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In re Troy S. Poe Trust

Court of Appeals of Texas, Eighth District, El Paso

August 28, 2019

IN THE MATTER OF TROY S. POE TRUST

          Appeal from Probate Court No. 1 of El Paso County, Texas (TC # 2016-CPR00308)

          Before McClure, C.J., Rodriguez, and Palafox, JJ.

          OPINION

          ANN CRAWFORD MCCLURE, CHIEF JUSTICE

         Under the Troy S. Poe Trust, the trustees are required to agree on all decisions. The problem here is that the two remaining trustees also happen to be combatants in other protracted litigation. In this proceeding, one of the trustees moved to modify the trust to: (1) add a third trustee into the mix; (2) require only a majority, and not a unanimous decision by the trustees; and (3) further define the scope of acceptable trust expenditures. Following a bench trial, the probate court agreed and modified the terms of the trust as requested. The other trustee now appeals that judgment, claiming in main part that the probate court's decision fails to conform as nearly as possible to the probable intention of the settlor, and in any event, a jury should have decided disputed fact questions.

         We hold that the predicate questions of whether the trust needed to be modified was a fact question that should have been decided by a jury upon a proper jury demand. Because we remand for a new trial on that issue, we find it unnecessary to decide if the trial court's particular modifications were proper.

         FACTUAL BACKGROUND

         The Troy S. Poe Trust

         Richard C. Poe, who commonly appeared in commercials as "Dick Poe," operated a number of car dealerships. We will refer to him in this opinion as Dick Poe, or more simply, Dick. At the time of his death, he had two adult sons, Troy Poe ("Troy') and Richard C. Poe II ("Richard"). Troy was born with cerebral palsy and is totally disabled. Fortunately for Troy, Dick's dealerships were financially successful which allowed Dick to provide for Troy's security.

         To that end, in 2007 Dick set up a trust to provide for Troy, appropriately enough called the Troy S. Poe Trust. When it was established, the trust included three named trustees: Dick, Richard, and the accountant who at that time did work for both--Anthony Bock. If one of the originally named trustees failed or ceased to serve, the trust document stated that "the remaining Trustees or Trustee shall have the right to serve as sole Trustee hereunder, without appointment of a successor co-Trustee." Upon the last remaining trustee's failure to serve, a specific bank was named as the sole trustee. But in case of a resignation that would otherwise leave no remaining trustees, the trust document provided that the resignation would not be effective until Dick, or if he was unable, a court of competent jurisdiction, appointed a successor trustee.

         By 2017, the trust had two significant assets. First, it held title to land on which one of Dick's dealerships operated and for which it paid rents to the trust. It also held title to a shopping center and collected rental payment from that property. Under the terms of the trust, the trustees must use the net income for the benefit of Troy. The trustees were also authorized to invade the principal of the trust, but only for Troy's "health, education, maintenance or support." As of the date of the proceeding below, however, the trust had never needed to rely on principal to pay any of Troy's expenses.[1] Upon Troy's death any remaining trust assets would be paid to Dick's "then living issue, in equal shares, per stirpes." At the time of this proceeding, the only living issue was Richard. The trust was irrevocable and qualified as a spendthrift trust. See Tex.Prop.Code Ann. § 112.035(a).

         The trust also contained a provision that the trustees were to take actions "jointly" which the parties agree requires unanimity for trustee decisions. Despite this term, from its inception in 2007 until Dick's death on May 16, 2015, Dick made the majority of the decisions regarding Troy and distributions from the trust. There was one notable exception. Troy has a full-time caretaker, Angel Reyes, Jr. who has provided for Troy's care since 1998. In September 2010, the trust entered into a ten-year "Care Agreement" with Reyes that set out the terms of his duties, salary, and benefits. All three trustees signed the original care contract in 2010 and a ten-year extension executed in February 2015.[2]

         The nature of the care agreement necessitates that the trust makes periodic on-going decisions. Troy lives in a house that Dick had specially built for him. Reyes, per the terms of the Care Agreement, also lives in the same house. The care agreement contemplates that Reyes will advance the cost of "reasonable out-of-pocket expenses for Troy's care and maintenance" which would be reimbursed, but only up to a monthly cap. Reyes was responsible for providing documentation to establish the bona fides of those expenses. In practice, those expenses included household expenses such as food and utilities. The trust was also responsible for other expenses, such as transportation, insurance, and a share of a housekeeper's cost. Each month Reyes would submit for review a recap of those expenses for reimbursement. Additionally, Reyes travels with Troy. The trust (and thus the trustees) must review those expenditures, and others, such as medical equipment, medical expenses, and the like. During his life, Dick handled those functions.

         The Share Issuance Litigation

         The origin of this suit begins with Dick's death in 2015. As explained in more detail in another case before this Court, several weeks before his death Dick instructed his lawyer, Paul Sergent, Jr., to proceed with a stock transaction that would effectively ensure that control of Dick's dealerships would pass to his executors, and not to Richard.[3] To accomplish the transaction, Anthony Bock as the company's accountant calculated the "book value" of the new stock being issued. And likely more upsetting to Richard, Bock had also been named as a co-executor under Dick's will, meaning that Bock and not Richard would be running the dealerships and other family businesses. Nor did it help matters that Richard was not told about the stock purchase until after Dick's death.

         Richard sued Bock, Paul Sergent, Jr., and Karen Castro (the other executor of Dick's estate) in what the parties refer to as the share issuance litigation. By the time Richard filed an Eighth Amended Petition in that suit, he asserted a number of claims against Bock, including breaches of fiduciary duties. Richard sought rescission of the share issuance, as well as actual and punitive damages from Bock and others. He also sought to remove Bock as a trustee from a separate estate trust set up under Dick's will. Richard premised that claim on the "hostility, ill will, and distrust" between Bock on the one hand, and Richard and Troy, on the other. He also sought an accounting for estate assets and distributions. Several claims in the share issuance litigation were tried in May of 2017, resulting in cancellation of the shares, but no personal liability for damages against Bock. Both sides appealed that judgment to this Court.

         Post-Death Administration of the Troy S. Poe Trust

         After Dick's death, Bock looked at the history of distributions that Dick had made under the trust and essentially tried to follow the same pattern. Just like Dick had not regularly included the other co-trustees, Bock initially did not involve Richard in that process. Following trial of the share issuance litigation in May of 2017, however, Richard's lawyer served a letter on Bock's attorney demanding that Bock "strictly comply" with the Trust's requirement that the co-trustees "act jointly" in taking actions on behalf of the trust. Following that communication, Bock began forwarding copies of Reyes's reimbursement requests, other household bills, and other invoices that were submitted to the trust for Richard's approval. All communications were accomplished by email, with carbon copies to Bock's and Richard's litigation counsel, as well as Troy's guardian ad litem. Bock declined to engage in any oral communications with Richard.[4]

         The emails covered a period from July 2017 up to January 2018 when this matter was tried. For that period, Bock claimed that Richard delayed in responding to some requests and ignored others.[5] By late December 2017, Bock started to include language in reimbursement requests requiring a response by date certain, and failing that, he would proceed with issuing the reimbursement check. Richard claimed he did not always receive the emails and requested that Bock "text" him if Richard did not timely respond to an email. He also pointed to delays by Bock and Angel Reyes in submitting bills.[6]

         On some issues, Richard and Bock reached agreement. For instance, they agreed that none of Reyes's expense reports should include reimbursement requests for alcohol. They eventually agreed on a cheaper automobile insurance policy. Richard also approved Bock's accounting firm's statements for services rendered to the trust. On other issues they disagreed. Bock wanted a standing agreement on reoccurring expenses, such as Reyes's bi-monthly salary, Troy's health insurance premium, and yard and pool services. Richard declined to give preapproval on any expense. Annually, Dick had given Reyes a Christmas bonus out of his own pocket. Bock wanted the trust to continue that practice for 2017, but Richard declined. Reyes's wife and child also lived in the house, and his family regularly attended dinners and other social outings. Reyes and his immediate family also traveled with Troy. Bock reasoned that Dick had paid a share of those expenses, and Troy considered Reyes, his wife, child, and their extended family as part of his own family. Richard, however, objected to reimbursing expenses for the extended family members.

         And on one issue they absolutely disagreed. Bock had submitted his attorney's bill for conducting this litigation to the trust. Richard refused to approve any of those bills.

         Most of the communications were civil, but some less so.[7] Bock was also made aware of a text message where Richard accused him of theft. Richard referred to Bock as "the crooked CPA" who was trying to "steal all [Troy's] money" and "take over his trust funds" with Angel Reyes "behind a lot of it[.]" He accused Bock of paying for a vehicle and a home remodeling project with "stolen money from Troy"-- a claim that Bock steadfastly denied.

         PROCEDURAL BACKGROUND

         Bock originally filed this suit on March 1, 2016. He sought to modify the trust only with respect to the number and manner of succession of the trustees, as well as the unanimity requirement for trust decisions. The probate court appointed a guardian and attorney ad litem for Troy. At least from the docket sheet, the case was inactive until July 2017 following the trial of the share issuance litigation.

         Bock then filed an amended petition which again sought the addition of a third trustee, and modification of the unanimity requirement. The amended petition also sought other changes: (1) authorizing travel and vacation expenses for Troy along with travel companions; (2) requiring that the trustees give primary consideration to Troy, and not any contingent remainder beneficiary; (3) that the trustees take into consideration Troy' standard of living at the time of Dick's death and the "substantial ancillary expenses" due to Troy's disability; and (4) that the trustees consider that indirect benefits to Troy's caretakers and their families enhance the quality and enjoyment of Troy's life. Richard responded with a counterclaim, asserting that Bock failed to include Richard in trust decisions. He ...


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