ACCEPTED 04-15-00727-CV FOURTH COURT OF APPEALS SAN ANTONIO, TEXAS 12/29/2015 5:19:45 PM KEITH HOTTLE CLERK
No. 04-15-00727-CV
FILED IN 4th COURT OF APPEALS IN THE COURT OF APPEALS FOR SAN ANTONIO, TEXAS THE FOURTH DISTRICT OF TEXAS 12/29/2015 5:19:45 PM SITTING AT SAN ANTONIO KEITH E. HOTTLE Clerk
LAUREN SAKS a/k/a GLORIA LAUREN NICOLE SAKS,
V
DIANE M. FLORES and SANDRA GARZA DAVIS f/k/a SANDRA C. SAKS
On Appeal from Probate Court No. One, Bexar County, Texas Honorable Kelly Cross, presiding Trial Court Cause No. 2011-PC-3466
APPELLANT'S BRIEF
Respectfully submitted,
Philip M. Ross ORAL ARGUMENT REQUESTED State Bar No. 017304200 1006 Holbrook Road San Antonio, Texas 78218 Phone: 210/326-2100 Email: ross_law@hotmail.com
By: /s/ Philip M. Ross Philip M. Ross Attorney for Appellant Margaret Landen Saks IDENTITY OF PARTIES AND COUNSEL
Party: Counsel:
Margaret Landen Saks Philip M. Ross State Bar No. 17304200 Appellant 1006 Holbrook Road San Antonio, Texas 78218 Phone: 210-326-2100 Email: ross_law@hotmail.com
Heinrichs & De Gennaro, P.C. Jonathan Yedor State Bar No. 22151400 Appellee 100 N.E. Loop 410, Suite 1075 San Antonio, Texas 78216 Phone: 210-366-0900 Email: JonathanY@heinrichslaw.com
ii TABLE OF CONTENTS
Page
IDENTITY OF PARTIES AND COUNSEL ..………………………… ii
TABLE OF CONTENTS ……………………………………………… iii
INDEX OF AUTHORITIES ………………………………………….. vi
STATEMENT OF THE CASE ……………………………… ………. 2
STATEMENT OF JURISDICTION ………………………………….. 3
STATEMENT REGARDING THE RECORD….……………………… 4
ISSUES PRESENTED …………………………………………………. 4
ISSUE NO. 1 Issue No. 1 Whether the trial court erred by
granting Heinrichs' second amended motion to
strike Landen's plea in intervention.
ISSUE NO. 2 Whether the trial court erred by granting Judgment
Creditor's Motion to Order Disbursement of Funds
from the Registry of the Court in Payment of
Judgment.
STATEMENT OF FACTS AND PROCEDURAL BACKGROUND .. 4
SUMMARY OF ARGUMENT ……………………………………….. 9
STANDARD OF REVIEW ….....................................................………. 11
iii ARGUMENT AND AUTHORITY ……………...…………………….. 11
ISSUE NO. 1 Whether the trial court erred by granting Heinrichs' second amended motion to strike Landen's plea in intervention. …................. 11
ISSUE NO. 2 Whether the trial court erred by granting Judgment Creditor's Motion to Order Disbursement of Funds from the Registry of the Court in Payment of Judgment ................... 16
CONCLUSION and PRAYER……………………….……………...... 23
CERTIFICATION ……………………...…………………………..… 25
CERTIFICATE OF COMPLIANCE ..…………………….…....…..... 25
CERTIFICATE OF SERVICE …………………………….…...…..... 25
v INDEX OF AUTHORITIES
CASES PAGE(S)
Apparel Contractors, Inc. v. Vantage Properties, Inc. 620 S.W.2d 666 (Tex. Civ. App.-Dallas 1981, writ ref'd n.r.e.) …............................ 13
Austin Nursing Center, Inc. v. Lovato 171 S.W.3d 845 (Tex. 2005) …........................................................ 17
Beall v. Helm 50 S.W.2d 460 (Tex. Civ. App.-Fort Worth 1932, writ dism'd) ….. 12
Beutel v. Dallas County Flood Control Dist., No. 1 916 S.W.2d 685 (Tex. App.-Waco 1996, writ denied) …............... 12
Barr v. Resolution Trust Corp. 837 S.W.2d 627 (Tex.1992) …........................................................ 20
Cross, Kieschnick & Co. v. Johnston 892 S.W.2d 435 (Tex.App.-San Antonio, 1994) …...................... 20, 21
Downer v. Aquamarine Operators, Inc. 701 S.W.2d 238 (Tex.1985)) …................................................... 11, 21
Estate of Harley D. Webb, Jr., Deceased. 266 S.W.3d 544 (Civ. App. - Fort Worth 2008) ….......................... 11
Evan's World Travel, Inc. v. Adams 978 S.W.2d 225 (Tex. App.-Texarkana 1998, no pet.) …............... 12
Ginther v. Bank of America, N.A. No. 01-08-00430-CV (Civ.App.-Houston 1st Dist. 2010, pet. denied) …........................................................................ 22
Guaranty Fed. Sav. Bank v. Horseshoe Operating Co. 793 S.W.2d 652 (Tex. 1990) …........................................... 12, 14
vi CASES PAGE(S)
Huie v. DeShazo 922 S.W.2d 920 (Tex.1996) …............................................... 16
Gibson v. Shaver 434 S.W.2d 462 (Tex. Civ. App.—Tyler 1968, no writ) ….. 35, 36
In re Webb 266 S.W.3d 544 (Tex. App.-Fort Worth 2008, pet. denied) … 14
Intermarque Automotive Products, Inc. v. Stewart Feldman and Marla Matz 21 S.W.3d 544 (Tex.App.-Texarkana 2000) …........................ 12
Inter-Continental Corp. v. Moody 411 S.W.2d 578 (Tex. Civ. App.-Houston 1966, writ ref'd n.r.e.) ….................................................................. 13
Interfirst Bank-Houston, N.A. v. Quintana Petroleum Corp. 699 S.W.2d 864 (Tex. App.-Houston [1st Dist.] 1985, writ ref'd n.r.e.) …......................................................................... 14, 22
Law Offices of Windle Turley, P.C. v. Ghiasinejad 109 S.W.3d 68 (Tex.App.-Fort Worth 2003, no pet.) …................. 11
Mendez v. Brewer 626 S.W.2d 4989 (Tex. 1982) …. 12
Miami Indep. Sch. Dist. v. Moses 989 S.W.2d 871 (Tex. App.-Austin 1999, pet. Denied) …............... 12
Mower v. Boyer 811 S.W.2d 560 (Tex.1991) ….................................................. 20
Rogers v. Searle 533 S.W.2d 440 (Tex. App.-Corpus Christi 1976, no writ) …... 12
vii CASES PAGE(S)
Ray Malooly Trust v. Juhl 186 S.W.3d 568 (Tex., 2006) …................................................. 16, 18
Slay v. Burnett Trust 187 S.W.2d 377 (1945) …............................................................... 16
Smith v. Wayman 224 S.W.2d 211 (1949) …............................................................... 16
Wilson v. County of Calhoun 489 S.W.2d 393 (Tex. Civ. App.-Corpus Christi 1972, writ ref'd n.r.e.) …............................................................................ 13
STATE STATUTES AND RULES PAGE(S)
TEX. CIV. PRAC. & REM. CODE ANN. § 15.0642 …................... 3
TEX. CIV. PRAC. & REM. CODE ANN. § 31.002(b)(1) …........... 21
TEX. CONST. Art. 5, § 6 ….............................................................. 3
TEX. R. APP. P. 25.1(b) …................................................................ 3
TEX. GOV'T CODE § 311.005(2) …................................................. 17
TEX. PROP. CODE § 111.004(4) …............................................... 17, 18
viii No. 04-15-00727-CV
IN THE COURT OF APPEALS FOR THE FOURTH DISTRICT OF TEXAS SITTING AT SAN ANTONIO
On Appeal from Probate Court No. One, Bexar County, Texas Honorable Kelly Cross, presiding Trial Court Cause No. 2011-PC-3466
TO THE HONORABLE JUSTICES OF THE FOURTH COURT OF APPEALS:
COMES NOW, MARGARET LANDEN SAKS ("Landen"), by and through
undersigned counsel, and files this Appellant's Brief and in support thereof would
show:
1 STATEMENT OF CASE
This case initially arose as a dispute involving alleged mismanagement of
the Saks Children Family Trust (“Trust”), which was filed by Lauren Saks
Merriman (“Lauren”) against her mother Sandra Saks, who was the Settlor, and
her aunt Diane Flores, who was the Trustee. The case was settled in mediation
according to a mediated settlement agreement (“MSA”), which contained an
arbitration clause. When a dispute arose among the parties to the MSA, the trial
court ordered the parties including the three named parties to the suit as well as
Landen and Marcus Rogers, as interim trustee (“Interim Trustee”), to arbitrate the
dispute. Lauren's attorneys A. Chris Heinrichs, J. Barrett Shipp and Heinrichs &
De Gennaro, P.C. (“Heinrichs”) were not parties to the MSA or the arbitration, but
they were awarded fees to be paid by the Trust according to the agreement of the
parties.
The arbitration award was confirmed by the trial court, and Landen filed an
appeal claiming that the Trust had been terminated prior to the MSA and that she
was not a party to the MSA. The Order Confirming the Arbitration Award was
affirmed on appeal. Then, when Heinrichs filed a Judgment Creditor's Motion to
Order Disbursement of Funds from the Registry of the Court in Payment of
Judgment and the Interim Trustee did not object, Landen filed a plea in 2 intervention and objected to payment of Heinrichs' fees by the Trust. Landen's
objection claimed that the Trust was not a party to the MSA or arbitration and
lacked capacity to pay a judgment. Alternatively, the Trust was a spendthrift trust,
which had not been amended, and the Trustee lacked authority to pay a judgment
pursuant to the MSA.
On September 25, 2015, after hearing argument of counsel for the parties,
the trial court struck Landen's plea in intervention and Ordered payment of
Heinrichs' judgment from the registry of the court. Landen submits that the trial
court abused its discretion by striking her intervention and ordering payment of
Heinrichs' fees from the registry of the court. Landen claimed standing and
capacity on behalf of the trustee to object to payment of an unenforceable
judgment by the Trust. Landen timely filed a notice of appeal.
STATEMENT OF JURISDICTION
Appellant files this appeal pursuant to Article V, Section 6 of the Texas
Constitution and TEX. CIV. PRAC. & REM. CODE ANN. § 15.0642. TEX. R.
APP. P. 25.1(b) requires the filing of a notice of appeal, which invokes the
appellate court's jurisdiction. Appellant submits that she has complied with all
conditions precedent to invoking the jurisdiction of the Fourth Court of Appeals.
3 STATEMENT REGARDING THE RECORD
The Clerk’s Record consisting of one volume plus two supplemental
volumes has been requested and filed. The Reporter's Record consisting of one
volume including transcript of one hearing has been filed.
ISSUE PRESENTED
1 Whether the trial court erred by granting Heinrichs' second amended motion
to strike Landen's plea in intervention.
2 Whether the trial court erred by granting Judgment Creditor's Motion to
Order Disbursement of Funds from the Registry of the Court in Payment of
STATEMENT OF FACTS AND PROCEDURAL BACKGROUND
On January 2, 1991, Sandra Saks (“Sandra”), acting in her capacity as
settlor, created the Saks Children Family Trust a/k/a ATFL&L (“Trust”) for the
benefit of her children including daughters Gloria Lauren Nicole Saks (“Lauren”),
Margaret Landen Corina Saks (“Landen”), and any other children later born to or
legally adopted by Sandra through court proceedings. (CR page 222-252).
Sandra's sister Diane M. Flores (“Diane”) was appointed as Trustee.
Twenty years later, on August 17, 2011, Lauren sued Sandra and Diana in
Cause No. 2011-PC-3466 alleging mismanagement of the Trust and other claims 4 and seeking to remove Diana as Trustee. (CR page 5-13). Lauren was represented
by attorneys A. Chris Heinrichs, J. Barrett Shipp and Heinrichs & DeGennaro,
P.C. (“Heinrichs”).
Diane served as trustee until December 21, 2011, when she gave notice of
termination of the Trust. A few days later, Marcus Rogers (“Interim Trustee”) was
appointed by the trial court to investigate what assets were owned by the Trust and
he was given a nominal title as “Interim Trustee”. (CR page 14-16). Cause No.
2011-PC-3466 was resolved according to a mediated settlement agreement
(“MSA”) on April 2, 2012. (CR page 17; TAB 5).
The MSA included an agreement to pay Heinrichs and Marcus. (CR page
33). However, that agreement was not enforceable against the Trust, which is an
irrevocable spendthrift trust, which has not been amended. (CR page 235, ¶ 4.5).
However, the Interim Trustee neither agreed nor objected to payment of Heinrichs'
fees. (CR page 173). The Trust prohibits both voluntary and involuntary
distributions by or on behalf of the beneficiaries. (CR page 235, ¶ 4.5). Therefore,
Landen submits that neither the trustee nor the trial court has discretion to pay
Heinrichs, and the trustee would be breaching his fiduciary duty to the
beneficiaries if he pays Heinrichs' claim, which is not legally enforceable against
the Trust. 5 The MSA was approved by an Order of the trial court signed and filed on
May 8, 2012. (CR page 17).
The MSA provided at ¶7 that if one or more disputes arose, the parties
agreed that the dispute would be referred to arbitration in accordance with the
applicable United States Arbitration and Mediation Rules of Arbitration. (Tab 5,
page 3). When a dispute arose between Lauren and Sandra, Lauren requested the
trial court to issue an order waiving the parties' agreement to follow the USA&M
Rules of Arbitration and compelling the parties to attend mediation and
arbitration.
An arbitration hearing was conducted on October 18, 2012 purportedly
pursuant to the provisions of the MSA, and the arbitrator signed an award on
October 18, 2012. (CR page 37). Landen submits that the Arbitration Award was
unenforceable as to the order that the Trust pay attorney's fees to Heinrichs & De
Gennaro, P.C. in the amount of $285,000.00 plus expenses of $12,358.85.00
because the Trust is not an entity, the Trust was not a party, and the Trust is an
irrevocable spendthrift trust. Therefore, Landen submits that Heinrichs' claim for
payment of attorney's fees relating to his contract for legal services as attorney for
Lauren, who is a beneficiary of the Trust, is not collectable against the Trust
because the Trust does not have the capacity to be a judgment debtor. 6 On May 7, 2013, the trial court signed an Order Confirming Award of
Arbitrator and Final Judgment. (CR page 24-25). Landen submits that the Order
Confirming Award of Arbitrator and Final Judgment was final as to the order that
the Trust pay attorney's fees to Heinrichs & De Gennaro, P.C., but that the Trust
does not have the capacity to be a judgment debtor because it is not a person or
thing, and it is a spendthrift trust. Now, it is too late for Heinrichs to appeal the
final Judgment to change the identity of the judgment debtor.
On July 23, 2015, Heinrichs filed a Judgment Creditor's Motion to Order
Disbursement of Funds from the Registry of the Court in Payment of Judgment.
Heinrichs claims a Judgment against the Trust for $297,358.85 plus accrued
postjudgment interest (through August 5, 2015) in the amount of $34,521.12.(CR
Supplement, page 11). Heinrichs filed an Amended Judgment Creditor's Motion
to Order Disbursement of Funds from the Registry of the Court in Payment of
Judgment on August 24, 2015. (CR pages 128-134). Landen filed her Verified
Plea in Intervention on August 24, 2015. (CR pages 135-144). Heinrichs filed a
Second Amended Judgment Creditor's Motion to Order Disbursement of Funds
from the Registry of the Court in Payment of Judgment on September 17, 2015.
(CR pages 169-175). Heinrichs filed a Motion to Strike Landen Saks' Intervention
on August 28, 2015. (CR pages 149-163). 7 Landen alleges and would prove that the Trust was not legally obligated to
pay Heinrichs' judgment, which was not legally enforceable against the Trust, but
that Marcus failed or refused to intervene and object to Heinrichs' claim. The
Trust provides as follows:
“4.7 Spendthrift Restriction. Each trust created hereunder is a
spendthrift trust. Accordingly, no beneficiary shall have the power to
anticipate, encumber, or transfer his interest in any trust estate in any
manner. No part of any trust estate shall be liable for or charged with
any debts, contracts, liabilities, or torts of a beneficiary, or subject to
seizure or other process by any creditor of a beneficiary.”
(CR page 235 ¶ 4.7).
Landen alleges and would prove that the trustee breached his fiduciary duty
to the beneficiaries of the Trust by not intervening and objecting to Heinrichs'
claim because the claim was not legally enforceable against the Trust.
Furthermore, payment of such unenforceable claim would reduce the principal of
the Trust, which would also adversely affect the income-producing capacity of the
Trust and corresponding distributions to the beneficiaries.
Therefore, Landen claims a justiciable interest in the Trust, and her
intervention on behalf of the trustee was essential to protecting her interest in the 8 Trust from being dissipated or diluted by the improper payment of an
unenforceable judgment against the Trust. Landen claims a justiciable interest in
protecting the Trust from mismanagement, and her intervention on behalf of the
interim trustee was necessary to protect her interests as a beneficiary because the
interim trustee failed or refused to intervene and object to Heinrichs' claim
The trial court, after considering the pleadings and argument of counsel for
the parties, signed the Order Striking Intervention (CR supplement, pages 4-5) and
Order to Disburse Funds from the Registry of the Court in Payment of Judgment
(CR Supplement, page 6) on September 25, 2015. Landen timely filed her notice
of appeal on the same day.
SUMMARY OF ARGUMENT
Landen submits that the trial court abused its discretion when it signed the
Orders granting Heinrichs' amended motion to strike Landen's plea in intervention.
Landen submits that she was deemed to be a party to the MSA, arbitration award
and judgment confirming the award although she contested these findings on
appeal. Landen also contested the existence of the trust, which she argued had
been terminated prior to the MSA, on appeal. Landen is not contesting these
findings or appealing the prior Judgment Confirming Award of Arbitrator and
Final Judgment, dated May 7, 2013. 9 Landen submits that she had a right to intervene, when Heinrichs filed his
motion to order disbursement of funds from the registry of the Court to pay his
judgment against the Trust. Landen is a beneficiary of the Trust, and she was
found to be a party to the Judgment Confirming Award of Arbitrator and Final
Judgment, dated May 7, 2013. (CR page 24-25). Landen claimed that disbursing
funds belonging to the Trust would reduce the principal and earning capacity of
the Trust, which would directly and indirectly affect Landen's beneficial interests.
Secondly, Landen submits that the trial court erred by granting Judgment
Creditor's Motion to Order Disbursement of Funds from the Registry of the Court
in Payment of Judgment. Landen submits that Heinrichs was not a party to the
MSA; the interim trustee was not a judgment debtor; the Trust was not amended to
allow payment of a debt incurred by a beneficiary despite the spendthrift
protection; and Heinrichs' judgment against the Trust was not enforceable,
notwithstanding the parties', (not including Rogers as interim trustee), agreement
to pay Heinrichs' and Rogers' fees from the Trust pursuant to the MSA. Landen
also claimed that Heinrichs' claim against the Trust was unenforceable because the
Trust lacks capacity to be a judgment debtor, i.e., the Trust cannot pay a judgment,
and Heinrichs did not get a judgment against the Interim Trustee. Therefore,
Heinrichs lacked standing or capacity to demand payment from the registry of the 10 court.
STANDARD OF REVIEW
Appellate courts review for an abuse of discretion a trial court's
determination on a motion to strike a plea in intervention. Estate of Harley D.
Webb, Jr., Deceased., 266 S.W.3d 544 (Civ. App. - Fort Worth 2008) citing Law
Offices of Windle Turley, P.C. v. Ghiasinejad, 109 S.W.3d 68, 70 (Tex.App.-Fort
Worth 2003, no pet.). To determine whether a trial court abused its discretion, an
appellate court must decide whether the trial court acted without reference to any
guiding rules or principles; in other words, the appellate court must decide
whether the act was arbitrary or unreasonable. Downer v. Aquamarine Operators,
Inc., 701 S.W.2d 238, 241-42 (Tex. 1985), cert. denied, 476 U.S. 1159 (1986).
Merely because a trial court may decide a matter within its discretion in a different
manner than an appellate court would in a similar circumstance does not
demonstrate that an abuse of discretion has occurred. Id.
ARGUMENT AND AUTHORITY
Issue No. 1: Whether the trial court erred by granting Heinrichs'
swcond amended motion to strike Landen's plea in intervention.
The Texas Rules of Civil Procedure provide that "[a]ny party may intervene
Page 549. . . subject to being stricken out by the court for sufficient cause on the 11 motion of any party." TEX. R. CIV. P. 60. Thus, an intervenor is not required to
secure the trial court's permission to intervene; but instead, any party who opposes
the intervention has the burden to challenge it by a motion to strike. Intermarque
Automotive Products, Inc. v. Stewart Feldman and Marla Matz, 21 S.W.3d 544
(Tex.App.-Texarkana 2000) citing Guaranty Fed. Sav. Bank v. Horseshoe
Operating Co., 793 S.W.2d 652, 657 (Tex. 1990).
Once the motion to strike has been filed, the burden then shifts to the
intervenor to show a justiciable interest in the lawsuit. Mendez v. Brewer, 626
S.W.2d 498, 499 (Tex. 1982). The interest asserted by the intervenor may be legal
or equitable in nature, id.; but it must be "greater than a mere contingent or remote
interest." Rogers v. Searle, 533 S.W.2d 440, 442 (Tex. App.-Corpus Christi 1976,
no writ), citing Beall v. Helm, 50 S.W.2d 460 (Tex. Civ. App.-Fort Worth 1932,
writ dism'd). A party has a justiciable interest in a lawsuit, and thus a right to
intervene, when his interests will be affected by the litigation. See Miami Indep.
Sch. Dist. v. Moses, 989 S.W.2d 871, 879 (Tex. App.-Austin 1999, pet. denied);
Evan's World Travel, Inc. v. Adams, 978 S.W.2d 225, 234-35 (Tex. App.-
Texarkana 1998, no pet.). If a party cannot show a justiciable interest in the
lawsuit, the trial court has sufficient cause to strike his plea in intervention. See
Beutel v. Dallas County Flood Control Dist., No. 1, 916 S.W.2d 685, 691 (Tex. 12 App.-Waco 1996, writ denied) (stating that party may intervene if "he has
justiciable interest in the subject matter that makes it necessary or proper for him
to come into the case for his self-protection"); Wilson v. County of Calhoun, 489
S.W.2d 393 (Tex. Civ. App.-Corpus Christi 1972, writ ref'd n.r.e.).
Landen submits that she had a right to intervene in order to protect her
beneficial interests in the Trust, when Heinrichs filed his motion to order
disbursement of funds from the registry of the Court to pay his judgment against
the Trust. Landen is a beneficiary of the Trust, and the trial court confirmed the
arbitrator's finding that Landen was a party to the Judgment Confirming Award of
Arbitrator and Final Judgment, dated May 7, 2013. (CR page 24-25). Landen
claimed that disbursing funds belonging to the Trust would reduce the principal
and earning capacity of the Trust, which would affect Landen's beneficial interest.
Furthermore, even if a party has a justiciable interest, and thus a right to
intervene in a lawsuit, the trial court will still have broad discretion in determining
whether his plea in intervention should be struck. Rogers, 533 S.W.2d at 442;
Inter-Continental Corp. v. Moody, 411 S.W.2d 578, 589 (Tex. Civ. App.-Houston
1966, writ ref'd n.r.e.). The trial court's discretion, however, is not unbridled.
Apparel Contractors, Inc. v. Vantage Properties, Inc., 620 S.W.2d 666, 668 (Tex.
Civ. App.-Dallas 1981, writ ref'd n.r.e.); Inter-Continental Corp., 411 S.W.2d at 13 589. The Texas Supreme Court has held that it is an abuse of discretion to strike a
plea in intervention if (1) the intervenor could have brought the same action, or
any part thereof, in his own name, or if the action had been brought against him,
he would be able to defeat recovery, or some part thereof, (2) the intervention will
not complicate the case by an excessive multiplication of the issues, and (3) the
intervention is almost essential to effectively protect the intervenor's interest.
Guaranty Fed. Sav. Bank, 793 S.W.2d at 657.
The Trust Code provides that in an action by or against a trustee and in all
proceedings concerning trusts, the trustee is a necessary party "if a trustee is
serving at the time the action is filed." In re Webb, 266 S.W.3d 544, 548-49 (Tex.
App.-Fort Worth 2008, pet. denied); see Tex. Prop. Code Ann. §§ 111.004,
115.011. This court has held that, because legal title to trust property is vested in
the trustee, the trustee is the proper party to bring an action on behalf of a trust.
Interfirst Bank-Houston, N.A. v. Quintana Petroleum Corp., 699 S.W.2d 864, 874
(Tex. App.-Houston [1st Dist.] 1985, writ ref'd n.r.e.). There is an exception,
however. When the trustee cannot or will not enforce the cause of action that it has
against a third person, a beneficiary may enforce it. Id. In such a case, the
beneficiary is not acting on a cause of action vested in him, but he is acting for the
trustee. Id. 14 Landen submits that Rogers was appointed interim trustee with limited
powers pursuant to the Order Appointing Interim Trustee, Marcus Rogers on
December 28, 2011. (CR pages 14-16). Although, Rogers approved the MSA as
to form only, he approved the Order Approving Settlement Agreement on May 8,
2012. (CR page 17). The Interim Trustee, did not object to Heinrichs' motion to
order disbursement of funds from the registry of the Court to pay his judgment
against the Trust. Landen submits that the Interim Trustee's failure to object to
Heinrichs' claim against the Trust was a breach of fiduciary duty in violation of the
spendthrift clause at ¶ 4.7. (TAB 5, page 3). So, Landen timely filed her plea in
intervention in order to object to Heinrichs' motion on behalf of the Interim
Trustee before the trial court signed the Order to Disburse Funds from the Registry
of the Court in Payment of Judgment.
Therefore, Landen submits that it was an abuse of discretion for the trial
court to strike her plea in intervention because (1) she could have been able to
defeat Heinrichs' claim, or some part thereof, acting for the Interim Trustee, (2) her
intervention would not complicate the case by an excessive multiplication of the
issues because the Interim Trustee did not file any opposition to Heinrichs' claim,
and (3) her intervention was almost essential to effectively protect her interest as a
beneficiary of the Trust. Guaranty Fed. Sav. Bank, 793 S.W.2d at 657. 15 Issue No. 2: Whether the trial court erred by granting Judgment
Creditor's Motion to Order Disbursement of Funds from the Registry of the Court
in Payment of Judgment.
As a preliminary matter, the Court must decide whether the postjudgment
order enforcing the court's judgment in this case is a final and appealable order.
Kenseth v. Dallas County, 126 S.W.3d 584 (Tex. App., 2004). Postjudgment
orders embodying awards to claimants or enforcing the court's judgment itself are
appealable orders; they function like judgments. Id., at 600.
The Texas Supreme Court has held that "[t]he term `trust' refers not to a
separate legal entity but rather to the fiduciary relationship governing the trustee
with respect to the trust property." Ray Malooly Trust v. Juhl, 186 S.W.3d 568
(Tex., 2006), citing Huie v. DeShazo , 922 S.W.2d 920, 926 (Tex.1996) (holding
that treating trust rather than trustee as attorney's client "is inconsistent with the
law of trusts"). The general rule in Texas (and elsewhere) has long been that suits
against a trust must be brought against its legal representative, the trustee. See
Werner v. Colwell, 909 S.W.2d 866, 870 (Tex.1995); Smith v. Wayman, 148 Tex.
318, 224 S.W.2d 211, 218 (1949); Slay v. Burnett Trust, 143 Tex. 621, 187
S.W.2d 377, 382 (1945). Landen's attorney made this argument to the trial court
at the hearing on September 25, 2015. (RR pages 12-13, TAB 5). 16 According to the Judgment Confirming Arbitration Award in this case,
neither Heinrichs, Shipp, Heinrichs & De Gennaro nor the trust were parties the
MSA. (CR Vol. 1, page 36, ¶ 6). Rogers, as Interim Trustee, did not approve the
substance of the MSA; he and Heinrichs only approved the form of the agreement
of the parties.
According to the Code Construction Act specifies that "person" includes a ".
. . business trust, estate, trust, partnership, association, and any other legal entity."
TEX. GOV'T CODE § 311.005(2). But the Code Construction Act addresses the
construction of state codes, not the capacity to sue or be sued. Id. at § 311.002. For
example, the Act includes estates as statutory "persons," but an estate is
nonetheless "not a legal entity and may not properly sue or be sued as such."
Austin Nursing Center, Inc. v. Lovato, 171 S.W.3d 845, 849 (Tex. 2005).
Moreover, the definitions in the Code Construction Act apply unless other
statutes or contexts require a different definition. TEX. GOV'T CODE §
311.005(2). The most relevant code — the Texas Trust Code — explicitly defines
a trust as a relationship rather than a legal entity. See TEX. PROP. CODE §
111.004(4). It states that trustees "may compromise, contest, arbitrate, or settle
claims" against a trust. Id. § 113.019. It validates payments to and conveyances
from a trustee, even if the trustee absconds with the proceeds. Id. §§ 114.081, 17 114.082. And since the trustee is "the person holding the property in trust," id. §
111.004(18), a judgment against that property must be brought against the person
who holds it. Ray Malooly Trust v. Juhl, 186 S.W.3d 568 (Tex., 2006).
Heinrichs claims a right to seek collection of its purported judgment against
the Trust as to funds on deposit through a court proceeding if the Trust owns
property that: (1) cannot readily be attached or levied by ordinary legal process;
and (2) is not exempt from attachment, execution or seizure for the satisfaction of
liabilities pursuant to TCP&RC Section 31.002(a). However, Heinrichs' claim of a
right to collect his purported judgment against the Trust fails because the Texas
Trust Code explicitly defines a trust as a relationship rather than a legal entity. See
TEX. PROP. CODE § 111.004(4).
The Trust cannot be a judgment debtor because it is not an entity, since it is
neither a “person” nor “property”, and therefore, does not have the capacity to sue
or be sued. Heinrichs pleaded for judgment against the Trust although he knew or
should have known that the Trust was not a party to the MSA and did not have the
capacity to be sued. Inexplicably, Heinrichs chose not to sue the interim trustee,
who, according to the Judgment Affirming Arbitration Award, was a party to the
MSA even though he only signed approval as to form. Landen submits that
neither Heinrichs nor the Interim Trustee agreed to the terms of the MSA 18 including the provision for payment of his fees and Heinrichs' fees.
Additionally and alternatively, none of the parties to the MSA had authority
to agree to terms that would breach the spendthrift terms of the Trust, which was
not amended to allow payment of a beneficiary's debts. Therefore, Heinrichs knew
or should have known that getting a judgment against a non-entity would be
uncollectable. Additionally and alternatively, getting a judgment a spendthrift
trust would be uncollectable.
Heinrichs knew or should have known that his judgment against the Trust
was unenforceable because he did not contract with the Trust or the interim
trustee, and the Trust did not have the capacity to be sued. Nevertheless,
Heinrichs obtained an Abstract of Judgment identifying himself as judgment
creditor and the Trust as judgment debtor on October 30, 2013. (CR Supplement,
pages 32-34).
Landen appealed the Judgment Affirming Arbitration Award, which was a
final, appealable judgment. Heinrichs did not appeal the Judgment Affirming
Arbitration Award, and now it is too late to alter or amend the judgment.
Likewise, Heinrichs cannot relitigate the issue regarding the identity of a judgment
debtor because his judgment against the Trust became final, and he didn't file an
appeal. 19 Relitigation of an issue will be barred by collateral estoppel if "(1) the facts
sought to be litigated in the first action were fully and fairly litigated in the prior
action; (2) those facts were essential to the judgment in the first action; and (3)
the parties were cast as adversaries in the first action." Cross, Kieschnick & Co. v.
Johnston, 892 S.W.2d 435, 439 (Tex.App.-San Antonio, 1994) For collateral
estoppel to be invoked, it is only necessary that the party against whom the plea of
collateral estoppel is being asserted be a party or in privity with a party in the prior
litigation. Id., citing Mower v. Boyer, 811 S.W.2d 560, 563 (Tex.1991) (citation
omitted); see also Barr v. Resolution Trust Corp., 837 S.W.2d 627, 628
(Tex.1992).
All collateral estoppel requirements have been met in the present case. First,
the issue of the proper judgment debtor and the applicability of the misnomer
doctrine was fully and fairly litigated in the prior action. Second, those facts were
essential to the amended judgment. Third, Heinrichs was not a plaintiff in the first
action. Consequently, Heinrichs is precluded by collateral estoppel from
relitigating the issue of the proper judgment debtor through the issue of misnomer
in a subsequent turnover proceeding.
In conclusion, Heinrichs was not diligent in amending its pleadings in the
trial court to cure the misnomer. The trial judgment became final. The turnover 20 statute may not be used to cure a misnomer once the trial judgment has become
final. It was improper as a matter of law to issue a turnover order against non-
judgment debtors. The trial court abused its discretion. The Court of Appeals
should render the turnover order void. Cross, Kieschnick & Co. v. Johnston, 892
S.W.2d 435 (Tex.App.-San Antonio, 1994).
The Order to Disburse Funds from the Registry of the Court in Payment of
Judgment, was signed in error on September 25, 2015. Landen submits that the
trial court abused its discretion because it acted without reference to any guiding
rules or principles. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-
42 (Tex. 1985), cert. denied, 476 U.S. 1159 (1986). To wit, the Order did not
contain reference to any guiding rules or principles as a basis for ordering a check
to be issued by the County Clerk from the Registry of the Court payable to
Heinrichs in satisfaction of his judgment against the Trust.
So, Heinrichs' assertion that the TCP&RC Section 31.002(b)(1) authorizes
the Court to order the Trust to turn over non-exempt property is false. Likewise,
Heinrichs' assertion that the Court may also grant turnover relief against the clerk
of the court as a third party in possession of the Trust's property is also false
because the Trust is not an entity; it was not a party to this case; and it could not
be a judgment debtor. Additionally and alternatively, even though Heinrichs 21 requested, and the trial court agreed, to name the Trust as a judgment debtor, the
judgment is not collectable because the final Judgment named a non-entity, which
owns no assets, as judgment debtor.
Heinrichs' argument that “[T]he entire amount of the funds on deposit with
the clerk of the court, as property in custodia legis, is subject to turnover relief and
can be applied toward payment of the Law Firm's Judgment[.]” should not be
relied on because it invites error. A judgment against a trust without joining the
trustee is unenforceable. The Trust Code provides that in an action by or against a
trustee and in all proceedings concerning trusts, the trustee is a necessary party "if
a trustee is serving at the time the action is filed." In re Webb, 266 S.W.3d 544,
548-49 (Tex. App.-Fort Worth 2008, pet. denied); see Tex. Prop. Code Ann. §§
111.004, 115.011. The First Court of Appeals – Houston has held that, because
legal title to trust property is vested in the trustee, the trustee is the proper party to
bring an action on behalf of a trust. Ginther v. Bank of America, N.A., No. 01-08-
00430-CV (Civ.App.-Houston 1st Dist. 2010, pet. denied) citing Interfirst Bank-
Houston, N.A. v. Quintana Petroleum Corp., 699 S.W.2d 864, 874 (Tex. App.-
Houston [1st Dist.] 1985, writ ref'd n.r.e.).
There is an exception, when the trustee cannot or will not enforce the cause
of action that it has against a third person, a beneficiary may enforce it. Id. In such 22 a case, the beneficiary is not acting on a cause of action vested in him, but he is
acting for the trustee. Id. When Rogers' attorney stipulated that Rogers, as interim
trustee, did not object to Heinrichs' claim on or about July 23, 2015, the failure or
refusal of the interim trustee to intervene and object triggered the exception, which
allowed Landen, as a beneficiary of the Trust, to act for the trustee to protect her
interest in the Trust. Id.
Hienrichs argues that “[A] further compelling reason to order payment of
the Law Firm's Judgment from the funds on deposit is the restricted nature of the
Law Firm's right to pursue collection of the Judgment by other means.” However,
this argument fails for the same reasons that his other arguments fail. The Trust
cannot be a judgment debtor because (1) the Trust is not an entity, (2) the Trust is
not a party to this case, (3) the trustee of the Trust is not a party to this case; (4)
Heinrichs' judgment is not against the trustee of the Trust, and (5) the other
beneficiaries of the Trust are not parties, and (6) the Trust is an irrevocable
spendthrift trust.
CONCLUSION AND PRAYER
WHEREFORE, Appellant Landen Saks requests the Court to reverse the
trial court's Order Striking Intervention and Order to Disburse Funds from the
Registry of the Court in Payment of Judgment and render judgment dismissing 23 Heinrichs' claims. Alternatively, Landen Saks requests the Court to reverse the
trial court's Order Striking Intervention and Order to Disburse Funds from the
Registry of the Court in Payment of Judgment and remand the case to Probate
Court No. Two, Bexar County, Texas for dismissal. Appellant also requests the
Court to grant her all additional relief to which she may be justly entitled.
/s/ Philip M. Ross Philip M. Ross State Bar No. 17304200 1006 Holbrook Road San Antonio, Texas 78218 Phone: 210/326-2100 Email: ross_law@hotmail.com ATTORNEY FOR APPELLANT LANDEN SAKS
24 CERTIFICATION
I hereby certify that every factual statement in the petition is supported by competent evidence included in the appendix or record.
/s/ Philip M. Ross Philip M. Ross
CERTIFICATE OF COMPLIANCE
I hereby certify that this brief is in compliance with Texas Rule of Appellate Procedure Rule 9. It contains 5,334 words, 24 pages, 14 point typeface.
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the above document was e- filed and sent by email or electronic delivery to: Jonathan Yedor and Royal Lea, III on December 29, 2015.