In In re Estate of Stewart, siblings filed claims regarding the administration of their father’s estate. No. 04-20-00103-CV, 2021 Tex. App. LEXIS 3897 (Tex. App.—San Antonio May 19, 2021, no pet. history). Among other claims, a sister claimed that her brother breached fiduciary duties as executor by distributing real property to three of the siblings, but not to her. The brother claimed that he had the right to do so under the Estates Code. The jury found that the brother breached his fiduciary duties, but found that the sister had not been harmed. The brother appealed. The court of appeals first discussed an executor’s fiduciary duties to the estate’s beneficiaries:

“The relationship between an executor and the estate’s beneficiaries is one that gives rise to a fiduciary duty as a matter of law.” “An executor’s fiduciary duty to the estate’s beneficiaries arises from the executor’s status as trustee of the property of the estate.” “The executor thus holds the estate in trust for the benefit of those who have acquired a vested right to the decedent’s property under the will.” “The fiduciary duties owed to the beneficiaries of an estate by an independent executor include a duty of full disclosure of all material facts known to the executor that might affect the beneficiaries’ rights.” “A fiduciary also ‘owes its principal a high duty of good faith, fair dealing, honest performance, and strict accountability.’” “When an independent executor takes the oath and qualifies in that capacity, he or she assumes all duties of a fiduciary as a matter of law which, in addition to other duties, includes the duty to avoid commingling of funds.”

Id.

Regarding the brother’s claim that the Texas Estates Code allowed him to make a non-pro rata distribution of the real property, the brother cited to section 405.0015 of the Texas Estates Code, which states:

Unless the will, if any, or a court order provides otherwise, an independent executor may, in distributing property not specifically devised that the independent executor is authorized to sell: (1) make distributions in divided or undivided interests; (2) allocate particular assets in proportionate or disproportionate shares; (3) value the estate property for the purposes of acting under Subdivision (1) or (2); and (4) adjust the distribution, division, or termination for resulting differences in valuation.

Id. (citing Tex. Est. Code § 405.0015). The sister claimed that even if the brother could make a non-pro rata distribution, that he still had a duty to make disclosures to her. The brother argued as follows:

Wayne further argues that Jennifer based her breach of fiduciary claims on (1) Wayne’s failure to disclose his distribution plan and his decision to deed the Goliad Property to the three brothers; (2) Wayne’s failure to disclose the AEP easement to her; and (3) Wayne’s failure to value the Goliad Property at $11,250.00 per acre, which is the amount AEP paid for its easement. According to Wayne, under section 405.0015 and the will, he had the authority to determine whether and how to make non-pro rata distributions of the residuary estate, and thus to exclude Jennifer from distribution of the Goliad Property. Wayne argues neither his plan nor ultimate distribution of the Goliad Property could have affected Jennifer’s rights so long as she received equal value of the residuary estate. Thus, Wayne argues the information Jennifer claims she did not receive was not material, and his failure to disclose that information, constitutes no evidence that he failed to comply with his fiduciary obligations.

Id. The court disagreed with the brother, and stated:

In looking at the plain meaning of section 405.0015, it clearly grants an independent executor, unless otherwise limited, authority to make distributions in divided or undivided interests; to allocate particular assets in proportionate or disproportionate share; to value the estate property; and to adjust the distribution, division or termination for resulting differences in valuation. See Tex. Est. Code § 405.0015. However, section 405.0015 states nothing about divesting an independent executor of the fiduciary duties he owes the beneficiaries of the will. We agree with Jennifer that Wayne’s interpretation would lead to an absurd result. We also agree with Jennifer that it is not a coincidence section 405.0015 became effective simultaneously with the Texas Uniform Partition of Heir’s Property Act (the “Heirs Partition Act”). See Tex. Prop. Code § 23A.001 (effective Sept. 1, 2017). The Heirs Partition Act provides a streamlined process by which heirs can either force partition in kind, or alternatively effectuate the buyout, of undivided interests in inherited property. See Tex. Prop. Code §§ 23A.001-.013. We conclude section 405.0015 merely provides an independent executor with the tools necessary to make non-pro-rata distributions and avoid the common partition litigation among heirs anticipated and addressed by the Heirs Partition Act. Thus, the typical fiduciary duties of good faith, fair dealing, and full disclosure still apply to Wayne’s actions notwithstanding section 405.0015.

Id. The court then held that there was sufficient evidence to support the jury’s finding that the brother breached his fiduciary duties to the sister by failing to disclose material facts:

As noted previously, an independent executor owes a fiduciary duty to fully disclose all material facts known to him that might affect the beneficiaries’ rights. “This duty exists independently of the rules of discovery, applying even if no litigious dispute exists between the trustee and beneficiaries.” Further, “[t]he existence of strained relations between the parties [does] not lessen the fiduciary’s duty of full and complete disclosure.” Here, there was evidence at trial that Wayne repeatedly did not disclose material facts to Jennifer about the administration of the estate. With regard to the Goliad Property, there was evidence that he did not disclose the AEP easement offer to her or to Mark Barnes, the appraiser hired to perform the valuation on the Goliad Property for the estate. The evidence shows Wayne then applied the lower valuation found by Barnes in distributing the estate’s assets while, at the same time, intentionally waiting to sell the easement until after he had deeded the property to himself and his brothers, at the exclusion of Jennifer. That is, between August and December 2017, Wayne and his brother Steven negotiated the easement purchase price from the initial offer of $7,500 per acre to $11,250 per acre. On December 19, 2017, after agreeing to the easement price of $11,250 per acre but before executing the easement, Wayne deeded the Goliad Property to himself and his brothers. Wayne testified he took these actions knowing he was going to receive $73,000 from AEP that Jennifer would not. Wayne’s failure to timely disclose material facts to Jennifer affected her ability to challenge valuation of the Goliad Property. In addition to the Goliad property, Wayne admittedly did not disclose to Jennifer the nature of the securities distributed to her. Without this information, Jennifer could not establish the fairness or completeness of the distribution to her in lieu of an in-kind share in the Goliad property. We conclude there was evidence that Wayne failed to disclose to Jennifer material facts that might have affected her rights.

Id. The court also held that the fact that the jury found that the sister had no damages was not dispositive because the evidence showed that the brother had a benefit from his breach of fiduciary duties: “Wayne’s repeated non-disclosures to Jennifer about the material facts relevant to her interest in the Goliad Property, as well as his decision to apply a lower valuation to Jennifer’s share of the Goliad Property and exclude her from the more lucrative offer made on the AEP easement, resulted in a benefit to himself at the exclusion of Jennifer. That is, Wayne received a larger portion of the remaining residuary estate for himself because he chose to pay Jennifer thousands of dollars an acre less for her share of the Goliad property prior to negotiating a higher price for the easement he agreed to with AEP.” Id. Thus, the court affirmed the jury’s finding of breach of fiduciary duty as against the brother.

That affirmance was pivotal in the case, as due to the breach finding, the court of appeals affirmed: the trial court’s award of the sister’s attorney’s fees against the brother, the trial court’s refusal to allow the brother’s fees to be paid by the estate, the trial court’s order to require the brother to pay back the money from the estate used to pay his attorneys, and the trial court’s refusal to discharge the executor.

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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