In re Bumstead Family Irrevocable Tr.
| Decision Date | 10 March 2022 |
| Docket Number | 13-20-00350-CV |
| Parties | IN THE MATTER OF BUMSTEAD FAMILY IRREVOCABLE TRUST |
| Court | Texas Court of Appeals |
IN THE MATTER OF BUMSTEAD FAMILY IRREVOCABLE TRUST
No. 13-20-00350-CV
Court of Appeals of Texas, Thirteenth District, Corpus Christi-Edinburg
March 10, 2022
On appeal from the Probate Court No. 1 of Harris County, Texas.
Before Chief Justice Contreras and Justices Benavides and Longoria
MEMORANDUM OPINION
GINA M. BENAVIDES JUSTICE
This appeal arises from a dispute between the trustee of several trusts, Taylor C. Moss, and the beneficiaries of those trusts, Taylor's mother, Carol Bumstead Moss, and Taylor's aunts, Debra M. Holzworth and Kathryn Marcotte (the beneficiaries).[1] After an
evidentiary hearing, the trial court issued an order on July 20, 2020, in favor of the beneficiaries which, inter alia, granted a temporary injunction, ordered an accounting, appointed a receiver, and suspended Taylor as the trustee of the trusts.
Appellants, including Taylor in his individual capacity; Taylor as Trustee of the TCM Trust, Bumstead Living Trust, Bumstead Family Trust, Bumstead Survivor's Trust, and Sylvia M. Bumstead Revocable Trust, and Manager of Wolf Trot Properties, LLC and Wolf Trot Properties, LLC d/b/a Melia Investments, LLC; DeisoMoss, LLC; and DeisoMoss Property Management, LLC, have appealed this order by three issues through which they assert that the trial court erred by: (1) using mechanisms for temporary relief to disrupt the status quo and decide the merits of the underlying causes of action without due process; (2) relying on findings contradicted by conclusive evidence and supported by no evidence; and (3) ordering Taylor to provide an accounting requiring information outside of his knowledge and funds outside of his control.
We affirm in part and reverse and remand in part.
I. Introduction
In summary, this case involves three generations of the Bumstead family. Richard C. and Sylvia M. Bumstead, possessing a substantial estate, created several trusts and various business entities to hold and manage their assets. Richard and Sylvia's primary real estate assets included: (1) a 15-acre tract of land located at 14200 West Hardy Road, Houston, Texas (the Hardy Road Property); (2) a two-hundred-acre tract of property located at 2435 Wolf Road, Huffman, Texas (the Homestead); and (3) a 1, 437-acre tract of land located at 2435 Wolf Road, Huffman, Texas, excluding the Homestead (Wolf Road
Property).[2] The two main business entities that they created were Ridescka, Ltd. (Ridescka) and Wolf Trot Properties, LLC.[3]
Richard and Sylvia had three daughters: Debra, Kathryn, and Carol. Carol had two children: Taylor and Lindsay Moss. Richard passed away suddenly in 2012. As a result of his death, the structure and funding of the family's trusts changed. Taylor began assisting his grandmother Sylvia, who was in ill health, with the family properties. In 2013, Sylvia created the TCM Trust for Taylor and in 2014 allegedly transferred the Hardy Road Property to that trust. Neither Sylvia nor Taylor disclosed that transfer to Debra, Kathryn, or Carol. The beneficiaries dispute the validity of that transaction. When Taylor graduated from college in 2015, Taylor began residing with Sylvia at the Homestead. During this period, Sylvia and Taylor made several changes relative to the family trusts and entities which the beneficiaries allege were inconsistent with the terms of the family trusts and the foundational documentation for the family business entities. The beneficiaries were not involved in the decision-making processes or informed regarding the changes. Taylor began acting as trustee and managed the family's assets and businesses. In
approximately 2019, the beneficiaries discovered that Sylvia had transferred the Hardy Road Property to Taylor's trust. In 2019, Sylvia passed away. The beneficiaries sought information from Taylor regarding the family's assets but were unsatisfied with his responses and became concerned about his management of the family properties. The beneficiaries requested Taylor to fund the trusts that resulted from Sylvia's death; however, Taylor refused to do so in the absence of a release of liability.
On November 13, 2019, Debra, Kathryn, and Carol filed suit against appellants.[4] They sought declaratory relief, an accounting, the imposition of a constructive trust, the removal of Taylor as alleged trustee, and temporary injunctive relief. They alleged causes of action for fraud, breach of fiduciary duty, negligence, undue influence, trespass, conversion, and money had and received. This pleading and its exhibits span more than seven hundred pages of the clerk's record. On February 21, 2020, the beneficiaries filed a first amended petition reiterating the foregoing causes of action and including, inter alia, causes of action for statutory fraud and the breach of the duty of full disclosure.
On December 23, 2019, the beneficiaries filed a "Motion to Remove Trustee and Appoint Receiver, and Alternatively, Motion to Require Non-Corporate Trustee to Post Bond." On January 6, 2020, they filed an amended version of that motion. On April 21, 2020, the beneficiaries filed a supplement to their amended motion to remove trustee and appoint receiver, and alternatively, motion to require non-corporate trustee to post bond, and their application for a temporary injunction.
After appellants filed responsive pleadings, the trial court held hearings on these matters on May 4, 5, 11, 12, 13 and July 1, 2020. The trial court heard testimony from Kathryn; Taylor; attorney James C. Mulder, who worked with the Bumsteads on their legal affairs and estate planning for a span of twenty years; and attorney Mickey Davis, who assisted Sylvia and Taylor with estate planning matters thereafter.
On July 20, 2020, the trial court signed its "Order Suspending Powers of Trustee and Appointing Receiver." The order is thirty-one pages long and includes 180 separate enumerated paragraphs containing general findings, findings supporting interim relief, and findings supporting a probable right of recovery and probable imminent and irreparable harm.
The trial court concluded that Taylor failed to comply with his duty to disclose material facts; failed to comply with his duties to maintain trust and entity assets separately and not to co-mingle the assets of the various trusts, either with his own property or with other trusts or entities; "breached and/or may breach fiduciary duties"; provided inadequate, incomplete, and/or inaccurate accountings; breached his duty of self-dealing; breached his duty to account, and duty of loyalty. In short, the trial court assumed jurisdiction over the disputed assets, suspended Taylor's powers as trustee, appointed a receiver, Howard Reiner (Receiver), and issued injunctive relief prohibiting Taylor from interfering with the trusts, assets, and entities at issue, and requiring him to provide an accounting for each of the trusts.
This appeal ensued.[5] See Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(1), (a)(4) (permitting immediate appeal of an interlocutory order appointing a receiver or granting a temporary injunction).
II. Background
The events at issue span more than twenty years and encompass a labyrinthine and evolving family financial structure. The following provides a summation of the basic facts pertaining to the main issues in the lawsuit.
A. Richard and Sylvia
The Bumstead family built an "empire" in the construction business and amassed substantial personal assets. Upon retirement, Richard and Sylvia moved to their family ranch in Huffman, Texas. On October 13, 1998, with the assistance of attorney Mulder, [6] Richard and Sylvia created several entities for the purposes of managing their assets.
First, Richard and Sylvia created the Bumstead Living Trust (Living Trust) for which they served as both settlors and trustees. They funded the Living Trust with, among other things, personal effects and personal property, the Hardy Road Property, and the Homestead. The instrument establishing the Living Trust was extensive and addressed numerous matters, including trust administration, the death of a settlor, and other resulting trusts, including the Survivor's Trust, the Exempt and Nonexempt Marital Trusts, and the Family Trust.
Second, Richard and Sylvia created the Bumstead Family Irrevocable Trust (Family Trust) for the benefit of their daughters and descendants. Richard and Sylvia served as settlors and Debra, Kathryn, and Carol were designated as trustees.
Third, Richard and Sylvia created Ridescka with an "Agreement of Limited Partnership." The agreement stated that Ridescka's general partners were Richard and Sylvia in their individual capacities, while Ridescka's limited partners were Richard and Sylvia as trustees of the Living Trust and their daughters as trustees of the Family Trust. Richard and Sylvia also executed an "Appointment of Standby General Partners" for
Ridescka. Under the appointment: (1) if both Richard and Sylvia died, became incapacitated, or otherwise ceased to act as general partners of Ridescka, the beneficiaries were designated as Ridescka's general partners, and (2) if either Richard or Sylvia died, became incapacitated, or otherwise ceased to act as general partner, the general partner would be "the one of us who is living, not incapacitated, and desires to continue to act as [g]eneral [p]artner."
By separate warranty deeds, Richard and Sylvia conveyed to Ridescka: (1) a tract of approximately 439 acres of the Wolf Road Property (the Harris tract), and (2) a tract of approximately 999 acres of the Wolf Road Property (the Liberty tract). The transfer of realty to Ridescka excluded the Homestead. Kathryn testified that Ridescka is the "main family business."
In 2010, Richard and Sylvia formed Wolf Trot Properties, LLC to own and manage some of the Ridescka properties. As general partners of Ridescka, Richard and Sylvia transferred real...
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