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Rachal v. Reitz

An inter vivos trust contained a provision requiring all disputes regarding the trust and the trustee to proceed to arbitration. When a trust beneficiary sued the trustee, the trustee moved to compel arbitration. The trial court denied the motion and the court of appeals affirmed. The beneficiary's acceptance of the benefits of the trust and suit to enforce its terms constituted the assent required to form an enforceable agreement to arbitrate. The court of appeals' judgment is reversed and remanded. Texas Supreme Court, No. 11-0708, 05-03-2013.

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Argued November 7, 2012

Federal and state policies favor arbitration for its efficient method of resolving disputes, and arbitration has become a mainstay of the dispute resolution process.*fn1 Today we determine whether these policies render an arbitration provision contained in an inter vivos trust enforceable against the trust beneficiaries. The trust here contained a provision requiring all disputes regarding the trust and the trustee to proceed to arbitration. When a trust beneficiary sued the trustee, the trustee moved to compel arbitration. The trial court denied the motion. The court of appeals, sitting en banc, affirmed, concluding that the provision could not be enforced under the Texas Arbitration Act (TAA) because there was no agreement to arbitrate trust disputes.*fn2 We conclude that the arbitration provision contained in the trust at issue is enforceable against the beneficiary for two reasons. First, the settlor determines the conditions attached to her gifts, and we enforce trust restrictions on the basis of the settlor’s intent. The settlor’s intent here was to arbitrate any disputes over the trust. Second, the TAA requires enforcement of written agreements to arbitrate, and an agreement requires mutual assent, which we have previously concluded may be manifested through the doctrine of direct benefits estoppel. Thus, the beneficiary’s acceptance of the benefits of the trust and suit to enforce its terms constituted the assent required to form an enforceable agreement to arbitrate under the TAA. We reverse the judgment of the court of appeals and remand to the trial court to enter an order consistent with this opinion.

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