Tuesday, April 5, 2016

Court Affirmed Holding That Trust Owned Real Estate and was Entitled to Attorney’s Fees

Originally published by David Fowler Johnson.

In Courtade v. Estrada, Estrada created an inter vivos irrevocable trust and deeded real estate into the trust. No. 02-14-00295-CV, 2016 Tex. App. LEXIS 3105 (Tex. App.—Fort Worth March 24, 2016, no pet. history). Two days later, Estrada attempted to deed the same property to a daughter. After Estrada died, the trustee of her trust and her daughter sued each other regarding the real property and other issues. The trial court entered summary judgment for the trustee, holding that the trust owned the real estate.

The court of appeals affirmed that decision. The court held that “It is axiomatic that a grantor cannot convey to a grantee a greater or better title than he holds.” Id. at *11. The court held:

The issue decided by summary judgment concerned the title to the rental properties and the validity of the deeds to Estrada-Davis executed on August 8, 2012. Appellee presented uncontroverted evidence that the rental properties were transferred to the Trust by deeds executed on August 6, 2012. While there is also evidence that Gloria attempted to transfer the rental properties to Estrada-Davis on August 8, 2012, such evidence does not raise a fact issue concerning the title to the rental properties because Gloria did not own the rental properties on August 8, 2012. Although the transcripts reflect that Gloria possibly later changed her mind concerning the rental properties, “the deed was already done”-title to the properties had been transferred to the Trust on August 6, 2012.

The daughter also filed a counterclaim against her siblings alleging fraud and undue influence; she alleged that her siblings made certain misrepresentations to Estrada immediately prior to the signing of the trust agreement and that they unduly influenced her to sign the agreement. The trial court dismissed these claims on the basis that the daughter did not have standing to assert them. The court of appeals affirmed, holding that Estrada’s estate would have sole standing to assert those claims and not her daughter.

The daughter also alleged that the trust was invalid because Estrada had revoked it. The trial court and court of appeals disagreed for two reasons. First, the document that had the revocation language did not expressly mention the trust, and therefore it was not operative as to the trust. Second, the trust stated: “[t]his Trust may not be amended, modified or revoked without the written consent and agreement of the Trustee.” As the trustee did not consent in writing to the revocation of the trust, any alleged revocation by the settlor was not effective.

Finally, the daughter challenged the trial court’s award of fees for the trustee. One of the grounds for fees alleged by the trustee was that section 114.031 of the property code provides that a beneficiary is liable for loss to the trust if the beneficiary “misappropriated or otherwise wrongfully dealt with the trust property.” Id (citing Tex. Prop. Code Ann. § 114.031).  The court of appeals held that the trial court could have found that the daughter misappropriated trust property by living in the trust’s real property without permission and without paying any rent and by directing other tenants to send rent checks to her. The court concluded: “The trial court was therefore within its discretion to offset those attorney’s fees against Estrada-Davis’s interest in the Trust.”

Interesting Note: To avoid the standing issue, the daughter could have pled a tortious interference with inheritance claim against her siblings. That claim could have potentially allowed for a damage remedy.  Also, the daughter could have alleged that the executor of Estrada’s estate refused to assert the fraud and undue influence claims, and when that is pled, there is precedent that would allow a beneficiary of an estate to bring estate claims. Though recent precedent, In re XTO Energy Inc., No. 05-14-01446-CV, 2015 Tex. App. LEXIS 7723 (Tex. App.—Dallas July 27, 2015, original proceeding), which was previously cited on this blog, may limit that standing exception. If the daughter could successfully challenge the creation of the trust and the deeds, those documents would be voidable, and potentially, the second deeds to her may have been effective.

Curated by Texas Bar Today. Follow us on Twitter @texasbartoday.

from Texas Bar Today http://ift.tt/1N7ce02
via Abogado Aly Website

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