June 27, 2022

Volume XII, Number 178

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June 27, 2022

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Court Affirmed Order Granting Injunction to Allow Successor Trustees to Manage a Business Owned By a Trust

In Clark v. Clark, two brothers sued a third brother regarding the third brother’s ability to be trustee of a trust due to a traumatic brain injury. No. 14-19-00604-CV, 2021 Tex. App. LEXIS 9866 (Tex. App.—Houston [14th Dist.] December 14, 2021, no pet.). The parties’ mother created a testamentary trust that held a family business and named the third brother as the trustee. The will provided that “[i]f for any reason, SCOTT ALEXANDER CLARK, shall fail to qualify or cease to serve, for any reason, as Trustee under my Will, I designate and appoint as successor Co-trustees my sons, STEVEN WAYNE CLARK and ROBERT GEORGE CLARK.” Id. The two brothers alleged that because the third suffered a traumatic brain injury that required brain surgery, intubation, and hospitalization, he had ceased to serve or was unable to serve as trustee of the trust. They sought a preliminary order that declared that “(1) Scott had ceased to serve or was unable to serve as trustee; (2) Steven and Robert are successor co-trustees under the terms of the Will; and (3) Steven and Robert, as successor co-trustees of the Trust, are appointed to manage the assets of the Trust so long as Scott is unable to do so.” Id. The two brothers also sought a temporary restraining order and a temporary injunction prohibiting the company’s employees from interfering with their operation of the business. The trial court granted the order, and the third brother appealed.

The court of appeals first analyzed whether it had jurisdiction over the appeal from this interlocutory order. Regarding the probate-order exception to the one-final-judgment rule, the court held that it did not apply:

[T]o determine whether the Order in this case is final and appealable under the probate exception to the general rule for determining finality, we must determine (1) if there is a particular phase of the probate proceedings of which the order logically may be considered a part, and (2) if, in the Order, the probate court disposed of all parties and all issues in this phase. To make this determination, we examine the live pleadings contained in the record. Presuming for the sake of argument that the claims asserted and relief sought by Steven and Robert logically are a particular phase of the probate proceedings of which the Order logically may be considered a part, in the Order, the trial court did not dispose of all parties or all issues in this particular phase of the probate proceedings. So, the Order is not a final order under the probate exception to the general rule for determining finality.

Id. The court held that the statute allowing for an interlocutory appeal of receivership orders did not apply because the trial court’s order did not appoint a receiver. Id. (citing Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(1) (stating that “a person may appeal from an interlocutory order of a . . .  statutory probate court . . . that . . . appoints a receiver. . . .”). The court of appeals held that it also did not have jurisdiction over the trial court’s order because the court appointed a trustee as the order appointed successor trustees: “Texas courts have consistently construed section 51.014(a)(1) and its statutory predecessors to provide for an interlocutory appeal from an order in which the trial court appoints an original trustee but not to provide for an interlocutory appeal from an order in which the trial court appoints a successor trustee.” Id.

The court held that it did have jurisdiction over the injunctive relief portion of the order:

In section 51.014(a)(4) of the Civil Practice and Remedies Code, the Legislature provides that “a person may appeal from an interlocutory order of a . . . statutory probate court . . . that . . . grants or refuses a temporary injunction.” This statute provides for an interlocutory appeal from an order granting a temporary injunction. But, a person may not use an appeal under this statute as a vehicle for obtaining an interlocutory appeal of other non-appealable rulings made in the order in which the trial court grants or refuses a temporary injunction… Under the Order’s plain text and considering the Order’s substance, character, and function, we conclude that the following parts of the Order grant non-appealable, non-injunctive declaratory relief: the parts of the Order in which the trial court declares that as a result of Scott’s brain injury he has ceased or is incapable of serving as Trustee of the Trust, and that until judgment is entered in this case, Steven and Robert are appointed successor co-trustees of the Trust… Under the Order’s plain text and considering the Order’s substance, character, and function, we conclude that the trial court granted a temporary injunction in the part of the Order in which the trial court purported to enjoin all employees or agents of Limeco, Inc. from hindering or interfering with the ability of Steven and Robert to manage the Trust asset — Limeco, Inc. (the “Temporary Injunction Part”).

Id. The court held it would not review the order other than the temporary injunction part. The court then reviewed the evidence at the hearing and affirmed the injunction aspect of the order citing evidence that the two brothers were not allowed to come into the business premises, after the accident the third brother had not been to the business, and that he was at the hospital, was at one time in a coma, was at one point intubated, and could not drive himself to the business. Id.

Interestingly, one of the justices authored a concurrence and argued that the majority should have cited to the Texas Estate Code regarding its jurisdiction over final probate orders:

One example is Estates Code section 32.001, which states, in relevant part: … (c) A final order issued by a probate court is appealable to the court of appeals.” Tex. Est. Code Ann. § 32.001 (emphasis added). In this case, as in general, when the construction of a statute is relevant, I would begin by citing and analyzing the statute, rather than bypassing the statute and moving directly to a discussion of caselaw.

Id.

© 2022 Winstead PC.National Law Review, Volume XII, Number 72
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About this Author

David Johnson Financial Institution lLtigation Winstead Law Firm Fort Worth Texas
Managing Shareholder - Fort Worth

David maintains an active trial and appellate practice and has consistently worked on financial institution litigation matters throughout his career. David is the primary author of the Texas Fiduciary Litigator blog, which reports on legal cases and issues impacting the fiduciary field in Texas. 

David's financial institution experience includes (but is not limited to): breach of contract, foreclosure litigation, lender liability, receivership and injunction remedies upon default, non-recourse and other real estate lending, class...

817.420.8223
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