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Lee v. Lee

Court of Appeals of Texas, Fourteenth District

August 1, 2017


         On Appeal from the Probate Court No. 2 Harris County, Texas Trial Court Cause No. 137, 506-403

          Panel consists of Chief Justice Frost and Justices Christopher and Donovan.



         In this dispute between siblings concerning the administration of their mother's testamentary trust, a sister appeals trial court rulings (1) removing her as trustee, (2) appointing a receiver, (3) approving the receiver's application for approval of a settlement agreement with the sister's brother, and (4) denying the sister's motion to continue the hearing on the receiver's application. We conclude that the statutory probate court's orders are not void for lack of jurisdiction, and that the court did not abuse its discretion in approving the settlement agreement or in denying the motion for a continuance. We accordingly affirm the trial court's judgment.

         I. Background

         Katherine Pillot Lee Barnhart died in 1975, and under the terms of her will, most of her estate passed into a testamentary trust ("the Trust"). Barnhart's children Ronald E. Lee Jr. ("Ronald") and Susan Camille Lee ("Susan") are beneficiaries of the Trust, as are Ronald's daughter Katherine Lee Stacy ("Stacy") and Susan's daughter Susan Gibson ("Gibson"). The trustee is required to make quarterly distributions of one-sixth of the Trust's current net income to Ronald and one-sixth to Susan. If this amount, together with funds available from other sources, is insufficient to provide for either Ronald's or Susan's health, maintenance, and support, then the Trust must distribute additional amounts to that person from the remaining two-thirds of the Trust's current net income. The remainder of the Trust's current net income must be distributed at least semi-annually to Stacy and Gibson. On the death of Ronald and Susan, the remainder of the Trust estate is to be transferred to new, separate trusts for Stacy and Gibson.

         A. The First Lawsuit: Susan's Suit Against Ronald

         Thirteen years after Barnhart's death, Ronald, the executor of his mother's estate and original trustee of the Trust, had made no distributions and had not responded to Susan's repeated demands for an accounting. Susan, individually and on behalf of the Trust, sued Ronald in a statutory probate court for breach of fiduciary duty and asked the trial court to remove him as executor and as trustee.

         The jury found that Ronald breached his fiduciary duties to the Trust by expending large amounts on a later-abandoned real estate development project, unreasonable office expenses, and excessive executor's fees. The trial court reduced the amount of the damages assessed by the jury for excessive fees and declined to remove Ronald as executor or trustee. The parties agreed that each side's reasonable and necessary attorney's fees were $1.5 million for attorney's fees through trial, an additional $300, 000 in the event of an appeal to an intermediate appellate court, and a further $100, 000 in the event of an appeal to the Texas Supreme Court. The trial court ordered the Trust to pay for each side's attorney's fees.

         Susan appealed. See Lee v. Lee, 47 S.W.3d 767 (Tex. App.-Houston [14th Dist.] 2001, pet. denied) (corr. op. on reh'g) ("Lee I"). We concluded that the trial court erred in reducing the damages assessed by the jury; in failing to remove Ronald as trustee; and in refusing to require Ronald to reimburse the Trust for Susan's attorney's fees. See id. at 801. Although Ronald had paid the judgment rendered by the trial court, the decision in Lee I left Ronald owing the Trust-of which Susan was now the trustee-more than $1.5 million as reimbursement for his excessive executor's fees and $1.9 million as reimbursement for Susan's attorney's fees. The parties agree that as of February 28, 2002, pre-and post-judgment interest brought this amount to $6, 128, 326.99.

         B. This Lawsuit: Ronald's Suit Against Susan

         Fourteen years after Susan became trustee, she too had failed to make any distributions to Ronald or his daughter; however, there is evidence that Susan made distributions to herself and her own daughter. In the summer of 2014, Ronald sued and requested a Trust accounting so he could calculate the extent to which his outstanding debt to the Trust was offset by the Trust's withholding of the required distributions to him. Susan refused to respond. Six months later, Ronald received notice of the impending foreclosure of one of the Trust's real properties for nonpayment of taxes. Susan allowed a default judgment to be taken against the Trust, but redeemed the property before it was sold.

         Ronald sued Susan, individually and in her capacity as trustee, in the same statutory probate court in which the earlier case was tried. He asserted claims for breach of fiduciary duty, violations of the Trust's terms and of the Texas Trust Code, and asked for an accounting, Susan's removal as trustee, and attorney's fees. Stacy intervened in the action, seeking the same relief on the same grounds.

         After finding that Susan had breached the terms of the Trust and of the Texas Trust Code, and that the Trust was at risk of further imminent harm from Susan's failure to pay taxes on Trust real property, the trial court removed Susan as trustee on June 18, 2015 and appointed Legacy Trust Company, N.A. ("Legacy") as the Trust's receiver. The trial court directed Legacy to, among other things, pay Ronald's attorney's fees; "[c]ollect, compromise, or settle all debts owed to the Trust"; "[p]rosecute, defend, and/or settle all legal proceedings . . . brought by or against the Trustee of the Trust"; and "[i]nstitute such legal proceedings as the Receiver deems necessary or advisable to obtain constructive or actual possession of assets of the Trust or to recover damages suffered by the Trust." The trial court also granted the receiver "discretion not to pursue litigation against [Susan] that is undertaken by beneficiaries of the Trust for the benefit of the Trust." The trial court ordered Susan to provide to Legacy, within seven days, copies of all records in her possession, custody, and control sufficient to identify (1) all real and personal property owned by the Trust, or by Susan as trustee, at any time while Susan was trustee; and (2) all of the Trust's distributions and expenditures during that time. Susan did none of these things.

         After Susan was removed as trustee, Ronald paid Legacy $8 million toward his debt to the Trust and asked to negotiate a settlement. Legacy informed Susan's attorney Thomas Zabel that it was negotiating a settlement with Ronald. Legacy also attempted to contact Susan directly by phone, email, letter, and finally by having a Legacy employee fly with Zabel to Florida, where Susan resides, but Susan refused to respond.

         After months of negotiation, Legacy and Ronald reached a settlement agreement and Legacy filed an application for the trial court's approval. Susan filed a response and objections to the application. A week before the hearing on the application, Susan moved for a continuance of at least ninety days to conduct discovery. At the hearing on both matters, the trial court stated that it would hear the description of the settlement first, and that Susan could move for a continuance afterward if she still believed discovery was needed.

         Legacy's president and chief executive officer Edward "Ned" Naumes testified in support of the settlement agreement, as did Ronald. At the close of the evidence on the application for approval of the settlement, the parties presented their arguments on Susan's motion for a continuance to perform discovery. The trial court denied the motion, approved the settlement, and informed counsel that the court would hold another hearing on the application in two weeks if Susan moved for a rehearing. Susan did not do so.

         Two days after Susan filed her notice of appeal, Legacy and Ronald closed on the settlement agreement. In accordance with the agreement's terms, Ronald deeded his interest in certain property to Legacy, in its capacity as the Trust's receiver. Ronald also executed and delivered a promissory note and other agreements and made the first payment toward the cash portion of the settlement. In exchange for this and other consideration, Legacy sold to Ronald the Trust's judgment against him.

         II. Issues Presented

         In her first issue, Susan asserts that the statutory probate court could exercise jurisdiction over the claims and requests raised in this case only if there were a pending probate proceeding. She asserts that there was no pending probate proceeding when the trial court removed her as trustee and appointed a receiver in June 2015, or when the trial court approved Legacy's settlement agreement with Ronald in March 2016. She therefore reasons that these rulings are void for want of jurisdiction. In her second issue, Susan contends that if the trial court had jurisdiction, then the trial court abused its discretion in approving the settlement agreement. She argues in her third issue that the trial court abused its discretion in denying her motion to continue the hearing on Legacy's application for approval of the settlement agreement.

         III. This Court's Jurisdiction

         A judgment or order by a court without the power or jurisdiction to render it is void. See Urbish v. 127th Judicial Dist. Court, 708 S.W.2d 429, 431 (Tex. 1986) (orig. proceeding). All courts accordingly are obliged "to ascertain that subject matter jurisdiction exists regardless of whether the parties have questioned it." City of Houston v. Rhule, 417 S.W.3d 440, 442 (Tex. 2013) (per curiam) (quoting In re United Servs. Auto. Ass'n, 307 S.W.3d 299, 306 (Tex. 2010) (orig. proceeding)). The requirement that a court must determine whether it has subject-matter jurisdiction applies to appellate courts just as it does to trial courts. See Pidgeon v. Turner, No. 15-0688, -S.W.3d-, 2017 WL 2829350, *6 (Tex. June 30, 2017); Thai Xuan Vill. Condo. Ass'n, Inc. v. Hien Luu, No. 14-15-00873-CV, 2016 WL 6887344, *2 (Tex. App.-Houston [14th Dist.] Nov. 22, 2016, no pet.) (mem. op.). Thus, before we can reach the merits of the trial court's challenged rulings, we first must determine whether we have jurisdiction to do so.

         A. Finality of the Trial Court's Order Approving the Settlement

         As part of Susan's first issue, she challenges the trial court's March 2, 2016 order approving the settlement-or more precisely, Legacy's sale of the judgment against Ronald-both on the merits and on the ground that the trial court lacked jurisdiction over the case. We have appellate jurisdiction only over final judgments and over statutorily authorized interlocutory appeals. See Ogletree v. Matthews, 262 S.W.3d 316, 318 n.1 (Tex. 2007). This is not a statutorily authorized interlocutory appeal, nor do the parties contend otherwise. We therefore lack jurisdiction to review the March 2, 2016 order unless it is a final order.

         Ordinarily, there is only one final judgment in a case. See Ventling v. Johnson, 466 S.W.3d 143, 149 (Tex. 2015) (citing Tex.R.Civ.P. 301). As a rule, a judgment must dispose of all legal issues between or among all parties to be a final judgment. See Jack B. Anglin Co. v. Tipps, 842 S.W.3d 266, 272 (Tex. 1992) (orig. proceeding), superseded by statute on other grounds as stated in In re Santander Consumer USA, Inc., 445 S.W.3d 216, 218 (Tex. App.-Houston [1st Dist.] 2013, orig. proceeding). Because Ronald's and Stacy's claims against Susan remain pending, the trial court's order approving the settlement of the Trust's judgment against Ronald does not constitute a final order by this definition. There are, however, exceptions to the general rule that a final, appealable judgment must dispose of all issues and all parties.

         As the Texas Supreme Court held in Huston v. F.D.I.C., "a trial court's order that resolves a discrete issue in connection with any receivership has the same force and effect as any other final adjudication of a court, and thus, is appealable." 800 S.W.2d 845, 847 (Tex. 1990) (op. on reh'g). Because the trial court's order approving the receiver's sale to Ronald of the Trust's judgment against him resolved this discrete issue, the order is a final, appealable judgment. See id. at 848 (discussing the policy reasons for concluding that a trial court's approval and confirmation of a receiver's sale of property is a final appealable judgment).

         In the remainder of Susan's first issue, she argues that the trial court lacked jurisdiction to render its June 2015 order removing her as trustee and appointing a receiver. Ronald states that Susan's attempted appeal of that ruling is untimely, and thus, we lack jurisdiction to review it.[1] See Gibson v. Cuellar, 440 S.W.3d 150, 155 (Tex. App.-Houston [14th Dist.] 2013, no pet.). However, Susan's only complaint about the June 2015 order is that the trial court lacks jurisdiction over the entire case, which is the same jurisdictional argument she makes in her timely appeal of the trial court's March 2016 order. If Susan is correct and the trial court lacked jurisdiction over the case, then all of the trial court's actions are void. Thus, if we can reach Susan's argument that the March 2016 order is void for lack of jurisdiction, then our disposition of that argument applies equally to the trial court's June 2015 order. First, however, we must address Ronald's and Legacy's remaining challenges to our own subject-matter jurisdiction.

         B. Lack of Mootness

         Ronald and Legacy next contend that we lack subject-matter jurisdiction to review the order approving the settlement because the issue was rendered moot when the settlement closed. See Matthews ex. rel. M.M. v. Kountze Indep. Sch. Dist., 484 S.W.3d 416, 418 (Tex. 2016) ("The mootness doctrine applies to cases in which a justiciable controversy exists between the parties at the time the case arose, but the live controversy ceases because of subsequent events."); Kessling v. Friendswood Indep. Sch. Dist., 302 S.W.3d 373, 384 n.9 (Tex. App.-Houston [14th Dist.] 2009, pet. denied) (explaining that courts lack subject-matter jurisdiction over a moot claim). Ronald further contends that because Susan's appeal of the order approving the settlement is moot, her challenge to the trial court's denial of her motion to continue the hearing on the application for approval similarly is moot.

         According to Ronald, Susan's appeal of the order approving the settlement became moot when the settlement agreement closed because he conveyed to the Trust his interests in two properties, one of which has been leased to a third party. Ronald also signed a promissory note and made the first payment of the cash portion of the settlement. Finally, the receiver filed a satisfaction of judgment. These facts, however, do not indicate that the appeal is moot.[2]

         An appeal is rendered moot when there ceases to be a live controversy between the parties such that appellate relief would be futile. See Marshall v. Hous. Auth. of City of San Antonio, 198 S.W.3d 782, 787 (Tex. 2006). The conveyance of property can moot an appeal. For example, in Mitchell v. Turbine Resources Unlimited, Inc., No. 14-15-00417-CV, -S.W.3d-, 2017 WL 1181228, at *5 (Tex. App.-Houston [14th Dist.] Mar. 30, 2017, pet. filed), the appellant sought reversal of the trial court's order authorizing a receiver to sell vehicles in which the appellant claimed an ownership interest. The appeal became moot when the appellant herself sold the vehicles and thereby eliminated her claim that she owned them. See id.

         Unlike the facts in Mitchell, however, the parties in this case continue to have a live controversy for which appellate relief potentially is available. The promissory note can be rescinded; money paid can be refunded; and a "satisfaction of judgment" can be set aside. Cf. Brown v. Enter. Recovery Sys., Inc., No. 02-11-00436-CV, 2013 WL 4506582, *1 (Tex. App.-Fort Worth Aug. 22, 2013, pet. denied) (mem. op.) (reversing in part and remanding, despite the filing of a notice of satisfaction of judgment). As for the conveyance of real property, the settlement resulted in conveyances only from Ronald to Legacy, in its capacity as the Trust's receiver, and if Susan should prevail, these transactions can be reversed. Although Ronald implies that the property was leased after he conveyed it, the record shows that the opposite is true: the lease was effective on July 1, 2015, nearly nine months before Ronald conveyed the property.

         Because the evidence before us does not indicate that anything has been done that cannot be undone, or that the parties' dispute about the settlement has ceased to be a live controversy, we conclude that Susan's appeal of the order approving the settlement is not moot.

         C. The Denial of Susan's Motion for a Continuance

         In addition to asserting the mootness argument addressed above, Ronald contends that we lack jurisdiction to review the denial of Susan's motion to continue the hearing on Legacy's application for approval of the settlement agreement because Susan (1) failed to reduce the trial court's ruling to writing, and (2) failed to list the denial of her motion for a continuance in her notice of appeal.

         1. Susan's Failure to Reduce the Trial Court's Ruling to Writing

         Ronald contends that we lack jurisdiction to address this issue because Susan did not have the denial reduced to a written order, and he asserts that "[c]ourts dismiss for lack of jurisdiction appeals of oral orders." In support of this position, Ronald cites Archer v. Tunnell, No. 05-15-00459-CV, 2016 WL 519632, at *3 (Tex. App.-Dallas Feb. 9, 2016, no pet.) (mem. op.). We are not bound by Archer, but even if we were, we would consider Ronald's reliance on Archer misplaced.

         In Archer, the Fifth Court of Appeals held that it lacked jurisdiction to review the denial of a summary-judgment motion and a motion to dismiss or abate. See id. at *2. The trial court orally denied one of the appellant's summary-judgment grounds, but did not rule, orally or in writing, on the appellant's other summary-judgment grounds or the motion to dismiss or abate. See id. Our sister court held that it lacked jurisdiction to review the trial court's alleged denial of the summary-judgment motion and the motion to dismiss or abate because "an interlocutory appeal may be perfected only from a written order, not an oral ruling." Id. at *3.

         We need not decide whether we agree with the Archer court's reasoning, because the facts in this case are distinguishable. Here, the trial court announced on the record that it denied Susan's motion to continue the hearing on Legacy's application for approval of the settlement. The ruling was not required to be reduced to writing; the oral pronouncement was sufficient. See Dunn v. Dunn, 439 S.W.2d 830, 832 (Tex. 1969); see also Tex. R. Civ. P. 306a(2) ("Judges, attorneys and clerks are directed to use their best efforts to cause all judgments, decisions and orders of any kind to be reduced to writing and signed by the trial judge with the date of signing stated therein." (emphasis added)). The interlocutory ruling denying Susan's motion for continuance was merged into the written final judgment approving the settlement. See Roccaforte v. Jefferson County, 341 S.W.3d 919, 924 (Tex. 2011) ("The final judgment necessarily replaced the interlocutory order, which merged into the judgment . . . ."); In re Newsome, Nos. 14-12-01083-CV and 14-12-01084-CV, 2012 WL 6163124, at *1 (Tex. App.-Houston [14th Dist.] Dec. 11, 2012, orig. proceeding) (per curiam) (mem. op.) ("An interlocutory order is appealable when it has merged into a subsequent final, appealable order.").

         2. Susan's Failure to List the Denial of the Motion for Continuance in Her Notice of Appeal

         Ronald also asserts that we lack jurisdiction to review the denial of Susan's motion for continuance because it is not listed in her notice of appeal. This argument is contrary to the Texas Rules of Appellate Procedure and to binding precedent from both the Texas Supreme Court and our own court.

         A party is not required to describe in a notice of appeal each interlocutory ruling to be challenged in the appellate court, but need only "state the date of the judgment or order appealed from." See Tex. R. App. P. 25.1(d)(2); see also Perry v. Cohen, 272 S.W.3d 585, 587 (Tex. 2008) ("We initially note that the shareholders were not required to state in their notice of appeal that they were challenging the interlocutory order granting special exceptions. They were required only to state the date of the judgment or order appealed from-in this instance the order dismissing their suit."); Valls v. Johanson & Fairless, L.L.P., 314 S.W.3d 624, 631 n.7 (Tex. App.-Houston [14th Dist.] 2010, no pet.) ("A notice of appeal need not identify every adverse interlocutory ruling the appellant intends to challenge; instead, the notice must state only the date of the judgment or order from which he appeals-in this case, the order granting summary judgment.").

         Because Susan complied with Texas Rule of Appellate Procedure 25.1(d)(2) by stating in her notice of appeal her intent to appeal the trial court's final order signed on March 2, 2016, she invoked our jurisdiction not only to review that order but also to address interlocutory rulings that were merged into it.

         In sum, we have jurisdiction to consider Susan's appeal of the trial court's written order granting Legacy's application for approval of the settlement agreement and the trial court's oral ruling denying Susan's motion for a continuance of the hearing on that application. We now turn to Susan's first issue, in which she argues that the statutory probate court's ...

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