Texas State Bank v. Amaro

• Decision Date: 26 September 2002
• Docket Number: No. 00-1220.,00-1220.
• Citation: 87 S.W.3d 538
• Parties: TEXAS STATE BANK, Petitioner, v. Rutilo Vargas AMARO, Respondent.
• Court: Texas Supreme Court

87 S.W.3d 538

TEXAS STATE BANK, Petitioner, v. Rutilo Vargas AMARO, Respondent.

No. 00-1220.

Supreme Court of Texas.

Argued October 3, 2001.

Decided September 26, 2002.

Lisa Powell, Gary Gurwitz, Sofia Amabel Ramon, Atlas & Hall, McAllen, for petitioner.

Benjamin L. Hall, III, Elizabeth B. Hawkins, Hall Law Firm, Russell S. Post, Hogan Dubose & Townsend, Jennifer Bruch Hogan, Hogan Dubose & Townsend, L.L.P., John K. Leach, O'Quinn Laminack & Pirtle, Houston, for respondent.

Justice RODRIGUEZ delivered the opinion of the Court.

We overrule Texas State Bank's and Rutilo Vargas Amaro's motions for rehearing. We withdraw our opinion of June 6, 2002, and substitute the following in its place.

In this appeal from a modification of a district court's order, Texas State Bank (TSB) asks this Court to reinstate those parts of the district court's order the court of appeals reversed. The issues here are whether the district court had continuing jurisdiction over a trust it created under Chapter 142 of the Texas Trust Code, and whether the district court's order went beyond the relief TSB's motion requested. Because the district court did have continuing jurisdiction over the trust but the district court's judgment exceeded the relief TSB's motion requested, we reinstate only a part of the order and affirm the court of appeals' judgment, as modified.

I.

Rutilo Vargas Amaro (Vargas)¹ suffered severe injuries in a sugarcane field burn-off. He sued the field's owners, Rio Grande Valley Sugar Growers, Inc. (Sugar Growers), for negligence in the 206th district court and received a substantial settlement. In 1989, the district court adjudged Vargas incapacitated as defined by section 142.007 of the Texas Property Code, and, on Vargas's guardian's motion, the court created a trust for him under section 142.005 of the Code. The trust document provided that the trust would terminate when Vargas regained capacity, and the district court's decree stated that the trust would "take effect immediately to remain in full force and effect until further orders of this Court." TSB served as trustee during the trust's nine-year existence.

In May 1997, Vargas filed a "Motion for Termination of Trust" in the 206th district court, alleging that he had regained capacity. In September 1997, before the 206th district court had ruled on Vargas's motion, the 370th District Court of Hidalgo County issued an order in Vargas's uncontested divorce action decreeing that Vargas was fully capable of acting as sole managing conservator for his minor child and suffered no incapacity. Five days after the 370th district court issued its order, Vargas filed a motion with the 206th district court to withdraw his request to terminate the trust and, the following day, he filed a notice of nonsuit in the 206th district court. Vargas then sent a letter to TSB, demanding that TSB release the trust funds due to the divorce court's adjudication of his regained capacity. In the letter, Vargas threatened TSB with legal action if TSB did not promptly comply with the request.

TSB responded by tendering the trust funds to the 206th district court and filing a "Motion Regarding the Rutilo Vargas Amaro Trust for Declaratory Judgment and for Other Relief' under the caption of the original personal-injury suit between Vargas and Sugar Growers. In this motion, filed September 18, 1997, TSB asked the court: (1) to determine if the trust was terminated because of Vargas's regained capacity; (2) to allow TSB to resign as trustee and to appoint a substitute trustee in case the trust was not terminated; (3) to "approve final accountings to be submitted to the Court;" and (4) to order any "other and further relief, at law or in equity, to which TSB may be justly entitled." TSB alleged jurisdiction under Chapter 142 of the Texas Property Code, the Texas Uniform Declaratory Judgments Act,² and section 115.001 of the Texas Trust Code.³

On October 6, Vargas filed a plea to the jurisdiction arguing that the 206th district court did not have continuing jurisdiction over the trust, and that the 370th district court had jurisdiction to determine Vargas's capacity. At the same time, he filed a "Notice of Determination of Capacity" with the 206th district court, informing the court that the 370th district court had found capacity. Vargas argued that the trust had terminated by its own terms when the 370th district court ruled that Vargas was not incapacitated.

Vargas then filed a new suit against TSB in the 93rd District Court, also in Hidalgo County. This suit alleged that TSB had committed fraud, breach of fiduciary duty, negligence, breach of the duty of good faith and fair dealing, breach of contract, and DTPA violations in administering the trust. Some of TSB's alleged misconduct, according to Vargas, had to do with improper and imprudent investment decisions, failing to keep Vargas fully informed of trust decisions, and failing to keep proper records regarding the trust. This suit is still pending and discovery is proceeding.

On November 25, 1997, the 206th district court denied Vargas's plea to the jurisdiction and claimed jurisdiction "to any matter pertaining to the assets of Mr. Rutilo Vargas as it relates to matters of his Trust." On February 26, 1998, Vargas filed a "Supplemental Notice of Determination of Capacity and Request for Release of Monies Owed to Rutilo Vargas Amaro" and scheduled a hearing for March 11, 1998. Through a letter to the court coordinator, sent six days before the hearing date, TSB gave notice that it was also scheduling a hearing on its "Motion Regarding the Rutilo Vargas Amaro Trust for Declaratory Judgment and for Other Relief." Vargas objected to TSB's request to have the 206th district court "make final legal determinations," arguing that the notice requirements of Texas Rule of Civil Procedure 245 were not met.

The 206th district court held hearings on both parties' motions and, on March 17, issued an "Order Terminating Trust, Approving Trust Administration, Investment Philosophy, Accounting, Actions and Fees, and Discharging Trustee Relating to the Rutilo Vargas Amaro Trust." In this order, the court terminated the trust due to Vargas's regained capacity and approved all accountings TSB presented, including all distributions TSB made, all fees TSB received, and all fees, costs, and expenses TSB paid. In addition, the court approved TSB's investment philosophy and ordered that "[s]ubject to the payment to Vargas ... as directed above, the Court discharges TSB as trustee and releases TSB as trustee from any liability to the Trust or to Vargas."

Vargas appealed, complaining that the 206th district court erred in absolving TSB of liability for its handling of the trust. Vargas argued that the Declaratory Judgments Act could not expand the district court's jurisdiction over the trust to allow it to adjudicate Vargas's tort claims against TSB. The court of appeals agreed, and modified the district court's judgment by reversing those parts of the district court's order: (1) approving all distributions, fees, costs, and expenses TSB paid, except for the fees, costs, and expenses relating to the trust's termination; (2) approving TSB's investment philosophy; and (3) absolving TSB from any liability to Vargas or the Vargas trust. 28 S.W.3d at 796.

TSB filed a petition for review, asking this Court to resolve four issues: 1) Did the 206th district court exercise continuing jurisdiction over the Chapter 142 trust that it created, and thus have jurisdiction to issue its declaratory judgment in connection with the trust, related issues, and parties? 2) Did the 206th district court have jurisdiction to and properly approve the investment philosophy, distributions, and expenses of the trustee of the Vargas trust, to discharge the trustee from liability, and to issue its declaratory relief? 3) Did Vargas waive his argument concerning the proper scope of declaratory relief by failing to make the argument to the district court? and, 4) Did Vargas waive his arguments by accepting payment under the judgment?

Vargas counters by asking this Court to consider cross-points that would preclude reinstatement of those parts of the 206th district court's judgment reversed by the court of appeals. Specifically, Vargas urges that the district court erred in rendering judgment for TSB when Vargas was not given the required forty-five days notice of trial under Rule 245 of the Texas Rules of Civil Procedure, and, alternatively, the district court erred in rendering judgment for TSB even though Vargas was denied his right to a jury trial.

II.

We first consider the district court's jurisdiction over a trust created under Texas Property Code section 142.005. By filing a motion under the caption of the original Sugar Growers personal-injury suit, TSB invoked the 206th district court's continuing jurisdiction over the trust created in that suit. TSB's motion specifically requested the 206th district court to determine whether the trust was terminated due to Vargas's regained capacity, to allow TSB to resign if the trust was not terminated, and to approve TSB's final accounting of the trust.

Chapter 142 provides that the trust will continue until terminated or revoked, and allows the court to amend, modify, or revoke the trust at any time before its termination. TEX. PROP.CODE § 142.005(d),(f). The 206th district court's decree creating the trust stated that the trust would "take effect immediately to remain in full force and effect until further orders of this court." And the trust document itself provides that the "Court shall retain the right at any time before the termination of this trust to amend, alter, modify, or revoke this trust." Taken together, these documents invoke the 206th district court's continuing jurisdiction over the trust under Chapter 142. Therefore, the 206th district court had continuing jurisdiction over the Vargas trust until such time...