in Re Estate of Gloria Banuelos Martinez ( 2019 )

Opinion issued April 2, 2019
In The
Court of Appeals
For The
First District of Texas
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NO. 01-18-00217-CV
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IN RE ESTATE OF GLORIA BANUELOS MARTINEZ
On Appeal from the County Court at Law No. 2
Fort Bend County, Texas
Trial Court Case No. 13-CPR 026038
MEMORANDUM OPINION
This interlocutory appeal arises from a probate dispute. See TEX. CIV. PRAC.
& REM. CODE § 51.014(a)(1). The sole issue in this appeal is whether the trial court
properly appointed a receiver to sell real estate that was jointly owned by the estate
and one of the heirs. Because there is insufficient evidence to satisfy the statutory
requirements for appointment of a receiver, we reverse the trial court’s order, and
we remand for further proceedings.
Background
In March 2004, Gloria Banuelos Martinez bought a house in Fort Bend
County with her daughter and son-in-law, Belinda and Thomas Kasmiersky. A
“Joint Ownership Agreement and Non-Testamentary Transfer Agreement” provided
that the property would be owned 50% by Belinda and Thomas, and 50% by Gloria,
who would be responsible for paying all ad valorem taxes and insurance. The
agreement established that upon Gloria’s death one-third of her one-half interest
would pass to Belinda in a non-testamentary transfer, and Belinda and Thomas
would have the option to purchase the remaining interest in the property at then-
current fair market value.
Gloria died intestate on August 4, 2013. She was survived by three children:
Belinda Kasmiersky, Yolanda Sanders, and Paul Martinez. No will was admitted to
probate, and the trial court appointed attorney Suzanne Kornblitt as dependent
administrator. Belinda sought reimbursement for ad valorem taxes paid during
Gloria’s lifetime. Belinda and Thomas also sought to buy the remaining interest in
the property.
For years, Gloria’s heirs have argued about the Fort Bend County property,
the estate’s most valuable asset. They have also disputed the validity of the non-
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testamentary transfer agreement, Belinda’s claims for reimbursement, and the costs
of administration. Belinda and Yolanda have each filed declaratory judgment actions
seeking a determination of the validity and effect of the Joint Ownership Agreement
and Non-Testamentary Transfer Agreement. Belinda has maintained that, as a result
of the non-testamentary transfer, she owns a two-thirds interest in the property,1
whereas Yolanda has argued that the estate owns a one-half interest in the property
because the Agreement was invalid.
The trial court authorized the administrator to sell the entire property, and the
administrator and a third party entered into a sales contract, which required that the
closing date of the sale be on or before February 7, 2018.
The trial court confirmed the sale on February 5, 2018. Ten days later, the
administrator filed an amended application for sale of real property, which showed
the acreage associated with the property to be 1.8065 acres rather than 1.502 acres,
as indicated in the earnest money contract, the prior application for sale of real
property, and the prior order confirming the sale. On March 8, 2018, the trial court
vacated its February 5, 2018 decree confirming the sale of real property In its order,
the trial court indicated that the contract for sale of the property “terminated on
February 6, 2018 for many reasons, especially because albeit it has no effect on the
1
(⅓ of Gloria’s ½ interest) = ⅓ × ½ = ⅙; and ⅙ + ½ (Belinda & Thomas’s
interest) = ⅙ + 3/6 = 4/6 = ⅔.
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appraised value, the acreage reflected in the Application and Order to Sell and the
Report and Decree does not match the acreage shown on the deed records.”
Referencing the heirs’ contentious relationship, the administrator sought
appointment of a receiver to sell the property. She asserted that the heirs had orally
agreed to sell the house, but they disagreed about what amount of the sale proceeds
would be placed in the court’s registry. She contended that this had created a problem
for the title company and jeopardized the sale. In the application, the administrator
stated that there was “a sale pending for $180,000,” and the property was “in danger
of being lost, damaged, or materially injured” because there was a risk that “we may
lose the buyer.” The administrator also stated that the estate lacked the funds to pay
its debts, including insurance and property taxes. No evidence was attached to the
application, and although no reporter’s record was made of the hearing on the
application for appointment of a receiver, it is undisputed that no evidence was
presented at the hearing.
The trial court appointed a receiver to sell the entire property, deduct costs,
and disburse one-half of the proceeds to Belinda and one-half of the proceeds to the
registry of the court. Belinda then filed this interlocutory appeal.
Analysis
In her sole issue, Belinda argues that the trial court erred by granting the
administrator’s application for appointment of a receiver to sell the property. Among
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other arguments, she contends that there was no evidence that the property was in
danger of being lost, damaged, or materially injured.
I. Evidentiary sufficiency is considered in an abuse-of-discretion review.
A party may bring an interlocutory appeal from an order appointing a receiver.
TEX. CIV. PRAC. & REM. CODE § 51.014(a)(1); see Estate of Hoskins, 501 S.W.3d
295, 301 (Tex. App.—Corpus Christi 2016, no pet.). We review an order appointing
a receiver for an abuse of discretion. Perry v. Perry, 512 S.W.3d 523, 526 (Tex.
App.—Houston [1st Dist.] 2016, no pet.); Benefield v. State, 266 S.W.3d 25, 31
(Tex. App.—Houston [1st Dist.] 2008, no pet.). “A trial court abuses its discretion
when it rules arbitrarily, unreasonably, without regard to guiding legal principles, or
without supporting evidence.” Bennett v. Baker Broocks & Lange, LLP, No. 01-13-
00674-CV, 2014 WL 3107661, at *1 (Tex. App.—Houston [1st Dist.] July 8, 2014,
no pet.) (mem. op.) (citing Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex. 1998)).
Under the abuse-of-discretion standard, legal and factual sufficiency of the evidence
are not independent grounds of error: they are relevant factors in assessing whether
the trial court abused its discretion. See Fannin v. Fereday, No. 01-13-00951-CV,
2015 WL 4463694, at *3 (Tex. App.—Houston [1st Dist.] July 21, 2015, no pet.).
II. Chapter 64 provides the legal standard for appointment of a receiver
over jointly owned property.
The party seeking the appointment of a receiver has the burden of proof to
demonstrate that the circumstances justify the appointment of a receiver. Benefield,
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266 S.W.3d at 31. Texas Civil Practice and Remedies Code section 64.001 provides
that a “court of competent jurisdiction” may appoint a receiver in six specific
circumstances, including “(3) in an action between partners or others jointly owning
or interested in any property or fund . . . or (6) in any other case in which a receiver
may be appointed under the rules of equity.” TEX. CIV. PRAC. & REM. CODE
§ 64.001(a). When a movant seeks appointment of a receiver under subsection
(a)(3), the movant “must have a probable interest in or right to the property or fund,
and the property or fund must be in danger of being lost, removed, or materially
injured.” Id. § 64.001(b) (emphasis supplied). Because the appointment of a receiver
is “a harsh, drastic, and extraordinary remedy, to be used cautiously,” Benefield, 266
S.W.3d at 31, “receivership is warranted only if the evidence shows a threat of
serious injury to the applicant.” Perry, 512 S.W.3d at 527 (quoting Benefield, 266
S.W.3d at 31).
III. The appointment of a receiver in this case cannot be justified “under the
rules of equity” alone.
Throughout her brief, the administrator argues that the appointment of a
receiver is justified on equitable grounds, suggesting that evidence of a danger of
loss, removal, or material injury to property is not necessary. For example, she
asserts that a court may appoint a receiver, on its own motion and in the absence of
a party’s application, when such an appointment is justified or to preserve property
that is the subject of litigation. She also argues that appointment of a receiver is
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appropriate in a probate case when the heirs cannot agree and years of litigation have
ensued. She maintains that the trial court acted properly and “within its equitable
jurisdiction” based on the judge’s memory of hearings that had been held over more
than five years of litigation.
The administrator relies on In re Estate of Trevino, 195 S.W.3d 223 (Tex.
App.—San Antonio 2006, no pet.), and In re Estate of Herring, 983 S.W.2d 61 (Tex.
App.—Corpus Christi 1998 no pet.), to support her argument that the appointment
of a receiver in this case could be justified under either subsection (a)(3) or (a)(6) of
section 64.001.
In Trevino, the executrix of an estate was the sole beneficiary, and she
inherited a bar. 195 S.W.3d at 226. The bar’s operator claimed an ownership interest
under a handwritten bill of sale. Id. The executrix engaged an attorney to recover the
property and resolve the operator’s ownership claims, and for that representation she
agreed to 40% contingency fee. Id. When the attorney prevailed in favor of the
executrix, he became a 40% owner of the bar, which he contended the executrix was
mismanaging. Id. at 228. The attorney then petitioned the court for partition by sale
and appointment of a receiver, which the court granted. Id. On appeal the executrix
argued that, in an action between co-owners of property, a receiver may be appointed
under section 64.001(a)(3) upon a showing that the property is “in danger of being
lost, removed, or materially injured.” Id. at 231.
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The court of appeals also noted that, under what was then subsection (a)(5), a
trial court could appoint a receiver based on the rules of equity. Id. Quoting Herring,
the court of appeals observed that “the appointment of a receiver will solve most, if
not all, of the vexations and problems confronting the parties on the issue of
partition, as well as management of the properties.” Id. at 231 (quoting Herring, 983
S.W.2d at 65). The court of appeals concluded that the court could have appointed a
receiver on an equitable basis due to the years of disputes and ongoing litigation
about the management of the bar. Id. Notably, the court also concluded that there
was some evidence that the bar was in danger of being lost, removed, or materially
injured because of decreasing revenues and the declining value of the business, as
shown by appraisals and purchase offers. Id. at 232.
The administrator’s reliance on Trevino and Herring is misplaced. This Court
has previously construed section 64.001 and reached a conclusion different from
Trevino and Herring, both of which found that the equitable basis for appointment
of a receiver could apply even if another subsection of 64.001 was applicable. See
id. at 231; Herring, 983 S.W.2d at 65.
In Mueller v. Beamalloy, Inc., 994 S.W.2d 855 (Tex. App.—Houston [1st
Dist.] 1999, no pet.), this Court considered an interlocutory appeal from an order
appointing a receiver to liquidate a corporation. 994 S.W.2d at 857. Mueller and
Wilson jointly owned an electron-beam welding business. Id. After about 15 years,
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Mueller brought a shareholder’s derivative suit against Wilson. Id. On Wilson’s
application, which was based on the Business Corporations Act and the “rules of
equity” provision of section 64.001, the trial court appointed a receiver to liquidate
Beamalloy. Id. at 857–58. Mueller appealed. Id. at 858.
On appeal, this Court noted that then section 64.001(a)(5) applied to
corporations, but required a showing of insolvency, dissolution, or forfeiture of
corporate rights to justify appointment of a receiver. Id. at 861. Beamalloy could not
satisfy that requirement. Id. at 861 The Court also considered the language of the
rules-of-equity provision, which was then section 64.001(a)(7) and is currently
codified as section 64.001(a)(6). Id.; see TEX. CIV. PRAC. & REM. CODE
§ 64.001(a)(6). That provision authorized the appointment of a receiver “in any other
case in which a receiver may be appointed under the rules of equity.” See Mueller,
994 S.W.2d at 861. The Court explained: “In authorizing a receiver in any other
case, subsection (a)(7) applies to instances beyond those listed” in the other
subsections. Mueller, 994 S.W.2d at 861 (emphasis original). “Given the specific
grant of authority to appoint a receiver for a corporation under the circumstances
listed in section 64.001(a)(5), the trial court had no authority to appoint a receiver”
for Beamalloy under the rules-of-equity provision. Id.
For the same reasons, section 64.001(a)(6) applies to instances beyond the
specific circumstances in subsections (a)(1) through (a)(5). Thus, if subsection (a)(3)
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applies, then subsection (a)(6) does not. The administrator, as the representative of
the estate, jointly owned the Fort Bend property with Belinda and Thomas. That
made the underlying case “an action between . . . others jointly owning . . . property.”
TEX. CIV. PRAC. & REM. CODE § 64.001(a)(3). Because subsection (a)(3) applies in
this case, we reject the administrator’s arguments that the appointment of a receiver
was justified “under the rules of equity,” and we focus our review on whether the
administrator met her burden to show that the property was in danger of being lost,
removed, or materially injured. See TEX. CIV. PRAC. & REM. CODE § 64.001(b).
IV. A conclusion that the property was in danger of loss, removal, or material
injury must be supported by evidence.
On appeal the administrator relies on three categories of support for the
appointment of a receiver. First, she relies on arguments made in pleadings and
hearings and factual assertions in pleadings and motions. Second, she presumes that
the trial court took judicial notice of its own records. Third, she relies on the judge’s
recollection of testimony adduced at a prior hearing in connection with another
motion. None of this is legally competent evidence capable of supporting the
appointment of a receiver.
A. Factual assertions and arguments in pleadings and motions are not
evidence.
Evidence may be in the form of testimony, documents, or tangible objects.
See Black’s Law Dictionary (10th ed. 2014) (defining “evidence”). Neither
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allegations in pleadings and assertions in motions nor arguments of counsel
constitute evidence. See Laidlaw Waste Sys. (Dallas), Inc. v. City of Wilmer, 904
S.W.2d 656, 660 (Tex. 1995) (“Generally, pleadings are not competent evidence,
even if sworn or verified.”); ODIN Demolition & Asset Recovery, LLC v. Marathon
Petroleum Co., LP, No. 01-17-00438-CV, 2018 WL 4131038, at *5 (Tex. App.—
Houston [1st Dist.] Aug. 30, 2018, no pet.) (mem. op.) (“Unsupported arguments in
briefs or motions are not evidence.”); Cleveland v. Taylor, 397 S.W.3d 683, 693
(Tex. App.—Houston [1st Dist.] 2012, pet. denied) (“Neither an attorney’s argument
nor the pleadings or motions of a party constitute evidence.”).
B. A trial court’s discretion to take judicial notice is not unlimited.
A trial court “may judicially notice a fact that is not subject to reasonable
dispute because it: (1) is generally known within the trial court’s territorial
jurisdiction; or (2) can be accurately and readily determined from sources whose
accuracy cannot reasonably be questioned.” TEX. R. EVID. 201(b). A trial court may
take judicial notice of its own file, but such judicial notice is limited to
acknowledgement of the existence of the documents in the court’s file. Perez v.
Williams, 474 S.W.3d 408, 419 (Tex. App.—Houston [1st Dist.] 2015, no pet.). The
“trial court may not take judicial notice of the truth of factual statements and
allegations contained in the pleadings, affidavits, or other documents in the file.”
Guyton v. Monteau, 332 S.W.3d 687, 693 (Tex. App.—Houston [14th Dist.] 2011,
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no pet.). “When evidence is the subject of improper judicial notice, it amounts to no
evidence.” Id.
C. The trial court’s recollection of testimony from prior hearings is not
evidence.
A judge may not take judicial notice of a fact learned over the course of
litigation because “‘personal knowledge is not judicial knowledge.’” Id. at 692
(quoting Wilson v. State, 677 S.W.2d 518, 524 (Tex. Crim. App. 1984)). Testimony
from a prior hearing or trial may be considered in a subsequent proceeding when the
transcript of that testimony is “properly authenticated and entered into evidence.”
Id. at 693.
Based on these principles, we conclude that much of what the administrator
relies on to support the appointment of a receiver is legally no evidence, including:
(1) unsupported arguments in pleadings and motions filed with the court, because
the court may not take judicial notice of the truth of factual assertions in such
documents; (2) testimony, argument, and documentary evidence from earlier
hearings, transcripts of which do not appear in the record and were not admitted into
evidence at the hearing on the application for receiver; and (3) any other personal
knowledge that the trial court acquired about this case over the course of the
litigation. We now consider whether evidence that was properly before the court
supports the appointment of a receiver.
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V. There is no evidence to support the appointment of a receiver under
Section 64.001(a)(3).
In the application, the administrator asserted that the Fort Bend property was
in danger of being lost, damaged, or materially injured because (1) “there exists a
contract for sale, for a very good price, and we may lose the buyer,” and (2) the
estate had “insufficient funds” to pay its debts.
A. There was no evidence of a pending contract for sale of the house or
the likelihood of losing a buyer.
In the application, the administrator asserted, among othering things,2 that a
cash sale for $180,000 was pending. The day after the application was filed, the trial
2
In the application for appointment of a receiver, the administrator asserted
that at a hearing in January 2018, “all the Parties before the Court insisted” that she
“place the property for sale and sell the property.” Neither a record from that hearing
nor an affidavit from a participant was attached to the application, and no such
evidence appears elsewhere in the appellate record.
The administrator recited facts about engaging a realtor, accepting an offer,
and the ambiguity of a prior court order to sell the property. She also asserted that
the title company “now refuses to commit to a title insurance policy” without
agreement of all parties about disbursement of sale proceeds. These factual
assertions are not supported by the record.
In her brief on appeal, the administrator argues that at a hearing on January
11, 2018, attorney Cassandra McGarvey, who was hired to represent the
administrator in the competing declaratory judgment actions, testified that the
November 2017 order of sale could make it difficult for a realtor or title company
to “open title” and that a receivership was likely to be a better way to satisfy a title
company. No record from this January 2018 hearing is in the appellate record, but
even if we accepted the administrator’s contention, we would nevertheless find that
it does not support the factual assertions in the application because McGarvey’s
testimony was opinion evidence offered by another attorney. It was not evidence
that any specific title company had refused to commit to a title insurance policy, as
represented in the application for appointment of a receiver.
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court determined that the contract for sale had terminated three weeks earlier. The
trial court appointed a receiver on March 8, 2018, over a week after it entered the
order to vacate, which recognized the earlier termination of the contract for sale.
Only the original earnest money contract, which terminated in early February,
appears in the appellate record. Thus, when the trial court appointed the receiver,
there was no sale pending. The administrator presented no evidence that a sale would
be lost or that the property could not be sold to another buyer if a sale was lost.
The administrator argues that testimony presented at the January 11, 2018
hearing established that appointment of a receiver would satisfy the concerns of the
title company. But she failed to present evidence that a specific title company refused
to commit to a title insurance policy, and there is no record of the January 11, 2018
hearing. The administrator referenced testimony from attorney Cassandra
McGarvey, who recommended appointment of a receiver in light of the language of
the court’s order of sale. Nothing in the record indicates that McGarvey’s testimony
was admitted into evidence at the hearing on the application for a receiver. See
Guyton, 332 S.W.3d at 693.
In addition, the administrator presented no evidence that the property itself
was in danger of loss, removal, or material injury. She argues that the court could
have relied on photographs she showed the judge at a hearing in November 2017,
when the trial court signed its order of sale. But the photographs are not in the record
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and the hearing was non-evidentiary. At the hearing, the administrator described the
property as “a lovely home” and “adorable.” The trial court judge could not have
properly taken judicial notice of the photographs. See id. at 692–93.
B. Evidence of cash-flow insolvency does not demonstrate that the real
property was in danger of loss, removal, or material injury.
Relying on her report and the vacated decree of sale, the administrator argues
that the estate was “insolvent” and that she has “never been paid or reimbursed for
her own cash outlays and for time spent on the case and at hearings.” In the
application for appointment of a receiver, she asserted that there were no estate funds
available to pay for insurance or taxes.
Attached to the February 15, 2018 amended application for sale of real
property was a verified exhibit showing the financial condition of the estate. It
demonstrated that the estate had more assets than debts but lacked available cash to
pay its debts. Evidence of this type of insolvency does not satisfy the statutory
standard, however, because it does not show that the real property at issue is in
danger of being lost, removed, or materially injured. See TEX. CIV. PRAC. & REM.
CODE § 64.001(b). There is no evidence that a tax foreclosure suit had been
threatened or filed and no evidence that Belinda and Thomas would not pay the taxes
on the property, subject to a claim for reimbursement. See Kneisley v. Intertex, Inc.,
797 S.W.2d 343, 346 (Tex. App.—Houston [14th Dist.] 1990, no writ) (holding
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evidence insufficient to support appointment of a receiver under Chapter 64 despite
filing of tax foreclosure suit because danger of foreclosure was slight).
Conclusion
We conclude that the administrator failed to carry her burden of proof on the
danger of loss, removal, or material injury to the Fort Bend County real property
over which the trial court appointed a receiver. See TEX. CIV. PRAC. & REM. CODE
§ 64.001(b). Accordingly, we hold that, based on this record, the trial court erred by
appointing a receiver. We sustain Belinda’s sole issue.
We vacate the order of the trial court appointing a receiver, and we remand
for further proceedings.
Peter Kelly
Justice
Panel consists of Justices Lloyd, Kelly, and Hightower.
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