Barrientos v. Nava

• Decision Date: 05 December 2002
• Docket Number: No. 14-01-00459-CV.,14-01-00459-CV.
• Citation: 94 S.W.3d 270
• Parties: Barbara Nava BARRIENTOS, Appellant, v. Josie Moreno NAVA, Appellee.
• Court: Texas Court of Appeals

94 S.W.3d 270

Barbara Nava BARRIENTOS, Appellant, v. Josie Moreno NAVA, Appellee.

No. 14-01-00459-CV.

Court of Appeals of Texas, Houston (14th Dist.).

December 5, 2002.

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Eileen F. O'Neill, Houston, for appellant.

Sally S. Andrews, Houston, for appellee.

Panel consists of Justices HUDSON, FOWLER, and MURPHY.^*

OPINION

WANDA McKEE FOWLER, Justice.

This is a dispute about money and who will control the money. The money was from two accounts owned by Reno Nava: a retirement account and a life insurance policy. When Reno died, his ex-wife, Josie, wanted control of these funds to replace child support Reno was supposed to — but did not — provide for the children. Reno's sister, Barbara, claimed that Reno made her trustee of these funds for his two children and that she should control them. Barbara appeals from a judgment in which the family law judge held that she could no longer control the funds and made Josie trustee over the funds. In this appeal, we address three broad issues. First, we consider whether the family court had jurisdiction over the subject matter, parties, and property. Second, we discuss three trust issues: (a) whether Reno created trusts over these two accounts, (b) whether Barbara was properly removed as trustee, and (c) whether Josie was properly substituted as trustee. Third, we weigh Barbara's claim that the trial court was improperly biased. We find that (1) the court had jurisdiction over the initial support issues brought before it and that it had jurisdiction as a district court over the additional party and property brought before it, (2) Reno Nava did create trusts and that Barbara was properly removed as trustee and Josie properly substituted, and (3) the court was not improperly biased. Consequently, we affirm the judgment of the court, with some modifications.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. FACTUAL BACKGROUND

Josie and Barbara are former sisters-in-law. Josie was married to Barbara's brother, Reno Nava. Josie and Reno had two children, Tyler and Brooke. In 1995, Josie and Reno were divorced. At the time of the divorce, Reno had a $50,000 insurance policy with the Knights of Columbus (the "KOC" policy). The final divorce decree obligated Reno to pay Josie child support for the children and to maintain, as additional child support, the $50,000 KOC life insurance policy, naming the children as beneficiaries and Josie as trustee.¹

Reno did not comply with the decree's order to name his children beneficiaries of the KOC policy; instead, he named his mother, Margaret Nava, and his father as the beneficiaries. Josie was unaware of this. It was her understanding that Reno "had taken care of the matter." She was also reassured by a copy of a 1993 designation form naming her and Tyler as beneficiaries of the KOC policy.

In addition to the KOC policy, Reno had retirement benefits with the Texas County and District Retirement System (the "TCDRS annuity"). Although the record does not include the specific order, the divorce decree undisputedly provided that Reno retained 100% of those benefits after the divorce. After the divorce, Reno also acquired a $15,000 life insurance policy with Blue Cross/Blue Shield (the "BCBS policy").

The designation forms for both the TCDRS annuity and the BCBS policy named Reno's sister Barbara as "trustee" for the beneficiaries, Tyler and Brooke.

In August of 1997, Reno died of brain cancer. Several days after his funeral, a KOC insurance agent met with Reno's sister, Barbara, and his mother, Margaret, at a restaurant. There, Barbara learned that Margaret was designated as a beneficiary of the KOC policy proceeds. In fact, during the meeting, Margaret filled out a form to claim the proceeds. The KOC policy proceeds were paid to Margaret in September,² and she quickly spent most of the money on herself.

After Reno's death, Josie and Barbara spoke frequently over the phone about the TCDRS annuity, worth approximately $20,000, and the BCBS policy. Because Barbara was handling those funds, Josie assumed Barbara was also handling the KOC policy.

Josie did not learn that Margaret was designated as the beneficiary of the KOC policy until early December 1997. When Josie specifically asked Barbara about the policy, Barbara stated only that Josie would have to speak to Margaret about it. Barbara did not tell Josie about the meeting with the KOC agent or that Margaret had claimed the benefits. Shortly thereafter, Josie discovered that Margaret had already spent half of the money. At a Christmas party Barbara hosted for Tyler and Brooke, Josie showed Barbara the divorce decree and told her, Margaret, and another sister of Reno's, Janet, that she believed the $50,000 belonged to the children. Margaret and the sister then left, and Josie and Barbara agreed that Barbara would be the "mediator" to resolve the matter and obtain the return of the children's money. However, when Josie telephoned Barbara in the weeks following the party, Barbara told her that she was unable to contact Margaret. Barbara then dropped the matter, and made no further effort to assist Josie.

Unable to resolve the matter through Barbara, Josie sued Margaret to recover the KOC policy benefits. Josie later added Barbara and her sister, Janet, as defendants. By the time the remaining benefits were located, only $10,000 was left. Josie eventually settled with Margaret and Janet, and proceeded to trial against Barbara.

B. PROCEDURAL HISTORY

The case was tried to the court without a jury. At trial, Josie argued that Reno attempted to designate Barbara as "trustee" for the children on the BCBS policy and the TCDRS annuity, but that he was unsuccessful and did not create valid trusts. She claimed she was entitled to the funds as equitable relief to replace the loss of the $50,000 KOC policy that was intended to be additional child support. In the alternative, she argued that Barbara should be removed as trustee because she was not competent to manage the trust funds, and she had acted with such hostility toward Josie that it interfered with her ability to properly perform her duties as trustee.

C. THE JUDGMENT AND FINDINGS OF FACT

The trial court ruled in favor of Josie, and entered a judgment ordering that "[w]hatever the legal status of the alleged trust[s] may be," Barbara be removed as trustee and all proceeds of the BCBS and TCDRS funds be delivered to Josie as trustee for the minor children, Tyler and Brooke. The judgment also recited that "[t]here is evidence before the Court that Barbara Nava Barrientos ... has dealt in hostility and bad faith."

The trial court also issued numerous findings of fact and conclusions of law. The relevant findings of fact are summarized as follows: (1) according to the divorce decree, Josie was entitled to receive the proceeds of the KOC policy as child support and be named "trustee for the benefit of the children"; (2) in failing to change the beneficiary on the KOC policy, Reno did not comply with the divorce decree, and, moreover, he falsely represented to Josie that he had changed the beneficiary designation; (3) Reno made the false representations to deceive Josie and prevent her from applying to the court for enforcement of the divorce decree's requirement that the beneficiary be changed; (4) Barbara participated in a restaurant meeting with the Knights of Columbus insurance agent and knew there was an issue regarding the beneficiary designation; (5) Barbara "deliberately misled Josie" about the KOC policy while Margaret spent all but $10,000 of the proceeds, and was part of the fraud against Josie; (6) at the time of Reno's death, the beneficiaries of the BCBS and TCDRS funds were the minor children, Tyler and Brooke Nava, with Barbara as trustee of the funds for their benefit, (7) Barbara "made no reasonably prudent decisions" about investing the proceeds, was unable to state how she would invest the proceeds, showed no ability to administer the proceeds to the best interests of the children, and showed a lack of appropriate investment knowledge; and, lastly, (8) Josie was "business-like," had knowledge of appropriate investments, and generally had demonstrated her capability to invest the monies on behalf of the children.

The trial court also found that "Josie Moreno Nava has not shown hostility to Barbara Nava Barrientos, but Barbara Nava Barrientos has shown such hostility that (a) Barbara Nava Barrientos' administrative plans (or lack thereof) for the [BCBS policy and the TCDRS annuity] have been affected, and (b) Barbara Nava Barrientos has not been able to think and act as a fiduciary should ...." Accordingly, the trial court found that it was in the best interests of the children that Barbara be removed as trustee and Josie receive the BCBS and TCDRS funds directly as trustee for the minor children.

In accordance with additional findings that there were no definite trust terms, the trial court also entered conclusions of law that Reno's designation of Barbara as "trustee" of the BCBS and TCDRS funds was not sufficient to create a trust, the trust failed for lack of definiteness, and the funds were not trust funds. However, the court also concluded it had the equitable power and authority to remove Barbara as trustee and name Josie as trustee, in order to partially compensate Josie for the loss of the KOC policy proceeds and put her and the children in "as close a position as possible to where they would have been" had Reno complied with the court's divorce decree regarding the KOC policy.

This appeal followed.

. ISSUES RAISED ON APPEAL

Barbara raises thirty-four issues on appeal. They fall into three categories: jurisdictional issues, trust issues, and improper bias of the trial court.

The overarching jurisdictional claim involves both an attack on the court's subject matter and in personam jurisdiction, and a claim that the court could not take any action regarding...