In Marshall v. Marshall, the Marshall Grandchildren’s Trust (“Trust”) was established in 1987 for Preston Marshall’s benefit, with his parents Elaine and E. Pierce Marshall as trustees. No. 14-23-00276-CV, 2025 Tex. App. LEXIS 8751 (Tex. App.—Houston [14thDist.] November 13, 2025, no pet. history). From 2007-2014, the Trust distributed income to Preston in cash. In 2015, after Preston demanded an accounting and challenged Elaine’s petition to appoint a successor trustee, Elaine made an in-kind distribution by using Trust income to pay down Preston’s debt to another trust benefiting Elaine. In 2016, Elaine made another in-kind distribution of stock. Elaine used Trust funds to pay about $220,000 in legal expenses, which she later reimbursed. The Trust contained an exculpatory clause protecting the trustee from liability for good faith mistakes.
Preston sued Elaine concerning her actions as trustee. On cross-motions for summary judgment, the trial court granted a partial summary judgment in Preston’s favor on liability and denied Elaine’s motion. A jury found in Preston’s favor on most of the issues submitted to it, awarding about $350,000 in actual damages. And the jury found the amount of Preston’s reasonable and necessary attorney’s fees to be $2 million. The trial court signed a final judgment awarding actual damages, nominal damages, and attorney’s fees to Preston, and Elaine appealed. The court of appeals, reversed and concluded that (1) Preston adduced legally insufficient evidence of the amount of actual damages awarded by the jury, although there is sufficient evidence of a lesser amount of damages; (2) the trial court erred by granting a partial summary judgment to Preston because a genuine issue of material fact exists about whether Elaine’s complained-of actions are excused by the trust’s exculpatory clause; and (3) the issue of attorney’s fees also must be reversed.
Regarding damages, the court stated:
Robert Hancock testified about Preston’s damages from the 2015 and 2016 distributions in the form of the “lost . . . opportunity to make an investment return.” Hancock testified about how the 2015 and 2016 transactions were unwound in 2017 and the cash given to Preston instead of the in-kind distributions. He noted that Preston was deprived of the 2015 distribution’s $1,050,147 cash value for 605 days. Preston was deprived of the 2016 distribution’s $627,000 cash value for 237 days. When the transactions were undone in 2017, Preston was not paid any interest on these amounts.
So, Hancock “wet [his] financial thumb and put it in the financial wind” to determine “what a reasonable rate of return would be expected in the marketplace” over that time period. He estimated that a “prudent or knowledgeable investor would have made” a 15% annual rate of return over both time periods based on a “well-diversified portfolio” including four major stock index funds. Hancock noted that these funds “are very popular with small and large investors.” Hancock explained that his estimate was reasonable because he put himself “in a financial time machine” that “had the benefit of foresight and hindsight.”
Id.
The court then held that this evidence was too speculative and was no evidence:
Hancock made no effort to tie his estimate of what a “prudent or knowledgeable investor would have made” by investing in a well-diversified portfolio of stock market index funds during the relevant time frame to any profits that Preston, himself, would have accrued (or to any profits that Elaine actually accrued). Hancock did not know how Preston invested his money. As Hancock acknowledged, “only God knows what would have happened.” Hancock relied on an assumption that was pure speculation, and thus, his testimony is no evidence of lost profit damages.
Attempting to determine what part of the stocks’ appreciation that Preston would have realized if he had used the cash to invest in the stock market is “too speculative.” Rather, the “proper way to compensate [Preston] for his lost investment opportunity is through the award of interest on his time-of-breach damages.”...
The jury charge authorized an award of “profit or interest that would have accrued” to Preston or the Trust. Interest can be a measure of compensatory damages. “Interest is an element of damages suffered by the loss of use of money.” Absent evidence of actual lost profit damages, “the measure of damages is the legal rate of interest on the money for the period of its wrongful detention.” When a specific sum of money has been wrongfully withheld, the “rate of interest established by law, being a fixed standard of the value of the use of money, is adopted by the court as the measure of . . . the damages accruing from the loss of the use of the money.” Because the record contains evidence about the amount of cash not distributed due to the in-kind distributions and the period of withholding, the amount of interest damages is determinable as a matter of law using the statutory rate for judgment interest. The trial court awarded judgment interest at a rate of 7.5%, which is less than the 15% from Hancock’s damages model.
When, as here, the evidence is legally insufficient to support the amount of damages awarded but legally sufficient to support a lesser amount, the remedy is to reverse the trial court’s judgment and remand for a new trial; and because Elaine contested liability, the remand encompasses both liability and damages.
Id. (internal citations omitted). The court did reverse and remand the case for a new trial to determine an appropriate amount of damages.
The court then addressed Elaine’s issue regarding her absolute discretion to make distributions:
As part of her first issue, Elaine contends that the Trust gives Elaine absolute discretion about when and how to distribute income under Articles VIII and XI.B, precluding liability for Preston’s claims about distributions.
“Notwithstanding the breadth of discretion granted to a trustee in the terms of the trust, including the use of terms such as ‘absolute,’ ‘sole,’ or ‘uncontrolled,’ the trustee shall exercise a discretionary power in good faith and in accordance with the terms and purposes of the trust and the interests of the beneficiaries.” The terms of a trust may not limit a trustee’s duty to act in good faith and in accordance with the purpose of the trust.
In his live petition, Preston alleged that Elaine failed to manage the Trust in good faith, engaged in self-dealing, and failed to make distributions in Preston’s best interests. Thus, despite the wide discretion given to Elaine under the Trust provisions, Preston’s claims based on the distributions are not foreclosed as a matter of law due solely to the discretionary terms of the Trust.
Elaine contends that a court may not undermine her absolute discretion to determine what distributions were in Preston’s best interest, citing Di Portanova v. Monroe, 229 S.W.3d 324, 332 (Tex. App.—Houston [1st Dist.] 2006, pet. denied). But Di Portanova acknowledges the common law requirement that a trustee’s exercise of discretionary powers are reviewable if the trustee “did not exercise his discretion in good faith or [if] his decision was unreasonable.” 229 S.W.3d at 331 (quotation omitted). Unlike here, in Di Portanova there was “no pleading or proof that the Trustees have acted with mala fides or a lack of good faith.” Id... Elaine was not entitled to a summary judgment on this ground.
Id. The court then addressed whether there was evidence of breach of the duty of loyalty and good faith:
Preston alleged in his live petition a breach of loyalty and good faith when Elaine made a distribution to Preston that resulted solely in tax liability. On appeal, Elaine contends that (1) Preston adduced no evidence on summary judgment of increased tax liability; (2) Preston’s expert at trial confirmed the distributions create no additional tax liability; (3) and Elaine had no reason to believe Preston was unable to meet his tax obligations.
We reject Elaine’s first contention because Preston adduced summary judgment evidence, through his declaration, that Elaine “did not distribute sufficient cash from the [Trust] for [him] to pay the taxes that the in-kind distributions caused [him] to incur.” Regarding the 2015 distribution, the trial court found in its temporary order (which was included in the summary judgment record) that the 2015 distribution “create[d] a tax liability for Preston.” Thus, there is some evidence that the in-kind distributions caused Preston to incur tax liability.
We reject Elaine’s second contention because, generally, we do not consider evidence adduced at a later trial to overturn a trial court’s denial of summary judgment. Moreover, even if the trial court would have erred by not reconsidering its partial summary judgment following the close of the evidence at trial, the remedy would be a new trial—not a rendition—because Preston was not called upon to litigate this issue at trial in light of the trial court’s prior ruling in his favor.
We reject Elaine’s third contention because her belief that Preston could pay his taxes is not conclusive evidence of good faith concerning her distribution decisions. Elaine’s proposed definition of “good faith” is “honesty in belief or purpose” and is purely subjective. Preston adduced some evidence raising an inference of Elaine’s lack of good faith—in particular, that she had an improper motive for making in-kind distributions—because there was evidence that (1) Elaine had distributed cash to Preston for any income distributions prior to 2015; (2) Elaine started making in-kind distributions in the same year that Preston filed suit for an accounting and challenged Elaine’s petition to appoint Cook; (3) Elaine’s distribution decisions were explicitly linked to his demand for an accounting, based on the June 2015 letter from Bonadona; and (4) Elaine exhibited a pattern of hostility towards Preston...
Although Elaine adduced evidence that the 2015 distribution benefited Preston in several ways, he adduced evidence that Elaine diverted over $1 million of income from the Trust to pay down a note that Preston owed to the Marital Trust—a trust for which Elaine was the principal income beneficiary. The interest rate on the note was 3%, which was lower than the range of investment returns in Hancock’s expert report. Hunter wrote to Legacy Trust in late 2016 that Elaine had “serious concerns about Preston’s ability/desire to make provisions for his substantial debt owed” to the Marital Trust. Considering this evidence together, there is at least some evidence that the 2015 distribution benefited Elaine.
In his motion for summary judgment, Preston included several factual theories that he did not mention in his live petition in support of his claim that Elaine breached her duties of loyalty and good faith—one concerning an indemnity agreement that Elaine entered into with her attorneys, and another concerning her alleged refusal to recognize that Legacy Trust was solely responsible for Trust distribution decisions...
As part of her first issue, Elaine contends this court should render a judgment on Preston’s claims based on the “attempted appointment” of Cook as a successor cotrustee because an attempt to do something cannot be a breach of fiduciary duty. However, Preston adduced evidence that Elaine did not merely “attempt” to appoint Cook. Through her attorney Hunter, Elaine instigated Sorensen’s appointment of Cook. Sorensen in fact appointed Cook. Cook then approved the 2015 distribution, which is a basis for part of Preston’s claimed damages. Although the trial court later granted Preston’s partial summary judgment claiming that Cook was not validly appointed (and the court appointed Legacy Trust in Cook’s place), there is some evidence that Preston’s claim was not based on purely “attempted” conduct. Elaine was not entitled to a summary judgment on this ground.
Id. The Court also addressed whether there was a fact question on whether Elaine breached her duty to disclose:
As part of her first issue, Elaine contends that there is no liability as a matter of law for her failure to disclose “administrative acts in advance,” including notice of “future distributions.” Elaine acknowledges that a trustee owes a duty to disclose material facts affecting the beneficiary’s rights. “A fact is material if it would likely affect the conduct of a reasonable person concerning the transaction in question.” “Materiality thus centers on whether a reasonable person would attach importance to and would be induced to act on the information in determining his choice of actions in the transaction in question.” Materiality is usually a question of fact for the jury. Here, Preston alleged a breach of the duty of full disclosure of Elaine’s directing Sorensen to appoint Cook as a successor cotrustee. And Preston alleged breaches of the duty of full disclosure and self-dealing by Elaine’s use of Trust funds pay down a note to herself and to pay her litigation expenses.
Under some circumstances a trustee need not disclose in advance that a new trustee will be appointed. But here, at the time Elaine instigated the nonjudicial appointment of Cook, Elaine had already received Preston’s opposition to her petition for a judicial appointment, in which Preston alleged that Cook was not qualified to serve. At least a fact issue exists about whether a reasonable person would attach importance to and would be induced to act on information that a trustee was surreptitiously seeking to appoint a cotrustee, knowing that the beneficiary explicitly objected to the cotrustee as unqualified...
When a beneficiary alleges that a fiduciary engaged in self-dealing, a presumption of unfairness arises, and it becomes the fiduciary’s burden to prove that the questioned transaction was made, among other things, “after full disclosure of all material information.” “Self-dealing can generally be defined as an occurrence in which the fiduciary uses the advantage of his position to gain a benefit at the expense of those to whom he owes a fiduciary duty.” As noted above, there is some evidence that Elaine benefited from the 2015 distribution. And before the 2015 distribution, all income distributions from the Trust had been in cash. Before Elaine made the 2015 distribution, she would have known that Preston claimed she had “no authority to curtail distributions.” Under these circumstances, a fact finder could determine that a reasonable person would attach importance to and would be induced to act on information regarding Elaine’s planned in-kind distribution in the form of paying down Preston’s debt to the Marital Trust.
Similarly, using Trust funds to pay legal expenses in defense of a beneficiary’s claim of breach of fiduciary duty can amount to self-dealing. A trustee may be liable for failing to disclose the use of trust funds to pay attorney’s fees incurred in defense of the beneficiary’s claims. Preston adduced evidence that Elaine used Trust funds to pay her attorney’s fees and did not disclose this fact until it became known while she was testifying. A fact finder could determine that a reasonable person would attach importance to and would be induced to act on information that a trustee was paying her litigation expenses with trust funds.
In sum, Elaine was not entitled to summary judgment on the ground that there can be no liability for disclosure of the planned actions of orchestrating Cook’s appointment, making the 2015 distribution, and using Trust funds to pay her litigation expenses.
Id.
The court also addressed Elaine’s exculpatory clause defense, holds that good faith is purely a subjective test, but held that there was evidence to support a finding of subjective bad faith:
In her second issue, Elaine contends that the Trust’s exculpatory clause bars all claims, entitling her to a take-nothing judgment. In her eighth issue, Elaine contends that she is entitled to a new trial because she raised a genuine issue of material fact establishing her good faith under the exculpatory clause.
Elaine contends that the exculpatory clause applies to all of Preston’s claims, while he contends that it does not apply to his breach of fiduciary duty claims.
Ordinarily, the fiduciary duties of good faith, fair dealing, loyalty, and fidelity impose on a trustee a duty to exercise the care and judgement that a person of ordinary prudence, discretion, and intelligence would exercise when managing their own affairs. Thus, a trustee’s simple negligence or lack of diligence can result in a breach of fiduciary duty. And, a trustee’s good faith or mistake does not preclude liability for a breach of fiduciary duty.
But here, the Trust provides that the trustee “shall not be liable for good faith mistakes of law or of fact or for good faith errors of judgment” (Part 1). The clause continues, “but shall be answerable only for” gross, wanton, or willful misconduct, or failing to exercise that degree of honesty, good faith, full disclosure, and fair dealing which fiduciary-trustees are by law required to exercise (Part 2). We understand this language to mean that conduct falling within the scope of Part 1 is mutually exclusive of conduct falling within the scope of Part 2, such that a good faith mistake of law, mistake of fact, or error in judgment could not amount to gross, wanton, or willful misconduct, or a failure to exercise the duties of honesty, good faith, full disclosure, and fair dealing. Because a claim for breach of fiduciary duty ordinarily can be brought even for a trustee’s good faith mistakes, Part 1 of the exculpatory clause would be rendered meaningless if it could not apply to a claim for breach of fiduciary duty... Of course, no exculpatory clause in a trust may relieve a trustee of liability for any profit derived by the trustee from a breach of trust. Thus, to the extent Preston can prove any profit to Elaine resulting from her breaches, the exculpatory clause would not apply.
The parties disagree further about the meaning of “good faith” for determining what evidence satisfies the exculpatory clause. Elaine contends it is purely subjective: “honesty in belief or purpose.” Preston contends there should be an objective component such that any subjective belief must also be “reasonable in light of existing law.” In construing an undefined term to determine the settlor’s intent, we give common words their plain meaning and may consult dictionary definitions. In consulting various dictionary definitions, our supreme court has noted that definitions of good faith “focus overwhelmingly on subjective state of mind.” In determining the meaning of good faith in a statute, the court rejected imposing an objective standard and relied on its earlier decision concerning a surety agreement, holding that “good faith” refers to conduct that is “honest in fact and is free of both improper motive and willful ignorance of the facts at hand.”
Lee involved an award of attorney’s fees that depended upon whether a party’s position in a lawsuit was maintained in good faith. Requiring a party’s position in a lawsuit to be “reasonable in light of existing law” is consistent with the nature of the proceedings (a lawsuit) and the award to be gained (attorney’s fees). But we cannot rely on public policy, as this court did in Lee when construing a statute, to add a requirement of “reasonable in light of existing law” to the words used by the settlor in a trust.
As noted above, a trustee ordinarily may be liable for breach of fiduciary duties even when her actions are made in good faith if her actions nonetheless fall below an objective standard of reasonableness. To give effect to the exculpatory clause here, as the settlor intended, we cannot impose an objective or reasonableness standard for the trustee’s good faith mistakes of law, mistakes of fact, or errors of judgment. We follow the Supreme Court of Texas for the common and ordinary meaning of good faith: honesty in fact and free of both improper motive and willful ignorance of the facts at hand. With this definition in mind, we review the evidence filed with the parties’ competing motions for summary judgment.
Elaine contends that she was entitled to a take-nothing judgment as a matter of law because she conclusively established her good faith or because Preston adduced no evidence of her bad faith, i.e., a lack of good faith. Generally, whether a party breached a fiduciary duty is a question of fact. Similarly, whether a party acted in good faith usually is a question of fact to be determined under all the circumstances. “An inquiry into a party’s state of mind turns on motives and credibility.” “Intent is a fact question uniquely within the realm of the trier of fact because it so depends upon the credibility of the witnesses and the weight to be given to their testimony.”
Preston adduced some evidence raising an inference of Elaine’s bad faith—in particular, that she had an improper motive or was willfully ignorant of the facts—regarding her decisions to make in-kind distributions, to have Cook appointed, and to use Trust funds to pay her attorneys.
As noted above regarding distributions, there is evidence that (1) Elaine had distributed cash to Preston for any income distributions prior to 2015; (2) Elaine started making in-kind distributions in the same year that Preston filed suit for an accounting and challenged Elaine’s petition to appoint Cook; (3) Elaine’s distribution decisions were explicitly linked to his demand for an accounting, based on the June 2015 letter from Bonadona; and (4) the distributions caused Preston to incur tax liabilities without the cash to pay them.
As noted above regarding the appointment of Cook, Elaine sought and achieved Cook’s appointment at a time that she knew Preston opposed the appointment because Preston believed Cook to be unqualified. And Sorensen’s letter alleged that Elaine’s attorneys misled and duped him into making the appointment with promises that were never fulfilled.
As noted above regarding the payment of litigation expenses, Elaine’s withdrawal of Trust funds to pay her expenses to litigate against a beneficiary is some evidence of self-dealing. This evidence raises an inference of bad faith. Moreover, Elaine otherwise exhibited a pattern of hostility towards Preston. She fired him from the family business. In letters written on her behalf, Hunter described Preston’s “petulant, ill-considered acts” and described a “comprehensive recounting” of “Preston’s misbehavior.” She also signed an indemnification agreement with her lawyers, which she testified might “slow [Preston] down on litigation.” Considering all of the circumstances, a fact finder could infer that Elaine’s alleged breaches of fiduciary duty were not merely the result of good faith mistakes of fact, mistakes of law, or errors in judgment. Elaine is not entitled to a take-nothing judgment under the exculpatory clause.
Id. The court then held that the trial court erred in grating Preston’s summary judgment because there was evidence of good faith by Elaine that, if believed, would trigger the exculpatory clause defense:
In sum, Elaine testified that she believed both in-kind distributions were in Preston’s best interest, the withdrawal of funds to pay litigation expenses was a mistake and was immediately reimbursed when it was discovered, and the attempt to have Cook appointed was an honest mistake. Moreover, she always consulted with lawyers and followed their advice before she took actions as a trustee, which can provide some evidence that she acted in good faith. We agree with Elaine that there is some evidence that her actions resulted from good faith mistakes of fact, mistakes of law, or errors in judgment as honest mistakes or errors free from improper motive and willful ignorance. Her motives and credibility should be assessed by the trier of fact. But as noted above, to the extent Preston can show Elaine’s profits from the challenged actions, he may recover regardless of whether Elaine acted in good faith.
Id. The court then held that it should reverse the award of attorney’s fees due to the overall reversal of the judgment and the remand.