Court Opinion

ID: 4069665
Source: CourtListenerOpinion
Date Created: 2016-09-30 00:45:05.731385+00
Date Added: 2024-06-11T14:32:58.031890
License: Public Domain

ACCEPTED
                                                                                          04-14-00110-CV
                                                                              FOURTH COURT OF APPEALS
                                                                                   SAN ANTONIO, TEXAS
                                                                                     5/19/2015 8:06:08 PM
                                                                                           KEITH HOTTLE
                                                                                                   CLERK

                              NO. 04-14-00110-CV

               IN THE COURT OF APPEALS FOR THE            FILED IN
                                                   4th COURT OF APPEALS
              FOURTH COURT OF APPEALS DISTRICT      SAN ANTONIO, TEXAS
                       SAN ANTONIO, TEXAS          5/19/2015 8:06:08 PM
__________________________________________________________________
                                                     KEITH E. HOTTLE
                                                                      Clerk
                           MARY MOCZYGEMBA,
                                         Appellant,

                                        v.

    THOMAS J. MOCZYGEMBA and HARRY LEE MOCZYGEMBA,
                                            Appellees.
__________________________________________________________________

     APPELLANT’S MOTION FOR EN BANC RECONSIDERATION

TO THE HONORABLE JUSTICES OF THE FOURTH COURT OF APPEALS:

      MARY MOCZYGEMBA, Appellant, files this Motion under Rule 49 Tex. R.

App. P.

      Appellant’s Motion for Rehearing was denied on May 4, 2015. The opinion

in this case holds that deeds to a fiduciary by a beneficiary of the fiduciary

relationship are not evidence of an objectively verifiable injury.       Appellant

believes that en banc reconsideration is vital here because the opinion: 1) impairs

well-established Texas fiduciary law; 2) creates confusion in the law because it

contradicts previous opinions of this Court without explanation; and 3) creates a

dangerous precedent in the jurisprudence of elder abuse.

                                        1
             This Court Erred By Repudiating the Cardinal Rule That
               Transactions between a Fiduciary and a Beneficiary
                   Are Presumptively Fraudulent and Tortious

         Unquestionably, the three deeds at issue in this case constituted transactions

between Appellant and her fiduciaries. Unquestionably, the three transactions

were objectively verifiable, because they are themselves specific documents.1

Transactions between a fiduciary and the beneficiary of the fiduciary relationship

are “presumptively fraudulent.” Jordan v. Lyles, -- S.W.3d --, 2015 WL 393791

*4 (Tex.App.-Tyler 2015, no pet.); Lesikar v. Rappeport, 33 S.W.3d 282, 298

(Tex.App.-Texarkana 2000, pet. denied); Chien v. Chen, 759 S.W.2d 484, 495

(Tex.App.-Austin 1988, no writ).

         However, this Court repudiated the well-settled rule that the deeds are

presumptively fraudulent when it erroneously held the following:

         While the deeds are evidence that Mary’s mineral interests passed to
         her sons, they are not evidence that the mineral interests were
         wrongfully transferred to her sons…. we cannot conclude that the
         mere transfer of mineral interests necessarily equates to Mary having
         suffered from a wrongful transfer of her property.

[Op., at 11].

         This Court’s erroneous holding above also repudiated the well-established

“presumption of unfairness” of “transactions between a fiduciary and a party to

whom the fiduciary owes its duties.” Porter v. Denas, 2006 WL 1686515 *5

1
    Polk Mechanical Co., LLC v. Jones, 2009 WL 1900414 *4 (Tex.App.-San Antonio 2009, pet.
    denied) (not for publication).

                                              2
(Tex.App.-San Antonio, pet. denied) (not for publication); Lee v. Hasson, 286
S.W.3d 1, 21 (Tex.App.-Houston [14th Dist.] 2007, pet. denied); Miller v. Miller,

700 S.W.2d 941, 946 (Tex.App.-Dallas 1985, writ ref'd n.r.e.).

      The common law deems the deeds to be injurious to Appellant, in and of

themselves, subject to rebuttal proof by Appellees of “the fairness of the

transaction.” Porter at *5. Because this Court made no mention of any evidence

showing the fairness of the deeds to Appellant (and, in fact, did not even mention

the legal concept of “fairness”), the effect of the above presumptions stand, and the

deeds are fraudulent and tortious by default. The only way this Court could

conclude that these deeds do not provide objectively verifiable evidence of the

injury, is to repudiate these long-standing presumptions.

  This Court Erred by Focusing on the Beneficiary’s Intent While Ignoring
            The Fairness of the Transactions to the Beneficiary

      This Court ignored the issue of the fairness of the transactions and based its

opinion solely on the allegedly unexpressed intent of Appellant:

      Mary herself testified that she wanted to transfer her property to her
      sons at a price lower than market value because they were her sons
      and they were helping her. … Mary agrees that at the time of the
      transfer of the property, there were no discussions about the mineral
      interests because she never thought about the mineral interests.

[Op., at 11]. Texas case law, however, is clear that the determination of injury

resulting from a transaction between a fiduciary and the beneficiary of the

fiduciary relationship focuses solely on the fairness of the transaction, and the

                                         3
beneficiary’s intent in the transaction is not determinative (and generally not even

relevant).   In Kirkpatrick v. Cusick, 2013 WL 6730049 *6 (Tex.App.-Corpus

Christi 2013, pet. denied), the court of appeals held that the fiduciaries had failed

to meet their burden of proving the fairness of their survivorship account

transaction with the beneficiary of their fiduciary duties, and further that:

      even if [the beneficiary] knowingly and voluntarily named [the
      fiduciary] as a joint tenant with right of survivorship on the bank
      accounts, that fact by itself does not conclusively demonstrate that
      [plaintiff] could not prove her pleaded allegations that [the fiduciary]
      breached a fiduciary duty to [the beneficiary].

Id. (emphasis added). Likewise, this Court in Sorrell v Elsey, 748 S.W.2d 584

(Tex.App.-San Antonio 1988, writ denied), held that:

      Whether the complaining party in a fiduciary transaction understood
      the transaction in question is not the critical issue. … Under fiduciary
      circumstances, a claim that a transaction was adopted by the
      execution of a document in conjunction therewith does not
      preclude an inquiry into the fairness of the entire transaction and the
      imposition of the fiduciary burdens. Archer v. Griffith, 390 S.W.2d at
      739, 740.

Id. at 586 (emphasis added).

      The Court in Miller held that the fact that the beneficiary of the fiduciary

relationship 1) read the contract with her fiduciary; 2) signed it; 3) asked no

questions about it; and 4) intended to be bound by the contract was not relevant to

the determination of the fairness of the transaction. Miller, 700 S.W.2d at 943.

                                           4
The Court held that the beneficiary’s intent was immaterial, and that the sole issue

was the fairness of the transaction:

      Under the charge as submitted by the court, materiality of the
      nondisclosed facts did not depend on Judy's state of mind. The court
      defined “material fact” as a “fact which a reasonable person, under the
      same or similar circumstances, would attach importance to in
      determining his course of conduct or action.” If the facts known to
      Howard were “material” in this sense, he had a fiduciary duty to
      disclose them, and his breach of this duty cannot be excused on the
      ground that Judy has failed to establish her reliance on Howard's duty
      to disclose them.

Id. at 948. This Court erred by doing the converse of the above three cases –

ignoring the fairness of the transactions and determining the lack of a documented

injury to Appellant based only on her unexpressed intent.

             This Court Erred By Contradicting Its Own Opinions
            Tolling Limitations in Breach of Fiduciary Duties Cases

      A.     Appellant cited Sorrell v Elsey, 748 S.W.2d 584 (Tex.App.-San

Antonio 1988, writ denied), a deed rescission case very similar to this one, for the

following propositions: 1) the fact that Appellant may have understood that she

was making a gift of some sort and consented to the gifts by signing the deeds was

irrelevant to the determination of her injury; and 2) a gift deed from the beneficiary

of the fiduciary relationship to the fiduciary is prima facie injury to the beneficiary.

This Court completely ignored Sorrell and, in fact, held the opposite -- that the

intent of the beneficiary determines whether she was injured, and that a gift deed to

a fiduciary is not a prima facie injury.

                                           5
      B.     Similarly, Appellant cited Camp Mystic, Inc. v. Eastland, 390 S.W.3d
444 (Tex. App.-San Antonio 2012, pet. granted, remanded by agr.), a lease case,

for the propositions that 1) the discovery rule applies to transactions between a

fiduciary and the beneficiary of the fiduciary relationship; and 2) the signing by a

beneficiary of a contract with a fiduciary does not preclude an attack by the

beneficiary on the contract for unfairness. This Court completely ignored Camp

Mystic, and held the opposite, that the discovery rule does not necessarily apply to

transactions between a fiduciary and a beneficiary; and that a beneficiary’s

unexpressed intent precludes an attack on a written transaction with a fiduciary.

           This Court Erred In Applying the S.V. Opinion to This Case

      Appellant pled that Appellees breached their “fiduciary duty of full

disclosure” by failing to disclose to Appellant “the ramifications of signing these

deeds, in particular that [Appellant] would be giving up her mineral interests.”

(CR1455). As shown below, the failure of a fiduciary to disclose material facts to

the beneficiary has been characterized as both fraud and fraudulent concealment.

      Although S.V. v. R.V., 933 S.W.2d 1 (Tex. 1996) was a repressed memory

case and not a fiduciary transaction case, this Court cited it twenty times in its

opinion. Clearly, S.V. provided the fundamental underpinning for its holding that

Appellant’s injury was not objectively verifiable. The Supreme Court in S.V.,

however, acknowledged that the typical discovery rule analysis, including the

                                         6
requirement of an objectively verifiable injury, does not apply to cases “involving”

fraud or fraudulent concealment:

      Strictly speaking, the cases in which we have deferred accrual of
      causes of action for limitations purposes fall into two categories:
      those involving fraud and fraudulent concealment, and all others.
      The deferral of accrual in the latter cases is properly referred to as the
      discovery rule. We observe the distinction between the two categories
      because each is characterized by different substantive and procedural
      rules. … Fraud, we have said, in and of itself prevents running of the
      statute of limitations … Restated, the general principle is this:
      accrual of a cause of action is deferred in cases of fraud or in
      which the wrongdoing is fraudulently concealed, and in discovery
      rule cases in which the alleged wrongful act and resulting injury were
      inherently undiscoverable at the time they occurred but may be
      objectively verified.

Id. at 4 (emphasis added).      Because this case involves fraud and fraudulent

concealment, limitations was automatically tolled, the discovery rule does not

apply, and there is no requirement of an objectively verifiable injury. Thus, the

entire foundation for, and analysis in, this Court’s opinion is fundamentally

erroneous. By requiring an objectively verifiable injury in a case involving fraud

and fraudulent concealment, this Court’s opinion turns S.V. on its head, and holds

the opposite of S.V.

      A fiduciary’s transactions with a beneficiary and failure to disclose material

facts to a beneficiary are presumptively fraud:

      All transactions between a fiduciary and his principal are
      presumptively fraudulent and void; therefore, the burden lies on the
      fiduciary to establish the validity of any particular transaction in
      which he is involved. …          Silence is equivalent to a false

                                          7
      representation where circumstances impose a duty to speak and one
      deliberately remains silent. Spoljaric v. Percival Tours, Inc., 708
S.W.2d 432, 435 (Tex.1986). So, for there to be actionable
      nondisclosure fraud, there must be a duty to disclose. Bradford v.
      Vento, 997 S.W.2d 713, 725 (Tex.App.-Corpus Christi 1999, pet.
      granted); Hoggett v. Brown, 971 S.W.2d at 487–88. Whether such a
      duty exists is a question of law. Bradford v. Vento, 997 S.W.2d at
      725. A duty to disclose may arise in four situations: (1) where there is
      a special or fiduciary relationship; …

Lesikar v. Rappeport, 33 S.W.3d 282, 298-99 (Tex.App.-Texarkana 2000, pet.

denied) (emphasis added). See also, Bright v. Addison, 171 S.W.3d 588, 599

(Tex.App-Dallas 2005, pet. denied) (“The failure [of a fiduciary] to disclose

constitutes fraud.”).

      A fiduciary’s failure to disclose material facts to a beneficiary of the

fiduciary relationship is also fraudulent concealment:

      A breach of a fiduciary duty of disclosure is tantamount to
      concealment for limitations purposes. Id. at 645; see Seureau, 274
S.W.3d at 228 (including as additional element of fraudulent
      concealment doctrine “a duty to disclose the wrong”). Thus, the
      statute of limitations for a breach of fiduciary duty claim does not
      begin to run until the claimant “knew or should have known of facts
      that in the exercise of reasonable diligence would have led to the
      discovery of the wrongful act.” Little v. Smith, 943 S.W.2d 414, 420
      (Tex.1997)

Dernick Resources, Inc. v. Wilstein, 312 S.W.3d 864, 878 (Tex.App.–Houston [1st

Dist.] 2009, no pet.) (emphasis added).

      A breach of a [fiduciary’s] duty to disclose is tantamount to
      concealment. Id. Failure to disclose in such situations constitutes
      fraudulent concealment which will prevent the wrongdoer from
      perpetrating further fraud by using limitations as a shield.

                                          8
Haas v. George, 71 S.W.3d 904, 913 (Tex.App.–Texarkana 2002, no pet.)

(emphasis added).

      By S.V.’s express holding, the type of breach of fiduciary duty case

presented here tolls limitations, regardless of the objectively verifiable prong of the

discovery rule.

   By Ruling That Appellant’s Injury Cannot Be Objectively Verified, The
   Court Has Effectively Created a New Shield for Defalcating Fiduciaries

      This Court’s opinion is a classic example of “bad facts make bad law.”

Collateral damage from the Court’s opinion will likely be significant. Essentially,

the Court has rejected all of the burdens placed on fiduciaries to prove fairness and

prove full disclosure - burdens that this Court has frequently recognized and

enforced, and which satisfy the objectively verifiable prong. Instead, the Court has

effectively classified Mary’s claim as just an unverifiable swearing match, because

Mary had to document her intention to keep the minerals. This Court’s opinion

turns the law of fiduciary duty on its head and switches the burden away from the

fiduciary and back to the beneficiary, as in any arms-length case.               More

importantly, this Court negated its own holding in Sorrell that “whether the

complaining party in a fiduciary transaction understood the transaction in

question is not the critical issue.” Id. at 586. Here, the Court has determined that

the critical issue is whether Mary understood the transaction: that is, she had to

                                          9
understand that the minerals were being taken and objectively express that she

wanted to keep her minerals.

      Essentially, this Court held that Mary could not objectively show that she

intended to retain the minerals in order to satisfy the objectively verifiable prong.

The Court specifically held that deposition testimony is not objectively verifiable:

      The evidence in this case consists of deposition testimony, which is
      not objectively verifiable evidence, and copies of the actual deeds
      showing a transfer of the mineral estate from Mary to Tommy and
      Harry, respectively. While the deeds are evidence that Mary’s mineral
      interests passed to her sons, they are not evidence that the mineral
      interests were wrongfully transferred to her sons.

      This statement by the Court effectively holds that no abusive gift, loan, sale,

or transfer between a beneficiary and her fiduciary will ever be subject to the

discovery rule. Apply this Court’s holding above to a deed given by an elderly

beneficiary to her lawyer, to a check given to a close confidante, or to the signing

of a survivorship account agreement at the request of a fiduciary. To trigger the

discovery rule in those situations, the beneficiary would be forced by this Court to

objectively prove that the transaction was not intended to be a gift, or not intended

to be compensation, or not made for some other legitimate reason. And, the Court

has effectively opined that one cannot show that the injury is objectively verifiable

via the long recognized presumptions of fraud and unfairness or through testimony.

How could any beneficiary ever meet that prong under this Court’s erroneous

interpretation?

                                         10
      This Court’s opinion is potentially devastating to beneficiaries of fiduciary

duty, especially to the elderly who are more apt to execute transactions without

fully grasping what they are. Any time a fiduciary slips a piece of paper in front of

his beneficiary, the clock will now run, even though the beneficiary may not know

what he or she signed, or the true effect of signing the document and regardless of

whether the transaction is unfair.      Because of this Court’s opinion, “sharp

bargains,” like the one here, will become the new elder abuse game in town.

      WHEREFORE, Appellant prays that the Court consider this Motion, grant

a reconsideration en banc, and grant general relief.

                                       Respectfully submitted,

                                       THE HARTNETT LAW FIRM

                                       By:    /s/ Jim Hartnett, Jr.
                                              Jim Hartnett, Jr.
                                              Texas Bar Card No. 09169200
                                              jim@hartnettlawfirm.com
                                              Will Hartnett
                                              Texas Bar Card No. 09170200
                                              will@hartnettlawfirm.com
                                              Fred Hartnett
                                              Texas Bar Card No. 00790833
                                              fred@hartnettlawfirm.com
                                              Melinda J. Hartnett
                                              Texas Bar Card No. 24032403

                                              2920 N. Pearl Street
                                              Dallas, Texas 75201
                                              Telephone (214) 742-4655
                                              Facsimile (214) 855-7857

                                         11
                               ATTORNEYS FOR MARY MOCZYGEMBA,
                               APPELLANT

                     CERTIFICATE OF COMPLIANCE

       I hereby certify that the above document complies with the word count
limits set forth in the amendments to the Texas Rules of Appellate Procedure. The
document has a word count of 2,768.

                                            /s/ Jim Hartnett, Jr.
                                               Jim Hartnett, Jr.

                        CERTIFICATE OF SERVICE

      I hereby certify that on the 19th day of May, 2015, a copy of the above and
foregoing response was sent pursuant to T.R.A.P. Rule 9.5 to the following parties
and counsel of record:

      Joyce W. Moore
      Langley & Banack, Inc.
      745 East Mulberry, Suite 900
      San Antonio, Texas 78212
      Telephone (210) 736-6600
      Facsimile (210) 735-6889
      jwmoore@langleybanack.com
      Attorneys for Thomas J. Moczygemba
      And Harry Lee Moczygemba

                                                          /s/ Jim Hartnett, Jr.
                                                          Jim Hartnett, Jr.

                                       12