Under § 113.019 of the Texas Trust Code, a trustee is generally authorized to compromise, contest, arbitrate, or settle claims affecting trust property. TEX. PROP. CODE ANN. § 113.019 ; seeIn re XTO Energy Inc. , 471 S.W.3d 126, 130 (Tex. App.—Dallas 2015, no pet.). In this case, the Trust provides that the Texas Trust Code applies, except for §§ 113.052, 113.053, and 113.054, which relate to self-dealing.
In order for beneficiaries to step into the trustee's shoes and sue on its behalf, the beneficiaries must demonstrate more than that a trustee declined to file suit; rather, they must show that the trustee's refusal to sue was wrongful. In re XTO Energy, Inc. , 471 S.W.3d 126, 131 (Tex. App.—Dallas 2015, no pet.). Linda did not bring claims against MNB and cites no interest of MNB adverse to the estate.
In re Benge In addition, in In re Benge, 2018 WL 1062899, at *1 we cited In re XTO Energy Inc., 471 S.W.3d 126, 131 (Tex. App.—Dallas 2015, no pet.), among other cases, stating that generally beneficiaries cannot bring derivative suits on behalf of the trust and concluded that the trial court in this case did not err in dismissing Benge's derivative claims. See Jacobs v. Jacobs, 448 S.W.3d 626, 630 (Tex. App.—Houston [14th Dist.] 2014, no pet.) ("The 'law of the case' doctrine is defined as that principle under which questions of law decided on appeal to a court of last resort will govern the case throughout its subsequent stages.").
Moorehead contended that, although there are exceptions to this general rule, they do not apply in this case—in particular, the Buckleys did not plead that the Bank, as trustee, wrongfully refused to bring suit. SeeInterfirst Bank-Hous., N.A. v. Quintana Petrol. Corp. , 699 S.W.2d 864, 874 (Tex. App.—Houston [1st Dist.] 1985, writ ref'd n.r.e.) ("It is only when the trustee cannot or will not enforce the cause of action that he has against the third person that the beneficiary is allowed to enforce it."); see alsoIn re XTO Energy Inc. , 471 S.W.3d 126, 131 (Tex. App.—Dallas 2015, orig. proceeding) (noting that a "trustee's refusal to bring suit must be wrongful for [the beneficiary] to be allowed to step into the trustee's shoes and maintain a suit on the Trust's behalf"). Moorehead additionally argued in its summary judgment motion that business organizations code section 10.361(g), which allows a "beneficial owner" to petition for valuation, does not apply because the shares at issue were never held "in a voting trust" or "by a nominee."
To say that the trustees "shall have power in their sole discretion" to submit a dispute to arbitration is to say that they cannot be prohibited from exercising discretion by any provision of the Trust Declaration or default provisions of state trust law. See In re XTO Energy Inc., 471 S.W.3d 126, 131 (Tex. App. 2015) (describing discretionary powers as those that "a trustee may decide whether or not to exercise" without "interfere[nce] [from a court] except to prevent an abuse of discretion"). That is, to grant the trustees sole discretion is to say that no one can tell them whether to decide to arbitrate, etc. It does not mean that the trustees have absolute power to make others do their bidding.
¶135 We agree with the Osguthorpe Children that the legal authority the district court and Rudd/Ballard cite applies only to situations where the beneficiaries sought to bring a trust's claims without permission of a trustee, and therefore, such authority does not control a trustee's assignment of claims to a beneficiary. See Hillcrest Inv. Co., v. Utah Dep't. of Transp., 2012 UT App 256, ¶¶ 22-26, 287 P.3d 427; Anderson v. Dean Witter Reynolds, Inc., 841 P.2d 742, 745 (Utah Ct. App. 1992); In re Voorhees' Est., 332 P.2d 670, 672 (Utah 1958); In re XTO Energy Inc., 471 S.W.3d 126, 131-36 (Tex. Ct. App. 2015); see also Restatement (Second) of Trusts § 282(1) (Am. L. Inst. 1959); Restatement (Third) of Trusts § 107(2)(b) (Am. L. Inst. 2012). ¶136 None of these authorities address the question of whether a trustee may voluntarily assign claims to a beneficiary.
¶135 We agree with the Osguthorpe Children that the legal authority the district court and Rudd/Ballard cite applies only to situations where the beneficiaries sought to bring a trust's claims without permission of a trustee, and therefore, such authority does not control a trustee's assignment of claims to a beneficiary. See Hillcrest Inv. Co., v. Utah Dep't. of Transp., 2012 UT App 256, ¶¶ 22-26, 287 P.3d 427; Anderson v. Dean Witter Reynolds, Inc., 841 P.2d 742, 745 (Utah Ct. App. 1992); In re Voorhees' Est., 332 P.2d 670, 672 (Utah 1958); In re XTO Energy Inc., 471 S.W.3d 126, 131-36 (Tex. Ct. App. 2015); see also RESTATEMENT (SECOND) OF TRUSTS § 282(1) (AM. L. INST. 1959); RESTATEMENT (THIRD) OF TRUSTS § 107(2)(b) (AM. L. INST. 2012). ¶136 None of these authorities address the question of whether a trustee may voluntarily assign claims to a beneficiary.
Such extraordinary circumstances include those in which "the very act of proceeding to trial, regardless of the outcome, would defeat the substantive right involved." In re XTO Energy Inc., 471 S.W.3d 126, 136 (Tex. App.-Dallas 2015, orig. proceeding). For example, in XTO Energy, a trustee sought mandamus relief from a special-exceptions ruling that would have allowed a lawsuit filed by a trust beneficiary on the trust's behalf to proceed to trial even though the trustee had determined that the lawsuit was meritless and should not be pursued.
"Generally, when the trial court sustains special exceptions, it must give the pleader an opportunity to amend the pleading, unless the pleading defect is of a type that amendment cannot cure." Baylor Univ., 221 S.W.3d at 635; see Friesenhahn, 960 S.W.2d at 658; In re XTO Energy Inc., 471 S.W.3d 126, 137 (Tex. App.-Dallas 2015, orig. proceeding); Shaw, 427 S.W.3d at 546; Gatten, 391 S.W.3d at 673. The right to amend exists only if the defect is curable.
Because the trustees' power to pay for expenses incurred at the end of Rita's life is discretionary-as indicated by the word "may" in § 4.3-this court can only intervene to override their decision if it constituted an abuse of discretion. In re XTO Energy Inc., 471 S.W.3d 126,131 (Tex. App. 2015) ("[W]hen a trustee is given discretion with respect to the exercise of a power, a court may not interfere except to prevent an abuse of discretion."); Di Portcmova v. Monroe, 229 S.W.3d 324, 330 (Tex. App. 2006) (finding that "the [t]rustees, not the court, are given the power to determine the best interest of the beneficiary" when the trust is discretionary). The co-trustees acted within the bounds of the authority provided to them by using the principal to pay for the exact types of expenses described in the Will, which means that they did not abuse their discretionary powers as co-trustees; therefore, the Individual Defendants did not breach a fiduciary duty to Kelley by dispensing principal to pay for the expenses incurred by Rita's passing.