Author: RFTB

Mendell v. Scott, No. 01-20-00578-CV, 2023 WL 4712050 (Tex. App.—Houston [1st Dist.] July 25, 2023, no pet.)(mem.op.).

Mendell was the trustee of various Trusts left for her nephew and niece, which were created at their Uncle Mutt’s death in August 2017.

After numerous requests for information and distributions, the beneficiaries sued Mendell as Trustee and in her individual capacity in April 2019. The suit included allegations of breach of fiduciary duty, a request to declare the Trusts terminated, and that the nephew and niece were the beneficiaries entitled to the Trusts’ assets. The beneficiaries sought a Court order compelling Mendell to wind up the Trusts and distribute the remaining assets to the beneficiaries, outright and free of trust.

Mendell responded with a counter suit against the beneficiaries seeking to enforce the Trusts’ terms and request that her attorney’s fees and expenses be reimbursed from the Trust.

The beneficiaries sought summary judgment on various issues and won. Whether Mendell had breached her fiduciary duty went to trial before a jury. The jury “came to a unanimous verdict that found Mendell breached her fiduciary duty in five different ways and awarded damages and attorney’s fees” to the beneficiaries. The jury awarded $715,792.21 in damages and attorney’s fees against Mendell in her individual capacity. Not only did the jury award the beneficiaries their attorney’s fees to be paid out of Mendell’s personal funds, but Mendell was also ordered to pay back the fees she paid out of the Trust to her own attorneys in the amount of $200,000.

On appeal, Mendell argued that the Trust should pay the attorney’s fees award, not Mendell personally. The Court of Appeals rejected this argument and “concluded that the terms of the Trust do not prevail over the statutorily authorized attorney’s fees in light of the evidence supporting the jury’s findings that Mendall breached her fiduciary duties and acted with malice.”

Section 111.0035 of the Property Code provides: “The terms of a trust
prevail over any provision of this subtitle, except that the terms of a
trust may not limit … a trustee’s duty … to act in good faith and in
accordance with the purposes of the trust[.]” TEX. PROP. CODE §
111.0035(b)(4)(B)(emphasis added).

MORAL OF THE STORY:
When a Trustee acts with malice, the Trust language can’t exonerate them, and the Trustee can
be held personally liable for its acts.

Dallas County Probate Courts provide numerous forms, checklists, instructions and links to zoom hearings on their website.

For the Probate Court of Dallas County, click here:

https://www.dallascounty.org/government/courts/probate/probate1/

For the Probate Court No. 2 of Dallas County, click here:

https://www.dallascounty.org/government/courts/probate/probate2/

For the Probate Court No. 3 of Dallas County, click here:

https://www.dallascounty.org/government/courts/probate/probate3/

The Texas Legislature meets every other year to tinker with the laws of the State of Texas. In

2023, several changes were made to the Estates Code and Trust Code. The following changes

were made to address various issues:

 

Qualified Delivery Method – Given the trouble with green cards (the fact that they are either

never returned or returned without a signature) the Legislature implanted a new rule permitting

delivery by private delivery services permitted by the U.S. Secretary of the Treasury with proof

of delivery receipt. This includes UPS, DHL, and FedEx.

 

Oath or Declaration – Where an oath was previously required, which necessitated having a

notary public, the statutes have been revised to permit declarations, which do not require a

notary. The form of the declaration is prescribed in each specific statute.

 

Wavier of Service of Citation – Previously, an individual aged 12 years or older could not waive

citation. The parent or legal guardian could waive citation for a minor 12 years or younger.

Thus, any person aged 12 years or older had to be personally served with citation. Section

202.056 was revised to permit a parent to waive service of citation on a child aged 15 years old

or younger – and any individual aged 16 or older may waive service of citation.