No CV IN THE COURT OF APPEALS FOR THE FIFTH DISTRICT DALLAS, TEXAS

Transcription

1 No CV IN THE COURT OF APPEALS FOR THE FIFTH DISTRICT DALLAS, TEXAS ALBERT G. HILL, III; ERIN HILL; ALBERT G. HILL, IV; AND CAROLINE HILL, APPELLANTS, v. BRETT RINGLE, AS TRUSTEE OF THE MARGARET HUNT TRUST ESTATE; ALBERT G. HILL, JR., LYDA HILL, AND ALINDA WIKERT, INDIVIDUALLY AND AS CO- EXECUTORS OF THE ESTATE OF MARGARET HUNT HILL, DECEASED; MICHAEL WISENBAKER, SR.; JAMES WIKERT; MICHAEL WISENBAKER, JR.; WESLEY WISENBAKER; CODY WIKERT; MARGRETTA WIKERT; HEATHER WASHBURNE; RAY WASHBURNE; HILL WASHBURNE; ANDREW WASHBURNE; MARY WASHBURNE; ELISA SUMMERS; STEPHEN SUMMERS; CAMILLE SUMMERS; AND EMILY SUMMERS, APPELLEES. ON APPEAL FROM PROBATE COURT NUMBER 2, DALLAS COUNTY, TEXAS HONORABLE ROBERT E. PRICE, PRESIDING JUDGE BRIEF OF THE WASHBURNE AND SUMMERS APPELLEES Stewart H. Thomas State Bar No Tom M. Dees, III State Bar No THOMAS & DEES, PLLC 300 Crescent Court, Suite 1000 Dallas, Texas Telephone: Facsimile: COUNSEL FOR THE WASHBURNE AND SUMMERS PARTIES

2 I. IDENTITY OF THE WASHBURNE AND SUMMERS PARTIES AND ADOPTION OF CERTAIN SECTIONS OF APPELLEE BRETT RINGLE S BRIEF Appellees Heather Washburne and Elisa Summers are the daughters of Appellee Albert G. Hill, Jr. ( Hill, Jr. ) and the sisters of Appellant Albert G. Hill, III ( Hill III ). Heather Washburne, husband Ray Washburne, and children Hill Washburne, Andrew Washburne, and Mary Washburne are collectively, the Washburne Parties. Elisa Summers, husband Stephen Summers, and children Camille Summers, Emily Summers, and Stephen Summers, III are collectively, the Summers Parties. The Washburne and Summers Parties agree with and adopt the Identity of Parties and Counsel, Abbreviations and Record References, Statement of the Case, Issues Presented, Preliminary Statement, and Statement of Facts as set forth in the brief submitted by Appellee Brett Ringle, as Trustee of the Margaret Hunt Trust Estate. 1

3 II. TABLE OF CONTENTS I. IDENTITY OF WASHBURNE AND SUMMERS PARTIES AND ADOPTION OF CERTAIN SECTIONS OF APPELLEE BRETT RINGLE S BRIEF 1 II. TABLE OF CONTENTS.. 2 III. TABLE OF AUTHORITIES.. 3 IV. SUMMARY OF THE ARGUMENT. 5 V. ARGUMENT Dividing the Margaret Trust is Consistent with Its Terms Dividing the Margaret Trust is Consistent with Prior Decisions Regarding an Identical Trust The Margaret Trust is Not a Pot Trust 6 4. The Probate Court Properly Exercised Its Discretion By Dividing the Margaret Trust The Purported Hill, Jr. Disclaimer Does Not Affect the Division Order The Probate Court s Division Order is Definite and Enforceable The Motion for Division Did Not Require A Trial or Summary Judgment 12 VI. CONCLUSION AND PRAYER 14 2

4 III. TABLE OF AUTHORITIES Cases Texas Supreme Court Ferguson v. Ferguson, 338 S.W.2d 945 (Tex. 1960) Gani v. Gani, 495 S.W.2d 576 (Tex. 1973) Hinde v. Hinde, 701 S.W.2d 637 (Tex. 1985).. 11 In re Ford Motor Co., 988 S.W.2d 714 (Tex. 1998) Steed v. State, 143 Tex. 82, 183 S.W.2d 458 (1944) 10 Texas State Bank v. Amaro, 87 S.W.3d 538 (Tex. 2002).. 12 Fifth District Court of Appeals (Dallas) Bank of Texas, N.A. v. Mexia, 135 S.W.3d 356 (Tex. App. Dallas 2004, pet. denied) 13 Reynolds v. Reynolds, 860 S.W.2d 568 (Tex. App. Dallas 1993, writ denied) 11 Smith v. Smith, 757 S.W.2d 422 (Tex. App. Dallas 1988, writ denied) 12 Weynand v. Weynand, 990 S.W.2d 843 (Tex. App. Dallas 1999, pet. denied). 12 Other Texas District Courts of Appeal Siegler v. Williams, 658 S.W.2d 236 (Tex. App. Houston [1st Dist.] 1983, no writ).. 12 Southwestern Bell Tel. Co. v. Vollmer, 805 S.W.2d 825 (Tex. App. Corpus Christi 1991, writ denied).. 12 Swantner-Carter v. Frost Nat l Bank, No CV, 2008 Tex. App. LEXIS 5989 (Tex. App. Corpus Christi Aug. 7, 2008, no pet). 8 Other District Courts of Appeal McNeil v. Bennett, 792 A.2d 190 (Del. Ch. 2001), rev d in part, 798 A.2d 503 (Del. 2002). 8, 9 3

5 Statutes Texas Property Code TEX. PROP. CODE (c)(6) TEX. PROP. CODE , official cmt. b.. 9 TEX. PROP. CODE TEX. PROP. CODE (a) 9, 11 Texas Rules of Evidence TEX. R. EVID. 902(1) & (4) TEX. R. Evid. 902(8) Texas Rules of Civil Procedure Tex. R. Civ. P. 166a. 13 Tex. R. Civ. P Miscellaneous Brief of Appellant Hill III

6 IV. SUMMARY OF THE ARGUMENT seven points: The Washburne and Summers Parties submit this brief to argue and clarify the following 1. Dividing the Margaret Trust is Consistent with Its Terms; 2. Dividing the Margaret Trust is Consistent with Prior Decisions Regarding an Identical Trust; 3. The Margaret Trust is Not a Pot Trust; 4. The Probate Court Properly Exercised Its Discretion By Dividing the Margaret Trust; 5. The Purported Hill, Jr. Disclaimer Does Not Affect the Division Order; 6. The Probate Court s Division Order is Definite and Enforceable; and 7. The Motion for Division Did Not Require A Trial or Summary Judgment. V. ARGUMENT 1. Dividing the Margaret Trust is Consistent with Its Terms The Probate Court s Division Order is consistent with the terms of the Margaret Trust. In 1935, H.L. and Lyda Hunt established six discretionary, single-beneficiary trusts one for each of their six children. One of these trusts was the Margaret Trust. The Hunts provided that the beneficial interests of these trusts, including the Margaret Trust, would pass according to the laws of descent and distribution. 1 Thus, on Margaret s death, her interest passed to her three children (Hill, Jr., Lyda Hill, and Alinda Wikert) in equal shares, each of whom are entitled to a 1/3 share (subject to any valid disclaimers), because Margaret had not otherwise disposed of her interest by exercising a power of appointment such that others received her interest C.R. 2:148. C.R. 2:148. 5

7 The Division Order divides the Margaret Trust into equal shares of a single trust, one for each of Margaret s children, which further divide into smaller equal shares for any validly disclaimed interests. 3 The Division Order therefore provides each heir with precisely the interest that he or she would inherit under the laws of descent and distribution, which is exactly what the Trust Agreement provides. 2. Dividing the Margaret Trust is Consistent with Prior Decisions Regarding an Identical Trust The Division Order is also consistent with the Probate Court s prior order regarding one of the other six 1935 trusts established by H.L. and Lyda Hunt. In Munson v. Holland, Jr., the Probate Court considered this same issue for the trust of Margaret s brother: Lamar Hunt. In that case, the Probate Court entered an Agreed Order finding that, at Lamar Hunt s death, the Lamar Hunt Trust Estate divided into five separate shares one for each heir. 4 Importantly, the Lamar Hunt Trust Agreement is identical to the Margaret Trust Agreement. While the parties involved with the Lamar Hunt Trust Estate were not the same as here, the issues and the conclusion reached by the Probate Court were the same as with the Margaret Trust: the trust divided into separate shares for each child at the death of the original beneficiary. 3. The Margaret Trust is Not a Pot Trust Hill III argues the Margaret Trust is a pot trust, suggesting that all beneficiaries have a right to any or all distributable net income. 5 Hill III continues this same line of argument in this appeal, suggesting that all beneficiaries possess an undivided share of the equitable interest in the MHTE. The Washburne and Summers Parties disagree It is undisputed that Alinda Wikert has disclaimed her entire interest in the Margaret Trust to her four children. On information and belief, Lyda Hill has not disclaimed any of her interest. A controversy exists regarding a purported disclaimer by Hill, Jr. C.R. 4:349. C.R. 3:

8 As set forth above, the six 1935 trusts established by H.L. and Lyda Hunt are discretionary, single-beneficiary trusts, which divide into separate shares at the death of the original beneficiary according to the laws of decent and distribution, unless disposed of otherwise. 6 Upon Margaret s death, her interest passed to and vested in her three children (Hill, Jr., Lyda Hill, and Alinda Wikert) in equal shares, each of whom are entitled to a 1/3 share (subject to any valid disclaimers) because Margaret had not otherwise disposed of her interest by exercising a power of appointment such that others received her interest. 7 Hill III s pot trust theory improperly dilutes the interests in the Margaret Trust. For example, a pot trust would give each beneficiary (presumably Hill III himself) an interest in the entire net profits for each distribution thereby ignoring the varying sizes of the various beneficiaries income interests. In simple terms, a pot trust would provide some beneficiaries with more than their allocated intestate share, and leave other beneficiaries with less than their intestate share. This result is not consistent with the laws of descent and distribution, or with the plain language of the Margaret Trust. To be clear, Hill III s pot trust theory exposes the beneficiaries of the Margaret Trust to improper dilution of their respective interests, and subjects each beneficiaries vested interests to new, additional beneficiaries. For example, according to Hill III, a beneficiary could transfer her interest to several additional beneficiaries thereby diluting the interests of all other beneficiaries in favor of those whom the appointing beneficiary prefers. This means, for example, that Alinda Wikert s undisputed disclaimer of her interests in the Margaret Trust to her 6 7 C.R. 2:148. The Trust Agreement provides the Beneficiary with a discretionary income interest in the annual net profits of the Trust: The Beneficiary may receive... such portions of the net profits accruing from time to time to this Trust Estate, as the Trustee, acting with the advice and consent of the Advisory Board, may see fit to pay over and deliver to the Beneficiary.... [I]n exercising this discretion said Trustee and Advisory Board shall give full consideration to the interest of both the Beneficiary and the Trust Estate. (C.R. 2:149.) C.R. 2:148. 7

9 four children would, according to Hill III s pot trust theory, entitle each of Alinda s four children to the same interest in the Margaret Trust as Alinda s sister Lyda Hill, who has not disclaimed any interest in the Margaret Trust. This example highlights precisely why Hill III s pot trust theory is untenable. This interpretation of the Margaret Trust runs counter to the laws of descent and distribution, and to the plain language of the Margaret Trust. In contrast, dividing the Margaret Trust into separate equal shares for Margaret s three children, which further divide into smaller equal shares for any validly disclaimed interests, as the Division Order provides, is consistent with the laws of descent and distribution because doing so provides each heir with the interests he or she would inherit The Probate Court Properly Exercised Its Discretion By Dividing the Margaret Trust The Washburne and Summers Parties agree that the Probate Court properly exercised its discretion to modify the Margaret Trust by dividing it into three separate, equal shares upon Margaret s death, 9 according to Section of the TEXAS PROPERTY CODE. 10 For example, in McNeil v. Bennett, 11 a Delaware court approved of dividing a true pot trust into four equal shares, to be administered independently, over a beneficiary s objection. In so doing, the Delaware court found two primary benefits to the division: first, the division would make it easier for the Trustees to focus on the particular needs of each Branch if each Branch C.R. 2:148. The Probate Court also properly exercised its discretion to modify the Margaret Trust to provide for its division into separate individual trusts following the Trustee s receipt of a private letter ruling from the Internal Revenue Service, or thirty-one days after the Trustee provides notice of the division. According to Section , a court may modify or terminate a trust where (1) the order will further the purposes of the trust because of circumstances not known or anticipated by the settlors; or (2) modification of administrative, nondispositive terms of the trust is necessary or appropriate to prevent waste or avoid impairment of the trust s administration. The Court reviews a trial court s determination regarding modification of a trust for abuse of discretion. Swantner-Carter v. Frost Nat l Bank, No CV, 2008 Tex. App. LEXIS 5989, at *11 (Tex. App. Corpus Christi Aug. 7, 2008, no pet.). 792 A.2d 190, (Del. Ch. 2001), rev d in part, 798 A.2d 503 (Del. 2002). 8

10 has its own corpus. The Division will make it possible for the Trustees to adapt investment and distribution policies more precisely, with less fear that alterations advisable for some beneficiaries will have an undue effect on others. 12 Second, the division would confine disputes to one Branch of the Family at a time, which is a material benefit in itself. 13 In this litigation, the various beneficiaries of the Margaret Trust will benefit from unique investment strategies and distribution plans tailored to each individual. 14 Further, confining disputes to a single share of the Margaret Trust will prevent additional waste of time and resources (and the corresponding impairment to administering the Margaret Trust) accompanying litigation, such as the numerous currently-pending lawsuits related to the Margaret Trust. 15 Texas trust law allows a Trustee to divide a trust where the division does not impair the rights of any beneficiary or adversely affect achievement of the purposes of the original trust. 16 And, a trustee of a discretionary trust may tailor the trust s management to a smaller class of beneficiaries. 17 The Probate Court properly exercised its sound discretion dividing the Margaret Trust because dividing it into three separate interests allows for a more focused investment strategy and trust administration. Finally, dividing the Trust does not conflict with any purpose of the Margaret Trust, such as to provide a trust for the use and benefit of Margaret Hunt, 18 because Margaret is deceased and each of her three children are alive with different investment strategies and investment plans Id. at 214. Id. at 215. See id. at 214; see also TEX. PROP. CODE (c)(6); official cmt. b. C.R. 3:264; 4:330. TEX. PROP. CODE (a). See McNeil, 792 A.2d at ; TEX. PROP. CODE C.R

11 5. The Purported Hill, Jr. Disclaimer Does Not Affect the Division Order The outcome of Hill, Jr. s purported partial disclaimer does not affect the Division Order. The Division Order divides the Margaret Trust into equal shares of a single Trust, one for each of Margaret s children (Hill, Jr., Lyda Hill, and Alinda Wikert), which further divide into smaller equal shares for any validly disclaimed interests. Hill, Jr. s purported partial disclaimer only affects Hill, Jr. s third of the Margaret Trust. Regardless of the outcome of that dispute, the Margaret Trust properly divides into separate shares for each beneficiary. The outcome of the dispute regarding Hill, Jr. s purported partial disclaimer does not affect Lyda Hill s separate share or Alinda Wikert s separate share of the Margaret Trust. And, the Division Order does not affect the Hill, Jr. disclaimer issue one way or the other. 6. The Probate Court s Division Order is Definite and Enforceable Hill III suggests the Division Order is void for indefiniteness. But the Division Order is sufficiently definite and certain to define and protect the rights of all litigants. 19 At a minimum, the Division Order provide[s] a definite means of ascertaining such rights, 20 which Hill III admits is the appropriate Texas Supreme Court standard. 21 First, the Division Order clearly states that the Margaret Trust divided into separate shares of a single trust upon Margaret s death. 22 Nothing indefinite or contradictory here: this language is clear, logical, and definite. In fact, the Division Order includes the exact division of shares to each beneficiary, clearly and without contradiction Steed v. State, 143 Tex. 82, 86, 183 S.W.2d 458, 460 (1944). Id. Brief of Appellant Hill III, at 6 ( ). C.R. 4:

12 Next, the Division Order states that the Margaret Trust would later divide into multiple separate trusts upon the Effective Date: the first to occur of (a) the Trustee receiving a private letter ruling from the Internal Revenue Service; or (b) 31 days after the Trustee gives notice of division under Section of the TEXAS PROPERTY CODE. 23 Once again, the Division Order is clear and logical the shares will be divided into separate trusts (governed by the original Trust Agreement) upon the first of two occurrences. Because either of the two occurrences must be in writing, they are easily determined and readily ascertainable. Hill III incorrectly suggests that a final order may never anticipate future events. But Texas courts regularly do just that. A judgment which settles all the legal issues and rights between the parties is final and appealable though further proceedings may be necessary in the execution of it or some incidental or dependent matter may still remain to be settled. 24 For example, in Hinde v. Hinde, 25 the Texas Supreme Court held that a judgment was final and appealable even though it provided for judgment credit if the judgment debtor reinstated a certain insurance policy. 26 In addition, in Gani v. Gani, 27 the Texas Supreme Court held that trial court s judgment was final and appealable even though it contained several in the event contingencies. 28 Further, in Reynolds v. Reynolds, 29 this Court held that an order was final and appealable where it ordered a party to deliver certain property and provided that if the party did not deliver the property, the trial court would award a judgment for the value of the property. 30 And, in Ferguson v. Ferguson, 31 the Texas Supreme Court upheld that a judgment C.R. 4:381, 4: Hinde v. Hinde, 701 S.W.2d 637, 639 (Tex. 1985) (internal quotation omitted). 701 S.W.2d 637, 639 (Tex. 1985) Id. at S.W.2d 576 (Tex. 1973). Id. at S.W.2d 568 (Tex. App. Dallas 1993, writ denied). Id. at

13 that ordered the defendant to furnish an accounting and to pay certain sums disclosed in the accounting. 32 In addition, Texas Courts routinely uphold judgments containing attorneys fees awards that are contingent on future events. 33 In each of these cases, the fact that the trial court s order contemplated future action by the parties did not render the judgment unenforceable or void for indefiniteness. Next, Hill III suggests the Division Order is invalid because it is self-contradictory. But a simple reading of the plain language of the Division Order dispels this notion. At Margaret s death, the Margaret Trust divided into multiple shares of a single trust. Then, on the Effective Date, the Margaret Trust will become separate trusts. This logical and ordered division is simple, logical, and clear, and it bears no resemblance to the self-contradictory orders from the cases cited by Hill III. 7. The Motion for Division Did Not Require A Trial or Summary Judgment The Trustee s Motion for Division did not require a trial or by summary judgment. The Motion did not seek to adjudicate liability, and the Order did not rule on liability, but merely provided clarity and definiteness for the proper and efficient administration of the Trust. No trial or summary judgment is necessary to enter an order relating to administering a trust, so long as the order does not adjudicate liability, as the Texas Supreme Court made clear in Texas State Bank v. Amaro. 34 In Amaro, the trustee sought declaratory relief regarding the S.W.2d 945 (Tex. 1960). Id. at Smith v. Smith, 757 S.W.2d 422, 426 (Tex. App. Dallas 1988, writ denied); Southwestern Bell Tel. Co. v. Vollmer, 805 S.W.2d 825, 834 (Tex. App. Corpus Christi 1991, writ denied); Siegler v. Williams, 658 S.W.2d 236, 241 (Tex. App. Houston [1st Dist.] 1983, no writ). See In re Ford Motor Co., 988 S.W.2d 714, 721 (Tex. 1998); Weynand v. Weynand, 990 S.W.2d 843, 847 (Tex. App. Dallas 1999, pet. denied). 87 S.W.3d 538, (Tex. 2002). 12

14 termination of the trust and approval of a final accounting. 35 After a hearing, the trial court entered an order holding that the trust had terminated and approved the final accounting. 36 The trust beneficiary appealed, arguing that the trial court s hearing amounted to a trial, and he did not receive 45 days notice of the hearing under Rule 245 of the TEXAS RULES OF CIVIL PROCEDURE. 37 The Texas Supreme Court rejected appellants argument, finding that the trial court s order was administrative rather than an adjudication of tort liability, and therefore, the beneficiary was not entitled to a jury or to 45 days notice of the hearing. 38 In Bank of Texas, N.A. v. Mexia, 39 this Court followed the Amaro decision in holding that a trustee was not entitled to a jury trial or 45 days notice before a hearing to terminate a trust, where the motion at issue did not address the trustee s liability. 40 In this case, the Probate Court s Division Order did not adjudicate the Trustee s liability, if any, to Hill III. Rather, the Probate Court entered an administrative order, like an order terminating a trust and approving a final accounting. Further, the Trustee s Motion for Division did not require resolution by summary judgment, and it did not require a trial. Likewise, because the hearing on the Trustee s Motion for Division was not a summary judgment hearing, there was no requirement that the Trustee submit evidence 21 days before the hearing pursuant to Rule 166a of the TEXAS RULES OF CIVIL PROCEDURE, and the Probate Court was free to consider the Trustee s Business Records Affidavit, which was properly filed fifteen days before the hearing Id. at Id. at 541. Id. at Id. at S.W.3d 356 (Tex. App. Dallas 2004, pet. denied). Id. at Supp. C.R. 1:28. In addition, the Probate Court also had before it the evidence attached to the Trustee s Motion. Three of the four exhibits were notarized, and thus self-authenticated. (C.R. 13

15 VI. CONCLUSION AND PRAYER For the foregoing reasons, the Washburne and Summers Parties pray that this Court affirm the Division Order entered by the Probate Court. Date: November 9, 2009 Respectfully submitted, /s/ Stewart H. Thomas Stewart H. Thomas State Bar No Tom M. Dees, III State Bar No THOMAS & DEES, PLLC 300 Crescent Court, Suite 1000 Dallas, Texas Telephone: Facsimile: COUNSEL FOR THE WASHBURNE AND SUMMERS PARTIES 2:150, 2:154, 2:157, 2:165, 2:168, 2:171); see TEX. R. Evid. 902(8). Moreover, the evidence attached to the Trustee s reply included a filing of which the Probate Court could take judicial notice (C.R. 4:306 n.2, 4:330), and a copy of public records filed under an officer s seal. (C.R. 4:344); TEX. R. EVID. 902(1) & (4)). 14

16 CERTIFICATE OF SERVICE I hereby certify that on November 9, 2009, a true and correct copy of the foregoing instrument was served on the following Counsel of Record by the method stated below: Justin M. Campbell, III Robin L. Harrison Suzanne E. Goss Kenneth J. Fair CAMPBELL HARRISON & DAGLEY L.L.P Two Houston Center 909 Fannin Street, Suite 4000 Houston, Texas R.W. Calloway John R. Norris III Mary C. Burdette CALLOWAY, NORRIS, BURDETTE & WEBER, PLLC 3811 Turtle Creek Blvd., Suite 400 Dallas, Texas George W. Bramblett, Jr. Nina Cortell Carrie L. Huff Ben L. Mesches HAYNES & BOONE, LLP 2323 Victory Avenue, Suite 700 Dallas, Texas Michael V. Bourland BOURLAND, WALL & WENZEL, P.C. 301 Commerce Street, Suite 1500 Fort Worth, Texas Michael P. Lynn Kent Kraybill LYNN TILLOTSON PINKER & COX, LLP 750 N. St. Paul Street, Suite 1400 Dallas, Texas Robert H. Thomas STRASBURGER & PRICE, LLP 901 Main Street, Suite 4400 Dallas, Texas VIA CERTIFIED MAIL VIA CERTIFIED MAIL VIA CERTIFIED MAIL VIA CERTIFIED MAIL VIA CERTIFIED MAIL VIA CERTIFIED MAIL 15

17 Frank N. Ikard IKARD & GOLDEN, P.C. 400 West 15th Street, Suite 975 Austin, Texas Donald E. Godwin Bruce Bowman GODWIN RONQUILLO, P.C Elm Street, Suite 1700 Dallas, Texas VIA CERTIFIED MAIL VIA CERTIFIED MAIL /s/ Tom M. Dees, III Tom M. Dees, III 16