Court Held That Trustee Had Authority To Sell Real Property And That The Beneficiaries Did Not Have A Right of First Refusal

by Winstead PC

In the Estate of Rodriguez, a trust beneficiary sued the trustee to enjoin the sale of real property owned by a testamentary trust. No. 04-17-00005-CV, 2018 Tex. App. LEXIS 254 (Tex. App.—San Antonio January 10, 2018, no pet. history). The trust stated: “My Trustee can sell the corpus of this Trust, but it [is] my desire my ranch stay intact as long as it is reasonable. If the corpus is sold it shall be distributed as set out in Section III, C and D.” Id. It also generally stated: “The Trustee during the continuation of each trust shall have the sole and complete right to possess, control, manage, and dispose of each trust estate and the said Trustee shall have the powers, rights, responsibilities and duties given to or imposed upon by trustees by the Texas Trust Code as such Code now exists.” Id. The trial court granted a motion for summary judgment filed by the trustee, allowing the trustee to close on a real estate contract for the real property. Id. The beneficiary appealed.

After providing the general rules for will and trust construction, the court of appeals described the rules for whether language was precatory or mandatory:

A court’s analysis regarding whether particular words are precatory or mandatory turns on “the testator’s expressed intent as evidenced by the context of the will and surrounding circumstances, ‘and words which are precatory in their ordinary meaning will nevertheless be construed as mandatory when it is evident that such was the testator’s intent.’” Generally, courts construe words akin to “want,” “wish,” “request,” and “desire” as precatory in their ordinary sense and not as imposing a legal obligation. These same words, however, become mandatory “‘when used in a will where it appears from the context or from the entire document that they are the expression of the testator’s intention in disposing of his property.’”

Id. The court noted that the language granting the power to sell the trust estate uses mandatory language and provides the trustee “shall have the sole and complete power to . . . dispose of each trust estate.” Id. The court concluded: “In view of the mandatory language used in granting Frank the power to sell the corpus of the trust, we hold the reference to Frank’s “desire” to keep the Ranch intact is precatory language which did not impose any legal obligation preventing Frank from entering into the to sell the Ranch to Christians.” Id.

The court also held that the beneficiary did not have a right of first refusal to purchase the property. Under such a provision, if the owner desires to sell the property, and has an offer he would accept, he must first offer to the holder of the right an opportunity to buy the property on the terms offered by a bona fide purchaser. The beneficiary argued that the testator’s statements to others, in combination with two clauses contained within the will, demonstrated his intent to create a right of first refusal for the beneficiaries under the trust. The clauses upon which the beneficiary relied were: “My Trustee can sell the corpus of this Trust, but it [is] my desire my ranch stay intact as long as it is reasonable…. If any of the four beneficiaries of his estate wants to sell their portion of the properties they can only sell it to the remaining beneficiaries.” Id. The court of appeals disagreed:

Neither of the clauses, however, requires the trustee to offer to anyone, much less the beneficiaries, an opportunity to purchase the property on the same terms offered to another potential buyer. Rather than imposing limitations on the trustee’s power to sell, the second clause is designed to  impose limitations on a beneficiary’s power to sell, precluding a beneficiary from selling to anyone other than another beneficiary. No similar limitation is imposed on the trustee’s power to sell. We conclude that neither of the clauses on which Blanca relies nor the Will as a whole evidence an intent to limit Frank’s power to sell by creating a right of first refusal in favor of the trust beneficiaries.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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