Michael E. Steele v. Rayellen Jarrell Milburn, Individually and as Independent of the Estate of Mary King Steele

Citation: Not availableDocket: 10-13-00426-CV

Court: Court of Appeals of Texas; August 13, 2015; Texas; State Appellate Court

Original Court Document: View Document

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Michael W. Steele filed a lawsuit against Rayellen J. Milburn, both individually and as the independent executor of the estate of Mary King Steele, seeking an accounting, distribution of the estate, a breach of fiduciary duty claim, and a declaratory judgment. Milburn challenged the court's jurisdiction, arguing that Steele lacked standing as he was not an "interested" party in the estate. The trial court held an evidentiary hearing and subsequently granted Milburn's plea to the jurisdiction, dismissing Steele's claims. Steele appealed, contending he is indeed an "interested" party and that the trial court erred in its decision.

Mary’s will designates Milburn as the sole child and independent executor, while naming Steele and Sheila Steele Howard as stepchildren whom she wished to treat as her own. The will includes provisions for trusts for her children, specifically the Michael Edward Steele Exempt Trust and the Michael Edward Steele Nonexempt Trust, alongside a direct gift of personal property to Milburn and substantial gifts of cash and real estate to the Milburn Nonexempt Trust. The will stipulates that any distributions to minors or descendants under 30 must be held in trust, and it names Milburn as the trustee with additional co-trustees designated in the event of her incapacity.

Milburn, Howard, and Frost declined to act as trustee or co-trustee for the Michael Edward Steele Exempt and Nonexempt Trusts prior to Steele filing his suit. Steele accepted a co-trusteeship in November 2013, with Comerica Bank joining in March 2014. In his petition filed on September 17, 2013, Steele claims to be a beneficiary of Mary’s estate, alleging that Milburn was appointed independent executor on September 14, 2009. Steele contends that there has been minimal progress in the estate's administration over the four years since Milburn's appointment and seeks a court order for Milburn to account for and distribute the estate under section 149B of the former Probate Code, now section 405.001 of the Estates Code.

In her response, Milburn challenges Steele's capacity to sue, asserting he is not an “interested person” in the estate under section 3(r) of the former Probate Code (now section 22.018 of the Estates Code). Milburn further claims the trial court lacks subject-matter jurisdiction due to Steele's lack of standing. The trial court agreed, dismissing Steele’s suit on these grounds.

The determination of the trial court's subject-matter jurisdiction is reviewed de novo as a legal question. Under section 22.018, an “interested person” includes heirs, devisees, spouses, creditors, or anyone with a property right or claim against the estate. Milburn maintains that Steele is not a direct beneficiary of the estate since the will allocates property to trusts rather than to him individually. The will stipulates that property is to be held in trust rather than directly distributed to beneficiaries. Thus, Milburn concludes that while Steele may be a beneficiary of the trusts, he is not an “interested person” in the estate itself, which should be represented by the trustees, not individual beneficiaries like Steele.

Milburn did not provide direct legal authority to support her position, relying instead on the language of the will and the statutory definition of “interested person.” Steele contends that Milburn has conflated standing with capacity, asserting his status as an interested person due to being a named beneficiary in the testamentary trust, which grants him a vested equitable property right in one-third of the estate assets up to the GST exemption and in the residuary assets. The court acknowledges Milburn's argument regarding the trusts being the devisees, but finds her interpretation of the statutory definition overly restrictive. It rules that Steele, as a testamentary-trust beneficiary, qualifies as an interested person with property rights in the estate, thus granting him standing to pursue claims against Milburn, the executor, for an accounting and distribution under section 405.001 of the Estates Code. Additionally, as a co-trustee of the trusts, Steele is recognized as an interested person with standing to make claims against Milburn. The court agrees with Steele that Milburn’s arguments improperly conflate standing and capacity, particularly her focus on his individual capacity as a beneficiary. The court reverses the trial court's order that granted Milburn's plea to the jurisdiction and remands for further proceedings.