Alpert v. Riley, 274 S.W.3d 277 (Tex. App.—Houston [1st Dist.] 2008, pet. denied).
A dispute arose as to whether a successor trustee was properly
appointed under a trust provision allowing the current trustee to
appoint a successor trustee or whether the default trustee provided for
in the trust was the trustee. The appellate court examined the evidence
and determined that fact questions existed and thus the trial court’s
grant of a summary judgment was improper.
With regard to another trust in the same case, the court determined that
the alleged successor trustee did not properly accept the position
because the trustee did not execute “an acknowledged acceptance of the
trusteeship” as required by the trust. Instead, the alleged successor
trustee had only signed a letter which had not been notarized. Although
this letter would be sufficient under Trust Code § 112.009(a), the trust
itself prescribed a method and the settlor’s instructions prevail over
the Trust Code’s default method under Trust Code § 111.0035(b) The court
also rejected the alleged successor trustee’s claim that equitable
theories such as estoppel or deviation would allow him to assume the
trusteeship without compliance with the express language of the trust.
The court also held that trial court abused its power in appointing a
successor trustee without first attempting to follow the trustee
selection method Settlor detailed in the trust itself.
Moral: A trust provision providing a method for the appointment of a
successor trustee needs to be clearly stated and then clearly followed.
Settlor created irrevocable trusts. Later, Trustee sued Settlor for
breach of fiduciary duty. The court determined that Trustee lacked
standing to sue Settlor because “[a] trust settlor has no fiduciary
obligation to a trust beneficiary once [a] trust is created, and control
of the trust assets is vested with the trustee.” Alpert, at 292. The
court rejected Trustee’s claim that he could bring the action based on a
breach of Settlor’s fiduciary duty as a parent to the beneficiaries, his
sons.
The court also pointed out that Trustee was precluded from suing Settlor
under Trust Code § 113.028(a) which provides that a trustee may not
asset a claim for damages against a party who is not a beneficiary if
each beneficiary provides written notice of his or her objection as was
done in this case.
Moral: Unlike with a trustee, a trust does not create a fiduciary
relationship between the settlor and the beneficiary.
The trial court denied Beneficiaries’ request to have attorney’s fees
awarded against Trustee and Beneficiaries appealed. The appellate court
reversed. Under Trust Code § 114.064, the trial court has the discretion
to make an award of attorney’s fees as it determines to be “equitable
and just.” Because of the way in which the appellate court disposed of
other issues in this case, the court held that the trial court needed to
make a redetermination of whether an award of fees would now be
appropriate.
Moral: The trial court’s determination whether to award, or not award,
attorney’s fees may need to be reexamined after an appellate court
disposes of other issues in the case.