Ali v. Smith, 554 S.W.3d 755 (Tex. App.—Houston [14th Dist.] 2018, no pet.).


Arbitration Provisions


Testator’s will contained a provision requiring arbitration of all disputes which read as follows:


If a dispute arises between or among any of the beneficiaries of my estate, the beneficiaries of a trust created under my Will, the Executor of my estate, or the Trustee of a trust created hereunder, or any combination thereof, such dispute shall be resolved by submitting the dispute to binding arbitration. It is my desire that all disputes between such parties be resolved amicably and without the necessity of litigation.


Successor Administrator sued Former Executor for several alleged breaches of fiduciary duty. Former Executor moved to compel arbitration. The trial court denied the motion and Former Executor appealed.


The appellate court affirmed. The court recognized that the Texas Supreme Court in Rachal v. Reitz, 403 S.W.3d 840 (Tex. 2013), enforced an arbitration clause in a trust against the beneficiaries because although they did not affirmatively consent to the clause, they were deemed to do so on based on the theory of direct-benefits estoppel. The court rejected the argument that Successor Administrator’s actions of attempting to enforce the will by suing him for breach of duty and accepting payment of attorney fees triggered direct-benefits estoppel. The court explained that Successor Administrator’s claims are not based on allegations that Former Executor violated the terms of the will. Instead, the breach of fiduciary duty claims against Former Executor were derived from statutes and common law, irrespective of the will itself. In addition, Successor Administrator’s entitlement to fees is based on Texas Estates Code § 352.051, not the will.


A dissenting judge would enforce the arbitration provision believing that by accepting the appointment as a personal representative of the estate, each party should be deemed to have assented to the arbitration provision. This result would also be consistent with Testator’s intent that all disputes be resolved without litigation.


Moral:  The enforcement of a mandatory arbitration clause in a will is problematic.