ENAX v. NOACK

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Court of Appeals of Texas,Houston (1st Dist.).

Lloyd R. ENAX, Appellant, v. Verna Lois NOACK, Independent Executrix of the Estate of Hilda Enax, Deceased, Appellee.

No. 01-98-00265-CV.

Decided: January 31, 2000

Panel consists of Justice WILSON, ANDELL, and TAFT. Warren Conner, Sealy, Deborah Heaton McElvaney, Loreta Rea, Houston, for appellant. Steven C. Haley, Tom Bartley, Brenham, for appellee.

OPINION

The primary issues on appeal are (1) whether the county court at law may impose a constructive trust in a guardianship proceeding and (2) whether the county court at law may transfer the case to the district court for rendition of judgment when the ward dies after the jury reaches its verdict, but before a final judgment is signed.   We reverse in part and affirm in part.

Facts

Lloyd Enax is Hilda Enax's son.   Hilda developed Alzheimer's disease in the late 1980s, and Lloyd assumed care of Hilda when she became a widow in 1989.   In October 1990, Lloyd sold Hilda's home in Spring and bought a new home for her in Brenham, near his home.   Hilda lived in the Brenham home until April 1996, when she was moved to a nursing home.   Lloyd then sold the Brenham home.   During this time, Lloyd allowed his property to become commingled with Hilda's property.

In February 1996, Lloyd applied and was appointed guardian of Hilda's person and estate.   In August 1996, Hilda's granddaughter, Lori Noack-May, filed an application to revoke Lloyd's guardianship and to be appointed as the successor guardian.   On August 27, 1996, the county court at law removed Lloyd as guardian, appointed Lori as successor guardian, temporarily restrained Lloyd from spending any proceeds from the sale of Hilda's house, and froze Lloyd's bank account.   The county court at law later issued a temporary injunction incorporating the terms of the temporary restraining order.   In September 1996, Lori, as successor guardian, sued Lloyd to recover Hilda's property under theories of negligence, fraud, negligent misrepresentation, and breach of fiduciary duty.   Lori also asked the court to impose a constructive and resulting trust.

After a question arose concerning a conflict of interest, the county court at law appointed Hilda's daughter, Sheila Enax, as guardian, and Sheila became the plaintiff in the suit against Lloyd.   Before the case came to trial, the county court at law ordered Lloyd to turn all of Hilda's property over to Sheila and to make a final accounting of his administration as guardian.   Lloyd never complied.

The case was tried to a jury in February 1997.   The jury returned a verdict for Sheila, awarding $191,989.65 in actual damages and $216,989.65 in exemplary damages and imposing a constructive trust on Lloyd for $141,989.65.   On February 26, 1997, the county court at law rendered judgment on the verdict.   In March 1997, the county court at law dissolved the temporary injunction.

Lloyd timely filed a motion for new trial and a motion to modify the judgment.   On May 13, 1997, the county court at law signed an amended interlocutory judgment, which in part reduced the actual damages by $5,000.00.   The judgment was made interlocutory to allow an appraisal of real estate owned by Lloyd that would be subject to the constructive trust.

Hilda died on June 21, 1997, before the county court at law signed an amended final judgment.   In August 1997, Verna Lois Noack was appointed as the executrix of Hilda's estate, and the county court at law allowed her to substitute as the plaintiff.   On October 9, 1997, the county court at law transferred the case to the district court with the district court's permission.   On December 30, 1997, the district court signed a final amended judgment, awarding $186,989.65 in actual damages and $216,989.65 in exemplary damages and imposing a constructive trust on Lloyd for $141,989.65.

Discussion

Authority of County Court at Law to Impose Constructive Trust

 In point of error one, Lloyd brings an issue of first impression, contending the county court at law lacked subject-matter jurisdiction to impose a constructive trust in a guardianship proceeding.1  Relying on cases holding that only statutory probate courts and district courts may impose constructive trusts in probate proceedings, Lloyd argues that the county court at law had no authority to impose a constructive trust in a guardianship proceeding.   We disagree.

 Both Lloyd and Verna agree that in probate proceedings the constitutional county courts and the statutory county courts at law have no authority to employ the equitable remedy of imposing a constructive trust.   See Qualia v. Qualia, 878 S.W.2d 339, 341 (Tex.App.-San Antonio 1994, writ denied);  Green v. Watson, 860 S.W.2d 238, 243-44 (Tex.App.-Austin 1993, no writ);  Ragland v. Ragland, 743 S.W.2d 758, 759 (Tex.App.-Waco 1987, no writ);  Mejorada v. Gonzalez, 663 S.W.2d 891, 892-93 (Tex.App.-San Antonio 1983, no writ).   The rationale behind these decisions is based on an interpretation of Probate Code section 5A:

tex. Prob.Code Ann. § 5A(a), (b) (Vernon Supp.2000) (emphasis added).   Because the legislature has given specific authority to the statutory probate courts and district courts over “all actions to construe wills, the interpretation and administration of testamentary trusts and the applying of constructive trusts,” the above cited cases interpreted this specific grant of authority to deny the constitutional county courts and statutory county courts at law the authority to impose constructive trusts.  Qualia, 878 S.W.2d at 341;  Green, 860 S.W.2d at 243-44;  Ragland, 743 S.W.2d at 759;  Mejorada, 663 S.W.2d at 892-93.   We agree with this interpretation of section 5A.2

Before 1993, section 5A applied to both probate and guardianship proceedings.   See Act of May 23, 1989, 71st Leg., R.S., ch. 1035, § 3, 1989 Tex. Gen. Laws 4162, 4163.   In 1993, the legislature rewrote the guardianship laws and separated them into a new chapter XIII of the Probate Code. See Act of May 30, 1993, 73d Leg., R.S., ch. 957, § 1, 1993 Tex. Gen. Laws 4081, 4081 (tex. Prob.Code Ann. §§ 601-892, since amended).   As a part of the 1993 revision, guardianship provisions have been removed from section 5A and “mirrored” in a new section 607:

Constitutional County Court and Statutory

County Court at Law Provisions

tex. Prob.Code Ann. §§ 5A(a), 607(a) (Vernon Supp.2000).

Statutory Probate Court and District Court Provisions

tex. Prob.Code Ann. §§ 5A(b), 607(b) (Vernon Supp.2000) (emphasis added).3

We have uncovered no indication that the legislature in 1993 intended to give the constitutional county courts and county courts at law the new power to impose constructive trusts in guardianship proceedings when this power was previously denied to them.   Legislative history indicates this by showing that new section 607 was supposed to be the “same as current law” except for the language about wills.   house Comm. on Judicial Affairs, Bill Analysis, Tex.C.S.H.B. 2685, 73d Leg., R.S. (1993).  The plain language of the statute, however, controls, and there is no longer language in the Probate Code that indicates only the district court and statutory probate court may apply constructive trusts in guardianship proceedings.   We note that county courts at law are generally authorized to exercise equitable powers.   See tex. Gov't Code Ann. §§ 25.0004(c) (statutory county courts at law have all other powers provided for constitutional county courts), 26.050 (powers of law and equity of constitutional county court) (Vernon 1988).

Accordingly, we conclude the county court at law did have the authority to impose a constructive trust in this guardianship proceeding, and we overrule point of error one.

Transfer from County Court at Law to District Court

In points of error two and three, Lloyd contends the county court at law's transfer of the case to the district court pursuant to Government Code section 74.121(b)(1) was invalid.   tex. Gov't Code Ann. § 74.121(b)(1) (Vernon 1998).4  Both parties agree (1) that the county court at law transferred the case because Hilda died after the jury reached a verdict against Lloyd, but before a final judgment was rendered and (2) that, due to Hilda's death, the case changed from a guardianship proceeding to a probate proceeding and thus the statutory county court at law no longer had the authority to impose a constructive trust.

 The majority of Lloyd's argument is that the statutory county court at law never had the authority to impose a constructive trust and that this lack of authority could not be cured by transferring the case to the district court.   We have rejected the basis for this argument in our treatment of point of error one.   Lloyd's remaining argument is that the district court could not render judgment in a case in which the court did not hear any of the evidence, citing our opinion in W.C. Banks, Inc. v. Team, Inc., 783 S.W.2d 783, 785-86 (Tex.App.-Houston [1st Dist.] 1990, no writ).   We disagree with Lloyd's interpretation of W.C. Banks.

In W.C. Banks, a visiting judge conducted a bench trial.  Id. at 784.   The visiting judge made a docket entry indicating a judgment for the plaintiff, but neither made findings of fact or formally rendered judgment for the plaintiff.  Id. at 784.   The regular judge later rendered judgment for the plaintiff without hearing any of the evidence.   We reversed, holding that Texas Rule of Civil Procedure 330(g) does not authorize a district judge who heard none of the case to render judgment in a bench trial.  Id. at 785-86.

In this case, the jury reached a verdict before the case was transferred.   The concerns addressed in W.C. Banks are inapplicable.   Accordingly, we hold that Government Code section 74.121(b)(1) authorized the country court at law to transfer the case to the district court.

We overrule points of error two and three.

The discussion of the remaining issues presented does not meet the criteria for publication set forth in Texas Rule of Appellate Procedure 47.4.   Accordingly, the remainder of the opinion is not designated for publication.

Based on our disposition of all the points of error, we reverse the judgment of the trial court in part and affirm the judgment of the trial court in part.

Constructive trust

In points of error four and five, Lloyd contends there is either no evidence or factually insufficient evidence to support the imposition of a constructive trust.   Lloyd's complaint appears to be directed at the jury's answer to question 15 in which the jury found that a constructive trust in the amount of $141,989.65 should be imposed on each of the following:  (1) Lloyd's bank account in New Ulm;  (2) his bank account in Bellville;  (3) his tools and tool cabinet;  and (4) the house in New Ulm. The final judgment, however, imposed a constructive trust in the total amount of $141,989.65 on the following of Lloyd's property:  (1) $10,411.25 in cash;  (2) tools and a portable tool cabinet;  and (3) the house in New Ulm.

Verna's attorney asked the jury in closing argument to award a constructive trust in the amount of $141,989.65 based on:  (1) $6,695 for the value of Hilda's Thunderbird automobile (plaintiff's exhibit 18);  (2) $40,732.91 for the value of the New Ulm house (plaintiff's exhibit 2);  (3) $24,750 from Hilda's account at Benjamin Franklin Savings (plaintiff's exhibit 17);  (4) $20,000 from Hilda's account at Washington State Bank (plaintiff's exhibit 20);  (5) $20,841.96 from Hilda's savings account at Brenham National Bank (plaintiff's exhibit 16);  and (6) $28,969.78 from Hilda's account at Guaranty Federal Bank (plaintiff's exhibit 22).   Evidence was adduced at trial that Lloyd appropriated these funds for his personal use.

Although the burden of proof is initially on the person seeking to impose the constructive trust to trace the funds into the specific property sought to be recovered, once this burden is satisfied the burden of proof shifts to the constructive trustee to show that the part of the fund used to purchase the properties was his money only.   Otherwise, the whole fund is treated as trust property.  Meyers v. Baylor Univ., 6 S.W.2d 393, 394-95 (Tex.Civ.App.-Dallas 1928, writ ref'd);  Graham v. Turner, 472 S.W.2d 831, 840 (Tex.Civ.App.-Waco 1971, no writ).

In deciding a no evidence point, we must consider only the evidence and inferences tending to support the finding of the trier of fact and disregard all evidence and inferences to the contrary.  Alm v. Aluminum Co. of Am., 717 S.W.2d 588, 593 (Tex.1986);  Garza v. Alviar, 395 S.W.2d 821, 823 (Tex.1965).   As long as more than a mere scintilla of evidence exists to support the jury's verdict, the evidence is legally sufficient.  Stafford v. Stafford, 726 S.W.2d 14,16 (Tex.1987).   When reviewing a jury verdict to determine the factual sufficiency of the evidence, we must consider and weigh all the evidence and should set aside the judgment only if it is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust.   Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986);  In re King's Estate, 150 Tex. 662, 244 S.W.2d 660, 661 (1951);  see also Pool v. Ford Motor Co., 715 S.W.2d 629 (Tex.1986).

While Lloyd presented evidence tracing the movement of the funds, the jury was free to weigh or discard the value of such evidence as long as it was not contrary to the overwhelming weight of the evidence.  Cain, 709 S.W.2d at 176.   After reviewing the evidence under the relevant standards, we conclude that the trial court's judgment is supported by both legally and factually sufficient evidence.

We overrule points of error four and five.

Limitations

In point of error six, Lloyd contends he established his defense of limitations as a matter of law.   Lloyd complains that the manner in which the limitations question was submitted to the jury prevented a finding that any claims against Lloyd were time barred;  however, he admits that he did not object to the limitations instruction submitted to the jury.

Lloyd admits he had the burden of pleading and proving his limitations defense.   It was his duty, therefore, to submit a substantially correct instruction on limitations.   See Tex.R. Civ. P. 279.   Because he did not do so, the issue is waived.   See Tex.R.App. P. 33.1(a)(1).

We overrule point of error six.

Causes of Action

Lloyd next challenges the legal and factual sufficiency of the evidence that supports the jury's answers to questions 1, 2, 3, and 4 concerning Verna's causes of action for breach of fiduciary duty, fraud, conversion, and negligence.   In points of error seven, eight, nine, and 10, Lloyd challenges the jury's answers to questions 1 (breach of fiduciary duty) and 3 (fraud).   Lloyd contends there is no evidence or factually insufficient evidence that Lloyd had a confidential relationship with Hilda.   Because the breach-of-fiduciary-duty and fraud questions are predicated on the existence of a confidential relationship, Lloyd argues the jury's answers cannot stand.

A confidential relationship may be shown between an elderly parent and a child when factors are present that show special confidence.  Hatton v. Turner, 622 S.W.2d 450, 455 (Tex.Civ.App.-Tyler 1981, no writ) (finding confidential relationship between an elderly parent and child);  Texas Bank & Trust Co. v. Moore, 595 S.W.2d 502, 507 (Tex.1980) (confidential relationship is not restricted to formal legal relationships).   Lloyd testified that, even before he was formally appointed as Hilda's guardian, he and Hilda were close and she trusted him to handle her matters.   The jury considered evidence that Lloyd was Hilda's son, that she was becoming unsound of mind, and that Lloyd handled her affairs.   Lloyd's only evidence to the contrary was that Hilda also trusted and maintained similar relationships with her other children.   There is no element of exclusivity in a confidential relationship.   The jury's finding was both legally and factually sufficient to show breach of a confidential trust.

We overrule points of error seven, eight, nine, and 10.   We do not reach points of error 11, 12, 13, and 14 because the proximate cause and damages questions were submitted in the alternative, and the answers to those questions can be upheld based on our disposition of points of error seven, eight, nine, and 10.

Failure to Discharge Duties as Guardian

In points of error 15 and 16, Lloyd contends there is either no evidence or factually insufficient evidence to support the jury's verdict that Lloyd failed to truly and faithfully discharge his duties as Hilda's guardian.   On appeal, Lloyd argues for the first time that no cause of action exists in Texas for failure to discharge one's duties as a guardian.   By not objecting to the inclusion of this question in the charge or otherwise bringing this matter to the trial court's attention, Lloyd has waived his complaint.   See Tex.R. Civ. P. 274;  State Dep't of Highways & Pub. Transp. v. Payne, 838 S.W.2d 235, 239-41 (Tex.1992).

We overrule points of error 15 and 16.

Actual Damages

In points of error 17 and 18, Lloyd contends there is either no evidence or factually insufficient evidence to support the jury's verdict for actual damages of $141,989.65 (question 6) and $50,000.00 (question 11).   Based on our discussion in points of error four and five, we hold the evidence is both legally and factually sufficient to support the jury's verdict for actual damages of $141,989.65.   However, we hold there is no evidence to support the jury's verdict for additional actual damages of $50,000.00 based on Lloyd's failure to truly and faithfully discharge his duties as Hilda's guardian.   Tellingly, Verna does not refute this issue on appeal.

We overrule point of error 17 in part insofar as it relates to the award of $141,989.65 in actual damages, and we sustain the point in part insofar as it relates to actual damages of $50,000.00.   We overrule point of error 18 in its entirety.

Exemplary Damages

In points of error 19 and 20, Lloyd contends there is either no evidence or factually insufficient evidence to support the exemplary damages of $216,989.65 based on the jury's answers to questions 7 and 8 ($141,989.65) and questions 12 and 13 ($75,000.00).   A jury may award exemplary damages when it finds that the actor committed fraud.   See Tex. Civ. Prac. & Rem Code Ann. § 41.003 (Vernon 1997).   As for exemplary damages based on a common-law fraud claim, the standard has been set in Transportation Insurance Co. v. Moriel, 879 S.W.2d 10 (Tex.1994).   In Moriel, the supreme court held that punitive damages are available only in exceptional cases.  Id. at 18.   They are levied only to punish defendants for “outrageous, malicious, or otherwise morally culpable conduct.”  Id. at 16.   The definition of gross negligence includes two elements:  (1) viewed objectively from the standpoint of the actor, the act or omission must involve an extreme degree of risk, considering the probability and magnitude of the potential harm to others and (2) the actor must have actual, subjective awareness of the risk involved, but nevertheless proceed in conscious indifference to the rights, safety, or welfare of others.  Id. at 23.

Without further citation to authority, Lloyd claims there is no evidence or factually insufficient evidence that he specifically intended to injure Hilda.   We disagree.   Among other things, the jury heard evidence that Lloyd refused to provide a final accounting to the guardianship court.   This evidence alone is legally and factually sufficient to allow the jury to conclude Lloyd proceeded in conscious indifference to Hilda's rights.

However, in light of our disposition of point of error 17 holding there is no evidence of the $50,000.00 actual damages based on Lloyd's failure to truly and faithfully discharge his duties as Hilda's guardian, we also hold there is no evidence to support the jury's answers to questions 12 and 13 which awarded $75,000.00 in exemplary damages.   Questions 12 and 13 were properly conditioned on an affirmative answer to question 11 because there can be no award of exemplary damages when no actual damages are awarded.

We overrule point of error 19 in part insofar as it relates to the award of $141,989.65 in exemplary damages, and we sustain the point in part insofar as it relates to exemplary damages of $75,000.00.   We overrule point of error 20 in its entirety.

Return of Property

In point of error 21, Lloyd contends the trial court erred in denying Lloyd's September 8, 1997 motion to return his property that was taken by Verna without legal process.   After the May 13, 1997 interlocutory judgment was rendered, Verna took possession of Lloyd's tools and two bank accounts.   Execution on a judgment requires that the judgment be final and that it be carried out by a sheriff or constable.   Tex.R. Civ. P. 627, 629.   This issue is moot, however, because a final judgment has since been rendered, and Lloyd has not complained on appeal that Verna would not be entitled to postjudgment execution.

We overrule point of error 21.

Attorney's Fees

In point of error 22, Lloyd contends the trial court erred in not granting his request for judgment notwithstanding the verdict on the issue of attorney's fees.   Lloyd argues that no statute provides for the recovery of attorney's fees in this lawsuit.   Lloyd, however, did not object to the submission of question 16 concerning attorney's fees to the jury.   Accordingly, Lloyd has waived this point.   See Tex.R. Civ. P. 274;  Payne, 838 S.W.2d 235.

We overrule point of error 22.

In point of error 23, Lloyd contends the trial court erred in awarding $11,986.23 in attorney ad litem fees.   An ad litem represents the proposed ward in a proceeding until a guardian is appointed.   Tex. Prob.Code Ann. § 646(a) (Vernon Supp.2000);  Coleson v. Bethan, 931 S.W.2d 706, 710 (Tex.App.-Fort Worth 1996, no writ).   When the court appoints a guardian, the ad litem's duties are discharged and the ad litem should be dismissed.   Brownsville-Valley Reg'l Med. Cent., Inc. v. Gamez, 894 S.W.2d 753, 755 (Tex.1995).   The Texas Supreme Court in Gamez concluded the trial court abused its discretion when it failed to discharge the ad litem at the conclusion of settlement negotiations involving a minor, her parents, and the defendant.  Id. at 756.   After that point, there were no longer any conflicts of interest between the minor and her parents as guardians and they could adequately protect her interests.  Id. While Gamez involves a discharge at the end of litigation, we apply the principle by analogy.   The ad litem's continued participation was not a function of the court's duty to protect Hilda's interests because she had a guardian with whom there was no conflict.   Thus, the continued fees of the ad litem were no longer a proper cost of the court to be passed on to Lloyd.

We sustain point of error 23.

Conclusion

We reverse the judgment of the trial court in part based on the erroneous awards of actual damages, exemplary damages, and attorney ad litem's fees.   We affirm the judgment in all other respects.   We remand the cause to the trial court for further proceedings limited to the redetermination of the attorney ad litem's fees, the recalculation of prejudgment interest, the reduction of the award of actual damages by $50,000.00, and the reduction of the award of exemplary damages by $75,000.00.

FOOTNOTES

1.   In his brief, Lloyd contends the county court at law lacked subject-matter jurisdiction to impose a constructive trust.   The Texas Supreme Court has recently overruled prior caselaw in which a party's failure to comply with all the requirements of a statutory cause of action is treated as a jurisdictional matter.   See Dubai Petroleum Co. v. Kazi, 43 Tex. Sup.Ct. J. 246, 247-49 (Jan. 6, 2000).   Accordingly, we will consider Lloyd's claims that the court has no subject-matter jurisdiction as claims that the court had no statutory authority to act as it did.

2.   We do not agree with the portion of Qualia opinion that cites Property Code section 115.001-defining the district court's exclusive jurisdiction over trusts-to the extent that the opinion implies section 115.001 addresses constructive trusts, because Property Code section 111.003 specifically excludes constructive trusts from the definition of a “trust” as used in the Texas Trust Code. tex. Prop.Code Ann. §§ 111.001-115.017 (Vernon 1995 & Supp.2000);  Qualia, 878 S.W.2d at 341-42.  Section 115.001 is a part of the Texas Trust Code.

3.   We note there is no “mirror” provision in section 607(b) concerning the power of statutory probate courts and district courts to impose constructive trusts in guardianship proceedings.

4.   The judge of a statutory county court may transfer a case to the docket of the district court, except that a case may not be transferred without the consent of the judge of the court to which it is being transferred and may not be transferred unless it is within the jurisdiction of the court to which it is transferred.tex. Gov't Code Ann. § 74.121(b)(1) (Vernon 1998).

DAVIE L. WILSON, Justice.

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