In re XTO Energy, Inc., 471 S.W.3d 126 (Tex. App.—Dallas 2015, no pet.).




Trustee failed to pursue litigation on behalf of the trust under the terms of the trust which granted Trustee the discretion to carry out the trustee’s powers and perform the trustee’s duties. Beneficiary, unhappy with Trustee’s inaction, brought action against Defendant on behalf of the trust. Trustee and Defendant seek a writ of mandamus to force the trial court to dismiss Beneficiary’s suit for lack of subject matter jurisdiction.


The appellate court began its analysis by recognizing that a trust beneficiary may sue a third party on behalf of the trust if the trustee cannot or will not bring the action. However, a beneficiary cannot bring an action merely because the trustee has refused to do so because “[t]o allow such an action would render the trustee’s authority to manage litigation on behalf of the trust illusory.” Id. at *3.


The court concluded that a beneficiary may not bring the suit unless “the beneficiary pleads and proves that the trustee’s refusal to pursue litigation constitutes fraud, misconduct, or a clear abuse of discretion.” Id. The court then engaged in a detailed analysis of the underlying dispute and determined that there were no facts that would support a finding that Trustee’s decision not to bring suit was the result of fraud, misconduct, or a clear abuse of discretion. Accordingly, the court conditionally granted mandamus relief. (The court, however, allowed Beneficiary’s claims against Trustee for breach of duty to continue.)


Moral:  This case appears to be the first time a Texas court has ruled on “the right of a beneficiary to enforce a cause of action against a third party that the trustee considered and concluded was not in the best interests of the trust to pursue.” The rule announced by the court is that the action may proceed if the trustee’s failure to bring the action is the result of fraud, misconduct, or a clear abuse of discretion.