Bank of Texas, N.A., Trustee v. Mexia

• Decision Date: 05 May 2004
• Docket Number: No. 05-03-00347-CV.,05-03-00347-CV.
• Parties: BANK OF TEXAS, N.A., TRUSTEE, Appellant, v. Steve MEXIA, Guardian, Appellee.
• Court: Texas Court of Appeals

135 S.W.3d 356

BANK OF TEXAS, N.A., TRUSTEE, Appellant, v. Steve MEXIA, Guardian, Appellee.

No. 05-03-00347-CV.

Court of Appeals of Texas, Dallas.

May 5, 2004.

T. Scott Smith, Smith and Smith, Sherman, for Appellant.

David M. Stagner, Stagner & Corley, Sherman, for Appellee.

Before Justices WHITTINGTON, LANG, and LANG-MIERS.

OPINION

Opinion by Justice LANG.

Bank of Texas, N.A., Trustee, challenges the order terminating the Lucas Michael Swenson Management Trust. In its first three issues, the Trustee contends that the trial judge was constitutionally disqualified because of a conflict of interest between the judge and counsel for the Guardian and that the trial judge should have been recused pursuant to rule of civil procedure 18(b)(2)(a) because of bias and interest. In issues four through seven, the Trustee contends the trial court violated the Trustee's due process rights to citation, notice trial by jury, and to call witnesses. In its eighth issue, the Trustee challenges the legal and factual sufficiency of the evidence supporting the trial court's decision to terminate the Trust because the standard for termination of a management trust was not met. For the reasons below, we resolve the Trustee's issues against it and affirm the trial court's judgment.

FACTUAL AND PROCEDURAL BACKGROUND

Lucas Swenson is a minor and a ward of the court in this cause number. Swenson stood to receive a settlement in an amount in excess of $1.5 million from litigation. In January 2002, the County Court at Law No. 1, sitting in probate, found that Swenson's best interest was served by creating a guardianship management trust for Swenson, created the trust by order, and named Bank of Texas, N.A., as the Trustee. Approximately one-half of the trust corpus was invested in the Trustee's proprietary mutual funds, which are mutual funds in which the Trustee or its affiliates have some interest. The Trustee's investment in proprietary funds was disclosed to the Guardian, Swenson's grandfather, in March 2002. On November 21, 2002, the Guardian filed an application for termination of the management trust.

The Guardian's counsel hand delivered to the Trustee an order signed by the trial court on November 21, 2002, setting a hearing on November 27, 2002, on the Guardian's application. The Trustee filed motions to quash and for continuance and a request for citation pursuant to rule 33(d) of the probate code, among other pleadings. On November 27 and December 2, the trial court took up the Trustee's motions to quash and for continuance, but made no rulings. A four-day hearing was held beginning December 10, 2002. On December 12, the Trustee filed a second motion for continuance or, alternatively, for recess, in which it discussed its attempt to secure an independent expert witness on investment strategies. The trial court orally denied the motion. As to the merits of the application, the trial court specifically found that the Trustee's proprietary mutual funds failed to match the performance of the benchmark mutual funds set forth in the prospectus for each respective fund; at least one of the Trustee's proprietary mutual funds was rated two out of possible five by Morning Star; and, during administration of the trust, the trust had lost approximately $300,000, as of the date of the hearing. The trial court found that termination of the management trust was in Swenson's best interest. On December 23, 2002, the trial court signed an order terminating the management trust.

The Trustee filed a motion for new trial. After the motion was filed, a newly elected trial judge succeeded the judge that presided over the hearing. Subsequently, the Trustee filed a supplemental motion for new trial, in which the Trustee argued that the judge who heard the proceedings was represented by counsel for the Guardian in another civil suit and should have been recused. The trial court heard both motions and denied them by written order. Findings of fact and conclusions of law were requested and filed. This appeal timely followed.

DISQUALIFICATION/RECUSAL

In issues one through three, the Trustee contends that the trial judge was subject to disqualification and recusal because of a conflict. In its supplemental motion for new trial, the Trustee argued that the trial judge should have been recused because of the attorney/client relationship between the trial judge and counsel for the Guardian. The successor judge, who heard the motions for new trial, specifically found that the counsel for the Guardian represented the judge who heard these proceedings in civil litigation in Tarrant County. The Guardian acknowledges that the conflict should have been disclosed, but argues that, pursuant to Moritz v. Preiss, 121 S.W.3d 715 (Tex.2003), the Trustee failed to preserve its recusal issue for review. On appeal, the Trustee argues for the first time that the trial judge is disqualified pursuant to article V, section 11 of the Texas Constitution because of interest and bias arising from the undisclosed conflict. The Guardian responds that representation by the Guardian's counsel of the presiding judge is not grounds for constitutional disqualification.

In Moritz, Preiss timely filed a motion for new trial alleging juror misconduct. More than thirty days after the trial court signed the final judgment, Preiss filed an amended motion for new trial, alleging another juror was disqualified. The supreme court reviewed the rules of civil procedure and case law regarding the time for filing an amended motion for new trial. Id. at 719-20. Specifically relying on rules 5, 329b(b), and 329b(e), the supreme court said that these rules, read together, "demonstrate that an amended motion for new trial filed more than thirty days after the trial court signs a final judgment is untimely." Id. at 720 (citing TEX. Rs. CIV. P. 5 (court may not enlarge period for taking any action under rules relating to new trials except as rules allow); 329b(b) (party may file an amended motion for new trial without leave of court before any earlier motion for new trial is overruled and within thirty days after judgment); 329b(e) (if party timely files a motion for new trial, trial court's plenary power extends an additional thirty days after the motion is overruled; during that time, court may grant new trial, or vacate, modify, correct, or reform judgment)). The court summarized the purpose of an untimely motion or amended motion for new trial as follows:

If the trial court ignores the tardy motion, it is ineffectual for any purpose. The court, however, may look to the motion for guidance in the exercise of its inherent power and acting before its plenary power has expired, may grant a new trial; but if the court denies a new trial, the belated motion is a nullity and supplies no basis for consideration upon appeal of grounds which were required to be set forth in a timely motion.

Id. (citing Kalteyer v. Sneed, 837 S.W.2d 848, 851 (Tex.App.-Austin 1992, no writ)).

Here, the trial court signed the order terminating the management trust on December 23, 2002. This order is final and appealable. See TEX. PROB.CODE ANN. § 5(g) (Vernon Supp.1994); Huston v. FDIC, 800 S.W.2d 845, 848 (Tex.1990) ("A probate order or judgment is final if it conclusively disposes of and is decisive of the issue or controverted question for which that particular part of the proceeding was brought, even if the decision does not fully and finally dispose of the entire probate proceeding."). The Trustee's motion for new trial was timely filed on December 26, 2002. See TEX.R. CIV. P. 329b(a) ("A motion for new trial, if filed, shall be filed prior to or within thirty days after the judgment or other order complained of is signed."). The Trustee's supplemental motion for new trial urging recusal was filed March 6, 2003, the seventythird day after the final judgment. Accordingly, this motion was untimely. See TEX.R. CIV. P. 329b(b). The trial court denied the motion. Recusal may be waived if not raised by proper motion. In re Union Pac. Res. Co., 969 S.W.2d 427, 428 (Tex.1998) (orig.proceeding). Pursuant to Moritz, the supplemental motion for new trial urging recusal was untimely, is a nullity, and does not preserve any issue for review. See Moritz, 121 S.W.3d at 720.

At oral argument, the Trustee argued that Moritz was a substantive change in the rules that may not be applied retroactively. See Baker Hughes, Inc. v. Keco R. & D., Inc., 12 S.W.3d 1, 4-5 (Tex.1999) (stating rule that "court decisions apply retroactively" except when establishing new principle of law; if prospective or retroactive application of rule will further or retard its operation through examination of history, purpose, and effect of rule; and where retroactive application could produce substantial inequitable results). However, Moritz cited the rules of civil procedure and case law interpreting the rules, determined the meaning of the rules, and applied those rules to the facts of that case. Accordingly, we reject the Trustee's argument that Moritz was a rules change that may not be applied retroactively.

Additionally, the Trustee claims that rule of civil procedure 18a regarding recusal does not apply in this circumstance because the Trustee could not file a motion to recuse, when the conflict was not disclosed and the Trustee did not discover the conflict until after the former judge's term of office expired. The Trustee relies on concurrences in Sun Exploration & Production Co. v. Jackson, 783 S.W.2d 202 (Tex.1989). In that case, the trial judge was a first cousin of the defendants' attorney and was related in the fourth degree to each defendant. Id. at 205 (Spears, J., concurring). In his concurrence in that case, Justice Spears opined that rule of civil procedure 18a, which permits a party to file a motion to recuse or disqualify ten days before trial, does not contemplate a situation in which a party did not know of a judge's...