Court Opinion

ID: 4077338
Source: CourtListenerOpinion
Date Created: 2016-09-30 20:47:04.51824+00
Date Added: 2024-06-11T14:32:15.401357
License: Public Domain

ACCEPTED
                                                                                        04-14-00751-CV
                                                                            FOURTH COURT OF APPEALS
                                                                                 SAN ANTONIO, TEXAS
                                                                                   10/9/2015 4:47:15 PM
                                                                                         KEITH HOTTLE
                                                                                                 CLERK

                                No. 04-14-00751-CV                    FILED IN
                                                               4th COURT OF APPEALS
                           IN THE COURT OF APPEALS              SAN ANTONIO, TEXAS
                          FOURTH DISTRICT OF TEXAS             10/9/2015 4:47:15 PM
                              SAN ANTONIO, TEXAS                 KEITH E. HOTTLE
                                                                       Clerk

                  JOSEFINA ALEXANDER GONZALEZ, ET AL.,
                                                    Appellants
                                  v.

                        RAYMOND S. DE LEON II, ET AL.,
                                                                Appellees

                  APPELLANTS’ MOTION FOR REHEARING

Barry Snell                               Eduardo Romero
State Bar No. 18789000                    State Bar No. 24056227
David C. “Clay” Snell                     Victor Villarreal
State Bar No. 24011309                    State Bar No. 24058160
BAYNE, SNELL & KRAUSE                     VILLARREAL & ROMERO, PLLC
1250 N.E. Loop 410, Suite 725             201 W. Del Mar Blvd., Suite 15
San Antonio, Texas 78209                  Laredo, Texas 78041
Tel: (210) 824-3278                       Tel: (956) 727-2402
Fax: (210) 824-3937                       Fax: (956) 727-2404
Email: bsnell@bsklaw.com                  Email: romero@vrlawfirm.com
Email: dsnell@bsklaw.com                  Email: villarreal@vrlawfirm.com

                                          Jesus M. Dominguez
                                          State Bar No. 00798151
                                          ATTORNEY & COUNSELOR AT LAW
                                          201 W. Hillside Road, Suite 17
                                          Laredo, Texas 78041
                                          Tel: (956) 728-1477
                                          Email: (956) 728-1491

                                          ATTORNEYS FOR APPELLANTS
                                    No. 04-14-00751-CV

                              IN THE COURT OF APPEALS
                             FOURTH DISTRICT OF TEXAS
                                 SAN ANTONIO, TEXAS

                    JOSEFINA ALEXANDER GONZALEZ, ET AL,
                                                      Appellants
                                    v.

                           RAYMOND S. DE LEON II, ET AL,
                                                                        Appellees

                    APPELLANTS’ MOTION FOR REHEARING

TO THE HONORABLE FOURTH COURT OF APPEALS:

       Josefina Alexander Gonzalez, by and through her Co-Attorneys-in-Fact, Judith

Zaffirini, David H. Arredondo, and Clarissa N. Chapa; Judith Zaffirini, David H. Arredondo,

and Clarissa N. Chapa, as Independent Co-Executors of the Estate of Delfina E. Alexander,

Deceased, and as Co-Trustees of the Rocio Gonzalez Guerra Exempt Trust; Alexander

Residential Development, LP; Alexander Commercial Development, LP; Alexander Retail

Development, LP; D&J Alexander Construction, LP; D&J Alexander Management, LP;

Delfina E. and Josefina Alexander LLC-1; and Delfina and Josefina Alexander Family Limited

Partnership, Appellants, file this Motion for Rehearing, and respectfully show as follows:

                                              ii
                                Table of Contents

                                                                           PAGE

Table of Authorities ……………………………………………………………………..iv

Issues Presented for Review………………………………………………………………1

Summary of the Argument ……………………………………………………………….2

Argument

     I.     The Court erred in concluding that Appellants, as
            Attorneys-in-Fact of Josefina Gonzalez, did not having
            standing because, as representatives of the settlor, they
            clearly were “affected by the administration of the trust”…………………...3

     II.    The Court erred in concluding that the Alexander Limited
            Partnerships were not affected by the administration
            of the Family Trust because there is no distinction between
            administration of the Trust and its role as a limited partner
            in the Alexander Limited Partnerships ……………………………………..6

     III.   The Court was incorrect in concluding that the portion
            of the judgment directing Appellants to produce documents
            was insufficient to give them standing to attack the judgment ..……………8

Conclusion and Request for Relief ………………………………………………………..9

Certificate of Service …………………………………………………………………….10

                                        iii
                             Table of Authorities

CASES                                                                 PAGE

Carr v. Carr,
       71 N.W. 785, 786 (IA. 1919) …………………………………………………………….5

Faulkner v. Bost,
      137 S.W.3d 254, 259 (Tex.App.—Tyler 2004, no pet.) ……………………………….3,6

Grynberg v. Christiansen,
      727 S.W.2d 665, 666-67 (Tex.App.—Dallas 1987, no pet.) …………………………2,8,9

HSBC Bank USA, N.A. v. Watson,
     377 S.W.3d 766, 774-75 (Tex. App.—Dallas 2012, pet. dism’d)…………………….5

Ray Malooly Trust v. Juhl,
      186 S.W.3d 568, 570 (Tex. 2006)……………………………………………………6

Rosenblatt v. Birnbaum,
      212 N.E.2d 37, 40-41 (N.Y. Court App. 1965) ………………………………………….5

STATUTES

Tex. Prop. Code § 111.004(7) ………………………………………………………………….3,4

Tex. Prop. Code § 112.054 …………………………………………………………………1,2,3,4

Tex. Prop. Code § 112.054(b) ………………………………………………………………….5,6

                                      iv
                               Issues Presented for Review

       1.      Whether the Court was incorrect in concluding that Appellants lacked standing

as attorneys-in-fact for Josefina Alexander Gonzales when Section 112.054 of the Texas

Property Code specifically requires the court to consider her intent in deciding whether to

reform a trust or appoint a new trustee.

       2.      Whether the Court was incorrect in concluding that Appellants lacked standing

as the Alexander Limited Partnerships when the Order appointing DeLeon gave him control

of the limited partner and gave him the ability to take various actions with regard to the

partnership.

       3.      Whether the Court was incorrect in concluding that Appellants lacked standing

to attack a judgment that required them to produce confidential financial information, which

information Josefina was duty bound to protect.

                                             1
                                 Summary of the Argument

       The Court was incorrect in concluding that Appellants, as attorneys-in-fact of Josefina

Alexander Gonzales, lacked standing. Section 112.054 of the Texas Property Code specifically

requires the court to consider the “probable intention” of the settlor before reforming a trust

or appointing a new trustee. Josefina Alexander Gonzales, one of the settlors of the trust, was

alive at the time the court reformed the trust and appointed DeLeon trustee. Any person

“affected by the administration of a trust” has standing to complain of the action. The

appointment of a new trustee and reformation of the trust clearly constitutes “administration”

of the trust. Therefore, Josefina, as settlor, was affected by the order appointing DeLeon

trustee and reforming the Trust.

       The Court was further incorrect in concluding that Appellants, as the Alexander

Limited Partnerships, lacked standing. The Court was incorrect in concluding there is

distinction between the administration of the Trust and the Trust’s service as limited partner.

Any decision DeLeon makes as limited partner concerning the Partnership necessarily

constitutes “administration of the trust.” The Alexander Limited Partnership is clearly affected

by DeLeon’s decisions in that DeLeon has brought suit against the Partnership.

       Finally, the Court was incorrect in concluding that the portion of the judgment that

ordered Appellants to produce records did not confer standing upon them to challenge the

judgment. Unlike the judgment in the Grynberg case, the judgment in this case specifically

imposed various duties upon appellant, which could potentially have exposed Appellants to

contempt charges. Accordingly, Appellants have a significant interest affected by the

judgment.

                                               2
                                         Argument

I.     The Court erred in concluding that Appellants, as Attorneys-in-Fact of Josefina
       Gonzalez, did not having standing because, as representatives of the settlor,
       they clearly were “affected by the administration of the trust.”

       In concluding that Appellants, as Co-Attorneys-in-Fact and Co-Executors of Delfina

and Josefina Alexander Gonzalez, were not affected by the administration of the Family Trust,

this Court reasoned that Appellants, who stand in the shoes of the original settlors of the

Family Trust, “do not manage any aspects of the Family Trust and do not stand to inherit any

of the Trust assets.” Memorandum Opinion, at 10. This Court further reasoned that “how

the Family Trust is administered has no impact on Gonzalez’s abilities to fulfill her duties as

Co-Attorneys-in-Fact or Administrator of Delfina’s Estate.” Id. However, in reaching this

conclusion, the Court did not consider and did not address the argument Appellants raised in

the trial court and on appeal that Tex. Prop. Code § 112.054 specifically requires the Court to

consider the probable intention of the settlor in deciding whether to reform or modify a trust.

       As this Court correctly acknowledged, Section 111.004(7) of the Texas Property Code

defines an “interested person” to include “any person who is affected by the administration

of the Trust.” Memorandum Opinion, at 9. The Court further acknowledge that the phrase

“administration of a trust” refers to when a trustee manages a trust in accordance with the

trust’s terms and conditions and the Texas Property Code. Memorandum Opinion, at 13

(citing Faulkner v. Bost, 137 S.W.3d 254, 259 (Tex.App.—Tyler 2004, no pet.)).           More

importantly, “whether a person, excluding a trustee or named beneficiary, is an interested

person may vary from time to time and must be determined according to the particular

                                              3
purposes of and matter involved in the proceeding.” Id. (quoting Tex. Prop. Code §

111.004(7)(emphasis added)).

       This case involves a bill of review seeking to vacate the judgment entered on March

12, 2012 in Cause No. 2012CVQ000262-D4 that appointed a successor trustee and modified

certain provisions of the Trust. The “particular purposes of and matter involved” in the

proceeding which resulted in the 2012 judgment was the petition of Rocio Gonzalez Guerra

to appoint a successor trustee and to reform or modify the original trust instrument.

       At the time Appellees brought the 2012 action, one of the settlors and former trustees,

Josefina Alexander Gonzalez (“Josefina”), was still alive. (CR 37). As settlor, Josefina clearly

was affected by the action because Guerra was seeking to reform the very trust Josefina

created.

       That a settlor is affected by attempts to reform the trust is underscored by Section

112.054 of the Texas Property Code. This section recognizes the importance of the settlor’s

intentions in determining whether reformation is appropriate. Section 112.054 provides, in

relevant part, as follows:

   (a) On the petition of a trustee or a beneficiary, a court may order that the trustee
       be changed, that the terms of the trust be modified, that the trustee be directed
       or permitted to do acts that are not authorized or that are forbidden by the
       terms of the trust, that the trustee be prohibited from performing acts required
       by the terms of the trust, or that the trust be terminated in whole or in part,
       …

   (b) The court shall exercise its discretion to order a modification or termination
       under Subsection (a) in the manner that conforms as nearly as possible to
       the probable intention of the settlor…

(Emphasis added).

                                               4
       Given that Section 112.054(b) requires the court to exercise its discretion to order

modification in a manner that conforms as nearly as possible to the probable intention of the

Settlor, it cannot be said that Josefina would not be affected by a request by the beneficiaries

to reform the trust she created. As settlor, Josefina clearly had an interest in seeing that her

wishes as expressed in the trust instrument were carried out and in seeing that the court

correctly considered here “probable intention[s]” in reforming the trust she created.

       Although no Texas case addresses the issue of whether the settlor has standing to bring

suit to ensure her wishes are carried out by the trustee, various courts from other states have

recognized that the settlor has standing under these circumstances. For example, in Rosenblatt

v. Birnbaum, 212 N.E.2d 37, 40-41 (N.Y. Court App. 1965), the court held that a parent who

paid child support to the other parent in trust for the benefit of a child under a separation

agreement had standing in equity to sue the trustee to ensure that the intention of the trust

agreement was carried out. In addition, in Carr v. Carr, 71 N.W. 785, 786 (IA. 1919), the Iowa

Supreme Court recognized that the donor of a trust has standing to maintain a suit in equity

to compel the carrying out of the terms of the trust. For the same reasons, Josefina had

standing to ensure that her intentions in creating the Trust were not thwarted by Guerra’s

attempt at reforming the Trust.

       Whether the current actions of the Co-Attorneys-in-Fact are unrelated to the

administration of the Family Trust, as suggested by this Court in its Memorandum Opinion,

is immaterial. The ability to bring a bill of review is an assignable right. HSBC Bank USA,

N.A. v. Watson, 377 S.W.3d 766, 774-75 (Tex. App.—Dallas 2012, pet. dism’d). Appellants, as

co-attorneys-in-fact of Josefina, succeeded to Josefina’s right to bring the bill of review.

                                               5
Therefore, the issue is whether Josefina herself, as settlor, was affected by the administration

of the trust. Josefina, and now Appellants, were affected by the administration of the Family

Trust in that the intent of a living settlor and former trustee was frustrated by the reformation

of the trust instrument without the settlor having the opportunity to express her probable

intention as required by Section 112.054(b). Therefore, the Court was incorrect in determining

that the administration of the Family Trust, including the reformation of the rust instrument

and the appointment of a new trustee, did not affect Josefina.

II.    The Court erred in concluding that the Alexander Limited Partnerships were
       not affected by the administration of the Family Trust because there is no
       distinction between administration of the Trust and its role as a limited partner
       in the Alexander Limited Partnerships.

       In rejecting Appellants’ argument that the Alexander Limited Partnerships have

standing to bring the underlying suit, the Court attempted to draw a distinction between

administration of the Trust and the Trust’s role as a limited partner in the Alexander Limited

Partnerships. As stated above, the phrase “administration of a trust” refers to when a trustee

manages a trust in accordance with the trust’s terms and conditions and the Texas Property

Code. Memorandum Opinion, at 13. (citing Faulkner v. Bost, 137 S.W.3d 254, 259 (Tex.App.—

Tyler 2004, no pet.)). The Court correctly acknowledged that “the Alexander Limited

Partnerships may be affected by the actions of the limited partners—and thus the Family Trust

. . . .” Id. Nevertheless, the Court reasoned “the management of a trust in accordance with its

terms and conditions, i.e., its administration, is separate and distinct from the service of the

Family Trust as a limited partner.” Memorandum Opinion, pg. 13.

       The Court was incorrect in attempting to draw a distinction between administration of

the Trust and the Trust’s service as a limited partner. A trust is not a separate legal entity and

                                                6
can only act through its trustee. See Ray Malooly Trust v. Juhl, 186 S.W.3d 568, 570 (Tex. 2006).

Any action by De Leon as trustee regarding the Alexander Limited Partnerships could only

have been undertaken through management of the Trust in accordance with its terms and

conditions and the Property Code.

       The Order appointing De Leon trustee, which is the very order Appellants seek to

vacate with their bill of review action, clearly constituted “administration of a trust.” De Leon

accepted the duty as trustee and was required to manage the Trust in accordance with its terms

and conditions. De Leon’s ability to bring suit on behalf of the Trust against the general

partners arises under his authority to manage the Trust in accordance with its terms and

conditions. Therefore, De Leon’s decisions in this case, including the decision to seek

appointment as Trustee and to sue Appellants, absolutely constitute “administration.”

       Moreover, the Court should not consider the Partnership as being separate from the

Family Trust. As DeLeon himself has argued, the Family Trust is an integral part of a complex

estate plan on the part of Josefina and Delfina. CR 248-54; 249-55.

       As the Court further pointed out, as a passive limited partner, the Family Trust had the

ability to vote to amend the partnership agreements or remove the general partner.

Memorandum Opinion, at 13. The only person who could vote on behalf of the Trust is De

Leon. De Leon’s decision to vote on behalf of the Trust with respect to the Family Limited

Partnership would clearly constitute “administration of a trust” because he would be making

decisions regarding the Trust’s sole asset. Any such decision would necessarily have to be

made in accordance with the terms and conditions of the Trust and the Texas Property Code.

                                               7
       There is no question that Appellants have been affected by De Leon’s management of

the Trust. In particular, DeLeon has brought a suit to wind up the Partnership, which

absolutely affects the Partnership. Yet another reason that Appellants are affected by the

administration of the Trust is that Appellants, as general partner, owe various duties to the

limited partner and by extension to De Leon. The order at issue in the bill of review

proceeding is the order that appoints De Leon as trustee. The order changed the identity of

the person to whom the general partner owes these duites. Accordingly, the general

partnership was affected by the order appointing De Leon, and this order related to

administration of the Trust.

III.   The Court was incorrect in concluding that the portion of the judgment
       directing Appellants to produce documents was insufficient to give them
       standing to attack the judgment.

       In concluding that the portion of the judgment directing all individuals or entities

possessing financial records to deliver that information to the successor trustee did not grant

Appellants standing to bring the Bill of Review action, the Court relied upon Grynberg v.

Christiansen, 727 S.W.2d 665, 666-67 (Tex.App.—Dallas 1987, no pet.). While it is true that

the Grynberg court concluded that a person who is ordered to produce voluminous records

does not, on that ground alone, have an interest affected by the judgment so as to have

standing to collaterally attack the judgment, Grynberg is distinguishable from the case at bar in

one key respect. The plaintiff in Grynberg was the son of the person against whom the judgment

being collaterally attacked had been rendered. 727 S.W.2d at 666. The judgment at issue did

not require the son to produce documents or attend a deposition. Id. at 665-66. Rather, the

son’s obligation to produce documents and attend a deposition arose from a post-judgment

                                               8
deposition notice. Id. The court concluded that the son lacked standing because he lacked an

interest affected by the judgment. Id. at 667.

       In the present case, the judgment itself—not a deposition notice—affects an interest

of Appellants in that it requires them to turn over all of the Trust’s financial information. As

prior trustee, Josefina and Delfina retained certain duties to the trust beneficiaries, including

the duty not to disclose confidential information. The judgment at issue required Appellants

to turn over this information to a third-party. Moreover, unlike the son in Grynberg, who had

no obligations under the judgment, Appellants could conceivably be held in contempt of court

for refusing to turn over financial information. Therefore, Appellants’ interest affected by the

judgment is much more significant than the son in Grynberg.

                             Conclusion and Request for Relief

       WHEREFORE, Appellants respectfully request the Court to grant a rehearing of their

appeal and, upon rehearing, reverse the judgment of the trial court and remand this matter for

further proceedings. Appellants request such other relief to which they may be entitled.

                                             Respectfully submitted,

                                             /s/ David C. “Clay” Snell
                                             Barry Snell
                                             State Bar No. 18789000
                                             David C. “Clay” Snell
                                             State Bar No. 24011309
                                             Bayne, Snell & Krause
                                             1250 NE Loop 410, Suite 725
                                             San Antonio, Texas 78209
                                             Tel: (210) 824-3278
                                             Fax: (210) 824-3937
                                             Email: bsnell@bsklaw.com
                                             Email: dsnell@bsklaw.com

                                                 9
                                                   Eduardo Romero
                                                   Texas State Bar No. 24056227
                                                   Victor Villarreal
                                                   Texas State Bar No. 24058160
                                                   VILLARREAL & ROMERO, PLLC
                                                   201 W. Del Mar Blvd., Suite 15
                                                   Laredo, Texas 78041
                                                   Tel.: (956) 727-2402
                                                   Fax: (956) 727-2404
                                                   Email: romero@vrlawfirm.com
                                                   Email: villarreal@vrlawfirm.com

                                                   Jesus M. Dominguez
                                                   Texas State Bar No. 00798151
                                                   Attorney at Law
                                                   201 W. Hillside Rd., Suite # 17
                                                   Laredo, Texas 78041
                                                   Tel:    (956)728-1477
                                                   Fax: (956)728-1491
                                                   Email: lawjmd@swbell.net

                                    CERTIFICATE OF SERVICE

      I certify that a true and correct copy of the above and foregoing document has been served
on October 9, 2015 to the following counsel of record:

Judith R. Blakeway
Email: Judith.blakeway@strasburger.com
James Maverick McNeel
Email: james.mcneel@strasburger.com
Laura C. Mason
Email: laura.mason@strasburger.com
STRASBURGER & PRICE, LLP
2301 Broadway
San Antonio, Texas 78215
Attorneys for Raymond S. De Leon II, Trustee of the Family Trust

Jeffrey T. Knebel
Email: jtknebel@ohkdlaw.com
Michael B. Knisely
Email: mbknisely@ohkslaw.com
OSBORNE, HELMAN, KNEBEL & DELEERY, LLP
301 Congress Avenue, Suite 1910
Austin, Texas 78701
Attorneys for Rocio G. Guerra
                                     /s/ David C. “Clay” Snell
                                     DAVID C. “CLAY” SNELL

                                                     10