Commentary on HB 2066 and SB 861

1999 Legislation:

Commentary on HB 2066 and SB 861 -- The Interstate
Banking Bill

HB 2066, by Rep. Marchant, is the big interstate banking bill. Most of the provisions of the bill are beyond the scope of the Texas Probate Web Site and mailing list, but a few provisions potentially affect trust and probate law:

The bill amends the venue provision of the trust code, Tex. Prop. Code Sec. 115.002, to read as follows:

Sec. 115.002.  VENUE. (a) The venue of an action under Section 115.001 of this Act is determined according to this section.

(b)  If there is a single, noncorporate trustee, an action shall be brought [~~venue is~~] in the county in which:

(1)  the trustee resides or has resided at any time during the four-year period preceding the date the action is filed; or

(2)  the situs of administration of the trust is maintained or has been maintained at any time during the four-year period preceding the date the action is filed [~~the trustee's residence is located~~].

(c)  If there are multiple trustees or a corporate [~~any~~] trustee, an action shall be brought [~~is a corporation, venue is~~] in the county in which the situs of administration of the trust is maintained or has been maintained at any time during the four-year period preceding the date the action is filed, provided that an action against a corporate trustee as defendant may be brought in the county in which the corporate trustee maintains its principal office in this state [the corporation's principal office is located, or, if two or more corporations are trustees of the trust, venue is in the county in which the principal office of any of the corporations is located].

(d)  For just and reasonable cause, including the location of the records and the convenience of the parties and witnesses, the court may transfer an action from a county of proper venue under this section to another county of proper venue:

(1)  on motion of a defendant or joined party, filed concurrently with or before the filing of the answer or other initial responsive pleading, and served in accordance with law; or

(2)  on motion of an intervening party, filed not later than the 20th day after the court signs the order allowing the intervention, and served in accordance with law.

(e)  Notwithstanding any other provision of this section, on agreement by all parties the court may transfer an action from a county of proper venue under this section to any other county.

(f)  For the purposes of this section:

(1)  "Corporate trustee" means an entity organized as a financial institution or a corporation with the authority to act in a fiduciary capacity.

(2)  "Principal office" means an office of a corporate trustee in this state where the decision makers for the corporate trustee within this state conduct the daily affairs of the corporate trustee. The mere presence of an agent or representative of the corporate trustee does not establish a principal office. The principal office of the corporate trustee may also be but is not necessarily the same as the situs of administration of the trust.

(3)  "Situs of administration" means the location in this state where the trustee maintains the office that is primarily responsible for dealing with the settlor and beneficiaries of the trust. The situs of administration may also be but is not necessarily the same as the principal office of a corporate trustee [~~If there are two or more trustees, none of which is a corporation, venue is in the county in which the principal office of the trust is maintained~~].

This is a substantial improvement over the current venue statute, which provides that suits against corporate trustees must be brought "in the county in which the corporation's principal office is located." That provision may have worked satisfactorily back in the good old days when there was no branch banking, but currently this statute appears to give most corporate trustees the power to be sued far away from where the trust services may have been provided. For example, a Kerrville customer of Bank One may be required to bring suit in Dallas even if he or she never set foot in Big D.

For plaintiff-oriented fiduciary litigators, the proposed change may not go far enough. The "situs of administration" concept may work in many cases, but it will not permit the resident of a rural county to sue in his or her home county (if there is no trust office in the county), even if the trust officers dutifully called upon the customer at home for years and years to transact trust business. Also, the ability of the trustee to seek removal to another county "for just and reasonable cause" without the consent of the plaintiff may become a routine pre-trial hurdle for the plaintiff to overcome.

Still, consumers of trust services in the smaller towns and cities will be much better off with the proposed change than they are with the current Section 115.002.

The bill adds Section 9.005 of the Texas Trust Company Act (Article 342a-1.001 et seq., Vernon's Texas Civil Statutes), which permits settlors and trustees to choose to make the laws of another state or county govern the trust "if a trust or its subject matter bears a reasonable relation to this state and also to another state or a foreign country." Even if a different state's laws are made applicable to the trust, however, Section 9.005 would provide that "a trust institution is subject to Sections 113.052 and 113.053, Property Code, with respect to a trust if the trust is established by a client that resides in this state and is solicited from or accepted by an office of the trust institution in this state." These two sections are the self-dealing provisions of the trust code which cannot be waived with respect to a corporate fiduciary pursuant to Tex. Prop. Code Sec. 113.059.

The bill makes several changes to the probate code generally making it easier for an out-of-state bank or trust company to act as personal representative of an estate. Click here to view the amendments to the probate code in the bill.

[03/08/99]

SB 861, by Sen. Fraser, is the companion interstate banking bill in the Senate. HB 2317, by Rep. Hartnett, takes the proposed trust code venue changes from HB 2066 verbatim and places them in a separate bill. That way, if the interstate banking bill is derailed for any reason, the venue provisions may pass on their own.

[03/10/99]