Alpert v. Riley

• Decision Date: 23 October 2008
• Docket Number: No. 01-06-00605-CV.,No. 01-06-00505-CV.,01-06-00605-CV.,01-06-00505-CV.
• Citation: 274 S.W.3d 277
• Parties: Robert ALPERT, Roman Alpert, and Renee Picazo, Guardian of the Estate of Daniel Alpert, A Minor, Appellants, v. Mark RILEY, Individually and as Trustee, Appellee.
• Court: Texas Court of Appeals

274 S.W.3d 277

Robert ALPERT, Roman Alpert, and Renee Picazo, Guardian of the Estate of Daniel Alpert, A Minor, Appellants, v. Mark RILEY, Individually and as Trustee, Appellee.

No. 01-06-00605-CV.

No. 01-06-00505-CV.

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

October 23, 2008.

Rehearing Overruled January 15, 2009.

Bobbie G. Bayless, Bobbie Grace Bayless, Bayless & Stokes, Christopher Jene Richart, Jeffrey L. Oldham, Mayer, Brown, Rowe & Maw LLP, Claudia Wilson Frost, Pillsbury Winthrop Shaw Pittman LLP, J. Brett Busby, Bracewell & Giuliani LLP, Mark D. Manela, Mayer Brown LLP, Edward J. Hennessy, Hennessey, Gardner & Barth, Kristin N. Necessary, Melinda M. Riseden, C. Vance Christopher, Sharon B. Gardner, Crain, Caton & James, P.C., Houston, TX, Patricia D. White, Sandra Day O'Connor College of Law, Arizona State University, Tempe, AR, for Appellants.

David W. Holman, The Holman Law Firm, P.C., Houston, TX for Appellee.

Panel consists of Chief Justice RADACK and Justices JENNINGS and BLAND.

CORRECTED OPINION ON REHEARING

JANE BLAND, Justice.

The parties filed motions for rehearing, and Mark Riley also moved for rehearing en banc. We grant rehearing and withdraw our opinion and judgment of October 9, 2008 and issue the following in their stead.¹ Our disposition of the case remains unchanged.

In this trust management dispute involving three separate trusts, Roman Alpert and Renee Picazo, Guardian of the Estate of Daniel Alpert, a minor (collectively, the beneficiaries), appeal the trial court's judgment. Specifically, they contend that the trial court erred in granting summary judgment that Mark Riley, appellee, was trustee of the three trusts as a matter of law, and in denying their motion urging the opposite conclusion—that, as a matter of law, he was not. The beneficiaries also ask that we reverse the judgment for other reasons, asserting that the trial court erred in (1) disregarding the jury's finding that Riley breached his fiduciary duty; (2) confirming Riley's payment of attorney's fees and refusing to enter judgment against Riley for their attorney's fees; and (3) reappointing Riley as his own successor trustee.

Robert Alpert, the trusts' settlor and father of the beneficiaries, also appeals the trial court's judgment, which finds him liable for breach of fiduciary duty and awards over $4 million in damages and attorney's fees to Riley on behalf of the trusts, pursuant to the trial court and jury findings that Alpert breached his fiduciary duty to the beneficiaries. Alpert contends that, as settlor of the trusts, (1) he had no fiduciary duty to the trusts, and (2) Riley has no standing to sue him absent such a duty.

We conclude that (1) the trial court erred in declaring Riley to be trustee of the three trusts as a matter of law because fact issues exist as to his status as trustee for two of the trusts, and he is not a trustee of the third trust pursuant to the express terms of the trust instrument; (2) the judgment against Alpert for breach of fiduciary duty must be reversed because, under the terms of these trusts, the settlor owes no fiduciary obligation to the trust's beneficiaries and Riley, as trustee, has no standing to sue the parent of a trust beneficiary for breach of a parent's fiduciary duty to a minor child; (3) the trial court erred in disregarding the jury's verdict as to Riley's breach of fiduciary duty but, as the jury awarded no damages, the beneficiaries recover nothing on the jury verdict; (4) while a remand is appropriate after reinstatement of the verdict as to Riley's breach of fiduciary duty to consider the remedy of equitable disgorgement of trustee compensation, a remand is unnecessary here because Riley is not entitled to trustee compensation as a matter of law; and (5) the trial court's award of attorney's fees, and the denial of the beneficiaries' claim for fees, must be reversed and remanded for further proceedings, given our resolution of the merits.

Alpert and the beneficiaries also filed a separate appeal challenging the trial court's denial of their request that Riley post a security bond pending appeal.² Because the trial court's decision on the bond does not constitute a final judgment, we lack jurisdiction over that appeal and dismiss it for that reason, but consider its substance as a request for relief under the main appeal pursuant to Texas Rule of Appellate Procedure 24. TEX.R.APP. P. 24.4(a). As to the merits, we conclude that the trial court properly denied the request for a security bond and deny the requested relief.

Facts

In 1990, Alpert, as settlor, created the Roman Merker Alpert Trust (RAT) and the Daniel James Alpert Trust (DAT), to benefit each of his sons. Both trusts name Lisa D. Santos, M.D., as the original trustee, and, in identical language, empower Santos to appoint a successor trustee, who in turn would have the power and authority to appoint a successor or successors to himself, to take office as Trustee hereunder, and if more than one, singly, in the order named, upon such Trustee's ceasing to act hereunder.

The trusts further provide that, if Santos ceased to act as trustee and no trustee is appointed as provided, "the successor Trustee shall be Sandra Shulak," Robert's sister.

In 1996, Alpert created another trust for his children's benefit. That trust holds a minority interest in a company which in turn holds restricted shares of a public company that Alpert co-founded. The 1996 trust names Anna DiLieto as the original trustee. If the trustee position becomes vacant, "and a successor Trustee who is willing and able to serve" is not "otherwise provided for," the 1996 trust reserves to the grantor the power to appoint a successor trustee within thirty days. If the grantor fails to appoint a successor within the thirty-day period, the appointment power shifts to the trust beneficiaries or their guardian. The 1996 trust further provides that, "[a]ny successor Trustee, on executing an acknowledged acceptance of the trusteeship and upon receipt of those assets which are actually delivered to each successor Trustee by the prior Trustee, shall be vested without further act on the part of anyone with all of the estates, titles, rights, powers, duties, immunities and discretion granted to the prior Trustee."

Mark Riley is Alpert's former attorney, having assisted him from 1994 through 1998 in the administration of his business and legal affairs. Among other duties Riley acted as legal counsel to the three trusts, as well as to various businesses in which Alpert had an interest.

The parties vigorously contest whether Riley was properly appointed as trustee of the RAT and DAT. Among other evidence, the record contains

• Letters from successor trustee Barbara Nussbaum Carmichael to Alpert dated August 1, 1997, tendering her resignation as trustee of the RAT and DAT and appointing Riley as trustee³ of those trusts;

• Testimony from Alpert and an affidavit from Carmichael stating that Carmichael's employer informed them that Carmichael had to stop acting as trustee of the RAT and DAT as of September 9, 1996; and

• A July 1997 wire transfer request signed by Carmichael as trustee of the RAT and DAT.

The parties likewise clash over whether Riley was properly appointed trustee of the 1996 trust. Salient evidence concerning this dispute includes

• An April 3, 1997 letter from DiLieto resigning as trustee of 1996 Trust effective immediately, without naming a successor; and

• A letter dated April 3, 1997 from Riley to Alpert purporting to accept designation as trustee to the 1996 Children's Trust.⁴

The relationship between Alpert and Riley soured in 1998, and Riley's professional dealings with Alpert ended. By that time, Riley came to believe that Alpert had sold his own stocks to trigger a tax loss, and then caused the RAT and DAT to buy those same stocks, which allegedly resulted in the overpayment of taxes by the trusts. Without Alpert's knowledge and without notifying the beneficiaries, Riley approached the Internal Revenue Service with information and records relating to those transactions and became an informant against Alpert and the trusts.

The IRS did not pursue charges against Alpert, but Riley, purporting to be trustee of the RAT and DAT, sued Alpert to recover the tax overpayments, based on the theory that Alpert had breached fiduciary duties he owed to the beneficiaries. The beneficiaries intervened in the suit, seeking a declaration that Riley was not trustee of the RAT or DAT or, alternatively, an order removing him as trustee for breach of fiduciary duties.

After Riley allegedly intercepted a tax refund check issued to the 1996 trust, its putative trustee initiated a separate suit, seeking a declaration that Riley was not trustee of the 1996 trust. The trial court consolidated that suit with the previously filed suit involving the RAT and DAT.

On April 11, 2003, the beneficiaries moved to dismiss with prejudice all claims brought by Riley on their behalf against Alpert in this suit. The beneficiaries renewed this request in September 2003 and again in March 2005, and reiterated their wish that Riley discontinue this lawsuit.

Trial Court Proceedings

The parties filed cross-motions for summary judgment addressing whether Riley was the properly appointed trustee of the three trusts. The trial court granted Riley's motion for summary judgment against the beneficiaries as to the RAT and DAT, determining as a matter of law that Riley was properly appointed trustee and had properly served as trustee of those trusts since August 1, 1997. With respect to the 1996 trust, the trial court initially denied summary judgment, but reconsidered that decision at the pretrial hearing and ruled that Riley also had been properly appointed trustee of the 1996 trust as a matter of law. The trial court incorporated its rulings on all three trusts into its charge to the jury. The jury found that Riley breached his fiduciary duty...