In Pense v. Bennett, the ward in a guardianship proceeding sued to invalidate the sale of real property from a trust created for his benefit to an affiliate of the trustee. No. 06-20-00030-CV, 2020 Tex. App. LEXIS 8002 (Tex. App.—Texarkana October 8, 2020, no pet.). The trial court granted summary judgment for the trustee, held that the sale was effective, but expressly refused to rule on a breach of fiduciary duty claim based on the transaction as it was pending in another proceeding. The ward appealed.
The court of appeals explained how the guardian had sought and obtained court approval for the creation of a management trust and the transfer of real property from the guardianship estate to the new trust. The trustee of that trust had the express authority to sell trust property:
Article VIII of the Trust Instrument lists the powers of the trustee. And, “[w]here the language of the trust instrument is unambiguous and expresses the intentions of the maker, the trustee’s powers are conferred by the instrument and neither the court nor the trustee can add or take away such power.” As pertinent here, the Trust Instrument authorized the trustee to: “[P]artition, exchange, release, convey or assign any right, title or interest of the trust in any real estate or personal property owned by the trust”; “[S]ell, exchange, alter, mortgage, pledge or otherwise dispose of trust property”; “[E]xecute and deliver any deeds, conveyances, assignments, leases, contracts, stock or security transfer powers, or any other written instrument of any character appropriate to any of the powers or duties herein conferred on the Trustee”; and “[H]old title to investments in the name of the Trustee or a nominee.”
In addition to these powers specified in the Trust Instrument, the Texas Trust Code authorizes “a trustee [to] exercise any powers . . . that are necessary or appropriate to carry out the purpose of the trust.” Those powers include the power to “contract to sell, sell and convey, or grant an option to sell real or personal property at public auction or private sale for cash or for credit or for part cash and part credit, with or without security.”
Id. (internal citations omitted).
Under these terms, the court held that the trial court correctly held that the trustee had the authority to sell the trust’s real property to his affiliate. The ward complained that the transfer was invalid due to the breach of fiduciary duty claim. The court of appeals held that the ward waived any issue concerning the breach of fiduciary duty claim because he did not complain on appeal that the trial court erred in refusing to consider it:
The trial court did not consider this issue because the same issue was then pending in the Guardianship Court. Pense has never contended otherwise. And Pense has made no complaint in this Court that the trial court erred in failing to consider the issue of whether the alleged breach of fiduciary duty was sufficient to raise a fact issue to overcome summary judgment.… Because the trial court did not consider the breach of fiduciary duty issue, and because Pense did not object, on appeal, to that lack of consideration, Pense has offered nothing to contest the validity of the transfers as previously outlined.
Id. The court of appeals affirmed the summary judgment for the trustee. Presumably the ward’s breach of fiduciary duty claim against the trustee continued in the guardianship case (though the trustee’s affiliate got to keep the property).
Interestingly, the court discussed the propriety of the sale of the trust’s property from the trustee to the trustee’s affiliate. The court cited to Section 113.053(a) of the Texas Property Code, which provides: “(a) Except as provided by Subsections (b), (c), (d), (e), (f), and (g), a trustee shall not directly or indirectly buy or sell trust property from or to: (1) the trustee or an affiliate; (2) a director, officer, or employee of the trustee or an affiliate; (3) a relative of the trustee; or (4) the trustee’s employer, partner, or other business associate. Tex. Prop. Code Ann. § 113.053(a).” Id. (Tex. Prop. Code § 113.053(a)). The court held that “because Section 113.053(a) of the Texas Property Code prohibits self-dealing with respect to property held in trust, its violation amounts to a breach of fiduciary duty.” Id. (citing Snyder v. Cowell, No. 08-01-00444-CV, 2003 Tex. App. LEXIS 3139, 2003 WL 1849145, at *2 (Tex. App.—El Paso Apr. 10, 2003, no pet.) (mem. op.)). This note does not bode well for the trustee in the guardianship proceeding.