Opinions Released September 8, 2016

In this weekly blog, the Law Offices of Brandy Wingate Voss, PLLC will summarize recent decisions from the Thirteenth Court of Appeals and provide links to decisions on the court’s website.

 In re Estate of Lee Roy Hoskins, No. 13-15-00487-CV (Opinion by Justice Rodriguez; Panel Members: Chief Justice Valdez and Justice Garza)

In this interlocutory appeal from an order appointing a receiver, a litigious family continued its fight over the administration of two trusts created by Cowboy Hoskins’ will.

Lee Roy “Cowboy” Hoskins died in 1985, and his will created two trusts. Cowboy’s wife Hazel was the beneficiary of one trust, while the other benefitted Cowboy’s three sons and seven grandchildren. Hazel was the independent executor of the estate and the trustee for both trusts.

For the next three decades, Cowboy’s family fought in the courts regarding the trusts. Ultimately, an arbitrator named Marcus Rogers the temporary receiver of the trusts, ordering him to file a report with recommendations.

In 2013, near the time Rogers’ report was due, Cowboy’s grandson Rex filed suit challenging Hazel’s management of the trust property. Rex alleged that Hazel conducted illegal transfers to herself and her son Clifton, and he sought the removal of Hazel as executor and trustee. Hazel soon resigned her posts. In accordance with Cowboy’s will, a district court appointed two separate successor trustees; one for each trust.

Rogers then joined the suit, seeking affirmation of his appointment as receiver and alternatively seeking a new appointment as receiver. Instead, the probate court appointed Dyann McCully as dependent administrator. McCully filed a declaratory judgment suit seeking a declaration of all the claims existing between Rogers, Hazel, the various beneficiaries, and other related parties.

The probate court, in turn, ordered Hazel to perform an accounting of the estate and trusts dating all the way back to 1985, and to deliver such accounting to Rogers as “receiver.” Hazel provided an accounting of only one trust, and included numerous unsworn statements that aligned with her litigation position.

Finally, in April 2015, three of Cowboy’s grandchildren asked the probate court to name Rogers as receiver of the two trusts and to grant him the authority to pursue a lawsuit on behalf of the trusts. Numerous other family members indicated their support, as well as one of the two trustees appointed by the district court. The trustee even moved to resign if no receiver or ad litem was appointed, claiming the trust was underfunded. Hazel, Clifton, and Hoskins, Inc. objected.

The probate court held a hearing on the issue, and named Rogers receiver for the limited purpose of reporting on the assets in Cowboy’s estate. The order directed the trustees to determine the viability of litigation but noted that Rogers’ authority to file such litigation would require an additional court order.

Hazel died in October 2015, the same month the probate court issued its order appointing Rogers as receiver. Clifton Hoskins and Hoskins, Inc. (collectively, “Cliff”) appealed, claiming that the trial court abused its discretion because (a) there was no evidence to justify appointment of a receiver, and (b) the court erred by appointing Rogers in particular. Appellees, in turn, claimed that the probate court’s order merely affirmed Rogers’ appointment and was not subject to interlocutory appeal.

Held: The probate court’s order was subject to interlocutory appeal. Regardless, the court did not err by appointing Rogers as a receiver given Hazel’s breach of the trust and the limited nature of Rogers’ authority.

The court of appeals analyzed each of the parties’ arguments in turn, beginning with Appellees’ jurisdictional argument:

1.      The court of appeals has jurisdiction over an interlocutory appeal from an order appointing a receiver.

While Appellees admitted that section 51.014 of the Texas Civil Practice and Remedies Code allows interlocutory review of an order appointing a receiver, they argued that the probate court’s order was instead a confirmation of the earlier orders naming Rogers as receiver and thus, the appeal was untimely. The court of appeals applied the rules of construction to the probate court’s order to determine whether it was a new appointment or an affirmation of a prior appointment.

Reiterating the words of the order, the court of appeals noted that there was not an ambiguity on the face of the document. The order plainly stated that “Rogers is appointed as Receiver.” The order appeared to assign Rogers new responsibilities rather than ratifying old duties. Furthermore, although the order came at the end of a long and complex procedural history, there was only one reasonable interpretation because there was “no aspect of the order which operate[d] as a confirmation rather than an appointment.” 

Finally, the court of appeals compared the case to the Fifth Circuit’s opinion in In re Deepwater Horizon, 579 Fed. Appx. 256 (5th Cir. 2014) (per curiam). There, the trial court refused to enter an order on an arbitration award because of a pending injunction. Appellants argued that the effect of the order was to fully deny confirmation of the award. The Fifth Circuit held that there was no appealable order under the FAA because the order did not mention the FAA, change the arbitration award, or deny the parties’ motions. Similarly in the case at hand, the probate court did not reference the arbitrator’s prior order appointing Rogers as receiver. Thus, the order was a new appointment of a receiver, appealable pursuant to the Texas Civil Practice and Remedies Code.

In the footnotes of the opinion, the court of appeals expressly declined to rule on whether an order confirming a receiver would nonetheless qualify for interlocutory appeal under the Texas Civil Practice and Remedies Code. The court also noted that “probate cases are an exception to the ‘one final judgment’ rule” and can be appealed if an order is entered disposing of all claims or all parties “in a particular phase of the proceeding.” However, the court did not rely on this exception for its holding.

2.      The probate court's offhanded comments throughout the pendency of the case did not have the effect of appointing Rogers receiver.

Appellees alternatively argued that the probate court’s reference to Rogers as “receiver” in hearings and filings throughout the case had the effect of appointing Rogers to such position. Consequently, Appellees argued that Cliff did not timely appeal Rogers’ appointment. The court of appeals summarily rejected this argument, noting that the probate court’s earlier references to Rogers can be explained by Rogers’ expired status and self-identification as a receiver. No probate court order issued before 2015 could reasonably be construed to appoint Rogers as receiver. Thus, Appellees’ argument was overruled.

3.      The probate court’s order was supported by sufficient evidence.

Finally, the Thirteenth Court reached the core issue: evidentiary support for the probate court’s appointment of Rogers as receiver. Such an appointment is reviewed for an abuse of discretion. Legal and factual insufficiency are components of the abuse of discretion analysis.

Although the probate court did not hear evidence at the July 2015 hearing on the motion to appoint Rogers receiver, it had received and considered evidence throughout the pendency of the case. In a 2014 hearing, for example, Rogers testified that Hazel and Clifton claimed the estate had no assets exceeding its debts, that they had no relevant documents regarding the estate, and that the trusts need not continue in existence. Then, days before the 2014 hearing, Hazel changed her story and produced the relevant documents reflecting the estate assets. The documents showed that Hazel had transferred trust property to herself and Clifton. At the time, Hazel responded by claiming that she had the right to engage in self-dealing. However, on interlocutory appeal, this argument was rejected by both the San Antonio Court of Appeals and the Texas Supreme Court.

After the 2014 hearing, the probate court ordered Hazel to perform an accounting of the trusts. Hazel provided an accounting for only one of the two trusts, and omitted key facts such as itemized debts, balance statements, and estate transactions.

The probate court’s decision to appoint Rogers was thus supported by Hazel’s repeated breach of the trust, and the hope that Rogers’ prior work as receiver would allow for efficient administration of the now-underfunded trusts.

4.      The probate court did not err by failing to consider and reject less severe remedies.

Cliff further claimed that the appointment of a receiver is a severe remedy and is available only where other remedies are inadequate. Yet, the probate court did not consider and reject alternatives prior to appointing Rogers as a receiver.

However, the Thirteenth Court of Appeals distinguished the present case based on Rogers’ limited powers. The court recognized an exception to the severity of receiverships, noting that Rogers’ receivership was not severe because he had limited authority and was tasked to provide the court with information that Hazel refused to provide herself. Rogers’ role was parallel to that of an auditor tasked with examining the relevant assets. Rogers was ordered to develop a report of the trust’s assets; the trustees and administrator retained the authority to take action on Rogers’ report. Thus, the probate court did not err by appointing a receiver without first ruling out less severe remedies.

5.      Cliff’s motion to strike the evidence stemming from the parties’ 2014 hearing was denied.

Next, Cliff claimed the probate court could not consider evidence outside the 2015 hearing, particularly given that its order contained recitals stating it considered the parties motions and arguments. However, the recitals in the 2015 order did not claim that the probate court only considered the parties motions and arguments. More importantly, a trial court is presumed to have taken judicial notice of its own records in a case. Here, both parties even attached excerpts of the 2014 hearing to their motions, and referenced the 2014 hearing in their arguments. Thus, the probate court properly considered evidence from the 2014 hearing and Cliff’s motion to strike was denied.

6.      The trial court did not err by appointing a receiver based on a prior trustee’s breach.

Cliff argued that even if Hazel breached the trust, the current trustees—appointed by the district court—did not. Based on the present tense language used in Texas Property Code section 114.008, Cliff claimed a receivership is only warranted if the relevant breach was committed by the current trustee.

However, Cliff’s reliance on verb tense of the Texas property Code was improper because under the rules of statutory construction, “words in the present tense include the future tense.” Section 114.008 does not explicitly limit itself to breaches by current trustees, and the context makes clear that the appointment of a new trustee does not always remedy a breach. Therefore, the court did not err by appointing a receiver based on Hazel’s breach.

7.      Rogers was a disinterested party, qualified to serve as receiver.

Finally, Cliff claimed that Rogers was not a neutral, disinterested person and thus not appropriate to be appointed as receiver. Cliff pointed out that Leonard Hoskins—Cowboy’s son and Clifton’s brother—paid Rogers’ fees during Rogers’ prior service as receiver, thus creating a conflict of interest.

This argument was flawed however, because Leonard did not choose to pay Rogers’ fees. Rather, during arbitration the arbitrator ordered Leonard to pay Rogers’ fees as part of the parties’ agreement. Furthermore, the probate court ordered Rogers’ current fees to be paid out of the estate, rather than by Leonard. Therefore, there was no conflict of interest.

Having rejected each of Appellant’s arguments, the probate court’s order was affirmed.

Read the Full Opinion Here