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Factual and Procedural Background

Leroy Keaton and Bob Keaton initiated a lawsuit against Beatty Oldham, the independent executor of the estate of Annie Hillboldt, deceased, seeking to compel Oldham to close the independent administration of the estate and distribute its assets to the trustees of a testamentary trust created by the will. The suit also sought the return of alleged excess executor's fees and the removal of Oldham as a trustee. The Keatons had purchased the contingent remainder interests in the estate from Eric and Jimmie Swearingen, who were entitled to a 1/8th remainder interest each but were not named beneficiaries under the will.

The trial court rendered judgment ordering Oldham to reimburse the estate $4,812.87 for unauthorized executor's fees and to close the estate administration by distributing assets according to the will. The court declined to remove Oldham as trustee. Oldham appealed, raising ten points of error, including venue issues, jurisdiction, standing, and the propriety of the executor's fees and the court's order to close the administration.

Legal Issues Presented

  1. Whether the trial court properly overruled Oldham's amended plea of privilege concerning venue.
  2. Whether the trial court had jurisdiction to entertain the suit to close the independent administration and order distribution of estate assets.
  3. Whether the Keatons had standing to bring the suit as holders of contingent remainder interests.
  4. Whether the court erred in limiting the executor's fees and ordering reimbursement of alleged excess fees.
  5. Whether the court properly ordered the closing of the estate administration despite Oldham's objections.
  6. Whether Oldham was entitled to attorney's fees incurred in defending the suit.

Arguments of the Parties

Appellant's Arguments (Beatty Oldham)

  • Oldham argued that the trial court erred in overruling his amended plea of privilege because the Keatons abandoned the cause of action supporting venue in Austin County.
  • He contended the court lacked jurisdiction to close the independent administration.
  • He asserted the Keatons lacked standing to bring the suit.
  • Oldham claimed that other trust beneficiaries were indispensable parties, preventing the court from proceeding without them.
  • He challenged the limitation on his executor's fees, asserting entitlement to a higher amount.
  • He argued the court improperly substituted its judgment for his regarding the timing to close the administration, especially given outstanding estate debts.
  • Oldham sought attorney's fees for defending the action against him.

Appellees' Arguments (Leroy and Bob Keaton)

  • The Keatons maintained venue was proper in Austin County based on causes of action involving waste and damage to estate lands.
  • They argued the district court had jurisdiction to close the independent administration and protect their interests as assignees of contingent remainder interests.
  • They asserted standing to sue to prevent waste and recover unauthorized executor's fees.
  • The Keatons contended the administration should be closed and assets distributed because no further administration was necessary after a certain date.
  • They disputed Oldham’s entitlement to additional executor's fees beyond the statutory amount.
  • They opposed the allowance of attorney's fees to Oldham for defending the suit, alleging the administration was prolonged intentionally for fee generation.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
City of San Antonio v. United Gas Pipe Line Co., 354 S.W.2d 217 (Tex.Civ.App. Austin 1962, no writ) Venue principles regarding abandonment of causes of action supporting venue Supported the court’s conclusion that venue remained proper despite amended pleadings
Phillips Petroleum Co. v. Mecom, 375 S.W.2d 335 (Tex.Civ.App. Austin 1964, no writ) Definition of "waste" in land-related suits Clarified that waste includes unauthorized destruction of estate property, supporting venue in Austin County
Griggs v. Brewster, 62 S.W.2d 980 (Tex. 1933) District court jurisdiction over independent administration and power to appoint receivers Confirmed district court’s authority to close administration and protect estate interests
Metting v. Metting, 431 S.W.2d 906 (Tex.Civ.App. San Antonio 1968, no writ) District court jurisdiction and adequacy of probate court jurisdiction Supported district court jurisdiction where probate court jurisdiction inadequate
Rowe v. Dyess, 213 S.W. 234 (Tex.Com.App. 1919, jdgmt. adopted) Allowance of attorney's fees depends on good faith and honest belief of executor Supported denial of attorney's fees to executor prolonging administration for fee generation
Dwyer v. Kaltayer, 5 S.W. 75 (Tex. 1887) Executor’s entitlement to fees for estate administration vs. business operations Informed court’s reasoning limiting fees to statutory amounts excluding business operations
Walling v. Hubbard, 389 S.W.2d 581 (Tex.Civ.App. Houston 1965, writ dism’d n.r.e.) Executor’s fees calculation excluding business operations Supported limitation on executor’s fees for business operations of estate property
Other cited cases (e.g., Gulf Oil Corporation v. Horton, Continental Oil Company v. Anderson, Stanley v. Henderson, etc.) Various principles on waste, jurisdiction, and fiduciary duties Reinforced legal principles applied to venue, jurisdiction, waste, and fiduciary responsibilities

Court's Reasoning and Analysis

The court first addressed venue, finding that despite the amended petition removing a damages claim, the detailed allegations of waste to estate lands situated in Austin County preserved venue there under statutory provisions. The court explained that preventing waste by a fiduciary in possession of another's land is properly triable where the land lies, and the amended petition's prayer to close the estate and distribute assets sufficed to support venue.

Regarding jurisdiction, the court relied on established precedent holding that district courts have broad equity powers to supervise independent administrations, appoint receivers, and compel accounting when probate courts lack adequate jurisdiction. The Keatons, as assignees of contingent remainder interests, had standing to sue to prevent waste and recover unauthorized fees. The absence of other trust beneficiaries did not impede the court’s ability to proceed because their interests were unaffected by the relief granted.

On executor’s fees, the court found that while the independent executor could operate estate businesses to preserve assets, statutory executor’s fees did not extend to business operation transactions unless the court found the statutory fee inadequate, which it did not. The court recalculated fees based on statutory guidelines and ordered reimbursement of excess fees.

The court rejected Oldham’s argument that it improperly substituted its judgment on timing to close the administration. It found sufficient evidence that no further administration was necessary after a certain date and that Oldham’s objections were resolved in the suit itself. The court also held that denial of attorney's fees to Oldham was proper because he prolonged administration intentionally to generate fees, lacking good faith justification.

Upon rehearing, the court corrected its fee calculation to include certain tax payments and rental and royalty receipts, concluding these were properly part of the estate administration and thus includable in the statutory fee base. Consequently, the court reformed the judgment to remove the order requiring reimbursement of excess fees.

Holding and Implications

The court affirmed the trial court’s judgment as reformed, holding that:

  • Venue in Austin County was proper based on allegations of waste to estate lands.
  • The district court had jurisdiction to close the independent administration and order distribution of assets.
  • The Keatons had standing as assignees of contingent remainder interests to bring suit.
  • The executor’s fees were properly limited to statutory amounts excluding business operation transactions, but certain transactions related to preservation of estate assets were includable in fee calculations.
  • The trial court properly ordered the administration closed and denied attorney's fees to the executor for prolonging the administration in bad faith.

The direct effect of this decision is to require the independent executor to close the estate administration and distribute assets according to the will, reimburse only limited executor’s fees, and deny attorney’s fees for defense of this action. The opinion does not establish new precedent beyond applying existing principles to these facts.

Beatty OLDHAM, Indi v. dually and as Independent Executor of the Estate of Annie Hillboldt, Deceased, Appellant,

CORNELIUS, Chief Justice.

Leroy Keaton and Bob Keaton brought this action against Beatty Oldham, independent executor of the will of Annie Hillboldt, deceased, to compel Oldham to close the independent administration and distribute the assets of the estate to the trustees of a testamentary trust created by the will. The suit also sought the return of alleged excess executor's fees and the removal of Oldham as one of the trustees of the trust.

The Keatons purchased the interests of Eric and Jimmie Swearingen in Mrs. Hillboldt's estate. Mrs. Hillboldt's will provided that the corpus of the estate was to be held in trust during the lives of seven older family members designated as Class A beneficiaries who were to share 7/11ths of the income, with 1/11th each to go to four younger family members designated as Class B beneficiaries. At the death of the Class A beneficiaries, the Class B beneficiaries, plus four other family members, would receive a 1/8th remainder interest each. Eric and Jimmie Swearingen were neither Class A nor Class B beneficiaries, but were each entitled to a 1/8th remainder. They sold those interests to the Keatons, who were not named in Mrs. Hillboldt's will.

In a non-jury trial the court rendered judgment in favor of the Keatons ordering Oldham to pay the estate the sum of $4,812.87 representing unauthorized executor's fees, and ordering him to "proceed forthwith instanter to close said Estate and distribute its assets in accordance with the Last Will and Testament of Annie Hillboldt, Deceased." The court did not remove Mr. Oldham as one of the trustees of the testamentary trust.

Mr. Oldham has assigned ten points of error which will be grouped for discussion. The first group asserts that the trial judge erred in overruling Oldham's first amended plea of privilege.

The third amended original petition alleged that Oldham had breached his fiduciary duty to preserve and maintain the estate assets, was guilty of committing waste of the estate's lands situated mainly in Austin County where suit was filed, and had made unauthorized distributions to the trust's beneficiaries. The petition prayed for damages resulting from waste and negligence in administering the estate, for an order requiring Oldham to file a full accounting, for the closing of the estate and the distribution of the assets to the trustees, and for costs and attorney's fees. Under this state of the pleadings, Oldham filed his original plea of privilege to be sued in Harris County, the county of his residence. The Keatons filed their controverting affidavit which asserted that venue was proper in Austin County pursuant to Subdivisions 14 (suits for waste or damage to land), 9a (suits for negligence), 18 (revision of probate), and 11 (suits involving inheritances) of Tex.Rev.Civ.Stat.Ann. art. 1995. A hearing was held and Oldham's plea of privilege was overruled. Oldham did not appeal the court's ruling. Subsequently, the Keatons filed their fifth amended original petition. That pleading alleged essentially the same facts as the former pleading, some in more detail than before, but the prayer for relief did not contain a plea for damages. Instead it prayed for reimbursement of alleged excess executor's fees, an order requiring that the administration be closed, and that Oldham be removed as one of the trustees. It also contained a prayer for general relief. Oldham took the position that the amendment abandoned the only cause of action previously pleaded which would sustain venue in Austin County, i. e., damages for negligence, thus giving him the right to file a new or an amended plea of privilege. The trial court disagreed and overruled the amended plea. No new controverting affidavit had been filed.

The trial court was correct in overruling the amended plea of privilege. Where a plaintiff by amended petition abandons the cause of action on which venue is based and relies only upon causes of action not properly triable in the county where the suit is filed, the right to then file a plea of privilege enures to the defendant. City of San Antonio v. United Gas Pipe Line Company, 354 S.W.2d 217 (Tex.Civ.App. Austin 1962, no writ); Idaho Oil Co. v. Atlas Supply Co., 166 S.W.2d 740 (Tex.Civ.App. Fort Worth 1942, no writ); Gossett v. Lone Star Building Loan Ass'n., 143 S.W.2d 219 (Tex.Civ.App. Galveston 1940, writ dism'd); Wood v. Fulton Property Co., 90 S.W.2d 617 (Tex.Civ.App. Eastland 1936, no writ); 28 S.W.2d 883 (Tex.Civ.App. El Paso 1930, no writ); Johnson v. Adams, 291 S.W. 578 (Tex.Civ.App. Fort Worth), rev'd on other grounds, Adams v. Johnson, 298 S.W. 265 (Tex.Com.App. 1927, judgmt. adopted); Fant v. Kenedy Pasture Co., 69 S.W. 420 (Tex.Civ.App. 1902, no writ). Since the second plea here was not controverted, the trial court had no choice but to sustain it if the Keatons had abandoned all causes of action properly triable in Austin County. Wilson v. Groos National Bank of San Antonio, 535 S.W.2d 374 (Tex.Civ.App. Tyler 1976, no writ); Calvert Fire Ins. Co. v. Carroll, 231 S.W.2d 490 (Tex.Civ.App. Texarkana 1950, no writ); Tex.R.Civ.P. 86. But we do not find that to be the case. Both petitions, for example, alleged that the bulk of the estate assets consisted of lands situated mainly in Austin County, and alleged in considerable detail certain acts and omissions of Mr. Oldham which, it was asserted, constituted waste of such lands. Specific allegations were made as to the fences and other improvements, as well as the pasture and the lands themselves. Subdivision 14 of Article 1995 provides that:

"Lands. Suits for the recovery of lands or damages thereto, or to remove incumbrances upon the title to land, or to quiet the title to land, or to prevent or stay waste on lands, must be brought in the county in which the land, or a part thereof, may lie." (Emphasis added.)

"Waste", as known at common law and as used in Subdivision 14 of Article 1995 refers to an unauthorized destruction or severance of improvements, trees, minerals, or other corporeal hereditaments on or from land belonging to the person with respect to whom such waste is committed, by some other person who did not have title but may be rightfully in possession. Phillips Petroleum Co. v. Mecom, 375 S.W.2d 335 (Tex.Civ.App. Austin 1964, no writ); Gulf Oil Corporation v. Horton, 143 S.W.2d 132 (Tex.Civ.App. Amarillo 1940, no writ). Although the fifth amended petition did not specifically pray for damages due to waste, as the third amendment did, it alleged the acts of waste in even more detail than the former pleading and it prayed that the administration be closed and the assets delivered to those who were entitled thereto under the terms of the will. The allegations were thus broad enough to constitute an action to stay or prevent waste of lands. We cannot conceive of any better way to stay or prevent waste being committed by a fiduciary in possession of another party's lands, than by taking possession of those lands away from that fiduciary, and delivering possession to the owner, or to someone acting for the owner. See Continental Oil Company v. Anderson, 405 S.W.2d 622 (Tex.Civ.App. Eastland 1966, writ dism'd); Murtex Oil Company v. Murphy, 395 S.W.2d 853 (Tex.Civ.App. Texarkana 1965, no writ); Lower Nueces River Water Supply Dist. v. Pleasanton, 251 S.W.2d 777 (Tex.Civ.App. San Antonio 1952, no writ); Tidal Oil Co. v. Grays, 54 S.W.2d 1043, reh. denied, 64 S.W.2d 405 (Tex.Civ.App. Waco 1932, no writ); Jackson v. First National Bank, 290 S.W. 276 (Tex.Civ.App. Amarillo 1927, writ dism'd).

Mr. Oldham also contends that the trial court did not have jurisdiction to entertain the action to close the independent administration; that the Keatons had no standing to bring the suit; and that the other beneficiaries of the testamentary trust were indispensable parties without whom the trial court could not proceed to determine the controversy. We cannot agree.

On the question of jurisdiction, it is well settled that the district court has the power to appoint a receiver to take charge of an independent administration in order to protect the estate from mismanagement or unauthorized dissipation. Griggs v. Brewster, 122 Tex. 588, 62 S.W.2d 980 (1933); First State Bank of Bellevue v. Gaines, 121 Tex. 559, 50 S.W.2d 774 (1932); Stanley v. Henderson, 139 Tex. 160, 162 S.W.2d 95 (1942); Laurie v. Stabel, 482 S.W.2d 652 (Tex.Civ.App. Amarillo 1972, no writ); Metting v. Metting, 431 S.W.2d 906 (Tex.Civ.App. San Antonio 1968, no writ); O'Connor v. O'Connor, 320 S.W.2d 384 (Tex.Civ.App. Dallas 1959, writ dism'd); Huth v. Huth, 110 S.W.2d 1011 (Tex.Civ.App. San Antonio 1937, writ dism'd). The rule is especially applicable when the plaintiffs are seeking to protect their interests in land, where money damages are usually inadequate. See Metting v. Metting, supra. It is also well settled that the district court, as well as the probate court, may require an independent executor to account to the persons entitled to the estate, and that when it appears by the pleadings and proof that the suit involves controversies and issues between the parties for which the probate jurisdiction of the county court is inadequate to grant the relief sought, the district court has jurisdiction and may grant the necessary relief. Griggs v. Brewster, supra; Gregory v. Ward, 118 Tex. 526, 18 S.W.2d 1049 (1929); Metting v. Metting, supra; O'Connor v. O'Connor, supra. This power has frequently been used where the independent executor withholds the estate's assets, claiming some interest therein adverse to the devisees and legatees. Griggs v. Brewster, supra; Stanley v. Henderson, supra; Leach v. Leach, 208 S.W.2d 618 (Tex.Civ.App. Galveston 1948, writ ref'd n.r.e.); Huth v. Huth, supra. As stated by our Supreme Court in Jerrard v. McKenzie, 61 Tex. 40 (1884), where an independent executor refused to deliver the funds which had been bequeathed to two minor heirs,

Tex. Probate Code Ann. § 149A (Supp. 1978-1979).

". . . the district court, by virtue of its general powers, can, in a proper case, call the independent executor to account, and can compel him to surrender to the duly appointed guardian, property or funds of the ward which may be in his possession. . . ."

The case of Redditt v. Quinn, 215 S.W.2d 367 (Tex.Civ.App. Eastland 1948, writ ref'd n.r.e.), does not support a contrary view. In that case the undisputed evidence showed that the estate had not been fully administered, thereby making the suit to close the independent administration premature. The Court of Civil Appeals implied that the trial court's dismissal of the action for lack of jurisdiction was technically incorrect, but held that the result was correct because the uncontradicted evidence revealed that the estate had not yet been fully administered. See O'Connor v. O'Connor, supra.

The probate court has no jurisdiction, absent a specific statutory provision, to determine controversies between an independent executor and the devisees and legatees under the will. Griggs v. Brewster, supra; Gonzalez v. Gonzalez, 309 S.W.2d 111 (Tex.Civ.App. Forth Worth 1958, no writ). And according to the decision of Carter v. Brady, 423 S.W.2d 946 (Tex.Civ.App. San Antonio 1967, writ ref'd n.r.e.), the Keatons could not qualify as "distributees" so as to be entitled to petition the probate court to close the administration under § 152 of the Tex. Probate Code Ann. Neither would an action under § 149 of the Code to force the executor to give bond afford adequate relief. See Metting v. Metting, supra. Consequently, the district court, whose powers of equity jurisdiction conferred by the constitution are as broad as those of probate jurisdiction conferred upon the county court, was empowered to entertain the suit and grant the relief justified by the pleadings and proof. Griggs v. Brewster, supra; Metting v. Metting, supra; O'Connor v. O'Connor, supra; Toplitsky v. Toplitsky, 282 S.W.2d 254 (Tex.Civ.App. Galveston 1955, writ ref'd n.r.e.). Otherwise, the Keatons would be left with no adequate remedy, a result which our law will not countenance.

Eric and Jimmie Swearingen had the legal right to transfer their contingent remainder interests in the estate, and they transferred them to the Keatons by assignments, the validity of which have not been attacked in the proceeding. The Keatons therefore had standing to bring this suit to prevent their interests in the estate lands from being destroyed or damaged by continuing waste. Too, their remainder interests were not limited to the estate lands, but extended to the estate itself, so they also had standing to complain of excess or unauthorized executor's fees which tended to deplete or decrease the value of their respective interests.

The absence of the other trust beneficiaries as parties did not prevent the court from proceeding to judgment. Although the Keatons prayed that Oldham be removed as a trustee, he was not removed, and the interests of the trust beneficiaries were not affected in any manner whatsoever. Tex.R.Civ.P. 39 and 434.

In points of error 5, 9(b), 10(b) and 10(c) it is urged that the court erred in limiting the independent executor's fees. Mr. Oldham had paid himself $65,000.00 in fees, but contended that he was entitled to some $87,011.22. The court found that only $60,187.13 in fees was properly earned. The basis of the disagreement between the court's figures and the executor's figures may be explained as follows: The court found that the independent administration could reasonably have been closed shortly after January 23, 1975. It also found that Mr. Oldham, as executor, was only authorized to pay the debts, collect and assemble the assets of the estate, and distribute them to the persons entitled thereto, and that he was not authorized to operate any business of the estate. The court then concluded that Oldham was acting as trustee of the testamentary trust, rather than as independent executor, when he operated the farming and ranching business which belonged to the estate, and he was not entitled to fees on the receipts and disbursements made in the operation of that business. We think the court was wrong in its conclusion, but nevertheless reached the right result. The independent executor had the right to operate the business of the estate if it was necessary to preserve the assets pending the necessary administration, but he was not entitled to the statutory executor's fees on the business operation transactions unless the trial court in its discretion found that the regular statutory fee was inadequate, and there was no such finding. Tex. Probate Code Ann. § 241(a); Dwyer v. Kaltayer, 68 Tex. 554, 5 S.W. 75 (1887); Walling v. Hubbard, 389 S.W.2d 581 (Tex.Civ.App. Houston 1965, writ dism'd n.r.e.); 18 Woodward Smith, Texas Probate Decedents' Estates § 722, p. 86 (1971). The findings of fact revealed that, for the purpose of calculating the statutory fees, Mr. Oldham paid out and received a total of $1,219,422.72, 5% of which is $60,970.00. The trial court found $60,187.13 to be the correct amount of fee and required Mr. Oldham to reimburse the estate $4,812.87. The judgment will be reformed to require a reimbursement of $4,029.87, the difference between the $65,000.00 collected by Mr. Oldham and the $60,970.00 which was authorized.

The next group of points challenges the court's action in ordering Mr. Oldham to close the independent administration and distribute the assets to the trustees. The main basis of the contention is that the district court has no right to substitute its judgment for that of the independent executor as to the proper time to close the administration, especially when there are estate debts remaining to be paid. We cannot agree that the trial court acted improperly in that regard. The court found that after January 23, 1975, no further administration was necessary and the estate could and should have been closed and the assets delivered to the trustees. The evidence supports that finding. The main reasons why Mr. Oldham suggests the estate should not be closed are that executor's fees are still due and he is defending the instant suit to close the administration. These factors were resolved in the suit itself, so they constituted no bar to the court's judgment. In fact, Mr. Oldham offered in his pleadings to close the administration as soon as the instant lawsuit was resolved.

Finally, it is argued that the court erred in refusing to allow Mr. Oldham judgment against the estate for attorney's fees incurred by him in defending this action. We have concluded that the court did not abuse its discretion in that regard.

Personal representatives are entitled to recover reasonable attorney's fees which are necessarily incurred in connection with the management of an estate, (Tex.Probate Code Ann. § 242), but the right does not extend to the prosecution of a claim by the executor against the estate. And in resisting an effort to withdraw the estate from administration, the allowance of attorney's fees depends upon whether, in resisting such effort, the representative acts in good faith and under the honest belief that the attempted withdrawal is illegal. Rowe v. Dyess, 213 S.W. 234 (Tex.Com.App. 1919, jdgmt. adopted). Accord, Humane Society, etc. v. Austin National Bank, 531 S.W.2d 574 (Tex. 1975). The trial court here found, upon sufficient evidence, that no legitimate cause existed for the continuation of the administration, and that Mr. Oldham prolonged the administration intentionally for the purpose of generating additional executor's fees. Under the circumstances, the court's refusal to allow attorney's fees was not error.

All of the points of error have been carefully considered and are respectfully overruled. The judgment of the trial court as reformed is affirmed.

ON MOTION FOR REHEARING

In his motion for rehearing Mr. Oldham asserts that the undisputed evidence establishes that, during the period found by the court to have been reasonably necessary for the administration of the estate, he paid estate-owed income taxes in the sum of $8,240.00, as well as ad valorem taxes amounting to $23,003.00, and also collected $55,193.00 in tenant house and farm rentals and $8,110.00 in oil and gas royalties, none of which was included in the amount on which the statutory executor's fee was calculated by the trial court. The assertion appears to be correct. The transactions are shown in the exhibits and are apparently not contested. The trial judge probably excluded them because of his view that they were not within Mr. Oldham's authority as independent executor, but rather came within his responsibility as one of the trustees. As pointed out in our original opinion, these transactions, if they were necessary to preserve the assets during proper administration of the estate, were properly made by the independent executor and are includable in the calculation of the statutory executor's fee, since they do not constitute income or expenses from "business operations" as contemplated by the decision of Walling v. Hubbard, 389 S.W.2d 581 (Tex.Civ.App. Houston 1965, writ dism'd n.r.e.). The five percent (5%) fee on the total of those items amounts to $4,727.30. Consequently, the motion for rehearing will be granted in part and the judgment will be reformed to delete that portion which requires Mr. Oldham to reimburse the estate excess executor's fees.

It is so ordered.

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OLDHAM v. KEATON
(Mar 31, 1980)