Texas Commerce Bank, N.A. v. Grizzle Ex Rel. Grizzle
96 S.W.3d 240 · Texas Supreme Court · 2002
Facts
A Dallas County district court established the Brentley G. Grizzle Trust in 1992, designating Frost National Bank as trustee for a minor's wrongful death settlement. The trust, funded with $200,000, permitted Frost to invest in its own stock and included an exculpatory clause limiting liability to gross negligence, bad faith, or fraud, also allowing for successor trustees via merger. In April 1994, Frost merged with Texas Commerce Bank (TCB), which then became the Grizzle Trust's trustee. TCB liquidated the Frost stock and income funds from the trust into cash, citing federal law, resulting in a $5,508.70 capital tax loss due to prior market decreases. TCB briefly placed funds in a short-term investment before reinvesting them in TCB-managed funds. Linda Grizzle, as next friend, sued TCB and Frost, alleging breach of fiduciary duty, self-dealing, and other claims due to damages from the merger and liquidation.
Procedural history
Linda Grizzle filed suit, and the trial court granted summary judgment for TCB and Frost. Grizzle's first appeal was dismissed for lack of jurisdiction due to an unresolved party. The trial court subsequently struck amended petitions and rendered final judgment, leading to Grizzle's second appeal. The court of appeals affirmed in part and reversed in part, remanding the case, but the Supreme Court of Texas granted TCB and Frost's petitions for review.
Issue
Can a trust instrument's exculpatory clause, as a matter of public policy, exonerate a corporate trustee from liability for self-dealing defined as misapplication or mishandling of trust funds, including failure to promptly reinvest, when such actions do not violate specific statutory prohibitions or amount to gross negligence, bad faith, or fraud? Additionally, did the trial court properly grant summary judgment for the banks and strike subsequent amended petitions?
Holding
The court held that the Grizzle Trust's exculpatory clause exonerated TCB and Frost from liability for Grizzle's claims. It reversed the court of appeals' judgment in part and rendered judgment that Grizzle take nothing against the TCB and Frost defendants. The court also found that the trial court properly struck the amended petitions and purported interventions.
Rule
The Texas Trust Code applies to express trusts, including those created under Property Code chapter 142. Trust Code sections 111.002 and 113.059 permit a settlor to relieve a corporate trustee from liability for duties, restrictions, and liabilities, except for specific self-dealing prohibitions in sections 113.052 and 113.053. Public policy, as expressed by the Legislature in the Trust Code, does not preclude such exculpatory clauses for actions like misapplication or mishandling of trust funds or delayed reinvestment, unless they violate the specified statutory prohibitions or constitute gross negligence, bad faith, or fraud as defined by the trust instrument. A plaintiff without a live individual claim lacks standing to bring suit on behalf of a putative class, thus interventions by new class representatives are properly struck if the original plaintiff's claims fail.
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