Kelley Ann O'Shea, Individually and as Co-Trustee of the Marital Deduction Trust and Family Trust of John Joseph Connor O'Shea v. Kathleen M. O'Shea, Individually & as Co-Executor of the Estate of Rita O'Shea, Co-Trustee of the Marital Deduction Trust and Family Trust of John J.C. O'Shea, Jr. and Manager/Director of Brehon LC ( 2018 )

In The
Court of Appeals
Seventh District of Texas at Amarillo
________________________
No. 07-16-00321-CV
________________________
KELLY ANN O’SHEA, INDIVIDUALLY AND AS CO-TRUSTEE
OF THE MARITAL DEDUCTION TRUST AND FAMILY TRUST
OF JOHN JOSEPH CONNOR O’SHEA, APPELLANT
V.
KATHLEEN M. O’SHEA, INDIVIDUALLY AND AS CO-EXECUTOR OF THE ESTATE
OF RITA O’SHEA, CO-TRUSTEE OF THE MARITAL DEDUCTION TRUST AND
FAMILY TRUST OF JOHN J.C. O’SHEA, JR., & MANAGER/DIRECTOR OF BREHON
LC, BRIAN CONNOR O’SHEA, INDIVUDUALLY AND AS CO-EXECUTOR OF THE
ESTATE OF RITA O’SHEA, CO-TRUSTEE OF THE MARITAL DEDUCTION TRUST
AND FAMILY TRUST OF JOHN J.C. O’SHEA, JR., JOHN J.C. O’SHEA III,
INDIVIDUALLY AND AS CO-TRUSTEE OF THE MARITAL DEDUCTION TRUST
AND FAMILY TRUST OF JOHN J.C. O’SHEA, JR., AND BREHON LC, APPELLEES
On Appeal from the 237th District Court
Lubbock County, Texas
Trial Court No. 2014-513,113-B; Honorable Leslie Hatch, Presiding
August 17, 2018
MEMORANDUM OPINION
Before CAMPBELL, PIRTLE, and PARKER, JJ.
This is an appeal of an order dismissing a bill of review proceeding brought by
Appellant, Kelly Ann O’Shea, individually and as co-trustee of the Marital Deduction Trust
and Family Trust of John Joseph Connor O'Shea, seeking to set aside portions of a final
judgment issued in a previous court proceeding (Cause Number 2009-549,465, in the
237th District Court of Lubbock County, Texas), involving the same parties and
concerning similar claims that were litigated in that prior proceeding regarding allegations
of fraud, conversion of assets, and breach of fiduciary duties owed to Kelly by Appellees,
Kathleen M. O’Shea, individually and as co-executor of the estate of Rita O’Shea, co-
trustee of the Marital Deduction Trust and Family Trust of John J.C. O’Shea, Jr., and
manager/director of Brehon LC; Brian Connor O’Shea, individually and as co-executor of
the estate of Rita O’Shea, co-trustee of the Marital Deduction Trust and Family Trust of
John J.C. O’Shea, Jr.; John J.C. O’Shea III, individually and as co-trustee of the Marital
Deduction Trust and Family Trust of John J.C. O’Shea, Jr.; and Brehon LC. By two
issues, Kelly contends the trial court erred by (1) granting a motion to dismiss her
equitable bill of review pursuant to precedent articulated in Baker v. Goldsmith, 582
S.W.3d 404 (Tex. 1979), and (2) denying her demand for payment of attorney’s fees and
litigation expenses. We affirm.
BACKGROUND
The issues in this appeal arise out of transactions relating to two testamentary
trusts (a “Marital Deduction Trust” and a “Family Trust”) created by the last will and
testament of John J.C. “Rusty” O’Shea, Jr. upon his death in 1996. At the time of Rusty’s
death, he was survived by his wife, Rita O’Shea, and four children: Kelly, Kathleen, Brian,
and John. Rita was the sole beneficiary of the Marital Deduction Trust during her lifetime.
Upon her death, the Marital Deduction Trust was to be distributed to Rusty’s descendants.
Rita was the primary beneficiary of the Family Trust during her lifetime, with the remaining
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trust assets also being distributed to Rusty’s descendants upon her death. Rita passed
away in 2013.
During Rita’s lifetime, several disputes arose between Kelly and the other parties
regarding management of trust assets. While those claims involved multiple lawsuits
based upon a myriad of legal theories, the overarching complaint was a general allegation
of breach of fiduciary duty and fraud involving (1) Brehon, LC, (2) Scopey, Inc., and (3)
various monetary transfers made by Rita. In a petition filed October 19, 2009, in Cause
Number 2009-549,465, in the 237th District Court in and for Lubbock County, Kelly
brought suit against Rita for breach of fiduciary duty, fraud, and conversion. In addition
to monetary damages, Kelly sought the removal of Rita as a co-trustee of the Marital
Deduction Trust and Family Trust. That proceeding resulted in a judgment, which was
entered on December 13, 2010, in favor of Rita as to all claims and causes of action.
The judgment entered in the 2009 litigation was then affirmed by this court in 2012.
See Duncan v. O’Shea, No. 07-11-00088-CV, 2012 Tex. App. LEXIS 6494 (Tex. App.—
Amarillo Aug. 7, 2012, no pet.) (mem. op.).1 As the appellant in that cause, Kelly did not
file a motion for rehearing or seek a review of this court’s decision by the Texas Supreme
Court. It is that judgment which Kelly sought to set aside by the bill of review proceeding
filed in 2014.
On August 15, 2016, following what the parties described as a “Baker v. Goldsmith
hearing,”2 the trial court dismissed Kelly’s petition for bill of review as being barred as a
matter of law. The trial court also severed Kelly’s remaining claims and assigned those
1 Appellant, Kelly Ann O’Shea, was formerly known as Kelly Ann O’Shea Duncan.
2 See Baker v. Goldsmith, 582 S.W.2d 404, 406 (Tex. 1979) (setting forth the essential elements
of a bill of review proceeding).
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claims a new cause number. Kelly timely filed a notice of appeal pertaining to the denial
of the bill of review and subsequently dismissed the severed claims without prejudice.
BILL OF REVIEW
A bill of review is an independent equitable cause of action brought by a party to a
former action seeking to set aside a judgment which is not void on the face of the record
and is no longer appealable or subject to challenge by a motion for new trial or appeal.
King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 751 (Tex. 2003) (citing Baker v.
Goldsmith, 582 S.W.2d 404, 406 (Tex. 1979)). It is a separate and independent suit,
brought in the same court that entered the judgment being attacked. The remedy afforded
by a bill of review is equitable in nature and it is intended to prevent manifest injustice.
Caldwell v. Barnes, 975 S.W.2d 535, 537 (Tex. 1998); French v. Brown, 424 S.W.2d 893,
895 (Tex. 1967). The mere fact that an injustice has occurred is not, however, a sufficient
reason alone to justify its use. Wembley Inv. Co. v. Herrera, 11 S.W.3d 924, 927 (Tex.
1999).
A bill of review is a new and independent cause of action that is commenced by
the filing of an original petition in the trial court that rendered the judgment in question.
Urso v. Lyon Financial Services, Inc., 93 S.W.3d 276, 280 (Tex. App.—Houston [14th
Dist.] 2002, no pet.). In order to be successful upon a bill of review, the petitioner must
allege and prove: (1) a meritorious defense to the cause of action alleged to support the
judgment,3 (2) which the petitioner was prevented from making by fraud, accident, or
3As stated above, Kelly is in the unusual position of attacking a judgment in a cause of action
where, not only was she the plaintiff, she participated in the proceeding through an appeal to this court.
Rather than establish a meritorious defense to the challenged judgment, Kelly seeks to establish a
meritorious claim she contends she was prevented from presenting in the previous lawsuit. See King
Ranch, Inc., 118 S.W.3d at 751 (holding that a bill of review is proper where, “through no fault of the bill’s
proponent, fraud, accident, or mistake precludes presentation of a meritorious claim . . . .”).
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wrongful act of the opposing party, (3) unmixed with any fault or negligence of the
petitioner. King Ranch, Inc., 118 S.W.3d at 752; Baker, 582 S.W.2d at 406-07 (citing
Alexander v. Hagedorn, 226 S.W.2d 996, 998 (Tex. 1950)). Courts have narrowly
construed the grounds on which a petitioner may obtain a bill or review due to Texas’s
fundamental public policy favoring the finality of judgments. Mabon Ltd. v. Afri-Carib
Enters., 369 S.W.3d 809, 812 (Tex. 2012); King Ranch, Inc., 118 S.W.3d at 751.
Therefore, a bill of review seeking relief from an otherwise final judgment is to be
scrutinized by courts of equity “with extreme jealousy, and the grounds on which
interference will be allowed are narrow and restricted.” Montgomery v. Kennedy, 669
S.W.2d 309, 312 (Tex. 1984) (quoting Hagedorn, 226 S.W.2d at 998).
While courts have cautiously decided bill of review requests, they have consistently
recognized that a judgment obtained by fraud will justify a bill of review to set it aside.
Montgomery, 669 S.W.2d at 312. In that regard, courts have classified fraud as either
“intrinsic” or “extrinsic,” with extrinsic fraud being the only type of fraud that would entitle
a petitioner to bill of review relief. Hagedorn, 226 S.W.2d at 1001. Extrinsic fraud is that
species of deceptive conduct which denies a losing litigant the opportunity to fully litigate
her claims or defenses during the trial leading to the judgment under attack. Id. “Extrinsic
fraud is ‘collateral’ fraud in the sense that it must be collateral to the matter actually tried
and not something which was actually or potentially in issue in the trial.” Montgomery,
669 S.W.2d at 312. Essentially, extrinsic fraud prevents a meaningful trial upon the
merits. Intrinsic fraud, on the other hand, is deceptive conduct which has or could have
been considered and determined in the previous trial “where the fraudulent acts pertain
to an issue involved in the original action, or where the acts constituting the fraud were,
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or could have been litigated therein.” Id. at 313 (quoting Mills v. Baird, 147 S.W.2d 312,
316 (Tex. Civ. App.—Austin 1941, writ ref’d)).
Intrinsic fraud includes such things as fraudulent instruments, perjured testimony,
or any other matter which was actually presented to and considered by the trial court in
rendering the judgment being attacked. Montgomery, 669 S.W.2d at 313. Accordingly,
alleged perjury associated with a contested issue in the earlier trial, which the opposing
party had an opportunity to confront and rebut, is intrinsic fraud. Id.
ANALYSIS
Typically, a bill of review is used to collaterally attack a default judgment that has
become final and is no longer appealable. In this case, however, Kelly seeks to set aside
a judgment that was entered in 2009, in a proceeding in which she fully participated,
which was subsequently affirmed on appeal in 2012. In support of the relief she seeks,
Kelly contends perjury and the failure to disclose material information relevant to the
assets of the Marital Deduction Trust and Family Trust constitute extrinsic fraud, entitling
her to a new trial, because those acts denied her the opportunity to fully litigate her claims
during the 2009 litigation. Specifically, she alleges fraud with respect to three general
categories: (1) Brehon, LC, (2) Scopey, Inc., and (3) Rita’s mishandling of trust funds.
In response, Kathleen, Brian, and John contend the trial court properly dismissed
Kelly’s bill of review because she failed to show a meritorious claim, any claim made was
barred by limitations, and her claims were not preserved for appeal. They further contend
the trial court’s denial of her claim for attorney’s fees and expenses is not a matter
properly before this court because those claims, if any, were severed from Kelly’s petition
for bill of review and were the subject of the proceeding subsequently dismissed by her.
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BREHON, LC
One of the issues raised by Kelly in this bill of review proceeding pertains to
dealings involving Brehon, LC, an entity whose only substantial asset was land and a
barn where Kathleen ran a riding and stable operation. Kathleen purchased Brehon, LC
from Rita and the Marital Deduction Trust (one-half from each party). In the 2009 lawsuit,
Kelly claimed the transfer was improper because it was the product of Rita’s breach of a
fiduciary duty or fraud, as evidenced by the fact that the sales price was for less than the
property’s fair market value. On appeal of the judgment entered in the 2009 lawsuit, this
court addressed that issue when it affirmed the trial court’s judgment because Kelly failed
to preserve a complaint for appellate review by failing to obtain an express or implicit
ruling on the issues of breach of fiduciary duty or fraud. In the opinion issued in that
cause, we did not address Rita’s affirmative defense of statute of limitations. In her bill of
review lawsuit, Kelly contends the transfer occurred within the four-year statute of
limitations period and that she was prevented from establishing that fact by the fraudulent
testimony of Rita and Kathleen. Because limitations was not the basis of our decision,
any fraud in connection with actual date of transfer would be non-determinative.
Furthermore, because the issues pertaining to Brehon, LC were litigated in the prior
proceeding, any fraud resulting from Rita’s or Kathleen’s alleged perjury or fraud would
have been intrinsic fraud, not authorizing equitable bill of review relief.
SCOPEY, INC.
Another issue raised by Kelly in her petition for bill of review was Rita’s investment
in Scopey, Inc. In the 2009 lawsuit, Kelly maintained the investment was impermissible
under the terms of the Marital Deduction Trust. Contrary to Kelly’s position, this court
held that the provisions of the trust expressly authorized Rita, as Trustee, “[t]o invest and
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reinvest [Rusty’s] estate and each of the trust estates in any kind of property whatsoever,
real or personal . . . whether or not productive of income.” In her bill of review lawsuit,
Kelly contends the trial court erroneously found that the transfer of assets to Scopey, Inc.
was an investment rather than a distribution based on Rita’s perjured testimony.
Regardless of whether the transfer was an investment or a distribution, the underlying
facts of the Scopey, Inc. transaction were litigated in the 2009 lawsuit. Once again, any
fraud or perjury associated with that particular transaction would have been intrinsic fraud
since Kelly had the opportunity to fully litigate those issues in the earlier proceeding.
Where a bill-of-review petitioner’s prior pleading shows the alleged specific fraudulent
acts were known and in issue in the prior suit, the fraud is intrinsic. Montgomery, 669
S.W.2d at 314.
MISUSE OF TRUST FUNDS
Finally, Kelly contends Rita breached her fiduciary duty by improperly transferring
trust assets and by failing to make full disclosures to the trust beneficiaries. Kelly
maintains that Rita perjured herself when she testified in the 2009 lawsuit that she only
made authorized transfers. As a sub-issue, Kelly contends the trial court erred in
dismissing her bill of review without allowing her full discovery of evidence necessary to
support her claim. In support of her argument, Kelly contends the trial court erred when
it denied discovery relating to documents produced prior to the judgment entered in the
2009 lawsuit, i.e., December 13, 2010. She further references the numerous discovery
requests made during the 2009 litigation.
As to the sub-issue concerning discovery, Kelly has failed to preserve any error.
First, as an appellant, Kelly has failed to bring before this court the record of any hearing
before the trial court. Secondly, the only record reference cited in Kelly’s brief is a
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reference to a Motion to Reconsider Letter Ruling of July 5, 2016, wherein Kelly asked
the trial court to reconsider its decision to delay “formal discovery” until after she was
given the opportunity to replead and respond to the defendant’s motion to dismiss. No
where does Kelly present any manner of offer of proof or bill of exceptions to enlighten
the court as to just what discovery was reasonable and necessary. In an appeal from a
discovery or evidentiary ruling, the appellant must preserve error by presenting a “timely
request, objection, or motion,” setting forth the basis of the objection and obtaining a ruling
from the trial court. TEX. R. APP. P. 33.1. In the absence of such a request and ruling,
Kelly has waived any argument pertaining to the denial of discovery.
Concerning Kelly’s general complaint about the misuse of trust assets, she
contends Rita perjured herself when she testified concerning distributions from the trust
made in 2009 and 2010. Kelly contends those distributions were in violation of Rita’s
fiduciary duty because they were counter to the provisions of the Marital Deduction Trust
and Family Trust. Again, any testimony given in the 2009 trial was subject to cross-
examination and rebuttal. As such, the perjury, if any, would have been considered to be
intrinsic fraud, not authorizing equitable relief by way of a bill of review. Based on the
above and foregoing, issue one is overruled.
EXHAUSTION OF REMEDIES
Furthermore, where the judgment the petitioner seeks to set aside has been the
subject of a prior appeal, the petitioner must show that she exercised due diligence to
assert every legal remedy available before filing a bill of review. See Caldwell, 975
S.W.2d at 537. Accordingly, a party who has permitted a judgment to become final
without invoking every legal remedy available is not entitled to relief unless an adequate
explanation is advanced for ignoring the remedy available. French, 424 S.W.2d at 895;
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Nguyen v. Intertex, Inc., 93 S.W.3d 288, 293-95 (Tex. App.—Houston [14th Dist.] 2002,
no pet.) (party permitting judgment to become final without pursuing appellate remedy
cannot seek relief by bill of review without providing adequate explanation for failure to
appeal). This is true even if the failure to appeal resulted from the negligence or mistake
of the party’s attorney. Id. at 293.
Here, Kelly participated in the 2009 trial and the subsequent appeal. Following the
issuance of our judgment on appeal, Kelly never filed a motion for rehearing, nor did she
pursue further relief by filing a petition for review with the Texas Supreme Court.
Furthermore, she has offered no explanation whatsoever to explain why she failed to
pursue these available remedies. For this additional reason, issue number one is
overruled.
ATTORNEY’S FEES
By her second issue, Kelly contends the trial court erred by denying her demand
for payment of attorney’s fees and litigation expenses. Kathleen, Brian, and John respond
by simply contending that the issue is not properly before this court because the issue of
attorney’s fees was severed into a new cause of action by the trial court. We agree.
Because the trial court did not rule on the issue of attorney’s fees one way or the other,
there is no judgment on the issue. Because there is no judgment, no appellate jurisdiction
exists to review this issue. See TEX. CONST. art. V, § 6; TEX. GOV’T CODE ANN. § 22.220(a)
(West Supp. 2017). Accordingly, issue two is overruled.
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CONCLUSION
The judgment of the trial court is affirmed.
Patrick A. Pirtle
Justice
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