Statute of Frauds

Ayers v. Mitchell, 167 S.W.3d 924 (Tex. App.—Texarkana 2005, no pet.).


Mother, Father, Daughter, and Son opened a joint bank account consisting of funds contributed by Mother and Father. Over time, Daughter obtained sole control over these funds and refused to return them to Father after Mother’s death. The trial court determined that Mother and Father had created an irrevocable oral trust with Daughter as the trustee and thus agreed with Daughter that Father could not regain the funds. The appellate court reversed.

The court began its analysis with Property Code § 112.004 which provides that a trust must be in writing unless it satisfies the oral trust exception for personal property. For an oral trust of personal property to be enforceable, there must be a transfer of trust property to a trustee who is neither the settlor nor a beneficiary provided the transferor expresses trust intent either at or before the time of the transfer. The court reviewed the facts and determined that Father had not made a completed transfer of the bank account funds and thus no trust existed even though Father had expressed the requisite trust intent.

The court recognized that the Trust Code does not define the term “transfer.” After examining cases dealing with the ownership of funds in multiple-party accounts, the court held that a transfer “must divest the [settlor] of all dominion and control over the trust res.” Ayers at 929. Father did not transfer the funds because he remained on the account and thus had the right to make withdrawals at any time. In addition, there was evidence of several occasions where Father directed the use of the funds in the account.

Note: In dicta, the court explained that even if Father had created a trust, it would have been revocable and the evidence established its revocation. For example, Father’s filing this lawsuit and asking for his money would have revoked any trust that he may have created.

Moral: All trusts should be in writing and the writing should clearly express the settlor’s intent.