Court Opinion

ID: 9368559
Source: CourtListenerOpinion
Date Created: 2023-02-05 09:15:38.548427+00
Date Added: 2024-06-11T17:16:09.142753
License: Public Domain

Affirmed and Memorandum Opinion filed January 31, 2023.

                                      In The

                    Fourteenth Court of Appeals

                              NO. 14-22-00235-CV

MARY REBECCA WHITENER, IN HER CAPACITIES AS TRUSTEE OF
 THE CHARLES CLEVELAND WHITENER, III MARITAL TRUST,
   TRUSTEE OF THE CHARLES CLEVELAND WHITENER, III
  RESIDUARY TRUST, AND INDEPENDENT EXECUTOR OF THE
  ESTATE OF CHARLES CLEVELAND WHITENER, III Appellant

                                        V.

                            ORIGIN BANK, Appellee

                    On Appeal from the 113th District Court
                            Harris County, Texas
                      Trial Court Cause No. 2021-14052

                  MEMORANDUM OPINION

      Appellant Mary Rebecca Whitener, in her capacities as (1) Trustee of the
Charles Cleveland Whitener, III Marital Trust, (2) Trustee of the Charles Cleveland
Whitener, III Residuary Trust, and (3) Independent Executor of the Estate of Charles
Cleveland Whitener, III, appeals a summary judgment granted in favor of appellee
Origin Bank on Origin’s claims for breach of guaranty agreements against the trusts
and the Estate.      Mary contends:       (1) the district court lacked subject matter
jurisdiction over Origin’s breach of contract claims because the County Court of
Taylor County, in which the Estate of Charles Cleveland Whitener, III (the “Estate”)
matters are pending, had exclusive jurisdiction over them; and (2) the trial court
erred in granting summary judgment in Origin’s favor against the Estate because
Origin’s claim was a preferred debt and lien claim and Origin seized the collateral
securing the loan.

         We reject Mary’s jurisdictional argument because the Taylor County Court’s
jurisdiction over Origin’s claims was not exclusive, and the Harris County district
court has concurrent subject matter jurisdiction. We also conclude that Origin’s
claim against the Estate was not a secured claim, and Mary’s arguments that Origin
could not proceed against the Estate lack merit. We affirm the judgment in Origin’s
favor.

                                        Background

         In 2013, Origin entered into a letter loan agreement with the Lauren
Corporation, which was amended periodically                    (collectively, the “Loan
Agreement”).1 In connection with the Loan Agreement, the Lauren Corporation
executed promissory notes in favor of Origin, which were also amended
periodically. Origin remained the holder of the notes. The Loan Agreement and
promissory notes were secured by a lien and security interest against accounts, stock,
and equipment owned by the Lauren Corporation and other companies. On February
4, 2014, Charles Cleveland Whitener, III executed a guaranty agreement,

         1
         The original letter loan agreement and promissory notes were between the Lauren
Corporation and Community Trust Bank, but later modifications substituted Origin as the lender.

                                              2
unconditionally guaranteeing all debts, liabilities, and obligations of the Lauren
Corporation under the Loan Agreement.

       Charles died on February 20, 2020. His will currently is being probated in
County Court in Taylor County.2 On August 15, 2020, the Residuary Trust and the
Marital Trust executed guaranty agreements, unconditionally guaranteeing all debts,
liabilities, and obligations of the Lauren Corporation. Also on August 15, Mary, in
her capacity as trustee of the trusts and executor of the Estate, among others,
executed a “Consent of Guarantors” agreement, ratifying the previously signed
guaranty agreements. This ratification provides:

       1. Guarantors acknowledge and consent to each of the terms and
          provisions of the Amendments and the modification of the Loan
          Documents, as therein provided.
       2. Guarantors ratify, affirm, reaffirm, acknowledge, confirm, and agree
          that the Guaranty Agreements represent the valid and binding
          obligations of Guarantors to and for the benefit of [Origin].
       3. Guarantors agree that the Guaranty Agreements are in full force and
          effect and there are no claims for rights of offset against, or defenses
          or counterclaims to, the terms and provisions of the Guaranty
          Agreements or the other obligations created or evidenced by the
          Guaranty Agreements.
       In January 2021, Origin notified the Lauren Corporation that it was in default
under the Loan Agreement. The parties do not dispute that the Lauren Corporation
breached the Loan Agreement by defaulting on the loan. On March 10, Origin filed
suit for breach of the Loan Agreement and the guaranties against, inter alia, the

       2
          The County Court of Taylor County is a constitutional county court, not a statutory county
court at law. See Tex. Const. art. V, § 15 (“There shall be established in each county in this State
a County Court, which shall be a court of record . . . .”); Tex. Gov’t Code § 25.2231 (creating
County Court at Law of Taylor County and County Court at Law No. 2 of Taylor County); Dailing
v. State, 546 S.W.3d 438, 444-45 (Tex. App.—Houston [14th Dist.] 2018, no pet.) (discussing
difference between constitutional county courts and statutory county courts). We refer to this court
as the “Taylor County Court.”

                                                 3
Lauren Corporation, the Marital Trust, and the Residuary Trust.3 On March 11,
Origin filed an authenticated unsecured claim against the Estate in the probate
proceedings based on Charles’s guaranty of the Lauren Corporation’s loan. The
Lauren Corporation filed for bankruptcy protection in April 2021.                   Origin’s
unsecured claim against the Estate was deemed rejected by the Taylor County Court
on April 11. On April 14, Origin amended its petition in the district court to name
the Estate as a defendant for breach of Charles’s guaranty of the Lauren
Corporation’s loan.

       Origin moved for a traditional summary judgment on its breach of guaranty
claims against the Marital Trust, the Residual Trust, and the Estate. In its motion,
Origin asserted the following undisputed facts:

       1. Origin Bank and Borrower executed a Loan Agreement. In
          connection with the Loan agreement, Borrower . . . executed
          Promissory Notes in favor of Origin Bank.
       2. Guarantors . . . [Charles] Whitener, Residual Trust, and Marital
          Trust executed Guaranty Agreements in which they absolutely and
          unconditionally guaranteed all debts, liabilities, and obligations of
          the Borrower under the Loan Agreement.
       3. On February 20, 2020, [Charles] Whitener passed away. The
          Whitener Will is currently being probated. On March 11, 2021,
          Origin Bank filed a claim in the Probate Proceeding.
       4. On or about August 15, 2020, Guarantor Defendants, jointly and
          severally, ratified the Guaranty Agreements.
       5. The Loan Agreement is in default.
       6. Origin Bank provided notice and demand for payment to the
          Borrower and Defendant Guarantors on the default and the amount
          outstanding under the Loan Agreement to no avail.

       3
         Other defendants in this lawsuit, with the exception of TLC Air, LLC, were non-suited
without prejudice. TLC Air, LLC has not appealed the judgment against it.

                                              4
       7. The current amounts due and owing under the Guaranty
          Agreements, including interest, total $8,024,932.33.
(Citations to summary judgment motion attachments omitted).

       Among other evidence, Origin attached to its summary judgment motion the
Lauren Corporation’s Loan Agreement and the Marital Trust’s, the Residual Trust’s,
and Charles’s guaranty agreements. Origin also sought attorney’s fees pursuant to
the guaranty agreements.

       Mary, as trustee of the trusts and executor of the Estate, did not dispute these
facts, but responded to Origin’s summary judgment motion with four legal
arguments. First, she asserted that Origin, as a purported secured creditor of the
Estate, already seized the collateral to which it was entitled under the Loan
Agreement, and thus could not proceed against the Estate for any deficiency between
that collateral and the debt.4 Second, she argued that the Estate never guaranteed the
loan and thus Origin could not proceed against the Estate on its guaranty claim. She
then urged that, because Origin could not proceed against the Estate, it could not
proceed against the trusts because they are beneficiaries of the Estate. Finally, she
contended that Origin lacked standing to sue the Estate because it did not have a
justiciable interest in the Estate—i.e., it could not collect any funds from the Estate.

       Origin replied to Mary’s response, explaining that it was an unsecured, not a
secured, creditor of the Estate, but that it was a secured creditor against the Lauren
Corporation. Because it was an unsecured creditor of the Estate, Origin argued that
Mary’s invocation of various provisions of the Estates Code regarding secured
creditors lacked merit. Origin further stressed that, because Charles personally

       4
         According to unsworn declarations attached to Mary’s summary judgment response,
Origin, “acting under that certain Letter Loan Agreement dated October 15, 2013 between it and
Lauren, seized the funds in Lauren Engineers & Constructors, Inc.’s (‘LEC’) operating accounts,”
which caused “Lauren and its subsidiary entities, including LEC, [to] file for bankruptcy.”

                                               5
guaranteed the Lauren Corporation’s Loan Agreement, the Estate was liable on the
guaranty. Finally, Origin clarified that, because the Marital Trust and the Residuary
Trust are separate legal entities that signed guaranty agreements for the Lauren
Corporation’s loan, they were also liable on their guaranties.

      The trial court granted Origin’s summary judgment motion, awarding it
$8,245,617.96 in damages, $66,171.84 in attorney’s fees, and post-judgment interest
jointly and severally against the Estate and trusts. Mary filed a motion for new trial
and plea to the jurisdiction, reasserting the arguments she had made in her summary
judgment response. Also, Mary argued for the first time that the district court lacked
subject matter jurisdiction over Origin’s claims because the Taylor County Court
exercising probate jurisdiction over the Estate has exclusive jurisdiction of all
matters related to the probate proceeding, including Origin’s claims.

      The trial court denied Mary’s motion for new trial and plea to the jurisdiction,
and Mary timely appealed.

                                    Jurisdiction

      In her first issue, Mary contends the trial court should have granted her plea
to the jurisdiction and dismissed this case because the district court lacked subject
matter jurisdiction over Origin’s suit under the Estates Code. According to Mary,
the Taylor County Court exercising probate jurisdiction over the Estate has exclusive
jurisdiction of all matters related to the probate proceeding, including Origin’s
claims.   In response, Origin argues that the district court has subject matter
jurisdiction over its lawsuit and that the Taylor County Court’s jurisdiction over
Origin’s claims is not exclusive of, but concurrent with, the district court. Origin
says the issue is one of dominant jurisdiction, and Mary waived her jurisdictional
complaint by failing to file a plea in abatement.

                                          6
      Subject matter jurisdiction is necessary to a court’s authority to decide a case.
City of Houston v. Rhule, 417 S.W.3d 440, 442 (Tex. 2013) (per curiam). Subject
matter jurisdiction is never presumed, and challenges to it cannot be waived. Tex.
Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 443 (Tex. 1993). Thus,
challenges to subject matter jurisdiction may be raised at any time. See Carroll v.
Carroll, 304 S.W.3d 366, 367 (Tex. 2010) (citing Tex. Ass’n of Bus., 852 S.W.2d at
445). Whether a trial court has subject matter jurisdiction is a question of law we
review de novo. See Frost Nat’l Bank v. Fernandez, 315 S.W.3d 494, 502 (Tex.
2010); San Jacinto River Auth. v. Lewis, 629 S.W.3d 768, 772 (Tex. App.—Houston
[14th Dist.] 2021, no pet.).

      The fundamental question raised by Mary’s plea to the jurisdiction is whether
a Harris County district court has subject matter jurisdiction over Origin’s claims.
The Texas Constitution and state statutes provide the sole sources of jurisdiction for
Texas courts. Chenault v. Phillips, 914 S.W.2d 140, 141 (Tex. 1996). We observe
that “district courts are constitutionally authorized to resolve legal disputes.” Oncor
Elec. Delivery Co. v. Chaparral Energy, LLC, 546 S.W.3d 133, 138 (Tex. 2018).
As courts of general jurisdiction, district courts are presumed to have subject matter
jurisdiction over a dispute unless the Constitution or another law grants exclusive
jurisdiction to another court or to an administrative agency.           See id.; Dubai
Petroleum Co. v. Kazi, 12 S.W.3d 71, 75 (Tex. 2000); Tex. Const. art. V, § 8
(“District Court jurisdiction consists of exclusive, appellate, and original jurisdiction
of all actions, proceedings, and remedies, except in cases where exclusive, appellate,
or original jurisdiction may be conferred by this Constitution or other law on some
other court, tribunal, or administrative body.”) Thus, the supreme court has held that
“[a] district court has subject-matter jurisdiction to resolve disputes unless the

                                           7
Legislature divests it of that jurisdiction.” In re Oncor Elec. Delivery Co., 630
S.W.3d 40, 44 (Tex. 2021).

       It is Mary’s burden, therefore, to demonstrate that exclusive jurisdiction over
Origin’s claims lies in a court other than the Harris County district court. Mary
posits that the Harris County district court lacks jurisdiction because the Taylor
County Court possesses exclusive jurisdiction over the probate proceedings and
because Origin’s claims are related to those proceedings. We disagree.

       Texas Estates Code section 32.001 states, “[a]ll probate proceedings must be
filed and heard in a court exercising original probate jurisdiction.” Tex. Est. Code
§ 32.001. Original probate jurisdiction is vested in statutory probate courts in
counties that have them. Id. § 32.002(c). In counties like Taylor County that lack a
statutory probate court, see Tex. Gov’t Code § 25.2231, original probate jurisdiction
exists in either a county court at law or in a county court. See Tex. Est. Code
§ 32.002(a), (b). In counties where there are county courts at law exercising original
probate jurisdiction, that jurisdiction is concurrent with the county court. See id.
§ 32.002(b).

       The Estate proceedings were filed in County Court in Taylor County, which
has original probate jurisdiction. See id.; Tex. Gov’t Code § 26.321 (“The County
Court of Taylor County has the general jurisdiction of a probate court and juvenile
jurisdiction as provided by Section 26.042(b) but has no other criminal or civil
jurisdiction.”).   The court exercising original probate jurisdiction also has
jurisdiction of all matters related to the probate proceeding as specified in section
31.002 for that type of court, which includes “an action brought against a personal
representative in the representative’s capacity as personal representative.” Tex. Est.
Code §§ 31.002(a)(4), (b)(1), 32.001. Thus, the Taylor County Court possesses

                                          8
subject matter jurisdiction over Origin’s claims against the Estate, and no party takes
issue with that proposition.5

       Mary directs us, however, to no provision in the Texas Constitution or in any
Texas statute declaring that the original probate jurisdiction exercised by a county
court is exclusive as to all other courts. Exclusive jurisdiction is “a court’s power to
adjudicate an action or class of actions to the exclusion of all other courts.” Dailing
v. State, 546 S.W.3d 438, 450 (Tex. App.—Houston [14th Dist.] 2018, no pet.)
(internal quotation omitted). The parties agree that the Estates Code is silent on
whether a constitutional county court sitting in probate has exclusive jurisdiction.
The legislature could have enacted such a provision had it desired to do so, as it has
in other instances. See, e.g., Tex. Gov’t Code § 25.003(e) (“In a county that has a
statutory probate court, a statutory probate court is the only county court created by
statute with probate jurisdiction.”); Tex. Est. Code § 32.005 (vesting statutory
probate courts, in counties that have them, with “exclusive jurisdiction of all probate
proceedings” and providing that actions “related to the probate proceeding must be
brought” therein, unless the statutory probate court’s jurisdiction is concurrent with
a district court’s or any other court’s jurisdiction); id. § 1022.005 (vesting statutory
probate court with “exclusive jurisdiction of all guardianship proceedings, regardless
of whether contested or uncontested”); Tex. Fam. Code § 51.04 (juvenile court has
“exclusive original jurisdiction” over proceedings under the Juvenile Justice Code).
Indeed, the legislature has made clear that generally a county court’s original probate
jurisdiction is not exclusive when the county has a statutory county court at law but
not a statutory probate court. See Tex. Est. Code § 32.002(b) (providing for

       5
          Further, Origin has not asserted that the Taylor County Court lacks jurisdiction over any
of its other claims. For example, the parties have not joined issue on whether Origin’s claims
against Mary as trustee of trusts are “related” to the probate proceeding. We need not address that
issue, as our focus is whether the district court possessed jurisdiction over Origin’s claims.

                                                9
concurrent probate jurisdiction). The plain text of section 32.002(b) shows, at a
minimum, that the legislature did not intend for a county court’s original probate
jurisdiction to be exclusive to that court.

       Acknowledging this jurisdictional reality, Mary relies on this court’s opinion
in Thomas v. Tollon, 609 S.W.2d 859 (Tex. App.—Houston [14th Dist.] 1980, writ
ref’d n.r.e.), to assert that, once Charles’s will was admitted to probate in Taylor
County Court, that court was vested with “exclusive jurisdiction to hear all incident
claims.” Id. at 860-61. Mary’s reliance on Thomas is misplaced. Thomas involved
a determination of heirship, which the court explained was a matter committed
exclusively to the county court sitting in probate. See id. at 860 (“Exclusive original
jurisdiction to determine heirship is conferred upon the county court sitting in
probate, and the district court has no such original jurisdiction.”). Thus, Thomas is
distinguishable from today’s case, which does not involve any similar statute
establishing exclusive original jurisdiction over Origin’s breach of contract claims.6

       Importantly, the Supreme Court of Texas has rejected the proposition for
which Mary cites Thomas: the notion that “a county court sitting in probate attains
exclusive jurisdiction over matters appertaining and incident to the estate once
administration is opened there.” See In re Puig, 351 S.W.3d 301, 305 (Tex. 2011)
(orig. proceeding). In Puig, the supreme court addressed whether the Webb County
district court erred in denying the defendants’ plea in abatement when the plaintiffs’
action was “appertaining and incident to” an earlier-filed and ongoing probate
proceeding in the Fort Bend county court at law sitting in probate. Id. at 303, 305.
Although the Fort Bend county court had the power to hear the plaintiffs’ lawsuit,

       6
         Thomas also involved interpretation of a repealed provision of the former Probate Code.
See Act of June 19, 2009, 81st Leg., R.S., Ch. 1351, § 12(h), 2009 Tex. Gen. Laws 4273, 4279.

                                              10
the Puig court refused to hold that it had exclusive jurisdiction. Id. at 305. Instead,
the court considered the issue one of dominant jurisdiction. See id.

      Here, we conclude that Mary has not demonstrated that the Texas Constitution
or another law vests exclusive jurisdiction over Origin’s claims in the Taylor County
Court. Rather, subject matter jurisdiction over Origin’s claims is concurrent in both
courts. Thus, the trial court did not err in denying Mary’s plea to the jurisdiction.

      We overrule Mary’s first issue.

                             Mary’s Other Arguments

      In her second issue, Mary asserts that the trial court should have denied
Origin’s summary judgment motion because Origin “irrevocably elected to proceed
on its secured debt against the Estate as a preferred debt and lien claim rather than
as a matured secured claim.” Mary makes several arguments in support of this issue,
but none of them are meritorious.

      1. Origin does not have a secured claim against the Estate.

      First, Mary contends that, because Origin elected to treat its claim as a
preferred debt and lien claim, by seizing the underlying collateral, it cannot now
recover the balance from the Estate. The Estates Code sections upon which Mary
relies apply to secured claims. See Tex. Est. Code §§ 355.151, 355.152 (both
providing for the treatment of secured claims against an estate). As this court has
held, if a secured creditor fails to present the creditor’s secured claim for money
against the Estate within a certain time period or fails to specify the treatment of the
claim, then the claim is treated as a preferred debt and lien on the property securing
the indebtedness and the creditor’s recovery is limited to that property. See Harrison
v. Select Portfolio Servicing, Inc., No. 14-21-00425-CV, 2022 WL 17038537, at *3

                                          11
(Tex. App.—Houston [14th Dist.] Nov. 17, 2022, no pet. h.) (mem. op.) (explaining
treatment of secured claims under the Estates Code).

       Origin, however, did not submit a secured claim against the Estate; Origin’s
claim against the Estate arises from the guaranty signed by Charles, and Origin filed
an authenticated unsecured claim against the Estate pursuant to that guaranty. The
code sections cited by Mary do not apply to Origin’s breach of contract claim against
the Estate because the underlying obligation to pay the loan is secured by assets of
third parties—the Lauren Corporation and other related companies—rather than
Estate assets.7 See, e.g., Tex. Est. Code § 403.052 (explaining that a creditor with a
claim for money secured by property of the estate must give notice to the
administrator to have the creditor’s claim approved as a secured claim to be paid by
the estate (emphasis added)); id. § 308.053 (providing for notice to secured creditor;
“a personal representative of an estate shall give notice of the issuance of the letters
[testamentary or of administration] to each person the representative knows to have
a claim for money against the estate that is secured by estate property” (emphasis
added)). This portion of Mary’s argument lacks merit.

       7
         For the first time in her reply brief, Mary asserts that “the Estate owned Lauren’s accounts
through its ownership of Lauren’s stock.” This argument would require us to ignore that the
Lauren Corporation is a distinct legal entity separate from its owners or shareholders. See, e.g.,
Kennedy v. Gulf Coast Cancer & Diagnostic Ctr. at Se., Inc., 326 S.W.3d 352, 358 (Tex. App.—
Houston [1st Dist.] 2010, no pet.) (“A corporation is a legal entity separate and apart from the
persons who compose it.”); Davey v. Shaw, 225 S.W.3d 843, 854 (Tex. App.—Dallas 2007, no
pet.) (“Generally, a corporation is a separate legal entity that insulates its owners or shareholders
from personal liability.”). Even if we were to presume that stock ownership makes the Estate an
equitable or beneficial owner of the Lauren Corporation’s assets, see Sneed v. Webre, 465 S.W.3d
169, 190 (Tex. 2015), including the collateral that Origin allegedly seized, Mary does not direct
us to any record evidence establishing that the Estate owns Lauren’s stock. Moreover, the unsworn
declarations attached to Mary’s summary judgment response indicate that Origin seized the
operating account of a third company, Lauren Engineers & Constructors, Inc. (see supra note 4),
and there is nothing in Mary’s brief or our record explaining the relationship, if any, between the
Estate and that company.

                                                 12
       2. Charles’s guaranty is binding on the Estate.

       Mary next urges that Origin cannot succeed on its claim against the Estate
because, although Mary acknowledges that Charles guaranteed the Lauren
Corporation’s loan, the Estate itself never guaranteed this obligation. Mary is
incorrect. Charles’s death did not extinguish his liability on the guaranty he signed
while alive. See Tex. Est. Code § 355.112 (“On the death of a person jointly bound
with one or more other persons for the payment of a debt or for any other purpose,
the decedent’s estate shall be charged by virtue of the obligation in the same manner
as if the obligors had been bound severally as well as jointly.”). In fact, Charles’s
guaranty expressly states that, in the event the guarantor dies, the guaranty “shall be
binding upon such Guarantor’s estate, legal representative, and heirs,” and
additionally states that it binds “the heirs, personal representatives, successors and
assigns of Guarantor. . . .” There can be no doubt that Charles’s Estate is liable under
Charles’s guaranty. We overrule this portion of Mary’s argument.

       3. Mary’s remaining arguments are unpersuasive.

       Mary’s remaining arguments in support of this issue rely on the validity of her
first two assertions that Origin cannot proceed against the Estate on Origin’s
guaranty claim. She urges that, because Origin cannot collect from the Estate, it
cannot collect on the guaranties executed by the trusts. She additionally argues that,
because Origin has already seized the collateral owed it and cannot recover
additional funds from the Estate and because the Estate did not itself guarantee the
loan, Origin lacks standing to proceed against the Estate.8 However, as discussed

       8
         In making this argument, Mary relies on In re Estate of Chapman, No. 06-17-0051-CV,
2017 WL 5180405, at *1 (Tex. App.—Texarkana Nov. 9, 2017, no pet.) (mem. op.). However,
Chapman is inapplicable: unlike in today’s case, the loan at issue there was undertaken by the
decedent and secured by the decedent’s property. Id. at *1 (“Before his death, Chapman had
entered into a lien note with the Bank secured by a first lien deed of trust on certain real estate
                                                13
above, Mary’s arguments that Origin cannot collect from the Estate are without
merit. Thus, her arguments that Origin cannot proceed against the trusts and that
Origin lacks standing to proceed against the Estate premised on these propositions
likewise fail.

       We overrule Mary’s second issue.

                                    Conclusion

       Having overruled both of Mary’s issues, we affirm the trial court’s judgment.

                                       /s/     Kevin Jewell
                                               Justice

Panel consists of Justices Wise, Jewell, and Poissant.

located in Lamar County.”).

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