to our property held in trust.
ARTICLE xvm - ACCEPTANCE OF TRUST
The Trustees, by joining in the execution of the Trust Agreement, hereby accepts the
Trust upon the terms and conditions herein,
EXECUTED in this 1st day of November, 2004.
STATE OF TEXAS
COUNTY OF POTTER
The foregoing instrument was acknowledged before me on the 1st day of November,
by HOBART B. MeMORDIE, II,
Notary Pubhc
Hoban B. Mclvfordie, 11 Asset Monogemf!Tlt TrUJt
ACCEPTED by HOBART B. McMORDIE. II and MAGDALENA SANCHEZ
McMORDIE of Amarillo. Texas. as original CD-Trustees, this 1st day of November. 2004.
~j~,
Co
JJA/;;b
rustee
.
.
SCBEDULE"A"
1. My interest individually or held in any trust previously created by me (being
J/3rd of a 92211 000 interest) in all the minerals under the "McMordie Nortil and
Sou til Ranch" situated in Roberts County. Texas as described in the attachment
#1 hereto;
2. My interest individually or held in any trust rreviously created by me (being a
1/2 interest) in 11.975 acres in tlle surface 0 the real estate situated in Roberts
County. Texas as described in the attachment #2 hereto (referred to as the
("McMordie North Ranch");
3. My interest individually or held in any trust previously created by me (being a
1/2 interest in the Water Rights as described in tlle attachment #3 hereto (also
referred to as the ("McMordie North Ranch");
4. The residence located at 3200 Hawthorne. Amarillo. Texas;
5. Securities;
6. Bank Accounts;
7. Life Insurance Policies;
8. Fumi ture & Furnishings;
9. Personal Effects;
10. Beechcraft Airplane;
II. Automobiles; and
12. All my interest in any other properties; real. personal. tangible and intangible.
located in the United States.
esfpbrl'lW-mnrdfe,h\I1\lSLbls
Arter Recording Return to!
Donald R. Hum. Attorney
500 S. Taylor. L.B. 221
Amarillo, Texas 79101
Hobar! l1. Mclvlordie, 11 Asset Management Trust
·:MORDIE NORTH AND SOUTH W' --'J-!
. Section Block Survey Acres
34 C G&M 640 acres
85 C G&M 640, ncres
86 C G&M 640 acres
87 C G&M 602 acres
88 C G&M 640, acres
89 C G&M 640 acres
90, C G&M 640 acres
91 C G&M 640 acres
"118 (NfW pt.) C G&M 214 acres
123 C G&M 495 acres
124 C G&M 625 acres
125 C G&M 590, acres
126 C G&M 577 acres
127 C G&M 640, ncres
128 C G&M 640, acres
129 C G&M 367 acres
130, C G&M 365 acres
131 C G&M 324 acres
132 ,C G&M 223 acres
6 A-I EL&RR Ry Co, 320, acres
7 A-I EL&RRRyCo. 320, acres
8 A-I EL&RRRyCo. 320 acres**
9 (W/pL) A-I EL&RRRyCo_ "vVest 122 acres
II (W/pt.) A-I EL&RRRyCo. West 67 acres
12 A-I EL&RRRyCo. 320 acres
13 (W/pt.) A-[ EL&RR Ry CD. West 220 acres
14 (W/pL) A-[ EL&RR Ry Co. West 153 acres
15 A-I EL&RRRyCo. 320 acres
16 (W/pt.) A-I EL&RRRyCo. 245 acres
17 A-I EL&RRRyCo. 320 acres
18 A-[ EL&RRRyCo, 320, acres
19 A-I EL&RR Ry CD. 320, acres
20 A-I EL&RRRyCo. 320 acres
21 A-I Cl'CO 102.3 acres'
22 A-I CFCO 102.3 acres
23 A-I D&SERy.Co. 320 acres
24 A-I D&SERy, Co. 320 acres
25 A-I D&SERy. Co. 640, acres
26 A-I D&SERy.Co. 640, acres
I A-2 EL&RR Ry. Co, 320 acres
3 A-2 EL&RR Ry. Co. 320 acres
4 A-2 EL&RR Ry. Co. 320, acres
5 A-Z EL&RR Ry. Co. 320 acres
6 A-2 EL&RR Ry. Co. 320, acres
7 A-2 EL&RRRy. Co, 320 acres
8 A-2 EL&RR Ry. Co. 320" acres
9 A-2 EL&RRRy. Co. 320 acres
10 A-2 EL&RR Ry. Co. 320, acres
11 A-2 EL&RRRy, Co, 320 acres
12 A-2 EL&RRRy. Co. 320 acres
13 A·2 EL&RR Ry. Co. 320 acres
14 A-2 EL&RRRy. CD; 320 acres
[62 (NW/4) 42 H&TC Ry, Co. : 160 acres
187 42 H&TC Ry, Co. , 561 acres
'Metes and bounds description: Beginning at the Northwest Corner of said Survey, Thence East
1288 varas; thence South 1535 varas; Thence East North 8j Degrees 20 Minutes West 640, Varas
10 a poinl On the East line of Survey 20" Block A-I; Thence North 1070 Varas to the Northeast
Comer of said Survey 20; Thence West 651 varas to the Southwest comer of Section 118;
Thence North 392 vm'as to the place of beginning.
{As described in the Deed of Distribution and Recorded in the Deed Records of
Roberts County, Texas in Volume 112, Page 95, subject to all reservations stated
in said Deed of Distribution)
ATTACIillENT 1I2
HcMOROIE NORTH RANCH
Sectlon Block Survey Acres
& A·I EL&RRRyCo. 320
9 (Wlpt.) A·J EL&RRRyCo. 122
11 (W/pt.) A·J EL&RRRyCo. 67
12 A·I . EL&RRRyCo. 320
'13 (W/p!.) A·I EL&RRRyCo. 220
14 (W/pt.) A'I EL&RRRyCo. 153
15 A·I EL&RRRyCo. 320
]6 (W/pt.) A·I EL&RRRyCo. 245
17 A·I EL&RRRyCo. 320
18 A·I EL&RRRyCo. 32Q
19 A·I EL&RRRyCo .. 320
20 A'I EL&RR Ry Co. 320
21 A·I CFCO 102.3
22 A·I CFCO 102.3
23 A·I D&SERy. Co. 320
24 A·I D&SERy. Co. 320
1 A·2 EL&RRRy. Co. 32D
3 A·2 EL&RRRy. Co. 320
4 A·2 EL&RRRy. Co. 320
5 A·2 EL&RRRy.·Co. 320
6 A,2 EL&RRRy. Co. 320
7 A·2 . EL&RRRy. CO. 32G
8 A·2 IiL&RRRy. Co. 320
9 A·2 BL&RR Ry. Co. 320
10 A'2 EL&RR Ry. Co. 320
11 A·2 EL&RR Ry. Co. 320
12 A-2 EL&RRRy. Co. 320
13 A'2 BL&RRRy. Co. 320
14 A c2 BL&RR·Ry. Co. 320
IS7 42 H&TCRy.Co. 561
118 a'llW pt.) C G&M 214
125 C G&M 590
126 C G&M 577
124 C G&M 416.66
123 C G&M 495
132 C G&M 223
127 C G&Jv1 640
124 C G&M 208.33
d 'b d in the Partition Deed (Surface Estate) and recorded in the
(As escrJ. e ? .
Deed Records of Roberts County, Texas in Volume 113, Page ~D3 subJect to
all reservations stated in said partition Deed)
ATTACHMENT #3
l<]CMORDIE NORTH RANCH
Section Block ~ Acres
S A-I EL&RRRyCo. 320
9 ('NIp!.) A·I EL&.lUtRy Co. 122
11 (Wlp!.) A-I EL&RRRyCo. 67
12 A-I, EL&RRRyCo, 320'
'1'3 (Wlpt.) A-I EL&.lUt Ry Co. 220
14 ('NIp!,) A'I EL&.lUtRy Co, 153
is A-I EL&RRRyCo. 320
16 (Wlpt.) A-I EL&RRRyCo, 245
17 A-I EL&RRRyCo, 320
18 A-I EL&RRRyCo, 32Q
19 A-I EL&.lUtRy Co, . 320
20 A'I EL&RRRyCo, 320
21 A-I CFCO 102.3
22 A-l epeo 102,3
23 A-I D&SERy, Co, 320
24 A-I b&SERy, Co, 31'0
I A,2 EL&RRRy. Co. 320
3 A-2 EL&RRRy. Co, 320.
4 A-2 EL&RRRy, Co, 320
5 A,2 EL&RRRy.Co. 320
6 A,2 EL&RRRy. Co, 320
7 A-2 . EL&:R:R Ry, Co. 320
8 A"2 EL&RR Ry. Co. 320
9 A-2 EL&RRRy, Co, nD
IO 'Ac2 EL&RRRy, Co, 320
l! A-2 EL&RRRy, Co, 320
12 A-2 EL&RRRy, Co. 320
13 A-2 EL&RRRy. Co, 320
14 A-2 EL&RR·Ry. Co, 320
187 42 H&TCRy,Co, 561
liB (NfW pt.) C G&M 214
125 C G&M 59'0
126 C G&NI 577
124 C G&M 416,66
123 C G&NI 495
132 C G&M 223
127 C G&M 640
124 C G&M 208,33
'b d 'n the partition need (\vater Rights) and'recorded in
{As d escr~ e ~ . t
- R berts county Texas in Volume 119. Page 435 subJec
Deed Recor d s or 0 I . .
to all reservations stated in said Part~t~on Deed}
FIt E 0
DONNA L GOODMAN
County a~rk. /fOb.m C:ClUlIly, TCfllG'
9 ~ 00 A I'Y\.
DEC 2 8 2004
``;f..,~
_ _ _ _ _ _--"'L·~J.::'.'i
lila 5la!o CITII'UlSjl, OOl'lflJ L Goodmm. County
COOflty cl P.oberls CIeri!, In and for uflj
Ceunty. do N~trl C1!'I~':I In~1 1M 1000000000[l
\Il&lrurflOllf w~lh It..: r"t":O:;;'.! fll aulll!!l'lliffeat:::.n
wts moo lot mtWJ Iii i1~.' ':.It:'