The Fort Worth Court of Appeals has reversed a trial court’s denial of a motion to dismiss under the Texas Citizens Participation Act (Ch. 27, CPRC) in a dispute arising out of the administration of a marital trust by the stepmother of decedent husband’s two daughters.
The facts of Jennifer C. Cass and Nichole R. Malicoat v. Cheryl Anne Hughes, as Trustee of the Jimmy Celtyn Hughes QTIP Marital Trust (No. 02-23-00122-CV; filed September 28, 2023) are these. The father of two daughters remarried in 2013. He created a revocable trust providing that, upon father’s death, the balance of the trust fund would be distributed to his new bride as trustee. The trust further provided that all of the net annual income of the trust would be provided to his bride during her lifetime, as well as certain amounts of trust principal to support her health, education, maintenance, or support in her accustomed standard of living. When father died in 2018, his daughters demanded accounting information for the trust. Unhappy with stepmother’s response, daughters sued in Tarrant County district court for breach of fiduciary duty. Stepmother responded by notifying daughters that she intended to enforce the trust’s in terrorem clause, by which the settlor disinherited any person who contested or attacked the trust. Subsequently, the parties entered into a pair of Rule 11 agreements, which resulted in daughters nonsuiting their lawsuit without prejudice.
Fast forward about 19 months, when stepmother sued daughters for declaratory judgment on the in terrorem clause, seeking to disinherit them. Daughters responded with a TCPA motion to dismiss, alleging that stepmother’s lawsuit was based on or in response to their petition rights. Stepmother asserted that she established a prima facie case for each essential element of her UDJA claim. The trial court denied the motion to dismiss. Stepdaughters appealed.
The court of appeals reversed. Stepmother conceded that the TCPA applied to her lawsuit. The court agreed, noting that the filing of a petition in a lawsuit is a “communication in or pertaining to a judicial proceeding that implicates a party’s exercise of the right to petition” under § 27.001. Because stepmother’s declaratory judgment action alleged that daughters had violated the in terrorem clause by filing their lawsuit, daughters established that stepmother’s legal action met the statutory definition. The court then turned to whether stepmother established by clear and convincing evidence each essential element of her claim. “There are two prerequisites for a declaratory judgment claim,” the court began, “(1) there must be a real controversy between the parties, and (2) the controversy must be one that will actually be determined by the judicial declaration sought” (citations omitted).
As to whether a “real controversy” existed, the court had to determine whether the in terrorem clause, which, as a forfeiture provision, must be strictly construed, had been triggered. In its analysis the court cited various provisions of the Property Code governing the removal of a trustee, including § 112.038(b)’s directive that in terrorem clauses “generally will not be construed to prevent a beneficiary from seeking to compel a fiduciary to perform the fiduciary’s duties, seeking redress against a fiduciary for a breach of the fiduciary’s duties, or seeking a judicial construction of a will or trust.” It noted further that the clause in question applied only to a challenge to the appointment of a trustee, not removal. According to case law, then, “[b]ecause the trust is silent regarding the removal of a trustee, even if a beneficiary or remainderman who sought removal of a trustee would not violate the in terrorem clause” (citation omitted). The trust provisions of the Property Code thus applied.
Stepmother alleged further that daughters sought injunctive relief against the exercise of her powers under the trust in violation of the in terrorem clause. The court did not bite at this argument, either. Citing § 114.008(a)(2), Property Code, the court held that daughters’ requests for injunctive relief did not violate the in terrorem clause because the statute “expressly authorizes a trial court to ‘enjoin the trustee from committing a breach of trust’ as a remedy to a breach of trust that has occurred or might occur.” Additionally, even if seeking injunctive relief could be construed as a violation, the clause still required the challenge to be “unsuccessful.” In the event, the trial court never ruled on either the daughters’ request for relief or the merits of the case. Instead, they went to mediation and made Rule 11 agreements directing stepmother to perform certain actions in exchange for nonsuiting daughters’ action. The court thus reversed the trial court’s order to dismiss, rendered judgment granting daughters’ TCPA motion to dismiss, and remanded the case for further proceedings.
