In Neal v. Neal, the court of appeals affirmed a trial court’s judgment resolving who were the correct beneficiaries of a trust. No. 05-19-00364-CV, 2020 Tex. App. LEXIS 4514 (Tex. App.—Dallas June 17, 2020, no pet. history). The trial court’s judgment declaring the decedent’s sister’s children the remainder beneficiaries of his trust was in line with a prior agreed judgment and was proper because the estate’s assumption ignored the parties’ compromise settlement agreement and the agreed judgment, both of which clearly provided that the trust was amended. The court held: “We interpret an agreed judgment like a contract between the parties, seeking to harmonize and give effect to all its provisions so that none are rendered meaningless.” Id. The court then concluded that the earlier agreed judgment unambiguously stated that the sister’s children were the only remainder beneficiaries of the decedent’s trust. The trial court’s judgment was affirmed.

In JTREO, Inc. v. Hightower & Assocs., the buyer of a note and mortgage sued the attorney for the lender who facilitated the transaction by loaning money to the buyer for breach of fiduciary duty arising from the fact that there was no mortgage title policy endorsement as represented in the transaction. No. 03-19-00255-CV 2020 Tex. App. LEXIS 4523 (Tex. App.—Austin June 18, 2020, no pet. history). The attorney filed a no-evidence motion for summary judgment, alleging that he did not owe a fiduciary duty. The trial court granted the motion, and the plaintiff appealed. The court of appeals affirmed. The court noted that there was no written escrow agreement, and that the attorney was not a properly appointed escrow agent as a matter of law and did not owe any fiduciary duties as an escrow agent. The court stated:

Furthermore, the evidence conclusively establishes that at all relevant times, Hightower served solely as Libertad’s attorney with respect to the transaction, and JTREO acknowledged as much in a two-page disclosure that it signed. Texas courts have routinely held that no fiduciary duty exists between a lender (i.e., Libertad and its agent Hightower) and a borrower (i.e., JTREO). Moreover, as Libertad’s attorneys, Hightower could not have held the funds in “escrow” for its own principal (or anyone else), because as long as the funds are in the possession and control of the principal’s attorney, they remain subject to the control of the principal.

Id. Nonetheless, JTREO contends that Hightower “served as the closing/escrow agent for the sale of the Note” through its actions, despite the lack of a written escrow agreement and Hightower’s undisputed role as Libertad’s attorneys. The court disagreed because the attorney was not acting as a title company and earned no fees for being an escrow agent. “We hold that Hightower did not owe a fiduciary duty to JTREO as a matter of law…” Id.

In Smith v. Malone, parties litigated the propriety of certain transactions in an estate proceeding before a statutory probate court. No. 01-19-00266-CV, 2020 Tex. App. LEXIS 4622 (Tex. App.—Houston [1st Dist.] June 23, 2020, no pet. history). At trial, the estate’s representative asked for a record, but the court refused. After there was an adverse judgment, the representative appealed and asserted, among other arguments, that the judgment must be reversed due to the failure of the trial court to make a transcript of the evidence. Then court of appeals agreed. The court first discussed the general requirements for trial courts to make a record:

Section 52.046(a) of the Government Code placed the obligation on Scott, not the probate court, to ensure that a court reporter recorded oral testimony. See Tex. Gov’t Code § 52.046(a) (requiring an official court reporter to take full shorthand notes of oral testimony “on request”). An official court reporter must take full shorthand notes of oral testimony “on request.” Id. § 52.046(a). As Smith notes, Section 52.046(d) of the Government Code creates an exception to the “on request” language found in 52.046(a). Subsection (d) mandates that a “judge of a county court or county court at law shall appoint a certified shorthand reporter to report the oral testimony given in any contested probate matter in that judge’s court.” Id. § 52.046(d).

The court then addressed whether this rule applied to statutory probate courts:

The Estates Code defines the generic term “court” to include “a court created by statute and authorized to exercise original probate jurisdiction.” Tex. Estates Code § 22.007(a)(2). The Code provides that the terms “county court” and “probate court” are synonymous and both include “a court created by statute and authorized to exercise original probate jurisdiction.” Id. § 22.007(b)(2). The Estates Code defines a “statutory probate court” as “a court created by statute and designated as a statutory probate court under Chapter 25 [of the] Government Code. For purposes of this code, the term does not include a county court at law exercising probate jurisdiction unless the court is designated a statutory probate court under Chapter 25 [of the] Government Code.” Id. § 22.007(c). [A] plain reading of these statutory provisions leads us to conclude it does [apply to statutory probate courts]. A statutory probate court is a court created by statute and authorized to exercise original probate jurisdiction. See id. §§ 22.007(c), 32.002(c). As such, a statutory probate court meets the definition of a “county court.” Id. § 22.007(b)(2). And the Government Code directs that a judge of a “county court . . . shall appoint a certified shorthand reporter to report the oral testimony given in any contested probate matter in that judge’s court.” Tex. Gov’t Code § 52.046(d)…

Id. The court concluded that the requirement of a court reporter was mandatory on the statutory probate court, and as the court did not have a reporter, the error required reversal.

Interesting Note: A party should always request a record for any evidentiary hearing. When no reporter’s record is filed, a court of appeals must assume the evidence supports the trial court’s ruling and summarily affirm. Bryant v. United Shortline Inc. Assurance Servs., 972 S.W.2d 26, 31 (Tex. 1998). So, if a party wants to challenge a trial court’s ruling or judgment based on evidentiary complaints, it must present a record of the evidence to the court of appeals. This is why the Malone opinion is so important. If a statutory probate court could deny a party the right to a record, even when requested, then the court would effectively eviscerate any right of appellate review. A judge may like that, but it is not fair and not due process.

Further, a party wanting to challenge the trial court’s ruling on an evidentiary matter should also request findings of fact and conclusions of law. When no findings of fact and conclusions of law are filed, a court of appeals must presume the trial court made all the necessary findings to support its judgment. Roberson v. Robinson, 768 S.W.2d 280, 281 (Tex. 1989). This may seem a little counter-intuitive: why would a losing party want the trial court to explain why the party lost? I have had many attorneys (even smart ones) make this exact point. But, if the trial court does not enter findings, the appellate court will presume that the losing party lost on all issues of fact. So, express findings cannot make it any worse and likely will assist the losing party in some respect. It should be mentioned that a party has a right to findings and conclusions after a bench trial if the party properly preserves that right, which can be a little tricky. A party does not have a right to findings and conclusions after an interlocutory order, but a trial court can enter findings and conclusions after such an order and often does when requested. So, a party who wants to challenge an interlocutory order should also request findings and conclusions.

In Caceres v. Kerri Grahamas Dependent Adm’r of the Estate of Alicia Maribel Procell, decedent was survived by a minor child and her estate was insolvent. No. 14-18-00826-CV, 2020 Tex. App. LEXIS 4198 (Tex. App.—Houston [14th Dist.] May 28, 2020, no pet. history). The trial court appointed a dependent administrator and approved the administrator’s inventory, appraisement, and list of claims. The administrator had included the decedent’s homestead on the estate’s inventory and represented that the estate had a claim for the rental income from the homestead. The trial court overruled the objections of two of the children to the inventory, appraisement, and list of claims, and granted the administrator’s motion to terminate the property’s homestead protection and to subject it, and the income it generated, to the dependent administration.

On appeal, the appellate court disagreed with the trial court because one of the decedent’s children was a minor when her mother died. The court held that the homestead remains exempt as a matter of law from the claims of the estate’s creditors and is not subject to administration. The court also held that title to the homestead vested in the decedent’s four children upon her death; thus, rent due after her death belongs to the estate. The court discussed the law governing homestead and a decedent’s minor children:

[A]n application by a person authorized to act on the minor’s behalf, the court must “set aside . . . the homestead for the use and benefit of . . . the minor children.” This means that, with a few narrow exceptions not presented here, the homestead is not liable for the payment of any of the estate’s debts. Unless one of the express exceptions applies, the homestead is not subject to administration.  Instead, the decedent’s children share “absolute title” to the homestead. Second, a trial court has discretion to permit a minor’s guardian to “to use and occupy” the homestead under a court order. Third, the homestead may not be partitioned among the decedent’s heirs for so long as the trial court permits the guardian of the decedent’s minor children “to use and occupy” the homestead.

Id. The court held that the fact that the administrator included the homestead property in the inventory did not mean that it was presumptively homestead:

Although there is case law holding that inclusion of real property in the administrator’s inventory is prima facie evidence that the property is not a homestead, and thus, a homestead should not be included on the inventory, we cannot say that the inclusion of homestead property in the administrator’s inventory is per se erroneous, because the Texas Estate Code appears to permit its inclusion. “Estate” is statutorily defined to include all of a decedent’s property, and the homestead falls within that broad definition.

Id.

The court also disagreed with the trial court’s conclusion that the minor’s homestead’s rights should have been terminated when she turned eighteen. The court held: “the homestead passed free of claims by or against the estate to the decedent’s children upon their mother’s death, and it continues to be exempt homestead property even though Jennifer is no longer a minor.” Id. The court reversed the trial court’s orders and remanded for further proceedings.

In In re Estate of Scott, an annuity company sued a customer’s estate for not reporting the death of his wife, which resulted in him receiving larger monthly payments after her death than he was entitled to under the contract. No. 04-19-00592-CV, 2020 Tex. App. LEXIS 4059 (Tex. App.—San Antonio May 27, 2020, no pet. history). The customer died in 2013, and the annuity company discovered the overpayments in 2014. In 2016, the annuity company filed suit against the customer’s estate for the overpayments. Both parties filed summary judgment motions, and the trial court entered judgment for the annuity company. The estate appealed.

The court of appeals reversed and rendered for the estate. The court first addressed the annuity company’s breach of contract claim. The court held that the contract did not expressly or impliedly require the surviving spouse to report the death of the first spouse. The court held:

In sum, the annuity contract, taken as a whole, does not evidence an intent to impose an implied obligation on Harold to notify Principal of Emily’s death or an implied obligation to return money Harold received in excess of the stated contract amount. Moreover, it is undisputed that this was Principal’s contract. “In Texas, a writing is generally construed most strictly against its author and in such a manner as to reach a reasonable result consistent with the apparent intent of the parties.” Principal, a sophisticated commercial enterprise, did not include express provisions requiring Harold to notify Principal of Emily’s death or to return money received in excess of the stated contract amount. The annuity contract, as written, does not evidence an intent to imply these obligations. Because we conclude the annuity contract, taken as a whole, does not support imposition of an implied obligation on Harold to notify Principal of Emily’s death or an implied obligation to return money Harold received in excess of the stated contract amount, Principal cannot show Harold breached the annuity contract.

Id.

The court then reviewed the annuity company’s money-had-and-received claim. The court described the claim thusly: “Money had and received is an equitable doctrine designed to prevent unjust enrichment. To prevail on a claim for money had and received, the plaintiff need only prove that the defendant holds money which in equity and good conscience belongs to the plaintiff.” Id. The court held that the claim was barred by the two-year statute of limitations as the annuity company did not file its claim within two years of discovering the overpayments.

Finally, the court rejected the annuity company’s fraud by nondisclosure claim. To establish fraud by non-disclosure, “Principal must prove: (1) Harold deliberately failed to disclose material facts; (2) Harold had a duty to disclose such facts to Principal; (3) Principal was ignorant of the facts and did not have an equal opportunity to discover them; (4) by failing to disclose the facts, Harold intended to induce Principal to act or refrain from acting; and (5) Principal relied on the non-disclosure, which resulted in injury.” Id. The court held that the annuity company had an equal opportunity to discover its customer’s death:

Principal had an equal opportunity to discover Emily’s death. Principal had internal procedures in place to discover this very type of information. Angela Essick, Principal’s corporate representative, testified that between 2001 and the present, Principal utilized a third-party company and the Social Security Master Index to provide it with a list of names and social security numbers of the deceased on a quarterly basis. Principal would compare these names and social security numbers with those of its annuitants. Principal failed to discover Emily’s death through these channels because it never obtained Emily’s social security number. Principal cannot rely on its internal oversight to claim it did not have an equal opportunity to discover Emily’s death.

Id. Accordingly, the court dismissed all of the annuity company’s claims and rendered judgment for the estate of the customer.

Author David F. Johnson has been named to the board of directors for the Texas Board of Legal Specialization (TBLS). David will serve a three-year term beginning in July of 2020. The TBLS board is composed of twelve members appointed by the President of the State Bar of Texas, with the approval of its Board of Directors. The TBLS was established in 1974 by the Supreme Court of Texas. TBLS certifies lawyers and paralegals that have substantial, relevant experience in select areas of law, completed continuing legal education hours in the specialty area, and passed a rigorous exam. Out of 110,000 lawyers that are licensed to practice in Texas, only 7,400 are Board Certified. David one of less than thirty attorneys in Texas who are Board Certified in Civil Appellate Law, Civil Trial Law, and Personal Injury Trial Law. David’s main practice area is fiduciary litigation.

 

In Hanschen v. Hanschen, a trustee challenged a default judgment. No. 05-19-01134-CV, 2020 Tex. App. LEXIS 4075 (Tex. App.—Dallas May 28, 2020, no pet. history). The family sued the trustee in his personal capacity and in his capacity as trustee for breaching fiduciary duties. While the trustee was in Texas, the family served him in his personal capacity. The family then obtained a default judgment against him in both capacities when he did not file an answer. Later, the trustee filed a special appearance challenging the court’s personal jurisdiction, and the trial granted the motion. The family then appealed.

The court of appeals reversed the special appearance against the trustee in his personal capacity. The court held that because the trustee was personally served in Texas, the trial court had personal jurisdiction over him:

In this case, the family personally served James with the petition and citation while he was in Texas. The family concedes they “have never asserted that Texas has general jurisdiction over James or that the traditional minimum contacts analysis would be met in the absence of his physical presence.” They are correct and the case law is clear that a trial court has authority to exercise in personam jurisdiction over a nonresident where the court’s jurisdiction grew out of the personal service of citation upon the nonresident within the state. A nonresident, merely by reason of his nonresidence, is not exempt from a court’s jurisdiction if he voluntarily comes to the state and thus is within the territorial limits of such jurisdiction and can be duly served with process.

Id. The trustee also argued that the court did not have adequate jurisdiction over him in his personal capacity because there were no claims against him in that capacity, but the court of appeals disagreed:

While we may agree with James that the default judgment granted relief against the entities for which it would be necessary for Texas courts to have jurisdiction over James in representative capacities, the family’s petition pleaded causes of action against James individually for breaches of fiduciary duties arising from his role as trustee of the Progeny Trust and his roles in NBR-C2, NBR-C3, and NBR-Needham. The family seeks exemplary damages against James for these alleged breaches of fiduciary duties. James does not make a specific argument why these claims are not pleaded against him personally. In Texas, generally an agent is personally liable for his own tortious conduct. For these reasons, we agree with the family that James was personally served with process in Texas, so the trial court has personal jurisdiction over him in that capacity.

Id.

The court of appeals then turned to whether the trial court had personal jurisdiction over the trustee in his capacity as trustee. The court noted that the citation was not issued to him in that capacity. The court held that this defect was dispositive and affirmed the special appearance for the trustee in his representative capacity:

We have held, “[t]he capacity in which a non-resident has contact with a forum state must be considered in the jurisdictional analysis.” James was not served with a citation directed to him in any representative capacity; only “JAMES HANSCHEN WHEREEVER HE MAY BE FOUND.” At oral argument, the family argued the listing of all the parties in the citation was sufficient to constitute service on James in each representative capacity he was listed as a defendant. We reject this contention and the family’s counsel acknowledged in oral argument a citation addressed to one defendant inadvertently served on a different, unrelated defendant would not constitute good service of process merely because all defendants’ names were in the list of defendants in the style of the lawsuit… In this case, James was not served with citations which were returned to the court clerk stating he had been served in his representative capacities. Any failure to comply with the rules regarding service of process renders the attempted service of process invalid, and the trial court acquires no personal jurisdiction over the defendant. A default judgment based on improper service is void. Accordingly, the trial court did not have personal jurisdiction over James in his representative capacities.

Id.

In the Estate of Trickett, two petitioners filed an heirship proceeding to establish their status as the sole heirs and rightful owners of a royalty interest. No. 13-19-00154-CV, 2020 Tex. App. LEXIS 3949 (Tex. App.—Corpus Christi May 14, 2020, no pet. history). Others opposed the application as they claimed the same interest from the decedent’s husband’s estate. The trial court ruled for the petitioners, and the opposing parties appealed. The court of appeals first held that the statute of limitations for heirship proceedings is four years. The court then held that the applicant’s claim was barred because it accrued over forty years ago:

[A]ny alleged legal injury of which the appellees now complain occurred in 1972 when Claralyn passed away and Claralyn’s property vested in Robert. The deeds gave at least constructive knowledge that any interest appellees possessed in the property was at stake. However, appellees did not file suit until March 25, 2015, more than forty-two years after her death. We therefore conclude that appellees’ claims are barred by the four-year statute of limitations.

Id.

Interesting Note: The residual four-year statute of limitations should not apply in cases moving forward because Section 202.0025 of the Texas Estates Code now allows an heirship proceeding to be filed at any point in time after the person’s death. Tex. Est. Code Ann. § 202.0025. That statute did not apply to the case cited above because the decedent died before January 1, 2014. See Act of May 27, 2013, 83rd Leg., R.S., ch. 1136, § 62(f), 2013 Tex. Gen. Laws 2737, 2754. Instead, the court of appeals had to apply the statutes in force at the time of death. See Dickson v. Simpson, 807 S.W.2d 726, 727 (Tex. 1991).

In Episcopal Diocese of Fort Worth v. Episcopal Church, the Texas Supreme Court addressed whether a withdrawing faction was entitled to church property and also addressed a trust issue. No. 18-0438, 2020 Tex. LEXIS 434 (Tex. May 22, 2020). Following a disagreement over religious doctrine dealing with homosexuals, the Episcopal Diocese of Fort Worth and a majority of its congregations withdrew from The Episcopal Church. The church replaced the diocese’s leaders with church loyalists, and both the disaffiliating and replacement factions claimed ownership of property held in trust for the diocese and local congregations. Interestingly, on a congregation by congregation approach, the withdrawing factions may be been in the minority.

The church relied on the Dennis Canon and argued that it was a trust that protected the property for it. That canon provided, in relevant part, that “all real and personal property held by or for the benefit of any Parish, Mission or Congregation is held in trust for [TEC][.]” The parties dispute the trust’s validity under Texas law and its revocability.

The Texas Supreme Court held that under Texas trust law, a trust may be created by any of the following methods: (1) a property owner’s declaration that the owner holds the property as trustee for another person; (2) a property owner’s inter vivos transfer of the property to another person as trustee for the transferor or a third person; (3) a property owner’s testamentary transfer to another person as trustee for a third person; (4) an appointment under a power of appointment to another person as trustee for the donee of the power or for a third person; or (5) a promise to another person whose rights under the promise are to be held in trust for a third person. Id. (citing Tex. Prop. Code § 112.001).

The Texas Supreme Court held that the Dennis Cannon did not create an irrevocable trust that could not revoked:

A trust is created only if the settlor manifests, in writing, an intention to create a trust, and a settlor may revoke a trust “unless it is irrevocable by the express terms of the instrument creating it or of an instrument modifying it.” Id. The court of appeals held that the Dennis Canon is not a valid trust under Texas law because “an entity that does not own the property to be held in trust cannot establish a trust for itself simply by decreeing that it is the beneficiary of a trust.” As to revocability, we held in Masterson and Episcopal Diocese that even assuming the Dennis Canon is a valid trust, it is revocable under Texas law because it was not made expressly irrevocable. Moreover, “[e]ven if the Canon could be read to imply the trust was irrevocable, that is not good enough under Texas law. The Texas statute requires express terms making [the trust] irrevocable.” For the reasons stated by the court of appeals (among others), the Majority Diocese asserts the Dennis Canon is not a valid trust, but even if it were valid, it was revocable and revoked by the 1989 amendment to the Diocesan Constitution and Canons, nearly two decades before this dispute arose. TEC contends the Dennis Canon creates a valid trust and argues it is entitled to possession of the disputed property under that trust for two independent reasons: (1) the 1989 amendment was ineffective to revoke the Dennis Canon trust because, at that time, the Diocesan Constitution and Canons only authorized amendments to the diocese’s canons that were “not inconsistent” with the national church’s constitution and canons and (2) the trust is irrevocable because it is a contractual trust supported by valuable consideration. Neither argument is persuasive. While it is true, as TEC says, that the diocese’s organizational documents prohibited the adoption of canons inconsistent with the national church’s constitution and canons, revocation is not inconsistent with a revocable trust. Moreover, in the twenty years between revocation and eruption of a dispute over the property, TEC lodged no objection to the amended canon and does not now contend the 1989 amendment is invalid for any other reason than purported “inconsistency.” In the alternative, and contrary to our holdings in Masterson and Episcopal Diocese, TEC insists that the Dennis Canon is irrevocable notwithstanding the absence of express language of irrevocability, as required by Texas Property Code section 112.051.… TEC has not identified any provision constraining revocation of the Dennis Canon, so the statutory requirement of express language retains its legal force.

Id. Therefore, the Court held that no trust existed to protect the church and held for the faction that left the church.

In United States Bank Nat’l Ass’n v. Moss, U.S. Bank (USB) sought to vacate a default judgment in an underlying suit involving title to real property through a bill of review based on allegedly improper service under the Texas Estates Code. No. 05-19-00223-CV, 2020 Tex. App. LEXIS 4030 (Tex. App.—Dallas May 21, 2020, no pet. history). In the underlying case, a home owner sued the lender, who was assigned the deed of trust as a trustee, alleging that the lender’s claims were barred by the statute of limitations. After the trial court entered a default judgment for homeowner, the lender filed a collateral bill of review action to set it aside, claiming that service was not appropriate. The trial court granted summary judgment for the homeowner, and the lender appealed.

The court of appeals first discussed service of process under the Texas Estates Code and the Texas Civil Practice and Remedies Code:

Under the Texas Estates Code, a foreign corporate fiduciary is defined as a “corporate fiduciary that does not have its main office or a branch office in [Texas].” Tex. Est. Code § 505.001. A foreign corporate fiduciary “may be appointed by will, deed, agreement, declaration, indenture, court order or decree, or otherwise and may serve in this state in any fiduciary capacity, including as: trustee of a personal or corporate trust.” Tex. Est. Code § 505.003(a). A foreign corporate fiduciary must appoint the secretary of state as its agent for service of process and “[s]ervice of notice or process . . . on the secretary of state as agent for a foreign corporate fiduciary has the same effect as if personal service had been had in [Texas] on the foreign corporate fiduciary.” Tex. Est. Code §§ 505.004, 505.005. “[T]he appointment of the secretary of state as the agent to receive service of process . . . is limited to matters related to an estate in which the foreign bank or trust company is acting as an executor, administrator, trustee, guardian of the estate, or in any other fiduciary capacity.” Bank of N.Y. v. Chesapeake 34771 Land Trust, 456 S.W.3d 628, 635 (Tex. App.—El Paso 2015, pet. denied); see also Bank of N.Y. Mellon v. NSL Prop. Holdings, LLC, No. 02-17-00465-CV, 2018 WL 3153540, at *5 (Tex. App.—Fort Worth 2018 no pet.) (mem.op). The Civil Practice and Remedies Code provides that service may be made on a financial institution by “serving the registered agent of the financial institution; or if the financial institution does not have a registered agent, serving the president or branch manager at any office located in this state.” Tex. Civ. Prac. & Rem. Code § 17.028(b). USB’s status as a foreign financial institution is irrelevant to the statute’s application. See Bank of N.Y. Mellon v. Redbud 115 Land Tr., 452 S.W.3d 868, 871 (Tex. App.—Dallas 2014, pet. denied) (nothing in § 17.028 limits its application to Texas financial institutions).

Id. The court of appeals held that these two statutes do not conflict: “Both statutes permit service on the secretary of state, and § 505.005 applies specifically to foreign corporate fiduciaries when they are sued in that capacity.” Id. The court then held that the lender was properly served by the secretary of state and was negligent in not keeping its designee for receiving process updated.

Finally, the court held against the lender on three issues: it held that the plaintiff’s pleading was sufficient to support service under the Texas Estates Code, service on the lender’s registered agent (the Texas Secretary of State) was appropriate, and the Whitney Certificate from the Secretary of State was sufficient to show proper service. The court affirmed the trial court’s summary judgment for the homeowner.