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.



Exculpatory Provisions

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).