Fred A. Hildebrand, Jr. and Wilma Hildebrand v. Brim, Arnett & Robinett, P.C. ( 1999 )

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

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NO. 03-98-00656-CV

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Fred A. Hildebrand, Jr. and Wilma Hildebrand, Appellants

v.

Brim, Arnett & Robinett, P.C., Appellee

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FROM THE DISTRICT COURT OF TRAVIS COUNTY, 261ST JUDICIAL DISTRICT NO. 98-04533, HONORABLE PETER M. LOWRY, JUDGE PRESIDING

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Appellants Fred A. Hildebrand, Jr. and Wilma Hildebrand sued appellee Brim, Arnett & Robinett, P.C. (hereinafter "Brim") on theories of breach of a trust agreement, breach of contract, and breach of an escrow agreement. Both parties filed motions for summary judgment; the trial court granted Brim's motion and denied the Hildebrands' motion. We will affirm.

THE CONTROVERSY

This lawsuit stems from a dispute between the Hildebrands and a third party, Consolidated GMP, Inc., over the terms of a sale of cattle by the Hildebrands to Consolidated. In an attempt to facilitate an agreement, Consolidated proposed that it forward $25,000 to John Morehead, counsel for the Hildebrands, to be held in trust and to be released to the Hildebrands upon certain conditions being met. Morehead agreed to hold the funds as trustee for the benefit of the Hildebrands; nonetheless, shortly thereafter the Hildebrands filed suit in United States District Court, complaining they had not been paid for the cattle. ⁽¹⁾  

Following the filing of the federal suit, Consolidated directed Morehead to transfer the trust funds to Brim, counsel for Consolidated. Morehead complied. On Consolidated's instruction, Brim then disbursed the funds to parties other than the Hildebrands.

The Hildebrands filed the instant suit against Brim for breach of a trust agreement, breach of contract, and breach of an escrow agreement, arguing that the funds were still trust funds, which Brim had a duty not to disburse. The parties filed cross-motions for summary judgment; the trial court granted Brim's motion and denied the Hildebrands' motion. ⁽²⁾

DISCUSSION

Standard of Review

The parties do not dispute the facts material to this case. The propriety of summary judgment is a question of law. See Natividad v. Alexsis Inc., 875 S.W.2d 695, 699 (Tex. 1994). We review the trial court's decision de novo to determine whether Brim was entitled to judgment as a matter of law. See id.; Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex. 1985). In granting summary judgment in favor of Brim, the trial court did not specify the basis for its ruling; thus, the summary judgment may be affirmed on any ground presented by Brim to the trial court in its motion. See Cincinnati Life Ins. Co. v. Cates, 927 S.W.2d 623, 625 (Tex. 1996). Because both parties have filed motions for summary judgment, and one was granted and the other denied, we must review the summary judgment evidence presented by both sides, determine all questions presented, and render such judgment as the trial court should have rendered. See Commissioners Court v. Agan, 940 S.W.2d 77, 81 (Tex. 1997).

The Trust

The parties agree that a trust was created by certain correspondence between Consolidated and Morehead, with the Hildebrands as beneficiaries and Consolidated as settlor. In the first letter, Consolidated informed Morehead of its "intention to set up a trust account with your firm and to transfer monies which will be used to pay down the outstanding amounts with Mr. Fred Hildebrand." This letter also indicated that, as a condition precedent to the release of the trust funds, the Hildebrands must provide Consolidated with cattle registration papers. Morehead agreed to "hold [the] money in our Trust Account subject to any reasonable conditions which accompany the money--If we cannot accept the conditions we will return the money."

In its letter forwarding the $25,000 to Morehead as trustee, Consolidated reiterated that the funds could not be released without its authorization. Morehead acknowledged receipt of the funds, and agreed to "hold this money subject to your further instructions." Morehead also informed Consolidated that, based on recently received information, the Hildebrands had no intention of providing the registration papers.

Following the Hildebrands' filing suit in federal court, Consolidated directed Morehead, by letter dated November 28 (the "November letter") to forward the trust funds to Brim, its Texas counsel. Brim then disbursed the funds to third parties per Consolidated's instructions.

The Hildebrands contend that Brim had a duty to refrain from disbursing the trust funds, even at the direction of its client, Consolidated. The Hildebrands argue that they had vested legal rights to the $25,000 trust corpus; that the trust remained intact following the transfer of the funds to Brim, with Brim merely acting as the substitute trustee; and that Brim was on notice of the Hildebrands' vested rights when it improperly disbursed the funds to third parties. Brim counters that the Hildebrands never had "vested rights" to the trust corpus, but contends that even if they did, the November letter revoked the trust, eliminating any possible rights. The Hildebrands concede in their brief to this Court that if their alleged vested rights in the $25,000 were terminated by the November letter, Brim must prevail in this appeal. We will assume, without deciding, that the Hildebrands had a vested right in the trust funds prior to the November letter, and will turn our attention to whether the trust was revoked.

Revocation

   All express trusts created in Texas are revocable by the settlor unless the trust is made irrevocable by the express terms of the trust-creating instrument. See Tex. Prop. Code Ann. § 112.051 (West 1995). Here, the correspondence between the parties does not in any way indicate the trust was irrevocable.

Brim argues that the November letter was a specific written directive by Consolidated revoking the trust and ordering Morehead, as trustee, to return the trust funds to the settlor in conformance with the termination. Once the trust was revoked, the trust property reverted to the settlor, and the Hildebrands lost any interest in the trust funds they may have had.

Because of the importance of the November letter to the outcome of this appeal, we quote it in its entirety.

With respect to our letter of September 19 and our deposit of $25,000 USD into your trust account. Please be advised that we have retained council [sic] in Texas and wish to have these funds transferred to his trust account immediately.

Please consider this letter as direction under the conditions of our trust with you to pass these funds together with interest to the attention of Mr. John Judge at Rim [sic] Arnett & Judge.

Revocation of a trust may be accomplished by the settlor through any manner that manifests the intention to revoke the trust. See Sanderson v. Aubrey, 472 S.W.2d 286-87 (Tex. Civ. App.--Fort Worth 1971, writ ref'd n.r.e.) (citing Restatement (Second) of Trusts § 330) ("If the settlor reserves a power to revoke the trust . . . the power can be exercised in any manner which sufficiently manifests the intention of the settlor to revoke the trust. Any definitive manifestation by the settlor of his intention that the trust should be forthwith revoked is sufficient."). Key in determining whether a trust has been revoked is whether the instrument in question "manifests" the intent to revoke. See Runyan v. Mullins, 864 S.W.2d 785, 789 (Tex. App.--Fort Worth 1993, writ denied) (letter did not "manifest" intent to revoke trust); Jameson v. Bain, 693 S.W.2d 676, 681 (Tex. App.--San Antonio 1985, no writ) (instrument did not contain "definitive manifestation" to revoke trust). As previously noted by this Court:

Where no procedure for termination is stated in the trust instrument, any reasonable method may be used.

The instrument claimed to be in exercise of the power of revocation must show an intent to use the power, although it need not necessarily refer expressly to the power.

Revocation may be held to have occurred by means of a conveyance by the settlor to a third person that covers the trust property.

Starcrest Trust v. Berry, 926 S.W.2d 343, 353 (Tex. App.--Austin 1996, no writ) (quoting George Gleason Bogert, The Law of Trusts and Trustees § 1001 (rev. 2d ed. 1983)).

Placed in perspective by the surrounding circumstances, the November letter clearly manifested Consolidated's intention to revoke the trust arrangement at issue. The summary judgment evidence shows that the trust was initially created as a means of amicably settling the dispute regarding the cattle sale. As a condition precedent to the release of the trust corpus, the Hildebrands were to provide Consolidated with registration papers for the cattle. Although Morehead, as trustee, accepted the trust funds, shortly thereafter he candidly informed Consolidated that the Hildebrands had no intention of releasing the registration papers. Furthermore, the Hildebrands proceeded to file suit in federal court against Consolidated. It was in this context that Consolidated, the settlor, directed Morehead to send the funds to its attorneys. In reclaiming the funds for itself, Consolidated employed a perfectly reasonable method by which to manifest its intention to exercise its revocation power, particularly since the purpose of the trust--to encourage a settlement--had clearly failed.

We conclude that the November letter demonstrated as a matter of law Consolidate's intention to revoke the trust at issue. Because the trust was revoked, Brim did not become a substitute trustee; accordingly, Brim was entitled to summary judgment on the Hildebrands' theory that Brim breached a trust agreement.

Alternative Theories

   The Hildebrands urge this Court to find they had a perfected security interest in the trust funds prior to the transfer to Brim, thus negating Brim's revocation argument. This theory was not raised before the trial court either in a motion for summary judgment filed by the Hildebrands or in any response to Brim's motion for summary judgment; accordingly, this argument may not be considered on appeal as grounds for reversal. See Tex. R. Civ. P. 166a(c); McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 339 (Tex. 1993).

Similarly, in their reply brief before this Court, the Hildebrands present several additional alternative arguments. None of these theories was raised before the trial court by motion for summary judgment or by any response to Brim's summary judgment motion; as a result, these arguments may not be considered on appeal as grounds for reversal. See Tex. R. Civ. P. 166a(c). We also note that the Hildebrands failed to raise these arguments in their initial brief to this Court, and that they are not responsive to any argument made by Brim in its brief to this Court. See Tex. R. App. P. 38.3.

CONCLUSION

Because we hold that the trust created by Consolidated was revoked as a matter of law prior to Brim's disbursal of the trust corpus, the trial court properly granted summary judgment in favor of Brim. The judgment is affirmed.

J. Woodfin Jones, Justice

Before Justices Jones, B. A. Smith and Yeakel

Affirmed

Filed: August 12, 1999

Do Not Publish

1. Suit was filed in the United States District Court for the Western District of Texas, Austin Division, Cause No. A-95-CA-668.

2. In their motion for summary judgment, the Hildebrands argued they should prevail on each of their pleaded theories: breach of a trust agreement, breach of contract, and breach of an escrow agreement. On appeal, the Hildebrands challenge only the trial court's judgment as to their cause of action for breach of a trust agreement. The remaining two theories are thus not at issue in this appeal.

thod may be used.

The instrument claimed to be in exercise of the power of revocation must show an intent to use the power, although it need not necessarily refer expressly to the power.

Revocation may be held to have occurred by means of a conveyance by the settlor to a third person that covers the trust property.

Starcrest Trust v. Berry, 926 S.W.2d 343, 353 (Tex. App.--Austin 1996, no writ) (quoting George Gleason Bogert, The Law of Trusts and Trustees § 1001 (rev. 2d ed. 1983)).

Placed in perspective by the surrounding circumstances, the November letter clearly manifested Consolidated's intention to revoke the trust arrangement at issue. The summary judgment evidence shows that the trust was initially created as a means of amicably settling the dispute regarding the cattle sale. As a condition precedent to the release of the trust corpus, the Hildebrands were to provide Consolidated with registration papers for the cattle. Although Morehead, as trustee, accepted the trust funds, shortly thereafter he candidly informed Consolidated that the Hildebrands had no intention of releasing the registration papers. Furthermore, the Hildebrands proceeded to file suit in federal court against Consolidated. It was in this context that Consolidated, the settlor, directed Morehead to send the funds to its attorneys. In reclaiming the funds for itself, Consolidated employed a perfectly reasonable method by which to manifest its intention to exercise its revocation power, particularly since the purpose of the trust--to encourage a settlement--had clearly failed.

We conclude that the November letter demonstrated as a matter of law Consolidate's intention to revoke the trust at issue. Because the trust was revoked, Brim did not become a substitute trustee; accordingly, Brim was entitled to summary judgment on the Hildebrands' theory that Brim breached a trust agreement.

Alternative Theories

   The Hildebrands urge this Court to find they had a perfected security interest in the trust funds prior to the transfer to Brim, thus negating Brim's revocation argument. This theory was not raised before the trial court either in a motion for summary judgment filed by the Hildebrands or in any response to Brim's motion for summary judgment; accordingly, this argument may not be considered on appeal as grounds for reversal. See Tex. R. Civ. P. 166a(c); McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 339 (Tex. 1993).

Similarly, in their reply brief before this Court, the Hildebrands present several additional alternative arguments. None of these theories was raised before the trial court by motion for summary judgment or by any response to Brim's summary judgment motion; as a result, these arguments may not be considered on appeal as grounds for reversal. See Tex. R. Civ. P. 166a(c). We also note that the Hildebrands failed to raise these arguments in their initial brief to this Court, and that they are not responsive to any argument made by Brim in its brief to this Court. See Tex. R. App. P. 38.3.

CONCLUSION

Because we hold that the trust created by Consolidated was revoked as a matter of law prior to Brim's disbursal of the trust corpus, the trial court properly granted summary judgment in favor of Brim. The judgment is affirmed.

J. Woodfin Jones, Justice

Before Justices Jones, B. A. Smith and Yeakel

Affi