Alpert v. Gerstner

• Decision Date: 31 August 2006
• Docket Number: No. 01-05-00418-CV.,01-05-00418-CV.
• Citation: 232 S.W.3d 117
• Parties: Roman Merker ALPERT and Renee Picazo, Next Friend of Daniel Alpert, Appellants, v. Karen S. GERSTNER, Individually and as Receiver for the Roman Merker Alpert Trust, the Daniel James Alpert Trust, and the Robert Alpert 1996 Children's Trust, and Davis Ridout Jones & Gerstner, L.L.P., Appellees.
• Court: Texas Court of Appeals

232 S.W.3d 117

Roman Merker ALPERT and Renee Picazo, Next Friend of Daniel Alpert, Appellants, v. Karen S. GERSTNER, Individually and as Receiver for the Roman Merker Alpert Trust, the Daniel James Alpert Trust, and the Robert Alpert 1996 Children's Trust, and Davis Ridout Jones & Gerstner, L.L.P., Appellees.

No. 01-05-00418-CV.

Court of Appeals of Texas, Houston (1st Dist.).

August 31, 2006.

Claudia Wilson Frost, J. Brett Busby, Mayer, Brown, Rowe & Maw LLP, Houston, for Appellant.

Joseph S. Horrigan, Horrigan & Goehrs, L.L.P., Robert Myrick Browning, Houston, for Appellee.

Panel consists of Justices JENNINGS, ALCALA, and PRICE.^*

OPINION

TERRY JENNINGS, Justice.

Appellants, Roman Merker Alpert and Renee Picazo, next friend of Daniel Alpert (collectively, "the beneficiaries"), challenge the trial court's rendition of summary judgment in favor of appellees, Karen S. Gerstner ("Gerstner"), individually and as receiver for the Roman Merker Alpert Trust, the Daniel James Alpert Trust, and the Robert Alpert 1996 Children's Trust (the "Trusts"), and Davis Ridout Jones & Gerstner, L.L.P. ("Davis Ridout"), in the beneficiaries' suit against Gerstner and Davis Ridout for breach of fiduciary duty. In three issues, the beneficiaries contend that the district court erred in ordering the case transferred to the statutory probate court and that the probate court erred in granting appellees' summary judgment motion on the grounds that their claims against Gerstner are barred by judicial immunity and that Davis Ridout did not owe them a fiduciary duty.

We reverse and remand the case for proceedings consistent with this opinion.

Factual and Procedural Background

The Alperts and Picazo are beneficiaries of three Trusts: the Roman Merker Alpert Trust, the Daniel James Alpert Trust, and the Robert Alpert 1996 Children's Trust. Prior to the filing of the instant suit, a dispute arose regarding who was the proper trustee of the Trusts. Mark Riley, a non-party to this appeal, filed suit in Harris County Statutory Probate Court Number 2 (referred to hereafter as "the underlying suit"), asserting that he was the trustee of the Trusts.¹ The beneficiaries intervened in the underlying suit, seeking either a declaration that Riley was not the trustee of the Trusts or an order removing Riley as trustee.

On January 14, 2000, pursuant to section 64.001 of the Texas Civil Practice and Remedies Code,² the probate court, on its own motion, appointed Gerstner as receiver for each of the Trusts "so that there will be no loss or material injury to the Trust[s] pending the determination of the proper trustee of the Trust[s] and the resolution of this suit."³ The orders appointing Gerstner provided:

. . . .

(iii) that [the Receiver] shall take charge and keep possession of all property of the Trust[s] in compliance with section 64.031 of the Texas Civil Practice & Remedies Code;

(iv) that, pursuant to section 64.031(5), the Receiver shall have the same powers and duties as a trustee appointed pursuant to the terms of the Indenture of Trust creating the Trust[s], specifically including, but not limited to, the power to invest the properties of the Trust[s], to sell properties of the Trust[s], to pay debts and expenses attributable to the Trust[s], to file income tax returns and, as appropriate, amended income tax returns for the Trust[s], to pay any and all taxes due with respect to the Trust[s], and to receive any and all tax refunds due the Trust[s];

(v) that the Receiver shall be entitled to exercise the powers of a trustee granted above without prior approval by this Court or any party to this litigation;

(vi) that the Receiver shall maintain appropriate books and records for the Trust[s] and shall provide periodic reports . . .;

(vii) that the Receiver shall, immediately upon qualification, have the right and power to take charge and keep possession of any property of the Trust[s], including, but not limited to, any property of the Trust[s] held in an account at any bank, brokerage firm, or other financial institution . . .;

. . . .

Shortly after appointing Gerstner, the probate court approved Gerstner's application to retain her law firm, Davis Ridout, "to assist the Receiver in the administration of her duties, and as a means to minimize the cost of [the Receiver's] services to the Trusts."

On July 25, 2003 and November 7, 2003, the probate court entered orders accepting Gerstner's resignation as receiver of the Trusts, subject to the court's approval of Gerstner's final accountings. Gerstner also requested a judicial discharge. The beneficiaries opposed Gerstner's requests on the grounds that the probate court did not have jurisdiction to rule on Gerstner's liability and that Gerstner acted in direct violation of the probate court's directives. The beneficiaries also objected to the fees sought by Gerstner and "the other professionals."

In May 2004, the beneficiaries filed in district court the instant suit against Gerstner and Davis Ridout for breach of fiduciary duty, alleging that "[d]uring the more than three years that Gerstner was receiver" for the Trusts and that "as a result of Gerstner's failure to take any action to protect the stock portfolio assets of the Trusts, including, but not limited to, her failure to seek and/or take advice regarding diversification of, purchasing and selling the stock portfolios or otherwise make any prudent changes in stock investments of the Trusts," the stock portfolios of the Trusts declined in value from approximately $600,000 to $13,000. They also alleged that Gerstner "breached her fiduciary duties resulting from her acceptance of her position as Receiver by failing to preserve and protect the assets of the Trusts" and "by failing to exercise the powers of a trustee as required by the order." Specifically, the beneficiaries alleged that Gerstner "failed to act prudently with respect to decisions regarding the merger of one of the companies owned by the Trusts," "failed to collect monies owed to the Trusts," and failed to provide the beneficiaries with quarterly reports.

In regard to Davis Ridout, the beneficiaries alleged that Davis Ridout "performed Receivership duties in conjunction with Gerstner" and failed to monitor Gerstner's activities. They also alleged that Davis Ridout, "as attorney for the Trusts, breached its fiduciary duties" to the beneficiaries "by failing to act with the utmost fairness and in good faith, failing to inform [the beneficiaries] of all material facts and provide full disclosure, charging the Trusts for unnecessary legal fees and failing to act with loyalty and good faith in controlling and monitoring the activities as Gerstner as Receiver."

In response to the petition filed in district court, appellees filed a motion to transfer venue, a plea in abatement, and an answer. In their motion to transfer venue, appellees stated that they reserved the right to seek transfer of the case to the statutory probate court based on local rules, Chapter 15 of the Texas Civil Practice & Remedies Code,⁴ and "other rules." In an amended plea in abatement, appellees requested that the district court "abate and dismiss [the beneficiaries'] suit against them because these claims should only be asserted within [the probate court]." Appellees asserted that abatement was mandatory because (1) the beneficiaries had not fulfilled a condition precedent in bringing their suit in that they had not obtained permission from the probate court to sue Gerstner in her individual capacity in the district court, and (2) the probate court had dominant jurisdiction over the claims asserted in the district court. Alternatively, appellees asserted that permissive abatement was appropriate based on concerns of "comity, convenience, and the necessity for orderly procedure in the trial of contested issues."

In their response to appellees' plea, the beneficiaries asserted that it was not necessary to obtain the permission of the probate court to sue Gerstner in district court and that the district court had dominant jurisdiction over the breach of fiduciary claim because it was filed first in that court. The district court never ruled on appellees' plea in abatement. Instead, on August 20, 2004, the district court entered an order transferring the case to the probate court. The district court's order did not explain the basis or the authority for the transfer and did not discuss any of the arguments presented in appellees' plea in abatement or in the beneficiaries' responses to the plea in abatement.

Following transfer, the lawsuit originally filed in district court appears to have proceeded on a "sub-docket" of the probate court. The record indicates that the probate court subsequently created a new cause number and assigned to that number "all claims brought by or against the receiver relating to the performance of her duties as the receiver or for fees and expenses of the receiver as well as any professional fees incurred on behalf of the receiver."

After the district court transferred the suit to the probate court, appellees filed a summary judgment motion in the probate court suit, contending that any claims asserted against Gerstner for actions taken by her as receiver for the Trusts were barred by judicial immunity. Appellees further contended that, to the extent the beneficiaries asserted that Davis Ridout acted as a receiver, judicial immunity also applied to bar those claims. Finally, appellees argued that any claims against Davis Ridout for breach of fiduciary duty failed as a matter of law because "no fiduciary duty existed." Appellees attached to their summary judgment motion the affidavit of Gerstner, in which she testified that the probate court appointed her as the receiver for the Trusts, that she served as the receiver until late 2003, that during this time "the [c]ourt, through [her], controlled the Trusts," that she "was granted authority by [the][c]ourt to hire...