Court Opinion

ID: 3104238
Source: CourtListenerOpinion
Date Created: 2015-10-16 05:37:09.043331+00
Date Added: 2024-06-11T11:44:40.086367
License: Public Domain

NO. 07-10-00484-CV

                              IN THE COURT OF APPEALS

                          FOR THE SEVENTH DISTRICT OF TEXAS

                                    AT AMARILLO

                                      PANEL C

                                  OCTOBER 24, 2011

                              ROBERTA WEST, APPELLANT

                                          v.

                        SHERRY LAREE HAMILTON PROCTOR,
                      INDIVIDUALLY AND AS EXECUTRIX OF THE
                     ESTATE OF CLIFFORD HAMILTON, APPELLEE

            FROM THE 237TH DISTRICT COURT OF LUBBOCK COUNTY;

               NO. 2006-534,940; HONORABLE LESLIE HATCH, JUDGE

Before QUINN, C.J., and HANCOCK and PIRTLE, JJ.

                                      OPINION

       We overrule appellant’s September 23, 2011 motion for rehearing. However, we

withdraw the opinion issued in this cause on September 8, 2011, and substitute the

following in its place.

       Appellant, Roberta West, appeals a take nothing judgment on her claims of

breach of contract, breach of fiduciary duty, fraud, and for reformation of contract
asserted against appellee, Sherry Laree Hamilton Proctor, individually and as executrix

of the estate of Clifford Hamilton.1 We will affirm.

                                        Background

       Hamilton was married to West’s sister, Dee, and he and West had a close

relationship. Throughout the 57 years of this relationship, Hamilton helped West with

various legal and business transactions. As an example, Hamilton helped West get her

land into the federal CRP program and helped advise her through two divorces.

       In 1999, Panhandle Brine contacted Hamilton about the possibility of obtaining a

lease to extract salt water from West’s property. Hamilton contacted West regarding

this offer indicating that he thought that West could make good money from the lease.

West told Hamilton to go ahead with the deal, and that she trusted him to negotiate it for

her. Hamilton informed West that he wanted a fee for negotiating the lease. While

West and Hamilton agreed that Hamilton would receive a fee under the lease, there was

a wide disparity between the two regarding the amount of that fee. West believed that

Hamilton would receive a one-time payment of fifteen percent of the first royalty

payment. Hamilton believed West had agreed to his receiving a third of all royalty

payments paid under the lease.

       On November 17, 1999, Hamilton called West to inform her that a representative

of Panhandle Brine was there with the lease contract.          West, Hamilton, and the

Panhandle Brine representative then went to a notary and West signed the lease. Even
       1
        For purposes of clarity, references to “Proctor” will refer to Sherry Laree
Hamilton Proctor, both individually and as appellee in this appeal, while references to
“Hamilton” will refer to Clifford Hamilton.
                                              2
though this was the first time that she had seen the contract, West did not read it

because she did not want to take up too much of the notary’s time, and because she

trusted Hamilton.

        A month or two after West signed the lease, she read it. While she did not

understand much of the contract, she did notice that the contract provided that Hamilton

would receive one-third of the royalty payments which were due on the 25th of each

month. This provision was in clear conflict with West’s understanding that Hamilton

would receive a one-time payment of fifteen percent of her first royalty payment. West

had trusted Hamilton to “do what was right” by her, but she did not feel like this change

to the terms of the agreement “was doing what was right.” However, West did not

confront Hamilton or take any other action to rectify this discrepancy because she did

not want to cause a conflict within the family.

        Under the terms of the lease, West received two-thirds and Hamilton received

one-third of each monthly royalty payment for years without any objection raised by

West. Finally, in 2006, West met with an attorney regarding the terms of the lease

contract. During this meeting, West discovered that the lease included terms such as

modifications to the lease required Hamilton’s approval, Hamilton’s interest in the lease

would run to his heirs and assigns, and the lease would continue indefinitely so long as

there was production under it. West filed the instant suit against Hamilton in May of

2006.

        Hamilton filed a motion for summary judgment on the basis that West’s claims

were barred by the applicable statutes of limitation. The trial court granted summary

                                             3
judgment in favor of Hamilton. However, this Court reversed the summary judgment on

the bases that Hamilton failed to identify the date upon which West’s claims accrued

and negate application of the discovery rule. See West v. Hamilton, No. 07-07-0235-

CV, 2008 Tex.App. LEXIS 7694, at *7-*10 (Tex.App.—Amarillo Oct. 9, 2008, no pet.).

       While the case was awaiting trial, Hamilton died.2 As a result, West amended

her pleadings to name Proctor as the defendant both individually and in her capacity as

executrix of Hamilton’s estate. The case was tried to a jury on August 16th and 17th of

2010. After hearing the evidence, the jury returned a verdict finding Hamilton breached

his agreement with West, breached the fiduciary duty he owed to West, and committed

fraud. However, the jury also found that West, “in the exercise of reasonable diligence,

[should] have discovered all of the false, misleading, or deceptive acts or practices of

Hamilton” on November 17, 1999, the date that the lease contract was signed. Before

judgment was issued by the trial court, West filed a motion to disregard jury findings.

This motion was heard and overruled by the trial court. On October 1, 2010, the trial

court entered judgment that West take nothing by her suit. West appeals from this

judgment.

       West presents two issues by her appeal. Her first issue contends that the trial

court erred in denying her motion to disregard jury findings, specifically Question Seven

regarding the date that West should have discovered her claims against Hamilton. Her

second issue contends that the trial court erred in its determination that Proctor was not

liable in her individual capacity.

       2
        Prior to Hamilton’s death, his deposition was taken. Thus, all references to
Hamilton’s testimony refers to this deposition.
                                            4
                                  Issue One: Limitations

       By her first issue, West contends that the trial court erred in failing to disregard

the jury’s finding that West, in the exercise of reasonable diligence, should have

discovered her claims against Hamilton on November 17, 1999, the date that the salt

water lease contract was signed by the parties to that contract. The significance of this

jury question is that the statute of limitations on each of West’s claims had run long

before she filed suit, so application of some legal principle that defers the accrual of

West’s causes of action was necessary for her claims to survive Proctor’s claim that

limitations barred the present suit.     In support of this issue, West contends that

limitations was deferred due to Hamilton’s fraudulent concealment of her claims,

limitations was deferred by the discovery rule under the law of the case doctrine and

under the applicable law, and the evidence was legally and factually insufficient to

support the jury’s discovery rule finding.

   a. The Law of Limitations Generally

       Statutes of limitations are intended to compel plaintiffs to assert their claims

within a reasonable period of time while the evidence is fresh in the minds of the parties

and witnesses. Computer Assocs. Int’l, Inc. v. Altai, Inc., 918 S.W.2d 453, 455 (Tex.

1996). When the legislature has established a limitations period for a claim, a claimant

must file his cause of action within the applicable limitations period or risk losing the

claim. See City of Murphy v. City of Parker, 932 S.W.2d 479, 481-82 (Tex. 1996). An

applicable limitations period begins to run when a cause of action accrues. See F.D.

Stella Prods. Co. v. Scott, 875 S.W.2d 462, 464 (Tex.App.—Austin 1994, no writ).

                                             5
       Generally, a cause of action accrues and the limitations period begins running

when a wrongful act causes some legal injury, even if the fact of injury is not discovered

until later, and even if all resulting damages have not yet occurred. S.V. v. R.V., 933
S.W.2d 1, 4 (Tex. 1996); Advent Trust Co. v. Hyder, 12 S.W.3d 534, 538 (Tex.App.—

San Antonio 1999, pet. denied). This principle that a cause of action accrues when a

wrongful act causes some legal injury is known as the “legal injury rule.” See Murphy v.

Campbell, 964 S.W.2d 265, 270 (Tex. 1997). However, there are two categories of

cases where accrual is deferred. One of these exceptions applies when a cause of

action is fraudulently concealed from the plaintiff. See Wright v. Greenberg, 2 S.W.3d
666, 675 (Tex.App.—Houston [14th Dist.] 1999, pet. denied).           The other exception,

known as the “discovery rule,” is for certain categories of cases in which the nature of

the injury is inherently undiscoverable and the evidence of injury is objectively verifiable.

See S.V., 933 S.W.2d at 6; Advent Trust, 12 S.W.3d at 538.

       In the present case, the trial court submitted jury questions relating to West’s

claims for breach of contract, breach of fiduciary duty, and fraud.         The applicable

limitations period for breach of fiduciary duty and fraud is four years. TEX. CIV. PRAC. &

REM. CODE ANN. § 16.004(a)(4), (5) (West 2002). Likewise, an action for breach of

contract is governed by a four-year statute of limitations. See id. § 16.051 (West 2008);

Smith v. Ferguson, 160 S.W.3d 115, 123 (Tex.App.—Dallas 2005, pet. denied) (residual

four-year limitations period applies to actions for breach of contract).

       West and Hamilton signed the lease contract with Panhandle Brine on November

17, 1999. Therefore, because any legal injury suffered by West by virtue of Hamilton’s

                                             6
actions relating to the lease arose on that date, unless one of the exceptions to the

general rule applied, West’s causes of action accrued on November 17, 1999, and she

would have been required to file suit no later than November 17, 2003. West filed the

instant suit in May of 2006.

   b. Fraudulent Concealment

       West contends that she pled and proved the application of fraudulent

concealment to her claims and, therefore, the application of the bar of limitations is

negated as a matter of law. Proctor responds that West waived this argument by failing

to request that a proper charge be submitted to the jury, and that, if not waived, there

was insufficient evidence that Hamilton concealed the facts underlying West’s causes of

action or that West exercised reasonable diligence.

       One of the exceptions to the legal injury rule is when a cause of action is

fraudulently concealed from the plaintiff. See Wright, 2 S.W.3d at 675. A defendant is

estopped from relying on limitations as an affirmative defense when the defendant is

under a duty to make a disclosure but fraudulently conceals the existence of the cause

of action from the party to whom it belongs. Id. However, the estoppel ends when the

party learns of facts or circumstances that would lead a reasonably prudent person to

inquire and thereby discover the concealed cause of action.3 Id.

       3
         Because of the nature of our resolution of West’s fraudulent concealment claim,
we need not address the issue of when West learned of facts that gave rise to her duty
to inquire into any concealed cause of action. However, our review of the record leads
us to believe that West learned facts sufficient to invoke her duty to inquire into any
potentially concealed cause of action when she read the lease contract a month or two
after she signed it.
                                           7
       While fraudulent concealment can defer accrual of a cause of action under

limitations, West, as the party seeking to avoid application of limitations, had the burden

to plead and secure a finding of fraudulent concealment. See Advent Trust, 12 S.W.3d

at 541.   The elements of fraudulent concealment are: 1) an underlying tort; 2) the

defendant’s knowledge of the tort; 3) the defendant’s use of deception to conceal the

tort; and 4) the plaintiff’s reasonable reliance on the deception. Id. A party asserting

any form of equitable estoppel must have reasonably relied on the defendant’s

misrepresentations or concealment. Id.

       In the present case, the fraud question that was submitted to the jury, and upon

which West premises her avoidance of limitations due to fraudulent concealment,

instructed the jury on the substantive, common-law tort of fraud based on a failure to

disclose when there is a duty to disclose. Specifically, the jury was instructed that,

       Fraud occurs when –
          a. a party fails to disclose a material fact within the knowledge of
             that party.
          b. the party knows that the other party is ignorant of the fact and
             does not have an equal opportunity to discover the truth.
          c. [t]he party intends to induce the other party to take some action
             by failing to disclose the fact, and
          d. the other party suffers injury as a result of acting without
             knowledge of the undisclosed fact.
This instruction tracks the applicable language of the pattern jury charge for fraudulent

breach of a duty to disclose. See STATE BAR       OF   TEXAS PATTERN JURY CHARGES PJC

105.4 (2002).    The next jury question asked the jury to determine the amount of

damages caused by Hamilton’s fraud and/or breach of agreement. The question after

that asked the jury, “By what date should [West], in the exercise of reasonable

                                             8
diligence, have discovered all of the false, misleading, or deceptive acts or practices of

Hamilton.”

       Viewing the charge as a whole, it is clear that the fraud question that was

submitted to the jury involved the substantive tort of fraud, rather than a claim of

fraudulent concealment as an avoidance of the statute of limitations. See Advent Trust,
12 S.W.3d at 542. This becomes even more clear by virtue of the fact that it would not

be appropriate to ask the jury causation and damages questions regarding a theory of

avoidance as these questions are appropriate only to a theory of liability. Id.

       Because West failed to submit fraudulent concealment to the jury, she has

waived this theory of avoidance of the statute of limitations.

   c. Law of the Case

       West also contends that this Court’s prior opinion determined that West “pleaded

or otherwise raised the issue of fraudulent concealment,” and, as such, Hamilton bore

the burden of negating the discovery rule.4 However, significantly, this Court’s prior

opinion reviewed the trial court’s grant of summary judgment in favor of Hamilton. See

West, 2008 Tex.App. LEXIS 7694, at *1. Law of the case does not apply when either

the issues or facts presented at successive appeals are not substantially the same.

See Hudson v. Wakefield, 711 S.W.2d 628, 630 (Tex. 1986).

       4
         While West conflates fraudulent concealment and the discovery rule throughout
her brief, each of these exceptions to the injury rule are distinct and characterized by
different substantive and procedural rules. See S.V., 933 S.W.2d at 4.
                                             9
       “[O]n motion for summary judgment, the burden is on the defendant to negate the

discovery rule by proving as a matter of law that no issue of material fact exists

concerning when the plaintiff discovered or should have discovered.” Woods v. William

M. Mercer, Inc., 769 S.W.2d 515, 518 n.2 (Tex. 1988). “However, where the case

proceeds to trial with a fact question as to when the plaintiff discovered, it is the plaintiff

who benefits by the discovery rule who must ensure that such an issue is submitted

[and proven].” Id. at 518, 518 n.2.

       This Court’s prior opinion simply concluded that Hamilton failed to establish his

entitlement to summary judgment because he did not meet his summary judgment

burden to establish as a matter of law when West’s cause of action accrued, and to

negate the discovery rule. See West, 2008 Tex.App. LEXIS 7694, at *8-*9. As such

and due to the differences in the burden of proof governing this Court’s prior opinion

and those that applied to the trial on the merits, we conclude that the law of the case

doctrine does not apply. See Hudson, 711 S.W.2d at 630.

   d. Applicability of the Discovery Rule

       Next, West contends, and Proctor essentially concedes, that the discovery rule

applies to the claims West asserted in this case.

       Accrual of a cause of action is deferred in cases in which the nature of injury is

inherently undiscoverable and the evidence of injury is objectively verifiable. See S.V.,
933 S.W.2d at 6. Accrual, in these cases, is deferred until the plaintiff knows or in the

exercise of reasonable diligence should know of the wrongful act and the resulting

injury. Advent Trust, 12 S.W.3d at 538. This is known as the “discovery rule.” Id.
                                              10
       The evidence in this case establishes that Hamilton owed West fiduciary duties

by virtue of their long-standing relationship and prior business transactions.          See

Consol. Bearing & Supply Co. v. First Nat’l Bank, 720 S.W.2d 647, 649 (Tex.App.—

Amarillo 1986, no writ) (generally discussing factors in determining when a confidential

relationship becomes a fiduciary relationship).         The establishment of a fiduciary

relationship is significant because the Texas Supreme Court has held that a fiduciary’s

misconduct may be inherently undiscoverable. See Willis v. Maverick, 760 S.W.2d 642,

645 (Tex. 1988); Slay v. Burnett Trust, 143 Tex. 621, 187 S.W.2d 377, 394 (1945).

However, the person to whom a fiduciary duty is owed is relieved of the responsibility of

diligent inquiry into the fiduciary’s conduct only so long as that relationship exists. S.V.,
933 S.W.2d at 8. When the fact of a fiduciary’s misconduct becomes apparent, the

person owed the fiduciary duty is no longer relieved of the duty to exercise reasonable

care and diligence to discover the existence of a cause of action. See id.; Willis, 760
S.W.2d at 646.

       As a result of the fiduciary relationship existing between West and Hamilton, we

conclude that the discovery rule applied to West’s present causes. As such, West was

relieved of the duty to inquire into whether Hamilton properly discharged his fiduciary

duties in negotiating the lease contract.         However, once it became apparent that

Hamilton had breached his fiduciary duties by securing an unauthorized benefit to

himself under the salt water lease, West was held to the duty to exercise reasonable

care and diligence to discover the existence of a cause of action.

                                             11
   e. Legal and Factual Sufficiency of Evidence Supporting Jury’s Finding

       West contends that the evidence supporting the jury’s finding that, “in the

exercise of reasonable diligence, [West should] have discovered all of the false,

misleading, or deceptive acts or practices of Hamilton” by November 17, 1999, the date

that the lease contract was signed, is legally and factually insufficient. Proctor responds

contending that the evidence that West failed to exercise reasonable diligence to

discover the present causes is sufficient.

       When a party challenges the legal sufficiency of the evidence supporting a jury

finding, we consider the evidence in the light most favorable to the finding and indulge

every reasonable inference that supports it. See City of Keller v. Wilson, 168 S.W.3d
802, 822 (Tex. 2005). We credit favorable evidence if a reasonable jury could and

disregard contrary evidence unless a reasonable jury could not. Id. at 827. If the

evidence would permit reasonable and fair-minded people to reach the finding under

review, the legal sufficiency challenge fails. Id. When a party challenges the factual

sufficiency of the evidence, we consider all of the evidence and will set aside the finding

only if the evidence supporting the finding is so weak or so against the overwhelming

weight of the evidence that the finding is clearly wrong and manifestly unjust. Cain v.

Bain, 709 S.W.2d 175, 176 (Tex. 1986). In conducting our review, we are mindful that

the jury is the sole judge of the credibility of the witnesses and the weight to be given

their testimony. City of Keller, 168 S.W.3d at 819; Hinkle v. Hinkle, 223 S.W.3d 773,

782 (Tex.App.—Dallas 2007, no pet.).

                                             12
       Viewing the evidence supporting the jury’s discovery rule finding in the light most

favorable to the finding, we find the evidence to be legally sufficient. The evidence

establishes that West and Hamilton disagreed about the amount of compensation

Hamilton would receive for brokering the salt water lease. West testified that she had

agreed to Hamilton receiving a one-time payment of fifteen percent of the first royalty

payment. Hamilton told West on multiple occasions that he wanted a third of whatever

the lease paid. Thus, the disagreement about Hamilton’s compensation was known to

West before she ever saw the lease contract. The evidence also establishes that West

did not read the lease contract at the time that she signed it. However, a month or two

later, when West did read the lease, it was apparent to her that the lease provided that

Hamilton would receive one-third of each monthly royalty payment.            Indulging all

reasonable inferences in favor of the jury’s finding, a reasonable jury could have

concluded that West’s prior knowledge that she and Hamilton disagreed about

Hamilton’s compensation was sufficient to put West under a duty to verify that the terms

of the lease contract reflected her agreement. Since simply reading the contract would

have revealed West’s claim, we conclude that the evidence supporting the jury’s

November 17, 1999 discovery rule finding is legally sufficient.

       However, viewing the jury’s discovery rule finding without the prism of viewing

the evidence in the light most favorable to the finding yields a slightly different result.

While the evidence still establishes that West was aware that Hamilton wanted more

compensation than she had agreed to, the evidence does establish that West and

Hamilton were in a fiduciary relationship when Hamilton negotiated the lease. As such,

it was reasonable for West to trust that Hamilton negotiated the lease in accordance
                                            13
with the terms she had agreed to. See S.V., 933 S.W.2d at 8. Thus, West was under

no duty to read the lease prior to signing it. Consequently, the jury’s finding that, in the

exercise of reasonable diligence, West should have discovered her claims against

Hamilton on November 17, 1999, is so against the great weight of the evidence as to be

clearly wrong.

       While the jury’s finding of the specific discovery date is not supported by factually

sufficient evidence, West bore the burden of proving that accrual of her causes of action

was deferred until May of 2002 or after.5 As previously addressed, all of West’s claims

are subject to a four-year statute of limitation. Statutes of limitation are affirmative

defenses, and a defendant that raises the defense bears the initial burden to plead,

prove, and secure findings to sustain its plea. Woods, 769 S.W.2d at 517. In response,

a plaintiff may seek the benefit of the discovery rule, which is a plea in confession and

avoidance. Id. However, when a plaintiff contends that the discovery rule applies to

defer accrual of a cause of action, the plaintiff so contending bears the burden of

proving and securing favorable findings thereon. Id. Thus, in the present case, for

West to overcome Proctor’s assertion of limitations, West bore the burden of proving

and securing a jury finding that she did not know or, in the exercise of reasonable

diligence, should not have known of Hamilton’s wrongful acts until May 2002 or later.

Advent Trust, 12 S.W.3d at 538.         In other words, West’s sufficiency issue must

challenge the jury’s failure to find that the discovery rule applies in a manner that

prevents limitations from barring her claims against Proctor. When the party with the

       5
        As West’s present suit was filed in May of 2006, to avoid being barred by the
applicable statutes of limitation, West’s causes of action must not have accrued earlier
than May of 2002.
                                            14
burden of proof appeals from a jury’s failure to find in its favor, the party must show that

the failure to find is so against the great weight and preponderance of the evidence as

to be clearly wrong. See Cropper v. Caterpillar Tractor Co., 754 S.W.2d 646, 651 (Tex.

1988); Canal Ins. Co. v. Hopkins, 238 S.W.3d 549, 557 (Tex.App.—Tyler 2007, pet.

denied).

       While we have concluded that the jury’s November 17, 1999 discovery rule date

is not supported by factually sufficient evidence, the jury’s finding that West failed to

meet her burden of proving that the discovery rule did not prevent limitations from

barring her claims is not so against the great weight and preponderance of the evidence

as to be clearly wrong. While the fiduciary duty Hamilton owed to West relieved West of

the duty to read the lease at the time she signed it, once West read the lease and noted

that it differed from the terms that she had agreed to, West was under the duty to

exercise reasonable care and diligence to discover whether she possessed a cause of

action against Hamilton. See Willis, 760 S.W.2d at 646. Clearly, after reading the

lease, West could have confronted Hamilton about the terms of the lease or sought

review of the terms of the lease by other counsel. However, West testified that she did

not confront Hamilton about the lease’s compensation terms because West did not want

to cause problems within her family. West ultimately sought review of the lease by

outside counsel, but she did not do so until 2006, at least six years after her duty to

exercise reasonable care and diligence to discover any claims she might have under

the lease arose. Thus, we conclude that the evidence establishes that West should

have discovered the existence of the presently asserted causes of action no later than

the end of January of 2000. As such, her suit, filed in May of 2006, was outside of the
                                            15
applicable statutes of limitation periods, and the jury’s failure to find that West

established that the discovery rule deferred accrual of her causes of action until May of

2002 or later is not so against the great weight and preponderance of the evidence as to

be clearly wrong. See Cropper, 754 S.W.2d at 651; Canal Ins. Co., 238 S.W.3d at 557.

Consequently, we conclude that the evidence is factually sufficient to support the jury’s

failure to find in West’s favor.

       For the foregoing reasons, we overrule West’s first issue.

                                   Issue Two: Capacity

       By her second issue, West contends that the trial court erred in ruling that

Proctor is not liable in her individual capacity. West’s contention is premised on the fact

that Proctor did not file a verified denial of capacity, and did not object to being named

to the suit in her individual capacity. Proctor responds that there was no evidence to

support a charge against Proctor in her individual capacity.

       While it is true that a denial of liability in the capacity in which one is being sued

requires a verified denial, see TEX. R. CIV. P. 93, a failure to do so does not create

liability that is not supported by the evidence. In the present case, West cites to two

instances in which Hamilton testified that the lease granted him the right to transfer his

rights under the lease to his daughter.      However, there is no record evidence that

Hamilton ever took this action during his life or even that Proctor would receive any

portion of Hamilton’s interest in the lease as a beneficiary of Hamilton’s estate. As

such, we agree with Proctor that the trial court did not err by not charging the jury

                                             16
regarding Proctor’s individual liability as there was no evidence to support such a

submission.

      We overrule West’s second issue.

                                      Conclusion

      Having overruled both of West’s issues, we affirm the judgment of the trial court.

                                                      Mackey K. Hancock
                                                           Justice

                                           17