Court Opinion

ID: 4287638
Source: CourtListenerOpinion
Date Created: 2018-06-25 08:18:55.61203+00
Date Added: 2024-06-11T14:37:12.467948
License: Public Domain

Reversed and Remanded and Memorandum Opinion filed June 21, 2018.

                                       In The

                     Fourteenth Court of Appeals

                               NO. 14-17-00071-CV

  PHILLIP R. SCHLITTLER, INDIVIDUALLY AND AS INDEPENDENT
  EXECUTOR OF THE ESTATE OF CHARLES A. TISDALE, Appellant
                                          V.

               THE ESTATE OF ADRIAN F. MEYER, Appellee

                   On Appeal from the County Court at Law
                            Austin County, Texas
                      Trial Court Cause No. 14PR-9813

                  MEMORANDUM OPINION
      Phillip R. Schlittler, individually and as independent executor of the estate of
Charles A. Tisdale, sued the estate of Adrian F. Meyer, and alleged that Meyer
misappropriated assets while serving as executor of Charles A. Tisdale’s estate.
The trial court granted summary judgment in favor of Meyer’s estate, holding that
Schlittler’s claims were barred by the applicable four-year statute of limitations.

      We conclude that the summary judgment evidence failed to establish as a
 matter of law the date on which Schlittler’s claims accrued. We reverse and
 remand for proceedings consistent with this opinion.

                                      BACKGROUND

I.         Facts

           Schlittler is the grandson of Charles A. Tisdale, who died in 2005. Charles
 left the entirety of his estate to his daughter Connie Tisdale, who was Schlittler’s
 mother.1 Connie was named executor of Charles’s estate but died before Charles’s
 will was admitted to probate.

           A probate court in Iberia Parish, Louisiana oversaw the probate of Charles’s
 estate.       Meyer, Connie’s husband and Schlittler’s step-father, was appointed
 executor of Charles’s estate after Connie’s death.

           In January 2006, Meyer filed with the probate court a petition to appoint a
 notary to list the contents of Charles’s safe deposit box located at a Regions Bank
 branch in New Iberia, Louisiana. The probate court granted the petition and a
 notary opened Charles’s safe deposit box in Meyer’s presence on January 31,
 2006. The notary filed with the probate court a “Return of Notary” listing the safe
 deposit box’s contents, including seven Certificates of Deposit (“CDs”) in the
 name of “C.A. Tisdale or Connie L. Meyer.”                Schlittler alleges that Meyer
 subsequently misappropriated three of the CDs found in Charles’s safe deposit
 box.

           In December 2012, Schlittler mailed a letter to the probate court asserting
 that Meyer “abandoned [Charles’s estate] for nearly 7 years.” Schlittler claimed
 that Meyer failed to provide any annual accountings for Charles’s estate and

           1
          Because they shared the same last name, we will refer to Charles A. Tisdale and his
 daughter by their first names to avoid confusion.

                                              2
  asserted that Meyer’s current location was unknown.

        Schlittler mailed a second letter to the probate court in January 2013, again
  asserting that Meyer had abandoned Charles’s estate. Schlittler’s letter discussed
  his attempt to complete a partial accounting of Charles’s estate:

        Even with the court order I was not able to conduct a partial
        accounting on my own. Regions Bank informed me there are banking
        privacy rules and regulations that prevented disclosure of [Charles’s]
        account information. I would need to be the succession representative
        to be given account information.
  In January 2013, the probate court removed Meyer as executor of Charles’s estate
  and appointed Schlittler as executor.

        Schlittler received an email from Regions Bank on January 28, 2013,
  showing that three of the seven CDs found in Charles’s safe deposit box were
  “closed” on February 1, 2006, one day after Charles’s safe deposit box was
  opened.    On January 28, 2013, Schlittler sent a letter to Meyer’s attorney
  demanding the proceeds from the CDs. He received no response.

        Meyer died on March 10, 2014.             His wife, Shirley Poppe Meyer, was
  appointed executor of his estate.2

II.     Procedural History

        Schlittler sued Meyer’s estate on March 13, 2015, requesting declaratory
  relief and asserting a claim for breach of fiduciary duty. Schlittler’s first amended
  petition asserts that the discovery rule tolls the statute of limitations applicable to
  his claims. Schlittler served process on Shirley in her capacity as independent
  executrix of Meyer’s estate. Shirley answered as executrix of Meyer’s estate and

        2
         Because she shares the same last name as her late husband, we will refer to Shirley
  Poppe Meyer by her first name to avoid confusion.

                                              3
counterclaimed for conversion.3

       Shirley filed a traditional summary judgment motion entitled “Defendant’s
Second Motion for Partial Summary Judgment (Statute of Limitations).”4
Shirley’s summary judgment motion asserted that Schlittler’s suit is barred by the
applicable four-year statute of limitations. See Tex. Civ. Prac. & Rem. Code Ann.
§ 16.004(a)(5) (Vernon 2002).

       Schlittler argued in response that the statute of limitations was tolled by the
discovery rule and asserted that Shirley failed to “prove as a matter of law that
there is no genuine issue of fact about when [Schlittler] discovered or should have
discovered the nature of the injury.”             Schlittler stated that he was unable to
discover Meyer’s misappropriation of the CDs until after he was appointed
executor of Charles’s estate in January 2013, thereby tolling the applicable four-
year limitations period and making his March 2015 lawsuit timely for limitations
purposes.

       The trial court signed an order granting Shirley’s traditional summary
judgment motion on June 22, 2016. The order did not specify the grounds on
which the trial court granted Shirley’s summary judgment motion. Shirley filed a
notice of nonsuit of her counterclaim, which was confirmed by the trial court in an
order signed on July 11, 2016.

       Schlittler filed a motion for reconsideration of the trial court’s ruling on
Shirley’s summary judgment motion or, in the alternative, a motion for

       3
         “A decedent’s estate is not a legal entity and may not properly sue or be sued as such.”
Austin Nursing Ctr., Inc. v. Lovato, 171 S.W.3d 845, 849 (Tex. 2005) (internal quotation
omitted). Although the parties did not address this issue in the trial court, Shirley’s filings
indicate that she is litigating as executrix of Meyer’s estate. For the purposes of this
memorandum opinion, we refer to Shirley as the appellee in this action.
       4
           The trial court denied Shirley’s first summary judgment motion.

                                                 4
clarification. Schlittler’s motion for reconsideration was set for a hearing on
December 2, 2016. The trial court signed an order denying Schlittler’s motion for
reconsideration on December 22, 2016. Schlittler filed a notice of appeal. This
court entered an abatement order on June 9, 2017, to permit the trial court to clarify
its intent regarding the finality of its judgment. The trial court signed a “Final
Summary Judgment” on June 27, 2017, rendering a take-nothing judgment in favor
of Shirley. We reinstated Schlittler’s appeal on July 13, 2017.5

                                    STANDARD OF REVIEW

       A summary judgment is reviewed de novo. Exxon Mobil Corp. v. Rincones,
520 S.W.3d 572, 579 (Tex. 2017). When reviewing a summary judgment, we
examine the record in the light most favorable to the nonmoving party, indulging
every reasonable inference and resolving any doubts in the nonmoving party’s
favor. Cantey Hanger, LLP v. Byrd, 467 S.W.3d 477, 481 (Tex. 2015). The party
moving for traditional summary judgment has the burden of showing that there is
no genuine issue of material fact and that it is entitled to judgment as a matter of
law. Tex. R. Civ. P. 166a(c); Exxon Mobil Corp., 520 S.W.3d at 579.

                                            ANALYSIS

       Schlittler asserts that the trial court erred in granting Shirley’s traditional
summary judgment motion because (1) the discovery rule tolls the statute of

       5
          In the June 9, 2017 order abating Schlittler’s case, we determined that the trial court did
not fully dispose of Schlittler’s claims in its (1) June 22, 2016 order granting Shirley’s summary
judgment motion; (2) July 11, 2016 order confirming Shirley’s notice of nonsuit; or
(3) December 22, 2016 order denying Schlittler’s motion for reconsideration. We concluded that
“no final judgment ha[d] been signed in this case.” We abated Schlittler’s appeal to permit the
trial court to clarify its intent and to permit the parties to obtain a final judgment. See Tex. R.
App. P. 27.2.
        The trial court signed a final judgment on June 27, 2017. In our July 13, 2017 order, we
concluded that Schlittler’s notice of appeal was prematurely filed and “deemed [it] to have been
filed on June 27, 2017.” See Tex. R. App. P. 27.1(a).

                                                 5
 limitations applicable to his claims; and (2) Shirley failed to meet her burden to
 show no genuine issue of material fact regarding when Schlittler discovered or
 should have discovered the nature of the alleged injury. We sustain Schlittler’s
 issue on appeal.

I.     Discovery Rule

       Schlittler asserts that Shirley failed to show conclusively that the discovery
 rule does not toll the statute of limitations applicable to Schlittler’s breach of
 fiduciary duty claim and requests for declaratory relief.

       To be considered timely, a breach of fiduciary duty claim must be filed
 within four years of the claim’s accrual. Tex. Civ. Prac. & Rem. Code Ann.
 § 16.004(a)(5); Williard Law Firm, L.P. v. Sewell, 464 S.W.3d 747, 751 (Tex.
 App.—Houston [14th Dist.] 2015, no pet.). A declaratory judgment action is a
 “procedural device used to vindicate substantive rights” and “is generally governed
 by the statute of limitations for the legal remedy underlying the claim.” Nw. Austin
 Mun. Util. Dist. No. 1 v. City of Austin, 274 S.W.3d 820, 836 (Tex. App.—Austin
 2008, pet. denied); see also In re Estate of Denman, 362 S.W.3d 134, 144 (Tex.
 App.—San Antonio 2011, no pet.). Because Schlittler’s requests for declaratory
 relief arise from the same facts that underlie his fiduciary duty claim, they are
 governed by the same four-year limitations period. See Tex. Civ. Prac. & Rem.
 Code Ann. § 16.004(a)(5); In re Estate of Denman, 362 S.W.3d at 144; City of
 Austin, 274 S.W.3d at 836.

       “As a general rule, a cause of action accrues and the statute of limitations
 begins to run when facts come into existence that authorize a party to seek a
 judicial remedy.” Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211,
 221 (Tex. 2003). A cause of action “accrues when a wrongful act causes a legal
 injury, regardless of when the plaintiff learns of that injury or if all resulting
                                           6
damages have yet to occur.” Id. Determining a claim’s accrual presents a question
of law. Holy Cross Church of God in Christ v. Wolf, 44 S.W.3d 562, 567 (Tex.
2001).

      The discovery rule is a “very limited exception” to the general principles for
determining a claim’s accrual.     Comput. Assocs. Int’l, Inc. v. Altai, Inc., 918
S.W.2d 453, 455 (Tex. 1996); see also Williard Law Firm, L.P., 464 S.W.3d at
751. “The discovery rule exception defers accrual of a cause of action until the
plaintiff knew or, exercising reasonable diligence, should have known of the facts
giving rise to the cause of action.” Id. Under the discovery rule, a claim’s accrual
may be deferred if “‘the nature of the injury incurred is inherently undiscoverable
and the evidence of injury is objectively verifiable.’” Via Net v. TIG Ins. Co., 211
S.W.3d 310, 313 (Tex. 2006) (per curiam) (quoting Comput. Assocs. Int’l, Inc.,
918 S.W.2d at 456). “‘An injury is inherently undiscoverable if it is, by its nature,
unlikely to be discovered within the prescribed limitations period despite due
diligence.’” Id. at 313-14 (quoting Wagner & Brown, Ltd. v. Horwood, 58 S.W.3d
732, 734-35 (Tex. 2001)).

      When the non-movant asserts the discovery rule, the party seeking summary
judgment on limitations must (1) conclusively establish when the claim accrued,
and (2) negate the discovery rule by establishing, as a matter of law, that there is
no genuine issue of fact regarding when the plaintiff discovered, or in the exercise
of reasonable diligence should have discovered, the nature of the alleged injury.
KPMG Peat Marwick v. Harrison Cty. Hous. Fin. Corp., 988 S.W.2d 746, 748
(Tex. 1999); Cluck v. Mecom, 401 S.W.3d 110, 118 (Tex. App.—Houston [14th
Dist.] 2011, pet. denied).

      A.     The Discovery Rule Applies to Schlittler’s Claims
      The parties dispute whether the discovery rule applies to Schlittler’s claims.

                                         7
The discovery rule applies when the nature of the injury incurred is inherently
undiscoverable and the evidence of injury is objectively verifiable. Via Net, 211
S.W.3d at 313.

      Whether an injury is inherently undiscoverable is a legal question “decided
on a categorical rather than case-specific basis; the focus is on whether a type of
injury rather than a particular injury was discoverable.” Id. at 314 (emphasis in
original).

      “Because fiduciaries are presumed to possess superior knowledge to that of
the client, ‘it may be said [in the fiduciary context] that the nature of the injury is
presumed to be inherently undiscoverable, although a person owed a fiduciary duty
has some responsibility to ascertain when an injury occurs.’” Williard Law Firm,
L.P., 464 S.W.3d at 752 (quoting Comput. Assocs. Int’l, Inc., 918 S.W.2d at 456);
see also Moore v. Broussard, No. 14-03-00114-CV, 2004 WL 2438924, at *2
(Tex. App.—Houston [14th Dist.] Nov. 2, 2004, no pet.) (mem. op.) (reversing
trial court’s summary judgment on the plaintiff’s breach of fiduciary duty claim
because defendant did not negate the discovery rule as a matter of law). The
reason underlying this presumption “is that a person to whom a fiduciary duty is
owed is either unable to inquire into the fiduciary’s actions or unaware of the need
to do so.” S.V. v. R.V., 933 S.W.2d 1, 8 (Tex. 1996).

      Evidence of an injury is objectively verifiable if the facts upon which
liability is asserted are demonstrated by direct evidence, expert testimony, or are
otherwise indisputable. See id. at 7.

      We conclude that the discovery rule applies to Schlittler’s claims because
the nature of the alleged injury is inherently undiscoverable and evidence of the
injury is objectively verifiable.

                                          8
      As executor of Charles’s estate, Meyer was held to “the same high fiduciary
duties and standards . . . as are applicable to trustees.” Evans v. First Nat’l Bank of
Bellville, 946 S.W.2d 367, 379 (Tex. App.—Houston [14th Dist.] 1997, writ
denied). Because Meyer operated as a fiduciary, we may presume that the injury
flowing from Meyer’s alleged misappropriation of Charles’s CDs was inherently
undiscoverable.    See S.V., 933 S.W.2d at 8; Comput. Assocs. Int’l, Inc., 918
S.W.2d at 456.

      The summary judgment evidence supports the application of this
presumption. In his January 2013 letter to the probate court, Schlittler asserted that
he was unable to conduct a partial accounting of Charles’s safe deposit box
because he was not the estate’s representative. The record shows that Schlittler
learned of the disposition of the CDs only after he was appointed executor of
Charles’s estate. Schlittler’s inability to inquire regarding the CD’s status until he
was appointed executor of Charles’s estate supports the conclusion that the nature
of the alleged injury is inherently undiscoverable.

      The alleged injury is objectively verifiable because it can be demonstrated
by direct evidence. See S.V., 933 S.W.2d at 7. The email Schlittler received from
Regions Bank on January 28, 2013, indicates that the three CDs at issue were
“closed” on February 1, 2006, one day after Charles’s safe deposit box was
opened.

      Because the nature of the alleged injury is inherently undiscoverable and
evidence of the injury is objectively verifiable, the discovery rule applies to
Schlittler’s claims.

      Shirley asserts several arguments to support her contention that the
discovery rule is inapplicable, which we address in turn.

                                          9
      First, Shirley asserts that public policy counsels against employing the
discovery rule in the probate context because of the state’s interest in the orderly
administration of estates and the finality of judgments in probate proceedings.
Shirley cites Frost National Bank v. Fernandez, 315 S.W.3d 494 (Tex. 2010), and
Little v. Smith, 943 S.W.2d 414 (Tex. 1997), to support her argument.

      Little and Fernandez are distinguishable. In both cases, the court’s refusal to
permit tolling under the discovery rule was motivated by concerns regarding
belated inheritance claims asserted years after an estate was closed.            See
Fernandez, 315 S.W.3d at 511-12 (holding that the discovery rule does not apply
to inheritance claims by non-marital children); Little, 943 S.W.2d at 419-20
(holding that the discovery rule does not apply to inheritance claims by adoptee
children). That reasoning does not foreclose Schlittler’s reliance on the discovery
rule because he is not asserting an inheritance claim; instead, he seeks to recover
for a fiduciary’s alleged misappropriation of an estate’s assets.

      Second, Shirley asserts that Schlittler had “constructive knowledge” of the
alleged wrongdoing because “[t]he Return of Notary showed that [Meyer] had,
pursuant to the Court’s Order, taken possession of the contents of [Charles’s] safe
deposit box, and said contents included the CDs the subject of this suit.” This
constructive knowledge, Shirley contends, “negates a finding that an injury is
inherently undiscoverable.”

      This argument fails because, contrary to Shirley’s contention, the Return of
Notary did not show that Meyer took possession of the contents of Charles’s safe
deposit box. The Return states that Charles’s will and self-proving affidavit were
the only items removed from the safe deposit box. Although the Return of Notary
lists the seven CDs as items “found in the box,” the Return does not state or
otherwise indicate that the CDs were removed from the box.

                                          10
      Finally, Shirley asserts that Schlittler failed to plead that the alleged injury
was inherently undiscoverable and objectively verifiable.

      A party claiming reliance on the discovery rule ordinarily must plead it.
Nickols v. Oasis Remarketing, LLC, No. 14-17-00556-CV, 2018 WL 2436058, at
*4 (Tex. App.—Houston [14th Dist.] May 31, 2018, no pet. h.) (mem. op.).
Schlittler satisfied this requirement and pleaded the discovery rule in his first
amended petition. Shirley does not cite any cases that require a party’s pleading to
additionally invoke the “inherently undiscoverable and objectively verifiable”
standard using those precise words.6

      We conclude that the nature of the alleged injury is inherently
undiscoverable and evidence of the injury is objectively verifiable. Therefore, the
discovery rule applies to Schlittler’s claims.

      B.        Shirley Failed to Satisfy Her Summary Judgment Burden

      When the discovery rule applies, a claim’s accrual is deferred until the
plaintiff knew or should have known of the facts giving rise to the cause of action.
KPMG Peat Marwick, 988 S.W.2d at 748. The burden is on the party seeking
summary judgment to “prov[e], as a matter of law, there is no genuine issue of fact
about when the plaintiff discovered, or in the exercise of reasonable diligence
should have discovered, the nature of [his] injury.” Cluck, 401 S.W.3d at 117-18.

      Shirley failed to satisfy this burden.                  Shirley asserts that Schlittler
“admitted” that his causes of action accrued on February 1, 2006, and points to
Schlittler’s answers to her requests for admission to support this contention.
Schlittler answered “Admit” to the following requests for admission:

      5.        The document attached as Exhibit 3 is a genuine copy of that

      6
          Schlittler’s petition did state that the “act and omissions were undiscoverable.”

                                                 11
             document.
      6.     The document attached as Exhibit 3 was created on or before January
             28, 2013.
      7.     The document attached as Exhibit 3 was signed on or before January
             28, 2013.
      8.     The signature on page 1 of the document attached as Exhibit 3 was
             made by Phillip Schlittler.

“Exhibit 3” refers to Schlittler’s January 28, 2013 letter to Meyer’s attorney. In the
letter, Schlittler states that on February 1, 2006, Meyer cashed three CDs removed
from Charles’s safe deposit box. Schlittler’s letter demands that the proceeds be
returned to Charles’s estate.

      Under the discovery rule, a claim accrues when the plaintiff “discovered, or
in the exercise of reasonable diligence should have discovered, the nature of [his]
injury.” Id. We disagree with Shirley’s contention that Schlittler’s January 28,
2013 letter conclusively proves that Schlittler knew or should have known of the
alleged injury on February 1, 2006. Rather, the letter indicates at most that the
alleged injury occurred on February 1, 2006 — the letter does not suggest that
Schlittler knew or should have known of the injury on this date. This evidence
does not show that, as a matter of law, Schlittler knew or should have known of the
alleged injury in February 2006.

      Shirley does not advance any other arguments or point to other evidence to
show when Schlittler knew or should have known of Meyer’s alleged
misappropriation of the CDs stored in Charles’s safe deposit box. Shirley did not
satisfy her summary judgment burden and failed to prove that there is no genuine
issue of fact about when Schlittler discovered, or in the exercise of reasonable
diligence should have discovered, the nature of the alleged injury.

                                         12
                                   CONCLUSION

      We conclude that (1) the discovery rule applies to Schlittler’s claims; and
(2) Shirley failed to prove as a matter of law when Schlittler discovered or should
have discovered the nature of the alleged injury.

      We reverse the trial court’s June 27, 2017 “Final Summary Judgment” and
remand for proceedings consistent with this opinion.

                                       /s/    William J. Boyce
                                              Justice

Panel consists of Justices Boyce, Jamison, and Brown.

                                         13