michael-i-leavitt-successor-testamentary-trustee-of-the-bert-earl ( 2014 )

In The
Court of Appeals
Ninth District of Texas at Beaumont
___________________
NO. 09-12-00303-CV
___________________
MICHAEL I. LEAVITT, SUCCESSOR TESTAMENTARY TRUSTEE OF
THE BERT EARL GASSAWAY TESTAMENTARY TRUST AND
SUCCESSOR INDEPENDENT ADMINISTRATOR WITH WILL
ANNEXED OF THE ESTATE OF MARIE ANDERSON GASSAWAY,
Appellant
V.
BRUCE HOLBROOK, VIRGIL HOLBROOK, JUANITA HOLBROOK
RIZZO, INDIVIDUALLY AND AS TRUSTEE OF THE 1992 RIZZO
FAMILY TRUST, EVELYN WALDROP, AND JUNE WALDROP, Appellees
__________________________________________________________________
On Appeal from the 75th District Court
Liberty County, Texas
Trial Cause No. CV67744
__________________________________________________________________
MEMORANDUM OPINION
In this appeal, we resolve whether a statutory probate court has exclusive
jurisdiction over a suit, filed in 2004, seeking to clear a cloud on title. The suit,
filed by the owners of the executive mineral rights against the trustee of a
testamentary trust, sought to remove a cloud on the ownership of minerals on land
1
in Liberty County. The trustee created the cloud on the right of the executive
mineral owners to receive royalties from production attributed to a pooled unit by
claiming that it was entitled to a share in the royalties attributable to production
based on its ownership of a nonparticipating royalty interest (NPRI) 1 in certain
acreage burdened by the NPRI located within the pool. The 75th District Court of
Liberty County exercised jurisdiction over the dispute and rendered judgment,
clearing the cloud. Based on provisions in the Texas Probate Code that applied in
2004 when the executive mineral owners filed suit, we conclude the trial court did
not have jurisdiction over the claims asserted by the Holbrooks against the trustee.
With respect to the trial court’s judgment against the trustee, we vacate the
judgment and dismiss the claims of the executive mineral owners against the
trustee without prejudice. With respect to the parties who did not appeal, the trial
1
The Texas Supreme Court has described a nonparticipating royalty interest
as:
an interest in the gross production of oil, gas, and other minerals
carved out of the mineral fee estate as a free royalty, which does not
carry with it the right to participate in the execution of, the bonus
payable for, or the delay rentals to accrue under, oil, gas, and mineral
leases executed by the owner of the mineral fee estate.
In re Bass, 113 S.W.3d 735, 745 n.2 (Tex. 2003) (quoting Lee Jones, Non-
participating Royalty, 26 Tex. L. Rev. 569, 569 (1948)); see also Pickens v. Hope,
764 S.W.2d 256, 264 (Tex. App.—San Antonio 1988, writ denied) (explaining that
an NPRI owner has “no right to lease the land to another for mineral development
or to produce the minerals himself[,]” rather the interest “merely entitles him to a
share of production under the lease free of exploration and production expenses”).
2
court’s judgment is affirmed, without regard to the merits of the trial court’s
resolution of the issues.
Background
This appeal concerns the trial court’s decision to grant the motion for
summary judgment filed by the Holbrooks, 2 the owners of the executive mineral
rights to the acreage at issue, clearing a cloud the trustee 3 of the Bert Earl
Gassaway Testamentary Trust placed on the minerals by asserting a claim to share
in the royalties from production in a pooled unit. The Trust’s claim is based on the
Trust’s ownership of an NPRI in certain acreage that is located within the pool.
Throughout the proceedings, the trustee of the Trust has consistently asserted that
the district court in Liberty County did not have jurisdiction to adjudicate the
Holbrooks’ claims against the Trust. According to the trustee, the Probate Court
Number 2 in Harris County has exclusive jurisdiction over the claims the
Holbrooks asserted against the Trust’s trustee and its successor trustee.
The Holbrooks who executed a mineral lease that included the acreage in
2
which the Trust owned an interest are Bruce Holbrook, Virgil Holbrook, Juanita
Holbrook Rizzo (Individually and as Trustee of the 1992 Rizzo Family Trust),
Evelyn Waldrop, and June Waldrop.
3
Michael I. Leavitt is the Successor Testamentary Trustee of the Bert Earl
Gassaway Testamentary Trust. Michael was appointed to this position following
the death of his mother, Bernice Davis Leavitt, the initial Testamentary Trustee of
the Trust. Bernice’s demands that the Trust be paid based on the NPRI created the
cloud.
3
The Trust traces its interest in the NPRI at issue to provisions in Marie
Anderson Gassaway’s will. Prior to Marie’s death, she and her brother, Allie
Anderson, deeded acreage to A. Chester Holbrook, the Holbrooks’ predecessor in
interest. In the deed, Gassaway and Anderson reserved a 1/16 NPRI in the acreage
conveyed by the deed. Marie’s will, probated in the Probate Court Number 2 in
Harris County in 1980, created a testamentary trust benefitting her son, Bert Earl
Gassaway. Marie’s will directed her interest in the NPRI to the Trust. On Bert’s
death in 2002, the Trust’s interest in the NPRI passed under the provisions in the
will to “Sadie Boatner” (identified by the pleadings in the trial court as Celia
Boatner, a/k/a Sadie Boatner). On November 17, 2003, Celia ratified the pooling of
her interest in the NPRI, which is traced to the Anderson-Gassaway deed. After
Celia died in 2007, Patricia Boatner appeared in the proceedings as Celia’s
successor, and as trustee of the “Celia ‘Sadie’ Boatner Family Living Trust.”
The Holbrooks filed suit in district court in Liberty County on June 3, 2004.
They sued the Trust, Boatner, and others. Subsequently, Boatner and the others
who are not parties to the appeal settled the claims the Holbrooks asserted against
them.
While the case was pending in Liberty County, the trustee of the Trust filed
a motion in the Probate Court, requesting that the Probate Court transfer the
Holbrooks’ suit to Harris County. The Probate Court declined that request.
4
Additionally, in the Probate Court, the trustee sued the Holbrooks and others,
claiming that based on its NPRI, the Holbrooks owed the Trust past royalties they
had received from the production attributable to the pooled unit that included the
acreage burdened by its NPRI. At the Holbrooks’ request, the Probate Court abated
(but did not transfer or dismiss) the trustee’s claims against the Holbrooks and
others.
In 2012, based on the Holbrooks’ motion for summary judgment, the
presiding judge of the District Court in Liberty County rendered a final judgment
resolving the claims of all of the parties in the suit. The trial court’s judgment
declares that the Holbrooks’ royalty interest was burdened or reduced by the NPRI
interest held by Boatner only from and after November 17, 2003 (the date Celia
ratified the unit). The judgment rejects the Trust’s claim that it was entitled to
royalties from the production attributed to the pooled unit, and the judgment
removes the cloud the Trust placed on the executive mineral owner’s interest in the
royalties at issue. Only the trustee, on behalf of the Trust, appealed from the final
judgment.
In issue one, the trustee argues that the trial court could not exercise
jurisdiction over the trustee to decide that the Trust’s NPRI asset automatically
vested in Celia Boatner on Bert Gassaway’s death. In issue two, the trustee
contends that the Trust “was entitled to the equitable remedy of unjust enrichment
5
against [the Holbrooks.]” In issue three, the trustee argues the trial court erred
when it agreed with the Holbrooks’ that the owners of an NPRI had to ratify the
agreement to pool its acreage before becoming entitled to any of the royalties
attributable to the production from the pool. In issue four, the trustee contends that
material fact issues regarding the trustee’s knowledge that an agreement to pool the
minerals existed, and that these fact issues required a trial that could not be
resolved by summary judgment proceedings. In issue five, the trustee argues that
the Trust did not create a cloud on title because its claim that it was owed royalties
was not wrongful.
Jurisdiction
Initially, the trustee argues the trial court lacked subject matter jurisdiction
over matters pertaining to the Trust’s NPRI. According to the trustee, the statutory
probate court in Harris County, the county where Marie’s will was probated,
possesses continuing exclusive jurisdiction with respect to all of the matters that
concern the claims against the Trust and its trustee.
Whether a trial court has subject matter jurisdiction is a question of law we
review de novo. Tex. Natural Res. Conservation Comm’n v. IT-Davy, 74 S.W.3d
849, 855 (Tex. 2002). Lack of subject matter jurisdiction is fundamental error that
may be recognized by the appellate court, sua sponte, or raised by a party at any
time. Saudi v. Brieven, 176 S.W.3d 108, 113 (Tex. App.—Houston [1st Dist.]
6
2004, pet. denied). A judgment is void if the trial court rendering the judgment
lacks subject matter jurisdiction. See Cook v. Cameron, 733 S.W.2d 137, 140 (Tex.
1987).
When the Holbrooks filed their original petition in 2004 against the Trust,
the Texas Property Code provided that a district court’s jurisdiction over
proceedings concerning trusts is exclusive “except for jurisdiction conferred by
law on a statutory probate court[.]” Act of May 26, 1997, 75th Leg., R.S., ch. 1375,
§ 5, sec. 115.001(d), 1997 Tex. Gen. Laws 5162, 5163. Probate Court Number 2 of
Harris County is a statutory probate court. Tex. Gov’t Code Ann. § 25.1031(c)(2)
(West 2004).
Based on the date the Holbrooks filed suit, Sections 5 and 5A(b) of the
Texas Probate Code govern the jurisdiction of statutory probate court proceedings.
See Act of May 28, 2003, 78th Leg., R.S., ch. 1060, §§ 1-4, 2003 Tex. Gen. Laws
3052, 3052-3054.4 We note that even though Gassaway’s will was probated in
4
When the matters discussed in the opinion were before the trial and probate
courts, the Texas Probate Code applied. Effective January 1, 2014, the Probate
Code was repealed; it was substantially replaced by the new Texas Estates Code.
See Act of May 26, 2009, 81st Leg., R.S., ch. 680, 2009 Tex. Gen. Laws 1512,
1512-1732 (§§ 10-12 reflect the effective date of the Texas Estates Code and the
repeal of the Texas Probate Code), amended by Act of May 19, 2011, 82nd Leg.,
R.S., ch. 823, 2011 Tex. Sess. Law Serv. 1901, 1901-2095 (West); Act of May 9,
2013, 83rd Leg., R.S., ch. 161, art. 6, 2013 Tex. Sess. Law Serv. 623, 633-657
(West). With respect to the sections of the Probate Code pertaining to jurisdiction
of statutory probate courts, and based on the savings provisions in the Estates Code
7
1980, the sections of the Probate Code giving a statutory probate court exclusive
jurisdiction over claims against the trustee of a testamentary trust are the operable
provisions that govern this appeal. See id. at § 17, 2003 Tex. Gen. Laws at 3057
(explaining that sections 5 and 5A(b) apply to actions commenced on or after the
effective date, September 1, 2003, without regard to whether the probate
proceeding is already pending).
When the Holbrooks sued the trustee for clouding title to the minerals at
issue, section 5A(b) directed that, with the exception of matters provided in section
5, “any cause of action[,]” including those involving testamentary trusts, “shall be
brought in a statutory probate court.” Act of May 28, 2003, 78th Leg., R.S., ch.
1060, § 4, sec. 5A(b), 2003 Tex. Gen. Laws 3052, 3054. When the Holbrooks sued
the trustee in 2004, 5 suits against trustees of testamentary trusts were not excepted
that gave those provisions in the Probate Code continuing force, we cite to the
applicable Probate Code sections. See Tex. Est. Code Ann. §§ 32.006, 32.007
(West Pamph. 2013); Act of May 24, 2013, 83rd Leg., R.S., ch. 1136, § 62(d),
2013 Tex. Sess. Law Serv. 2740, 2757 (West); Act of June 1, 2009, 81st Leg.,
R.S., ch. 1351, § 14, 2009 Tex. Gen. Laws 4273, 4282.
5
In 2005, trustees of testamentary trusts were added as an exception to those
matters the Legislature required to be filed in statutory probate courts. Following
the effective date of the amendment, the Legislature gave district courts and the
statutory probate courts concurrent jurisdiction over trustees of testamentary trusts.
See Act of May 23, 2005, 79th Leg., R.S., ch. 551, § 1, sec. 5(e), 2005 Tex. Gen.
Laws 1476, 1477 (adding testamentary trusts and actions by and against a trustee
to the list of matters in section 5(e) over which district and statutory probate courts
8
from the requirement that such suits be filed in a statutory probate court. Act of
May 28, 2003, 78th Leg., R.S., ch. 1060, § 2, sec. 5(e), 2003 Tex. Gen. Laws 3052,
3053.
Marie’s will, which created the Trust, was admitted to probate in the Probate
Court Number 2, a statutory probate court. The estate’s administration remains
open. No one disputes that the Trust is a testamentary trust or that the Holbrooks
filed suit against the Trust’s trustee in 2004. While the Probate Code’s provision
that gave statutory probate courts exclusive jurisdiction over trustees existed for
only two years during the years that are relevant to the parties’ dispute, it is the
provision that applies based on the date the Holbrooks sued the trustee. Compare
Act of May 28, 2003, 78th Leg., R.S., ch. 1060, § 17, 2003 Tex. Gen. Laws at
3057, with Act of May 23, 2005, 79th Leg., R.S., ch. 551, § 9(a), 2005 Tex. Gen.
Laws at 1480. Therefore, we agree with the trustee that the statutory probate court
overseeing the Trust had exclusive jurisdiction over all of the claims the Holbrooks
made against the Trust’s trustee. See Act of May 28, 2003, 78th Leg., R.S., ch.
1060, § 4, sec. 5A(b), 2003 Tex. Gen. Laws 3052, 3054; id. at § 2, sec. 5(e), 2003
Tex. Gen. Laws at 3053. Because the trial court lacked jurisdiction over the trustee
share concurrent jurisdiction); id. at § 9(a), 2005 Tex. Gen. Laws at 1480
(instructing that the amendments to section 5 are applicable to only those matters
filed after the September 1, 2005 effective date); see also Gammill v. Fettner, 297
S.W.3d 792, 799 n.10 (Tex. App.—Houston [14th Dist.] 2009, no pet.).
9
and actions concerning the Testamentary Trust, the trial court could not render a
valid and binding final judgment that addressed the Holbrooks’ claims against the
trustee for the actions the trustee took on behalf of the Trust. See Cook, 733
S.W.2d at 140.
Because the trial court’s judgment against the trustee is void, we sustain the
Trust’s first issue. Given our resolution of issue one, we need not address the
Trust’s remaining appellate issues. Tex. R. App. P. 47.1. With respect to the trustee
and the interests of the Trust, we vacate the trial court’s final judgment, and we
dismiss the Holbrooks’ claims against the trustee without prejudice. Without
addressing the merits of the Holbrooks’ claims against the persons who are not
parties to the appeal, the trial court’s final judgment with respect to those other
parties is affirmed.
REVERSED AND DISMISSED IN PART; AFFIRMED IN PART.
___________________________
HOLLIS HORTON
Justice
Submitted on August 30, 2013
Opinion Delivered July 10, 2014
Before McKeithen, C.J., Kreger and Horton, JJ.
10