In Estate of Sloan, a wife died leaving her home, and her husband was the executor of her estate. No. 02-15-00198-CV, 2016 Tex. App. LEXIS 6465 (Tex. App.—Fort Worth June 16, 2016, no pet. history). The wife’s will left all of her assets to three trusts, but provided that her husband could buy assets for fair market value. The husband traded rental properties for the wife’s home for half of its value (asserting that she only owned have due to community property rules). After the husband died and this transaction came to light, the trustee sued his estate for breach of fiduciary duty, claiming that the property was the wife’s separate property and that the husband underpaid for the house by only paying for half. The husband’s estate argued that even if the property was the wife’s separate property, the consideration was fair considering the fact that the husband’s homestead right decreased the value of the home. The trial court ruled for the trustee, and the husband’s estate appealed.
The court of appeals reversed the trial court’s judgment. The court noted that a “property’s fair market value is what a willing buyer would pay a willing seller, neither acting under any compulsion.” “In the willing seller-willing buyer test of market value it is frequently said that all factors should be considered which would reasonably be given weight in negotiations between a seller and a buyer.” Texas Constitution article XVI, section 52 provides that a surviving spouse may occupy the homestead during the spouse’s lifetime without it being partitioned to the heirs of the deceased spouse until the survivor’s death. Because this probate homestead right belongs to a surviving spouse regardless of its community or separate property character, its characterization by the decedent is irrelevant. The homestead right therefore “reduc[es]” underlying ownership rights “in a homestead property to something akin to remainder interests and vest[s] in each spouse an interest akin to an undivided life estate in the property.” The court of appeals concluded that “as a matter of both logic and law,” the husband’s surviving homestead right, which entitled him to live in the property for the rest of his life and made the interest held by the wife’s estate akin to a vested remainder that would entitle a buyer to possession only upon the husband’s death, necessarily affected what such a buyer would pay a willing seller for the property and therefore reduced the property’s market value. Because the parties stipulated that if the husband’s interest decreased the value of the property, his estate would not owe anything, the court of appeals reversed and rendered for his estate.
The court then addressed the trustee’s argument that the husband violated his fiduciary duties by self-dealing when he, individually, purchased property from himself as executor of the estate. The trustee alleged that the husband had a duty of full disclosure, a duty of fair dealing, a duty of acting as a prudent man, and a duty of loyalty to the beneficiaries of the estate and the trusts. The court disagreed, holding: “In light of our holding above that Hollis’s homestead right decreased the fair market value of the estate’s interest in the property, of the trial court’s uncontested finding that Hollis was entitled to $25,000 in community reimbursement when he bought the property, and of the explicit authorization in Barbara’s will for Hollis to purchase assets from her estate at fair market value, we cannot conclude that Hollis violated fiduciary duties when buying the Winton Terrace Property.”