Clifton v. Hopkins, 107 S.W.3d 755 (Tex. App.—Waco 2003, no pet.).
Settlor, the primary beneficiary (mother) of a qualified personal
residence trust, sued Contingent Beneficiary (son) alleging that he made
false promises to her to induce her to establish the trust such as
agreeing to permit her to remain in the residence even after the trust
expired if she paid rent at fair market value. The trial court granted
Contingent Beneficiary’s motion for a summary judgment.
The appellate court affirmed. The court examined the evidence such as
Settlor’s depositions, and found that there was no fact issue with
regard to many of the elements of fraud such as intent not to perform,
material misrepresentation, and reliance.
Moral: Evidence must be presented to raise a fact issue with regard to
each element of fraud to withstand a motion for summary judgment.
Clifton v. Hopkins, 107 S.W.3d 755 (Tex. App.—Waco 2003, no pet.).
Primary Beneficiary sued Trustee alleging breach of fiduciary duty
for making improper allocations between principal and income when it
allocated 27.5% of the proceeds from oil and gas royalties to the
principal account. The trusts granted Trustee the full power to
determine the manner in which receipts are to be credited between
principal and income. The trust expressly permitted Trustee to consider
applicable statutory allocation rules but indicated that Trustee was not
bound by those rules. In addition, the trusts contained exculpatory
clauses. Accordingly, the trial court granted Trustee’s request for a
summary judgment that no breach of trust had occurred.
The appellate court affirmed basing its decision on the exculpatory
provisions citing Texas Commerce Bank, N.A. v. Grizzle, 96 S.W.3d 240
(Tex. 2002). The evidence conclusively established that Trustee is not
liable because there was no evidence that Trustee had acted in any
manner which would not be covered by the exculpatory provisions.
Moral: Effective September 1, 2003, exculpatory clauses will be governed
by Trust Code provisions which provide as follows: A settlor is
prohibited from relieving a trustee of liability for a breach of trust
committed (1) in bad faith, (2) intentionally, or (3) with reckless
indifference to the interest of the beneficiary. In addition, the
settlor may not permit the trustee to retain any profit derived from a
breach of trust. Prop. Code § 113.059(c). An exculpatory clause is
ineffective to the extent the provision was included in the trust
because of an abuse by the trustee of a fiduciary duty to or
confidential relationship with the settlor. Prop. Code § 113.059(d).