Court Reverses Summary Judgments On The Alleged Exercise Of A Power Of Appointment, Disclaimer, And The Statute Of Limitations

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In In re Estate of Wells, No. 12-23-00066-CV, 2023 Tex. App. LEXIS 8475 (Tex. App.—Tyler November 8, 2023, no pet. history). The testator left a will that created a trust for his wife and descendants, named his wife as the initial trustee, and granted the wife a power of appointment.  The power of appointment reads in relevant part:

Testamentary Power of Appointment. Upon the death of my spouse, the then remaining principal and undistributed income of the trust estate shall be distributed in such proportions and in such manner to or for the benefit of any one or more persons included in the group consisting of my descendants or spouses of my descendants, as my spouse may appoint by specific reference in my spouse’s last will and testament, or codicil thereto, (admitted to probate). The power herein granted shall in no event be exercised by my spouse in favor of my spouse, my spouse’s creditors, my spouse’s estate or creditors of my spouse’s estate. . . . To the extent that my spouse shall not exercise the foregoing testamentary power of appointment, then upon my spouse’s death the then existing corpus and undistributed income of such trust estate shall be held and distributed as hereinafter provided, in all respects as if such power of appointment had not been granted.

Id. The testator’s will contained additional instructions regarding exercise of testamentary powers of appointment:

Exercise of Testamentary Power of Appointment. Each testamentary power of appointment granted in this Will shall be exercised by a Will or any codicil thereto which (i) is executed in accordance with the formalities required at the time of the exercise of the power by the laws of the state of the donee’s domicile and (ii) specifically refers to such power of appointment. . . .

Id. If the wife did not exercise this power of appointment, then upon her death, the assets of the trust would be distributed equally to their two children.

The daughter of a son, who died after his parents, sued her aunt regarding various claims regarding her grandparents’ estates and trust. One issue was whether the wife exercised the power of appointment and left everything to her daughter. The court discussed powers of appointment:

A power of appointment is a power of disposition given to a person over property not his own, by someone who directs the mode in which that power shall be exercised by a particular instrument. However, a power of appointment is not itself property; the authority given to the donee of a power of appointment does not vest in him any estate, interest, or title in the property which is the subject of the power. Unless the instrument creating a power of appointment expressly provides to the contrary, a donee may exercise a power in any manner consistent with Chapter 181, subchapter C, of the Texas Property Code. “A testator may not exercise a power of appointment through a residuary clause in the testator’s will or through a will providing for general disposition of all of the testator’s property unless: (1) the testator makes a specific reference to the power in the will; or (2) there is some other indication in writing that the testator intended to include the property subject to the power in the will.”

Id.

The court then analyzed the requirements of Texas Estate Code Section 255.351, which discusses the exercise of a power of appointment:

Our examination of relevant case law shows that no Texas court has examined what constitutes “some other indication” that would satisfy the requirements of Section 255.351(2) (including under that Section’s former designation, Probate Code Section 58(c)). However, cases decided under the common law prior to Section 58(c)’s enactment indicate that for a will to constitute the exercise of a power of appointment (absent a specific reference thereto), the intent to exercise such power must be so clear that no other reasonable intent can be imputed under the will. “If, from the circumstances or the instrument executed, it be doubtful as to whether it was the intention to execute the power possessed by the grantor, then it will not be held that by such act or conveyance that power was in fact executed.” Although at least three Texas cases opined that the party granting a power of appointment “directs the mode in which that power shall be exercised by a particular instrument,” we similarly find no Texas law examining the impact of noncompliance with a restriction, set forth in the instrument creating a power of appointment, on the method by which the donee may exercise said power. We note that the Texas Property Code generally acknowledges that restrictions in the instrument creating a power may restrict the donee’s exercise thereof but does not address specific reference requirements.

Id.

In the wife’s last will, she stated: “I do not intend to exercise any power of appointment that I now possess or that may hereafter be conferred on me unless such a power is specifically referred to in this Will or in any codicil to this Will.” Id. She also stated:

I, being fully capable of deciding who I want my possessions to be handed down to and why I want them distributed to each of my children in the following manner do bequeath all of my real property, homestead, mineral rights, farm equipment, vehicles if viable, jewelry and personal property, cash, bank accounts, firearms, stocks, bonds and securities, household items, and furs and clothing, in other words, all material possessions in my name and under my control at the time of my demise to become the sole property of my daughter, KAREN DONNELL WELLS.

Id. The court analyzed this language and reversed the trial court’s summary judgment for the aunt and held that the power of appointment was not exercised:

[A]fter applying the aforementioned general principles of will construction to Helen’s will, we conclude that the intent of the testator is clear from a reading of the entire instrument and the words she used. In examining the exact words used in Helen’s will, we note that she states her intention to transfer “all of my Worldly Estate” (which she initially defines as including property she inherited from Don, community property acquired by herself and Don during their marriage, and her personal and household items, but later expands to include real property, financial assets, farm equipment, livestock, vehicles, stocks, bonds, firearms, and “papers of any value”). She further expresses her intention to dispose of “any separate property that I might own that I am sole Trustee, Executrix, and Beneficiary of since [Don’s] death,” and states that Kevin is not to inherit anything from “my Estate” other than a defined monetary bequest. Finally, she bequeaths to Karen “all material possessions in my name and under my control at the time of my demise.”

Helen’s explicit statement that (barring any subsequent specific references) she does not intend to exercise any powers of appointment does not conflict with the above statements of intent but can be read in harmony with the rest of the will. A power of appointment is not, itself, property, and the donee of a power of appointment does not receive any interest in or title to the property subject to said power of appointment. So, the power of appointment given to Helen by Don’s will is not part of Helen’s estate, something she owns, or a material possession “in [her] name and under [her] control,”-meaning that when she discusses disposing of items in these categories, she is not referencing any property subject to the power of appointment. The sole explicit or implicit reference in Helen’s will to the power of appointment is the provision stating that she does not intend to exercise any such powers. And in the absence of a specific reference to the contrary, the remainder of Helen’s will therefore lacks any “other indication” from which we may infer an intent to exercise the power of appointment created by Don’s will. We conclude that the trial court erred in granting Karen’s motion for partial summary judgment and denying Kelcey’s cross-motion.

Id.

The court then reviewed a document that the testator’s daughter obtained from her brother concerning the father’s estate. The court analyzed whether it was an assignment of the brother’s interest in the estate to his sister. The court discussed disclaimers and assignments:

A beneficiary of a will may disclaim his right to a bequest under Chapter 240.009 of the Texas Property Code, which sets forth certain requirements for the form, contents, and delivery of the disclaimer. A disclaimer of a property interest passing because of a decedent’s death takes effect as of the time of that death, and the disclaimed interest then passes as if the disclaimant had died immediately before the time as of which the disclaimer takes effect. The Estates Code provides that a person who is entitled to receive property (or an interest in property) from a decedent by inheritance, and who does not disclaim the property, may assign the property to any person. In general, “assignment” refers to the transfer of property or some right or interest from one person to another. However, an assignment of property under Chapter 122, Subchapter E of the Estates Code, “is a gift to the assignee.”

Id. The court noted that the parties did not argue that the document was a disclaimer. Rather, the trial court granted a summary judgment for the aunt, holding that the document was a valid assignment. The court reversed, holding that the document was ambiguous and that there was a fact question on his intent:

In the document, Kevin states that he “wish[es] to invoke the paragraph in [Helen’s] will allowing me to reject the inheritance given to me[,]” and is “rejecting any and all heirship” in Helen’s estate… Kevin further declares, “I hereby relenquish [sic] and quit any and all claims” to the estate… Finally, the April 2016 Document states that by signing, Kevin is “acknowledging” that Karen, Helen’s only other child, is the “sole heir” to the estate, and asks the probate court to “honour my decision and allow my only other sibling and child of Helen Brown Wells to inherit” the estate “in its entire amount.” … Although Karen argues that the use of these words definitively evidences Kevin’s intent to hand over his inheritance to her, the words are susceptible to multiple common meanings, many of which do not contemplate any specific recipient of the refused property. And we find relevant that the law permits a party to merely refuse a bequest via a signed document if certain statutory requirements are met, without necessarily assigning that bequest to any other person. Moreover, notably absent from the April 2016 Document are words such as “assign,” “transfer,” “give,” or “convey.” Reviewing the record in the light most favorable to Kelcey as nonmovant, and resolving any doubts against the motion, we cannot conclude that the express language of the April 2016 Document gives rise to a definite meaning that we may interpret as a matter of law.

Id.

The court also addressed a summary judgment motion based on the statute of limitations concerning a breach of fiduciary duty claim and reversed that motion as well. The court discussed the statute of limitations for breach of fiduciary duty claims against a trustee:

A claim for breach of fiduciary duty against a trustee does not accrue until after the trustee has done some act that shows repudiation of the trust and the beneficiary either has notice of, or by reasonable diligence should discover, the repudiation of the trust. Similarly, the statute of limitations cannot begin to run against a trust beneficiary following a trustee’s repudiation where said beneficiaries had no knowledge of the trust’s existence. Generally, accrual of a claim is not delayed when information that would reveal the existence of a legal injury is publicly available. Specifically, “[p]ersons interested in an estate admitted to probate are charged with notice of the contents of the probate records.” Therefore, a limitations period based on knowledge of the contents of probate records (including knowledge of the contents of a will) begins to run when the will is admitted to probate.

Don’s will, which created the Residuary Trust, was admitted to probate as a muniment of title on March 14, 2017. Karen does not contest Kelcey’s claim that she failed to inform Kevin or Kelcey that the Residuary Trust existed, but she incorrectly asserts that Kelcey is charged with constructive notice of the contents of the will on the day a copy was filed as part of an application for probate. Rather, Kelcey (as an interested person in her role as representative of Kevin’s estate) could only have been charged with constructive knowledge of the contents of Don’s will as of March 14, 2017, the date on which the will was admitted to probate. However, the inquiry as to claim accrual does not end there. Because Karen argues that Kelcey’s claims are barred by limitations, she necessarily argues that those claims have already accrued, and consequently, that the needed act of repudiation has already occurred. But Karen provides no legal authority or substantive analysis to establish when that repudiation took place (or even whether it occurred before or after Don’s will was admitted to probate), nor does she submit any date certain upon which Kelcey knew or should have known of such repudiation. Consequently, Karen did not conclusively prove when Kelcey’s cause of action for breach of fiduciary duty accrued. Viewing the available evidence in the light most favorable to the non-moving party, and resolving all doubts against the motion, we conclude that Karen did not conclusively establish her entitlement to traditional summary judgment on the affirmative defense of limitations.

Id. The court also reversed a summary judgment on a claim concerning the failure to make HEMS distributions because the form of the no-evidence motion was not sufficient. The court also reversed an award of attorney’s fees due to the reversal of most of the summary judgment rulings were reversed. The court remanded for further proceedings.

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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