Entering My 81st Year

Former Presiding Judge Jay Patterson, 80, of the 101st District Court in Dallas County, reflects on mortality and the importance of living for today.

 

I’ll soon be entering my 81st year. I turned 80 on May 5. What I am experiencing is of interest only to people aging as I am, but they already know most of these things. They just may not have thought about them. This will not be relevant to younger people. Just as I was, they are unable to understand and appreciate these things and won’t want to even think about them until they get older.

You can’t help but be conscious of elderly ailments and dying when you are in your 70s. You, your loved ones, and many of your friends are ailing or dying. Dying becomes just another part of life. Not so when you are younger. You cannot avoid it when you are older. It is all around you. Not the circle of life, more of a linear view of life as finite.

There is bad and good about all this. The bad is obvious. The good, not necessarily. It is easier when you are older to live for today and make the most of each day as people tell us we should do all along. Since the mortality rate is still 100%, it is really no big deal to die. It affects those who care about you more than it does you. And my children are doing a great job of following the Fifth Commandment.

I had a mild stroke in 2006 that affected my left side. It hasn’t really altered my life much, but recently I realized there could be another one, more serious, at any time. I may not live until the day after tomorrow. (This is not a strong risk. The doctors are not concerned. But it is a helpful state of mind for me.) Realization of this risk is not a bad thing. It motivates me to prepare for when I am gone. I tell the people I love that I love them. I try to live my life kindly, gently, considerately, unselfishly, generously for them so they will know that I truly do love them.

I make sure the memories that are important to me are written down so they don’t die with me. I’ve created a 61-page autobiography of my life and my family’s life during my lifetime, thanks to Bob Greene’s To Our Children’s Children: Preserving Family Histories for Generations to Come. It was more fun than I thought it would be. As I answered Greene’s questions, memories of events I hadn’t thought about for a long time came back to me in a rush. Great fun!

The photos and home movies that I would like to have future members of my family see are preserved for them. I’ve had them put into a digital format. I’ve even had the DVD disk of our family history put onto a flash drive to preserve it even longer. That preservation will not be important to me after I’m gone, but it may be to some present or future member of my family.

I didn’t realize how irritating it must have been for my seniors when I was young and naively expressed strong opinions, so sure of myself, until I now listen to young people do the same thing even when they are clearly wrong. They have the privilege of making their own mistakes.

I need to learn not to share advice or experience unless specifically asked for it (and I need to be able to distinguish between a real question seeking a response and a rhetorical question).

In our society it is hard to take each day a day at a time, savor it, and make the most of it. We are born to be planners. But in my 70s, having lost people dear to me, I am able to savor each day and value it. It comes more naturally. I cherish each day with the ones I love and want to be with them. I thank God for all of them. I try to become more and more like Christ so the ones I love will recognize the reality that I do love them with all my heart. May 5, we hosted my best friends in the world and their spouses for lunch and we invited all our family to join us at our house for lunch or, if they couldn’t make it, to join us on Zoom May 6.

“The days of our years are threescore and ten; and if by reason of strength they be fourscore years, yet is their strength labor and sorrow; for it is soon cut off, and we fly away.”

—Psalm 90:10

Former State District Judge Jay Patterson began practicing law in 1970 after serving in the U.S. Navy during Vietnam. In 1978, he and five other lawyers formed the law firm Cowles, Sorrells, Patterson and Thompson. In 1994, Patterson was elected judge of the 101st District Court in Dallas County. He was presented with the Legal Aid of NorthWest Texas Equal Justice Award and the DAYL Foundation Award of Excellence in 2003. In 2007, Patterson began work to gain approval for creation of the UNT Dallas College of Law. A longtime advocate for legal aid in Texas, he received the Judge Merrill Hartman Pro Bono Judge Award from the State Bar of Texas in 2013.

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Savings Statute Certification

The complex trial-court system in Texas led to Tex. Civ. Prac. & Rem. Code § 16.065, which suspends limitations for 60 days after a dismissal for lack of jurisdiction. Simple enough, in theory. But in Sanders v. The Boeing Co., the Fifth Circuit showed the deceptive complexity of that statute when it certified these two issues about the statute to the Texas Supreme Court

1)     Does Texas Civil Practice & Remedies Code § 16.064 apply to this lawsuit where Plaintiffs could have invoked the prior district court’s subject matter jurisdiction with proper pleading?

2)     Did Plaintiffs file this lawsuit within sixty days of when the prior judgment became “final” for purposes of Texas Civil Practice & Remedies Code § 16.064(a)(2)?

(The second issue arose from the specific question “whether Texas law would deem dht flight attendants’ tolling savings-statute deadline as running from the time the district court entered judgment or the time [the Fifth Circuit] affirmed that judgment.”) No. 22-20317 (May 25, 2023).

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Privileges and Benefits Part I: Hopman at 8th Circuit

Hope everybody had a great Memorial Day weekend. This week’s blog entry begins a two-part series talking about how the ADA prohibits discrimination on the basis of disability when it comes to offered privileges and benefits. In this week’s blog entry, we will talk about the recent Eighth Circuit decision, here, in Hopman v. Union Pacific Railroad (we discussed the trial court opinion here). Next week, we will turn to an 11^th Circuit case that just came down also discussing the privileges and benefits issue. Since we blogged on Hopman previously, we don’t need to go into great detail with respect to the facts. So, the blog entry will be divided into the categories of: facts briefly;  court’s reasoning that privileges and benefits of employment were not involved with respect to seeking a service animal while plaintiff worked on the job; and thought/takeaways. Since the blog entry is so short, I am figuring that the reader will want to read the whole thing. Of course, the reader is free to concentrate on any or all of the categories.

 

I

Facts Briefly

 

Plaintiff was a military veteran and requested a service dog to accompany him while working on trains as a conductor. The key to this case that makes it different from others is that the case was not about a failure to accommodate, but rather the case was structured as a failure to make reasonable modifications and adjustments so as to enable him to enjoy equal benefits and privileges of employment.

 

II

Court’s Reasoning That Privileges and Benefits of Employment Were Not Involved with Respect to Seeking a Service Animal While Plaintiff Worked on the Job

 

1. The plain text of EEOC regulations include only benefits and privileges enjoyed by other similarly situated employees without disabilities.
2. While “benefits and privileges of employment,” is not a term used and defined in the ADA, the statutory meaning of those terms (fringe benefits, access to recreational programs and facilities, and other employer-provided workplace advantages not directly related to job performance), can be derived from various provisions of the statute confirmed by its legislative history.
3. The EEOC’s interpretive guidance on title I in their Appendix to 29 C.F.R. part 1630 says that the reasonable accommodation obligation extends to all services and programs provided in connection with employment, and to all nonwork facilities provided or maintained by an employer for use by its employees. Accordingly, the obligation to accommodate applies to employer-sponsored placement or counseling services, and to employer-provided cafeterias, lounges, gymnasium, auditorium, transportation and the like.
4. The EEOC’s Technical Assistance Manual that addresses the issue of accommodation to ensure equal benefits of employment states that employees with disabilities must have equal access to lunchrooms, employee lounges, restrooms, meeting rooms, and other employer-provided or sponsor services such as health programs, transportation, and social events.
5. The employer duty to provide equal benefits and privileges of employment laid out in 29 C.F.R. §1630.2(o)(1)(iii) is limited by the plain text of the regulation.
6. The court refers to the EEOC’s interpretive guidance addressing the distinction between assisting an individual in performing the duties of a particular job and assisting the individual throughout his or her daily activities on and off the job. The former is job-related and subject to reasonable accommodation rules, while the latter is considered a personal item (examples given include a prosthetic limb, wheelchair, or eyeglasses), that the employer is not required to provide.
7. Providing a service dog at work so that an employee with a disability gets the same assistance the service dog provides away from work is not a cognizable benefit or privileges of employment.
8. ADA failure to accommodate cases are facts and context specific and this decision needs to be interpreted in that light. The court recognized that there are apparently conflicting decisions out there as to whether it is the job being reasonably accommodated or whether it is the disability that is being reasonably accommodated. Even so, the court said that is often possible to reconcile the apparent conflicting decision by paying careful attention to the particular facts and contexts of those various cases.
9. The court noted that another issue lurking was whether failure to accommodate cases required an adverse action. Even so, it wasn’t necessary to visit that question because both parties seem to assume that it did, and this case is a privilege and benefits case rather than a failure to accommodate case.

 

III

Thoughts/Takeaways

 

1. Very interesting that this was a privileges and benefits case and not a failure to accommodate case. I am not sure why the choice would need to focus on privileges and benefits rather than reasonable accommodations was utilized here.
2. I can understand the statement that a person getting the same assistance the service dog provides while at work and away from work is not a cognizable benefit or privilege of employment. However, that does not mean such a person is not entitled to the service animal as a reasonable accommodation.
3. The Department of Justice has asked the Supreme Court to weigh in on two cases involving the question of what are privileges and benefits with respect to title VII of the Civil Rights Act. The Department of Justice stated in their amicus briefs in those cases (Davis v. Legal Services of Alabama and Muldrow v. City of St. Louis, Missouri), that privileges and benefits should be construed very broadly. If the Supreme Court decides to take up those cases, those decisions should be followed closely to see whether there reasoning might also apply to the ADA, which also has privileges and benefits terminology within it.
4. Next week, we will take up a published 11th Circuit case, Beasley v. O’Reilly Auto Parts, which also goes into detail on the privileges and benefits question.
5. If the Eighth Circuit decision in Hopman teaches anything, where it is possible to argue failure to accommodate, it probably makes more sense to argue failure to accommodate than privileges and benefits. See also ¶ III(2) above.
6. Very much lurking here is the critical question and failure to accommodate cases of weather-related the job’s essential function being accommodated or is it the disability being accommodated. The answer depends upon where you are. For example, in the 11^th Circuit, as we discussed here, there is a case making it clear that it is the disability that is accommodated. This question is more than a theoretical concern as what is being accommodated will just about always be an issue in service animal cases.
7. Whether failure to accommodate claim require an adverse action being hotly debated in the courts, and we have discussed that issue in our blog before, such as here and here.
8. An interesting question is whether the reasoning of this case would affect the reasoning of cases we discussed here , where independent contractors, such as but not limited to a hospital physician, were suing for disability discrimination.

Next week is a published decision from the 11^th Circuit in Beasley v. O’Reilly Auto Parts unless something comes up that forces me to move that discussion back.

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Class, Certified.

The Fifth Circuit affirmed the certification of a class of GEICO car-insurance policyholders in Angell v. GEICO Adv. Ins. Co., holding, inter alia:

• 3 ways to breach 1 contract = 1 injury. “GEICO’s failure to remit any of the three Purchasing Fees amounts to the same harm—a breach of the Policies. Whether GEICO is liable to Plaintiffs for any of the Purchasing Fees is dependent on an interpretation on the same language in the Policies and how the Policies to support the standing approach …. Although each of the Purchasing Fees may accrue differently, e.g., through the acquisition of a vehicle or upon the expiration of a vehicle’s registration, the complained injury stems from GEICO’s failed remittance, not the costs as assessed by the State.”
• 1 injury = typicality. “The course of conduct here is virtually the
  same across the alleged deprivations of each Purchasing Fee, i.e., whether
  GEICO breached the Policies.”
• 1 injury = predominance. “[T]he need for individual calculation here is relatively minor when compared to the common issues that predominate. And Plaintiffs articulate a reasonably ascertainable formula. Sales tax is equivalent to 6.25% of [Adjusted Vehicle Value], and Plaintiffs contend that it can be calculated for almost 97% of the class without resort to individualized review.”

No. 22-20093 (May 12, 2023) (all citations omitted).

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Ordering Certified Letters of Testamentary as an Estate Executor

What are letters testamentary?

If you were named as the executor of a person’s will then you will be responsible for collecting and inventorying their property after he or she passes away. Additionally, the bills of the person who has passed in addition to their debts will also need to be accounted for. Frequently this involves going through the probate process so that creditors have a chance to come forward and ensure that they are paid (as much as possible) towards the debts owed to them by the decedent. Once debts have been paid you would be able to distribute property according to the terms of the will.

However, before you can start to distribute the property you will need to make sure that you have been given clearance to do so by the probate court judge. In most cases, this involves obtaining letters testamentary from a probate court. In today’s blog post from the Law Office of Bryan Fagan, we are going to discuss what it means to obtain these types of documents, what they are, and how they can impact your role as executor of a will or administrator of a person’s estate.

To begin with, letters testamentary give you the legal authority to act on behalf of a decedent in matters related to their estate. Whether it be paying creditors or distributing property to beneficiaries, you need permission from the court to perform these actions. How you get that permission is through the letters testamentary that we are going to be discussing today in our blog post. During the probate process concerning a will in Texas, most banks or creditors will require that you provide them with a copy of the letters testamentary to begin the process of telling you what is owed to them by your decedent. A payoff amount for a loan cannot be obtained, for example, without first providing the creditor with letters testamentary.

Letters testamentary are a court order which provides proof to the creditor or other financial institution that you have been appointed properly by a probate court and are qualified to execute the will. Part of this execution of the will relates to paying creditors if there are any. Normally, these institutions will not grant you access to accounts after a person dies. This can make it nearly impossible to see to it that their accounts are in a position to be closed if there are no outstanding balances or debts associated with them.

How do you get your hands on letters testamentary if you are an executor?

When you are named as the executor of a person’s will that is a major responsibility. The trouble with this is that some people who appoint an executor via their will never actually tell the person that they have been appointed. You will be out living your life until one day a judge or someone’s spouse will call you to say that you are the executor of John Smith’s will. This will usually come as a surprise when John Smith never contacted you beforehand to tell you about their putting you down as an executor.

In a healthier situation, you would have been contacted beforehand by the person who created the will so that he or she could tell you about their desire to list you as the executor. You may be the best person for the job- responsible, honest, and dependable. In many ways, it is a compliment to be named as the executor of a person’s will. If the person who named, you as an executor is a family member then you may be obligated to act in this capacity. However, if you do not believe that you can fulfill the duties of an executor then you would have the chance to tell the person if he or she tells you about your being named to this role. Better to tell the person and allow him or her to name another person as executor, rather than to have to wait and tell a judge that you are unwilling or unable to perform the duties of an executor after that person has passed away.

Once the person has told you that he or she would like you to be their executor you need to consider whether this is going to be a responsibility that you can handle. It is a somewhat rigorous process in terms of keeping up with the case and understanding the law. You will be instructed to a large extent by the court on matters related to a will, but it is helpful if you can be organized and understand what your responsibilities are daily. Having a game plan and an idea of how to attack these requirements is a good idea. Next, there is a time requirement that you attend hearings on occasion, handle matters related to the family of the decedent, and in contacting creditors and others to make final plans to close out accounts on behalf of the estate. Lastly, you will be responsible for dividing up property according to the terms of the will.

These are serious responsibilities that you should consider whether you have the aptitude and time to serve as executor. If you are not willing you should be honest with the person and explain why you believe that you are not able to do so. That person should hear it from you now while he or she still has time to name a substitute executor rather than place your name in the document and then struggle to find someone later on. Or worse yet- for their family to need to probate the will and have another person appointed as executor if they step forward and tell the court that they are not willing to serve.

If you are willing to serve as executor of the will then you must apply to the probate court within four years of the decedent’s passing. For most people, this is not going to be an issue. There will be pressure to get the ball rolling on the probate process as soon as possible after the person passes away. Friends and family (beneficiaries under the will) can reach out to you to receive updates on the probate process. They want their money/property, but they also will want closure regarding the entire subject matter involved. The responsibility to begin that process rests on your shoulders.

However, there may be a situation that has played out where the person passed away but told nobody about the will. His or her spouse may be looking through documents a few months after their passing only to find a well tucked away in a desk drawer. When you are named as the executor you can file the probate case yourself or the decedent’s spouse may step forward to do so. Once the will has been submitted to the court and you have filed an application to get the process started a hearing will be held which allows a judge to review your application to probate the will.

Attending a court hearing

Once you have been officially acknowledged by the court as the executor of the will a hearing will be held in probate court. Any documents filed into the case will be reviewed by the judge. The will would be scrutinized by the judge and any person who would like to contest the validity of the will may do so. Once you have applied for letters testamentary the judge will send out a notice of citation which will allow for any creditors to come forward and assert their claims against the estate. This includes family members and others who have a read to contest the will or otherwise become a part of the case.

In most cases, letters testamentary are issued within 30 days of the hearing date. This is when your case begins in earnest because it allows you to contact third parties on behalf of the estate to ask questions, obtain information and close out matters related to the debts, payments, or bills of the deceased individual. These matters must be attended to before your distributing property to any of the beneficiaries under the will.

If there is no will what happens?

A judge will only issue letters testamentary if there is a valid will. No will means that any heir to the estate of the deceased individual can go to the court and apply to become an administrator of the estate. Remember the importance of a will when it comes to being able to determine where your property ends up after you pass away. Having a will means authority and autonomy over determining where your property ends up. It could end up with your family, friends, or anyone for that matter. Your church or a charity could get all of your property when you pass away- if that is what you want to happen.

When you do not have a will it becomes much more confined as to who ends up with what in terms of your property. This blog is not going to cover the specifics of who ends up with what but suffice it to say that your spouse (if you have one at the time of your death) and your children will end up with most if not all your property if you die without a will. This is ok if you want your family to be able to end up with your property. It isn’t a great plan when you want other people or entities to be able to receive items and assets. Do not take it for granted that you have the ability, while you are alive, to be able to determine where your property goes. Nobody else can do this for you.

When you die without a will it also sets what could be an ugly dynamic within your family and the probate courts. If you have a spouse and a few, grown children who all get along this is usually not that tumultuous of a situation. However, if you have children from multiple marriages, a current spouse who doesn’t get along with the kids from a prior marriage, or heirs who like to cause trouble when they can this is a recipe for disaster. These folks will use the opportunity of your passing to try and scoop up any property that they can. This means people coming out of the woodwork to try and elbow their way in front of the immediate family or to try and do anything that they can influence the probate court judge. It all becomes so much simpler when you die with a will.

Rather than sending out letters testamentary, a judge will instead select an administrator of your estate and then will issue letters of administration. These letters of administration will do what the letters testamentary did have you died with a will.

What can you do to prepare for probate court as an executor?

If you are named as the executor of a will, by a parent for example, there are certain steps that you can follow to prepare for what is coming. It is a tough task to handle matters related to a parent’s death. These are legal and procedural issues as well as learning how to handle the emotions associated with an important and sad event in your own life. As a result, it is best to go into that process with a distinct plan in mind. Be as intentional as you can be and you will be able to handle these challenges much better than if you simply wander into the situation without a plan in place.

First things first- you need to be able to communicate effectively with a diverse group of people. You should talk to your parent about this responsibility. What are the expectations of your parents and what does their way say? If you are not sure about something you should ask them now while you can do so. This is not something that you should put off. Your parents will have an opportunity to voice their opinions to you about whatever is contained in this will. You should listen and ask questions as well. It is an honor to be asked to execute a will, but it is a lot of responsibility, as well.

Some items may not be covered by the will. You do not necessarily need to update the will if everyone agrees on what to do with personal property, but it is not a bad idea to include those items in a codicil to the will or in an addendum. At this stage, it may be better to simply communicate to all relatives and family members what is in the will and who is included. A reading of the will is a great idea. Rather than have you be the “bearer of bad news” after a parent has passed away, let everyone know what is in the will now so that it is not a surprise after the passing of a parent.

You should get your hands on the wall and make sure that any important documents are also included with the will in your important papers. The original will is something that you need to keep handy since you are the executor. Trust documents, insurance papers, and contact information for your parent’s insurance, real estate, or investment contacts are all important to keep handy during this time. Start to collect and organize this information so you can have it ready to go when a parent passes away. The last thing you want to do is to strain yourself to keep track of things when you are going through the grieving process. The more work you can do now, the better.

It makes sense to have as many copies of your parent’s death certificate as possible. Your parent’s bank, life insurance company, investment advisor, and other people will all need a copy of the death certificate. Anyone who is not covered by the will needs a death certificate to release funds to you as the executor. The funeral home where your parent will be buried can obtain them for you, but you can also contact the county where your parent died to learn more.

Not every will or estate must go through the probate process. A living trust allows you to bypass probate. Probate slows the entire process down. If your parent has non-probate assets like retirement accounts, life insurance policies, and bank accounts with transfer on death notices then you may not have to go through with a probate case. Otherwise, you can prepare as best you can for probate.

Questions about the material contained in today’s blog post? Contact the Law Office of Bryan Fagan

If you have any questions about the material contained in today’s blog post, please do not hesitate to contact the Law Office of Bryan Fagan. Our licensed estate planning attorneys offer free-of-charge consultations six days a week in person, over the phone, and via video. These consultations are a great way for you to learn more about the world of Texas estate planning law as well as how your family’s circumstances may be impacted by the filing of a probate lawsuit.

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A Day Made a Difference in This Purchase and Sale Agreement

Co-author Derek Younkers *

And what a difference it was! In Apache Corp. v. Apollo Expl. LLC et al, Apache and others acquired an oil and gas lease on 100,000+ acres in the Texas Panhandle. The primary term was three years. The effective date was January 1, 2007, “from which date the anniversary dates of this Lease shall be computed”.  Extension beyond the primary term required a producing well and the creation of three blocks of equal acreage from which the lessees would drill wells to a combined depth of 20,000 feet per block per year.

The parties recorded a Memorandum of Lease in the public records. The Memorandum recited that it was “subject to other provisions of the Lease” and “the Primary Term thereof expires on the 31^st day of December 2009.”

The other lessees sold 75% of their working interest to Apache by a series of substantially identical purchase-and-sale agreements. Section 2.5 granted each Seller a back-in working interest for up to one-third of the interests it conveyed to Apache once the wells reached “Two Hundred Percent … of Project Payout.”

Section 4.1 required Apache to offer “all of [its] interest in the affected Leases (or parts thereof) to Seller at no cost to Seller” should Apache’s drilling commitment for the year result in the loss or release of any of the leases.

In 2014, Apache bought lessee Gunn’s remaining interest of the leases and its PSA rights.

In 2015, Apache failed to drill 20,000 feet in the North Block of the lease.

The question for the Court: Did the North Block expire on December 31, 2015, or January 1, 2016?  The day the North Block expired determined whether Apache breached the contract by failing to offer the lease back to Sellers or had until the end of 2016 to drill the 20,000 feet.

The Sellers sued for breach of contract and declaratory relief. Apache filed four motions for summary judgment asking the Court to rule that:

(1) Apache complied with § 4.1;

(2) § 2.5’s 200% provision meant that Apache had to reach a 2:1 return on investment before Sellers could exercise their back-in option;

(3) the North Block expired on January 1, 2016; and

(4) § 4.1 required Apache to only offer back each Seller’s original interest, not all of the interests.

The Court applied the common-law default rule for describing time when parties use the words “from” or “after.” Under the rule, the date from or after a period is to be measured is excluded in calculating time periods. Thus, a period of years ends on the anniversary of the measuring date, not the day before. No language in the lease manifested a clear intent to displace the rule.

The Memorandum stipulated the lease would expire on December 31, 2009, but by its terms the Memorandum was subordinate to the lease. The lease was not ambiguous, so the Court ignored extrinsic evidence of the December date and found the primary term ended on January 1. Thus, the North Block expired on January 1, 2016.

The Court found that Section 4.1 only required Apache to offer back to each seller its original interest. A contrary interpretation would require Apache to offer each seller 100% of the same interests. (The court of appeal decision focused more on this issue.)

Finally, Section 2.5 meant a 2:1 ratio of profits to expenses. The Sellers’ argument that they could back in when profits equaled expenses would render the 200% language meaningless.

The Court remanded the case for further proceedings.

Your musical interlude.

* Derek is a rising 2-L at Baylor Law School and a Gray Reed summer associate.

 

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Creativity in the age of AI: US Copyright Office Issues Guidance for AI-Generated Content

Creativity in the age of AI: US Copyright Office Issues Guidance for AI-Generated Content   The US Copyright Office has developed guidance on how to register works containing content generated by artificial intelligence (AI) as it has received a growing number of applications claiming copyright for AI-generated material. Such applications have been denied if the […]

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Understanding Asset Protection Trusts in Texas

How an Asset Protection Trust Works

Spendthrift provisions protect trust assets from claims of creditors.

These provisions prevent the beneficiary of a trust from selling, assigning, or otherwise transferring their interest in trust assets to a third party. They also prevent the beneficiary from using their inheritance as collateral for a loan.

As a result, they add a layer of protection that prevents creditors from forcing the Trustee of the spendthrift trust to turn over trust assets to satisfy a judgment or a claim.

Can I Create an Asset Protection Trust for Myself in Texas?

Some states and foreign countries permit individuals to create asset protection trusts for their own benefit. However, the general rule in Texas is that person creating the trust (the “settlor”) can not get spendthrift protection if he creates the trust for his own benefit.

The rationale for the rule is obvious. Texas does not want bad actors to escape their creditors’ claims by creating asset protection trusts for themselves.

However, amendments the Texas Legislature made to the spendthrift statute in 2013 may have created a back door to creating a self-settled asset protection trust.

Spendthrift Protection for Trust Property Appointed Back to Settlor

Section 112.035 (d)(2) of the Texas Property Code summarizes the general rule that asset protection does not apply to the settlor if he is the beneficiary of a trust he creates. However, it includes an exception to the general rule.

Specifically, if the settlor becomes a beneficiary of the trust solely by virtue of the exercise of a power of appointment by a third party, then his interest in the trust will be protected from creditors.

A power of appointment is essentially a power to decide how to dispose of the property in the trust. It allows the power holder to direct who should receive the trust assets. A settlor can grant someone a limited or general power of appointment. A limited power of appointment limits the class of potential recipients to whom the power holder can appoint the property. A general power of appointment does not. Additionally, settlors can specify whether the power holder can exercise the power during his life, or only at death.

For example, suppose a settlor creates a trust to benefit his brother and grants his brother a power of appointment. The settlor can limit the power of appointment, requiring that his brother exercise it in favor of the settlor or his descendants. If his brother exercises the power of appointment in favor of an asset protection trust for the settlor, the resulting trust would receive protection from creditors. This would be true even though the settlor created the original trust.

Spendthift Trust Protection for Irrevocable Trusts Created for a Spouse

Remember the general rule is that a settlor cannot create an asset protection trust for his own benefit. But section 112.035(g) provides that a person is not considered a settlor in certain situations.

Specifically, sections 112.035(g)(1)-(2) of the statute provide that a person is not considered to be a settlor of an irrevocable trust created for the settlor’s spouse when the settlor becomes the beneficiary of the trust after the spouse’s death.

This section seems to allow a husband to create an irrevocable asset protection trust during his life for his wife. The trust could provide that if the wife predeceases him, all assets in the trust would pass to the husband in an asset protection trust. During his wife’s life, assets in the trust would receive protection from creditors. The husband would indirectly benefit from any distributions to his wife. If his wife predeceases him, assets that pass to him in trust after her death would receive protection from creditor claims. This can happen even though the husband originally created the trust for his wife.

Spendthrift Protection for Reciprocal Spousal Trusts and General Power of Appointment Trusts

Additionally, Section 112.035(g)(3)(A) says that for purposes of the spendthrift trust statute, a beneficiary of a asset protection trust created by a spouse will not be considered to be the settlor of the trust even if the beneficiary has also created a trust for the other spouse.

In other words, the statute seems to suggest that spouses could partition their property such that each spouse owns 50 percent of the property as his or her separate property. They could then each a create asset protection trust for each other’s benefit, thereby shielding all their assets.

Doing this is not advisable in situations where estate taxes are a concern because the IRS will disregard reciprocal trusts for transfer tax purposes. But for couples who don’t have estate tax concerns, this may provide a means of achieving asset protection in Texas.

Spendthrift Protection for General Power of Appointment Trusts

Finally, Section 112.035(g)(3)(B) provides that for purposes of the spendthrift trust statute, a person would not be considered a settlor to the extent that the property of the trust was subject to a general power of appointment in another person.

This suggests that a settlor can create a trust for a beneficiary, even someone who is not his spouse, and grant a third party a general power of appointment. If the third party exercises the power of appointment in favor of an asset protection trust for the settlor, the resulting trust would be protected from creditors’ claims. This would be the case even though the settlor created the original trust.

Some Caveats for Married Couples

A settlor must fund a trust for a spouse with separate property assets. This means spouses would need to partition community property. Partitioning community property has serious ramifications. Fifty percent of first marriages end in divorce, and the divorce rate for subsequent marriages is higher. When you partition assets and transfer them to an irrevocable trust for your spouse, you can’t take those assets back.

The same goes for irrevocable trusts created for any other beneficiary. When you transfer assets to an irrevocable trust, they are no longer yours. You should not give away assets you might need in the future for
your own support.

Other Caveats….

Giving someone a general power of appointment is risky. It gives the power holder enormous power to dispose of the assets as they wish. Additionally, assets subject to a general power of appointment would be included in the power holder’s estate when he or she dies. This means someone granted a general power of appointment must be willing to use some of his or her estate tax exemption to help the settlor achieve his asset protection goals.

Grantors should not transfer assets to an irrevocable trust as a means to avoid the claims of creditors. Irrevocable trusts will not be effective to shield a settlor’s assets from persons or other entities who currently have a claim against the settlor.

Asset Protection Without an Asset Protection Trust

Texas law already provides a good deal of asset protection for certain types of assets even without going through the trouble of creating a trust. For more information read: What Assets Are Protected From Creditors In Texas?

For additional protection, it is always wise to ensure you have adequate automobile and home insurance, as well as an umbrella policy. Creating an LLC and observing corporate formalities will protect your personal assets from business liabilities.

And finally, this is a relatively new statute. I could not find any case law elaborating on it. I discussed it with a colleague who reviewed the legislative history on the bill and found that there was no explanation or discussion of subsection (g) in the record that is of note. So while the statute seems to create a back door to a self-settled asset protection trust, we currently have no guidance on how it will develop.

This article was originally posted on May 17, 2019, and updated on May 2, 2023.

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Control Tower Checks Airport Litigation

Contentious litigation about the governance of the Jackson Municipal Airport again reached the Fifth Circuit in Jackson Municipal Airport Auth. v. Harkins, No. 21-60312 (May 10, 2023). The Court accepted jurisdiction in a document-production dispute for reasons unique to governmental privilege, but its waiver reasoning is instructive more broadly:

As relevant here, communications with third parties outside the legislature might still be within the sphere of “legitimate legislative activity” if the communication bears on potential legislation. Consequently, some communications with third parties, such as private communications with advocacy groups, are protected by legislative privilege when they are “a part and parcel of the modern legislative procedures through which legislators receive information possibly bearing on the legislation they are to consider.” Thus, we disagree with the district court’s broad pronouncement that the Legislators waived their legislative privilege for any documents or information that had been shared with third parties.

No 21-60312 (May 10, 2023) (citations omitted).

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Are Texas Parents Liable for a Teen’s Car Accident Damages?

No matter how skilled your teen driver is, putting your child behind the wheel can be scary for a parent. Whether you’re helping them pick out a car or letting them drive yours, there’s always the possibility they could get into a collision.

Many Texas parents wonder if they’re liable for damages caused by their teen driver’s car accident, especially with Texas laws being quite different from those of many other states.

What Are the Reasons for Teen Car Accidents?

Even after your teenager passes their driver’s test, they still have a lack of experience on the road. This can impact their ability to quickly recognize hazards and make critical safety decisions, such as whether or not it’s safest to hit the brakes if an animal is in the middle of the road.

Additionally, teen drivers may engage in more risk-taking behaviors, such as:

• Speeding
• Texting or using their phone while driving
• Driving under the influence of alcohol or drugs
• Other distracted driving behaviors, such as eating, drinking or talking to their fellow passengers
• Being influenced by peer pressure from friends in the car, who may encourage your teen driver to drive riskily or dangerously
• Not maintaining proper distance behind the car in front of them

Am I Liable for Damages Caused by My Teen’s Accident?

If there are damages or injuries resulting from a car accident, some states hold the owner of a vehicle responsible. This applies even if a different family member was driving the vehicle, which includes a teen-aged child.

However, Texas laws are different. Under negligent entrustment, you can be held liable for the driver’s negligence only if the following can be proven:

• Youre the vehicle owner and entrusted it to someone
• You allowed a person to use your vehicle and knew or should have known that they were an incompetent, unlicensed or reckless driver
• The person you allowed to drive your car caused the car accident through negligence

Texas’ parental liability law may also apply. A parent can be held responsible for “the negligent conduct of the child if the conduct is reasonably attributable to the negligent failure of the parent […] to exercise that duty.”

This means that if your teen driver’s negligence causes property damage, you can be held liable if your teen’s negligence is attributed to your failure to exercise control of their behavior. You may also be held liable for personal injury or death if you negligently entrust your vehicle to your teen when you know they can be intoxicated, unlicensed or reckless.

Has Your Teen Been in a Car Accident? Speak to an Experienced Attorney

Teaching your teen driving safety is crucial, but accidents can still happen no matter how safe they are. If your teen has been involved in a car or truck accident, learn your rights by speaking to a lawyer who’s experienced in vehicle accidents in Texas.

Speak with our experienced car accident lawyers at Ted B. Lyon & Associates in Dallas by calling us at 866-503-4864 or send us a message online.

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A Shot in Time

Despite skepticism in other opinions about vaccination programs in response to the COVID pandemic (especially when religious-liberty issues are in play), the Fifth Circuit reversed and rendered judgment for a prison doctor who administered an antipsychotic drug to a dangerous prisoner. The Court reasoned, inter alia: “[E]mergency  circumstances justify the abbreviation or elimination of pre-deprivation procedures like hearings.” Pinkston v. Kuiper, No. 21-60320 (May 4, 2023) (per curiam).

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Email Exchange Isn’t Offer & Acceptance

Sidestepping questions of equitable mootness, in Texxon Petrochemicals LLC v. Getty Leasing, Inc., No. 22-40357 (May 3, 2023), the Fifth Circuit affirmed the lower courts’ conclusions that this two-email exchange did not establish a contract to sell a North Austin gas station:

 

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Additional Steps For Probating A Copy Of A Lost Will In Texas

The process for court approval (probate) of an original will is generally not difficult in Texas presuming the will was properly drafted and that there was no contest to its validity.

However, if the original of the signed will cannot be located, it is more problematic since it is presumed to have been destroyed. As a result, additional proof is needed prior to the court approving the will is valid including the following:

1. Names and addresses of beneficiaries under the will as well as the heirs at law.

An heir (i.e., a child of the deceased) may not be named as a beneficiary of the will. Thus, if an heir was not named in a will as a beneficiary, there is greater likelihood the will may not be approved by the court since the omitted heir may object.

2. Service of citation.

All beneficiaries and heirs must be served with citation or waive their right to be served with citation. If all beneficiaries and heirs are in agreement, it is cheaper to have them sign a waiver (filed with the court) of their right to be served. Sometimes personal representatives will need to sign the waiver (i.e., the guardian of a minor or the executor of an estate if the beneficiary/heir is deceased).

3. Prove why the original will cannot be found.

Since there is a presumption that the will was destroyed by the testator if it cannot be located, the court will need some testimony as to why the original could not be located (i.e., the person in possession either had dementia or was disinherited).

4. Self-proving affidavit.

Under Texas law, a proper (if done pursuant to state law) self-proving affidavit will result in no need to bring witnesses to court to testify that the deceased (testator) was of sound mind, and over the proper age (as well as the witnesses) and that the witnesses saw the testator sign the will and in the presence of each other. However, in the case of probating a copy of a will, some courts may require testimony of witnesses since it is not an original will. Contents of the will can be confirmed by someone who witnessed the will being signed.

5. Some courts require the appointment of an attorney ad litem.

Some courts require the appointment of another attorney to represent the interest of any heirs that cannot be located.

Since there is no guarantee a court will approve a photocopy of a will and there are additional steps needed for a photocopy than a will that is an original, an exhaustive search should be made to find the original will. However, if all the heirs and beneficiaries are the same or if there is no contest to the application, the odds for approval of the will should be increased.

If interested in learning more about this article or other estate planning, Medicaid and public benefits planning, probate, etc., attend one of our free upcoming Estate Planning Essentials workshops by clicking here or calling 214-720-0102. We make it simple to attend and it is without obligation.

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Finding Finality

Among other issues presented by an unsuccessful attempt to relitigate an unsuccessful state-court takings claim in federal court, the Fifth Circuit reminded rhat the word “final” can have many meanings: “[A]lthough the rights of ‘all’ parties often need to be resolved before a judgment is ‘final’ for appeal, a ‘judgment may be final in a res judicata sense as to a part of an action although the litigation continues as to the rest.’” Tejas Motel LLC v. City of Mesquite, No. 22-10321 (March 22, 2023).

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Lessee Can’t Satisfy Texas Supreme Court’s Force Majeure Requirements

Imagine these facts in a force majeure dispute (as presented in Point Energy Partners Permian LLC et al. v. MRC Permian Company).

Lessee (MRC) invokes the force majeure provision of an oil and gas lease, asserting that “wellbore instability” on a well on an unrelated lease requires the lessee to effectively redrill portions of the other well, setting back its rig schedule for the lease at issue. The event results in a 30-hour slowdown in the drilling of the other well. The lessee’s deadline to spud a new well on the lease to avoid lease termination is May 22, which it mistakenly records as June 19. Lessee schedules the spud date for June 2. Lessee discovers the error after the deadline has passed. Lessee could have spudded the well by the May 22 deadline but decides to drill the other well first. Before lessors receive a June 15 force majeure notice from MRC they sign new leases with Point Energy. 

MRC sues Point Energy and the lessors for trespass to try title, repudiation and civil conspiracy to tortiously interfere with the existing lease. Point Energy counterclaims for trespass to try title, accounting and constructive trust.

Who wins?

The force majeure discussion

The Court described a force majeure clause as a “contractual provision allocating the risk of loss if performance becomes impossible or impracticable, especially as a result of an event or fact that the parties could not have anticipated or controlled”. The Court observed that force majeure clauses “come in many, shapes, sizes and forms” and may vary according to

• The definition of force majeure,
• the causal-nexus requirement,
• the remedial-action requirement,
• the notice requirement, and
• the grace period excusing or delaying performance.

The Court focused on the “causal-nexus” requirement that is a necessary predicate to properly invoke the force majeure clause and decided that MRC did not satisfy the predicate.

As for remedial-action requirement, the lessee must use its “best efforts” to overcome the problem, which would not have been satisfied even if there had been no delay because the drilling of the new well as scheduled (i.e., after the lease termination deadline) would not have satisfied the continuous drilling requirement to perpetuate the lease.

The Court also determined that MRC would have had enough time to move the rig to the well on the lease at issue and to commence drilling by the termination date but chose to drill other wells first.

MRC’s proposed definition of the meaning of “delay” was not persuasive. The Court cautioned against taking literalism too literally and adopting of wooden construction of a word foreclosed by the context of the document at issue. That’s a mouthful, but the lesson is the Court will not allow a party to focus on the meaning of one wordd at the expense of the entire document.

The Court concluded that the ordinary person using the phrase “Lessee’s operations are delayed in by an event of force majeure”, given its textual context, would not understand those words to encompass a 30-hour slowdown of an essential operation that was already destined to be untimely due to a scheduling error.

The Court conclujded that the force majeure clause did not save the lease, and the Court rendered a take nothing judgment on MRC’s tortious interference claims to the extent those claims were predicated on application of the force majeure clause to save the lease.

Other issues preserved but not reached by the Supreme Court, such as the extent of acreage that would be held under a retained-acreage clause, were remanded to the Court of Appeals. 

Your post-Jazz Fest musical interlude

 

 

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EP Energy v. Storey Minerals – a $41 million most-favored-nations clause

EP Energy E&P Co., L.P. v. Storey Minerals, Ltd., 2022 SL 223253 (Tex.App.-San Antonio 2022, pet. denied)

The Texas Supreme Court recently refused to review the opinion of the San Antonio Court of Appeals in this case, involving construction of a favored nations clause in an oil and gas lease. The court of appeals held that, under the favored nations clause, EP Energy owed the lessor an additional $41 million bonus. One judge dissented.

The case also recounts the “colorful history” of the Altito Ranch, covering about 23,000 acres in La Salle County. EP Energy’s brief describes that history:

Continue reading →

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