In In re John O. Yates Trust, a trustee of a trust filed suit to obtain declarations on whether it could sell certain real estate held in the trust, and if so, whether the proceeds should be designated as principal. No. 04-21-00365-CV, 2022 Tex. App. LEXIS 9470 (Tex. App.—San Antonio December 28, 2022, no pet. history). A beneficiary appeared and argue that the trustee could not sell the real estate, and if it did, the proceeds should be considered income. The trial court rule that the trustee could sell the real estate and that the proceeds would be considered principal. The beneficiary appealed.

Article IX(c) of the will provides: “Except as may otherwise be provided herein, my Trustee or its successor shall not have or exercise the right, power, privilege or authority to sell, convey or dispose of any of the trust property or any part thereof.” Article IX(m) states:

Otherwise, my Executor and/or Trustee shall, with the consent and approval of the Advisory Committee, lease or otherwise dispose of said properties [the disputed ranch] and the rentals or proceeds shall become part of the income or principal of the trusts created under my Will in equal parts or by stirpes as the case may be.

Id. The court of appeals held that the term “dispose” allowed the trustee to sell the ranch:

As these definitions illustrate, the plain and usual meaning of the term “dispose of” encompasses the sale of property. Nothing in Yates’s will demonstrates a clear intent to use the term “dispose of” in a different sense. Focusing, as we must, on the meaning of the words Yates actually used in his will, we conclude that the phrase “otherwise dispose of said properties” includes the sale of the Bexar County ranch.

Id. The court concluded: “The trial court did not err in declaring that the language at issue in article IX(m) authorizes the trustee, with the consent and approval of the advisory committee, to sell the Bexar County ranch.” Id.

Regarding whether the proceeds should be considered principal or income, the will stated that, generally, the Texas Trust Code would control. “The current statutory scheme governing trusts, the Texas Trust Code, provides that ‘money or other property received from the sale . . . of a principal asset’ ‘shall’ be allocated to the principal of the trust. Id. (citing Tex. Prop. Code § 116.161(2)). Despite a general provision that stated that receipts should be considered income where possible, the court noted that a different provision “specifically addresses the permissible dispositions of the Bexar County ranch, [and] does not contain any language creating an exception to the general rule set out in article IX(a) that the administration of the trust ‘shall be in accordance with and governed by the terms and provisions of the Texas Trust Act . . . as it may hereafter be amended.’” Id. The court held that the proceeds should be considered principal.

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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