Estate of Touring, In re

• Decision Date: 20 July 1989
• Docket Number: No. A14-88-592-CV,A14-88-592-CV
• Parties: In re ESTATE OF Roscoe Manville TOURING, Deceased, Relator. (14th Dist.)
• Court: Texas Court of Appeals

Page 39

775 S.W.2d 39

In re ESTATE OF Roscoe Manville TOURING, Deceased, Relator.

No. A14-88-592-CV.

Court of Appeals of Texas,

Houston (14th Dist.).

July 20, 1989.

Thomas H. Cantrill, Claudia B. Sangster, R.J. Watts, II, Dallas, for appellant.

C. Boone Schwartzel, Houston, for appellee.

Before J. CURTISS BROWN, C.J., and JUNELL and DRAUGHN, JJ.

OPINION

DRAUGHN, Justice.

This case involves questions of law concerning the constitutionality and implementation of the so-called Substitute Fiduciary Act ("the Act"), Tex.Rev.Civ.Stat.Ann. art. 548h (Vernon Supp.1989). Appellant MTrust Corp, N.A. applied for revised letters testamentary for the Estate of Roscoe Manville Touring, Deceased, after having been substituted as the estate's co-executor under the Substitute Fiduciary Act. The judge of Harris County Probate Court No. 1 denied appellant's application for letters testamentary, holding that the Substitute Fiduciary Act was unconstitutional and self-effectuating and that appellant had failed to comply with provisions of the Probate Code for the appointment of successor executors. In five points of error, appellant asserts that the probate court erred in denying its application for letters testamentary. We find that the Substitute Fiduciary Act is constitutional and reverse the judgment of the probate court.

The facts giving rise to this constitutional dispute reflect that Roscoe Manville Touring died on September 24, 1987, leaving a will naming his wife and Bank of the Southwest National Association, Houston, as independent co-executors of his estate. Bank of the Southwest National Association, Houston was succeeded by MBank Houston, N.A., thus qualifying MBank Houston, N.A. to be an independent co-executor with the deceased's wife. The deceased's last will and first codicil were admitted to probate, and letters testamentary were authorized by the probate court and issued by the clerk to the surviving wife and MBank Houston, N.A.

MBank Houston, N.A. and appellant MTrust Corp, N.A. are both subsidiaries of MCorp which owns, either directly or indirectly, more than fifty percent of the voting stock of both. MBank Houston, N.A. and appellant agreed to substitute appellant for MBank Houston, N.A. as independent co-executor of the Touring estate, effective January 1, 1988. They entered into a written substitution agreement pursuant to the Substitute Fiduciary Act. The substitution agreement provided that appellant was to be substituted for MBank Houston, N.A. in all its existing and prospective fiduciary appointments causing the powers, duties, and obligations of MBank Houston, N.A. as independent co-executor to be conferred upon appellant. After the effective date of the substitution agreement, appellant sought to transfer various interests of the estate held by various third parties into its name as co-executor. The third parties required that appellant furnish letters testamentary to evidence its authority to act as co-executor.

Appellant filed an Application for Grant and Issuance of Letters Testamentary Under Section 88(e) of the Texas Probate Code and filed an Amended Application for Probate of Will and Issuance of Letters Testamentary. The probate court denied the application on the grounds that:

1. The Substitute Fiduciary Act violates the principles of substantive due process because no social necessity exists which is sufficient to justify the restrictions the Act places upon the rights and liberties of testators, beneficiaries and the court;

2. The Act violates procedural due process since it permits substitution of a fiduciary without the requirement of any notice other than the filing of the agreement with the Texas Banking Commissioner which does not constitute sufficient notice;

3. The Act violates Article II, Section 1, of the Texas Constitution since it permits substitution without the approval of a court, thereby constituting a legislative invasion of a judicial function;

4. If the Act is constitutional, it and the substitution agreement in this case are self-effectuating, thereby automatically substituting appellant for MBank Houston, N.A. as independent co-executor without the necessity of any further judicial action, including the issuance of revised letters testamentary; and

5. Appellant has failed to comply with § 88(e), § 145, and § 154A of the Probate Code providing for the appointment of a successor independent executor.

Appellant appeals the probate court's denial of its application for letters testamentary in five points of error which challenge each of the court's holdings.

In its first point of error, appellant asserts that the probate court erred in not directing the issuance of letters testamentary because the Act does not violate substantive due process. The same standards for substantive due process are applied under Article I, Sec. 19 of the Texas Constitution and the Fourteenth Amendment of the U.S. Constitution. Mellinger v. City of Houston, 3 S.W. 249, 253 (Tex.1887); Massachusetts Indemnity and Life Insurance Company v. Texas State Board of Insurance, 685 S.W.2d 104, 113 (Tex.App.--Austin 1985, no writ). Therefore, we must determine whether the Act arbitrarily deprives someone of life, liberty, or property privileges or immunities without due process of law. To determine whether such a deprivation exists requires a two-step analysis: first, the asserted individual interest must be encompassed within the constitutional protection of life, liberty, or property; and second, if it is encompassed, the procedures thus employed must afford due process of law. Sullivan v. University Interscholastic League, 599 S.W.2d 860, 863 (Tex.Civ.App.--Austin 1980), aff'd in part and rev'd in part on other grounds, 616 S.W.2d 170 (Tex.1981), citing Ingraham v. Wright, 430 U.S. 651, 672, 97 S.Ct. 1401, 1413, 51 L.Ed.2d 711 (1977). There is a presumption of constitutionality in favor of an act of the Legislature. Spring Branch I.S.D. v. Stamos, 695 S.W.2d 556, 558 (Tex.1985).

When a statute is subjected to this two-step analysis, but no fundamental right is involved, the substantive due process inquiry determines whether any rational relationship can reasonably be conceived between the Act's purpose and its means. Retail Merchants Association of Houston, Inc. v. Handy Dan Hardware, Inc., 696 S.W.2d 44, 54 (Tex.App.--Houston [1st Dist.] 1985, no writ). Fundamental rights are those guaranteed by the Bill of Rights of the United States Constitution, are in some way traceable to the constitution, or are those that the courts feel are preservative of other basic political and civil rights. Retail Merchants Association of Houston, Inc., 696 S.W.2d at 51, citing Shapiro v. Thompson, 394 U.S. 618, 89 S.Ct. 1322, 22 L.Ed.2d 600 (1969). Although the right of a testator to name an executor in a will indirectly affects the ultimate disposition of property, this right is a statutorily created right and is not absolute. See Huffman v. Huffman, 329 S.W.2d 139, 142 (Tex.Civ.App.--Fort Worth 1959), aff'd, 161 Tex. 267, 339 S.W.2d 885 (1960). This is evident as the Probate Code has express provisions for disqualifying certain administrators named in a will. Tex. Probate Code Ann. § 78 (Vernon 1980). The Substitute Fiduciary Act encroaches only upon the testator's right to name an executor and does not burden an inherently suspect class. See Spring Branch I.S.D., 695 S.W.2d at 560. Because this right is outside the ambit of fundamental rights, we must review all the evidence to determine whether the Act excludes the possibility that there is any rational relationship between the Act's purpose and its effect, and whether the evidence excludes the possibility that the Act bears any rational relationship to an actual or articulated interest. Retail Merchants Association of Houston, Inc. 696 S.W.2d at 51.

The purpose of the Act is to promote efficient and cost-effective delivery of fiduciary services by allowing the placement of these services within a single corporate entity which maintains offices throughout the State of Texas. Benefits which result are: (1) availability of a broader range of fiduciary services and products in smaller communities that might not be financially justified or available otherwise; (2) higher quality investment services; (3) enhanced control and supervision of fiduciary personnel; and (4) cost savings through the elimination of unnecessary duplication of personnel and equipment. Nine other states, including New York and Florida, have enacted similar substitution legislation. Ariz.Rev.Stat.Ann. 6-385 (1987); Fla.Stat.Ann. § 660.46 (West 1984); Minn.Stat.Ann § 48.846 (West 1987); N.Y. Banking Law § 154 (McKinney 1987); Ohio Rev.Code Ann. § 1109.021 (Anderson 1986); S.D. Codified Laws Ann. § 51-19A-15, 51-19A-16, 51-19A-17 (1980); Tenn.Code Ann. § 45.2- 1008 (1980); Va.Code Ann. § 6.1-32.9 (1987); Wis.Stat.Ann. § 223.07 (West 1982).

It is also argued that the Legislature has gone too far in passing an act which enables financial entities, for their own alleged selfish reasons, to encroach unconstitutionally upon testators' intent. The Act, however, provides that the creator of the fiduciary account may ensure that the account is not eligible for substitution through appropriate language in the document creating the account. Article 548h, Sec. 2(d) (Vernon Supp.1989). Thus, the Act can be avoided entirely.

In the present will, the testator appointed his wife and Bank of the Southwest National Association, Houston, as independent executors and trustees of his estate. He provided for Bank of the Southwest to act alone if his wife was unable for any reason to act. He further gave any trustee or substitute or successor trustee the right to appoint a successor trustee, thereby expressing the intent to allow substitution of the originally named successor trustees which were his wife and Bank of the Southwest.

The testator provided for flexible appointments of successor trus...