SRC-VRA H.B. 3503 78(R)   BILL ANALYSIS


Senate Research Center   H.B. 3503
By: Hartnett (Harris)
Jurisprudence
5/20/2003
Engrossed


DIGEST AND PURPOSE 

The Texas Supreme Court recently issued its opinion in the case of Texas
Commerce Bank, N.A. v. Grizzle, 2002 WL 31890895 (Tex. 2002).  The case
involved a plaintiff who brought suit against a trustee alleging, among
other things, self-dealing.   

The Grizzle trust contained an exculpatory clause, which provided that the
trustee "shall not be liable for any act or omission except in the case of
gross negligence, bad faith, or fraud."  The question before the court was
whether a trust's exculpatory clause can exonerate a corporate trustee
from liability for self-dealing without violating public policy.  The
court concluded that it could.  
 
The court stated that it recognized that the broad authority of a settlor
of a trust to exonerate a corporate trustee from liability "can lead to
harsh results," but said that it "presume[d] the Legislature was aware of
this when it enacted the Texas Trust Act" (predecessor to the current
Trust Code). H.B. 3503 sets forth new provisions regarding exculpatory
clauses in trusts.  

RULEMAKING AUTHORITY

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

SECTION BY SECTION ANALYSIS
SECTION 1.  Amends Section 142.005, Property Code, by adding Subsections
(h), (i), and (j), as follows: 
 
 (h)  Provides that a trust created under this section is subject to
Subtitle B, Title 9. 
 
(i)  Provides that notwithstanding Subsection (h), this section prevails
over a provision in Subtitle B, Title 9, that is in conflict or
inconsistent with this section. 
 
(j)  Provides that a provision in a trust created under this section that
relieves a trustee from a duty, responsibility, or liability imposed by
this section or Subtitle B, Title 9, is enforceable only if certain
conditions are met. 
  
SECTION 2.  Amends Section 868, Texas Probate Code, by adding Subsection
(c) to provide that a provision in a trust created under Section 867 that
relieves a trustee from a duty, responsibility, or liability imposed by
this subpart or Subtitle B, Title 9, Property Code, is enforceable only if
certain conditions are met. 
  
SECTION 3.Effective date:  September 1, 2003.
  Makes application of this Act prospective.