Warning: Reversed by Texas Commerce Bank, 96 S.W.3d 240 (Tex. 2002).
Grizzle v. Texas Commerce Bank, N.A., 38 S.W.3d 265 (Tex. App.—Dallas 2001), rev'd, 96 S.W.3d 240 (Tex. 2002).
Beneficiaries sued Trustee for breach of duty with respect to damages
which allegedly arose when Trustee, who had just taken over the trust,
merged and liquidated the trust funds for their own business reasons and
then reinvested those funds improperly. Trustee defended on the basis of
an exculpatory clause which read, “This instrument shall always be
construed in favor of the validity of any act or omission of any
Trustee, and a Trustee shall not be liable for any act or omission
except in the case of gross negligence, bad faith, or fraud.” The trial
court granted summary judgment in favor of Trustee.
The appellate court reversed. The court reviewed the evidence and
determined that Trustee’s failure to promptly reinvest trust funds is
evidence of mishandling of trust funds and may constitute self-dealing.
The exculpatory clause does not relieve Trustee from liability for
self-dealing. Because a fact issue exists whether Trustee engaged in
self-dealing, the exculpatory clause does not support a summary judgment
in favor of Trustee.
Moral: Exculpatory clauses are strictly construed and relieve a trustee
of liability only to the extent that it is clearly provided for in the
trust instrument.
Warning: Reversed by Texas Commerce Bank, 96 S.W.3d 240 (Tex. 2002).