In Mendell v. Scott, a decedent had a trust that named him as primary beneficiary, and upon his death, the trust would continue for a niece provided that she did not commit a prohibited act. No. 01-20-00578-CV, 2023 Tex. App. LEXIS 5382 (Tex. App.—Houston [1st Dist.] July 25, 2023, no pet.). If the niece predeceased him, then the trust would terminate and the assets would pass free and clear of any trust to the niece’s children. After the decedent died, the niece signed a disclaimer. When the trustee refused to terminate the trust, the niece’s children sued for breach of fiduciary duty and declaratory relief. The jury found for the plaintiffs and awarded damages and exemplary damages. The trustee appealed.

The court of appeals first noted the following provision in the Texas Property Code: “(a) A person other than a fiduciary may disclaim, in whole or in part, any interest in or power over property, including a power of appointment. (b) A person other than a fiduciary may disclaim an interest or power under this section even if the creator of the interest or power imposed a spendthrift provision or similar restriction on transfer or a restriction or limitation on the right to disclaim.” Tex. Prop. Code § 240.006. The Court held that Texas law is clear that a beneficiary has an absolute right to disclaim an interest in property and that right cannot be limited by the settlor. Regarding the effect of this disclaimer, the court held:

The effect of Susan’s Disclaimer was that it was to relate back to the time of the decedent’s death (June 8, 2017) and Susan was to be treated as having predeceased Uncle Mutt. Section 240.051(b) of the Property Code provides: “If an interest in property passes because of the death of a decedent . . . a disclaimer of the interest . . . takes effect as of the time of the decedent’s death; and . . . relates back for all purposes to the time of the decedent’s death.” Tex. Prop. Code § 240.051(b). Further, “if the interest is passing because of the death of a decedent, the disclaimed interest passes as if the disclaimant had died immediately before the time as of which the disclaimer takes effect under Subsection (b),” i.e., the decedent’s death. Id. § 240.051(e)(2)(A).2Link to the text of the note Because the effect of the Disclaimer meant that Susan predeceased Uncle Mutt, and the Disclaimer “relates back for all purposes to the time of the decedent’s death,” then Susan could not have committed a Prohibited Act, including by any of her actions surrounding the Disclaimer, after Uncle Mutt’s death on June 8.

Id. The court held that the disclaimer was effective, that the niece was presumed to have predeceased the settlor, and that remaining assets of the trust should have been distributed to the niece’s children as the sole beneficiaries, “outright and free of trust.”

The court then held that the trust had terminated. The court held:

As noted above, Section 112.052 provides that a “trust terminates if by its terms the trust is to continue only until . . . the happening of a certain event and . . . the event has occurred.” Tex. Prop. Code § 112.052. In their third motion for summary judgment, appellees pointed to the following language in Section 6.2 of the Trust as evidence that it terminated upon Uncle Mutt’s death: “If the said Susan Edis Gottlieb Herzfeld does not survive Settlor, and, again, conditioned upon no Prohibited Act . . . having been attributed to the Susan Herzfeld Share . . . then, instead, the Susan Herzfeld Share shall be distributed to her children, Laurence Scott (Herzfeld) and Rachel Chaput, in equal shares, outright and free of trust[.]”

The crux of Mendell’s argument in opposition of finding that the Trust terminated upon Uncle Mutt’s death seems to be that because the Trust provided her with the discretion to determine whether a Prohibited Act occurred, no merger could have happened (and thus, no termination of the Trust), until she made that determination. She further argues that the terms of the Trust obligated her to establish reserves to defend, not only the Trust, but also Uncle Mutt’s estate, and that all costs to defend the estate were to be borne by the Trust if Susan brought a challenge. While Susan disclaimed her interest in the Trust, she never disclaimed her interest in Uncle Mutt’s estate, so the reserves had to be maintained until the applicable limitations period expired for Susan to bring a challenge to the estate. See, e.g., Tex. Est. Code § 256.204(a) (two years for will contest). Mendell further contends that because Section 4.2 of the Trust Agreement mandates that the “primary purposes” for the Trust are to allow Mendell to pay from the Trust assets a one-third share of costs to defend Uncle Mutt’s estate and all other final bills or debts of the estate—before any distribution is made—the Trust could not terminate or be wound up until the applicable limitations period expired.6Link to the text of the note So, according to Mendell, she would have until at least that date to investigate whether a “Prohibited Act” had occurred.

We disagree.

The Trust does not contain the explicit statement that it is to terminate upon Uncle Mutt’s death; however, under the specific facts in this case, that is the effect of the distribution provision that applies in the event Susan “does not survive” Uncle Mutt. Although Susan’s disclaimer occurred after Uncle Mutt’s death, her disclaimer took “effect as of the time of [Uncle Mutt]’s death” and “relates back for all purposes to the time of [Uncle Mutt]’s death,” see Tex. Prop. Code § 240.051(b) (emphasis added), and the disclaimed interest passed as if she “had died immediately before” Uncle Mutt’s death. See id. § 240.051(e)(2)(A). Thus, we must proceed to the portion of Section 6.2 which provides for distribution in the event that Susan predeceased Uncle Mutt. Although Mendell is correct that distribution to appellees was likewise “conditioned upon no Prohibited Act . . . having been attributed to the Susan Herzfeld Share,” Mendell’s arguments related to her ability to exercise discretion to determine whether a Prohibited Act had occurred after Uncle Mutt’s death, thus preventing the termination or winding up of the Trust, all overlook the summary judgment evidence that she had, in fact, already made this determination as of August 17.

Furthermore, we reject Mendell’s argument that the Trust could not terminate until the primary purposes under Section 4.2(a) and (b) were fulfilled. Upon Uncle Mutt’s death, Section 6.1 provides for the payment of final and administrative expenses, i.e., the payment of costs and expenses identified in Sections 4.2(a) and (b). The language of Section 6.2 then provides for the distribution of the “remaining trust assets,” i.e., those “residual assets” identified in Section 4.3(c), to either Susan, in trust, or if Susan predeceased Uncle Mutt, to appellees “outright and free of trust.” Because Mendell had determined that as of August 17 no Prohibited Act had occurred by any party, and that she was prepared to move forward with the distributions pursuant to Section 6.2 of the Trust, albeit to Susan’s trust, this necessarily means that, as of August 17, Mendell had either made “payment or distribution, or provi[ded] for payment or distribution, of all amounts described in Section 4.2(a) and 4.2(b).” Accordingly, Section 6.2 directed that Mendell “shall” distribute “the remaining trust assets” to appellees “outright and free of trust.”

Thus, under the specific facts of this case, where Susan was treated as if she predeceased Uncle Mutt, the Trust was “to continue only until. . . the happening of a certain event,” i.e., Uncle Mutt’s death. See Tex. Prop. Code § 112.052. In other words, Uncle Mutt’s death was the “event of termination.” See id. Accordingly, we conclude that the trial court correctly determined that the trust “has terminated according to its terms.”

Id.

The trustee argued that an exculpatory clause applied to the plaintiffs’ breach of fiduciary duty claims. The trust provided: “This instrument shall always be construed in favor of the validity of any act or omission of any Trustee . . . and a Trustee . . . shall not be liable for any act or omission except in case of bad faith or fraud.” Id. The court noted that generally these types of provisions are enforceable under certain conditions. “The Texas Property Code provides: a) A term of a trust relieving a trustee of liability for breach of trust is unenforceable to the extent that the term relieves a trustee of liability for: (1) a breach of trust committed: (A) in bad faith; (B) intentionally; or (C) with reckless indifference to the interest of a beneficiary; or (2) any profit derived by the trustee from a breach of trust.” Id. (citing Tex. Prop. Code § 114.007(a)).

This court noted that it had previously held that an exculpatory clause is an affirmative defense. Id. (citing Kohlhausen v. Baxendale, No. 01-15-00901-CV, 2018 Tex. App. LEXIS 1828, 2018 WL 1278132, at *3 (Tex. App.—Houston [1st Dist.] Mar. 13, 2018, no pet.)). The court noted that a party asserting an affirmative defense bears the burden to plead, prove, and secure findings on the defense, and the failure to request a jury instruction on an affirmative defense results in waiver unless the issue was conclusively established. The trustee argued that it was the plaintiffs’  burden to request a jury question on the applicability of the exception to the exculpatory clause, i.e., that liability is not excused if actions are done in bad faith or fraud. The court disagreed, and held “as an exculpatory clause is an affirmative defense, it was her burden to prove and secure findings on that affirmative defense.” Id. And the court held that the failure to do so results in waiver unless the issue was conclusively established. The court then reviewed the evidence and did not agree with the trustee that the evidence conclusively established the applicability of the exculpatory clause.

The court then addressed the trustee’s argument that the trial erred in awarding damages against her and punitive damages based on her use of trust assets to pay her attorney’s fees. The trustee argued that the awards were improper because the trust grants her the express right to use trust assets to reimburse herself, or pay for in the first instance, all attorney’s fees and other expenses she incurred. The trust agreement contained certain provisions related to reimbursement for attorney’s fees and expenses, including:

• “Trustee shall also pay from the trust assets of the [Trust], all as the Trustee, in the Trustee’s sole discretion, deems appropriate . . . all other final bills and/or debts . . . of the Trustee relating to the defense of any trust or trusts created under this Trust Agreement or challenging the authority of the Trustee . . .”

• The Trustee “shall be entitled to receive full reimbursement for any and all expenses . . . incurred as a result of service of Trustee under this Trust Agreement . . . out of the assets of [the Trust], including, without limitation, attorney’s . . . fees . . . .”

• “[T]he Susan Herzfeld Share . . . [shall] be used for the payment of . . . as the Trustee shall determine, in the Trustee’s sole discretion, all costs and expenses, including attorney’s fees . . . incurred in reaction to, and/or defense against, problems, troubles, non-cooperation, . . . litigation or other proceedings (civil or criminal), . . . whether or not such activities constitute Prohibited Acts.” 

Id. The court noted that “while the Trust contains the above and other similar provisions, those provisions did not absolve Mendell of the duty to exercise her discretionary powers—even those that authorized her to act in her “sole discretion”—in good faith and in the interest of the beneficiaries.” Id. (citing Tex. Prop. Code § 113.029(a) (“Notwithstanding the breadth of discretion granted to a trustee in the terms of the trust, including the use of terms such as ‘absolute,’ ‘sole,’ or ‘uncontrolled,’ the trustee shall exercise a discretionary power in good faith and in accordance with the terms and purposes of the trust and the interests of the beneficiaries.”); and § 111.0035(b)(4)(B) (“The terms of a trust prevail over any provision of this subtitle, except that the terms of a trust may not limit . . . a trustee’s duty . . . to act in good faith and in accordance with the purposes of the trust.”)). The court also held:

Furthermore, while Texas law generally allows a trustee to incur expenses that are necessary to carry out the purposes of the trust and allows the trustee to be reimbursed from the trust estate for such expenses properly incurred, where an expense is not properly incurred, the trustee is not entitled to reimbursement from the trust estate. See Moody Found. v. Estate of Moody, No. 03-99-00034-CV, 1999 Tex. App. LEXIS 8597, 1999 WL 1041541, at *3 (Tex. App.—Austin Nov. 18, 1999, pet. denied) (citing Restatement (Second) of Trusts §§ 188, 244, 245). Thus, “[a] trustee is not entitled to reimbursement for expenses that do not confer a benefit upon the trust estate, such as those expenses related to litigation resulting from the fault of the trustee.” Id.; see also Stone v. King, No. 13-98-022-CV, 2000 Tex. App. LEXIS 8070, 2000 WL 35729200, at *8 (Tex. App.—Corpus Christi—Edinburg Nov. 30, 2000, pet. denied) (mem. op.) (holding that, based on earlier conclusion that trustee breached his fiduciary duties by failing to distribute trust funds, trial court could reasonably have concluded that litigation seeking to remove trustee resulted from trustee’s improper actions, that trustee did not act reasonably and in good faith in incurring attorney’s fees, and was, therefore, not entitled to charge trust for fees).

Here, the jury found that Mendell breached her fiduciary duty and that she acted with malice, and we conclude these findings (as detailed below) are supported by sufficient evidence. Therefore, Mendell was not entitled to charge the Trust for fees that did not confer a benefit on the Trust and that she incurred through the fault of her own, i.e., breaches of her fiduciary duties. We therefore hold these provisions of the Trust do not render the actual and exemplary damages awarded in the final judgment and the relief awarded in the Modified Permanent Injunction improper. See Moody Found., 1999 Tex. App. LEXIS 8597, 1999 WL 1041541, at *3; Stone, 2000 Tex. App. LEXIS 8070, 2000 WL 35729200, at *8; cf. In re McIntire, No. 07-22-00249-CV, 2023 Tex. App. LEXIS 60, 2023 WL 113059, at *4 (Tex. App.—Amarillo Jan. 5, 2023, orig. proceeding) (“So, given the rule that ‘a trustee may charge the trust for attorney’s fees the trustee, acting reasonably and in good faith, incurs defending charges of breach of trust,’ a finding of breach would seem a prerequisite to barring a trustee from turning to the trust for payment.” (internal citation omitted)).

Id.

The court then turned to the jury’s finding of breach of fiduciary duty. The jury found that the trustee breached her fiduciary duties in five different ways: she breached her fiduciary duty to administer the trust in good faith according to its terms, she failed to wind up the trust and distribute the trust property within a reasonable amount of time after the trust terminated, she breached her fiduciary duty of full disclosure, she breached her fiduciary duty of loyalty not to self-deal, and she breached her fiduciary duty of impartiality. The court of appeals only analyzed whether she breached her duty of full disclosure. The court noted that “A trustee has ‘a fiduciary duty of full disclosure of all material facts known to [the trustee] that might affect [a beneficiary’s] rights.” Id. (citing Montgomery v. Kennedy, 669 S.W.2d 309, 313 (Tex. 1984)). With respect to the duty of full disclosure, the jury charge stated:

Trustees have a fiduciary duty of full disclosure of all material facts known to them that might affect a beneficiary’s or principal’s right. Put another way, a trustee has much more than the traditional obligation not to make any material misrepresentations. Rather, a trustee also has an affirmative duty to make a full and accurate confession of all her trustee activities, transactions, profits and mistakes.

Id. The court reviewed evidence that it took six months to provide an accounting after a request for same, and that the accounting was not in proper form, that the trustee did not respond to many emails, and that the trustee failed to disclose that she had determined that the plaintiffs’ mother had triggered a prohibited action and that they were not entitled to any assets. The court also noted that “It is clear that there was a history of animosity between these parties and within the extended family; however, ‘[t]he existence of strained relations between the parties d[oes] not lessen the fiduciary’s duty of full and complete disclosure.’” Id. The court affirmed the jury’s finding that the trustee had breached her duty of disclosure.

Regarding damages, the court held that the trustee’s use of funds for her fees and expenses, which was not disclosed to the plaintiffs, was evidence to support the jury’s finding:

In connection with this, and unbeknownst to appellees, Mendell transferred $200,000 out of the Trust’s investment account into a no or low interest checking account and proceeded to pay attorney’s fees and other expenses out of this checking account. Mendell continued to pay her attorney’s fees out of this account until February 2020, when appellees received relief from the trial court in the form of a temporary injunction, which prohibited Mendell from “selling, spending, or otherwise dissipating in any way any assets belonging to the Trust, including further payment of attorney’s fees or trustee compensation during the pendency of this litigation.” In total, the evidence demonstrates that after Mendell transferred $200,000 from the Trust’s investment account to a no or low interest checking account, she paid approximately $200,000 in attorney’s fees and other expenses out of assets of the Trust, improperly and without appellees’ knowledge, which is evidence of a corresponding $200,000 loss in value to the Trust. Accordingly, considering the evidence in a light most favorable to the jury’s findings and indulging every reasonable inference to support them, we conclude there is legally sufficient evidence to support the jury’s finding that $200,000 represented the amount of loss in the value of the Trust as a result of Mendell’s breach.

Id.

The court then addressed the trustee’s argument that there was not sufficient evidence to support the exemplary damages award. Exemplary damages may be awarded if “the claimant proves by clear and convincing evidence that the harm with respect to which the claimant seeks recovery of exemplary damages results from . . . malice.” Id. (citing Tex. Civ. Prac. & Rem. Code § 41.003(a)(2)). Malice is defined as “a specific intent by the defendant to cause substantial injury or harm to the claimant.” Id. (citing Tex. Civ. Prac. & Rem. Code. § 41.001(7)). The court found that the evidence was sufficient to support the jury’s finding. The trustee admitted that even though she thought her five law firms informed the plaintiffs of her decision that their mother did a prohibited act, she admitted she did not present any documentary evidence, including emails or letters, demonstrating that this information was sent by her attorneys. She admitted that she did not disclose her concerns related to the disclaimer until after sued her. She did not communicate this decision despite receiving repeated emails and questions asking for a status report on the distribution of trust assets. “Although Rachel sent Mendell 12 emails over a six-month period in 2018, Mendell either did not respond to these emails or, when she finally did respond, she promised to address Rachel’s concerns soon, but never did. At no time during these email exchanges did Mendell communicate her concerns about any alleged Prohibited Acts or explain why distributions had not been made.” Id. The trustee also never informed plaintiffs that she had opened a separate checking account and transferred $200,000 to that account, or that she had hired and was paying attorneys with those assets. Further, the trustee admitted that she had not provided any invoices describing what work was being performed by the attorneys to whom these payments were made, only that “[i]t was in defending the trust[.]” The jury also heard evidence about the trustee’s distribution of two other trusts and that the trustee and plaintiffs had a history of animosity. The court concluded:

From all the above evidence, a reasonable juror could have formed a firm conviction or belief that Mendell, fueled by a history of animosity against Susan and her children, acted with a specific intent to harm appellees, by delaying the distribution of the assets of the Trust to them, unless or until they agreed to some other “global settlement,” and when they did not, searching for a reason to conclude that they were not entitled to distribution under the Trust at all. Although Mendell argues that there is insufficient evidence of malice because appellees have no direct evidence of malice or of her intent to injure appellees, as discussed above, “it is well-established that a plaintiff required to prove the state of mind of a defendant need not adduce direct evidence; it may instead rely upon circumstantial evidence.” Based on the above detailed circumstantial evidence viewed in favor of the jury’s findings and the reasonable inferences drawn therefrom, combined with the fact that credibility determinations are left up to the jury, we conclude that there is legally sufficient evidence to support the jury’s finding of malice.

Id.

Finally, the court addressed the trustee’s complaint that the trial court ordered her, in her individual capacity, to pay the attorney’s fees incurred by the plaintiffs. She argued that the award was in error because the trust unambiguously provides that she is never to have any liability in her individual capacity, and that plaintiffs themselves are to be responsible for such costs and expenses. Section 6.8 of the Trust provides:

Settlor directs that, in no event, shall any trust of Settlor, Settlor’s probate or nonprobate estate, or any Settlor Designated Representative [i.e., Mendell] . . . be responsible for payment of any costs incurred by any Susan Herzfeld Party [including appellees] . . . , including attorney’s fees. Further, Settlor directs that, in no event, shall any Susan Herzfeld Party . . . be entitled to reimbursement from any trust of Settlor, from Settlor’s probate or [*88]  nonprobate estate, or from any Settlor Designated Representative for any costs of any Susan Herzfeld Party . . . , including attorney’s fees.

Id. The trustee argued that these and similar provisions throughout the trust control over most statutory or common-law obligations. The court of appeals disagreed and cited to Section 111.0035 of the Property Code, which provides: “The terms of a trust prevail over any provision of this subtitle, except that the terms of a trust may not limit . . . a trustee’s duty . . . to act in good faith and in accordance with the purposes of the trust[.]” Id. (citing Tex. Prop. Code § 111.0035(b)(4)(B)). “Section 111.0035 does not prohibit an award of attorney’s fees pursuant to the Declaratory Judgment Act as it is not contained in the Property Code, let alone the same subtitle.” Id.

The court also held that due to the jury’s sustained findings that the trustee breached her fiduciary duties to appellees, and did so with malice, it would decline to hold that provisions of the trust stating that the trustee shall not be responsible for attorney’s fees prevail over either Section 114.064 or Section 37.009. “To do so when there is sufficient evidence that Mendell breached her fiduciary duties with malice, would limit Mendell’s duty to act in good faith by rewarding her failure to do so.” Id.

After considering whether the attorney’s fees were properly awarded under those relevant statutes, the court held that the award was within the discretion of the trial court:

The granting or denying of attorney’s fees under Section 114.064 or Section 37.009 is within the sound discretion of the trial court, and a reviewing court will not reverse the trial court’s judgment absent a clear showing that the trial court abused its discretion by acting without reference to any guiding rules and principles. The Declaratory Judgment Act provides: “In any proceeding under this chapter, the court may award costs and reasonable and necessary attorney’s fees as are equitable and just.” Appellees sought declaratory relief related to the interpretation of the Trust, and the trial court granted three partial summary judgments on appellees’ claims for declaratory relief and incorporated those rulings into its final judgment. These claims for declaratory relief were distinct from appellees’ breach of fiduciary duty claims, and we reject Mendell’s claims to the contrary. Thus, the trial court had discretion to award “reasonable and necessary attorney’s fees as are equitable and just” for appellees’ declaratory judgment claims.

Section 114.064(a) of the Property Code similarly states: “In any proceeding under this code the court may make such award of costs and reasonable and necessary attorney’s fees as may seem equitable and just.” Attorney’s fees are recoverable under this statute for appellees’ claims against Mendell as trustee for breaches of her fiduciary duties. Thus, the trial court had discretion to award “reasonable and necessary attorney’s fees as may seem equitable and just” for appellees’ breach of fiduciary duty claims.

Id. The court then affirmed the award of attorney’s fees against the trustee. The court affirmed the judgment of the trial court every aspect except as to an award of conditional appellate attorney’s fees and certain injunctive relief.

In Herbig v. Welch, a dispute arose around whether a trust terminated and whether certain transfers were valid. No. 01-22-00080-CV, 2023 Tex. App. LEXIS 4505 (Tex. App.—Houston [1st Dist.] June 27, 2023, no pet.). The parties disputed whether a trust terminated, whether a trustee had authority to accept transfers after termination, whether certain transfers were void, and whether a party had capacity or standing to assert all these issues. The court first noted that whether a party was an “interested party” under Section 115.001 of the Texas Trust Code, and had authority to bring claims under that statute, was an issue of capacity that could be waived. The court had that the issue was waived. Notwithstanding, the court held that even under a traditional standing analysis, that the trustee of an alleged terminated trust had standing because if certain transfers were void, the assets would refund into the trust.

The trial court granted summary judgment that the trust did terminate upon the death of the primary beneficiary, and the court of appeals affirmed:

In her motion for summary judgment, Jeanne pointed to the following language in Article IV of the WFT as evidence that it, and the sub trusts, terminated upon Richard’s death: … “Upon the death of the surviving Beneficiary, the Trustee shall distribute all assets remaining in the various Trusts established in Article III in accordance with any powers of appointment exercised by the surviving Beneficiary. To the extent not exercised, such property will be distributed to the descendants of Trustors on a per stirpes basis.” Herbig argues that while this article “provides for the distribution of assets upon Richard’s death, . . . it does not provide for an immediate extinction of the WFT.” While Herbig is correct that this language does not expressly state that the Welch Family Trust C became “immediate[ly] extinct[]” or that it terminates upon Richard’s death, it does, by its terms, direct that the trust be terminated. It provides for the distribution of “all assets remaining in the various Trusts . . . in accordance with any powers of appointment exercised by [Richard],” and to the extent such powers of appointment were not exercised, “such property will be distributed to the descendants of Trustors on a per stirpes basis.” There are no provisions allowing for powers of appointment related to the Welch Family Trust C, so under the terms applicable to that trust, any remaining assets at the time of Richard’s death “will be distributed to the descendants of Trustors on a per stirpes basis.” Other than to distribute “all assets remaining,” there are no directives as to what would be done with the trust following Richard’s death. After all trust property and assets remaining in the Welch Family Trust C are distributed upon Richard’s death, the trust would have no remaining property or corpus. The only reasonable interpretation of this provision is that the Welch Family Trust C was “to continue only until . . . the happening of a certain event,” i.e., Richard’s death. See Tex. Prop. Code § 112.052. In other words, Richard’s death was the “event of termination.” See id. Once that event occurred, i.e., Richard died, the Welch Family Trust C terminated.

Id. The court of appeals then determined whether the trustee of the terminated trust could accept new property to the trust after termination. The court stated:

As noted above, Section 112.052 of the Texas Property Code states: “If an event of termination occurs, the trustee may continue to exercise the powers of the trustee for the reasonable period of time required to wind up the affairs of the trust and to make distribution of its assets to the appropriate beneficiaries. The continued exercise of the trustee’s powers after an event of termination does not affect the vested rights of beneficiaries of the trust.” Tex. Prop. Code § 112.052…

Under this law, after the Welch Family Trust C terminated on September 9, 2019, Herbig was permitted to continue to exercise his powers as trustee for a reasonable time required to wind up the affairs of the trust and to make distribution of its assets to the appropriate beneficiaries. See Tex. Prop. Code § 112.052; Sorrel, 1 S.W.3d at 870. Herbig argues that because his powers as trustee included the power to accept additional property or interests into the trust “at any time,” he was endowed with that right beyond the termination of the trust. He asserts that winding up the trust necessarily could include accepting the transfer of property. We disagree.

The opening paragraph of the WFT provides that it assigned to Richard and Margaret “all property, real or personal, which we, or through the actions of our attorneys-in-fact, or any other person may, at any time or from time to time, transfer, add or cause to be added to this Trust, all of which, together with any income thereon, is hereinafter called ‘Trust Property[.]'” Article II also provides that “[s]ubject to acceptance by the Trustee, additional property or interests may be transferred or assigned from time to time or at any time by any person . . . .” It is this language that Herbig points to in support of his argument that he could continue to accept new property into the trust even after termination. He contends that Jeanne, and the trial court’s, construction of the WFT renders the “at any time” language meaningless. But this language cited by Herbig presupposes that there is a trust in which to accept property. If we were to adopt Herbig’s interpretation, this would mean that the trustee could continue to accept new property into a trust even many years after the termination event occurs, preventing the winding up of the trust indefinitely.

Furthermore, this language of the trust neither expressly permits, nor prohibits, the trustee from accepting new property into the trust after termination. Accordingly, as Herbig recognizes, where the language of the trust is silent, the provisions of the Trust Code govern. See Tex. Prop. Code § 113.001; Myrick v. Moody Nat’l Bank, 336 S.W.3d 795, 802 (Tex. App.—Houston [1st Dist.] 2011, no pet.). As stated above, Section 112.052 permits a trustee to retain his powers after termination “for the reasonable period of time required to wind up the affairs of the trust and to make distribution of its assets to the appropriate beneficiaries.” … Accordingly, we hold that the neither the express terms of the Welch family Trust C, nor the Trust Code, authorized Herbig to accept the transfers of new property into the trust following Richard’s death and the termination of the trust.

Id.

The court then held that because the trustee did not have authority to accept the transfers, that the attempted conveyances were void. The court noted that “Texas courts have held that a deed is void if the grantee is not in existence at the time the deed is executed. Because we have concluded that the Welch Family Trust C terminated upon Richard’s death, and that as trustee, Herbig did not have the power to accept new property into the trust after termination, we hold that this is sufficient to establish that the Welch Family Trust C no longer existed for the purposes of receiving property as a grantee.” Id. The court affirmed the trial court’s ruling that the conveyances made after the primary beneficiary’s death were void.

In In re Estate of Wells, No. 12-23-00066-CV, 2023 Tex. App. LEXIS 8475 (Tex. App.—Tyler November 8, 2023, no pet. history). The testator left a will that created a trust for his wife and descendants, named his wife as the initial trustee, and granted the wife a power of appointment.  The power of appointment reads in relevant part:

Testamentary Power of Appointment. Upon the death of my spouse, the then remaining principal and undistributed income of the trust estate shall be distributed in such proportions and in such manner to or for the benefit of any one or more persons included in the group consisting of my descendants or spouses of my descendants, as my spouse may appoint by specific reference in my spouse’s last will and testament, or codicil thereto, (admitted to probate). The power herein granted shall in no event be exercised by my spouse in favor of my spouse, my spouse’s creditors, my spouse’s estate or creditors of my spouse’s estate. . . . To the extent that my spouse shall not exercise the foregoing testamentary power of appointment, then upon my spouse’s death the then existing corpus and undistributed income of such trust estate shall be held and distributed as hereinafter provided, in all respects as if such power of appointment had not been granted.

Id. The testator’s will contained additional instructions regarding exercise of testamentary powers of appointment:

Exercise of Testamentary Power of Appointment. Each testamentary power of appointment granted in this Will shall be exercised by a Will or any codicil thereto which (i) is executed in accordance with the formalities required at the time of the exercise of the power by the laws of the state of the donee’s domicile and (ii) specifically refers to such power of appointment. . . .

Id. If the wife did not exercise this power of appointment, then upon her death, the assets of the trust would be distributed equally to their two children.

The daughter of a son, who died after his parents, sued her aunt regarding various claims regarding her grandparents’ estates and trust. One issue was whether the wife exercised the power of appointment and left everything to her daughter. The court discussed powers of appointment:

A power of appointment is a power of disposition given to a person over property not his own, by someone who directs the mode in which that power shall be exercised by a particular instrument. However, a power of appointment is not itself property; the authority given to the donee of a power of appointment does not vest in him any estate, interest, or title in the property which is the subject of the power. Unless the instrument creating a power of appointment expressly provides to the contrary, a donee may exercise a power in any manner consistent with Chapter 181, subchapter C, of the Texas Property Code. “A testator may not exercise a power of appointment through a residuary clause in the testator’s will or through a will providing for general disposition of all of the testator’s property unless: (1) the testator makes a specific reference to the power in the will; or (2) there is some other indication in writing that the testator intended to include the property subject to the power in the will.”

Id.

The court then analyzed the requirements of Texas Estate Code Section 255.351, which discusses the exercise of a power of appointment:

Our examination of relevant case law shows that no Texas court has examined what constitutes “some other indication” that would satisfy the requirements of Section 255.351(2) (including under that Section’s former designation, Probate Code Section 58(c)). However, cases decided under the common law prior to Section 58(c)’s enactment indicate that for a will to constitute the exercise of a power of appointment (absent a specific reference thereto), the intent to exercise such power must be so clear that no other reasonable intent can be imputed under the will. “If, from the circumstances or the instrument executed, it be doubtful as to whether it was the intention to execute the power possessed by the grantor, then it will not be held that by such act or conveyance that power was in fact executed.” Although at least three Texas cases opined that the party granting a power of appointment “directs the mode in which that power shall be exercised by a particular instrument,” we similarly find no Texas law examining the impact of noncompliance with a restriction, set forth in the instrument creating a power of appointment, on the method by which the donee may exercise said power. We note that the Texas Property Code generally acknowledges that restrictions in the instrument creating a power may restrict the donee’s exercise thereof but does not address specific reference requirements.

Id.

In the wife’s last will, she stated: “I do not intend to exercise any power of appointment that I now possess or that may hereafter be conferred on me unless such a power is specifically referred to in this Will or in any codicil to this Will.” Id. She also stated:

I, being fully capable of deciding who I want my possessions to be handed down to and why I want them distributed to each of my children in the following manner do bequeath all of my real property, homestead, mineral rights, farm equipment, vehicles if viable, jewelry and personal property, cash, bank accounts, firearms, stocks, bonds and securities, household items, and furs and clothing, in other words, all material possessions in my name and under my control at the time of my demise to become the sole property of my daughter, KAREN DONNELL WELLS.

Id. The court analyzed this language and reversed the trial court’s summary judgment for the aunt and held that the power of appointment was not exercised:

[A]fter applying the aforementioned general principles of will construction to Helen’s will, we conclude that the intent of the testator is clear from a reading of the entire instrument and the words she used. In examining the exact words used in Helen’s will, we note that she states her intention to transfer “all of my Worldly Estate” (which she initially defines as including property she inherited from Don, community property acquired by herself and Don during their marriage, and her personal and household items, but later expands to include real property, financial assets, farm equipment, livestock, vehicles, stocks, bonds, firearms, and “papers of any value”). She further expresses her intention to dispose of “any separate property that I might own that I am sole Trustee, Executrix, and Beneficiary of since [Don’s] death,” and states that Kevin is not to inherit anything from “my Estate” other than a defined monetary bequest. Finally, she bequeaths to Karen “all material possessions in my name and under my control at the time of my demise.”

Helen’s explicit statement that (barring any subsequent specific references) she does not intend to exercise any powers of appointment does not conflict with the above statements of intent but can be read in harmony with the rest of the will. A power of appointment is not, itself, property, and the donee of a power of appointment does not receive any interest in or title to the property subject to said power of appointment. So, the power of appointment given to Helen by Don’s will is not part of Helen’s estate, something she owns, or a material possession “in [her] name and under [her] control,”-meaning that when she discusses disposing of items in these categories, she is not referencing any property subject to the power of appointment. The sole explicit or implicit reference in Helen’s will to the power of appointment is the provision stating that she does not intend to exercise any such powers. And in the absence of a specific reference to the contrary, the remainder of Helen’s will therefore lacks any “other indication” from which we may infer an intent to exercise the power of appointment created by Don’s will. We conclude that the trial court erred in granting Karen’s motion for partial summary judgment and denying Kelcey’s cross-motion.

Id.

The court then reviewed a document that the testator’s daughter obtained from her brother concerning the father’s estate. The court analyzed whether it was an assignment of the brother’s interest in the estate to his sister. The court discussed disclaimers and assignments:

A beneficiary of a will may disclaim his right to a bequest under Chapter 240.009 of the Texas Property Code, which sets forth certain requirements for the form, contents, and delivery of the disclaimer. A disclaimer of a property interest passing because of a decedent’s death takes effect as of the time of that death, and the disclaimed interest then passes as if the disclaimant had died immediately before the time as of which the disclaimer takes effect. The Estates Code provides that a person who is entitled to receive property (or an interest in property) from a decedent by inheritance, and who does not disclaim the property, may assign the property to any person. In general, “assignment” refers to the transfer of property or some right or interest from one person to another. However, an assignment of property under Chapter 122, Subchapter E of the Estates Code, “is a gift to the assignee.”

Id. The court noted that the parties did not argue that the document was a disclaimer. Rather, the trial court granted a summary judgment for the aunt, holding that the document was a valid assignment. The court reversed, holding that the document was ambiguous and that there was a fact question on his intent:

In the document, Kevin states that he “wish[es] to invoke the paragraph in [Helen’s] will allowing me to reject the inheritance given to me[,]” and is “rejecting any and all heirship” in Helen’s estate… Kevin further declares, “I hereby relenquish [sic] and quit any and all claims” to the estate… Finally, the April 2016 Document states that by signing, Kevin is “acknowledging” that Karen, Helen’s only other child, is the “sole heir” to the estate, and asks the probate court to “honour my decision and allow my only other sibling and child of Helen Brown Wells to inherit” the estate “in its entire amount.” … Although Karen argues that the use of these words definitively evidences Kevin’s intent to hand over his inheritance to her, the words are susceptible to multiple common meanings, many of which do not contemplate any specific recipient of the refused property. And we find relevant that the law permits a party to merely refuse a bequest via a signed document if certain statutory requirements are met, without necessarily assigning that bequest to any other person. Moreover, notably absent from the April 2016 Document are words such as “assign,” “transfer,” “give,” or “convey.” Reviewing the record in the light most favorable to Kelcey as nonmovant, and resolving any doubts against the motion, we cannot conclude that the express language of the April 2016 Document gives rise to a definite meaning that we may interpret as a matter of law.

Id.

The court also addressed a summary judgment motion based on the statute of limitations concerning a breach of fiduciary duty claim and reversed that motion as well. The court discussed the statute of limitations for breach of fiduciary duty claims against a trustee:

A claim for breach of fiduciary duty against a trustee does not accrue until after the trustee has done some act that shows repudiation of the trust and the beneficiary either has notice of, or by reasonable diligence should discover, the repudiation of the trust. Similarly, the statute of limitations cannot begin to run against a trust beneficiary following a trustee’s repudiation where said beneficiaries had no knowledge of the trust’s existence. Generally, accrual of a claim is not delayed when information that would reveal the existence of a legal injury is publicly available. Specifically, “[p]ersons interested in an estate admitted to probate are charged with notice of the contents of the probate records.” Therefore, a limitations period based on knowledge of the contents of probate records (including knowledge of the contents of a will) begins to run when the will is admitted to probate.

Don’s will, which created the Residuary Trust, was admitted to probate as a muniment of title on March 14, 2017. Karen does not contest Kelcey’s claim that she failed to inform Kevin or Kelcey that the Residuary Trust existed, but she incorrectly asserts that Kelcey is charged with constructive notice of the contents of the will on the day a copy was filed as part of an application for probate. Rather, Kelcey (as an interested person in her role as representative of Kevin’s estate) could only have been charged with constructive knowledge of the contents of Don’s will as of March 14, 2017, the date on which the will was admitted to probate. However, the inquiry as to claim accrual does not end there. Because Karen argues that Kelcey’s claims are barred by limitations, she necessarily argues that those claims have already accrued, and consequently, that the needed act of repudiation has already occurred. But Karen provides no legal authority or substantive analysis to establish when that repudiation took place (or even whether it occurred before or after Don’s will was admitted to probate), nor does she submit any date certain upon which Kelcey knew or should have known of such repudiation. Consequently, Karen did not conclusively prove when Kelcey’s cause of action for breach of fiduciary duty accrued. Viewing the available evidence in the light most favorable to the non-moving party, and resolving all doubts against the motion, we conclude that Karen did not conclusively establish her entitlement to traditional summary judgment on the affirmative defense of limitations.

Id. The court also reversed a summary judgment on a claim concerning the failure to make HEMS distributions because the form of the no-evidence motion was not sufficient. The court also reversed an award of attorney’s fees due to the reversal of most of the summary judgment rulings were reversed. The court remanded for further proceedings.

Watch Shareholder David F. Johnson address the following issues: whether a party has a right to jury trial in trust modification and other similar actions, what are the standards for pretrial receivership and injunctive relief in trust disputes, payment of attorney’s fees by trustees, oral trusts, enforceability of release agreements between trustees and beneficiaries, voiding marriages in estate disputes, provisions in wills giving an estate representative the right to construe the will, probating a lost will, and litigating the Dead Man’s Rule.

Watch On Demand

Beneficiaries of trust can face a difficult situation when the trustee of their trust either dies or becomes incapacitated. They may have many questions about the trust, such as what assets are in the trust or should be in the trust, what income and expenses have been incurred, what liabilities exist, what loans to and from the trust exist, what compensation has been paid, etc.? The problem is that the one person that should know all the answers is no longer able to provide them. What should the beneficiary do?

The first step is to analyze what duties a trustee has regarding disclosures to beneficiaries. The Texas Supreme Court has stated that “trustees and executors have a fiduciary duty of full disclosure of all material facts known to them that might affect [a beneficiary’s] rights.” Huie v. DeShazo, 922 S.W.2d 920, 923 (Tex. 1996); see also Valdez v. Hollenbeck, 465 S.W.3d 217, 231 (Tex. 2015). That duty cannot be limited by a trust document as to any beneficiary twenty-five years of age and entitled or permitted to receive trust distributions or who would receive a distribution if the trust terminated. Tex. Prop. Code § 111.0035(c). A strained trustee-beneficiary relationship does not minimize the fiduciary’s duty of full and complete disclosure. Montgomery v. Kennedy, 669 S.W.2d 309, 313 (Tex. 1984).

In addition to the duty of disclosure, a trustee must maintain a complete and accurate accounting of the administration of a trust. Faulkner v. Bost, 137 S.W.3d 254, 258 (Tex. App.—Tyler 2004, no pet.) (citing Shannon v. Frost Nat’l Bank of San Antonio, 533 S.W.2d 389, 393 (Tex. App.—San Antonio 1975, writ ref’d n.r.e.)). Those two duties come together in the statutory duty of a trustee to disclose the complete and accurate accounting of the trust’s administration on demand. Tex. Prop. Code § 113.151(a). That statute expressly permits a beneficiary or an interested person to demand an accounting, which must be provided on or before ninety (90) days following the demand. Tex. Prop. Code §§ 113.151(a)-(b); see also Davis v. Davis, No. 2-00-436-CV, 2003 Tex. App. LEXIS 2667, at *7 (Tex. App.—Fort Worth 2003, no pet.) (mem. op.). An accounting must show five things: 1) all assets that belong to the trust (whether in the trustee’s possession or not); 2) all receipts, disbursements, and other transactions including their source and nature, with receipts of principal and interest shown separately; 3) listing of all property being administered; 4) cash balance on hand and the name and location of the depository where the balance is maintained; and 5) all known liabilities owed by the trust. Tex. Prop. Code § 113.152. The accounting must provide these items from either the period when the trust was created or since the last accounting, whichever is later. Id. at § 113.151(a); Soefje v. Jones, 270 S.W.3d 617, 628 (Tex. App.—San Antonio 2008, no pet.). Any accounting that does not strictly provide all five of these is insufficient, and a court commits reversible error in approving of a deficient accounting. In re Dillard, 98 S.W.3d 386, 397–98 (Tex. App.—Amarillo 2003, pet. denied).

The right to an accounting is critical in that it protects beneficiaries from the inherent risk of inequitable trustee conduct. As one court put it, “[w]ithout an account the beneficiary must be in the dark as to whether there has been a breach of trust and so is prevented as a practical matter from holding the trustee liable for a breach.” Hollenback v. Hanna, 802 S.W.2d 412, 415-16 (Tex. App.—San Antonio 1991, no writ). In line with this reality, a trust document may not limit a trustee’s duty to respond to a demand for an accounting if it is from a beneficiary who:  (a) is entitled or permitted to receive a distribution from the trust, or (b) would receive a distribution if the trust terminated at the time of the demand. Tex. Prop. Code § 111.0035(b)(4).

Moreover, a trustee is not allowed to complain that the accounting is for a long period of time. The duty to disclose reflects the information a trustee is duty-bound to maintain as he or she is required to keep records of trust property and his or her actions. Beaty v. Bales, 677 S.W.2d 750, 754 (Tex. App.—San Antonio 1984, writ ref’d n.r.e.). A trustee is under a duty to keep and maintain accurate records of transactions relating to trust property and the administration of the trust. National Cattle Loan Co. v. Ward, 113 Tex. 312, 255 S.W. 160, 164 (Comm’n App. 1923); Faulkner v. Bost, 137 S.W.3d 254, 259 (Tex. App.—Tyler 2004, no pet.); Corpus Christi Bank & Trust v. Roberts, 587 S.W.2d 173, 181 (Tex. App.—Corpus Christi 1979), aff’d, 597 S.W.2d 752 (Tex. 1980) (“One of the primary duties of a trustee is to keep full, accurate and orderly records concerning the status of the trust estate and all acts performed thereunder.”); Shannon v. Frost Nat’l Bank of San Antonio, 533 S.W.2d 389, 393 (Tex. App.—San Antonio 1975, writ ref’d n.r.e.). There is no statute of limitations defense to a request for an accounting. See Estate of Erwin, No. 13-20-00301-CV, 2021 Tex. App. LEXIS 10160 (Tex. App.—Corpus Christi Dec. 29, 2021, no pet.) (“To the extent that Redding relies on the statute of limitations to shield her from rendering an accounting, she provides no case law, and we find none, that hold that the statute of limitations preventing recovery for breaches of fiduciary duty for failure to render an account prevent beneficiaries from seeking to compel an accounting.”).

The Restatement (Third) of Trusts provides a good description for the liability of not maintaining adequate records:

A trustee who fails to keep proper records is liable for any loss or expense resulting from that failure. A trustee’s failure to maintain necessary books and records may also cause a court in reviewing a judicial accounting to resolve doubts against the trustee. These failures by trustees may furnish grounds for reducing or denying compensation, or even for removal, or for charging the trustee with the costs of corrective procedures or of having to conduct otherwise unnecessary accounting proceedings in court.

Restatement (Third) of Trusts § 83.

When a trustee becomes incapacitated or dies, his or her estate representative may have the duty to prepare the accounting during his or her tenure. The leading case in Texas on this issue is Corpus Christi Bank & Trust v. Roberts, 587 S.W.2d 173 (Tex. App.—Corpus Christi 1979), reformed in part on other grounds and aff’d in part, 597 S.W.2d 752 (Tex. 1980). The settlor created a trust for her grandsons, which terminated when they became thirty years old. Id. at 176. After the trust terminated, the beneficiaries requested that the trustee prepare an accounting, but the trustee refused to do so. Id. The beneficiaries filed suit against the trustee requesting a court-ordered accounting and damages. Id. The trustee died prior to trial, and his executor, Corpus Christi Bank and Trust, was then substituted as party defendant. Id. Thereafter, the beneficiaries filed a motion seeking to compel the Bank, on behalf of the trustee, to render a full accounting, which the trial court granted. Id.

The court of appeals affirmed and explained:

One of the primary duties of a trustee is to keep full, accurate and orderly records concerning the status of the trust estate and all acts performed thereunder …. A trustee is charged with the duty of maintaining an accurate account of all the transactions relating to the trust property. He is chargeable with all assets coming into his hands, the disposition for which he cannot account. … In the event the trustee dies prior to the time he has rendered an account, … [his representative] must render the account for the trust beneficiaries.

Id.

The Texas Supreme Court affirmed this aspect of the court of appeals’s opinion. The Court analyzed a suit where, “After the trust [in issue] terminated under its terms [making the trustee a ‘former trustee’] respondents filed suit seeking an accounting and recovery of all sums belonging to the trust estate which had not been properly accounted for by the [former] Trustee.” Corpus Christi Bank & Trust v. Roberts, 597 S.W.2d 752, 573 (Tex. 1980). Despite expressing sympathy for the deceased trustee’s executor, the Texas Supreme Court upheld the requirement for the accounting, stating: “We sympathize with the executor’s difficulty in making a full accounting because of the death of this nonprofessional trustee as well as the death of his accountant before either could give testimony in this case. Nevertheless, this difficulty does not discharge the Trustee’s obligation to make a full accounting of all funds belonging to the trust estate.” Id. at 755.

More recently, an appellate court held that a former trustee’s executor had to prepare an accounting and reversed a trial court’s motion for protection on that issue. See Estate of Erwin, No. 13-20-00301-CV, 2021 Tex. App. LEXIS 10160 (Tex. App.—Corpus Christi 2021, no pet.). Citing to Roberts opinion, the court stated:

Although Redding has not been appointed the successor trustee over C.E.’s testamentary trusts, as independent administrator for Bettye’s estate, Redding assumes the responsibility of rendering an accounting. The trial court erred in granting Redding’s motion for order of protection against producing an accounting of the trusts.

Id. The Roberts court did imply that once a successor trustee is appointed that the successor trustee had the duty to prepare the accounting. Id. However, a successor trustee does not have knowledge of the trust’s transactions and assets, and it has the right to seek an accounting from a former trustee. Tex. Prop. Code § 113.151(b) (interested parties can seek an accounting); Restatement (Third) of Trusts § 83.

In In re Ng, a trial court issued an order requiring the wife of a former trustee to prepare an accounting. No. 09-17-00386-CV, 2017 Tex. App. LEXIS 10129, at *1 (Tex. App.—Beaumont Oct. 27, 2017, no pet.). In that suit, the successor trustee sued the estate of the former trustee and obtained the order. Id. The wife filed a mandamus action, and the successor trustee responded. Id. The court of appeals refused mandamus relief, allowing the trial court’s order requiring the accounting from the former trustee’s estate’s representative to be operative. Id.

Accordingly, the guardian for an incapacitated trustee or the representative of the estate of a deceased trustee may have the duty to prepare an accounting for a beneficiary.

Another issue is who pays for the accounting. The Texas Trust Code is silent on who pays for an accounting. Tex. Prop. Code § 113.151. It does state that “If a beneficiary is successful in the suit to compel a statement…, the court may … award all or part of the costs of court and all of the suing beneficiary’s reasonable and necessary attorney’s fees and costs against the trustee in the trustee’s individual capacity or in the trustee’s capacity as trustee.” Id. So, where a trustee fails to prepare an accounting the court can order the trustee, individually, to pay the fees and costs associated with that litigation.

Moreover, Section 114.008 of the Texas Trust Code provides:

To remedy a breach of trust that has occurred or might occur, the court may: (1) compel the trustee to perform the trustee’s duty or duties; (2) enjoin the trustee from committing a breach of trust; (3) compel the trustee to redress a breach of trust, including compelling the trustee to pay money or to restore property; (4) order a trustee to account; … (8) reduce or deny compensation to the trustee; … or (10) order any other appropriate relief.

Tex. Prop. Code § 114.008(a). This statute provides a court with authority to redress a trustee’s breach of trust (failure to keep and maintain adequate records) by ordering his or her estate to prepare an accounting at the estate’s expense.

Moreover, the Restatement (Third) of Trusts provides also provides for the remedies available where a trustee fails to properly maintain accurate records of all trust transactions:

A trustee who fails to keep proper records is liable for any loss or expense resulting from that failure. A trustee’s failure to maintain necessary books and records may also cause a court in reviewing a judicial accounting to resolve doubts against the trustee. These failures by trustees may furnish grounds for reducing or denying compensation, or even for removal, or for charging the trustee with the costs of corrective procedures or of having to conduct otherwise unnecessary accounting proceedings in court.

Restatement (Third) Of Trusts, § 83a(1). See also, Miller v. Pender, 93 N.H. 1, 34 A.2d 663 (1943) (affirming a trial court’s order requiring a trustee to pay the expense of employing an accountant when the expenditures were made necessary by the inadequacy of the trustee’s records). So, the common law supports a court entering an order requiring a trustee’s estate to prepare an accounting since inception and that the estate representative pay for same.

In In re Tr. A & Tr. C, Established Under Bernard L. & Jeannette Fenenbock Living Tr. Agreement, Dated Mar. 12, 2008, a co-trustee of a family trust transferred stock from the trust to her personal trust and then sold the stock to her sons. 651 S.W.3d 588 (Tex. App.—El Paso 2022), pet. granted (Dec. 15, 2023). Following the sale, her co-executor sued her, seeking a declaration that he is a co-trustee and that the transfer was void because he had not consented to it. The probate court declared the stock transfer to be void, ordered that the stock be “restored” to the family trust, and ordered the defendant to undertake certain actions, including an accounting and deposit of substantial funds. The defendant appealed, and the court of appeals vacated and remanded, holding that the probate court lacked jurisdiction to declare the stock transfer void due to the omission of “jurisdictionally indispensable” parties, the defendant’s sons.

Both parties petitioned for review to the Texas Supreme Court. The plaintiff argued that the sons did not need to be joined, and the defendant argued that her sons did not need to have been joined for the probate court to have jurisdiction, but that the probate court’s adjudication of the stock’s ownership in her sons’ absence was in error. The Supreme Court granted the parties’ petitions for review, and its staff presents the issue as: “The central issue in this case is whether compulsory joinder extends to subsequent purchasers of stock when a lawsuit between other parties effectively adjudicates the stock’s ownership.”

In Many v. Ridgely, a decedent’s son and daughter were beneficiaries of her estate. No. 03-21-00520-CV, 2023 Tex. App. LEXIS 8189 (Tex. App.—Austin October 27, 2023, no pet. history). Six years after an initial accounting, the daughter, who was the executrix, filed an updated accounting, and the parties attended a hearing. After the hearing, the executrix provided her brother with additional information. The brother then filed a motion under Texas Estate Code Section 405.001 for a forensic accounting. After another hearing, the probate court approved the executrix’s accounting and denied the motion for a forensic accounting. The brother appealed.

The court first addressed the Estate Code’s provisions for accountings:

Section 404.001(a) of the Estates Code provides that an interested party may demand an accounting from the independent executor. See id. § 404.001(a). The statute then provides a list of what the independent executor must provide to the interested party within sixty days, including, among other things: estate property that has “come into” the executor’s possession and the disposition of that property; debts paid by the estate; and debts and expenses still owing to the estate. Id. Subsection (6) contains a catch-all provision, requiring the executor to show “other facts as may be necessary to a full and definite understanding of the exact condition of the estate.” Id. Section 405.001, on the other hand, allows an interested person to petition the probate court for accounting and distribution. See id. § 405.001(a). The probate court “may order an accounting to be made with the court by the independent executor at such time as the court considers proper.” Id. The statute requires the accounting to include “the information that the court considers necessary to determine whether any part of the estate should be distributed.” Id.

Id. The court noted that the executrix provided the probate court with the first accounting and then two more detailed accountings, which included over one hundred pages of invoices, receipts, canceled checks, and other documents. The court describes the brother’s objections and the explanations:

First, in regard to the April 8, 2021 accounting, Many complained about “unexplained contradictions” and “inconsistences” within Ridgely’s accounting of expenses, one of them being why Ridgely left the Decedent’s residence vacant for several years after Decedent’s death. In response, Ridgely provided documentation explaining that she attempted to lease the residence but had issues doing so because of the residence’s physical condition and her inability to find prospective tenants who could afford the requested rent. Relatedly, Many also questioned the utility expenses on the residence, claiming they were unusually high for a mostly vacant property. In response, Ridgely provided documentation of homeowner’s insurance, water usage reports, exterminator services, housekeeping services, and other items related to the upkeep of the residence. As independent executor, Ridgely had a duty to “take care of estate property as a prudent person would take care of that person’s own property, and keep [any buildings belonging to the estate] in good repair.” Id. § 351.101.

Despite these explanations, Many again objected to the accounting, specifically to Ridgely’s itemized debts. Once more, Ridgely, in a sworn affidavit and inventory, provided the probate court with a response to the accounting items challenged by Many. These explanatory documents included, among other items: receipts from payments of housekeeping services, property taxes, lawn services, neighborhood association dues, and funeral services. In all, the sworn inventory provided approximately thirty-six items of specific Estate expenses that Ridgely paid out of her own personal funds. Based on the documentary evidence and Ridgely’s sworn affidavit, we conclude the probate court did not abuse its discretion in approving Ridgely’s final accounting.

Id. The court then affirmed the denial of the request for a forensic accounting, stating: “Because we have determined the probate court did not abuse its discretion in approving Ridgely’s final accounting, we necessarily conclude that Many’s request for accounting and distribution under Section 405.001 was unnecessary and that the probate court did not err in denying it.” Id.

In Parker v. Filip, a trust owned a limited partnership interest and the partnership owned real property in Fayette County, Texas. No. 14-23-00372-CV, 2023 Tex. App. LEXIS 6976 (Tex. App.—Houston [14th Dist.] August 31, 2023, no pet. history). Several limited partners sued the general partner and other limited partners, including the trustee of the trust, regarding the operation of the partnership in Fort Bend County, Texas, where the defendants resided. The defendants filed a motion to transfer venue to Fayette County, Texas, due to the real estate existing there. The trial court denied the motion, and the defendants appealed.

The court of appeals discussed the competing venue statutes:

 Section 15.011 of the Civil Practice and Remedies Code provides that:

Actions for recovery of real property or an estate or interest in real property, for partition of real property, to remove encumbrances from the title to real property, for recovery of damages to real property, or to quiet title to real property shall be brought in the county in which all or part of the property is located.

Tex. Civ. Prac. & Rem. Code § 15.011.

In its relevant parts, section 115.002 of the Property Code provides that:

The venue of an action under Section 115.001 of this Act is determined according to this section. If there is a single, noncorporate trustee, an action shall be brought in the county in which the trustee resides or has resided at any time during the four-year period preceding the date the action is filed.

Tex. Prop. Code § 115.002.

Section 115.002 of the Property Code is a separate statute from the Civil Practice and Remedies Code. Thus, we look to section 15.016 of the Civil Practice and Remedies Code for guidance because it provides that “[a]n action governed by any other statute prescribing mandatory venue shall be brought in the county required by that statute.” “[I]f an action is governed by a separate mandatory venue provision, then the action shall be brought in the county required by the separate venue provision.”

As shown above in the analysis of proper pleading, this action is governed by a separate mandatory venue provision. Therefore, section 15.016 of the Civil Practice and Remedies Code requires that the mandatory venue provisions in section 115.002 of the Property Code prevail over section 15.011 of the Civil Practice and Remedies Code. See Tex. Civ. Prac. & Rem. Code § 15.016. There is no dispute that Rebecca is a noncorporate trustee of the Parker Trust and that both Rebecca and Brian resided in Fort Bend County in the four years preceding this suit.

Id. Thus, the court held that Fort Bend County controlled under the Trust Code and that the Trust Code prevailed over the Texas Civil Practice and Remedies Code.

The court also addressed an argument that the trustee was not really an interested party to the suit:

Instead, appellants argue that appellees reliance on section 115.002 fails because appellees “failed to allege facts showing they are ‘interested persons'” under section 115.011. See Tex. Prop. Code § 115.011 (“Any interested person may bring an action under Section 115.001 of this Act.”). Appellants suggest that because the suit does not invoke jurisdiction under section 115.001, the venue provisions of section 115.002 are inapplicable. We disagree.

Property Code section 115.001(a-1) provides,

The list of proceedings described by Subsection (a) over which a district court has exclusive and original jurisdiction is not exhaustive. A district court has exclusive and original jurisdiction over a proceeding by or against a trustee or a proceeding concerning a trust under Subsection (a) whether or not the proceeding is listed in Subsection (a).

Id. at § 115.001(a-1)… Applying the plain language of section 115.001 to the case at hand, this section applies to “all proceedings by or against a trustee.” See Tex. Prop. Code § 115.001. This statutory language is neither vague nor ambiguous. See Am. Nat’l Ins., 410 S.W.3d at 853. We conclude that since this is a proceeding against a trustee in accordance with section 115.001, the mandatory venue provision of section 115.002 applies. Accordingly, we overrule appellants’ first and fifth issue.

Id. The court thus affirmed the trial court’s order denying the motion to transfer venue because the trustee lived in the county of suit and the Trust Code’s venue provision controlled.

In Reece Trust v. Reece, a husband created a trust for his wife, and they then began divorce proceedings. No. 22CA1393, 2023 COA 89, 2023 Colo. App. LEXIS 1456 (Colo. App. September 28, 2023). Before the divorce could become final, the husband died, and the trustee of the trust sought instruction from the court. The trust provided for HEMS standard distributions considering “my spouse’s other means of support and the standard of living enjoyed by my spouse during our marriage…” Id. The wife argued that the trustee should consider her lifestyle while she was together with her husband. The court disagreed. The court noted:

Reece argues that her standard of living should be assessed by looking solely at her finances in the three or four years before separating from Frascona. Everything after the separation, she further asserts, is irrelevant in interpreting the trust’s standard-of-living provision in article 4.3 of the will. In making this argument, Reece relies on In re Estate of McCart, 847 P.2d 184 (Colo. App. 1992), where a division of this court approved using the average of the parties’ income and expenses from the time the trust was created until the time of the settlor’s death to arrive at the standard of living. But the division didn’t hold that this is the only way to determine standard of living. And there’s no indication that there had been any change in the standard of living during the three-year period in that case.

Id. Rather, the court cited to the Restatement of Trusts and held that the wife’s standard of living should be judged at the time that the husband died (after their separation):

In resolving the appropriate measure of Reece’s standard of living, the probate court relied on section 50 of the Restatement (Third) of Trusts. A comment to that section says that “[t]he accustomed manner of living for . . . purposes [of support and maintenance] is ordinarily that enjoyed by the beneficiary at the time of the settlor’s death or at the time an irrevocable trust is created.” Restatement (Third) of Trs. § 50 cmt. d(2). And because the trust was not established — and did not become irrevocable — until Frascona’s death, the court concluded that Reece’s standard of living was her income and expenses at the time of Frascona’s death, including the period of their legal separation. We perceive no error in this analysis under these facts.

Id.

In McCoy v. McCoy, trust beneficiaries sued the trustee for breaching his fiduciary duties by pursing claims against a third party when they instructed him not to do so. No. 08-23-00119-CV, 2023 Tex. App. LEXIS 6604 (Tex. App.—El Paso August 25, 2023, no pet. history). The trustee filed a motion to dismiss under the TCPA, alleging that the beneficiaries’ claims were based on his right to petition. The trial court denied the motion, and the trustee appealed. 

The court of appeals affirmed. The beneficiaries cited the TCPA’s language that it does not abrogate the application of other statutory rights and argued that the legislature passed the TCPA with full knowledge of and with no intent to abrogate that the Trust Code provision allowing beneficiaries to stop a trustee from suing third parties. The court held:

 Though the right to petition is protected under the TCPA, it is protected only “to the maximum extent permitted by law[.]” Section 113.028 of the Trust Code acts as a limitation on those rights by defining permissible litigation conduct by trustees. According to Aubrey and Lexi’s allegations, James exceeded the “maximum extent” of his permissible right to petition by pursuing a claim for damages against Denise, who is not a beneficiary to their trusts, in his capacity as co-trustee, even after Aubrey and Lexi provided James with written notice of their opposition. Indeed, by agreeing to serve as co-trustee to Aubrey and Lexi’s trusts, James agreed to limit his normally unrestricted constitutional right to petition. Nothing in Aubrey and Lexi’s petition seeks to directly limit James’s right to petition to the maximum extent permitted by law.

To interpret the TCPA otherwise would frustrate the purpose of section 113.028 of the Trust Code and undermine the TCPA’s “clear directive” that it “does not abrogate or lessen any other defense, remedy, immunity, or privilege available under other constitutional, statutory, case, or common law or rule provisions.”… Section 113.028 of the Trust Code predates the TCPA and expressly provides that a trustee may not maintain a claim for damages against a non-beneficiary of that trust if the trust beneficiary provides written notice of her opposition. In light of that specific limitation on a trustee’s petitioning rights, we presume the legislature did not intend to undermine or override section 113.028 by passing the TCPA but instead passed the TCPA with full knowledge of the Trust Code and the limitations it imposes on trustees. This conclusion is consistent with that of courts interpreting the TCPA alongside other statutory schemes.

James did not carry his burden to show the TCPA applies to Aubrey and Lexi’s section 113.028 claim. Because we conclude the TCPA does not apply, we do not reach the parties’ remaining arguments which address the following steps in the TCPA analysis.

Id. The court affirmed the trial court’s order denying the TCPA motion to dismiss.