Opinion
No. 01-02-01266-CV.
Opinion issued March 18, 2004.
On Appeal from Probate Court No. 1, Harris County, Texas, Trial Court Cause No. 294,687-401.
Bobbie G. Bayless, Bayless Stokes, Houston, TX, and Russell H. McMains, Law Offices of Russell H. McMains, Corpus Christi, TX, for Appellant(s).
Reagan M. Brown, and Warren Szutse Huang, Fulbright Jaworski L.L.P., Houston, TX, Stephen W. Lemmon, Brown McCarroll, L.L.P., Austin, TX, for Appellee(s).
Panel consists of Justices NUCHIA, ALCALA, and HANKS.
MEMORANDUM OPINION
Appellant, Rhoda Tomasco, appeals the take-nothing judgment rendered against her by the trial court notwithstanding the jury verdict in her favor. We affirm.
BACKGROUND
Rhoda and Donald J. Tomasco (Don Sr.) were married in 1959. Three children, Don Jr., Karen, and Kirkland, were born to the marriage. Don Sr., an architect, became involved in land development and investments, and Rhoda founded and became director of Sunshine Kids Foundation (Sunshine Kids), a non-profit foundation that organized and funded recreational trips for children with cancer and their families. Rhoda's involvement was initially as a volunteer, raising money and organizing trips. In 1989 she began taking a salary, which, at the time of trial, was about $80,000. The Sunshine Kids' annual budget at the time of trial was $1.5 to $2 million.
In 1984, Don Sr., wanting to protect his assets from creditors, discussed with his attorney, Carlos Kepke, of the firm of Chamberlain, Hrdlicka, White, Williams Martin (Chamberlain), the potential to achieve his goals through foreign trusts. Kepke informed him that such trusts could not be established with earned income, but could be created and funded through a will or through a gift from a foreign national who is not a resident of the United States. Kepke advised Don Sr. that, should a foreign national express a desire, preferably in writing, to make such a gift, Don Sr. could then ask Kepke's advice on the best way to handle it. Kepke indicated that he could then proceed to set up the foreign trust.
Creation of Foreign Trusts
On June 25, 1984, Jaime and Lucila Fernandez, citizens of Mexico and parents of one of the cancer patients who had benefitted from the Sunshine Kids program, wrote Rhoda and Don Sr. to thank them for their kindness and support during the time they were in Houston. To show their appreciation, the Fernandezes asked Rhoda and Don Sr. to come to Mexico City to receive a gift. The Tomascos went to Mexico City and, on July 26, 1984, they and the Fernandezes executed a trust indenture that had been prepared by Chamberlain and that was funded with $25,000 purportedly given by the Fernandezes to the Tomascos.
At trial, the Fernandezes testified that they did not give the Tomascos $25,000, but that some checks were exchanged but never cashed.
On September 5, 1984, Rhoda's mother, Margie Morrow, executed two codicils, prepared by Chamberlain, to her will. The first codicil made a special bequest to Rhoda in the sum of $1,000 to establish a trust and set forth the terms and provisions of the trust to be known as the Kaufman Trust. The second codicil made a similar bequest to Mrs. Morrow's son, Terry Morrow, to establish a trust to be known as the Morrow Trust. Mrs. Morrow died on September 23, 1984, and the Kaufman Trust was established.
After Mrs. Morrow's death, Chamberlain became concerned that the second codicil creating the Morrow Trust might nullify the first codicil. In a series of telephone calls, Don Sr., Rhoda, Kepke, and Mrs. Morrow's attorney, Jerry Huff, discussed a plan to persuade Terry to enter into an agreement with Rhoda that the second codicil would not be probated. That agreement was executed on October 18, 1984.
On September 4, 1984, Joaquin and Etelvina Rodriguez, citizens of Mexico and parents of a patient who had benefitted from the Sunshine Kids program, wrote Don Sr. and Rhoda, asking them to come to Mexico City to accept a gift in appreciation for their kindness and assistance during the time the Rodriguezes were in Houston for their son's treatment. The Tomascos again went to Mexico City, and, on October 18, 1984, they and the Rodriguezes executed the Kapital Trust, which was funded with $15,000 apparently given to the Tomascos by the Rodriguezes.
The beneficiaries of the Konig, Kaufman, and Kapital Trusts (the Trusts) were Don Sr., Rhoda, Don Jr., Kirkland, and Karen. The Trusts named the Bank of Butterfield in Bermuda as Trustee and Don Sr. as Trust Protector with power to replace the Trustee with or without cause on five days' notice. The Trusts also granted Don Sr. a limited power of appointment. The Trusts provided that, upon the death of Don Sr., a committee consisting of Rhoda, Don Jr., Kirkland, and Karen, acting by majority vote, was to serve as Trust Protector, with Rhoda having three votes and Don Jr., Kirkland, and Karen having one vote each. The Trustee had the sole and absolute discretion to distribute the corpus and income of the Trusts to any one or more of the beneficiaries for a variety of uses, including maintaining their "accustomed standard of living." In 1985, Don Sr. also established an insurance trust and a family trust, which were not foreign trusts. Don Jr. was the trustee of the insurance trust and Rhoda was the beneficiary. Don Sr. was the trustee of the family trust and Don Jr., Kirkland, and Karen were the beneficiaries.
Divorce and Bankruptcy
Rhoda testified at trial that she began to consider leaving Don Sr. in 1988 and that she finally left him in 1990 or 1991. She filed for divorce in June 1992. In March 1993, Don Sr. filed a petition in bankruptcy under chapter 7, and in April he filed a schedule of assets and liabilities that showed assets of $495,000 consisting of his homestead and liabilities of $57,800,000. In 1994, Don Sr. was diagnosed with cancer.
On April 24, 1995, Don Sr. filed an Inventory and Appraisement in the divorce case. The Trusts were not included in the inventory. On September 20, 1996, Don Sr. exercised his special, limited powers of appointment over the Trusts to provide that, upon his death, all of the assets of the Trusts were to be placed into a new trust to be called the Konig Trust. The Bank of Butterfield was to be the Trustee, and Don Jr. and Karen, jointly, were to be the Trust Protector. Rhoda was not included as a beneficiary of this Konig Trust. The funds of this Konig Trust were to be divided equally into three separate trusts, each benefitting one of the Tomasco children. The final divorce decree, signed on November 8, 1996, did not refer to any of the foreign trusts or to the life insurance trust. The decree ordered that Don Sr., as trustee of the family trust, provide Rhoda with quarterly financial statements of that trust. Don Sr. died on November 15, 1997.
The Lawsuit
In August 1998, Don Jr. talked to Rhoda about the Trusts. On February 5, 1999, Rhoda filed her lawsuit against the Estate, Don Jr., and Karen, alleging that she had recently learned about the foreign trusts into which Don Sr. had placed community assets without informing her. Rhoda requested declaratory relief and, in the alternative, a constructive trust on the Trusts' assets. On June 29, 1999, Rhoda filed her first amended petition, which added Chamberlain and two of its attorneys, Lawrence D. Pennoni and Paul Martin, as defendants.
In her third amended petition, Rhoda requested a declaratory judgment that the transfers of property to the Trusts were not disclosed and that, through operation of a provision in the Tomasco's divorce decree, the Trust assets were awarded to her. In the alternative, Rhoda requested that a constructive trust in her favor be imposed on the assets held in the Trusts because Don Sr. had violated his fiduciary obligation to her and because of the constructive-trust provision in the divorce decree that orders that the party in possession and control of undisclosed community property is a constructive trustee of the property for the benefit of the other party. Against Chamberlain, Pennoni, and Martin, Rhoda asserted causes of action for negligence, gross negligence, vicarious liability, violation of the Texas Deceptive Trade Practices Act, breach of fiduciary duty, conspiracy, negligent misrepresentation, negligence per se, fraudulent misrepresentation, and fraud. Rhoda requested actual and punitive damages, treble damages, forfeiture of fees, and attorney's fees. Rhoda also asserted the discovery rule and alleged that she did not learn of the Trusts and the transfers of community property to them until late August or early September 1998.
At trial, Rhoda testified that the first time she knew that there were trusts outside the country was when Don Jr. told her in August 1998. When asked how she could not know that a codicil to her mother's will created the Kaufman Trust, she testified that she did not know what the codicil to her mother's will was and did not understand "legal things." She further testified that she did not know what the second codicil was, did not know about an issue regarding the two codicils, and did not know whether she signed an agreement regarding the creation of the Morrow Trust. She also testified that she did not remember whether she had any discussions with Jerry Huff.
What Rhoda Knew and When She Knew It
Transcriptions of three taped telephone conferences on October 9, 1984 were admitted into evidence during the trial. The participants in the first call were Rhoda, Don Sr., and Huff. Huff had spoken with Terry about a problem with the two codicils and reported that Terry had indicated, "if the only way out of it was not to probate this codicil, well, then — then he said, Let's just don't do it." Rhoda asked, "Did it — it didn't seem to be a — a big deal particularly in his mind or . . . something that he had hung a lot of personal stock on?" Huff assured her that that was not the case. In discussing whether Terry would have any use for a trust as set out in the codicil, the following was said:
[Rhoda]:You know, it could be, like I mentioned to Don, the kind of thing that they never wish to operate on that level of a business type of thing and they could just have it sit and — and they be only involved in more tangible things in the immediate future like the farm and immediate things there in Austin.
[Don Sr.]:Well, to them, Rhoda, they might be more interested in the $1,000.
. . . .
[Rhoda]:Well, that might come through more if Jerry [Huff] says it. You know, Hey, this may be something that — I mean, I don't know. I think that Terry has a lot of confidence in your judgment, and I wish — I wish the world for him to have something. And, you know, maybe we're in error of building it up to be such a big thing when, really, in fact, you know, it isn't to them, but is to Don and his business.
[Huff]:Certainly. Well, this is something in Terry's and my discussion, you know, we talked about how that now — although I have no experience with foreign trusts like this, I told him, I said, Terry, it appears to me that this is really for the people that are going to sock away the big bucks.
They discussed the effect that Terry's knowing he would receive a large amount of money when his mother's will was probated might have on Terry. Don Sr. was concerned that it might cause Terry to think he needed a trust. They continued their discussion as follows:
[Huff]:Well, you know, of course, I was thinking about this after we talked this morning, Don. And — and I may, you know, be completely wrong, but I'm really not looking for any problems with Terry on this thing just because of the impression that I got from him last week. He was so — so amicable. And it was, you know, Hey, I don't really care. And if it's going to hurt Rhoda, I don't want to do it.
[Rhoda]:God —
[Huff]:So that was the approach I was going to take and —
[Rhoda]:Yeah.
[Huff]: — and I really expect him to say, Well, let's just don't probate that darn thing.
[Rhoda]:Yeah.
[Don Sr.]:Yeah, I do too. I really do. You know, we think —
[Rhoda]:Especially if Jerry handles it. I think he has —
[Don Sr.]:Yeah.
[Rhoda]: — a lot of — a lot of respect for Jerry.
[Don Sr.]:And why don't you do this. Say, Okay, Terry. What I'll do, I'm going to send Don — next time say, I understand he's doing some work in Austin. I'm going to send — make me sound like a messenger.
[Rhoda]: Yeah.
. . . .
[Don Sr.]:I'm going to send Don as a messenger, if you don't mind. I wish you'd put it just that way.
[Huff]:Okay, sure.
After Huff got off the line, Don Sr. asked Rhoda if she felt better about "that," and Rhoda said, "Yeah, I do. I think if Jerry handles it, that it'll be sort of unbiased opinion."
Huff talked to Terry, then called the Tomascos again that same day. Huff reported that everything was settled and that Terry would sign whatever needed to be signed. Huff said that he told Terry that Don Sr. would be bringing up the papers, and that Terry had asked whether Huff would see them first. Huff said that he had assured Terry that he would review them. Rhoda expressed some concern that Terry might be disappointed, and Huff assured her that he was not. Huff told them that Terry was looking forward to having Don Sr. bring the papers, and Rhoda said, "Jerry, that's great. You really saved the day there."
The agreement not to admit the second codicil to Mrs. Morrow's will to probate, signed by Rhoda and Terry, was admitted into evidence. In addition, photographs showing Rhoda, Don Sr., and the Rodriguez family and the Fernandezes at the formal signing of the Kapital Trust were admitted into evidence.
The Verdict and JNOV
The case was tried to a jury, which found that (1) Chamberlain breached its fiduciary duty to Rhoda; (2) the negligence of both Chamberlain and Rhoda proximately caused damage to Rhoda; (3) Chamberlain was 20% and Rhoda was 80% negligent; (4) Chamberlain committed fraud against Rhoda; (5) Chamberlain was part of a conspiracy that damaged Rhoda; (6) Chamberlain knowingly engaged in an unconscionable action or course of action that was a producing cause of damage to Rhoda; (7) $325,000 would fairly and reasonably compensate Rhoda for her injuries; (8) $0 would compensate Rhoda for her past and future mental anguish, (9) $390,000 was a reasonable fee for Rhoda's attorneys; (10) 1998 was the earliest date Rhoda discovered or should have discovered Chamberlain's breach of fiduciary duty, negligence, fraud, or false, misleading or deceptive acts; (11) Don Sr. breached his fiduciary duties to Rhoda regarding the foreign trust during their marriage; (12) Rhoda was not guilty of laches in bringing her claim against the estate; (13) Rhoda was not estopped from bringing her claim against the estate; (14) Rhoda had not waived the right to bring her claim against the estate; (15) 1998 was the earliest date Rhoda discovered or should have discovered the complained-of conduct of Don Sr.; and (16) the harm to Rhoda resulted from malice of a vice-principal at Chamberlain.
Chamberlain filed a motion to disregard certain jury findings and to render a take-nothing judgment. The motion was based on several grounds, including the statute of limitations. The trial court granted Chamberlain's motion without specifying the grounds and rendered judgment that Rhoda take nothing from Chamberlain and the Estate.
Rhoda presents eight issues challenging the trial court's judgment, contending that the contributory negligence finding does not negate the jury's findings in her favor on her claims against Chamberlain for breach of fiduciary duty, fraud, conspiracy and violations of the Deceptive Trades Practices Act (issues one, three, and four), the evidence supports the findings regarding the discovery rule (issue two) and malice (issue seven), the trial court erred in failing to grant her claim for fee disgorgement (issue five) and in prematurely discharging the jury before submitting a jury question on exemplary damages (issue six), and the trial court erred in rendering a judgment notwithstanding the verdict (JNOV) in favor of the Estate and in failing to impose a constructive trust against the estate (issue eight).
DISCUSSION
Standard of Review
A trial court may disregard a jury's findings and grant a motion for JNOV when there is no evidence upon which the jury could have made its findings. Mancorp, Inc. v. Culpepper, 802 S.W.2d 226, 227 (Tex. 1990); Lone Star Ford, Inc. v. McCormick, 838 S.W.2d 734, 738 (Tex. App.-Houston [1st Dist.] 1992, writ denied). In reviewing the grant of a JNOV, the reviewing court must determine whether there is any evidence upon which the jury could have made the finding, considering only the evidence and inferences that support the finding and rejecting the evidence and inferences contrary to the finding. Navarette v. Temple Indep. School Dist., 706 S.W.2d 308, 309 (Tex. 1986). If there is more than a scintilla of competent evidence to support the jury's finding, then the JNOV will be reversed. Southern States Transp., Inc. v. State, 774 S.W.2d 639, 640 (Tex. 1989).
A JNOV is also permitted when a legal principle precludes recovery, even though all the allegations are proven. Schindley v. Northeast Tex. Community College, 13 S.W.3d 62, 65 (Tex. App.-Texarkana 2000, pet denied); see also Stevenson v. Koutzarov, 795 S.W.2d 313, 319-20 (Tex. App.-Houston [1st Dist.] 1990, writ denied) (holding trial court erred in denying motion for JNOV because claims were barred by limitations).
Statute of Limitations
In her second issue, Rhoda asks, "Was there some evidence to support the jury findings as to the discovery rule application in Questions 10-13 relating to Plaintiff's independent liability and damage findings against the attorneys?" She contends that her own testimony and that of Don Jr. is sufficient to support the discovery rule findings by the jury.
Rhoda does not state the specific testimony by her or Don Jr. that she claims supports the jury findings. Rhoda testified that she signed documents without reading them and that she did not know the details of Don Sr.'s business or of legal matters. Both she and Don Jr. testified that he talked to her about the Trusts in August 1998, but Don Jr. testified that he thought she knew, before that date, that the Trusts existed, and Rhoda's testimony confirmed that.
Limitations generally begin to run when facts have come into existence that authorize a claimant to seek a judicial remedy. Johnson Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 514 (Tex. 1998). The discovery rule is an exception to this general rule and operates to toll the statute of limitations until the plaintiff discovers, or by exercising reasonable care and diligence should have discovered, the nature of his injury. Willis v. Maverick, 760 S.W.2d 642, 646 (Tex. 1988). To avail himself of the discovery rule, the plaintiff must plead the rule and has the burden of proving and securing findings in his favor. Woods v. William M. Mercer, Inc., 769 S.W.2d 515, 518 (Tex. 1988).
All of Rhoda's claims against Chamberlain were subject to either the two-year or four-year statute of limitations. She filed her lawsuit against Chamberlain on June 29, 1999. Therefore, it was her burden to establish that she did not discover, and in the exercise of reasonable care and diligence could not have discovered, the conduct of Chamberlain of which she complains until after June 29, 1995.
There is no direct evidence in the record to establish that Rhoda was present at the formal execution of the Konig Trust indenture, although there is evidence that she was in Mexico City visiting the Fernandezes at the time of the signing. However, there is evidence that Rhoda was aware of the creation of the Kaufman Trust and Kapital Trust at the time they were created.
Before the Kaufman Trust was created, Rhoda participated in the telephone conference with Don Sr. and Huff, set forth above, during which they devised a plan to persuade her brother, Terry, to agree not to probate the codicil that would create a trust for his benefit because of the potential of that codicil to nullify the codicil that would create the Kaufman Trust. It was clear from her statements that she knew the creation of a trust was at stake, and the statements of Huff indicated that the trust created would be a foreign trust. It was also clear from the conversation that the purpose behind the trust was "to sock away the big bucks."
Rhoda and Don Sr. went to Mexico City for a formal execution of the Kapital Trust Indenture. Photographs were made of a celebratory dinner that included Joaquin and Etelvina Rodriguez and their three children, the Fernandezes, and the Tomascos. The photographs show members of the group, including Rhoda, gathered around a table as different individuals sign the documents.
At trial, Rhoda admitted that she had knowledge of foreign trusts before August 1998. She said, "I heard discussions about it from my husband but I never knew details."
On April 24, 1995, Don Sr. filed an Inventory and Appraisement in the divorce case. The Certificate of Service in that document shows that a copy of that document was served on Rhoda's attorney on April 20, 1995. The Inventory and Appraisement did not list any foreign trusts.
Under these facts, there is no evidence that Rhoda did not discover, and could not have discovered, her causes of action against Chamberlain. Furthermore, the evidence established that Rhoda knew about the creation of foreign trusts in 1984 and that she knew or should have known by April 20, 1995 that these trusts were not included in Don Sr.'s inventory of community property and would, therefore, not be included in the division of property. When Rhoda sued Chamberlain on June 29, 1999, both the two-year and four-year statutes of limitations had expired. Accordingly, her claims against Chamberlain were time-barred.
We overrule Rhoda's second issue. Because we hold that Rhoda's claims against Chamberlain were barred by limitations, we need not consider her issues one and three through seven.
Claim Against the Estate
In her eighth issue, Rhoda contends that the "trial court erred in granting a judgment notwithstanding the verdict in favor of the Estate and in failing to impress a constructive trust under the circumstances." Rhoda first complains that the trial court improperly granted judgment for the Estate on the basis of Chamberlain's motion for JNOV, arguing that Chamberlain lacked standing to assert a motion on the Estate's behalf. We note that the judgment does not recite that the take-nothing judgment in favor of the Estate is awarded on the basis of Chamberlain's motion.
Rhoda asserts, "The evidence amply supports the jury's finding of fraud as against the wife's interests." Although Rhoda does not direct us to any specific evidence, we will assume, for the purposes of this issue, that she is correct.
The finding against the estate is in Question No. 14, which asks the following question:
Did Donald J. Tomasco, Sr. breach his fiduciary duties to Rhoda Tomasco regarding the foreign trust during their marriage?
The term "fiduciary duty" means a relationship of confidence and trust that exists between a husband and wife with regard to that portion of the community property that each controls. This relationship requires that the spouses use the utmost good faith and frankness in their dealings with each other.
Answer "Yes" or "No."
The jury answered "Yes." Question numbers 15, 16, and 17 asked whether Rhoda was guilty of laches in bringing her claim against the estate, whether she was estopped from bringing her claim, and whether she had waived the right to bring her claim. The jury answered each of these questions "No." Question number 18 asked the jury to find the earliest date on which Rhoda discovered or, in the exercise of reasonable care and diligence should have discovered the conduct of Don Sr. of which she complains in this suit. The jury answered "1998."
Based on the jury's responses to question numbers 14 through 18, Rhoda filed a motion for entry of judgment that requested the trial court to impose a constructive trust in favor of Rhoda on the assets held in the Konig Trust, the Dyna Trust, the Intergroup Trust, and any other foreign trusts into which Don Sr. had placed assets or had directed that assets be placed. She now complains of the denial of that motion.
To impose a constructive trust, there must be (1) a breach of a confidential relationship or actual fraud, (2) unjust enrichment of the wrongdoer, and (3) tracing to an identifiable res. Mowbray v. Avery, 76 S.W.3d 663, 681 n. 27 (Tex. App.-Corpus Christi 2002, pet. denied). Here, although the res is the trust assets, Rhoda does not direct us to any evidence that established that the Estate has ownership, possession, or control of those assets. The Konig Trust's Trustee, who was, at the time of trial, The Bank of Butterfield, and the trustees of the other trusts mentioned in Rhoda's motion hold the trusts for the benefit of the beneficiaries. There is no evidence that the trusts or the trustees have any connection with the Estate. Moreover, neither the trusts nor the trustees were parties to this lawsuit. See Starcrest Trust v. Berry, 926 S.W.2d 343, 355 (Tex. App.-Austin 1996, no writ) (recognizing general rule that trustee and beneficiaries should be made parties to suits involving trust property). Therefore, the trial court had no power to impose a constructive trust on the assets of the trusts. Accordingly, we hold that the trial court did not err in rendering a take-nothing judgment in the Estate's favor.
We overrule Rhoda's eighth issue.
CONCLUSION
We affirm the judgment.