Jury Trial in Trust Modification Proceeding?

Take-Away: Can a party request a jury trial in a probate court proceeding to modify the terms of a trust? Probably not, but who really knows?

Background: An interesting question arose recently in the Texas Supreme Court, which is whether a jury trial could be demanded in a trust modification proceeding. Consider the various provisions of the Michigan Trust Code (which adopted the Uniform Trust Code’s provisions) that provide many ways that an irrevocable trust can be modified. For example, a trust instrument can be modified if the modification is consistent with the trust’s material purposes (Section 7411), or because of circumstances not anticipated by the settlor a trust can be modified in order to further the settlor’s stated purpose or probable intent (Section 7412), or to achieve the settlor’s tax objectives if not contrary to the settlor’s probable intention (Section 7416.) All of these section involve the probate court’s involvement in some manner. No reference is made in these statutes to the use of a jury to determine the facts necessary to implement a trust modification under any of these Michigan Trust Code Sections.

Common Law- Equitable Proceeding:  At common law a trust relationship is a creature of a court of equity. A trustee owes fiduciary duties to the trust beneficiaries, and the fiduciary principle is also an invention of equity courts. Similarly, a trust beneficiary is treated as owning equitable property rights incident to a trust relationship. A trustee assumes equitable duties under the trust instrument. The internal affairs of a trust, like a dispute between or among the parties to a trust, are the domain of equity courts. Courts impose equitable remedies in the administration of a trust. Courts of equity exist because an equitable issue is typically a question that involves both facts and law, and at common law the conclusion was that a judge is presumably in a better position than a layperson to identify and construe legal questions. Accordingly, in either a federal court or a state court, there is generally no right to have facts found by a jury in litigation that involves the internal affairs of a trust. The legal conclusion for this is that in disputes that relate to trusts, the equity court, i.e., the judge, apart from functioning judicially, is administratively tasked with the determination and the enforcement of the settlor’s intent as expressed in the trust instrument. Hence the Michigan’s Trust Code’s reference to the settlor’s material purpose, probable intent, or circumstances not anticipated by the settlor- all of which deal with the settlor’s state-of-mind.

With this background on a court’s equitable powers, it is interesting to now learn that ‘probate’ courts in Texas are grappling with a demand for a jury trial in a proceeding to modify the terms of a trust. Like Michigan, Texas has adopted much of the Uniform Trust Code.

In re Matter of Troy S. Poe Trust, 673 S.W.3d 395 (Texas Appeals, 2023)

Facts: This is a hotly contested trust modification proceeding in the Texas courts and has been dragging on for some time. The claim brought by petitioners is that a jury should be impaneled to determine the facts required to determine, as a prerequisite, a modification of an existing trust dealing with the settlor’s probably intent.

Trial Court: The trial judge found that there was no right to have a jury as the finder-of-fact in the trust modification proceeding.

Appeals Court: The Texas Court of Appeals reversed the trial judge and  found that there was a right to a jury trial to determine the contested facts as to the settlor’s intent.

Texas Supreme Court:  The Texas Supreme Court held that there is no right to a jury trial under Texas’ version of the Uniform Trust Code, but it nonetheless remanded the dispute to the Appellate Court and tasked that court to determine the ‘novel’ issue of whether Texas’ Constitution (Article V, Section 10) guarantees the parties a jury trial in such a proceeding. The Texas Constitution provides, in part: “In the trial of all causes in the District Courts, the plaintiff or defendant shall upon application made in open court, have the right to trial by jury.”

Appeals Court: On remand, this past July the Texas Court of Appeals issued its decision that the a trust-modification proceeding is not sufficiently adversarial to constitute a “cause.”  This is a bit confusing, since a cause is a vague term-of-art, and a trust modification proceeding in some situations could result in a readjustment of equitable property rights. It might have been better for the Texas Supreme Court to have just come out and conclude as a general equitable principle that trust-modification issues are issues of law (or a judge) rather than issues of fact (for a jury to determine.) That said, in Texas there is no right to a jury trial in a trust modification proceeding.

Michigan: Michigan’s Constitution provides that the “right of trial by jury shall remain, but shall be waived in all civil cases unless demanded by one of the parties in the manner prescribed by law.” [Article VI, Section 14.] I suspect that the words shall remain means that those rights to a jury trial that existed at common law are not abridged with the adoption of the state Constitution. But as noted, at common law there was/is no right to a jury trial in equitable proceedings with regard to an irrevocable trust and the trust’s administration by the trustee. The Michigan General Court Rules simply state that “the right to a jury trial is as declared in the Michigan Constitution.” [MCR. 2.508.] The court rules then to on to provide that “in a case in which some issues are to be tried by a jury and others by the court… the court may determine the sequence of trial by the issues, preserving the constitutional right to trial by jury according to the basic nature of every issue for which a demand for jury trial has been made under MRC 2.508.” All of which means that we sorta have the answer that there is no right to a jury trial in a trust modification proceeding, or arguably one that deals with the trustee’s exercise of a right to decant trust assets, there is still a bit of ambiguity on the question.

Conclusion: Perhaps the Michigan Trust Code should be amended to clearly state that in all proceedings that deal with the judicial modification or termination of a trust, there is no right to a jury trial.