Janetta Bess Harrison, A/K/A Bess Janetta Harrison, A/K/A Bess Janetta Harrison, A/K/A Bess H. Terry, Individually And As Trustee Of The Keekack Trust, A/K/A Keekack Trust Number One v. Estate of Jimmie L. Querner, Sr., Deceased Jimmie L. Querner, Jr. Co-Independent Executor and Beneficiary of the Estate--Appeal from Probate Court No 1 of Bexar County

No. 04-98-00189-CV No. 04-98-00189-CV
Janetta Bess HARRISON, a/k/a Bess Janetta Harrison,

a/k/a Bess H. Terry, Individually and as Trustee of
the Keekack Trust, a/k/a Keekack Trust No. One,
Appellant
v.
Jimmie L. QUERNER, Jr.,

Co-Independent Executor and Beneficiary of the
Estate of Jimmie L. Querner, Sr., Deceased,
Appellee
From Probate Court No. One, Bexar County, Texas
Trial Court No. 89-PC-2417
Honorable John A. Hutchison, III, Visiting Judge Presiding

Opinion by: Alma L. L pez, Justice

Sitting: Phil Hardberger, Chief Justice

Alma L. L pez, Justice

Karen Angelini, Justice

Delivered and Filed: November 30, 1999

AFFIRMED

This is an appeal from the probate court of a declaratory judgment concerning allegations of fraud, conversion, and undue influence concerning the collection of a real estate lien note. For the reasons stated in this opinion, we affirm the judgment of the trial court.

Factual Background

In 1983, Jimmie L. Querner, Sr., 74, was in bad health and deeply in debt. His ex-wife was seeking enforcement of the property settlement of the divorce by foreclosing on part of his ranch. On June 28, 1983, he signed an Indenture of Trust which conveyed the major part of his assets to three trustees - his sister, Mary Poole, his niece, Bess Harrison, and his brother, Harold D. Querner for the benefit of Querner's children. His two adult children, Thera Querner and Jimmie L., Jr., who are the beneficiaries of his Estate, were unaware of this transaction.

On July 5, 1983, Querner purportedly signed duplicate Powers of Attorney (POA) naming Bess as his Attorney-in-fact. The POA contained facial irregularities and questionable signatures and notarizations. On July 22, 1983, the three Querner Trust trustees and Querner, Sr. signed an amendment to the Querner Trust Agreement in which Querner, Sr. relinquished his power over the trust and gave absolute discretion to the trustees, including the discretion to terminate the trust in seven years and distribute the corpus to themselves and Bess's two children.

On December 2, 1983, Bess and her mother, as trustees, executed a real estate lien note in the amount of $188,000.00 payable to the Keekack Trust (a trust for the benefit of Bess's children). The note also contains an alleged signature of Querner, Sr. as Guarantor. The note was given to reflect a loan from the Keekack Trust to the Querner Trust. Bess allegedly served as a pass-through of a $188,000.00 loan from City Savings Association to Bess as trustee of Keekack Trust. Bess stated that this loan was necessary to stop the former Mrs. Querner's foreclosure effort on the ranch. In connection with this loan, the 900-acre Q-Bar-Q Ranch, located in Gillespie and Kerr Counties, was listed as security. There is no evidence of a deposit of this amount being made into the Querner Trust bank account. At trial, the evidence established that only $1,545.50 was actually loaned to the Querner Trust in connection with this transaction.

In September of 1984, Querner, Sr. and his ex-wife sold a 13-acre property known as Belgium Farms. At the closing of this sale, the Querner children learned for the first time of the Querner Trust's existence because Querner's interest in this property had been previously conveyed to the Trust. On September 21, 1984, the Querner Trust was revoked, the corpus was returned to Querner, Sr., and he realized gross proceeds from this sale of slightly more than one million dollars. Title company records show that Bess was paid $249,660.68 from these proceeds based on the loans payable schedule provided to the closing agent by Bess's accountant at Bess's direction. The schedule included the $188,000.00 note.

In the Estate litigation from which this appeal arises, Bess attached to a motion for partial summary judgment a mostly type-written letter addressed to "Uncle Jimmie" which notified him that her mother would serve as substitute trustee of Keekack Trust in connection with an extension of the $188,000 note which Bess would ultimately sign as Querner's attorney-in-fact. The note also stated:

Due to the fact you are unable to pay off the debt due out of the proceeds of the sale from the Belgium Farms in all or part, then I agree to extend the Note for 15-20 years. I feel that 15 years is adequate. I also understand that the Austin Street property may sale [sic] and certainly, I expect to receive partial if not full payoff then, please.

I appreciate your agreement to pay off the unsecured monies you owe on closing. With the revocation of the Trust, it is imperative that we wait to see if you have any payments made on the ranch before I extend the note to know the new balance.

The letter is signed "Bess" and bears a hand-written date of "Sept 2, '84." Bess relied on this letter to show that the payment she received from the Belgium Farms closing was not applied to the note in question.

On November 10, 1984, Bess, in her purported capacity as attorney-in-fact for Querner, Sr., executed an agreement to extend the $188,000.00 note and deed of trust payable to herself as trustee of the Keekack Trust.

Procedural background

Querner, Sr. sought relief from his creditors in the bankruptcy court in April of 1989. He died in August of 1989 and the case was transferred to the state probate court. Bess presented a secured claim based on a $188,000.00 note and extension agreement to the Estate for payment in 1996. Bess was unable to produce the original note. Copies of the note were ultimately filed or produced in several forms, and contained a purported signature by Querner, Sr., and the signatures of Bess and her mother as trustees of the Querner Trust. On some forms, part of the signature page evidenced a torn-out area where the signature of the third trustee, Harold D. Querner, would logically have been placed, if executed. On another copy, Harold D.'s signature line was blank. And on a third form of the note, the purported signature of Harold D. is shown.(1)

Jimmie, Jr. and Thera, the co-independent executors and beneficiaries of their father's Estate, filed a declaratory judgment action seeking a judgment that the $188,000.00 had been fully paid and discharged at the 1984 closing, and/or that the extension was, inter alia, void, fraudulent, and barred by the statute of limitations, and that clear title in the Q Bar Q Ranch should be found in the names of the Estate's beneficiaries. The co-executors also sued Bess for malicious cloud on title, for conspiring with her mother to defraud the Estate, conversion, breach of fiduciary duty, and for attorney's fees. Bess denied these charges, raised affirmative defenses and counterclaimed to collect on the note and for filing frivolous pleadings. The parties filed cross-motions for partial summary judgment on the note and extension agreement in question. The trial court denied Bess's motion and granted the co-executors' motion based upon limitations.

Following a jury trial on the remaining issues, the court entered a final judgment based upon the verdict on October 20, 1997. The jury found that the note in question had been fully paid, that Bess had fraudulently altered the note and converted funds belonging to Querner, Sr. or his Trust. The jury found that out of the proceeds of the $188,000.00 loan, only $1,545.50 had actually been lent to Querner, and that Bess had unlawfully converted the remaining $186,454.50. The jury also found that the extension agreement was executed in breach of Bess's fiduciary duty to Querner and without his authorization. They further found that the notary's signature on the POA was invalid, that the POA was procured by fraud, and executed as a result of a breach of fiduciary duty by Bess and/or her mother. The jury also found that Bess had constructively defrauded Querner in the amount of $270,836.24 in actual damages.

The jury found that Bess had acted with malice, and the trial court then conducted a second, bifurcated trial and the jury awarded $500,000.00 each to Jimmie Jr. and to Thera as punitive damages. Bess filed a motion for new trial and motion for judgment n.o.v. The co-executors filed a stipulation of remittitur, which the court acknowledged in its order denying Bess's motions, which reduced the amount of actual damages to $208,195.42. Bess filed a notice of appeal.

Waiver

Bess's first six issues concern the $188,000.00 note - legal and factual insufficiency that the note was paid in full, that the note was materially altered, and that the court erroneously admitted defendant's abandoned pleadings (i.e., superseded by amended versions) which showed several forms of the note in question which unfairly prejudiced Bess's case. Appellant, however, does not raise any issue concerning the court's determination that her suit to collect on the note and to foreclose the deed of trust liens were barred by limitations. The unenforceability of the note has been determined as a matter of law. See Tex. Civ. Prac. & Rem. Code 16.035(a) (lienholder must sue within four years of date cause of action accrues), (d)(lien void when limitations runs). Therefore, any error Bess attempts to raise on the jury charge or an evidentiary ruling at trial as to the validity of her claim on the note would be harmless error. These issues are waived. Issues determined in a partial summary judgment are final although the judgment is interlocutory. Crumpton v. Mike Stevens, MGA, 936 S.W.2d 473, 477 (Tex. App.-Fort Worth 1996, no writ). After an interlocutory summary judgment is granted, the issues it decides cannot be litigated further unless the trial court sets the judgment aside or the partial summary judgment is reversed on appeal. Id.; Hendricks v. Thornton, 973 S.W.2d 348, 358 (Tex. App.-Beaumont 1998, no pet.).

The trial court found that the $188,000.00 note first matured on December 2, 1985, but that Bess's claim accrued again no later than August 16, 1989, when she learned that Querner, Sr. had filed bankruptcy proceedings. If the extension agreement had not been held invalid, the four-year statute of limitations would have expired on December 2, 1989. If the claim were somehow revived by the bankruptcy, limitations would have expired August 16, 1993. Bess filed her claim in the probate proceedings on April 17, 1996. We overrule appellant's first six issues concerning the enforceability of the note.

Actual Damages

In her seventh and eighth issues, appellant asserts the evidence supporting the jury's finding of actual damages in the amount of $270,836.24 is legally and factually insufficient. Appellant's brief overlooks the appellees' stipulation of remittitur and the trial court's order reducing the judgment to reflect actual damages of $208,195.42. The damages stem from the monies paid to appellant at the closing of the Belgium Farms sale pursuant to a 41-page schedule of loans payable to appellant as supplied by appellant and her accountant. This schedule indicated that Querner owed appellant $188,000.00 and accrued interest, which the jury concluded was grossly inaccurate.

Appellant attempts to shed the responsibility of a fiduciary to undo the liability she incurred for breach of this duty. That argument is without merit, however. The jury found that appellant had wrongfully converted $186,454.40 of Querner's funds and committed constructive fraud. She assigned no error to the submission of these issues on the amount actually loaned ($1,545.50), the amount unlawfully converted, and on the constructive fraud issue. Nor does she raise any question of insufficient evidence on these issues, or that the court's conclusions of law that the note was not a valid debt because it was procured by fraud and there was a substantial failure of consideration. There is ample evidence to support these findings and conclusions. Issues seven and eight are overruled.

Million Dollar Malice

In issues nine through thirteen, appellant argues that there is no evidence or insufficient evidence that she acted with malice with respect to Querner, Sr. or that the evidence justified a million dollar punitive damage award. She also complains that the award was excessive.

When reviewing the factual sufficiency of a punitive damages award, we are required to evaluate in detail the relevant evidence and explain why it does or does not support the award in light of the Kraus factors. See Transportation Ins. Co. v. Moriel, 879 S.W.2d 10, 31 (Tex. 1994). In determining whether an award of punitive damages is reasonable, the court should consider (1) the nature of the wrong, (2) the character of the conduct involved, (3) the degree of culpability of the wrongdoer, (4) the situation and sensibilities of the parties concerned, and (5) the extent to which such conduct offends a public sense of justice and propriety. See Alamo Nat'l Bank v. Kraus, 616 S.W.2d 908, 910 (Tex. 1981). We may overturn a jury's verdict and remand the case for new trial only if the verdict "is so against the great weight and preponderance of the evidence as to be manifestly unjust." Pool v. Ford Motor Co., 715 S.W.2d 629, 635 (Tex. 1986).

To determine whether the punitive damages awarded in this case were excessive, we apply the three guideposts established by the Supreme Court in BMW: (1) the degree of reprehensibility of the defendant's misconduct; (2) the disparity between actual and punitive damages; and (3) a comparison of the punitive damages awarded and other civil or criminal penalties that could be imposed for similar misconduct. BMW of North America v. Gore, 517 U.S. 559, 574-75 (1996); see Owens-Corning Fiberglass Corp. v. Malone, 972 S.W.2d 35, 45 (Tex. 1998) (upholding punitive damage award of $3.7 million against asbestos manufacturer under BMW standards).

The jury heard evidence that Bess caused Querner, Sr. to place most of his assets into a trust when he was in very ill health. She also was responsible for creating powers of attorney which contained forged signatures of Querner, Sr. and the notary. Then, she caused the Querner Trust to be amended to permit Bess, her mother, and another uncle to terminate the Trust and divert the assets away from his children, the intended beneficiaries, and be given to the trustees and Bess's children. She misrepresented these terms to Querner, Sr. She obtained Querner's guarantee on the $188,000.00 note with the understanding that the funds were for him, but only paid $1,545.50 into the Querner Trust Account. She submitted claims for debts in amounts not owed by Querner, accepted payments in excess of the true amounts owed, and then used an invalid POA to renew and extend the same note and attempt to collect on the note again. The record is replete with examples of reprehensible conduct. Under the circumstances, a punitive to actual damages ratio of five to one is not unreasonable.

Appellant argues that the evidence does not establish accepted criteria for awarding punitive damages. At the punitive stage of the trial, appellant was questioned about her financial status. Bess testified that she frequently travels internationally. She had bank accounts in a number of foreign countries. She is self-employed and engaged in the import and export of international commodities, primarily fish meal. She also told the jury that she was bankrupt, living with her mother when she was in this country, and that her net worth consisted of a 1992 Chrysler and the clothes on her back. The jury was already aware, however, that she was the grantor and trustee of more than one trust for the benefit of herself and her children. The jury also had a more than adequate opportunity to evaluate appellant's credibility. There is ample evidence to support the jury's award.

Appellant also argues that the million dollar award is excessive in light of her net worth. See Lunsford v. Morris, 746 S.W.2d 471, 472 (Tex. 1988). Bess was never asked directly whether she had any money in the numerous foreign back accounts. Therefore, appellant suggests that the jury should have been instructed to limit its analysis to the evidence that she owned a car and the clothes on her back. However, counsel for both sides covered the net worth factor in their closing arguments, directing the jury's attention to that element. Any error in failing to adequately instruct the jury on net worth was harmless. Appellant's ninth through thirteenth issues are overruled.

The judgment of the trial court is affirmed and the costs of appeal are charged against the appellant.

Justice Alma L. L pez

DO NOT PUBLISH

1. At trial Harold D. Querner's wife testified that the signature on one version of the note was not her husband's. Notary Janice C. Stenoien also testified that the signature attesting Harold D.'s signature was not hers.