After reviewing a range of cases about term limits, the Fifth Court applied them to a trust-governance issue in Employees’ Retirement Fund v. City of Dallas, holding:

“The imposition of term limits for elected Fund board members added a substantive qualification for office that rendered a class of potential candidates ineligible and effected a fundamental change to the Trust Document, which must follow the amendment process set out in the Trust Document itself. The City did not follow the amendment process set out in section 40A-35 of the City Code. Rather, in enacting section 8-1.5(a-1), the City attempted to accomplish indirectly what it was prohibited from doing directly. Accordingly, we sustain the Fund’s first and third issues.”

No. 05-20-00494-CV (Oct. 29, 2021) (emphasis added).

The Dallas Court of Appeals has granted mandamus to correct a trial court’s failure to grant special exceptions and dismiss the plaintiff’s claims against the settlor of a royalty trust. The Court held that a beneficiary of the trust had no authority to interfere with the trustee’s exercise of discretionary powers, concluding that the trustee acted within its discretion by refusing to sue the settlor on claims that were precluded by the terms of the trust instruments. Citing the “practical and prudential” mandamus standard of In re Prudential, the Court of Appeals held that mandamus relief was appropriate because allowing the plaintiff to proceed to trial on behalf of the trust would defeat the trustee’s right to control such litigation. But while the settlor of the trust was dismissed from the lawsuit, and the plaintiff could not sue the trustee on behalf of the trust, the Court held that the plaintiff should have the opportunity to amend her petition to sue the trustee solely on her own behalf.

In re XTO Energy, Inc., No. 05-14-01446-CV

The grantor to a trust apparently changed his mind and sought to undo the trust.  After litigation on several fronts spanning several decades, the grantor filed a declaratory action seeking a declaration that he is the owner of an oil and gas lease called the Westbrook Lease, which was previously property of the trust he created.  The trustee opposed the grantor’s efforts, arguing that the trust was still intact and that the trust still owned the rights to the Westbrook Lease.

The main issue in the case was the effect of several judgments, dating as far back as 1980.  Specifically, the grantor moved for summary judgment, claiming that res judicata applied in his favor based on one of the prior orders.  The trial court agreed and granted summary judgment.  The Court of Appeals, however, reversed because the judgment upon which the trial court relied had been reversed on appeal.

Schmidt v. Ward

The Court of Appeals has conditionally granted mandamus relief in a divorce proceeding to vacate an order requiring a trustee to withhold distributions from the husband and pay them instead to the wife. The trust instrument included a spendthrift provision, which prevents creditors from claiming distributable money or property from the trust, as well as any assignment of a beneficiary’s interest in the trust’s distributions. The Court of Appeals held that the spendthrift provision was enforceable, and that the trial court abused its discretion by ordering the trustee to make distributions in circumvention of the trust’s terms. Because the trustee was a non-party to the divorce proceeding, it also had no adequate remedy at law, thereby justifying the grant of mandamus relief.

In re BancourpSouth Bank, No. 05-14-00294-CV