In the Estate of: Lynne Vines, a/k/a Doris Lynne Vines, Deceased

Houston, Texas – Probate lawyer represented Appellant with complaining of the probate court's order appointing a receiver in an underlying will contest.

Lynne Vines's husband, Larry, started Dial Electrical Controls of Houston,

Inc. ("Dial Electrical”) and its sister company, LV Controls, Inc. ("LV Controls”)

(collectively referred to as the "companies”) decades ago. Lynn's husband died in

2005.

1

In early February 2020, Lynn was struck by a car while walking in a

parking lot. After getting treated at a hospital, she eventually was transferred to a

rehabilitation center and released.

After the accident, Lynn purportedly signed the following documents that

have been contested below: (1) a power of attorney to her nephew, Kenneth, dated

March 10, 2020; (2) a will dated March 27, 2020, appointing Kenneth as the

executor and giving him all of her estate, and if he did not survive her, all of her

estate to Kenneth's wife, Twila; and (3) special-meeting minutes dated April 13,

2020, in which Lynne appointed Kenneth as Vice President, CEO, and Director of

the companies and awarded him all shares of the companies upon her death.2

1 During the proceedings below, the parties have assumed that after Larry died,

Lynne became the sole shareholder of the companies.

2 The April 13 minutes also indicate that the companies held a meeting on March

27, 2020 and appointed Kenneth as Financial Officer of the companies.

3

On July 7, 2020, Lynn died at the age of 83. At the time of her death, Lynn

was unmarried and her two children, Donna Pacetti and Steven Hawkins, had

predeceased her. Lynne's daughter, Donna, had two children, Jason and Melissa

Pacetti. On July 10, 2020, Kenneth moved to probate Lynne's March 27, 2020

will.

3

Shortly thereafter, Lynne's grandchildren, the Pacettis, filed a motion for

temporary restraining order against Kenneth and opposed the application for

probate of Lynne's purported will. The Pacettis requested the appointment of a

temporary administrator4

and alleged that Lynne's March 27, 2020 will had

multiple defects, including improper execution, fraud, forgery, lack of testamentary

capacity, and undue influence. The Pacettis further alleged that Lynne's estate had

been sold, liquidated, damaged, and harmed by Kenneth and others working in

concert with him.

After a hearing, the probate court signed a September 29, 2020 order,

appointing Berlinger as temporary administrator, pending the will contest. As part

of the probate court's order, Berlinger was authorized to oversee and make

necessary decisions regarding operation of the companies, among other powers.

3 On November 17, 2020, Twila McFarland sought to probate Lynne's May 16,

2020 handwritten will.

4 See TEX. ESTATES CODE § 452.051 (providing that court may appoint temporary

administrator in contest related to probating will).

4

On October 26, 2020, Berlinger sought to enforce the probate court's order

appointing him temporary administrator, alleging that Kenneth had failed to

provide access to Dial Electrical and that he committed acts of self-dealing,

including "transferring monies out of Dial Electrical . . . that ultimately ended up in

an account in his and his wife, Twila McFarland's name.” Berlinger attached bank

records, which showed incoming transfers into Kenneth's bank account from

Lynne in the amounts of $56,500.07, $110,000, and $80,000 occurring in June

2020 and another transfer of $100,000 occurring in July 2020.

On November 2, 2020, Kenneth responded to Berlinger's motion to enforce,

stating that on April 13, 2020, a special meeting of the companies' shareholders

occurred, and Lynne appointed Kenneth as Vice President, CEO, and Director.

Kenneth explained that after the probate court appointed Berlinger as temporary

administrator, Kenneth's counsel "identified written non-testamentary transfer

language signed by [Lynne] which gifted all of [Lynne's] shares in Dial Electrical

and LV Controls to [Kenneth] immediately upon her death.” Kenneth contended

that the special-meeting minutes conformed with section 111.052 of the Texas

Estates Code

5

and removed any authority of Lynne's probate estate to control Dial

Electrical or LV Controls. Kenneth asserted that the probate court's temporary

administrator order did not obligate him to do anything and that it could not be

5 See TEX. ESTATES CODE § 111.052 ("Validity of Certain Nontestamentary

Instruments and Provisions”).

5

enforced against him. Kenneth also explained that "[a]ll transfers of dividend

payments were completed at the request of Lynne Vines by the bookkeeper for

Dial Electrical and LV Controls” and requested the probate court to enter a revised

order to remove any unclear and vague language that implied a right for Berlinger

to control either Dial Electrical or LV Controls.

Kenneth included a declaration with his response, explaining that Lynne

granted him power of attorney, he had Lynne's blessing to transfer approximately

$346,500 to his account, these funds were "exclusively used . . . to pay Lynne's

bills and the bills of her deceased son, Steven Hawkins,” and that the funds

transferred "were used solely for the benefit of Ms. Vines and her property.”

On November 3, 2020, the probate court held a hearing on Berlinger's

motion to enforce and motion to retain counsel. Berlinger requested counsel

because Kenneth was asserting that the probate court's order appointing Berlinger

as temporary administrator did not apply to Dial Electrical. Berlinger also opined

that the special-meeting minutes did not create a non-testamentary transfer and

therefore Dial Electrical was an asset of the estate. Berlinger repeatedly told the

probate court that it would need to determine whether the special-meeting minutes

constituted a non-testamentary transfer.

Kenneth argued that "Berlinger is incorrect that you have the authority at

this given time to make a decision on that [referring to section 111.052],” the

6

written transfer is an automatic transfer under section 111.052(a), and the "only

way to invalidate that transfer would be through a declaratory judgment which

would take a trial on the merits.” Kenneth continued, "So I'm not saying that at

some point you couldn't invalidate that if the petition was brought; absolutely, if

the evidence was shown and they met their burden, you could. However, that's not

before the Court today. That is an automatic transfer, just as much as a beneficiary

designation on an account or anything else. Those are nonprobate assets that the

probate estate does not have any authority to control.”

After stating that it would not make a ruling during the hearing, the probate

court then turned to Berlinger's motion to enforce the temporary administrator

order. Berlinger informed the probate court that he was only receiving partial

access to Dial Electrical and explained how funds were moving from Dial

Electrical to an account with Lynne and Kenneth as a power of attorney. Berlinger

explained, "it goes from Dial Electric[al] in Lynne's name to a power-of-attorney

account that [Kenneth] is the agent under. And that's when he acted as an agent

and transferred it to his wife and his account as the agent.”

The probate court responded that his order speaks for itself, giving Berlinger

authority to oversee Dial Electrical. Kenneth was then given an opportunity to

respond, and he proceeded to question Berlinger about items he requested in a

subpoena duces tecum sent to Berlinger and filed with the court. After Berlinger

7

testified that he did not have any documents, Kenneth began questioning Berlinger

on matters outside the subpoena. The probate court eventually stopped Kenneth's

attorney and stated that he wanted briefs on the motion to retain counsel and the

positions of the parties relative to the companies.

On November 3, 2020, Berlinger filed a brief in support of his motion to

enforce, stating that the positions taken by Kenneth and the Pacettis have made it

necessary to seek the probate court's assistance in enforcing, clarifying, and

perhaps expanding its temporary administrator order. Berlinger further stated that

he had not been provided full and complete access to the companies' books and

records, he was unaware of whether the company maintained organizational or

operational documents such as bylaws, shareholders agreements or similar

controlling documents, and "there has been no production of either company's

historical records as they pertain to other annual and/or special meetings of the

directors and the shareholders, if any.”

Berlinger listed various documents he wanted to review to determine the

status of the companies and stated, for the first time, that the probate court could

accomplish the same purpose as it originally intended by expanding his

appointment as temporary administrator to that of a receiver.

In his "Bench Brief Regarding Non-Testamentary Transfer of Company

Shares,” Kenneth pointed out that no party had contested the validity of the non-

8

probate transfer of shares. Kenneth thus argued that the special-meeting minutes

that Lynne signed, transferring the shares of the companies to him, constituted a

written instrument and a non-testamentary transfer of property pursuant to section

111.052(a)(1)(A), which removed the companies from Lynne's estate.

On December 9, 2020, the probate court granted Berlinger's motion to

enforce, expanding its previous September 29, 2020 order. The expanded order, as

relevant here,

• required Kenneth to produce all books and records for the companies

with an expanded definition of books and records;

• provided that Berlinger had authority to initiate a declaratory

judgment to address the validity of the purported durable power of

attorney and purported special meeting company minutes from March

27, 2020 and April 13, 2020;

• provided that Berlinger had authority to act as the temporary

administrator over the companies notwithstanding Kenneth's current

non-testamentary transfer theory;

• appointed Berlinger to serve as a receiver with respect to the

companies; and

• denied all other relief requested by Kenneth.

On December 14, 2020, Berlinger filed a motion for appointment of a

receiver with respect to Dial Electrical, acknowledging that the probate court had

appointed him as the receiver but indicating his belief that appointing Jeff

Compton as receiver pursuant to section 64.001(a)(6) would be in the best interest

9

of the estate.

6

Berlinger explained that Kenneth made himself an employee of Dial

Electrical on April 9, 2020 and paid himself a salary of $1,500 a week. Then, on

May 1, 2020, Kenneth increased his salary to $1,600. After Lynne died, he again

increased his salary to $3,846.15. Once Berlinger was appointed temporary

administrator, Kenneth decreased his salary to $1,500 a week. Berlinger further

alleged that Kenneth "possibly unwittingly committed acts of self-dealing some of

which included transferring monies out of [Dial Electrical] that ultimately ended

up in an account in his and his wife, Twila McFarland's name.”

7



On December 31, 2020, Kenneth filed an interlocutory appeal of the probate

court's December 9, 2020 order appointing Berlinger as receiver over Dial

Electrical and LV Controls.

8



On January 5, 2021, the probate court held a hearing on Berlinger's

December 14 motion to appoint a receiver. Berlinger stated that he requested the

6 See TEX. CIV. PRAC. & REM. CODE § 64.001(a)(6) (providing that court may

appoint receiver under rules of equity).

7 The Pacettis also filed a statement in support of a receiver.

8 See TEX. CIV. PRAC. & REM. CODE § 51.014(a)(1). Kenneth also filed a petition

for writ of mandamus in this Court, seeking to vacate the probate court's

December 9, 2020 order giving Berlinger authority to control the companies. We

denied the mandamus petition without opinion. See In re McFarland, No. 01-21-

00033-CV, 2021 WL 499051, at *1 (Tex. App.—Houston [1st Dist.] Feb. 11,

2021, orig. proceeding).

10

receiver because of equity, that it was in the best interest of the estate to appoint a

receiver, and that he thought it would be better to have a CPA serve as the receiver.

Twila McFarland, who is not a party to this appeal, argued that the company

was a non-probate asset that was transferred by non-testamentary transfer and no

live pleading attacked the non-testamentary nature of the transfer. Twila further

argued that appointing a receiver required an evidentiary proceeding and that no

evidence of imminent harm or imminent threat as required by caselaw had been

presented. She concluded by stating that a receiver should only be appointed until

after the court of appeals had an opportunity to rule on whether "there should be

some management by the temporary administrator or receiver on what is today a

non-testamentary asset.”

After the parties discussed whether the special-meeting minutes constituted a

non-testamentary transfer, the probate court stated that he did not know, and he had

not heard any evidence so he could not address it. Berlinger responded that he

could file a "[declaratory judgment] action and seek a decision as to whether it's a

non-testamentary transfer.” Kenneth then argued that, at this point in time, the

transfer of the companies to him remained a non-probate transfer and that he was

unaware of any authority that would permit the probate court to appoint someone

to take the non-probate asset.

11

On January 6, 2021, the Pacettis filed their second amended opposition to

probate the will and codicil, contending that the purported will and codicil had

improper formalities, lacked testamentary intent, lack of capacity, and undue

influence. The Pacettis alleged breach of fiduciary duty, conversion, sought

declaratory relief that the special-meeting minutes did not constitute a nontestamentary transfer, and explained why the minutes were not a non-testamentary

transfer.

On January 11, 2021, the probate court signed an order appointing Jeff

Compton as receiver of Dial Electrical pursuant to Chapter 64 of the Texas Civil

Practice and Remedies Code and for other good cause. Kenneth timely filed a

second notice of interlocutory appeal of the order appointing Jeff Compton as

receiver.

Receivership

In four issues, Kenneth argues that Lynne made a non-testamentary transfer

and that the probate court abused its discretion by appointing a receiver.

A. Standard of Review and Applicable Law

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,

12

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.).

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, 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, as relevant here, "in an action between

partners or others jointly owning or interested in any property or fund” or "in any

other case in which a receiver may be appointed under the rules of equity.” TEX.

CIV. PRAC. & REM. CODE § 64.001(a).

13

B. Non-Testamentary Transfer

In his first issue, Kenneth argues that the April 13, 2020 special-meeting

minutes constituted a non-testamentary transfer of all shares of the companies to

Kenneth upon Lynne's death. According to Kenneth, this transfer caused the

companies to pass as non-probate assets outside Lynne's estate, thereby precluding

the probate court from giving control of the non-probate assets to a receiver or

temporary administrator.

To preserve a complaint for appellate review, Kenneth was required to

present his complaint to the probate court and obtain a ruling. See TEX. R. APP. P.

33.1(a). As mentioned many times during the proceedings below and as conceded

in his appellate brief,

9

the probate court has not yet ruled on Kenneth's nontestamentary transfer theory based on the special-meeting minutes. The issue is

currently pending before the probate court in the Pacettis' Second Amended

Opposition to Probate of Will and Codicil, in which they sought declaratory

judgment on whether Lynne made a non-testamentary transfer of the shares of the

companies. Likewise, Berlinger has also sought declaratory judgment on the same

issue. Because the probate court has yet to rule on this issue, the issue has not been

preserved, and we decline to address the validity of Kenneth's non-testamentary

9 Kenneth's brief states, "Regardless of the substance, it has not been judicially

determined that the transfers were invalid.”

14

transfer theory.10

See TEX. R. APP. P. 33.1(a)(2); see also City of Dallas v. Dixon,

365 S.W.2d 919, 923 (Tex. 1963) (noting that courts of appeals are primarily

courts of review), rev'd on other grounds sub nom., Donovan v. City of Dallas, 377

U.S. 408 (1964).

We overrule Kenneth's first issue.

C. Section 64.001

In his second issue, Kenneth argues that the probate court abused its

discretion by ignoring the standards found in section 64.001. Specifically,

Kenneth argues that the probate court could not appoint Compton11 as receiver

pursuant to section 64.001(a)(3) because the section did not apply.

10 Within his first issue, Kenneth argues that the "Probate Court has no jurisdiction

over the Companies.” Because Kenneth does not provide appropriate authority

and substantive analysis, we conclude the issue has been waived. See TEX. R.

APP. P. 38.1(i) (stating that brief "must contain a clear and concise argument for

the contentions made, with appropriate citation to authorities”); Guimaraes v.

Brann, 562 S.W.3d 521, 537–38 (Tex. App.—Houston [1st Dist.] 2018, pet.

denied).

11 Although the probate court initially appointed Berlinger as a receiver in its

December 9, 2020 order, Berlinger never qualified to serve and sought to appoint

Jeff Compton as receiver. Subsequent to the filing of Kenneth's first notice of

appeal, the probate court appointed Jeff Compton as receiver on January 11, 2021

and discharged Berlinger as receiver. Where the complained-of defects of an

initial order are remedied in the issuance of a subsequent order, the initial

complaints become moot. Flamingo Permian Oil & Gas, L.L.C. v. Star Expl.,

L.L.C., 569 S.W.3d 329, 331 (Tex. App.—El Paso 2019, no pet.) (dismissing as

moot three issues rectified by the issuance of subsequent order executed while

appeal was pending); see also Smith v. Smith, 681 S.W.2d 793, 797 (Tex. App.—

Houston [14th Dist.] 1984, no writ). Because the subsequent order appointed Jeff

15

Section 64.001(a) provides that a court may appoint a receiver,

(1) in an action by a vendor to vacate a fraudulent purchase

of property;

(2) in an action by a creditor to subject any property or fund

to his claim;

(3) in an action between partners or others jointly owning or

interested in any property or fund;

(4) in an action by a mortgagee for the foreclosure of the

mortgage and sale of the mortgaged property;

(5) for a corporation that is insolvent, is in imminent danger

of insolvency, has been dissolved, or has forfeited its

corporate rights; 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)(1)(6).

Berlinger sought the appointment of a receiver based on section

64.001(a)(6). The probate court's January 11, 2021 order appointing a receiver

stated it was appointing a receiver pursuant to Chapter 64 of the Texas Civil

Practice and Remedies Code, but it did not specify which subsection it was relying

on in granting the appointment of a receiver. Thus, on appeal, it was incumbent on

Kenneth to attack all possible grounds. See Walling v. Metcalfe, 863 S.W.2d 56,

58 (Tex. 1993) ("We have held repeatedly that the courts of appeals may not

Compton and discharged Berlinger as receiver, we confine our analysis to the

January 11, 2021 order.

16

reverse the judgment of a trial court for a reason not raised in a point of error.”);

Britton v. Tex. Dep't of Criminal Justice, 95 S.W.3d 676, 681 (Tex. App.—

Houston [1st Dist.] 2002, no pet.) (stating that if independent ground fully supports

judgment, but appellant assigns no error to that independent ground, then court of

appeals must accept validity of unchallenged independent ground).

Here, Kenneth does not attack all independent grounds that support the

probate court's order. Specifically, Kenneth assigns no error to subsection (a)(6),

which generally allows a probate court to appoint a receiver under the rules of

equity. See TEX. CIV. PRAC. & REM. CODE § 64.001(a)(6). By failing to attack this

independent ground, Kenneth has waived error, if any.12

Britton, 95 S.W.3d at

681.

In addition, Kenneth's appellate arguments in this issue were not raised with

the probate court. At the hearing on the motion to appoint a receiver on January 5,

2021, Kenneth did not assert any argument specific to section 64.001(a)(3). Thus,

the issue was not preserved. See TEX. R. APP. P. 33.1.

We overrule Kenneth's second issue.

12 By failing to attack this independent ground, it is unnecessary to address any

additional arguments that Kenneth raises concerning section 64.001(b) because the

limitations under (b) only apply if the probate court appointed a receiver pursuant

to subsections (a)(1), (2), or (3). See TEX. CIV. PRAC. & REM. CODE § 64.001(b);

TEX. R. APP. P. 47.1.

17

D. Section 11.404

In his third issue, Kenneth argues that the probate court abused its discretion

by ignoring the standards articulated in section 11.404 of the Texas Business

Organizations Code.13

Kenneth also argues within this issue that the probate court

did not hear evidence to support a receiver under section 11.404(a) and (b).

Specifically, Kenneth argues that "the probate court abused its discretion by failing

to hear any evidence establishing the need for a receiver to conserve the property

and business of the Companies and to avoid damage to interested parties” and

"there is a lack of evidence that a single alternative was considered by the Probate

Court.”

Similar to his second issue, because Kenneth did not attack the independent

ground in section 64.001(a)(6) in support of the probate court's order, his

additional complaints within this issue are waived. Britton, 95 S.W.3d at 681.

Moreover, the record does not show that Kenneth raised any complaint

about section 11.404 with the probate court, he has not identified anywhere within

the record where he raised these appellate issues with the probate court, and he

cites no authority in support of his argument that the probate court abused its

13 TEX. BUS. ORG. CODE § 11.404 ("Appointment of Receiver to Rehabilitate

Domestic Entity”).

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discretion. See TEX. R. APP. P. 33.1; 38.1(i). Accordingly, Kenneth's appellate

complaints within this issue are waived. See TEX. R. APP. P. 33.1, 38.1(i).

We overrule Kenneth's third issue.

E. Appointing Temporary Administrator Berlinger As Receiver

In his fourth issue, Kenneth complains that before the probate court could

appoint a receiver, the probate court "failed to make the requisite finding of

necessity,” including a finding of probable interest in the company and a finding

that the company was in danger of being lost, removed, or materially injured.

These same complaints were raised in Kenneth's second and third issues. For the

same reasons we stated in issues two and three, we overrule this portion of

Kenneth's fourth issue.

In three sub-issues, Kenneth argues that (1) at the time the probate court

entered its December 9, 2020 order, no party had raised an adverse claim against

the purported non-testamentary transfer; and, by authorizing Berlinger to control

the companies, the court "unilaterally shifted the burden to [Kenneth] to prove the

transfers were valid instead of on another party to prove they were invalid. This is

improper;” (2) the probate court appointed Berlinger without additional bond

coverage as receiver; and (3) Berlinger's actions involved assets outside of the

estate that were not covered by his bond.

19

As stated earlier, the probate court issued a subsequent order appointing

Compton as receiver and discharging Berlinger. Thus, Kenneth's issues

concerning the December 9, 2020 order appointing Berlinger are moot. See

Flamingo, 569 S.W.3d at 331. Moreover, his second and third sub-issues listed

above were not presented to the probate court and are outside of our interlocutory

jurisdiction to address the January 11, 2021 order appointing a receiver. See TEX.

R. APP. P. 33.1(a); TEX. CIV. PRAC. & REM. Code § 51.014(a)(1) (permitting

interlocutory appeal of order appointing receiver); Walker Sand, Inc. v. Baytown

Asphalt Materials, Ltd., 95 S.W.3d 511, 514 (Tex. App.—Houston [1st Dist.]

2002, no pet.) (stating that Texas courts strictly construe statutes authorizing

interlocutory appeals).

We overrule Kenneth's fourth issue.

F. Appointment of Jeff Compton as Receiver of Dial Electrical

In his fifth issue, Kenneth argues that the probate court improperly

appointed Compton as receiver of Dial Electrical. In a single paragraph, Kenneth

repeats his earlier arguments from his second, third, and fourth issues that the

probate court did not make findings of "necessity to prevent danger of being lost,

removed or materially injured” or "to conserve the Company and avoid damage to

interested parties is required.” For the same reasons we stated in issues two, three,

and four, we overrule this portion of his fifth issue.

20

In another sub-issue, Kenneth also complains that no evidence was presented

as to Compton's qualifications before he assumed the role of receiver. Kenneth's

sub-issue was also not presented to the probate court, and he cites no authority in

support of his argument. See TEX. R. APP. P. 33.1, 38.1(i). Accordingly, the issue

is waived.

We overrule Kenneth's fifth issue.

Because Kenneth has failed to challenge an independent ground supporting

the probate court’s receivership order, we conclude that Kenneth has not shown

that the probate court abused its discretion in appointing a receiver. We overrule

all pending motions as moot.