Jones, Richard D. v. Stubbeman, McRae, Sealy, Laughlin & Browder, Inc., and William Pennebaker--Appeal from County Court of Midland County

COURT OF APPEALS

COURT OF APPEALS

EIGHTH DISTRICT OF TEXAS

EL PASO, TEXAS

)

RICHARD D. JONES, ) No. 08-01-00202-CV

)

Appellant, ) Appeal from

)

v. ) County Court

)

STUBBEMAN, McRAE, SEALY, ) of Midland County, Texas

LAUGHLIN & BROWDER, INC., and )

WILLIAM PENNEBAKER, ) (TC# P11,674)

)

Appellees. )

O P I N I O N

We issued our original opinion on April 18, 2002, affirming the summary judgment granted in favor of Stubbeman, McRae, Sealy, Laughlin & Browder, Inc. and William Pennebaker (Stubbeman-Pennebaker). Appellant, Richard D. Jones subsequently filed a Motion for Rehearing alleging that the opinion failed to address several causes of action. We grant the motion for rehearing, withdraw our prior opinion, and substitute the following opinion. We affirm in part and reverse in part.

FACTUAL SUMMARY

 

Robert Emmett Boyle (Emmett) died in 1980. He was survived by wife, Sweetie Boyle, his daughter by a previous marriage, Patricia Boyle Young, his stepdaughter, Mary Catherine Jones, (Sweetie=s daughter by a previous marriage), Mary=s children, Richard Jones and Leigh Jones, and Mary=s granddaughter, Angela Starrett. At the time of his death, Emmett=s gross estate (one-half of the community estate) totaled almost $3 million. Emmett disposed of his half of the community estate by will. He made a minor cash bequest of $2,500 to Mary and left the reminder of his gross estate in a trust for the benefit of Patricia with the trust to terminate on July 1, 1989. Sweetie retained the other half of the community estate. Midland National Bank (the Bank)[1] served as trustee of the trust. Although Sweetie was designated the executor of the will, she suffered from serious physical and mental problems and could not serve in that capacity. Consequently, Pennebaker was appointed executor. In 1983, as a result of Sweetie=s disability, the family and the Bank created a management trust to manage Sweetie=s assets, with the Bank serving as trustee. Approximately $1 million in assets were withheld from the management trust and were instead managed by Mary. Sweetie was adjudged incompetent in 1984 but she did not have a guardian of her person or estate appointed until 1988. At that time, Mary was appointed to serve as the guardian of both her estate and person. In November 1988, the County Court at Law approved Mary=s application for a gifting plan for Sweetie=s heirs.

 

On June 14, 1992, Mary died. On June 17, the Bank was appointed the successor guardian of Sweetie=s estate and William Pennebaker of the Stubbeman, McRae, Sealy, Laughlin & Browder law firm was appointed the successor guardian of her person. In July 1992, Richard filed a formal objection to these appointments and requested that the court appoint him to serve as the guardian of Sweetie=s estate and person. On October 27, 1992, the Bank and Richard resolved the dispute by agreeing that Richard would be appointed guardian of Sweetie=s person and the Bank would remain the guardian of her estate. Both parties submitted their respective claims for attorney=s fees and neither party contested the other party=s claim for attorney=s fees. Those fees were paid out of the guardianship account.

In May 1993, Richard=s attorneys proposed another gifting plan to the Bank. The Bank did not immediately file an application with the County Court at Law for approval of this plan. According to Richard, the Bank resisted the plan before finally submitting it to the County Court at Law for approval. On December 16, 1994, the court approved the Bank=s application to carry out this gifting plan. Sweetie died on December 16, 1996, and her will named the Bank as the executor of her estate. Because the disbursements under the gifting plan occurred less than three years before Sweetie=s death, these sums were included in her estate. The Bank served as executor of the estate and filed an Inventory, Appraisement, and List of Claims on November 20, 1997.

On February 24, 1999, the Bank filed a final accounting showing the condition of the estate. In the same document, it filed a petition for declaratory judgment related to its execution of duties as executor of Sweetie=s estate. Among other things, it specifically sought a declaration that it had no liability to any of the beneficiaries. Richard filed a counterclaim against the Bank, Pennebaker, and the Stubbeman law firm, alleging numerous acts of mismanagement, misconduct, and breach of fiduciary duty on the part of the defendants arising out of the management of Sweetie=s assets and estate prior to and following her death.

 

The Stubbeman-Pennebaker defendants filed a motion for summary judgment based upon the affirmative defenses of resjudicata, collateral estoppel, and limitations. The trial court granted summary judgment in favor of these defendants and severed it from the suit involving the Bank so that it became a final and appealable summary judgment.[2]

SUMMARY JUDGMENT

In Issues One, Two, and Three, Richard challenges the summary judgment granted in favor of the Stubbeman-Pennebaker defendants. Because the trial court did not specify the ground relied upon for its ruling, the summary judgment must be affirmed if any of the theories advanced is meritorious. See State Farm Fire & Casualty Co. v. S.S., 858 S.W.2d 374, 380 (Tex. 1993).

The Standard of Review

In a traditional summary judgment proceeding, the standard of review on appeal is whether the successful movant at the trial level carried the burden of showing that there is no genuine issue of material fact and that judgment should be granted as a matter of law. Lear Siegler, Inc. v. Perez, 819 S.W.2d 470, 471 (Tex. 1991); Duran v. Furr=s Supermarkets, Inc., 921 S.W.2d 778, 784 (Tex.App. El Paso 1996, writ denied). Thus, the question on appeal is not whether the summary judgment proof raises fact issues as to required elements of the movant=s cause or claim, but whether the summary judgment proof establishes, as a matter of law, that there is no genuine issue of material fact as to one or more elements of the movant=s cause or claim. Gibbs v. General Motors Corp., 450 S.W.2d 827, 828 (Tex. 1970); Duran, 921 S.W.2d at 784. In resolving the issue of whether the movant has carried this burden, all evidence favorable to the non movant must be taken as true and all reasonable inferences, including any doubts, must be resolved in the non movant=s favor. Nixon v. Mr. Property Management Co., Inc., 690 S.W.2d 546, 548-49 (Tex. 1985); Duran, 921 S.W.2d at 784.

 

A defendant who conclusively negates at least one essential element of a plaintiff=s cause of action is entitled to summary judgment on that cause of action. Randall=s Food Markets, Inc. v. Johnson, 891 S.W.2d 640, 644 (Tex. 1995); Provenciov. Paradigm Media, Inc., 44 S.W.3d 677, 680 (Tex.App. -El Paso 2001, no pet.). Similarly, a defendant who conclusively establishes each element of an affirmative defense is entitled to summary judgment. Randall=s Food Markets, 891 S.W.2d at 644; Provencio, 44 S.W.3d at 680. If the defendant meets this burden, the plaintiff must then raise a genuine issue of material fact on the negated element of the cause of action or must produce evidence raising a genuine issue of material fact in avoidance of the affirmative defense. Provencio, 44 S.W.3d at 680;Milam v. National Ins. Crime Bureau, 989 S.W.2d 126, 130 (Tex.App. San Antonio 1999, no pet.).

Statute of Limitations

A defendant moving for summary judgment on the affirmative defense of limitations has the burden to conclusively establish that defense. KPMG Peat Marwick v. Harrison County Housing Finance Corp., 988 S.W.2d 746, 748 (Tex. 1999). Thus, the defendant must (1) conclusively prove when the cause of action accrued, and (2) negate the discovery rule, if it applies and has been pled or otherwise raised, by proving as a matter of law that there is no genuine issue of material fact about when the plaintiff discovered, or in the exercise of reasonable diligence should have discovered, the nature of its injury. Id. If the movant establishes that the statute of limitations bars the action, the non-movant must then adduce summary judgment proof raising a fact issue in avoidance of the statute of limitations. Id.

 

Richard=s claims based upon breach of fiduciary duty and fraud are subject to a four-year statute of limitations. See Tex.Civ.Prac.&Rem.Code Ann. ' 16.004(a)(4)(5)(Vernon Supp. 2002). Ordinarily, the statute of limitations begins to run when a particular cause of action accrues. S.V. v. R.V., 933 S.W.2d 1, 4 (Tex. 1996); Mitchell Energy Corp. v. Bartlett, 958 S.W.2d 430, 436 (Tex.App.--Fort Worth 1997, pet. denied). Determining what rule of accrual to apply is a question of law. Moreno v. Sterling Drug, Inc., 787 S.W.2d 348, 351 (Tex. 1990); Mitchell Energy, 958 S.W.2d at 436. As to the defendant=s burden under the first prong of the test stated in KPMG Peat Marwick, a cause of action accrues when a wrongful act causes some legal injury, even if the fact of injury is not discovered until later. S.V., 933 S.W.2d at 4; TanglewoodTerrace, Ltd. v. City of Texarkana, Texas, 996 S.W.2d 330, 336 (Tex.App.--Texarkana 1999, no pet.).

Richard=s claims assert numerous acts of misconduct, fraud, and breach of fiduciary duties on the part of the Stubbeman-Pennebaker defendants over a time period from 1980 until 1998.[3] These allegations of misconduct are more easily addressed in two groups: 1980 to 1992, and 1993 to 1998.

1980 - 1992

C The Stubbeman law firm failed to disclose that at the time Pennebaker represented the estates of Emmett Boyle and Sweetie Boyle, the law firm represented the Bank in other matters.

C Pennebaker engaged in self-dealing and failed to disclose a conflict of interest. Pennebaker, as agent and attorney-in-fact for Sweetie Boyle, purchased $28,680 in common stock in Lovelady, Inc. in June 1983 at a time when Pennebaker was a member of the Board of Directors of that corporation and while its principal, Ike Lovelady, was a major client of the Stubbeman law firm. The stock was sold in 1985 for only $458, resulting in a loss of $28,222 to Sweetie Boyle.

 

C Pennebaker permitted Sweetie Boyle to execute documents as executor of Emmett=s estate and on her own behalf transferring assets from their estates, even after the establishment of the Sweetie Boyle Management Trust.

C After Sweetie was adjudged incompetent, Pennebaker transferred property out of Emmett=s estate in a manner contrary to the will.

C Between December 1985 and November 1986, approximately 13,513 shares of AT&T stock disappeared from the Sweetie Boyle Management Trust and have not been accounted for by the Bank or by Pennebaker.

C From 1984 to 1988, no guardian was appointed for the person or the estate of Sweetie Boyle.

C Pennebaker and the Stubbeman law firm made material misrepresentations to the probate court and engaged in fraudulent conduct.

C Pennebaker and the Stubbeman law firm engaged in a conspiracy to defraud Richard.

C The Bank, Pennebaker, and the Stubbeman law firm caused unnecessary and excessive expenses by refusing Richard=s request to be appointed guardian of Sweetie=s person and estate, and then by fighting his objection to the appointment of the Bank and Pennebaker to serve in these capacities.

Reports and Records

 

In the motion for summary judgment, the Stubbeman-Pennebaker defendants generally alleged that all of those claims accrued prior to February 16, 1996. With respect to Richard=s assertion of the discovery rule, they argued that with the exercise of reasonable diligence, he should have discovered the nature of his injury prior to that date because he received regular, comprehensive reports from the Bank which specified all actions taken with respect to the various trusts, guardianship estate, and other accounts. However, Pennebaker and the Stubbeman law firm did not include any of these reports in the summary judgment evidence.[4] Gay Fields, a trust officer with the Bank, stated in a summary judgment affidavit that trust beneficiaries receive quarterly and annual reports. These reports list all income received in the trust and every expenditure made by the Bank. Richard had received monthly, quarterly, and annual reports pertaining to his trust account as long as Fields had been in charge of his trust account. However, Richard=s allegations pertained to mismanagement of the estates of his grandparents, not his own trust account; therefore, the reports he received on his trust account were irrelevant to this issue.

The Stubbeman-Pennebaker defendants also relied on the deposition testimony of Kathy Kennedy, a trust officer with the Bank, to establish that Richard knew the facts on which his claims were based prior to February 16, 1996. According to Kennedy, the Bank sends out comprehensive reports to its clients on a quarterly and sometimes monthly basis. These reports list the assets and all account transactions during a specified period of time. Kennedy=s testimony does not demonstrate that Richard ever received reports related to his grandparents= accounts or estates. Kennedy also stated that she spoke with Richard on a regular basis about Atrust business@ but she did not detail the content of these conversations or when they occurred. Therefore, this evidence does not establish any facts from which it can be determined that Richard discovered the nature of his injury prior to February 16, 1996.

At his deposition, Richard produced numerous documents, including various bank statements, to support his claims, but the record does not indicate when he came into possession of these documents. Additionally, Richard possessed numerous documents related to Sweetie=s estate which he had used in 1993 to produce the gifting plan. The record does not reflect the facts contained within these documents. Consequently, it cannot be concluded that Richard knew, or with the exercise of reasonable diligence should have known of the nature of his injury. This evidence does not negate Richard=s assertion of the discovery rule.

 

Application of Other Summary Judgment Evidence to Richard=s Claims

With respect to the conflict of interest allegations, Richard knew in 1988 that the Stubbeman law firm represented his grandparents= estates and the Bank. Therefore, Pennebaker and the Stubbeman law firm conclusively established that this particular claim is barred by limitations. Richard also alleged that Pennebaker engaged in self-dealing. In 1983, Pennebaker, acting on behalf of Sweetie Boyle pursuant to a power of attorney, purchased 4,000 shares of Lovelady, Inc. common stock at a price of $28,680. Pennebaker did not disclose that he was a member of the company=s board of directors. Pennebaker did not offer any evidence to negate the discovery rule with respect to this claim.

Several of Richard=s allegations pertain to the improper transfer of property by Pennebaker. All of these allegations relate to events occurring in the 1980s. But Pennebaker did not establish any facts to negate Richard=s assertion of the discovery rule and thus did not establish his entitlement to summary judgment on this claim.

Richard also complains that neither the Stubbeman law firm nor Pennebaker took steps to secure the appointment of a guardian for Sweetie Boyle during the years 1984 to 1988. It is undisputed that Richard knew of his grandmother=s incompetency during these years. Therefore, the trial court properly determined that the statute of limitations had run on this claim prior to 1996.

 

Richard makes several claims against the Stubbeman-Pennebaker defendants related to the 1992 guardianship dispute. These include his claims that the defendants made material misrepresentations to the probate court, engaged in fraudulent conduct, and caused unnecessary and excessive expenses. Richard admitted in his deposition that these allegations had all been raised in the 1992 litigation. The evidence conclusively shows that Richard had knowledge of all pertinent facts related to the guardianship dispute several years prior to February 1996 since he participated in the litigation such that these matters are barred by limitations.

In summary, the statute of limitations had expired prior to the filing of Richard=s suit on the following claims occurring between 1980 and 1992: (1) the Stubbeman law firm and Pennebaker failed to disclose their relationship; (2) the Stubbeman law firm and Pennebaker failed to secure appointment of guardian for Sweetie; and (3) the Stubbeman law firm and Pennebaker engaged in misconduct and caused Richard and the various estates to incur unnecessary expenses related to guardianship dispute in 1992. Therefore, the trial court properly granted summary judgment on all these claims. We will now consider whether the trial court properly granted summary judgment on the remaining claims occurring between 1980 and 1992.

General Law Governing Res Judicata

Seeking to establish both claim preclusion and issue preclusion, the Stubbeman-Pennebaker defendants argued in the trial court that the settlement of the guardianship dispute completely bars the current litigation. Broadly speaking, res judicata is the generic term for a group of related concepts concerning the conclusive effects given final judgments. Barr v. Resolution Trust Corp., 837 S.W.2d 627, 628 (Tex. 1992). There are two principal categories within this general doctrine: (1) claim preclusion (also known as resjudicata); and (2) issue preclusion (also known as collateral estoppel). Barr, 837 S.W.2d at 628. Resjudicata, or claim preclusion, prevents the relitigation of a claim or cause of action that has been finally adjudicated, as well as related matters that, with the use of diligence, should have been litigated in the prior suit. Id. Issue preclusion, or collateral estoppel, prevents relitigation of particular issues already resolved in a prior suit. Id.

 

Claim Preclusion

Res judicata or claim preclusion prevents splitting a cause of action. Id. at 629. The policies behind the doctrine reflect the need to bring all litigation to an end, prevent vexatious litigation, maintain stability of court decisions, promote judicial economy, and prevent double recovery. Id. Res judicata treats a judgment, once rendered, as the full measure of relief to be accorded between the parties on the same claim or cause of action. Ford v. City State Bank of Palacios, 44 S.W.3d 121, 131 (Tex.App.--Corpus Christi 2001, no pet.), citing Barr, 837 S.W.2d at 628.

Res judicata precludes relitigation of claims that have been finally adjudicated, or that arise out of the same subject matter and that could have been litigated in the prior action. Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 652 (Tex. 1996), citing Barr, 837 S.W.2d at 628. It requires proof of the following elements: (1) a prior final judgment on the merits by a court of competent jurisdiction; (2) identity of parties or those in privity with them; and (3) a second action based on the same claims as were raised or could have been raised in the first action. Amstadt, 919 S.W.2d at 652.

 

The remaining claims pertain to Pennebaker=s alleged self-dealing, the improper transfer of property from the estates of Emmett and Sweetie Boyle, and the loss of property from the estate of Sweetie Boyle. All of these events occurred between 1983 and 1986. Pennebaker established all three res judicata elements. First, the summary judgment evidence shows that the parties entered into a Rule 11 agreement in settlement of Richard=s claims, and pursuant to that agreement, Richard dismissed his request to be named guardian of Sweetie=s estate. An agreed judgment of dismissal in settlement of a controversy is a judgment on the merits. Freeman v. Cherokee Water Co., 11 S.W.3d 480, 483 (Tex.App. -Texarkana 2000, pet. denied). Second, Pennebaker was a party to the suit. Finally, the summary judgment evidence established that Richard sought to be appointed guardian of Sweetie=s estate because he wanted to have access to the records and discover the basis for Pennebaker=s actions. This evidence demonstrates that Richard, with the exercise of diligence, could have discovered and litigated his claims against Pennebaker in the 1992 litigation. Therefore, the trial court properly determined that the remaining claims were barred by resjudicata. Given our conclusion, it is unnecessary to address the collateral estoppel argument.

1993 - 1998

Turning our attention to the claims based upon misconduct occurring between 1993 and 1998, Richard=s petition alleged that the Stubbeman-Pennebaker defendants participated in the Bank=s breach of its fiduciary duties as follows:

C The Bank failed to engage in estate tax planning with respect to Sweetie=s estate from 1993 until her death in late 1996, and with the assistance of Pennebaker and the Stubbeman law firm, delayed implementation of the 1994 gifting plan.

C In 1993, the Bank transferred oil-producing properties to Anadarko Petroleum without exploring the value of the properties.

C The Bank failed to investigate alleged wrongdoing occurring in the management of Sweetie=s estate.

C In 1998, the Bank leased half of certain property in Scurry County, which the Bank manages as trustee for Patricia Boyle Young, but it failed or refused to lease the other half of the property, which the Bank holds as executor of Sweetie=s estate.

C The Bank improperly invested in derivative investments A[s]ometime before 1994.@

 

The motion for summary judgment did not attempt to establish when any of these causes of action accrued but generally alleged that all of Richard=s claims accrued prior to February 16, 1996. With respect to the first allegation, the failure to engage in estate tax planning did not cause any injury until Sweetie=s death on December 16, 1996. Therefore, this claim could not have accrued prior to February 16, 1996. Assuming the cause of action accrued on the date of Sweetie=s death, the statute of limitations would not have expired until December 16, 2000. Because Richard filed suit within this time period, summary judgment on the ground of limitations is not proper.

The allegations pertaining to the failure to investigate wrongdoing in the management of Sweetie=s estate would have necessarily occurred after December 16, 1996. Likewise, the claim pertaining to the Scurry County lease is based upon conduct occurring in 1998. Therefore, limitations does not bar these two claims.

Richard=s remaining two claims, the 1993 Anadarko Petroleum transaction and the derivative investments made prior to 1994, occurred more than four years prior to the filing of suit. However, the Stubbeman-Pennebaker defendants offered no summary judgment evidence to establish when Richard discovered or should have known the nature of his injury. Consequently, they did not conclusively prove their entitlement to summary judgment on the ground of limitations. We will now consider whether summary judgment is properly based on res judicata or collateral estoppel.

Res Judicata and Collateral Estoppel

The Stubbeman-Pennebaker defendants relied exclusively on the resolution of the 1992 guardianship dispute to argue that Richard=s claims are barred by res judicata and collateral estoppel. All of the remaining claims are based upon new facts arising after the conclusion of the guardianship dispute. Consequently, res judicata does not apply to these claims. See Marino v. State Farm Fire & Casualty Insurance Co., 787 S.W.2d 948, 949-50 (Tex. 1990).

 

The doctrine of collateral estoppel is used to prevent a party from relitigating an issue that it previously litigated and lost. Quinney Elec., Inc. v. Kondos Entertainment, Inc., 988 S.W.2d 212, 213 (Tex. 1999). To invoke collateral estoppel successfully, a party must establish the following elements: (1) the facts sought to be litigated in the second action were fully and fairly litigated in the first action; (2) those facts were essential to the judgment in the first action; and (3) the parties were cast as adversaries in the first action. Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 521 (Tex. 1998). Because the factual basis of these claims arose after the conclusion of the guardianship dispute, the Stubbeman-Pennebaker defendants are unable to show that the facts sought to be litigated here were litigated in the first suit. Therefore, collateral estoppel does not bar litigation of these facts. Accordingly, we conclude that summary judgment should not have been granted on those claims based upon misconduct occurring between 1993 and 1998. Issues One, Two, and Three are sustained. We affirm the judgment of the trial court granting summary judgment on the claims occurring between 1980 and 1992, but reverse the summary judgment and remand for trial on the remaining claims.

June 13, 2002

ANN CRAWFORD McCLURE, Justice

Before Panel No. 2

Barajas, C.J., McClure, and Chew, JJ.

(Do Not Publish)

 

[1] In 1989, Midland National Bank changed its name to First City National Bank of Midland and then to First City, Texas--Midland, National Association. In 1993, Texas Commerce Bank--Midland, National Association merged with Texas Commerce Bank, National Association, Houston, Texas. Texas Commerce Bank later merged with Chemical Bank and changed its name to Chase Bank of Texas, National Association, in 1998. Chase Bank brought the petition for declaratory judgment. Throughout this opinion, we will refer to the banking entities which served in various capacities simply as Athe Bank.@

[2] The Bank filed a separate motion for partial summary judgment which the trial court granted in the same judgment. The Bank is not a party to this appeal.

[3] Our prior opinion stated that Richard=s causes of action against these defendants pertained to misconduct occurring from 1980 until 1992. Although the petition clearly states other allegations of misconduct by the Bank occurring from 1993 through 1998, it did not immediately appear that those claims also pertained to the Stubbeman- Pennebaker defendants. In his motion for rehearing, Richard correctly pointed out that his petition asserted that the Stubbeman-Pennebaker defendants participated in the Bank=s breach of fiduciary duties.

[4] In support of this assertion, Pennebaker and the Stubbeman law firm cite to AExhibit 1.@ However, their summary judgment evidence contains an Appendix and Appendix II but it does not contain an AExhibit 1@ or any of the reports. The Bank attached numerous reports to its petition for declaratory judgment and labeled it Exhibit 1 but these reports are not part of the summary judgment evidence.