Are Arbitration Provisions of a Will Enforceable?

I have written previously that arbitration clauses in trust are enforceable against the beneficiaries. Normally, arbitration clauses are not enforceable against someone unless they agreed to be bound by arbitration. In the trust context, the Supreme Court has held that if a trust contains an arbitration clause and you receive benefits from the trust, you are agreeing to the arbitration clause. This is called direct-benefits estoppel. I said in that article that the same rule would probably apply to an arbitration clause in a will. Well, there is a case now involving an arbitration clause in a will.

In the will case, the Testator’s will contained a provision requiring arbitration of all disputes. 14-18-00003-CV. The Successor Administrator sued the Former Executor for several alleged breaches of fiduciary duty. Former Executor moved to compel arbitration. The trial court denied the motion and Former Executor appealed.

The appeals court also denied arbitration. They said that direct-benefits estoppel did not apply because the Former Executor did not receive benefits. The Former Executor claimed that the fees that the he received were benefits under the will so the arbitration clause required arbitration. The court explained that Successor Administrator’s claims are not based on allegations that Former Executor violated the terms of the will. Instead, the breach of fiduciary duty claims against Former Executor were derived from statutes and common law, irrespective of the will itself. In addition, Successor Administrator’s entitlement to fees is based on Texas Estates Code § 352.051, not the will.

So, the implication is that arbitration clauses in wills are enforceable under the right circumstances.

Note: A 2019 case denied an interlocutory appeal of an order to arbitrate. A party sued a trust company for inappropriately distributing funds. The trust company demanded arbitration which the trial court ordered. The party that did no want arbitration attempted an interlocutory appeal. The appeals court denied the appeal saying that only orders denying arbitration are subject to interlocutory appeals, not orders granting arbitration.  11-19-00017-CV.

Removal Of Executor In Texas

Removal Of Executor In Texas

Grounds for removal of an executor in Texas

A Texas executor, administrator, trustee, or other fiduciaries can be removed by the probate court but not because the beneficiaries under the will don’t like him. A Texas executor can only be removed for specific reasons that must be pled and proven by the beneficiaries who are seeking his removal. Some of those grounds are gross misconduct, gross mismanagement and a material conflict of interest.

Gross Mismanagement

In a 2015 case from the San Antonio court of appeals, the beneficiaries pled that the executor had not “assiduously pursued settlement of the estate” and that the executor had a conflict of interest with the estate. The application further alleged that “grounds exist for removal of  the independent executor due to misapplication of funds and other fiduciary property, breach of fiduciary duty, and self-dealing in estate property.” The complaint was that the executor had not tried to sell the estate’s only asset, a house and that he had moved in the house and was not paying rent. The executor claimed that the application for his removal did not allege gross misconduct, gross mismanagement, or material conflict of interest as grounds for his removal which are the only grounds for removal. The court ruled that Texas has notice pleadings and that the application in this case while not using the words in the removal statute was sufficient to give the executor notice of why the beneficiaries wanted his removal.

Conflict of Interest

In addition to the pleadings question, the executor alleged that the conflict of interest alleged by the beneficiaries was only a good-faith disagreement regarding the value of the property. The supreme court of Texas has ruled that good faith disagreements regarding the value of the property do not constitute a conflict of interest sufficient to remove an executor. The court rejected the executor’s argument noting that he had moved from a garage apartment into the house, had said that he was going to live there forever, and had changed the locks. The court ruled that these acts were not just good-faith disagreements over the value of the property but were sufficient grounds for the removal of an executor in Texas.

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