David Herbig, Trustee of the Welch Family Trust C v. Jeanne Manry Welch, Trustee of the Welch Manry Family Trust ( 2023 )

Opinion issued June 27, 2023
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-22-00080-CV
———————————
DAVID HERBIG, TRUSTEE OF THE WELCH FAMILY TRUST C,
Appellant
V.
JEANNE MANRY WELCH, TRUSTEE OF THE WELCH MANRY
FAMILY TRUST, Appellee
On Appeal from the 164th District Court
Harris County, Texas
Trial Court Case No. 2020-07680
OPINION
Appellant David Herbig, trustee of the Welch Family Trust C, appeals from
the trial court’s final judgment which made final an interlocutory summary judgment
order entered in favor of appellee Jeanne Manry Welch, trustee of the Welch Manry
Family Trust, on her declaratory judgment claims brought under Chapter 37 of the
Texas Civil Practice and Remedies Code, the Uniform Declaratory Judgments Act
(UDJA). In two issues on appeal, Herbig argues that Jeanne lacks standing to bring
her claims and that the trial court erred in granting summary judgment on Jeanne’s
claims.
Because we conclude that the trial court lacked jurisdiction over the Welch
Family Trust B, a party not before the trial court, the relief awarded against that trust
in the trial court’s order is void. Accordingly, we vacate the portion of the trial
court’s order voiding the conveyance made to the Welch Family Trust B and affirm
the remainder of the trial court’s final judgment.
Background
Richard Welch and his wife, Margaret, created the Welch Family Trust (WFT)
in 1993. At the time of its execution, Richard and Margaret were trustors,
beneficiaries, and co-trustees of the WFT. During their life, the WFT Trustee could
make distributions of income or principal to Richard, Margaret, and their children.
Margaret died in 2015. Upon her death, the WFT provided that the trust assets
would be divided into two interests of equal value—Richard’s one-half (as the
surviving spouse) and Margaret’s one-half (as the deceased spouse)—and from
there, divided into three subtrusts, the Welch Family Trusts A, B, and C. As the
surviving spouse, Richard’s one-half interest in the trust property passed to “the
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surviving Trustor [Richard], as Trustee of the Welch Family Trust C.” Margaret’s
portion of the then-trust property would flow into Welch Family Trust A and B.
In general terms, the Welch Family Trust A was designed to provide a gift
that would cover all funds necessary for federal estate tax purposes. The “rest and
residue” of the Welch Family Trust A, after addressing the federal estate tax
liabilities, would be for the benefit of the surviving spouse, Richard, including for
his “health, education, maintenance and support or to pay any federal income or gift
taxes imposed on him.” The “rest and residue” was distributed into the Welch Family
Trust B. Richard, as the surviving spouse, also had special power of appointment
over the Welch Family Trust B, which included transferring remaining trust property
to descendants by will or other instruments or documents.
As to the Welch Family Trust C, Richard was the trustee and beneficiary, as
the sole surviving spouse, which entitled him to the income and, if necessary, the
principal, for his health, education, maintenance, or support. Upon Richard’s death,
as the surviving spouse, the WFT directed that the trustee “shall distribute all assets
remaining in the various Trusts established in Article III in accordance with any
powers of appointment exercised by the surviving Beneficiary. To the extent not
exercised, such property will be distributed to the descendants of Trustors on a per
stirpes basis.”
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In the event that Richard was unwilling or unable to serve as trustee of any
WFT, two other persons were appointed as successor trustees. While Richard and
Margaret were still living, two amendments to the WFT were made to change the
successor trustees, including Lewis Sims, to be appointed if the surviving spouse
was unwilling or unable to proceed as trustee of any of the WFTs. The last such
amendment designated appellant David Herbig as a successor trustee.
After Margaret died, Richard married Jeanne Manry Welch in May 2017. In
December 2017, Jeanne and Richard established their own trust, the Welch Manry
Family Trust (WMFT), for their mutual benefit, naming themselves as co-trustees.
In March 2019, Richard funded the WMFT with assets from the Welch Family Trust
C. Specifically, Richard transferred:
1. An undivided ½ interest in 219.66 acres of land in Blanco County,
2. A single-family home in Fredericksburg, Texas (the Acorn Street
Property),
3. 632 acres of land in Pecos and Reeves Counties, Texas,
4. Royalty rights related to land in La Salle County, Texas, and
5. 690 and 458/1000 shares of United Lands capital stock to the WMFT.
Richard died on September 9, 2019. After his death, the WMFT continued for
Jeanne’s benefit, and she became the sole trustee of the WMFT. As trustee, she had
the authority to transfer property out of the WMFT, make distributions of property
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or cash, exchange or sell all or any part of the trust property, and direct investments
of the trust.
In October 2019, one month after Richard’s death, Jeanne conveyed the
properties listed below from the WFMT back to the Welch Family Trust C.
1. The Acorn Street Property in Fredericksburg, Texas, to Lewis Sims,
successor trustee of the Welch Family Trust C;
2. 632 acres of land in Pecos and Reeves Counties, Texas, to Lewis Sims,
successor trustee of the Welch Family Trust C;
3. Royalty rights related to land in La Salle County, Texas, to Lewis Sims,
successor trustee of the Welch Family Trust C; and
4. 690 and 458/1000 shares of United Lands capital stock from the WMFT
to the Welch Family Trust C.
She also made one conveyance to the Welch Family Trust B—an undivided ½
interest in 219.66 acres of land in Blanco County, Texas, to Lewis Sims, successor
trustee of the Welch Family Trust B.
In early 2020, Jeanne sued Herbig, in his capacity as trustee of the Welch
Family Trust C, seeking declaratory judgments that the WFT, including Welch
Family Trusts A, B, and C, terminated on Richard’s death and that “any purported
transfers of property and assets from the Welch Manry Family Trust back into any
of the Welch Family Trusts (including Trust B and Trust C) are void.”
Jeanne moved for traditional summary judgment on her declaratory judgment
claims. The trial court granted summary judgment in favor of Jeanne. In its order,
the trial court made the following declarations:
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• “[U]nder its unambiguous terms, the Welch Family Trust C terminated
immediately upon the death of Richard C. Welch”;
• “[U]pon termination of the Welch Family Trust C, the trustee thereof
was restricted in his actions as Trustee to winding up the affairs of the
said Trust”; and
• “[T]he Trustee of the Welch Family Trust C was without authority to
accept or receive property to add to the corpus of the said trust
following the death of Richard C. Welch.”
The trial court also declared the following conveyances “void” and set them
aside:
• Warranty Deed from grantor Jeanne F. Welch a/k/a Jeanne F. Manry,
Trustee of the Welch Manry Family Trust to grantee Lewis Sims,
Successor Trustee of the Welch Family Trust C dated October 24, 2019,
filed in the Official Records of Pecos County, Texas under File No.
2019-168029 WD;
• Warranty Deed from grantor Jeanne F. Welch a/k/a Jeanne F. Manry,
Trustee of the Welch Manry Family Trust to grantee Lewis Sims,
Successor Trustee of the Welch Family Trust B dated October 7, 2019,
filed in the Official Public Records of Blanco County, Texas under File
No. 193583;
• Royalty Deed from grantor Jeanne F. Welch a/k/a Jeanne F. Manry,
Trustee of the Welch Manry Family Trust to grantee Lewis Sims,
Successor Trustee of the Welch Family Trust C dated October 24, 2019,
filed in the Official Records of La Salle County, Texas under File No.
00132872;
• Warranty Deed from grantor Jeanne F. Welch a/k/a Jeanne F. Manry,
Trustee of the Welch Manry Family Trust to grantee Lewis Sims,
Successor Trustee of the Welch Family Trust C dated October 24, 2019,
filed in the Official Public Records of Gillespie County, Texas under
File No. 20195926;
• 699 and 458/l000s Shares (Six Hundred Ninety Shares and Four
Hundred Fifty Eighth One-Thousandths of a Share) in United Lands
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Company, Inc. Capital Stock, originally represented by United Lands
Company, Inc. Share Certificate No. 1020 dated March 8, 2018.
The trial court reserved judgment on Jeanne’s request for attorney’s fees pursuant to
the UDJA and dismissed with prejudice Herbig’s counterclaims for slander of title
and declaratory judgment. Herbig moved for reconsideration, which the trial court
denied.
Following the trial court’s entry of interlocutory summary judgment, Jeanne
moved for entry of final judgment, in which she nonsuited her remaining claim for
attorney’s fees and moved to dismiss Herbig’s remaining counterclaim for an
accounting under Texas Property Code Section 113.151(b) for lack of subject matter
jurisdiction. On January 8, 2022, the trial court entered final judgment, in which the
trial court recognized Jeanne’s nonsuit, ordered Herbig take nothing on his
counterclaims, and ordered that Jeanne be entitled to all relief previously granted in
the interlocutory summary judgment order. This appeal followed.
Standing
In his first issue, Herbig argues that the trial court erred in granting Jeanne’s
motion for summary judgment because she is not an interested person under Texas
Property Code Section 115.001(a), and therefore, lacks standing to challenge his
actions as trustee of the WFT. Herbig contends that, under Section 115.001, courts
may only intervene in the administration of a trust when an interested person invokes
the trial court’s jurisdiction. See TEX. PROP. CODE § 115.001(c) (“The court may
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intervene in the administration of a trust to the extent that the court’s jurisdiction is
invoked by an interested person or as otherwise provided by law.”). An interested
person is defined as “a trustee, beneficiary, or any other person having an interest in
or a claim against the trust or any person who is affected by the administration of the
trust.” Id. § 111.004(7). Because Jeanne is not an interested person, as she is not a
beneficiary or trustee of the WFT trust, does not have an interest in or claim against
the trust, and is not affected by the administration of the trust, Herbig asserts that she
did not have standing to bring her claims, and therefore, the trial court lacked subject
matter jurisdiction.
In response, Jeanne contends Herbig waived this argument because, under a
recent Texas Supreme Court decision, the issue of whether Jeanne is an interested
person is a question of capacity, not standing, which does not implicate the trial
court’s subject matter jurisdiction. See Berry v. Berry, 646 S.W.3d 516 (Tex. 2022).
Because Herbig did not raise the “interested person” argument before the trial court,
Jeanne argues that he has waived that argument on appeal.
Although Herbig contends his first issue raises a question of Jeanne’s
“standing,” thus implicating the trial court’s subject matter jurisdiction, Texas courts
have made a distinction between constitutional standing and the requirement that
parties “fall within the class of persons statutorily authorized to bring the causes of
action they have asserted.” Id. at 527; see also In re K.S., 492 S.W.3d 419, 422–23
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(Tex. App.—Houston [14th Dist.] 2016, pet. denied) (explaining distinction between
constitutional requirement that plaintiff have standing, which implicates court’s
jurisdiction and may be raised for first time on appeal, and statutory restrictions on
who may bring suit, which affect plaintiff’s right to relief rather than court’s
jurisdiction).
Standing is a constitutional prerequisite to maintaining a suit under Texas law.
See Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 443–44 (Tex. 1993).
The test for constitutional standing in Texas requires that there be a “real controversy
between the parties, which . . . will be actually determined by the judicial declaration
sought.” Id. at 446. This issue focuses on whether a party has a sufficient relationship
with the lawsuit so as to have a “justiciable interest” in its outcome. Austin Nursing
Ctr., Inc. v. Lovato, 171 S.W.3d 845, 848 (Tex. 2005). Constitutional standing is
required for the court to have subject-matter jurisdiction; thus, it cannot be waived
and may be raised by a party or a court at any time, including on appeal. See Tex.
Ass’n of Bus., 852 S.W.2d at 445. To demonstrate standing, the plaintiff is required
to allege facts that affirmatively demonstrate the court’s jurisdiction to hear the
cause. Id. at 446.
In Berry, the parties disputed whether the plaintiffs fit within the definition of
“interested person” under Section 115.001 and, like Herbig here, characterized this
issue as one of “standing.” Berry, 646 S.W.3d at 527. The Texas Supreme Court
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explained that “‘standing’ has historically not always been used in its ‘proper,
jurisdictional sense.’” Id. (quoting Pike v. Tex. EMC Mgmt., LLC, 610 S.W.3d 763,
774 (Tex. 2020)). “To have standing in the ‘proper, jurisdictional sense,’ a plaintiff
must allege, among other things, a concrete, particularized injury in fact.” Id. (citing
Heckman v. Williamson Cnty., 369 S.W.3d 137, 154 (Tex. 2012)). The Court noted
that the parties focused their arguments “exclusively on whether [the plaintiffs] fall
within the class of persons statutorily authorized to bring the causes of action they
have asserted,” not on whether the plaintiffs had satisfied their burden to allege a
concrete, particularized injury, as is required for constitutional standing. Id. Because
the parties raised only a statutory-interpretation question, the Court confined its
inquiry to that issue. Id.Resolving the question of whether the plaintiffs fell within the class of persons
statutorily authorized under Section 115.001 to bring the causes of action asserted
“may overlap with, but does not necessarily implicate, questions of standing bearing
on subject-matter jurisdiction.” Id. (citing Pike, 610 S.W.3d at 775). For instance,
the Court explained, “the statutory inquiry into whether an unnamed beneficiary is
an ‘interested person’ may resemble in some respects the jurisdictional inquiry into
whether the unnamed beneficiary has alleged a concrete injury, and in that context
it may be addressed in a jurisdictional plea.” Id. at 527 n.3. But the Court emphasized
that these two “are nevertheless distinct inquiries.” Id.; see also Tex. Bd. of
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Chiropractic Exam’rs v. Tex. Med. Ass’n, 616 S.W.3d 558, 566–67 (Tex. 2021)
(“The Board characterizes § 2001.038(a) as a ‘statutory standing’ provision.
Constitutional standing is a prerequisite for subject matter jurisdiction . . . . But last
Term in Pike v. EMC Management, LLC, we discouraged the use of the term
standing to describe extra-constitutional restrictions on the right of a particular
plaintiff to bring a particular lawsuit.”); Pike, 610 S.W.3d at 774 (“[T]he question
whether a plaintiff has established his right to go forward with [his] suit or satisfied
the requisites of a particular statute pertains in reality to the right of the plaintiff to
relief rather than to the [subject-matter] jurisdiction of the court to afford it. Thus, a
plaintiff does not lack standing in its proper, jurisdictional sense simply because he
cannot prevail on the merits of his claim; he lacks standing [when] his claim of injury
is too slight for a court to afford redress.” (internal citations and quotations omitted));
Eagle Rock Timber, Inc. v. Rock Hard Rental, LLC, No. 04-21-00372-CV, 2023 WL
2506431, at *3 (Tex. App.—San Antonio Mar. 15, 2023, no pet. h.) (“The statutory
question of whether SRC is an ‘obligor or debtor’ under Section 12.003(a)(8) is an
extra-constitutional question and, therefore, not properly characterized as
jurisdictional under Pike.”).
Here, Herbig cites to several cases in support of his argument that this issue
is jurisdictional, including cases from this Court. See Newding v. Lambert, No. 01-
19-00899-CV, 2020 WL 6731658, at *3 (Tex. App.—Houston [1st Dist.] Nov. 17,
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2020, pet. denied) (mem. op.) (“If one is not an ‘interested person,’ then she lacks
standing—a jurisdictional defect—to bring a trust-related action.”); In re
Duddlesten, No. 01-18-00561-CV, 2018 WL 6694710, at *4 (Tex. App.—Houston
[1st Dist.] Dec. 20, 2018, no pet.) (mem. op.) (“[The plaintiff] is not an ‘interested
person’ under the Property Code because she is not a beneficiary or trustee of the
Marital Trust and does not otherwise have a legal or equitable interest in the trust’s
assets or administration. She does not have standing to sue individually.”); Gonzalez
v. De Leon, No. 04-14-00751-CV, 2015 WL 5037396, at *5–8 (Tex. App.—San
Antonio Aug. 26, 2015, pet. dism’d) (mem. op.) (holding that because settlor of
family trust was not interested person and administration of trust did not affect her
interests, settlor “lacked standing as a matter of law to prosecute her bill of review”);
Lee v. Rogers Agency, 517 S.W.3d 137, 159–60 (Tex. App.—Texarkana 2016, pet.
denied) (“To begin with, a settlor who ‘[u]nder the terms of the . . . Trust . . . do[es]
not manage any of the aspects of the . . . Trust and do[es] not stand to inherit any of
the trust assets’ is not an ‘interested person’ who has standing to bring an action
against a trustee or to bring other proceedings related to a trust under the Texas
Property Code.”); Moon v. Lesikar, 230 S.W.3d 800, 803 (Tex. App.—Houston
[14th Dist.] 2007, pet. denied) (noting contingent beneficiary “would appear to meet
the definition of an interested person with standing to bring suit against a trustee for
breach of fiduciary duty.”).
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However, each of these cases was decided before the Texas Supreme Court’s
decision in Berry, which distinguished the precise issue raised in this appeal—
whether Jeanne is an interested person under Section 115.001, which does not
implicate subject matter jurisdiction—with constitutional standing, which does.
Accordingly, we disagree with Herbig that whether Jeanne is an interested person
under Section 115.001 is a jurisdictional question of constitutional standing that can
be raised at any time, including for the first time on appeal. Because Herbig did not
raise this statutory interpretation issue below, he has waived it on appeal. See TEX.
R. APP. P. 33.1(a)(1)(A); cf. Eagle Rock Timber, 2023 WL 2506431, at *3–4
(holding that appellant’s argument that plaintiff did not have standing to bring claim
under fraudulent lien statute because it was not an “obligor or debtor” was not
jurisdictional and therefore not preserved on appeal where appellant did not raise
that issue in trial court); In Interest of J.W.G., No. 14-17-00389-CV, 2017 WL
5196223, at *6 (Tex. App.—Houston [14th Dist.] Nov. 9, 2017, pet. denied) (mem.
op.) (holding that department’s argument that grandfather did not have standing to
intervene in lawsuit “does not implicate the trial court’s jurisdiction, but rather
concerns whether [g]randfather met the statutory requirements for maintaining suit,
it may not be raised for the first time on appeal” and was therefore not preserved).
To the extent that Herbig has made a constitutional standing argument on
appeal, we conclude that Jeanne has alleged a particularized injury and relationship
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with the lawsuit sufficient to establish standing to bring her declaratory judgment
claims. As noted above, the plaintiff has the initial burden to plead facts establishing
standing. Tex. Ass’n of Bus., 852 S.W.2d at 446. A party has standing to sue if there
is (1) “a real controversy between the parties” that (2) “will be actually determined
by the judicial declaration sought.” Austin Nursing Ctr., 171 S.W.3d at 848. More
specifically, the UDJA provides that:
A person interested under a deed, will, written contract, or other
writings constituting a contract or whose rights, status, or other legal
relations are affected by a statute, municipal ordinance, contract, or
franchise may have determined any question of construction or validity
arising under the instrument, statute, ordinance, contract, or franchise
and obtain a declaration of rights, status, or other legal relations
thereunder.
TEX. CIV. PRAC. & REM. CODE § 37.004.
In her second amended petition, Jeanne alleged that:
• On December 1, 2017, Jeanne and Richard Welch established the
Welch Manry Family Trust for their mutual benefit and named
themselves as co-trustees.
• Soon after her husband Richard’s death on September 9, 2019, Jeanne
signed a number of documents in October 2019 purporting to convey
title in certain properties and assets back to the Welch Family Trusts B
and C.
• The terms of the Welch Family Trust provided that upon Richard’s
death the assets held in the Welch Family Trust (which includes the
Welch Family Trusts A, B, and C) were to be distributed.
• As such, as a matter of law these trusts A, B, and C arising out of the
Welch Family Trust ceased to exist on September 9, 2019 and
Defendant Herbig, the trustee of each of these trusts was without any
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further authority except to distribute the remaining assets and wind up
these trusts.
Accordingly, Jeanne sought declarations that “the Welch Family Trust[,] including
its Trusts A, B and C[,] terminated upon the death of Richard Welch on September
9, 2019,” and that “any purported transfers of property and assets from the Welch
Manry Family Trust back into any of the Welch Family Trusts (including Trust B
and Trust C) are void.”
Although Herbig focuses his arguments on Jeanne’s purported interest, or lack
thereof, in the WFT or its sub trusts, the crux of Jeanne’s declaratory judgment action
was to challenge the validity of the conveyances of property, which she made in her
capacity as trustee of the WMFT to the Welch Family Trusts B and C. If these
conveyances are void, as alleged by Jeanne and found by the trial court, then title to
these properties and stock remained with the WMFT. Jeanne is the trustee of the
WMFT and, in that capacity, was the grantor on the warranty and royalty deeds she
seeks to declare void. Accordingly, we hold that Jeanne has alleged “a sufficient
relationship with the lawsuit so as to have a ‘justiciable interest’ in its outcome.” See
Austin Nursing Ctr., 171 S.W.3d at 848.
We overrule Herbig’s first issue.
Transfers to the Welch Manry Family Trust
In his second issue, Herbig argues that the trial court erred in granting Jeanne’s
motion for summary judgment because “there is no legal support for her assertion
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that [Herbig] lacked authority to receive and accept assets Jeanne voluntarily
conveyed to the WFT” and that these conveyances were void.
A. Standard of Review
Declaratory judgments are reviewed under the same standards as other
judgments and decrees. Unocal Pipeline Co. v. BP Pipelines (Alaska) Inc., 512
S.W.3d 492, 499–500 (Tex. App.—Houston [1st Dist.] 2016, pet. denied); see also
TEX. CIV. PRAC. & REM. CODE § 37.010 (“All orders, judgments, and decrees under
this chapter may be reviewed as other orders, judgments, and decrees.”). We look to
the procedure used to resolve the issue at trial to determine the standard of review
on appeal. Unocal Pipeline Co., 512 S.W.3d at 499–500. Here, because the trial
court determined the declaratory judgment issue through summary judgment
proceedings, we review the propriety of the trial court’s declarations under the same
standards we apply to summary judgment. Id. at 500.
We review de novo the trial court’s ruling on a motion for summary judgment.
Eagle Oil & Gas Co. v. TRO-X, L.P., 619 S.W.3d 699, 705 (Tex. 2021). In doing so,
“[w]e review the summary judgment record in the light most favorable to the
nonmovant, indulging every reasonable inference and resolving any doubts against
the motion.” Id.The party moving for traditional summary judgment must show that no
genuine issue of material fact exists and that it is entitled to judgment as a matter of
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law. TEX. R. CIV. P. 166a(c); Eagle Oil & Gas, 619 S.W.3d at 705. A plaintiff
moving for traditional summary judgment must conclusively establish all essential
elements of its claim. Sheller v. Corral Tran Singh, LLP, 551 S.W.3d 357, 362 (Tex.
App.—Houston [14th Dist.] 2018, pet. denied).
Once the moving party establishes its right to a traditional summary judgment,
the burden shifts to the nonmoving party to present evidence raising a genuine issue
of material fact, thereby precluding summary judgment. See M.D. Anderson Hosp.
& Tumor Inst. v. Willrich, 28 S.W.3d 22, 23 (Tex. 2000) (per curiam); see Navy v.
Coll. of the Mainland, 407 S.W.3d 893, 898 (Tex. App.—Houston [14th Dist.] 2013,
no pet.). When reviewing a traditional summary judgment, we take as true all
evidence favorable to the nonmoving party and indulge every reasonable inference
in the nonmoving party’s favor. Cantey Hanger, LLP v. Byrd, 467 S.W.3d 477, 481
(Tex. 2015).
We also review de novo the trial court’s legal conclusions on the construction
of trusts. See Gamboa v. Gamboa, 383 S.W.3d 263, 273 (Tex. App.—San Antonio
2012, no pet.). We similarly ascertain a trust grantor’s intent from the language
contained in the trust’s four corners and focus on the meaning of the words actually
used, not what the grantor intended to write. Soefje v. Jones, 270 S.W.3d 617, 628
(Tex. App.—San Antonio 2008, no pet.). We must interpret a trust to give meaning
to all its provisions and to enact the intent of the grantor. See Hurley v. Moody Nat’l
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Bank of Galveston, 98 S.W.3d 307, 310 (Tex. App.—Houston [1st Dist.] 2003, no
pet.).
B. Analysis
In its summary judgment order, the trial court made essentially three separate
findings: (1) the Welch Family Trust C terminated on Richard’s death; (2) following
termination, Herbig’s powers as trustee were restricted to winding up the trust and
did not include the power to accept property into the trust after Richard’s death; and
(3) the conveyances made by Jeanne to the Welch Family Trust C after Richard’s
death were therefore void. On appeal, we are tasked with analyzing whether Jeanne
established, as a matter of law, her entitlement to each of these declarations. We
address each in turn.
1. Welch Family Trust C terminated on Richard’s death
Section 112.052 of the Texas Property Code states:
A trust terminates if by its terms the trust is to continue only until . . .
the happening of a certain event and . . . the event has occurred. If an
event of termination occurs, the trustee may continue to exercise the
powers of the trustee for the reasonable period of time required to wind
up the affairs of the trust and to make distribution of its assets to the
appropriate beneficiaries. The continued exercise of the trustee’s
powers after an event of termination does not affect the vested rights of
beneficiaries of the trust.
TEX. PROP. CODE § 112.052. In her motion for summary judgment, Jeanne pointed
to the following language in Article IV of the WFT as evidence that it, and the sub
trusts, terminated upon Richard’s death:
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Herbig argues that while this article “provides for the distribution of assets
upon Richard’s death, . . . it does not provide for an immediate extinction of the
WFT.” While Herbig is correct that this language does not expressly state that the
Welch Family Trust C became “immediate[ly] extinct[]” or that it terminates upon
Richard’s death, it does, by its terms, direct that the trust be terminated. It provides
for the distribution of “all assets remaining in the various Trusts . . . in accordance
with any powers of appointment exercised by [Richard],” and to the extent such
powers of appointment were not exercised, “such property will be distributed to the
descendants of Trustors on a per stirpes basis.” There are no provisions allowing for
powers of appointment related to the Welch Family Trust C, so under the terms
applicable to that trust, any remaining assets at the time of Richard’s death “will be
distributed to the descendants of Trustors on a per stirpes basis.” Other than to
distribute “all assets remaining,” there are no directives as to what would be done
with the trust following Richard’s death. After all trust property and assets remaining
in the Welch Family Trust C are distributed upon Richard’s death, the trust would
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have no remaining property or corpus. The only reasonable interpretation of this
provision is that the Welch Family Trust C was “to continue only until . . . the
happening of a certain event,” i.e., Richard’s death. See TEX. PROP. CODE § 112.052.
In other words, Richard’s death was the “event of termination.” See id. Once that
event occurred, i.e., Richard died, the Welch Family Trust C terminated. This is in
line with the purpose of this specific trust, which was to provide annual income
payments to Richard, and to allow for additional funds from the principal, if
necessary, for Richard’s health, education, maintenance, or support, which would no
longer be necessary after his death.1 Accordingly, we conclude that the trial court
correctly found that the Welch Family Trust C terminated on Richard’s death.
2. Herbig’s powers as trustee of the Welch Family Trust C following
Richard’s death were restricted to winding up the trust.
Having determined that the Welch Family Trust C terminated on Richard’s
death, we now must resolve the question of what powers Herbig, as trustee, retained
after termination. Specifically, we must determine whether Herbig retained the
power to accept or add new property to the Welch Family Trust C after it terminated.
1
Article III.B. provides: “The Welch family Trust C shall be subject to the following
provisions. The Trustee shall be the Beneficiary then surviving – whether Margaret
O. Welch or Richard C. Welch. All income shall be paid at least annually to the
surviving Beneficiary. If he or she shall need additional funds for health, education,
maintenance or support, my Trustee may invade principal for such purpose, all in
the sole discretion of my Trustee.”
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We hold that Herbig did not retain the power to accept or add new property to the
Welch Family Trust C after its termination under these facts.
As noted above, Section 112.052 of the Texas Property Code states:
If an event of termination occurs, the trustee may continue to exercise
the powers of the trustee for the reasonable period of time required to
wind up the affairs of the trust and to make distribution of its assets to
the appropriate beneficiaries. The continued exercise of the trustee’s
powers after an event of termination does not affect the vested rights of
beneficiaries of the trust.
TEX. PROP. CODE § 112.052. Upon termination, trustees retain only the powers
necessary to wind up the affairs of the trust and to distribute the trust property in
accordance with the terms of the trust. Sorrel v. Sorrel, 1 S.W.3d 867, 870 (Tex.
App.—Corpus Christi–Edinburg 1999, no pet.) (citing id.; Nowlin v. Frost Nat’l
Bank, 908 S.W.2d 283, 289 (Tex. App.—Houston [1st Dist.] 1995, no writ);
RESTATEMENT 2D OF TRUSTS § 344 (1957)). “This is so because title, in effect, has
already passed to the beneficiaries.” Id. During the existence of a trust, legal title to
the res is in the trustee and equitable title is in the beneficiaries. Id. at 871 (citing
Shearrer v. Holley, 952 S.W.2d 74, 78 (Tex. App.—San Antonio 1997, no writ)).
But, upon the termination of a trust,
the estate of the trustee ceases, and the legal, as well as the equitable,
title vests in the beneficial owner without the necessity of any act or
intervention on the part of the trustee, unless the intention of the creator
appears that the legal title should continue in the trustee. The
termination of a trust leaves the trustee with a mere administrative title
to the fund . . . . [A]t the time of termination, the trustee is not
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immediately divested of all duties and responsibilities, but he has
powers and duties appropriate for a winding up of trust affairs.
Id. at 870–71 (citing 89 C.J.S. TRUSTS § 96 (1955)).
Moreover, the property code expressly states that the trustee’s powers
exercised after termination shall not affect the vested rights of beneficiaries of the
trust. TEX. PROP. CODE § 112.052. Courts have interpreted this language in Section
112.052 to mean that “the beneficiaries entitled to receive the trust assets upon
termination automatically have vested rights upon the termination event,” see
Kellner v. Kellner, 419 S.W.3d 541, 546 (Tex. App.—San Antonio 2013, pet.
denied), because upon termination, legal and equitable interests merge, and the
beneficiaries acquire full ownership interest in the property. See Sorrel, 1 S.W.3d at
871; Shearrer, 952 S.W.2d at 78; see also TEX. PROP. CODE § 112.034(b) (“[A] trust
terminates if the legal title to the trust property and all equitable interests in the trust
become united in one person.”). After termination, the trustee has only the very
limited authority given by statute, i.e., to “wind up the affairs of the trust and to make
distribution.” Sorrel, 1 S.W.3d at 871.
Under this law, after the Welch Family Trust C terminated on September 9,
2019, Herbig was permitted to continue to exercise his powers as trustee for a
reasonable time required to wind up the affairs of the trust and to make distribution
of its assets to the appropriate beneficiaries. See TEX. PROP. CODE § 112.052; Sorrel,
1 S.W.3d at 870. Herbig argues that because his powers as trustee included the power
22
to accept additional property or interests into the trust “at any time,” he was endowed
with that right beyond the termination of the trust. He asserts that winding up the
trust necessarily could include accepting the transfer of property. We disagree.
The opening paragraph of the WFT provides that it assigned to Richard and
Margaret “all property, real or personal, which we, or through the actions of our
attorneys-in-fact, or any other person may, at any time or from time to time, transfer,
add or cause to be added to this Trust, all of which, together with any income thereon,
is hereinafter called ‘Trust Property[.]’” Article II also provides that “[s]ubject to
acceptance by the Trustee, additional property or interests may be transferred or
assigned from time to time or at any time by any person . . . .” It is this language that
Herbig points to in support of his argument that he could continue to accept new
property into the trust even after termination. He contends that Jeanne, and the trial
court’s, construction of the WFT renders the “at any time” language meaningless.
But this language cited by Herbig presupposes that there is a trust in which to accept
property. If we were to adopt Herbig’s interpretation, this would mean that the
trustee could continue to accept new property into a trust even many years after the
termination event occurs, preventing the winding up of the trust indefinitely.
Furthermore, this language of the trust neither expressly permits, nor
prohibits, the trustee from accepting new property into the trust after termination.
Accordingly, as Herbig recognizes, where the language of the trust is silent, the
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provisions of the Trust Code govern. See TEX. PROP. CODE § 113.001; Myrick v.
Moody Nat’l Bank, 336 S.W.3d 795, 802 (Tex. App.—Houston [1st Dist.] 2011, no
pet.). As stated above, Section 112.052 permits a trustee to retain his powers after
termination “for the reasonable period of time required to wind up the affairs of the
trust and to make distribution of its assets to the appropriate beneficiaries.”
The cases cited by Herbig, wherein courts concluded that the trustee retained
various powers after termination to facilitate the winding up of the trust, involve
powers not at issue here. For instance, in Cogdell v. Fort Worth Nat’l Bank, 544
S.W.2d 825, 829 (Tex. App.—Eastland 1976, writ ref’d n.r.e.), the court held that,
notwithstanding the fact that a testamentary trust had ended, the trustee had the
authority to compromise and settle its claims against the executors of the estate as
part of the winding up of the trust. As is relevant here, the litigation that was the
subject of the settlement had been pending for several years before the trust
terminated. See id. at 826. Before the trust could be wound up and final distributions
made, litigation involving the trust would need to be resolved. See, e.g., Myrick v.
Enron Oil & Gas Co., 296 S.W.3d 724, 728 (Tex. App.—El Paso 2009, no pet.)
(concluding that pending litigation prevented trustee from “winding up” the affairs
of trust and making final distribution until after litigation concluded).
Like Cogdell, Myrick v. Enron Oil and Gas Company involved litigation that
prevented the winding up of a trust following termination. See 296 S.W.3d at 727–
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28. There, the court considered the question of whether the trustee of a trust had the
power to execute a lease after the occurrence of the termination event. The court
explained:
The pending Trust 25 litigation prevented Moody Bank from “winding
up” the affairs of Trust 25 and making a final distribution until after the
agreed judgment was entered on March 19, 1993. During the period
after the trust terminated and the conclusion of the Trust 25 litigation,
Moody Bank had a continuing duty to manage the trust estate and seek
the best possible result for the beneficiaries. In the Bank’s judgment,
that included completing the Crockett County Lease in order to take
advantage of the available tax credits. Given that the Crockett County
Lease had been negotiated and approved prior to the termination event,
we conclude that Moody Bank had the authority and duty to execute it.
Because the Crockett County Lease is valid, summary judgment in
favor of Moody Bank and EOG was appropriate.
Id. at 728. Particularly relevant there was the fact that the lease had been approved
prior to the termination event and there was pending litigation preventing the
winding up of the trust—both facts that are not present in this case.
In Myrick v. Moody National Bank, this Court held that the trustee was
authorized to enter into a lease on a ranch that was part of the trust property with
terms that extended beyond the termination of the trust. 336 S.W.3d at 803. This
Court’s analysis in Myrick v. Moody National Bank focused on the language of
Section 113.011, which specifically authorizes a trustee to execute a lease containing
terms or options that extend beyond the duration of the trust. Id. (citing TEX. PROP.
CODE § 113.011). This Court held that the trust’s provision providing for the
distribution of assets in the trust estate upon termination did not conflict with Section
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113.011, and therefore, the trustee had the power to enter into the lease. Id. Of note,
the ranch at issue had been a part of the trust property and subject to various leases
for decades. Id. at 798. Moreover, the trust at issue in Myrick v. Moody National
Bank had not yet terminated—the dispute was over whether a lease entered into
during the existence of the trust could carry over past termination, which would
occur at some point in the future. See id. at 797–98. This court therefore was not
dealing with the issue presented here, i.e., whether a trustee has the power to accept
entirely new trust property into a trust after termination.
Herbig contends that Jeanne’s interpretation would extinguish multiple other
powers granted to the trustee, other than the power to simply distribute assets,
including the ability to pay taxes, sell trust property, invest funds, control and
manage investments, lease trust properties, and more. Again, we disagree. As is clear
in Section 112.052 and the case law, a trustee retains his powers after termination to
the extent necessary to wind up the trust. TEX. PROP. CODE § 112.052; Sorrel, 1
S.W.3d at 871 (after termination, trustee has only limited authority given by statute
to “wind up the affairs of the trust and to make distribution”); Hall v. Rawls, 188
S.W.2d 807, 814 (Tex. Civ. App.—Beaumont 1945, writ ref’d w.o.m.) (explaining
that powers of trustee, except those relating to winding up of trust, terminate on
expiration of time during which parties intended trust to exist). To the extent that it
would be necessary to pay taxes, sell property to make distributions, manage
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investment, lease properties, and more, in order to facilitate the winding up of the
trust, our decision today should not be interpreted as prohibiting the exercise of those
powers depending on the circumstances. See, e.g., RESTATEMENT (3D) OF TRUSTS §
89 (2007) (cmt. c & d) (noting that “[d]uring the windup period the trustee has a
duty: to determine and satisfy trust obligations, including those to taxing
authorities[;] to ascertain the proper distributees and their shares, and plan and make
distribution accordingly[;] . . . to prepare and submit an accounting or report to the
court or the beneficiaries[;] . . . exercise such powers as are reasonable and
appropriate for the preservation of the trust property[;] . . . keep real property and
tangible personalty of the trust insured and in repair[;] . . . [and] keep trust property
productive”). But those issues are not before us today, and we do not equate the
acquisition of new trust property following the termination of the trust with the
exercise of a power necessary to the winding up of the trust.
Accordingly, we hold that the neither the express terms of the Welch family
Trust C, nor the Trust Code, authorized Herbig to accept the transfers of new
property into the trust following Richard’s death and the termination of the trust.
3. The conveyances to the Welch Family Trust C following
Richard’s death are void.
Herbig argues that Jeanne fails to cite any authority for the ultimate
proposition that the conveyance following Richard’s death are void. Although he is
correct that Jeanne does not point to any specific legal authority, she did argue in her
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summary judgment briefing that the transfers were void because “the trusts named
as grantee in these instruments ceased to exist immediately upon Richard C. Welch’s
death.” Texas courts have held that “‘a deed is void if the grantee is not in existence
at the time the deed is executed.’” Parham Family Ltd. P’ship v. Morgan, 434
S.W.3d 774, 787 (Tex. App.—Houston [14th Dist.] 2014, no pet.) (quoting
Lighthouse Church of Cloverleaf v. Tex. Bank, 889 S.W.2d 595, 600 (Tex. App.—
Houston [14th Dist.] 1994, writ denied)). Because we have concluded that the Welch
Family Trust C terminated upon Richard’s death, and that as trustee, Herbig did not
have the power to accept new property into the trust after termination, we hold that
this is sufficient to establish that the Welch Family Trust C no longer existed for the
purposes of receiving property as a grantee. See id. Accordingly, we hold that the
trial court correctly determined that the conveyances made by Jeanne on behalf of
the WMFT to the Welch Family Trust C after Richard’s death are void. Cf. Sorrel,
1 S.W.3d at 871 (holding trustees were acting outside authority in attempting to
convey trust property after termination and trial court correctly held that conveyance
void).
C. The portion of the trial court’s order voiding the conveyance to Welch
Family Trust B is void.
Although we have held that the trial court correctly concluded that the
conveyances to the Welch Family Trust C were void, we are compelled to separately
address the single conveyance made by Jeanne on behalf of the WMFT to the Welch
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Family Trust B. Only the Welch Family Trust C, through its trustee Herbig, was
made a party to this lawsuit. No other trust, including the Welch Family Trust B,
was a party to the proceedings below.
A trial court may not enter judgment against a party not before it. Mapco, Inc.
v. Carter, 817 S.W.2d 686, 686 (Tex. 1991) (per curiam). An order is void when a
court has no power or jurisdiction to enter it. Urbish v. 127th Jud. Dist. Ct., 708
S.W.2d 429, 431 (Tex. 1986); Tomlinson v. Khoury, 624 S.W.3d 601, 605–06 (Tex.
App.—Houston [1st Dist.] 2020, pet. denied). “‘It is axiomatic that a judgment must
be supported by a proper showing of jurisdiction over the subject matter and over
the relevant parties.’” Tomlinson, 624 S.W.3d at 605 (quoting Velasco v. Ayala, 312
S.W.3d 783, 797 (Tex. App.—Houston [1st Dist.] 2009, no pet.)). A court obtains
jurisdiction over a defendant through valid service of process or through the
defendant’s appearance. Mapco, 817 S.W.2d at 687 (citing TEX. R. CIV. P. 124) (“In
no case shall judgment be rendered against any defendant unless upon service, or
acceptance or waiver of process, or upon an appearance.”); Velasco, 312 S.W.3d at
798 (“Personal jurisdiction is comp[o]sed of two elements: (1) the defendant must
be amenable to the jurisdiction of the court and (2) the plaintiff must validly invoke
that jurisdiction by valid service of process on the defendant.”). And where a court
rendering judgment has no jurisdiction over the parties or property, that judgment is
void. In re D.S., 602 S.W.3d 504, 512 (Tex. 2020).
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Texas law is clear that in all suits “by or against a trustee and all proceedings
concerning trusts,” the trustee is a necessary party to the action. See TEX. PROP. CODE
§§ 115.001(a), 115.011(b)(4); Tomlinson, 624 S.W.3d at 608; see also Ray Malooly
Tr. v. Juhl, 186 S.W.3d 568, 570 (Tex. 2006) (“The general rule in Texas (and
elsewhere) has long been that suits against a trust must be brought against its legal
representative, the trustee.”); In re Estate of Webb, 266 S.W.3d 544, 548 (Tex.
App.—Fort Worth 2008, pet. denied) (“The Texas Trust Code provides that in an
action by or against a trustee and in all proceedings concerning trusts, the trustee is
a necessary party if a trustee is serving at the time the action is filed.” (quotation
omitted)). And where the trustee is not properly before the court as a result of service,
acceptance, waiver of process, or an appearance, Texas courts have invalidated
orders that grant relief against a trust. See, e.g., Tomlinson, 624 S.W.3d at 609–10
(holding trial court lacked jurisdiction over trust where party was before trial court
in individual capacity, not in his capacity as trustee, and vacating post-judgment
modified turnover orders that awarded relief against trust as void); In re Ashton, 266
S.W.3d 602, 604 (Tex. App.—Dallas 2008, orig. proceeding) (“[F]or relief to be
ordered against a trust, its trustee must be properly before the trial court as a result
of service, acceptance, or waiver of process, or an appearance.”).
Although neither party raises this issue, we, as an appellate court, lack
jurisdiction to consider the merits of an appeal from a void order; rather, we have
30
jurisdiction only to determine that the order or judgment underlying the appeal is
void and make appropriate orders based on that determination. Freedom Commc’ns,
Inc. v. Coronado, 372 S.W.3d 621, 623 (Tex. 2012). And we must consider our
jurisdiction, even if that consideration is sua sponte. Id. at 624.
As noted, Herbig was only a party to this lawsuit in his capacity as trustee for
the Welch Family Trust C. The record before us does not indicate that Herbig was
sued or made an appearance in his capacity as trustee for the Welch Family Trust B.
Yet it is clear from the trial court’s summary judgment order, which was
incorporated in the trial court’s final judgment, that it ordered relief against the
Welch Family Trust B by voiding the conveyance from the WMFT to that trust. The
trial court had no jurisdiction over the Welch Family Trust B, and we hold that the
portion of the trial court’s order voiding the conveyance to this trust is void for lack
of jurisdiction.
Conclusion
We vacate the portion of the trial court’s summary judgment order,
incorporated into the final judgment, that voided the Warranty Deed from grantor
Jeanne F. Welch a/k/a Jeanne F. Manry, Trustee of the Welch Manry Family Trust,
to grantee Lewis Sims, Successor Trustee of the Welch Family Trust B, dated
October 7, 2019, and filed in the Official Public Records of Blanco County, Texas
31
under File No. 193583. We affirm the remainder of the trial court’s final judgment
as herein modified.
Amparo Guerra
Justice
Panel consists of Justices Landau, Countiss, and Guerra.
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