Nancy D. Twyman v. William Earl Twyman

Opinion issued July 16, 2009  

In The  

Court of Appeals

For The  

First District of Texas

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NO. 01-08-00904-CV

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NANCY D. TWYMAN, appellant

v.

WILLIAM EARL TWYMAN, appellee

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On Appeal from Probate Court No. 1

Harris County, Texas

Trial Court Cause No. 382,408

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MEMORANDUM OPINION

Appellant, Nancy D. Twyman ("Nancy"), brings this interlocutory appeal challenging the trial court's order entering a temporary injunction enjoining her from disbursing funds from the Edna H. Twyman Trust ("the Trust"). William Earl Twyman ("William"), acting as agent under a power of attorney for Edna H. Twyman ("Edna"), filed an application for a temporary restraining order, a temporary injunction, and removal of Nancy as trustee and sought declaratory judgment and damages. In one issue, Nancy argues that the trial court erroneously issued a temporary injunction.

We affirm.

Background

On September 13, 1999, Edna executed a trust that named herself as the primary beneficiary. Edna's trust named her daughters, Nancy and Kathy Twyman Compton, as trustees. William, Edna's son, is neither a trustee nor a beneficiary of the Trust.

Merrill Lynch at one time held a significant portion of the assets of the Trust.

Account documents dated between May 2005 and February 2006 show that multiple checks were written from the Trust to Nancy that total $99,100. Additional checks were also written to Danny Twyman for $15,000, to Henry Twyman, ⁽¹⁾ for $15,000, to cash for $6,000, and to the Etowah Water and Sewer Authority and other businesses involved in constructing Nancy's home in Georgia for over $18,000.

On February 23, 2006, Edna executed a durable power of attorney appointing William to act as her agent. On February 27, 2006, William and Edna's attorney sent Nancy a letter making a "formal demand for a full accounting . . . of every action that [she had] taken as Trustee." The letter also demanded that Nancy "pay back with interest every cent that [she had] taken from the trust in flagrant breach of [her] fiduciary duties as Trustee." The letter also stated:

If you have a promissory note documenting the terms of your loan from the trust, including the use of your home as collateral to secure the loan, then please provide it to us. Otherwise we see no way that your use of trust funds under the terms of the Trust is anything but conversion.

On March 16, 2006, Nancy executed a promissory note payable to Kathy Twyman Compton, as a Trustee of the Trust, for $153,419 payable on or before May 31, 2007. ⁽²⁾ The note provided for an interest rate of 5% per annum, and stated that the note "shall be effective for the purposes of interest calculation as of May 31, 2005." It provided for an interest rate of 12% on "outstanding principal" if not paid when due. The note is not supported by any collateral. Although the note contained a signature block for Edna, she did not sign it.

Nancy also took Edna to an attorney, David Munson, and Edna retained Munson for the purpose of having herself declared incompetent. On July 3, 2007, Munson filed an application for appointment of a permanent guardian for Edna's estate. The application stated that "the nature of [Edna's] incapacity is dementia, and the degree of her incapacity is partial" and that no one held a power of attorney signed by Edna. The application requested specific protection over Edna's financial affairs. William subsequently contacted Munson and informed him of the prior power of attorney executed by Edna naming William as her agent.

On May 30, 2008, a year after the promissory note was due to be paid in full, Nancy had Edna extend the promissory note for another year at the same terms as the original agreement. William testified that Nancy dictated the wording of the extension to Edna and Edna wrote what Nancy told her to write.

On August 18, 2008, William filed an "Application for Temporary Restraining Order, Temporary Injunction, For Removal of Trustee, Declaratory Judgment and Lawsuit for Damages." William filed the pleading as agent under power of attorney for Edna and sought to remove Nancy as trustee. William brought the suit pursuant to section 37.005 of the Texas Civil Practice and Remedies Code ⁽³⁾ to determine whether there had been theft and conversion of the Trust's assets by Nancy and the elder abuse inflicted on Edna by Nancy. The pleadings assert that Nancy "illegally" acted as trustee, "converted hundreds of thousands of dollars from the Trust for her own use," and "built herself a home, paid contractors/suppliers to do work in her home, all using [Edna's] Trust funds." William further alleged that Nancy "has threatened, begged, and intimidated [Edna] into signing legal documents to make her actions appear justified and as though the theft was a legitimate loan, under a pretense of being done with [Edna's] knowledge and consent." The petition also alleged that Nancy engaged David Munson to have Edna declared incompetent and that, after Munson "learned of the bad acts of Nancy Twyman," he "transferred" the case to another lawyer. ⁽⁴⁾

In his accompanying affidavit, William asserted:

I have personally observed my mother, Edna H. Twyman, succumb to undue worry, stress and pressure inflicted upon her by Nancy Twyman, regarding my mother's finances. . . . Unless Nancy Twyman is prevented by this Court from further withdrawing, disbursing, committing, encumbering, diminishing, or disposing of the [Trust's] funds[,] Edna H. Twyman will have no guarantee of recovering any of the funds and assets in her Trust accounts. Further, my mother will soon be penniless if Nancy Twyman maintains control, as Nancy Twyman has no means which to repay my mother what she has stolen.

On August 20, 2008, the trial court signed a temporary restraining order commanding Nancy to refrain from disposing of Trust funds until the hearing on the application for a temporary injunction could be had before the trial court. ⁽⁵⁾

The trial court held a hearing on William's request for a temporary injunction on September 8, 2008. Nancy did not personally attend this hearing. William testified that Edna lived on his property in Montgomery, Texas in a trailer that William had purchased for her as a partial repayment of a debt William owed to Edna. He testified that he became aware that Nancy was withdrawing funds from the Trust to pay for her own expenses and expenses related to her home in Georgia at the end of 2005, that there is no such person as Henry or Danny Twyman, and that he believed that those names occurred in Merrill Lynch's records due to a typographical or scanning error. William explained that Edna began to have difficulty with her financial record keeping due to poor eyesight and asked him to take over those responsibilities and that Edna executed the power of attorney to enable him to help her with that and other tasks. William testified that he became concerned when Nancy took Edna to the attorney to have Edna declared incompetent and that he became even more concerned when Nancy subsequently had Edna extend the terms of the past-due promissory note. His conversations with Nancy led him to believe that she did not have the means to repay the promissory note because she was having financial difficulties and had contemplated filing for bankruptcy and that she would continue to use Trust funds to pay her own expenses. William also testified that Nancy had the account with Merrill Lynch closed and transferred to another account in Pennsylvania, where Kathy Compton, the other original co-trustee, lives. He testified that Nancy had made no repayments to the Trust at the time of the hearing.

Nancy's counsel questioned William regarding a gift of $21,000 made by Edna to him in 2007, after he began serving as Edna's agent under the power of attorney. William testified that the money was given to him at Edna's insistence because she wanted to help him repay some outstanding student loans. William testified that he was not involved in writing the check to himself or transferring the money to himself in any way. Nancy's trial counsel also questioned William about a loan of over $50,000 Edna made to William prior to the creation of the Trust. William testified that he had repaid that loan to Edna by paying for Edna's mobile home, electricity, and various other expenses until he and Edna had calculated that he had repaid the amount Edna had loaned him.

On October 7, 2008, the trial court signed an order granting a temporary injunction and appointing a receiver for the Trust. The order stated that unless Nancy was "immediately restrained," she " may continue to deplete the funds" in the Trust and that Edna "will suffer irreparable injury because of the permanent loss of funds which belong to [her] Trust." The order also stated that Edna had no adequate remedy at law because Nancy had spent "all the funds" and Edna "may never recover her loss." The trial court ordered that Nancy be enjoined "from spending any of the funds of the Edna Twyman Trust . . . except for health, support, and maintenance for [Edna]." The trial court also appointed attorney Louis Ditta, a neutral party, as receiver of the Trust's funds upon posting a bond and taking an oath.

Temporary Injunction

   In her sole issue, Nancy argues that the trial court erred in granting a temporary injunction. Specifically, Nancy argues that the trial court did not adhere to the standard of proof because nothing in the record supported a finding of probable injury and there was no proof of imminent harm or irreparable injury. She also argues that William failed to prove that an adequate remedy at law did not exist and that William should have been denied his requested relief because he has unclean hands.

A. Standard of Review and Burden of Proof

Whether to grant a temporary injunction lies within the sound discretion of the trial court. Ahmed v. Shimi Ventures, L.P., 99 S.W.3d 682, 692 (Tex. App.--Houston [1st Dist.] 2003, no pet.). We will not reverse an order granting a temporary injunction unless the trial court's action was "so arbitrary that it exceeded the bounds of reasonable discretion." Id. (quoting Tel. Equip. Network, Inc. v. TA/Westchase Place, Ltd., 80 S.W.3d 601, 607 (Tex. App.--Houston [1st Dist.] 2002, no pet.)). We view the evidence in the light most favorable to the trial court's order, indulging every reasonable inference in its favor. Id. A temporary injunction's purpose is to preserve the status quo of the litigation's subject matter pending trial. Id. (citing Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002)). We may not review the merits of the applicant's case in an interlocutory appeal from a temporary injunction order. Id.

To obtain the temporary injunction, William, as the applicant, was required to plead and prove (1) a cause of action against Nancy, (2) a probable right to the relief sought, and (3) a probable, imminent, and irreparable injury in the interim. See id. (citing Butnaru, 84 S.W.3d at 204). Nancy does not argue on appeal that William failed to plead a cause of action against her or that he failed to establish a probable right to the relief sought. Therefore, we turn to the third requirement to obtain a temporary injunction--William was required to prove a probable, imminent, and irreparable injury to the Trust. See id.

B. Probable, Imminent, and Irreparable Injury

Nancy argues that William failed to prove that the Trust would suffer a probable, imminent, and irreparable injury and, particularly, that William failed to prove that there was no adequate remedy at law for the Trust's damages.

To establish an irreparable injury, the injured applicant must show that there is no adequate remedy at law for its damages--in other words, that it "cannot be adequately compensated in damages or . . . the damages cannot be measured by any certain pecuniary standard." Ahmed, 99 S.W.3d at 692 (quoting Butnaru, 84 S.W.3d at 204). "An adequate remedy at law is one that is as complete, practical, and efficient to the ends of justice and its prompt administration as is equitable relief." Id.

Through his pleadings, affidavit, supporting documents, and hearing testimony, William established that over $150,000 had been removed from the Trust by Nancy for her own personal use. Upon receiving a request for an accounting from William, acting as Edna's agent, Nancy later executed a promissory note. Nancy instigated proceedings to have Edna declared incapacitated for the purpose of dealing with her financial matters, failed to repay under the terms of the promissory note, and then subsequently pressured Edna to extend the term of the promissory note. William also established that, although her name still appears on documents and accounts for the Trust, Kathy Compton, the co-trustee, had resigned, leaving Nancy as the sole trustee. William testified that Nancy told him she could not pay back the money that she had borrowed from the Trust and that she would withdraw more money from the Trust to pay her own expenses if needed in the future.

Nancy argues that the Trust was not injured because it holds the promissory note executed by her and that William failed to show that the Trust had no adequate remedy at law because it could collect on the promissory note according to its terms. However, William testified that Nancy had admitted to him that she was having financial difficulties and that she had considered filing for bankruptcy. Although Nancy argues that William's allegation that she may file for bankruptcy is not enough to establish an irreparable injury, the evidence supporting her lack of ability or desire to repay the Trust under the terms of the promissory note goes beyond William's testimony regarding Nancy's financial difficulties.

The evidence presented in the trial court demonstrates that the circumstances surrounding the creation of the promissory note, including its lack of collateral, and its subsequent extension, raise a question regarding Nancy's intention and ability to repay the funds and her potential mismanagement as trustee for the Trust. Nancy's past behavior of withdrawing money for personal use and executing a promissory note after William's lawyer demanded an accounting, combined with her subsequent failure to repay any of the funds withdrawn and her efforts to extend the terms of the note, demonstrates that allowing her continued access to the Trust funds could lead to more withdrawals that would not be repaid. Even if the promissory note could be collected upon, it would not protect the Trust from loss for additional amounts Nancy would be able to withdraw if a temporary injunction were not granted. See Butnaru, 84 S.W.3d at 204 (holding that purpose of temporary injunction is to preserve status quo of litigation's subject matter pending trial).

Nancy also argues that William failed to demonstrate imminent harm because he waited to file the lawsuit until more than two years after he became aware of many of the transactions at issue in the underlying suit and because he "acknowledged that the Trust account for the last year sustained no significant drop in value." However, William did take action by having an attorney send Nancy a demand for an accounting in February 2006. William testified that he eventually decided to file a suit against Nancy when he became aware that Nancy had pressured Edna to extend the term of the promissory note rather than repay it according to its terms. Likewise, the fact that Nancy had not withdrawn any additional funds from the Trust since the 2006 demand letter was sent does not establish that she could not do so in future were she to remain the sole trustee of the Trust during the pending litigation. William's testimony and the documentary evidence presented at the hearing support the trial court's implied conclusion that Nancy posed an on-going danger of loss to the Trust's fund so long as she was acting as the sole trustee. See Ahmed, 99 S.W.3d at 692 (holding that appellate courts view evidence in light most favorable to trial court's order and indulge every reasonable inference in its favor).

Therefore, William established that Edna would suffer a probable, imminent, and irreparable injury if Nancy was not enjoined from disbursing money from the Trust. See id. We conclude that the only way to preserve the status quo and prevent further harm to the Trust was to deny Nancy the ability to withdraw any additional funds from the Trust while the litigation is pending. See id. There was no remedy at law that was as complete, practical, and efficient to the ends of justice and its prompt administration as temporarily enjoining Nancy from making withdrawals from the Trust. See id.

C. Unclean Hands

Nancy also argues that the trial court should not have granted the temporary injunction requested by William because he has unclean hands. Specifically, Nancy argues that William received $21,000 from Edna in 2007 and that he did not act promptly in enforcing his rights.

Injunctive relief is an equitable remedy, and the complaining party must come into court with clean hands and must have acted promptly to enforce its right. Landry's Seafood Inn & Oyster Bar-Kemah, Inc. v. Wiggins, 919 S.W.2d 924, 927 (Tex. App.--Houston [14th Dist.] 1996, no writ); Foxwood Homeowners Ass'n v. Ricles, 673 S.W.2d 376, 379 (Tex. App.--Houston [1st Dist.] 1984, writ ref'd n.r.e.). The doctrine of unclean hands will be applied only to "one whose conduct in connection with the same matter or transaction has been unconscientious, unjust, or marked by a want of good faith, or one who has violated the principles of equity and righteous dealing." In re Jim Walter Homes, Inc., 207 S.W.3d 888, 899 (Tex. App.--Houston [14th Dist.] 2006) (orig. proceeding) (quoting Thomas v. McNair, 882 S.W.2d 870, 880-81 (Tex. App.--Corpus Christi 1994, no writ.)). In addition, the complaining party must show serious injury to himself arising from the conduct that cannot be corrected without applying the doctrine. Id.

Here, the trial court heard conflicting testimony about the gift and loan to William. It resolved the issue, at this early stage of the proceedings, in favor of William. We defer to its implied finding that William is acting in good faith. See Ahmed, 99 S.W.3d at 692 (stating that reviewing court must indulge every reasonable inference in favor of trial court's order).

We conclude that the trial court did not abuse its discretion in granting the temporary injunction. See id. (holding that appellate courts may not reverse order granting temporary injunction unless trial court's action was "so arbitrary that it exceeded the bounds of reasonable discretion").

We overrule Nancy's sole issue.

Conclusion

We affirm the order of the trial court.

Evelyn V. Keyes

Justice

Panel consists of Justices Keyes, Hanks, and Bland.

1. Danny Twyman and Henry Twyman do not exist. As we discuss below, William testified that the inclusion in the account records was an error and that these funds also went to Nancy.

2. Kathy Compton subsequently withdrew as trustee, leaving Nancy as the sole trustee for the Trust. However, Compton's name remains on the Trust's documents and accounts as a co-trustee.

3. See Tex. Civ. Prac. & Rem. Code Ann. § 37.005 (Vernon 2008). Section 37.005 provides,

A person interested as or through an executor or administrator, including an independent executor or administrator, a trustee, guardian, other fiduciary, creditor, devisee, legatee, heir, next of kin, or cestui que trust in the administration of a trust or of the estate of a decedent, an infant, mentally incapacitated person, or insolvent may have a declaration of rights or legal relations in respect to the trust or estate:

(1) to ascertain any class of creditors, devisees, legatees, heirs, next of kin, or others;

(2) to direct the executors, administrators, or trustees to do or abstain from doing any particular act in their fiduciary capacity;

(3) to determine any question arising in the administration of the trust or estate, including questions of construction of wills and other writings; or

(4) to determine rights or legal relations of an independent executor or independent administrator regarding fiduciary fees and the settling of accounts.

Id.

4. According to William's appellate brief, the proceeding to have Edna declared incompetent "has since been dismissed by the Judge as not having been brought with authority."

5. Nancy filed a special appearance, which the trial court denied. This Court affirmed the trial court's denial of the special appearance in Twyman v. Twyman, No. 01-08-00888-CV, 2009 WL 1331341 (Tex. App.--Houston [1st Dist.] May 14, 2009, no pet. h.) (not designated for publication).