In Benge v. Roberts, a beneficiary sued co-trustees and sought to remove them for breaching duties by not considering claims against a former trustee. No. 03-19-00719-CV, 2020 Tex. App. LEXIS 6335 (Tex. App.—Austin August 12, 2020, no pet. history). The co-trustees filed a motion for summary judgment based on a clause in the trust that provided: “No successor Trustee shall have, or ever have, any duty, responsibility, obligation, or liability whatever for acts, defaults, or omissions of any predecessor Trustee, but such successor Trustee shall be liable only for its own acts and defaults with respect to the trust funds actually received by it as Trustee.” Id. The beneficiary appealed, and the court of appeals affirmed. The court stated that these types of clauses are generally enforceable: “The Trust Code expressly permits such clauses.” Id. The beneficiary argued that a cause exists for the co-trustees’ removal because they have “actual conflicts of interest” due to their participation with the former trustee. She contended that removal of the co-trustees because of their conflict of interest was a distinct claim from one alleging that they have liability for the former trustee’s alleged breaches of fiduciary duty and, therefore, was not subject to the exculpatory clause.

The court disagreed:

We reject this argument because it directly conflicts with the broad language in the exculpatory clause relieving the co-trustees from any “duty, responsibility, [or] obligation” for the “acts, defaults, or omissions” of Missi. While ordinarily a successor trustee has the duty to “make a reasonable effort to compel a redress” of any breaches by a predecessor, see Tex. Prop. Code § 114.002(3)—which presumably would include impartially evaluating whether to “fight” Benge in the appeal of the Consolidated Matter—the exculpatory clause in the Trust relieves the co-trustees of that duty, as permitted by the Trust Code. See id. §§ 111.0035(b), 114.007(c). The co-trustees cannot as a matter of law have a conflict of interest due to allegedly lacking the ability to be “impartial” about deciding whether or how to redress Missi’s alleged breaches when they have no duty to redress such breaches in the first instance. Accordingly, we hold that the trial court properly granted summary judgment on the basis of the Trust’s exculpatory clause.

Id. The court also held that the construction and application of the exculpatory clause was a question of law that the trial court had to determine:

[T]he trial court did not abuse its discretion in denying the motion because the effect of the exculpatory clause on the facts alleged—that is, whether it relieves the co-trustees of any duties vis à vis Missi’s alleged breaches—is a legal question that we review de novo, and thus the trial court had no discretion but to determine that summary judgment was proper on the basis of the clause. See Nowlin v. Frost Nat’l Bank, 908 S.W.2d 283, 286 (Tex. App.—Houston [1st Dist.] 1995, no writ) (“Construction of a trust instrument is a question of law for the trial court when no ambiguity exists.”); see also Walker v. Packer, 827 S.W.2d 833, 839 (Tex. 1992) (orig. proceeding) (“A trial court has no discretion in determining what the law is or in applying the law to the facts.”); Clifton, 107 S.W.3d at 760-61 (holding that because exculpatory clause was valid, and based on facts alleged, there was no issue of fact about whether trustee was exculpated).

Id. The court affirmed the trial court’s judgment for the co-trustee defendants.

Interesting Note: Normally, a successor trustee has the duty to “make a reasonable effort to compel a redress” of any breaches by a predecessor. Tex. Prop. Code § 114.002(3). So, can a trust abrogate a successor trustee’s liability for prior trustee’s actions? The Texas Trust Code provides that the terms of a trust prevail over the statutory terms except for certain enumerated instances. See id. at 111.0035(b). A trust may not limit Texas Property Code Section 114.007 to an exculpation term of a trust. Id. Section 114.007 provides:

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.

Tex. Prop. Code § 114.007(a). So, in Benge, if the co-trustees breached their duties to review the conduct of the prior trustee in bad faith, intentionally, or with reckless indifference to the beneficiary’s interests or where the co-trustees acted with or without negligence where the trustee derived a profit, then the exculpatory clause would not be enforceable regarding the co-trustees’ liability.

The allegations were that the co-trustees acted intentionally, without good faith, and with a conflict of interest in not pursuing claims against the prior trustee because they had actually participated with the prior trustee in some of those breaches. The beneficiary argued that that was sufficient to create a fact issue on whether the application of the exculpatory clause was appropriate and on the underlying claim. However, the analysis does not end there.

Section 114.007(c) provides:

This section applies only to a term of a trust that may otherwise relieve a trustee from liability for a breach of trust. Except as provided in Section 111.0035, this section does not prohibit the settlor, by the terms of the trust, from expressly: (1) relieving the trustee from a duty or restriction imposed by this subtitle or by common law; or (2) directing or permitting the trustee to do or not to do an action that would otherwise violate a duty or restriction imposed by this subtitle or by common law.

Tex. Prop. Code § 114.007(c). This provision states that a settlor can relieve a trustee of a duty imposed by the Texas Trust Code, such as the duty to review prior a trustee’s conduct. So, under this provision, the co-trustees would be relieved of a duty to review the prior trustee’s actions, but the co-trustees’ liability may not be waived if they acted in bad faith, with intent, or with gross negligence. When could the co-trustees be liable when they have no duty? This is the issue that the court wrestled with in Benge and found for the co-trustees.

But the analysis should not have ended with Section 114.007(c). There is another important statutory provision that the court did not address. It provides that a trust term may not limit a trustee’s “duty to act in good faith and in accordance with the purposes of the trust.” Tex. Prop. Code § 111.0035(b)(4)(B); Martin v. Martin, 363 S.W.3d 221, 2012 Tex. App. LEXIS 2146 (Tex. App.—Texarkana Mar. 20, 2012, no pet.) (even though a trust provision allowed the trustee to have conflicts of interest, the provision was not enforceable as a jury found that the trustee did not act in good faith). There is no statutory exception to this duty of good faith. In Benge, if the co-trustees acted in bad faith, as alleged, in not pursuing claims against the former trustee then under this statutory provision the exculpatory clause may not be enforceable. In that circumstance, the trial court would have erred in enforcing the exculpatory clause and granting summary judgment for the co-trustees. There has been no authority on the interplay between Section 114.007(c) and Section 111.0035(b)(4)(B).

It is also troubling that the court in this case cited to Texas Commerce Bank v. Grizzle, 96 S.W.3d 240, 249 (Tex. 2002) in support of the application of the exculpatory clause. The Texas Legislature subsequently overruled the Grizzle opinion in 2005 by repealing Texas Property Code Section 113.059 and adding Sections 111.0035 and 114.007. See Act of May 12, 2005, 79th Leg., R.S., ch. 148, § 21, 2005 Tex. Gen. Laws 287, 293-94.

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Photo of David Fowler Johnson David Fowler Johnson

[email protected]
817.420.8223

David maintains an active trial and appellate practice and has consistently worked on financial institution litigation matters throughout his career. David is the primary author of the The Fiduciary Litigator blog, which reports on legal cases and issues impacting the fiduciary…

[email protected]
817.420.8223

David maintains an active trial and appellate practice and has consistently worked on financial institution litigation matters throughout his career. David is the primary author of the The Fiduciary Litigator blog, which reports on legal cases and issues impacting the fiduciary field in Texas. Read More

David’s financial institution experience includes (but is not limited to): breach of contract, foreclosure litigation, lender liability, receivership and injunction remedies upon default, non-recourse and other real estate lending, class action, RICO actions, usury, various tort causes of action, breach of fiduciary duty claims, and preference and other related claims raised by receivers.

David also has experience in estate and trust disputes including will contests, mental competency issues, undue influence, trust modification/clarification, breach of fiduciary duty and related claims, and accountings. David’s recent trial experience includes:

  • Representing a bank in federal class action suit where trust beneficiaries challenged whether the bank was the authorized trustee of over 220 trusts;
  • Representing a bank in state court regarding claims that it mismanaged oil and gas assets;
  • Representing a bank who filed suit in probate court to modify three trusts to remove a charitable beneficiary that had substantially changed operations;
  • Represented an individual executor of an estate against claims raised by a beneficiary for breach of fiduciary duty and an accounting; and
  • Represented an individual trustee against claims raised by a beneficiary for breach of fiduciary duty, mental competence of the settlor, and undue influence.

David is one of twenty attorneys in the state (of the 84,000 licensed) that has the triple Board Certification in Civil Trial Law, Civil Appellate and Personal Injury Trial Law by the Texas Board of Legal Specialization.

Additionally, David is a member of the Civil Trial Law Commission of the Texas Board of Legal Specialization. This commission writes and grades the exam for new applicants for civil trial law certification.

David maintains an active appellate practice, which includes:

  • Appeals from final judgments after pre-trial orders such as summary judgments or after jury trials;
  • Interlocutory appeals dealing with temporary injunctions, arbitration, special appearances, sealing the record, and receiverships;
  • Original proceedings such as seeking and defending against mandamus relief; and
  • Seeking emergency relief staying trial court’s orders pending appeal or mandamus.

For example, David was the lead appellate lawyer in the Texas Supreme Court in In re Weekley Homes, LP, 295 S.W.3d 309 (Tex. 2009). The Court issued a ground-breaking opinion in favor of David’s client regarding the standards that a trial court should follow in ordering the production of computers in discovery.

David previously taught Appellate Advocacy at Texas Wesleyan University School of Law located in Fort Worth. David is licensed and has practiced in the U.S. Supreme Court; the Fifth, Seventh, and Eleventh Federal Circuits; the Federal District Courts for the Northern, Eastern, and Western Districts of Texas; the Texas Supreme Court and various Texas intermediate appellate courts. David also served as an adjunct professor at Baylor University Law School, where he taught products liability and portions of health law. He has authored many legal articles and spoken at numerous legal education courses on both trial and appellate issues. His articles have been cited as authority by the Texas Supreme Court (twice) and the Texas Courts of Appeals located in Waco, Texarkana, Beaumont, Tyler and Houston (Fourteenth District), and a federal district court in Pennsylvania. David’s articles also have been cited by McDonald and Carlson in their Texas Civil Practice treatise, William v. Dorsaneo in the Texas Litigation Guide, and various authors in the Baylor Law ReviewSt. Mary’s Law JournalSouth Texas Law Review and Tennessee Law Review.

Representative Experience

  • Civil Litigation and Appellate Law