Susan Camille Lee v. Ronald E. Lee Jr., Katherine Lee Stacy, and Legacy Trust Company, Receiver
2017 Tex. App. LEXIS 7174
| Tex. App. | 2017Background
- Katherine Barnhart’s will created a testamentary trust for her children and grandchildren; trustee must make quarterly income distributions to Ronald and Susan and semiannual distributions to their daughters.
- Ronald (original trustee) failed to make distributions; Susan sued him in 1996–2002 (Lee I). Appellate court reversed, holding Ronald breached fiduciary duties and owed substantial reimbursement and Susan’s attorney fees to the Trust; judgment plus interest left Ronald owing the Trust millions.
- Years later, as Susan (then trustee) failed to account or distribute income to Ronald, Ronald sued (2014), and the statutory probate court removed Susan as trustee (June 2015) and appointed Legacy Trust Company as receiver.
- Legacy negotiated a settlement with Ronald: cash payments (including $8M already paid), promissory note, and conveyance of Ronald’s interests in real properties in exchange for Legacy selling the Trust’s judgment against Ronald and releases of multiple claims; trial court approved the settlement March 2, 2016.
- Susan appealed, arguing the probate court lacked jurisdiction (no pending probate proceeding), that the court abused its discretion approving the settlement, and that denial of her continuance motion was erroneous.
Issues
| Issue | Plaintiff's Argument (Susan) | Defendant's Argument (Ronald/Legacy) | Held |
|---|---|---|---|
| Whether the statutory probate court had jurisdiction to remove trustee, appoint receiver, and approve settlement | Probate court lacked jurisdiction because no pending probate proceeding; district courts have exclusive jurisdiction over trustee removal/liability | Statutory probate courts have independent concurrent jurisdiction over actions by/against trustees and testamentary trusts under Estates Code §32.006 | Court held probate court had independent trust jurisdiction; orders not void for lack of jurisdiction |
| Whether March 2, 2016 order approving receiver’s sale of judgment is appealable/final | Order not final because Ronald’s and Stacy’s claims remain pending | Receiver-sales orders resolving discrete receivership issues are final and appealable (Huston) | Court held the approval was a final, appealable order |
| Whether trial court abused discretion approving settlement (fairness/adequacy) | Settlement undervalued the judgment; insufficient evidence to assess released claims; court relied on its own view of litigation costs | Receiver evaluated whole deal (cash, property, releases, litigation savings); further litigation costly and uncertain; record and testimony supported reasonableness | Abuse of discretion not shown; approval affirmed |
| Whether denial of Susan’s continuance to conduct discovery was erroneous | Needed at least 90 days to depose witnesses and obtain valuation/records | Susan failed to show diligence or affidavit of materiality; much info was presented or was in Legacy’s application; Zabel (her counsel) available | Denial not an abuse of discretion; motion failed to comply with rules and lacked specifics |
Key Cases Cited
- Urbish v. 127th Judicial Dist. Court, 708 S.W.2d 429 (Tex. 1986) (court must ascertain subject-matter jurisdiction)
- City of Houston v. Rhule, 417 S.W.3d 440 (Tex. 2013) (courts must ensure subject-matter jurisdiction exists)
- Lee v. Lee, 47 S.W.3d 767 (Tex. App.—Houston [14th Dist.] 2001) (appellate decision in earlier trustee litigation establishing liability/fees)
- Huston v. F.D.I.C., 800 S.W.2d 845 (Tex. 1990) (receiver’s sale approval resolving discrete receivership issues is final and appealable)
- Joe v. Two Thirty Nine Joint Venture, 145 S.W.3d 150 (Tex. 2004) (standard for reviewing denial of continuance to conduct discovery)