Removal of a Texas trustee can occur for a variety of reasons. Some of the grounds are obvious, like the trustee became incapacitated or failed to account. In Ramirez v. Rodriguez, a February 2020 case from a Texas appellate court, the court analyzed the alleged grounds for removal of a trustee for cause based upon ill will and hostility, which is not such a clear cut determination.
What Are The Grounds For Removal of A Trustee Under the Texas Trust Code?
Section 113.082 of the Texas Trust Code addresses the removal of a trustee and states:
(a) A trustee may be removed in accordance with the terms of the trust instrument, or, on the petition of an interested person and after hearing, a court may, in its discretion, remove a trustee and deny part or all of the trustee’s compensation if:
(1) the trustee materially violated or attempted to violate the terms of the trust and the violation or attempted violation results in a material financial loss to the trust;
(2) the trustee becomes incapacitated or insolvent;
(3) the trustee fails to make an accounting that is required by law or by the terms of the trust; or
(4) the court finds other cause for removal.
(b) A beneficiary, cotrustee, or successor trustee may treat a violation resulting in removal as a breach of trust.
(c) A trustee of a charitable trust may not be removed solely on the grounds that the trustee exercised the trustee’s power to adjust between principal and income under Section 113.0211.
Is Ill Will Or Hostility Grounds For Removal?
Yes, if such ill will or hostility affects the performance of the trustee and administration of the Trust.
Ill will or hostility between a trustee and the beneficiaries of the trust, is, standing alone, insufficient grounds for removal of the trustee from office. However, a trustee will be removed if his hostility or ill will affects his performance.
In Ramirez, the Texas appellate court considered what evidence constitutes clear and specific evidence supporting a prima facie case of removal under section 113.082(a)(4) for “other cause,” the cause alleged being hostility between the trustees.
The Trust had four trustees – Sonia, Victor, Javier, and Santiago.
The Trust contained a provision that any action on behalf of the Trust required the joinder of three of the four co-trustees. It is not uncommon for a Trust to contain a provision requiring that the majority of trustees participate or agree to any action. Indeed, the Texas Trusts Code, section 113.085, states that “Cotrustees may act by majority decision,” and requires a cotrustee to participate in the administration of the trust unless the cotrustee is unavailable or has delegated the performance of the function to another trustee.
In this case, cotrustee Santiago and Ancient Sunlight, Ltd. (one of the Trust’s beneficiaries of which Santiago was the general partner) sued cotrustee Sonia for breach of fiduciary duty and breach of trust. Sonia, Victor, and Javier filed a petition to remove Santiago as a co-trustee pursuant to the terms of the Trust and section 113.082(a)(4) of the Texas Trust Code.” The Petition alleged numerous examples of ill will and hostile behavior committed by Santiago.
Santiago moved to dismiss, pursuant to the Texas Citizens Participation Act. The Texas appeals court addressed whether Sonia, Victor, and Javier established a prima facie case for removal of trustee Santiago by clear and specific evidence.
What Constitutes Sufficient Evidence To Remove A Trustee?
The court determined that the evidence presented was c clear and specific that Santiago’s hostility was impeding his performance as a co-trustee and the performance of the Trust.
The court considered numerous exhibits attached to Sonia, Victor, and Javier’s filings, including:
- Santiago sending unilateral letters to the Texas State Board for Public Accountancy on Behalf of the Trust challenging invoices already approved by the other three trustees;
- Victor informing the Trust attorneys that Santiago does not represent the unanimity and consensus of 3 of the 4 trustees;
- Santiago’s emails to other individuals about Sonia’s incapacity and stating that Sonia’s husband “lies, cheats, and steals from their hocked home-vault”;
- Emails from individuals stating that Santiago is unable to work with the other co-trustees, is sabotaging Trust operations, and is following his own disruptive agenda;
- Santiago informing a third party about dysfunction within the family and encouraging the third party to consult the “null and void” clause in the Trust.
Based on this evidence, the majority of trustees presented a prima facie case under Texas law for removal of the trustee, and the court held that Santiago’s motion to dismiss was properly denied.
As stated by the court:
Removal actions prevent a trustee from engaging in further behavior that could potentially harm the trust. Any prior breaches or conflicts on the part of the trustee indicate that the trustee could repeat her behavior and harm the trust in the future. At the very least, such prior conduct might lead a court to conclude that the special relationship of trust and confidence remains compromised.