INTERESTING CASES: December 2, 2020

Sallee S. Smyth

  1. Moody v. Moody, 2020 Tex. App. LEXIS 8723 (Tex. App. – Houston [14th] November 10, 2020) (Cause No. 14-186-01018-CV)

In April 2014, H executed a will, a living trust, and a marital property agreement (MPA) converting some of his separate property into community property. In July 2014 H, age 89, died. His will named Moody National Bank (MNB) as executor of his estate and trustee of various trusts created under that will who filed for an estate administration and admitted the will to probate. H was survived by his W of 50+ years and four children, a son by his marriage to W and three daughters from a prior marriage. Almost all of H’s estate was left to a marital trust, but for the community interest in retirement benefits to W and some personal effects divided between his W and 4 children. The will established a Marital Trust which distributed income to W and several other exempt and non-exempt trusts all of which terminated at W’s death. Thus, it was not until W died that any of the children were entitled to receive distributions from H’s estate other than some personal effects. Two years after the probate administration began, Linda, one of H’s daughters from a prior marriage, sought declaratory judgment relief that H lacked the capacity to execute the MPA and further that it had been procured by W’s breach of fiduciary duty and fraud, claiming that the MPA was unenforceable. Linda did not challenge H’s capacity to sign the Will. The case was tried to a jury who rendered a verdict for Linda, awarding $34K in actual damages and $1.00 in exemplary damages in favor of H’s estate and against W. Linda and W signed a Rule 11 Agreement to try the issues of attorneys fees to the court, with a cap of $750K per party and further that such fees, if awarded, would be paid from the Living Trust funds. MNB, Trustee, did not sign the agreement. The trial court awarded Linda $633K in fees and awarded W $750K in fees. MNB, Trustee, appealed alleging that Linda lacked standing to challenge the MPA, claiming the MPA was valid and enforceable and challenged the award of fees as paid from the trust. W appealed also challenging Linda’s authority to prosecute claims against the estate. Linda asserted that she had standing to challenge the MPA, relying on TFC 4.205(c) which allows an heir or personal representative of a deceased spouse to provide the proof necessary to challenge the enforceability of a conversion agreement as required by TFC 4.205(a). Linda also claimed that MNB and W’s standing error had not been preserved in the trial court. Initially, the COA determined that since standing is a component of subject matter jurisdiction, claims challenging standing could be raised for the first time on appeal. Then, on the substantive standing arguments, the COA determined that Linda was not an “heir” because the Estate Code defined heir as a person entitled to part of an estate when the deceased dies “intestate” and here, H had a Will so there were named beneficiaries but not “heirs.” Further, the COA found that even if Linda were an “heir,” TFC 4.205(c) merely identifies the persons who may provide proof re: an agreement’s lack of enforceability, but it does not confer standing upon them to actually challenge the MPA. The COA also found that Linda did not possess standing under Estate Code statutes because she had no direct interest in H’s estate, being only a named beneficiary of a residuary trust. The COA determined that MNB, executor and Trustee, was the personal representative of H’s estate and had the exclusive authority to sue and recover property on behalf of H’s estate, determining that Linda failed to meet any of the exceptions which might allow an heir to sue. Because Linda did not challenge H’s Will, MNB as executor and Trustee, was the proper party to make claims, finding that Linda not only lacked standing, but also lacked capacity. The COA further determined that Linda lacked standing or capacity to assert “survival claims” against W, those being the tort claims of fraud and breach of fiduciary duty that Linda asserted against W. These claims belonged to the estate, surviving after H’s death, and could only be brought by the personal representative of H’s estate, that being MNB as executor and trustee. Because standing is a component of subject matter jurisdiction, the COA reversed the verdict and judgment and rendered judgment dismissing Linda’s suit for lack of jurisdiction. Comment: We often see the problems that can arise when family law and probate/estate planning law intersect and this case illustrates that point precisely. These parties spent millions in attorney fees taking this case to a jury without questioning standing as a threshold issue. On the one hand, it seems legitimate for a daughter of the deceased H to consider herself an “heir,” qualifying her to provide “proof” challenging a conversion agreement as executed by her father. However, the COA’s very specific application of statutory definitions and statutory construction and their notation regarding the omission of “standing” terms within the Family Code marital property agreement statutes, lead to a conclusion which literally renders all the time, effort and money completely meaningless. We learn that it is just as important to consider what the statutes say as what they don’t say!

  1. In re H.L., 2020 Tex. App. LEXIS 8794 (Tex. App. – Fort Worth November 12, 2020) (mem. op.) (Cause No. 02-20-00143-CV)

Within a suit for termination of parental rights, the child’s paternal grandparents (PGP) intervened and sought rights of grandparent access. PGP’s access claims were severed from the termination suit and other relatives (CL and KL) of PGP were named the child’s managing conservators when the parent’s rights were terminated. Within the PGP suit, CL and KL filed a motion to dismiss, alleging that PGP’s affidavit supporting relief was insufficient. The trial court denied the motion and eventually granted PGP access with their grandchild. CL and KL appealed. The COA acknowledged that a grandparent’s standing to assert a claim for access is governed by TFC 153.432(c), obligating the grandparent to attach an affidavit to their petition asserting supporting facts which establish a claim that denial of access will significantly impair the child’s physical health and emotional well-being. Taking guidance from prior Supreme Court decisions (219 SW3 327 and 325 SW3 640), the COA notes that a child’s “lingering sadness” over the loss of seeing their grandparents (which does not manifest into depression or behavioral problems) is insufficient to meet the statutory requirements. In this case the COA examined the paternal grandmother’s affidavit which detailed the PGP’s longstanding involvement with the child since birth which had gradually declined over the years in CL and KL’s care, ultimately stopping altogether. The affidavit described the child’s statements about missing the visits, noted that CL and KL had not given PGP pictures the child had drawn for them and that the child got upset when she had to leave, claiming that CL and KL had animosity for PGP and that this animosity would improperly teach the child about abandonment and suggest that PGP did not love the child, all of which would significantly impair her emotional well-being. The COA determined that PGP’s claims within the affidavit did not rise to the level required by the statute, noting that they merely described the child’s lingering sadness. The COA reversed the trial courts order and dismissed PGP’s suit per the mandate of TFC 153.432(c) when an affidavit is insufficient to support relief. Comment: Insider information from Paul Leopold, counsel for appellant, suggests that the COA never reached the more interesting issue in this case. Managing conservators (CL and KL) were non-parents who made the decision to stop allowing grandparents access. PGP’s argued that the “parental presumption/fit parent presumption” within TFC 153.433(b)(2), setting forth the conditions which a GP must satisfy to gain access once they establish standing under TFC 153.432, should not apply at the affidavit stage because it does not apply at the trial stage. PGP argued that because the parents were not the ones refusing access, they would not have to overcome the parental presumptions to prevail at trial (260 SW3 568) and thus, they should not have to overcome it at the standing/affidavit stage. The COA opinion relies solely upon the language of TFC 153.432 as providing the conditions for standing, which is an affidavit making the requisite allegations that “denial of access to the child by the petitioner [whether a parent or non-parent] would significantly impair the child’s physical health or emotional well-being.” Even though the “significant” impairment language in 153.432 is the same as the significant impairment language in 153.433, the COA nevertheless determined that the allegations must be included in the affidavit to gain standing under 153.432, notwithstanding case law (260 SW3 568) which provides that the presumptions of 153.433 are inapplicable when a non-parent managing conservator is involved. The COA did not discuss this distinction at all. As Paul suggests, perhaps the legislature should consider whether the mirror language of the two statutes should be studied further.

  1. Diaz v. Diaz, 2020 Tex. App. LEXIS 8775 (Tex. App. – San Antonio November 12, 2020) (mem. op.) (Cause No. 04-19-00767-CV)

H and W divorced in 1992. During marriage they jointly owned property at 3215 South Flores Street, legally described as Lots 8 and 9 of Block 2 in a specified area of San Antonio. The lots are contiguous. In their final decree the property at 3212 South Flores Street, specified as Lot 8 was awarded to H. W executed a SWD to H and the deed matched the property description in the final decree. Both the decree and the deed were drafted by W’s attorney as H was pro se. Neither document identified Lot 9 and both documents specified the address as 3212 and not 3215. After the divorce H constructed an apartment complex on both Lots 8 and 9. He paid all of the taxes on both lots until 2018 when W paid some portion. During some tax years the tax records showed both Lots to be owned by H and in other tax years those records showed only Lot 8 as owned by H and Lot 9 as owned by H and W jointly. When H tried to sell the property in 2018 he discovered the error in the decree and he filed a motion for judgment nunc pro tunc. At the hearing on the motion W testified that she was the owner of 3212 Flores Street and H admitted he had never owned an interest in that property. The parties both agreed that they had owned 3215 together and H argued that it was the parties’ intent that he be awarded both Lots 8 and 9 in the divorce. W claimed that the decree did not dispose of Lot 9. The trial court granted the judgment NPT and corrected the address of the property to 3215 South Flores Street and the decree to award H both lots. W appealed only the determination regarding Lot 9. The COA identified the difference between clerical errors, which can be corrected by NPT, and judicial errors, which cannot, noting that the deciding factor relied upon determining what judgment the trial court, not the parties, intended at rendition. The COA noted that at the hearing, H agreed the address should have been 3215 as he had never owned an interest in 3212. However, H’s argument relied on what he and W had intended, not the trial court. The COA found that the only evidence of rendition was the final decree itself, which rendered a division only of Lot 8. Although this error was attributed to the drafting mistake of W’s counsel, even such mistakes are part of the court’s rendition when signing the decree is the act of rendition. As such, the COA determined that the decree dividing only Lot 8 resulted from judicial (not clerical) reasoning and could not be corrected by a judgment NPT. Judgment affirmed as to address change and judgment reversed as to correction dividing Lot 9, reinstating the terms of the 1992 Final Decree as dividing Lot 8 only.

  1. Fuller v. DeFranco, 2020 Tex. App. LEXIS 8945 (Tex. App. – Dallas November 18, 2020) (mem. op.) (Cause No. 05-19-01203-CV)

The parties began dating in 2011/2012 and W (woman) moved into M’s (man’s) residence along with her children some time between 2012 and 2014. The parties broke up and W moved out in 2016 but then returned when they reconciled. At some point the parties got engaged and planned a wedding in Mexico in mid-2018. They continued living together until their final breakup in February 2018. M filed a suit for declaratory judgment, seeking a declaration that he and W were not married. W filed a counter suit for divorce claiming a common law marriage since 2014. During trial, W offered evidence of many different types of documents as signed by M in which he claimed she was his spouse. These included affidavits and forms required by American Airlines (M’s employer) to give W flying privileges and obtain health insurance. M further signed documents to obtain military ID and license plates for W, identifying her as his spouse. Both parties filed tax returns as HOH, claiming to be single. Multiple text messages between the parties were offered wherein they discussed being boyfriend/girlfriend and communicated regarding their future wedding. M testified that he signed the various forms in order that W be able to obtain certain benefits, but that he never agreed to be married. W testified that she believed they were married but admitted that some of her own text messages recognized she was not. The trial court concluded that the parties were not married and issued a DJ to that effect. W appealed. The COA examined the evidence and determined that all of the documents signed by M, which claimed W as his spouse, were signed only in order to obtain benefits as spouses and did not reflect M’s agreement to be married. The COA determined that the trial court was entitled to believe M despite all evidence identifying W as his spouse. Judgment affirmed. Comment: It is not unusual in common law marriage cases to see a few inconsistencies in the “holding-out” evidence, however in this case there were significant documents, including signed affidavits, wherein M represented W to be his spouse. Despite such evidence, the trial court found more credibility within the parties’ text messages and M’s testimony as providing evidence that M did not intend to agree to be married … he just apparently intended to defraud his employer and the government to obtain benefits, which must carry a penalty substantially less onerous than marriage!

  1. Choksi v. Choksi, 2020 Tex. App. LEXIS 8944 (Tex. App. – Beaumont November 19, 2020) (mem. op.) (Cause No. 09-19-00183-CV)

H and W, both physicians, married in 1981. During marriage they accumulated substantial property, including real estate. Some of the real estate was held in a limited partnership, Choksi, Ltd. which was owned 95% by H and W. In 2017, W called police after H threatened her with a gun. H was arrested and W filed for divorce the following day. The parties went to mediation in 2018. Prior to mediation, counsel for both parties discussed H’s authority to transfer property owned by Choksi, Ltd. During mediation, H was represented by two attorneys. He never spoke with W or her counsel, only his lawyers and the mediator. H requested that W sign a letter during mediation in hopes of having the pending criminal charges against him dropped. While these charges were pending, H lost privileges at several hospitals and was required to report his arrest to the Texas Medical Board. Despite these circumstances, the parties reached an agreement and signed an MSA which expressly provided that it was voluntary and not procured by duress. W moved to enter a decree and H challenged certain terms resulting in an arbitration. The arbitrator approved a decree and W sought entry again. H filed a response asking the trial court to set aside the MSA. H argued that he executed the MSA under duress, claiming that W had consistently held the pending criminal charges over his head and that his worries over a possible indictment prevented him from listening to his lawyers’ advice. H also claimed that the MSA contained a mutual mistake surrounding his lack of authority to transfer property owned by Choksi, Ltd. Apparently, H had obtained an injunction in another suit filed by Choksi, Ltd. delaying entry of the divorce decree involving Choksi, Ltd. properties. The trial court held an evidentiary hearing on H’s claims of duress. W testified that she did not make threats regarding criminal prosecution and had taken no action other than calling the police the night of the incident. H suggested she had interfered with his medical license but W denied these claims. The trial court found no duress and signed the Final Decree. H appealed. The COA acknowledged other intermediate appellate decisions which hold that fraud and duress can provide a basis to set aside an MSA, but recognized this question had not yet been decided by the TXSCt. Assuming, without deciding, that duress is an available defense to MSA enforcement, the COA reasoned that threats of criminal prosecution to resolve a contract claim is wrongful and presents a question of fact. Further, the COA found that question of duress focus on the conduct of the threatening party, not the emotions of the alleged victim. Here, the COA found that W (whose conduct was the focus of the inquiry) did not make any such threats, believing that her only involvement regarding the criminal charges was her initial call to the police. Regarding H’s claims of mutual mistake, the COA noted that at no time during mediation did H raise any issue regarding his claimed lack of authority to transfer Choksi, Ltd. properties. Further, the Choksi, Ltd. partnership agreement was not offered in evidence at the post-mediation hearing, therefor H failed to carry his burden that the MSA required him to take actions in violation of or inconsistent with such agreement. Finally, H asserted a claim that the MSA was against public policy based on the negotiated letter between H and W re: criminal charged, but the COA found that H failed to preserve this issue in the trial court. Judgment affirmed.