self-interested transaction

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.”


Continue Reading Court Holds That A Trustee Had The Power To Sell Trust Property To An Affiliate, Though Such An Act May Be In Breach Of A Duty

In Roels v. Valkenaar, a shareholder filed a shareholder derivative suit against former and current officers and directors of the company based on multiple claims of breach of fiduciary duty. No. 03-19-00502-CV, 2020 Tex. App. LEXIS 6684 (Tex. App.—Austin August 20, 2020, no pet. history). The defendants filed a motion to dismiss, and the trial court denied it. The defendants appealed, and the court of appeals reversed in part and affirmed in part.

The plaintiffs’ first claim dealt with certain interested-direction transactions that were loans from the company. The court dismissed these claims because the evidence showed that regarding one transaction that there was director consent to the loan and regarding the other loans that there was not sufficient evidence of damages. The court stated:

Self-dealing (i.e., an “interested transaction”) may constitute breach of an officer’s or director’s fiduciary duty to the corporation. However, we need not determine whether the shareholders met their prima facie burden as to the element of breach because we conclude that they have not met the burden as to the element of damages. To prove the damage-to-plaintiff or benefit-to defendant element of a claim for breach of fiduciary duty based on self-dealing, a plaintiff must demonstrate that the fiduciary obtained a benefit for itself either at the expense of its principal or without equally sharing the benefit with the principal. While the shareholders have alleged in conclusory fashion that the loans contained “non-market terms” and have “disproportionately benefitted” Roels and Barshop, they have not identified any specific harm to the Company or benefit to the defendants as a direct result of the loans.


Continue Reading Court Addressed A Shareholder Derivative Suit Against Officers And Directors For Self-Interested Transactions, Misuse Of Company Assets, And Dereliction Of Duties

In In re Estate of Klutts, a son held his mother’s power of attorney when he assisted in securing a new 2008 will, which enhanced his share of the estate. No. 02-18-00356-CV, 2019 Tex. App. LEXIS 11063 (Tex. App.—Fort Worth December 19, 2019, no pet. history). Siblings attempted to probate an earlier will and