Court Opinion

ID: 9770251
Source: CourtListenerOpinion
Date Created: 2023-08-29 15:55:39.914687+00
Date Added: 2024-06-11T07:31:15.984893
License: Public Domain

ROBERT E. MORSE, Jr., Former Justice,
dissenting.
I respectfully dissent. I would not reverse and remand this action. Rather, I would affirm the judgment in favor of Michael’s Estate as to all of Michael’s alleged misappropriations except the $83,650 withdrawal from the cash management account (CMA). As to the latter, I would reverse and render judgment for $83,650 against Michael’s Estate.
*421I. Perspective
Two main considerations influence my dissent. The first is my concern regarding the imposition of a presumption of unfairness on Michael’s Estate under the circumstances of this case, i.e., where both the fiduciary and beneficiary are deceased and where the terms of the fiduciary relationship and communications between the two were largely secret and unmemorialized. The second is my belief that this court should look behind the jury’s answer to a broad-form question and identify the necessarily implied findings. Then, where possible with fairness to the parties, we should sever the cause as appropriate and tailor our judgment in the interest of justice and judicial economy.
A. Presumption of Unfairness
A rebuttable presumption of unfairness arises regarding a transaction between a fiduciary and beneficiary when the plaintiff shows (1) a fiduciary relationship, and (2) an advantage gained by the fiduciary at the expense of the beneficiary. See Miller v. Miller, 700 S.W.2d 941, 946 (Tex.App.—Dallas 1985, writ ref'd n.r.e.). The fiduciary defendant must rebut the presumption to get the issue to the jury. This requires the offering of some evidence of fairness, i.e., more than a scintilla of evidence, such as would support a jury finding. However, under the circumstances of this case, I would not make that presumption an insurmountable barrier. That is, where the two persons in the best position to provide evidence on the allegations at hand, Michael and Aileen, are deceased, I would at least recognize the necessarily circumstantial nature of Michael’s Estate’s evidence and give it a full and fair reading. Otherwise, the danger exists of imposing on Michael’s Estate an unfair, or even impossible, burden of proof.
B. Jury Findings
Aileen’s Estate alleged that Michael breached his fiduciary duty to Aileen by (1) making unauthorized withdrawals from the Special Account from 1985 to 1989, and (2) making an unauthorized withdrawal from the CMA account on September 5, 1989. The jury was asked the broad-form question, “Do you find from the preponderance of the evidence that Michael Townes did not breach his fiduciary duties to his mother, Aileen Copley Townes?.” The jury answered, “He did not breach his fiduciary duties.” This answer was necessarily based on, and contained, “implied” findings that (1) Michael did not breach his fiduciary duty with regard to the Special Account withdrawals and (2) he did not breach his fiduciary duty as to the CMA account withdrawal.
Also, the trial court presented the jury with the broad-form questions, “Do you find from a preponderance of the evidence that Michael Townes converted funds belonging to Aileen Townes?” and “Do you find from a preponderance of the evidence that Donna Townes converted funds belonging to Aileen Townes?.” The jury answered both questions “We do not.” These answers necessarily were based on, and contained, “implied” findings that (1) Michael did not convert funds from the Special Account, (2) Michael did not convert funds from the CMA account, (3) Donna did not convert funds from the Special Account, and (4) Donna did not convert funds from the CMA account.
In a bench trial, “[t]he legal and factual sufficiency of the implied findings may be challenged on appeal, and the applicable standard of review is the same as applied in the review of jury findings or a trial court’s findings of fact.” Forscan Corp. v. Dresser Indus., 789 S.W.2d 389, 394 (Tex.App.—Houston [14th Dist.] 1990, writ denied). In an era of broad-form jury questions, I see no harm and much benefit in our separately addressing implied jury findings in a similar manner. In the interest of justice and judicial economy, we can then finalize and render judgment wherever possible with fairness to the parties.
In my opinion, Michael’s numerous withdrawals from the Special Account spread over a four-year period are clearly distinguishable from the single, very large withdrawal from the CMA account. The former were taken while Aileen was alive and in control of her faculties and from an account that Aileen had equal access. The latter was taken when Aileen was in a coma, near death, and from an account Michael would lose ac*422cess to upon her death. Where separate disposition of matters in dispute is possible, as in the present case, it wastes judicial resources to unnecessarily remand an entire case for a retrial.
In International Bankers Life Inc. Co. v. Holloway, 868 S.W.2d 567 (Tex.1963), a corporation sued corporate officers and directors for fraud and conspiracy. Separate claims and transactions involved (1) personal profit by defendants on purchase by corporation of land, (2) receipt of commissions on sales to public of stock issue, (3) conversion of corporate funds, and (4) profits realized from the sale of personal stock in competition with sale of corporation’s stock. Id. at 572. The case was presented to the jury by means of segregated special issues tracking each of these transactions. Id. at 570. The corporation won and defendants appealed, the case eventually reaching the Texas Supreme Court. In disposing of the appeal, the Court held that the issues involved in the separate claims and transactions were separable. Accordingly, the Court severed into one cause the claims related to the land purchase, the commissions, and the conversion; into another cause, the personal stock sale. Id. at 572.
With respect to the first restructured cause, the Court reversed the Court of Appeals and affirmed the trial court. As to the second cause, the Court reversed both the Court of Appeals and the trial court and remanded the cause for a new trial. The Court explained itself:
Plaintiffs suit involved one controversy between the parties but asserted separate claims against the defendants growing out of separate transactions. Each of the claims was based on a severable part of the controversy and a judgment on one would not be res judicata of the other. The situation is one where justice is done by the affirmance of the judgment as to severable issues fairly tried since they are sufficiently independent of the issues improperly tried so as not to prejudice the rights of either party.
Id. at 572, citing Slay v. Burnett Trust, 143 Tex. 621, 187 S.W.2d 377, 398 (1945).
In the present case, Aileen’s Estate did not submit separate issues to the jury for the withdrawals from the Special Account and for the withdrawal from the CMA account. Nowadays, special issues are disfavored in view of Rule 277’s admonition to submit broad-form jury questions whenever possible. Tex.R.Cxv.P. 277. However, (1) when the jury’s answer to a broad-form question yields an indisputable set of implied findings, (2) when the plaintiffs cause can be severed without prejudice to the parties, and (3) when such severance enables an appellate court to efficiently dispose of the matters in controversy or at least simplify the remaining issues to be resolved, then I believe that the approach taken in Holloway applies even where the jury’s findings are implied, not express.
Stephens County Museum, Inc. v. Swenson, 517 S.W.2d 257 (Tex.1974) is another case where the Court separately addressed each transaction of a series of transactions involving claimed breaches of fiduciary duty. In Swenson, the trial court, upon a jury verdict, entered judgment (1) denying recovery by the beneficiaries of an initial cash contribution to a museum, but setting aside (2) a second cash contribution, (3) a conveyance of a 1761-acre tract of land, (4) a conveyance of a 5777-acre tract, and (5) a trust associated with the 5777-acre tract. Id. at 259. The court of appeals affirmed. The Texas Supreme Court affirmed the upholding of the first cash contribution and the setting aside of the 1761-acre conveyance. But the Court severed the claim to set aside the second cash contribution and the claim to set aside the conveyance of the 5777-acre tract and its related trust, and remanded those claims to the trial court for a new trial. Id. at 262. Whereas the transactions in Swen-son were put to the jury as separate special issues, I see no reason, in principle, why necessarily implied jury findings cannot be handled in a similar manner.
II. Discussion
Point 1
In point one, Aileen’s Estate complains that the trial court erred in overruling its motion for JNOV and entering judgment in favor of Michael’s Estate, because there was *423no evidence to support the jury’s finding that Michael did not breach his fiduciary duties to Aileen.
The majority held that Michael’s Estate did not rebut the presumption of unfairness. This holding was sufficient to sustain point of error one. The majority additionally held that the evidence conclusively proved Michael’s breach of fiduciary duty. I would sustain the point of error in part, and overrule in part.
Several factors may be considered in determining whether a fiduciary defendant successfully rebutted the presumption of unfairness: (1) whether the fiduciary made reasonable use of the confidence placed in him by the beneficiary, (2) whether the transaction was ultimately fair and equitable, (3) whether the fiduciary made a good faith effort to fully inform the beneficiary of the nature and effect of the transaction, and (4) whether the beneficiary had the benefit of independent advice. See Sorrell v. Elsey, 748 S.W.2d 584, 586 (Tex.App.—San Antonio 1988, writ denied) [factors (1) thru (3) ] and Miller, supra at 949 [factor (4)].
The CMA Account Withdrawal
I agree with the majority in so far it holds that Michael’s Estate failed to meet its burden of production as to his withdrawal from the CMA account. At the time of that transaction, Aileen was in a coma. There was no evidence that Aileen could have been aware of that withdrawal, much less fully informed or afforded independent advice. Nor was there any evidence that the withdrawal was fair and equitable or a reasonable use of the confidence placed in Michael. There was testimony hypothesizing that the withdrawal was made in compliance with specific terms of an agreement between Michael and Aileen. But such testimony was based on facts not in evidence, was rank speculation, and should not have been admitted into evidence. I agree that the trial court’s ruling on Aileen’s Estate’s motion for JNOV was in error to the extent that it denied Aileen’s Estate a judgment with respect to Michael’s withdrawal from the CMA account.
The Special Account Withdrawals
However, I would hold that Michael’s Estate met its burden of production as to the withdrawals from the Special Account. There was some evidence, albeit circumstantial, that Michael and Aileen had an “agreement” or understanding whereby Michael was permitted to take funds from the special account for his personal use. For example: (1) Michael was especially close to Aileen, (2) they lived nearby and communicated several times a day, (3) she made him a co-signatory party to the Special Account without any express reservation, (4) Meen was of sound mind and generally kept track of her financial and business affairs, (5) Michael was dying of heart disease and Meen knew it, and (6) Michael was responsible to Meen for the management of over a $1,000,000 portfolio. Recognizing Michael’s Estate’s necessary reliance on circumstantial evidence, I would hold that the evidence was sufficient to rebut the presumption of unfairness. Moreover, I do not agree with the apparent conclusion of the majority that Meen’s Estate’s evidence otherwise conclusively established that Michael breached his fiduciary duty as to the Special Account withdrawals. Therefore, I would hold that the trial court’s ruling on the motion for JNOV was not in error to the extent that it denied Meen’s Estate a judgment with respect to Michael’s withdrawals from the Special Account.
I would sustain point of error one in part (as to the CMA withdrawal), and overrule in part (as to the Special Account withdrawals).
Remand or Render?
Having sustained Meen’s Estate point one as to the CMA account withdrawal, I would render judgment against Michael’s Estate for the $83,650 amount of that withdrawal.
My rationale for rendering rather than remanding follows:
Rule 81. Reversal in Civil and Criminal Cases
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(b) Reversible Error
(1) Civil Cases.
... [I]f it appears ... that the error affects a part only of the matter in con*424troversy and that such part is clearly separable without unfairness to the parties, the judgment shall only be reversed and a new trial ordered as to that part affected by such error, provided that a separate trial on unliquidated damages alone shall not be ordered if liability issues are contested.
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(c) Rendition Appropriate Unless Remand Necessary.
When the judgment or decree of the court below shall be reversed, the court shall proceed to render such judgment or decree as the court below should have rendered, except when it is necessary to remand to the court below for further proceedings.
Tex.R.App.P. 81.
With error in the failure to give an instructed verdict, it becomes our duty to render the judgment that the trial court should have rendered. See Franklin Life Ins. Co. v. Faggard, 296 S.W.2d 335, 339 (Tex.Civ.App.—San Antonio 1956, writ ref'd n.r.e.).
The issues were fully developed at trial. Michael’s Estate failed to offer more than a scintilla of evidence to overcome the presumption of unfairness. Judgment NOV was proper against Michael’s Estate as to the withdrawal from the CMA account. I would render judgment against Michael’s Estate as to the CMA withdrawal and order the trial court to enter judgment in favor of Aileen’s Estate for the amount of that withdrawal ($83,650) plus pre-judgment interest.
Finding no liability against Michael’s Estate or Donna, the jury did not need to answer the submitted jury questions on exemplary damages. Under my disposition of the case, I need not remand merely to permit the jury to answer these questions. First, the jury instructions stated that malice was not a required element of exemplary damages when there was an “intentional breach” of fiduciary duty. Apparently, the trial court required only a finding of knowing and intentional breach of fiduciary duty. But such knowledge and intent may not be supplied by inference from the presumption of unfair-, ness, and I find no other evidence that Michael knowingly or intentionally committed any breach of his fiduciary duty.
Second, the statutory expression of public policy is that, “[ejxemplary damages may be awarded only if the claimant proves that the personal injury, property damage, death, or other harm ... results from (1) fraud; (2) malice; or (3) gross negligence.” Tex.Civ. Pkac. & Rem.Code Ann. § 41.003(a) (Vernon Supp.1993) (effective September 2,1987); see McLendon v. McLendon, 862 S.W.2d 662, 671 (Tex.App.—Dallas 1993, n.r.h.) (Chapter 41 applies to breach of fiduciary duty); but see Transfer Products, Inc. v. Texpar Energy, Inc., 788 S.W.2d 713, 717 (Tex.App.—Corpus Christi 1990, no writ) (Chapter 41 does not apply to conversion).
The burden of proof on exemplaries “may not be shifted to the defendant_” Tex. Civ.PRAC. & Rem.Code Ann. § 41.003(b). Therefore, even though a presumption of unfairness operated to place the burden of production on Michael’s Estate with respect to Michael’s alleged breach of fiduciary duty, no presumption operated against Michael’s Estate as to the justification for punitive damages. The burden of proof for punitives rests squarely with the plaintiff, Aileen’s Estate.
Gross negligence is an inappropriate basis for punitives in the present case. For purposes of Chapter 41, “Fraud” means actual fraud, not constructive fraud. Id. § 41.-001(4). “Malice” means conduct that is specifically intended to cause substantial injury or an act carried out with a flagrant disregard for the rights of others and with actual awareness that the act will, in reasonable probability, result in human death, great bodily harm, or property damage. Id. § 41.-001(6). I find no evidence in the record of fraud or malice as those terms are defined in § 41.001. The lack of explanation by the deceased fiduciary does not require or justify the imposition of punitive damages on Michael’s Estate. Therefore, no remand for further consideration of such issue is necessary.
In sum, I would sustain point one to the extent that the trial court erred in denying Aileen’s Estate’s motion for JNOV as to the *425CMA withdrawal. As to that transaction, I would render judgment if favor of Aileen’s Estate on liability and actual damages. I would affirm the trial court’s denial of Aileen’s Estate’s motion for JNOV as to the Special Account withdrawals.
Point 2
In point two, Aileen’s Estate complains that the trial court erred in entering judgment in favor of Michael’s Estate and in overruling Aileen’s Estate’s motion for new trial, because there was factually insufficient evidence to support the jury’s finding that Michael did not breach his fiduciary duties to Aileen.
The majority did not address this point since it held in point one that Aileen’s Estate proved Michael’s breach of fiduciary duty as a matter of law. As discussed under point of error one, I would render judgment for Aileen’s Estate on the matter of Michael’s withdrawal from the CMA account. Therefore, I need only address point of error two as to the sufficiency of the evidence to support the jury’s implied finding of no breach of fiduciary duty as to the Special Account withdrawals.
I cannot agree with the majority that the evidence established Michael’s breach of duty as a matter of law with respect to these transactions. Michael’s Estate’s evidence of the course of dealings, habits, and surrounding circumstances concerning the Townes’ intrafamilial transactions raises a fact issue on the issues relevant to establishing a breach of fiduciary duty. I cannot hold, as does the majority, that there was no more than a scintilla of evidence that Michael did not breach his fiduciary duty to Aileen with respect to the Special Account withdrawals. Moreover, considering the circumstantial nature of the evidence on both sides, I would hold that the evidence of no breach as to those transactions was not so weak that the jury’s verdict was manifestly unfair or unjust.
In sum, my disposition of the matter of the CMA withdrawal under point one moots this point of error as to that transaction. I would affirm the trial court’s denial of Aileen’s Estate’s motion for new trial and affirm the jury verdict as to the Special Account withdrawals.
Point 5
In point five, Aileen’s Estate argues that the trial court erred in overruling its motion for JNOV and in entering judgment in favor of Michael’s Estate and Donna, because the evidence conclusively proved that Michael and Donna converted funds belonging to Aileen.
The majority holds that there was no evidence that Aileen consented or agreed to all of the withdrawals. They then hold that the evidence conclusively establishes that Michael converted funds belonging to Aileen. However, the burden of production and persuasion for conversion rests with the plaintiff, Aileen’s Estate. The burden was on Aileen’s Estate to prove lack of consent, not on Michael’s Estate to prove consent. See American Mortgage Corp. v. Wyman, 41 S.W.2d 270, 272 (Tex.Civ.App.—Austin 1931, no writ).
I cannot agree with the majority that Aileen’s Estate established as a matter of law that Michael and Donna converted Aileen’s funds from the Special Account. There is no evidence affirmatively establishing lack of consent except with regard to the withdrawal from the CMA account where there was evidence that Aileen was in a coma. I would overrule this point of error as to the withdrawals from the Special Account. The point is moot with regard to the CMA withdrawal.
Point 6
In point six, Aileen’s Estate contends that the trial court erred in entering judgment in favor of Michael’s Estate and Donna and in overruling its motion for new trial, because the jury’s finding that Michael and Donna did not convert funds belonging to Aileen was against the great weight and preponderance of the evidence.
The majority did not need to address this point. Given my ruling under point one, point six is moot as to the withdrawal from the CMA account. As to the Special Account withdrawals, I would hold that the jury’s verdict was not so against the great weight *426and preponderance of the evidence as to be manifestly unfair or unjust. As I stated under point five, the burden was on Aileen’s Estate to prove lack of consent and there was little if any evidence affirmatively establishing that element of Aileen’s Estate’s conversion claim. I would overrule point six.
Points 3 & 4
In point three, Aileen’s Estate contends that the trial court erred in overruling its motion for JNOV and in entering judgment in favor of Michael’s Estate, because there was no evidence to support the jury’s finding that Michael’s payments to himself were within the scope of an agreement with Aileen. In point four, Aileen’s Estate maintains that the trial court erred in entering judgment in favor of Michael’s Estate and in overruling its motion for new trial, because there was factually insufficient evidence to support the jury’s finding that Michael’s payments to himself were within the scope of an agreement with Aileen.
The jury was asked the question, “Do you find from a preponderance of the evidence that all of the withdrawals made by Michael Townes from his mother’s accounts were within the scope of an agreement between Michael Townes and his mother?.” The jury answered, ‘Tes.” The majority held that there was no evidence of an implied agreement between Michael and Aileen and sustained point four. It therefore did not need to reach point five. I would hold that this jury question is cumulative and not independently dispositive of whether a JNOV or new trial should have been granted. The concept of agreement or consent is inherent in the jury question on breach of fiduciary duty and its accompanying instruction: “A fiduciary may not use the relationship to benefit his personal interest, except with the full knowledge and consent of his principal.” The concept of agreement or consent is also inherent in the conversion questions as bearing on Aileen’s Estate’s burden to prove lack of consent. In other words, the jury’s answer to this “agreement” question gives us insight into the jury’s thinking, but is not dispositive of the ultimate issues of breach of fiduciary duty or conversion. A jury finding that there was no agreement per se, would not necessarily establish the lack of consent necessary for conversion or that Aileen was not fully informed of the withdrawals. Under the appropriate points of error, I have expressed my opinion that the circumstantial evidence was sufficient to support the jury’s findings regarding the allegations of breach of fiduciary duty and conversion as to the withdrawals from the Special Account. I need not revisit these matters here.
Point 7
In point seven, Aileen’s Estate asserts that the trial court erred in refusing to submit jury questions concerning unjust enrichment since such questions were supported by the pleadings and evidence.
The majority did not need to reach this point since it remanded the action for a new trial. I would overrule the point.
The only evidence supporting a restitution-ary claim that Michael and Donna were enriched unjustly related to Aileen’s Estate’s claims of breach of fiduciary duty and conversion. There were no allegations that Michael and Donna acquired Aileen’s funds by accident or mistake or other wrongdoing. Therefore, these questions were cumulative and unnecessary.
The trial court did not err in failing to submit Aileen’s Estate’s unjust enrichment questions to the jury. I would overrule point seven.
Point 8
In point eight, Aileen’s Estate complains that the trial court erred in allowing into evidence both the testimony and written report of Tim Winata because such testimony and report were premised entirely upon facts not in evidence, were wholly speculative, and not probative.
The majority did not address this point. I only comment that even if this testimony and evidence were inadmissible, Michael’s Estate’s and Donna’s defense does not rise or fall with it. There was other sufficient circumstantial evidence of some agreement or understanding between Michael and Aileen *427to sustain the jury’s verdict regarding the withdrawals from the Special Account.
III. Conclusion
I would affirm the trial court’s judgment in favor of Michael’s Estate as to Aileen’s Estate’s claims except for Michael’s breach of fiduciary duty in making the $83,650 withdrawal from the CMA account. As to that transaction, I would render judgment against Michael’s Estate.