SRC-SLL C.S.S.B. 911 75(R)BILL ANALYSIS


Senate Research CenterC.S.S.B. 911
By: Cain
Jurisprudence
3-25-97
Committee Report (Substituted)


DIGEST 

In 1996 the federal government enacted legislation that extended
protection from certain environmental claims to fiduciaries.  This was in
response to the growing number of environmentally burdened properties
ending up in the hands of fiduciaries, thus exposing the fiduciaries to
liability. Prior to federal relief, if the trust could not cover the cost
of damages, the corporate trustee and the individual trustee/trustees
administering the trust account could be held personally liable.  In
addition, it is generally held that a trustee may not delegate the
responsibility for investments to a third party and mitigate liability for
claims brought by a beneficiary specific to performance of those
investments managed by a third party.  As the knowledge of investments by
beneficiaries expands, and the nature of the market changes, trustees are
often not able to provide alternative investment strategies in the
appropriate circumstances.  This bill will bring the state statute in line
with the federal law regarding fiduciary liability for an environmentally
burdened property and will allow a release of the liability of the trustee
when a third party outside investment advisor is hired. 

PURPOSE

As proposed, C.S.S.B. 911 provides new regulations regarding fiduciary
liability for an environmentally burdened property, and allows a release
of the liability of the trustee when a third party outside investment
advisor is hired. 

RULEMAKING AUTHORITY

This bill does not grant any additional rulemaking authority to a state
officer, institution, or agency. 

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Section 114.001, Property Code, by adding Subsection
(e), to provide that the trustee has the same protection from liability
provided for a fiduciary under 42 U.S.C.  Section 9607(n). 

SECTION 2. Amends Section 114.005, Property Code, to authorize a
beneficiary who has full legal capacity and is acting on full information
to release a trustee from liability for an investment made or recommended
by an agent retained by the trustee for that purpose, including an agent
who is an affiliate of the trustee and whose employment is determined by
the beneficiary to be beneficial to the trust.  Provides that the release
is also a release as to a minor or unborn or unascertained person who is
not otherwise represented to the extent that the person's interest is
adequately represented by another party with a substantially identical
interest in the trust estate.  Requires the release under this section to
be in writing and delivered to the trustee.  Provides that a beneficiary
is not precluded from bringing an action for breach of contract against an
agent whose conduct is the basis of a release under Subsection (b).
Requires, in that action, the conduct of the agent to be judged on the
basis of the standard for trust management and investment prescribed by
Section 113.056(a).  Defines "affiliate."  Makes a nonsubstantive change. 

SECTION 3. Effective date: September 1, 1997.

SECTION 4. Emergency clause.


 SUMMARY OF COMMITTEE CHANGES

SECTION 2.

Amends Section 114.005(a), Property Code, to make a nonsubstantive change.

Amends Section 114.005(b), Property Code, to require the beneficiary to be
acting on full information in making the release; to include certain
agents; and to delete the provision regarding pro rata share. 

Adds Sections 114.005(d) and (e), Property Code, to provide for an action
for breach of contract against an agent and to define "affiliate."