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.

The Texas Legislature created a statute to protect parties’ rights to freedom of speech and to petition the courts: the Texas Citizen’s Participation Act (TCPA). See Tex. Civ. Prac. & Rem. Code Ann. §§ 27.001-.011. The TCPA’s purpose is “to encourage and safeguard the constitutional rights of persons to petition, speak freely, associate freely, and otherwise participate in government to the maximum extent permitted by law and, at the same time, protect the rights of a person to file meritorious lawsuits for demonstrable injury.” Tex. Civ. Prac. & Rem. Code Ann. § 27.002; see In re Lipsky, 460 S.W.3d 579, 584 (Tex. 2015) (noting that the TCPA “protects citizens who petition . . . from retaliatory lawsuits that seek to intimidate or silence them”) The TCPA provides this protection by authorizing a motion to dismiss early in the covered proceedings, subject to expedited interlocutory review. McLane Champions, LLC v. Hous. Baseball Partners LLC, 671 S.W.3d 907, 914 (Tex. 2023) (citing Tex. Civ. Prac. & Rem. Code Ann. §§ 27.003, .008).

Parties who move for dismissal under the TCPA invoke a three-step, burden-shifting process: (1) the movants seeking dismissal must demonstrate that a legal action has been brought against them and that the action is based on or is in response to an exercise of a protected constitutional right; (2) if the movants succeed, the burden then shifts to the party bringing the legal action to avoid dismissal by establishing by clear and specific evidence a prima facie case for each essential element of the claim in question; and (3) if the nonmovant succeeds, the burden then shifts back to the movants to justify dismissal by establishing an affirmative defense or other ground on which they are entitled to judgment as a matter of law. Newstream Roanoke 6.125, LLC v. Shore, No. 02-22-00506-CV, 2023 WL 5615871, at *3 (Tex. App.—Fort Worth Aug. 31, 2023, no pet. h.) (mem. op.); Hanson v. Johnson, No. 02-23-00040-CV, 2023 WL 3643640, at *2 (Tex. App.—Fort Worth May 25, 2023, no pet.) (mem. op.).

In Malicoat v. Hughes, trust beneficiaries sued a trustee for breach of fiduciary duty and sought injunctive relief and other relief. No. 02-23-00122-CV, 2023 Tex. App. LEXIS 7483 (Tex. App.—Fort Worth September 28, 2023, no pet. history). The trustee then gave notice that she was going to enforce a no contest clause in the trust, which was required by that particular clause. The parties then attended mediation and resolved the first suit. The trustee then filed a second suit seeking a declaration that the no contest clause was triggered by the first suit. The beneficiaries then filed a motion to dismiss under the TCPA, which was denied. The court of appeals reversed, and ordered the trial court to grant the motion to dismiss.

The court of appeals first held that the beneficiaries passed the first step in the TCPA analysis: “because Hughes alleges in the Second Lawsuit that Cass and Malicoat violated the in terrorem clause by filing and maintaining the First Lawsuit, Cass and Malicoat have established that Hughes’s legal action is based on or is in response to their right to petition.” Id. (citing Marshall v. Marshall, No. 14-18-00094-CV, 2021 WL 208459, at *4, 7 (Tex. App.—Houston [14th Dist.] Jan. 21, 2021, pet. denied) (mem. op.) (holding that appellee’s allegation that appellants had violated an in terrorem clause by contesting a will in a different lawsuit implicated appellants’ exercise of their right to petition); see also Serafine v. Blunt, 466 S.W.3d 352, 360 (Tex. App.—Austin 2015, no pet.) (concluding that the filing of a lawsuit is an exercise of the right to petition under the TCPA)).

The court then turned to whether the trustee established by clear and specific evidence a prima facie case for each essential element of her declaratory judgment claim based on the no contest clause. The trustee argued that she established that the beneficiaries “violated the in terrorem clause in two ways: (1) ‘they unsuccessfully sought to challenge the appointment of [Hughes] as the Trustee of the Marital Trust by seeking her removal as Trustee,’ and (2) ‘they unsuccessfully sought to impair [Hughes’s] exercise of powers expressly granted to [her] by the trust.’” Id.  

Regarding the first argument, the court held that the beneficiaries were not seeking to challenge the trustee’s appointment, but were seeking to remove the trustee, which did not contradict any term of the trust: “the Trust does not contain any provisions regarding the removal of a trustee. Accordingly, the trust provisions of the Texas Property Code—which authorize the removal of a trustee—govern. Moreover, because the Trust is silent regarding the removal of a trustee, Cass and Malicoat did not violate the in terrorem clause by seeking Hughes’s removal as trustee.” Id.

Regarding the second argument, the court held that the trust’s no contest clause gave a safe harbor period, that after the trustee sends notice, that the beneficiary can dismiss the offending action. The court determined that the beneficiaries nonsuited their claim for injunctive relief within the safe harbor period, and therefore, did not violate the no contest clause. The court held that even if the safe harbor provision was not triggered, the beneficiaries request for injunctive relief did not trigger the no contest clause:

Although Hughes argues that those requests for injunctive relief impaired certain express powers given to her as trustee of the Marital Trust, we note that Cass and Malicoat alleged in the First Lawsuit that Hughes had breached her fiduciary duties owed as trustee of the Marital Trust and that, unless enjoined, they would “continue to be damaged by Hughes’s indiscriminate use of the Marital Trust principal.” We further note that Section 112.038(b) of the Texas Property Code provides that an in terrorem clause “generally will not be construed to prevent a beneficiary from seeking to compel a fiduciary to perform the fiduciary’s duties, seeking redress against a fiduciary for a breach of the fiduciary’s duties, or seeking a judicial construction of a will or trust.” Tex. Prop. Code Ann. § 112.038(b). More importantly, Section 114.008(a)(2) of the Texas Property Code expressly authorizes a trial court to “enjoin the trustee from committing a breach of trust” as a remedy to a breach of trust that has occurred or might occur. Id. § 114.008(a)(2). Thus, we conclude that Cass and Malicoat’s requests for injunctive relief did not violate the in terrorem clause because the trial court was authorized to enjoin Hughes from committing a breach of trust.

Id. The court also held that the beneficiaries had to be unsuccessful, and the trial court never denied the request for injunctive relief. The Court reversed the trial court and ordered that the TCPA motion be granted. See also Roach v. Roach, No. 05-22-00194-CV 2023 Tex. App. LEXIS 7256 (Tex. App.—Dallas September 18, 2023, no pet. history) (ordering court to grant TCPA motion to dismiss in no contest clause case).

In McCoy v. McCoy, trust beneficiaries (daughters) sued the trustee (father) for maintaining a claim against a third party (mother) after they notified him of their opposition under section 113.028 of the Texas Trust Code. No. 08-23-00119-CV, 2023 Tex. App. LEXIS 6604 (Tex. App.—El Paso August 25, 2023, no pet. history). The trustee moved to dismiss that claim under the TCPA based on his right to petition. The probate court did not rule on it, and it was overruled as an operation of law. The trustee then appealed.

The court of appeals noted that the TCPA protects those who file lawsuits:

The TCPA “protects speech on matters of public concern by authorizing courts to conduct an early and expedited review of the legal merit of claims that seek to stifle speech through the imposition of civil liability and damages.” It “was designed to protect both a defendant’s rights of speech, petition, and association and a claimant’s right to pursue valid legal claims for injuries the defendant caused.”

Id. The trustee argued:

James first contends the TCPA applies to Aubrey and Lexi’s section 113.028 claim because it is a cause of action expressly based on and filed in response to his crossclaims against Denise. He also argues the TCPA’s fraud exemption does not apply, and Aubrey and Lexi failed to establish a prima facie case for each element of their claim. James thus asks us to dismiss Aubrey and Lexi’s section 113.028 claim and award him fees and costs under the TCPA.

Id. Section 113.028 of the Texas Trust Code provides: “A trustee may not prosecute or assert a claim for damages in a cause of action against a party who is not a beneficiary of the trust if each beneficiary of the trust provides written notice to the trustee of the beneficiary’s opposition to the trustee’s prosecuting or asserting the claim in the cause of action.” Id. The court disagreed and affirmed the denial of the TCPA motion:

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… 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.

Id.

First Appellate Decision. In In re Troy S. Poe Trust, a co-trustee of a trust filed suit to modify the trust to increase the number of trustees and change the method for trustees to vote on issues as well as other modifications. No. 08-18-00074-CV, 2019 Tex. App. LEXIS 7838 (Tex. App.—El Paso August 28, 2019, no pet.). The trial court denied the defendant co-trustee’s request for a jury trial on underlying fact issues and held a two-day bench trial. After the trial court granted the plaintiff’s modifications, the defendant co-trustee appealed and argued that the trial court erred in refusing him a jury trial.

The court of appeals first looked at a party’s general right to a jury trial in Texas:

 The Texas Constitution addresses the right to a jury trial in two distinct provisions. The first, found in the Bill of Rights, provides that the “right of trial by jury shall remain inviolate.” But this provision has been held to “maintain a right to trial by jury for those actions, or analogous actions, tried by jury when the Constitution was adopted in 1876.” And Richard has not shown that trust modifications were tried to a jury in 1876 or before. The Texas Constitution also contains another provision governing jury trials in its judiciary article: “In the trial of all causes in the District Courts, the plaintiff or defendant shall, upon application made in open court, have the right of trial by jury; but no jury shall be empaneled in any civil case unless demanded by a party to the case, and a jury fee be paid by the party demanding a jury, for such sum, and with such exceptions as may be prescribed by the Legislature.” This section is broader than the Section 15 right to jury in the sense that it does not depend on court practice in 1876 or before. It is narrower in the sense that it only applies to “causes.” But the Texas Supreme Court views the term “causes” expansively, and that court has only restricted the right to jury trial in specific contexts where “some special reason” made jury trials unsuitable, such civil contempt proceedings, election contests, suits to remove a sheriff, and appeals in administrative proceedings. The Texas Constitution also gives the legislature authority to regulate jury trials to maintain their “purity and efficiency.” In that regard, we look to the statutory framework to determine whether parties possess a right to a jury trial.

Id. (internal citation omitted). The court then held that Texas Property Code did not waive a party’s right to a jury trial regarding a claim to modify a trust, and that the defendant co-trustee had a right to a jury trial on underlying fact questions involved in a trust modification case:

Under Texas law, the right to a jury trial extends to disputed issues of fact in equitable, as well as legal proceedings. And as a general rule, “when contested fact issues must be resolved before equitable relief can be determined, a party is entitled to have that resolution made by a jury.” “Once any such necessary factual disputes have been resolved, the weighing of all equitable considerations . . . and the ultimate decision of how much, if any, equitable relief should be awarded, must be determined by the trial court.” The trial court, and not the jury, determines the “expediency, necessity, or propriety of equitable relief.” Based on these general principles, Richard complains that the predicate question of whether there were changed circumstances, or the purpose of the trust had become impossible to fulfill, were for a jury to resolve.

Id. (internal citations omitted). The court of appeals agreed with the defendant co-trustee and held that he had a right to a jury trial on those initial issues. The court reversed and remanded for further proceedings.

Second Appellate Decision. In In re Poe Trust, the Texas Supreme Court reversed and remanded the court of appeals. No. 20-0179, 2022 Tex. LEXIS 548 (Tex. June 17, 2022). The Court held that parties to trust modification proceedings were not entitled to a jury trial under the Texas Property Code:

The Trust Code’s incorporation of the Rules of Civil Procedure cannot be construed to create a jury right where one does not already exist. The procedures established by those rules are “not meant to alter the parties’ . . . right to a jury trial.” In short, no right to a jury trial in a judicial trust-modification proceeding was created by Trust Code Section 112.054, Trust Code Section 115.012, or the Texas Rules of Civil Procedure, whether they are viewed alone or in combination.

Id. But the Court remanded for the court of appeals to consider whether the defendant co-trustee had a right to a jury trial under the Texas Constitution:

The Texas Constitution provides “two guarantees of the right to trial by jury” in civil proceedings. The Bill of Rights ensures that the “right of trial by jury shall remain inviolate.” Our cases have said, and the parties here do not dispute, that this provision maintains a jury right for the sorts of actions tried by jury when the Constitution was adopted and, thus, “only applies if, in 1876, a jury would have been allowed to try the action or an analogous action.”

At the time of the Constitution’s adoption, there was no common-law right to a jury trial in equitable actions and, consequently, our courts have held that the Bill of Rights did “not alter the common law tradition eschewing juries in equity.” However, to provide a jury right in equitable actions, “a special clause was introduced.” In our present Constitution, that guarantee is found in Article V, the Judiciary Article. It provides: “In the trial of all causes in the District Courts, the plaintiff or defendant shall, upon application made in open court, have the right of trial by jury; but no jury shall be empaneled in any civil case unless demanded by a party to the case, and a jury fee be paid by the party demanding a jury, for such sum, and with such exceptions as may be prescribed by the Legislature.” We have held, and no party here disputes, that the Judiciary Article “covers all ’causes’ regardless of whether a jury was available in 1876.”

…

The court of appeals confronted none of these constitutional arguments, which were first presented on rehearing. By that time, the court of appeals had concluded that the Trust Code’s incorporation of the Rules of Civil Procedure conferred a right to a jury trial. That holding made in-depth treatment of the constitutional arguments unnecessary. Our holding today, however, changes that… Following our preferred practice, we remand the case to the court of appeals to address petitioners’ constitutional arguments in the first instance. And we echo the concurrence’s view that amici input could greatly aid the court of appeals’ decisional process.

Id.

Third Appellate Decision. In In re Poe Trust, the court of appeals held that the co-trustee defendant did not have a constitutional right to a jury trial in a trust modification case, and then affirmed the trial court’s modification of the trust. No. 08-18-00074-CV, 2023 Tex. App. LEXIS 5598 (Tex. App.—El Paso July 28, 2023, pet. filed). The court held that there was no right to a jury trial under the Texas Bill of Rights:

First, the Bill of Rights states the “right of trial by jury shall remain inviolate.” This provision maintains a jury-trial right for the type of actions tried by jury when the Constitution was adopted and thus “only applies if, in 1876, a jury would have been allowed to try the action or an analogous action.” And in 1876, there was no right to a jury trial in equitable actions; consequently, the Bill of Rights did “not alter the common law tradition eschewing juries in equity.” Insofar as trust-deviation proceedings existed in 1876, they were considered equitable in nature, such that there would have been no jury-trial right at that time. Therefore, as the parties concede, there is no jury-trial right in a trust-modification proceeding under the Bill of Rights.

Id. The court then turned to the Judiciary Article and stated:

[T]he “Judiciary Article” states: “In the trial of all causes in the District Courts, the plaintiff or defendant shall, upon application made in open court, have the right of trial by jury; but no jury shall be empaneled in any civil case unless demanded by a party to the case, and a jury fee be paid by the party demanding a jury, for such sum, and with such exceptions as may be prescribed by the Legislature.” In contrast with the Bill of Rights, this provision expanded the jury-trial right to all “causes” in both law and equity, regardless of whether a jury trial was available for the same in 1876. However, there are differences in opinion regarding how the term “causes” in this provision should be defined.

Id. The court then held that a trust modification proceeding is not a “cause” as that term is used in the Judiciary Article:

Bock, on the other hand, argues that “cause” should include only “ordinary” causes of action, also referred to as “personal” actions, in which a plaintiff is seeking a personal judgment against a defendant based on the defendant’s breach of a duty or other wrongdoing. He posits that a plaintiff must be asserting some “personal right” for which he may obtain a remedy or enforceable judgment against the defendant. And he argues that a trust-modification proceeding lacks the attributes of an ordinary cause of action—it is not brought by a plaintiff seeking a judgment against a defendant, but instead is brought in the interest of the beneficiary and will not result in an enforceable judgment against any of the interested parties.

We conclude that Bock’s approach is the correct one, as it more closely aligns with the 1876 Constitution drafters’ intent in formulating the Judiciary Article’s jury-trial right and best comports with Texas jurisprudence over time.

Id. The court further explained:

Professor Harris later described the proceeding in which a plaintiff sues a defendant seeking a personal judgment against the defendant as the “ordinary cause of action,” which he contrasted with “special civil proceedings” that do not share this key attribute… This interpretation of the term cause as meaning the ordinary cause of action in which a plaintiff seeks recourse against a defendant further comports with the Judiciary Article’s “plaintiff” and “defendant” terminology. During the era in which the 1876 Constitution was adopted, Bouvier’s Law Dictionary defined a plaintiff as a person “who, in a personal action, seeks a remedy for an injury to his rights.” Plaintiff. It defined the term “defendant” in the opposing stance as a “party who is sued in a personal action.” And in turn, it defined a “personal action” as one “brought for the specific goods and chattels; or for damages or other redress for breach of contract or for injuries of every other description; the specific recovery of lands, tenements and hereditaments only excepted.” In other words, a personal action encompasses a situation in which a party seeks a judgment against a defendant as a remedy for a violation of a personal right… [W]e find the ordinary-cause-of-action framework to be the correct framework or test by which to determine whether a proceeding can be considered a Judicial Article cause versus a special proceeding that falls outside its scope.

Id. The court then held that a trust modification proceeding is more of a special proceeding and does not involve an ordinary cause of action:

Utilizing the ordinary-cause-of-action framework, we agree with Bock that a trust-modification proceeding does not have any of the attributes of a cause for which a Judicial Article jury-trial right exists; instead, its nature is that of a special proceeding for which no jury-trial right exists. As Bock points out, in a trust-modification proceeding, there is no plaintiff seeking a right of recovery or a judgment against a defendant who has committed some wrong.

Id. So, the court of appeals affirmed the trial court’s decision to deny the defendant co-trustee’s request for a jury trial. The court then looked at the merits of the trust modification and affirmed it as well. The court essentially rejected the unambiguous intent expressed by the settlor in the trust document and focused on other evidence to modify the trust.

There was a dissenting justice who found that the defendant co-trustee did have a constitutional right to a jury trial. The dissenting justice stated:

In the years when the 1875 Constitution was drafted, Texas law used “cause” broadly… In other words, “cause” was viewed comprehensively as encompassing contested questions before a court… Moreover, as this Court held in our prior decision in this case, the record here establishes that statutory prerequisites include disputed questions of fact. Specifically, this Court concluded  that “the predicate questions of whether the trust needed to be modified was a fact question that should have been decided by a jury[.]”We observed in our earlier decision that, “as a general rule, ‘when contested fact issues must be resolved before equitable relief can be determined, a party is entitled to have that resolution made by a jury.'” Because this suit is based on a long recognized equitable cause of action, I would hold it falls squarely within the meaning of “all causes” as included in the Judiciary Article’s terms.

The majority views a material distinction between the term “cases,” as included in the Constitution of 1869, and the term “causes,” as currently included. Specifically, the majority describes the term “causes,” as “narrower language.” On that point, I disagree. Controlling authorities of the era inform that “all cases of law or equity,” as included in the 1869 version, essentially means the same thing as “all causes,” which was adopted in 1876. Given the historical use of these terms, I see no indication that the voters of that era drew back from the otherwise expanding guarantee of a right to a jury trial.

Additionally, the majority places heavy importance on the use of the terms, “plaintiff” and “defendant,” as appearing in the Judiciary Article. Based in part on these terms, the majority concludes that the term “cause” can only be interpretated as meaning an “ordinary cause of action.” Again, I disagree… First, these same terms, “plaintiff” and “defendant,” appear in the Constitution of 1845, where the jury-trial guarantee was otherwise provided in “all causes in equity.” Second, the terms “plaintiff” and “defendant” are not used as terms of limitation but rather to describe that a jury trial is guaranteed to all participants when “application [is] made in open court.” Third and lastly, I see no indication here of any special circumstance that would cause a jury trial to be prohibitive. On that score, Justice Busby’s concurring opinion in Poe, which is joined by Justice Devine and Justice Young, largely provides the analytical framework for making that determination. Because this modification suit is a statutory substitute for a cause in equity, I would classify it as falling into the second category of Justice Busby’s framework. To that extent, the jury-trial right would extend in part to the disputed issues of fact of this suit while questions of equitable discretion should be decided by the court. Unlike the majority, I would hold that a trust modification proceeding qualifies as “a cause” within the meaning of the Judiciary Article’s guarantee.

Id.

Fourth Appellate Decision? The defendant co-trustee has filed a petition for review in the Texas Supreme Court on both the jury trial right issue and on the trust modification issue. The first issue is one of great importance to Texas jurisprudence as it certainly impacts trust modifications and many other equitable proceedings under the Trust Code and Estate’s Code. The Texas Supreme Court should accept the petition in this case, again, and finally determine whether a party has a constitutional right to a jury trial on underlying fact disputes in these types of proceedings. Additionally, the trust modification issue is also important to Texas jurisprudence. The Texas Supreme Court has issued very little authority on what evidence a trial court can consider in modifying a trust and determining the settlor’s intent. The court of appeals’ broad opinion on this issue is in conflict with at least one other court of appeals.

In Moody Nat’l Bank v. Moody, a beneficiary sued a trustee regarding several allegations of breach of fiduciary duty. No. 14-21-00096-CV, 2022 Tex. App. LEXIS 7844 (Tex. App.—Houston [14th Dist.] October 25, 2022, pet. filed). Six months later, the beneficiary sought a receivership, and the trial court granted same. The trustee appealed the order, and the court of appeals affirmed the order on one basis concerning an alleged failure to disclose a marital property agreement entered between the settlor and his wife. Importantly, regarding the trustee’s argument that there was no evidence of any danger of loss, removal, or material injury to the trust property, the court held that it did not have to address that issue because the receiver was appointed under Texas Property Code Section 114.008(a)(5), which did not require any of the traditional elements for receivership relief. Id. at *17-18 and n. 12. Section 114.008(a)(5) of the Texas Property Code, that provides in part: “(a) To remedy a breach of trust that has occurred or might occur, the court may: … (5) appoint a receiver to take possession of the trust property and administer the trust.” Tex. Prop. Code § 114.008(a)(5). So, the court of appeals held that Texas Trust Code Section 114.008 did not require applicants for receivership to establish the traditional elements for receivership relief.

Interesting Note: Receiverships are regarded as one of the harshest remedies known to civil law. See Spiritas v. Davidoff, 459 S.W.3d 224, 232 (Tex. App.—Dallas 2015, no pet.) (“Receivership is an extraordinarily harsh remedy.”); Parr v. First State Bank, 507 S.W.2d 579, 583 (Tex. Civ. App.—San Antonio 1974, no writ) (“No more radical remedy could be devised.”). Because it is a harsh remedy, to obtain a receivership, an applicant must show that the property or fund in litigation is in danger of being lost, removed, or materially injured. B & W Cattle Co. v. First Nat’l. Bank of Hereford, 692 S.W.2d 946, 947 (Tex. App.—Amarillo 1985). There must be a showing of no lesser alternative remedies, and there must be evidence of serious injury without the receivership. Chapa v. Chapa, No. 04-12-00519-CV, 2012 Tex. App. LEXIS 10702, *12 (Tex. App.—San Antonio Dec. 28, 2012, no pet.).

Nothing in the Property Code indicates that the Legislature intended to abandon the traditional requirements for a receivership when it authorized courts to appoint receivers as a remedy for a breach of trust—especially not in the context of preliminary relief, when the liability allegations have not been fully litigated and the only justification for temporary relief is protection of the status quo. Rather, the Legislature was simply giving a non-exhaustive laundry list of remedies available to remedy a trustee’s breach. The Legislature’s intent was not to provide standards on what the procedural and substantive requirements were for each listed remedy.

To argue otherwise violates the cannons of statutory construction. Under the Code Construction Act, without regard to whether the statute is ambiguous, a court may consider the: “…(4) common law or former statutory provisions, including laws on the same or similar subjects; (5) consequences of a particular construction…” Tex. Gov’t Code § 311.023. In construing this statute, a court may consider the common law before the statute, which required a finding of harm, the law on similar subjects (such as executors and estates), which requires a finding of harm, and the consequences of the plaintiff’s construction, which would allow a trial court to effectively remove a trustee against the settlor’s intent when there is no harm in allowing the serving trustee to continue.

There is now a conflict in the courts of appeals on this subject. Some courts correctly hold that even if a specific statutory provision authorizes a receivership, a trial court should not appoint a receiver without a finding of harm or danger and only in the absence of another remedy, either legal or equitable. See, e.g., In re Estate of Hallmark, 629 S.W.3d 433, 437 (Tex. App.—Eastland 2020, no pet.) (“Even if a specific statutory provision authorizes a receivership, a trial court should not appoint a receiver if another remedy exists, either legal or equitable. ‘Rather, receivership is warranted only if the evidence shows a threat of serious injury to the applicant.’”); Elliott v. Weatherman, 396 S.W.3d 224, 228 (Tex. App.—Austin 2013, no pet.) (addressing receivership against co-trustees and holding: “Even if a specific statutory provision authorizes a receivership, a trial court should not appoint a receiver if another remedy exists at law or in equity that is adequate and complete” and also requiring showing of “great emergency or imperative necessity…”); Benefield v. State, 266 S.W.3d 25, 31 (Tex. App.—Houston [1st Dist.] 2008, no pet.) (“Even if a specific statutory provision authorizes a receivership, as in this case, a trial court should not appoint a receiver if another remedy exists, either legal or equitable. Rather, receivership is warranted only if the evidence shows a threat of serious injury to the applicant.”); Fortenberry v. Cavanaugh, No. 03-04-00816-CV, 2005 Tex. App. LEXIS 4665, *6 (Tex. App.—Austin June 16, 2005, no pet.) (“[A] receiver will not be appointed if another remedy exists at law or in equity that is adequate and complete, even if receivership is authorized under a specific statutory provision, as in this case.”). Some courts hold that the Texas Property Code allows a receivership on a showing of a potential breach of duty where there is no harm or danger to trust assets. See, e.g., Moody Nat’l Bank v. Moody, 2022 Tex. App. LEXIS 7844; In Re Estate of Benson, No. 04-15-00087-CV, 2015 Tex. App. LEXIS 9477, 2015 WL 5258702 (Tex. App.—San Antonio Sept. 9, 2015, pet. dism’d) (mem. op.).

Unfortunately, the Texas Supreme Court denied petition for review on this issue that is important to Texas jurisprudence. Like almost all denials of petition for review, the Court is not stating that it agrees with the court of appeals’s opinion or holding, but that it does not want to review the issue at this time. Perhaps the Court is waiting for further review in the lower courts before weighing in on this issue.

David F. Johnson, lead writer for The Texas Fiduciary Litigator blog, will examine the attorney-client privilege between a trustee and its attorney in detail. We will explore the extent of the privilege, the fiduciary exception that permits beneficiaries to access communications, and whether Texas acknowledges this exception. Additionally, we will cover joint-client and allied-litigant concerns, the rights of successor trustees concerning the privilege, inadvertent attorney-client relationships, and the advice of counsel defense.

Date: Tuesday, September 26, 2023
Time: 10:00 – 11:00 a.m. Central Time

Continuing Education Credit Information:

This course has been approved for Minimum Continuing Legal Education credit by the State Bar of Texas Committee on MCLE in the amount of 1.00 credit hours, of which 0.50 credit hours will apply to legal ethics/professional responsibility credit (Attendees will receive .5 ethics credit). This course has also been approved for 1 CTFA credit by the American Bankers Association; attendees can self-report.


Watch on Demand 

In Castello v. Ex’r of the Est. of Castello, the decedent died leaving a will that left his property to his wife “for life” and then to his three children by a prior marriage. No 03-22-00012-CV 2023 Tex. App. LEXIS 4454 (Tex. App.—Austin June 23, 2023, no pet. history). The wife filed an opposition, alleging decedent’s lack of testamentary capacity and attaching an earlier will that she sought to probate. The proposed executor filed a motion for summary judgment, arguing that there is no genuine issue of material fact regarding decedent’s testamentary capacity and seeking to dismiss the opposition. He attached to his motion the will, the affidavit of the attorney who drafted the will, and a warranty deed. The wife filed a response and attached her affidavit and excerpts from the attorney’s deposition. The trial court granted the motion and admitted the new will to probate, and the wife appealed.

The court of appeals reversed, holding that the wife’s affidavit provided sufficient facts that created a fact question on mental capacity:

Cindy’s evidence shows that Decedent’s physical health and mental functioning had been declining since his stroke in 2006, and that by 2008 he could not manage or understand the day-to-day operations or functions of his business and needed a twenty-four-hour caregiver. It also shows that during the period the will was executed, Decedent was on medication for Alzheimer’s disease; did not recognize his family members; could not remember what he did during the day or what he ate (or even whether he ate) while Cindy was away at work; did not possess sufficient memory to make decisions for himself, including ordering at a restaurant; and relied on Cindy to speak to doctors or others on his behalf. Cindy’s evidence also showed that she, having known Decedent as his wife for over twenty years when he died and having been around him every day, believed that at the time of the 2012 Will’s execution Decedent did not have the mental capacity to execute a will, understand the effect of making a will or know the general nature and extent of his property or his next of kin and the natural objects of his bounty, or make “any other decisions that would require him to think and act on his own accord with an understanding of what he was doing.” Additionally, Steinhauser testified that he had not discussed the specific contents of Decedent’s estate with him, despite the statement in his affidavit to the contrary, creating an issue of fact on whether Steinhauser could have opined on the aspect of Decedent’s testamentary capacity requiring him to know the “general nature and extent of his property.” Cindy’s evidence, in the form of her affidavit, is of the type that both shows a lack of testamentary capacity and is probative of such lack at the time the 2012 Will was executed.

Although Mark contends that Cindy’s affidavit is “self-serving and conclusory,” many of the statements therein are of the same character as those in Steinhauser’s affidavit. That is, each Steinhauser and Cindy aver their respective—and opposing—beliefs about whether Decedent “understood the business in which he was engaged, the effect of making a will, the general nature and extent of his property, and his next of kin and the objects of his bounty.” But, unlike Cindy’s affidavit, Steinhauser’s does not describe any facts from which his conclusions are drawn, except to state that after Decedent “confirmed that the Will expressed his desires,” he and his staff witnessed the will. To determine on summary judgment that Steinhauser’s beliefs conclusively establish Decedent’s testamentary capacity when countered by Cindy’s similarly stated beliefs—and more—would require determinations as to the weight and credibility of the evidence, which is the province of the factfinder. Additionally, although the 2012 warranty deed likely weighs against Cindy’s position, it should be considered by the factfinder along with the entirety of the evidence and does not conclusively establish that Decedent had testamentary capacity on the date of the 2012 Will’s execution, in light of Cindy’s conflicting evidence.

We hold that Cindy presented sufficient evidence to show the existence of a material fact issue with respect to Decedent’s testamentary capacity at the time of the 2012 Will’s execution. Accordingly, we conclude that the trial court erred in granting Mark’s motion for summary judgment and admitting the 2012 Will to probate.

Id.

In Estate of Long, the plaintiff sued trustees and alleged that she was the only child of the decedent and asserted a cause of action for a will contest and for a declaratory judgment action in which she requested the trial court to declare that the residuary clause of the will admitted lapsed and that the decedent’s residuary estate passed via intestacy to her. No. 06-23-00025-CV, 2023 Tex. App. LEXIS 4313 (Tex. App.—Texarkana June 20, 2023, no pet. history). The trial court granted the plaintiff a motion for summary judgment, denied the trustees’ summary judgment, and construed the will to mean that the entire residue of decedent’s estate passed to his heirs-at-law, which would later be determined by the trial court. The court of appeals raised the issue of whether it had jurisdiction over the appeal. The court noted that in probate proceedings there was an exception to the one final judgment rule:

“Probate and guardianship proceedings present ‘an exception to the “one final judgment” rule[.]'” “[I]n such cases, multiple judgments final for purposes of appeal can be rendered on certain discrete issues.” “This exception reflects the necessity of reviewing ‘”controlling, intermediate decisions before an error can harm later phases of the proceeding[.]”‘” … [I]n probate and guardianship proceedings, “if there is a proceeding of which the order in question may logically be considered a part, but one or more pleadings also part of that proceeding raise issues or parties not disposed of, then the probate order is interlocutory.”

Id. The parties contended that multiple Texas courts have recognized that an order determining a will’s validity or construing a will is a final order for purposes of appeal. The court disagreed that the order was sufficiently final:

[T]he relevant and discrete portion of the probate proceeding presented through Zazulak’s declaratory judgment action and motion for summary judgment was a determination of the effect of the failure of the residuary clause of the Will. In her declaratory judgment action, Zazulak sought both a declaration that the residuary clause of the Will lapsed and that the Decedent’s residuary estate passed via intestacy to her. The March 1 Order determined that the residuary clause lapsed, but it did not determine that Zazulak  was the Decedent’s sole heir-at-law or that the residuary estate passed to her. Because the March 1 Order does not dispose of all parties and issues at this stage of the proceeding, it is not a final, appealable order.

Id.

WEBINAR (September 26): “Issues Regarding the Attorney-Client Privilege for Trustees in Texas. ” David F. Johnson, lead writer for The Fiduciary Litigator blog, will examine the attorney-client privilege between a trustee and its attorney in detail. We will explore the extent of the privilege, the fiduciary exception that permits beneficiaries to access communications, and whether Texas acknowledges this exception. Additionally, we will cover joint-client and allied-litigant concerns, the rights of successor trustees concerning the privilege, inadvertent attorney-client relationships, and the advice of counsel defense. REGISTER HERE

Date: Tuesday, September 26, 2023
Time: 10:00 – 11:00 a.m. (CST)

Continuing Education Credit Information:
This course has been approved for Minimum Continuing Legal Education credit by the State Bar of Texas Committee on MCLE in the amount of 1.00 credit hours, of which 0.50 credit hours will apply to legal ethics/professional responsibility credit (Attendees will receive .5 ethics credit). This course has also been approved for 1 CTFA credit by the American Bankers Association; attendees can self-report.

Who should attend:
In-house counsel and other litigation contacts, trust officers, risk management contacts, and wealth advisors