Cluck v. Mecom: The burden shifts to the trustee

In a traditional civil lawsuit, the plaintiff has the burden of proving her claim by a preponderance of the evidence. However, in the context of a fiduciary, the burden often flips to the defendant. This is exemplified by a recent Houston Fourteenth Court of Appeals Opinion: Cluck v. Mecom. In this case, trust beneficiaries asserted various claims against the trustee, including breach of fiduciary duty, for the trustee allegedly failing to properly disclose certain transactions, favoring himself in certain transactions and squandering trust assets. The trial court granted summary judgment against the beneficiaries on the basis that they had not provided evidence of the misdeeds. The court of appeals reversed, noting that the fiduciary bore the burden of proof:

A fiduciary “has an affirmative duty to make a full and accurate confession of all his fiduciary activities, transactions, profits, and mistakes.”  Jackson Law Office, P.C. v. Chappell, 37 S.W.3d 15, 22 (Tex. App.—Tyler 2000, pet. denied) (citing Montgomery v. Kennedy, 669 S.W.2d 309, 312–14 (Tex. 1984); Kinzbach Tool Co., Inc. v. Corbett-Wallace Corp., 160 S.W.2d 509, 513–14 (Tex. 1942)).  Additionally, when a plaintiff alleges self-dealing by the fiduciary as part of a breach-of-fiduciary-duty claim, a presumption of unfairness automatically arises, which the fiduciary bears the burden to rebut.  See Houston v. Ludwick, No. 14-09-00600-CV, 2010 WL 4132215, at *7 (Tex. App.—Houston [14th Dist.] Oct. 21, 2010, pet. denied) (mem. op.); Chappell, 37 S.W.3d at 22 (citing Stephens County Museum, Inc. v. Swenson, 517 S.W.2d 257, 261 (Tex. 1974); Int’l Bankers Life Ins. Co. v. Holloway, 368 S.W.2d 567, 576 (Tex. 1963)).  Mecom admitted in his deposition that he owed a fiduciary duty to manage the assets for appellants’ benefits and a duty to disclose his personal transactions with the trust.

The court of appeals even went so far as to question whether a no-evidence summary judgment would even be appropriate to consider in this fiduciary context. Trustee Fiduciary Duty in Texas