Sibling has standing to complain of another sibling

Sibling has standing to complain of another sibling

In Mayfield v. Peek, the El Paso Court of Appeals considered a standing issue.  Standing may sound like a dry issue, particularly to non-lawyers.  But is a crucial issue to my practice of litigating Texas estate and trust beneficiary disputes.  If a court rules that a party does not have standing, it will typically not even reach the merits of the underlying issue.  In layman’s terms, the courthouse doors are closed.

Mayfield involved two siblings fighting over an inheritance from their parents. The parents had set up a family revocable trust their children and several other relatives.  The trust was funded by several pieces of real property and other assets. The trust became irrevocable upon the death of the first parent.

The mother died in 2012 and the father in 2014. Various claims were failed by brother, sister and others relating to the trust and a will. The particular  issue in this opinion involved a claim by the daughter that her brother had convinced their mother via undue influence to transfer property out of the trust. The property was transferred to another trust that benefitted the brother, to the exclusion of sister.  Brother convinced the trial court that sister had no standing to challenge the transfer.  At the time of the transfer, both parents were still alive so the trust was revocable.  While sister was a residuary or “contingent” beneficiary, that was a mere expectancy interest.  Her interest in the trust would not be confirmed until one parent died and the trust became irrevocable.  Thus, she lacked a “justiciable interest” in the trust assets.

The court of appeals framed the issue as: “does a beneficiary of a revocable trust have standing to complain that a trustee has exerted undue influence over the settlor to alter or amend the trust, or that the settlor lacked the mental capacity to make the transfer?”

The court of appeals noted that the effect of the trial court’s ruling was the inequitable result that a  person might avoid any consequences for exerting undue influence over a mentally impaired settlor.  The court quoted from Bogart’s treatise, THE LAW OF TRUSTS AND TRUSTEES § 964:

Consistent with the rule that the duties of a trustee of a revocable trust are owed exclusively to the settlor, at least while the settlor has capacity, the rights of nonsettlor
beneficiaries of a revocable trust generally are subject to the control of the settlor. Thus, as a general rule, the trustee cannot be held to account by other
beneficiaries for its administration of a revocable trust during the settlor’s lifetime. After the settlor’s death, of course, the trustee is accountable to the
trust’s other beneficiaries for its administration of the trust after the settlor’s death. Further, many courts have allowed other beneficiaries to pursue breach of
duty claims after the settlor’s death, related to the administration of the trust during the settlor’s lifetime, when, for example, there are allegations that the
trustee breached its duty during the settlor’s lifetime and that the settlor had lost capacity, was under undue influence, or did not approve or ratify the trustee’s
conduct.

The court of appeals thus concluded that the sister at least had standing to complain that her mother’s transfer decision was the result of her brother’s undue influence.

 

 

 

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