David B. Kinsey, Lewis Kinsey and Patricia O. Porter v. Norwest Bank Texas, N.A. ( 1997 )

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

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NO. 03-97-00019-CV

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David B. Kinsey, Lewis Kinsey, and Patricia O. Porter, Appellant

v.

Norwest Bank, Texas, N.A., Appellee

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FROM THE DISTRICT COURT OF TOM GREEN COUNTY, 119TH JUDICIAL DISTRICT NO. B-96-0446-C, HONORABLE DICK ALCALA, JUDGE PRESIDING

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PER CURIAM

Appellants David B. Kinsey, Lewis Kinsey, and Patricia O. Porter challenge a summary judgment rendered in favor of appellee Norwest Bank, Texas, N.A. We will affirm the trial court's judgment.

THE DISPUTE

Appellants are nephews and niece of E. Bertram Gray, who died on July 13, 1976. Bertram was survived by his wife, Ora Coon Gray. They had no children.

Bertram executed a will on October 20, 1961, naming Ora as independent executrix. Ora probated the will shortly after Bertram's death. Neither Norwest Bank nor its predecessors had any involvement with Bertram's estate.

Bertram's will left all his property to Ora, with the provision that if she predeceased him, one-half would go to his sisters, Mable Gray Kinsey and Hazel Gray Ogden, and the other one-half would go to her sisters, Clara Coon Pearson and Fay Coon Dorn. The will contained the further provision that, "My wife and I are executing similar wills at this time and it is hereby recognized and agreed that these wills are contractual."

After Bertram's death, Ora made several new wills. She died on January 1, 1994, leaving a will dated September 12, 1986. While the will left specific bequests to her late husband's family, it did not leave to them one-half the estate. ⁽¹⁾

The September 1, 1986, will named Central National Bank of San Angelo as independent executor. Central National Bank's successor, First National Bank of West Texas, was appointed independent executor and probated the will on January 31, 1994. First National Bank later changed its name to Norwest Bank Texas.

On April 16, 1996, appellants filed suit against the estate, Norwest Bank, and Ora's devisees, alleging (1) that Bertram and Ora had executed contractual wills, (2) that Ora had no power to depart from the terms of the contractual wills, (3) that the agreement should be enforced by awarding them one-half of the estate, and (4) that Norwest Bank had breached its fiduciary duty by not advising them of the purported contractual will and by charging their bequests with a prorated amount of estate taxes. Appellants settled with the estate before trial, with the estate paying appellants an additional $120,000. The claims against Norwest Bank were dismissed, but appellants filed the instant cause the following week, once again alleging a breach of fiduciary duty.

ANALYSIS

To prevail on the motion for summary judgment, the defendant must have either disproved at least one element of the plaintiff's cause of action, or pleaded and conclusively established each essential element of an affirmative defense. Gibbs v. General Motors Corp., 450 S.W.2d 827, 828 (Tex. 1970). The nonmovant has no duty to present contrary evidence until the movant establishes a right to summary judgment. City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979). The standards for reviewing a motion for summary judgment are well established: (1) the movant for summary judgment has the burden of showing that no genuine issue of material fact exists and that the movant is entitled to judgment as a matter of law; (2) in deciding whether a disputed material fact issue precludes summary judgment, evidence favorable to the nonmovant will be taken as true; and (3) every reasonable inference must be indulged in favor of the nonmovant and any doubts resolved in its favor. Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex. 1985).

By point of error one, appellants complain that the trial court erred in granting summary judgment for Norwest Bank on the issue whether Norwest Bank breached its fiduciary duty by failing to disclose to them its knowledge of evidence that Ora was bound by contractual wills. Norwest Bank moved for summary judgment on this claim on the grounds that (1) it did not owe a fiduciary duty to appellants in their role as creditor, (2) it fulfilled its duty to them as beneficiaries under the will, and (3) appellants were not damaged by its failure to inform them of the possible existence of a contractual will. Because we agree that appellants were not damaged by Norwest Bank's failure to disclose the possible existence of a contractual will, we do not reach the other grounds.

Appellants learned of their claim, prosecuted it, and settled it. Appellants first claim that they do not have to prove that they suffered actual damages because "even without an actual 'loss' they are entitled to special fiduciary damages." (Emphasis added.) They cite for this proposition City of Fort Worth v. Pippen, 439 S.W.2d 660 (Tex. 1969), and Kinzback Tool Co., Inc. v. Corbett-Wallace Corp., 160 S.W.2d 509 (Tex. 1942). Neither of these cases stands for the proposition cited; rather, both cases hold that an agent that has profited through his agency must give to his principal the extra profit he has made. There is no allegation in this case that Norwest Bank secretly profited from its acts, nor is there case law support for an award of damages for breach of fiduciary duty regardless whether actual damages exist.

Appellants further argue that attorney's fees are recoverable under Texas Probate Code section 245, which provides that, "When the personal representative of an estate . . . neglects the performance of any duty required and any costs are incurred thereby . . . he . . . shall be liable for reasonable attorneys' fees incurred . . . in obtaining his compliance regarding any statutory duty he has neglected." Tex. Prob. Code Ann. § 245 (West Supp. 1997). This Court has held that attorney's fees are recoverable only if the personal representative has neglected a statutory duty. Lawyers Surety Corp. v. Larson, 869 S.W.2d 649, 652 (Tex. App.--Austin 1994, writ denied). Appellants are not entitled to attorney's fees under section 245 because they do not allege that Norwest Bank neglected a particular statutory duty.

Finally, appellants allege they are entitled to exemplary damages because Norwest Bank intentionally breached its fiduciary duties. Manges v. Guerra, 673 S.W.2d 180 (Tex. 1984); Texas Bank & Trust v. Moore, 595 S.W.2d 502 (Tex. 1980). But exemplary damages cannot be awarded unless actual damages exist. See Twin City Fire Ins. Co. v. Davis, 904 S.W.2d 663, 665 (Tex. 1995); City Products Corp. v. Berman, 610 S.W.2d 446, 450 (Tex. 1980). Since no actual damages exist, appellants, as a matter of law, are not entitled to exemplary damages. We overrule point of error one.

By point of error two, appellants complain that the trial court erred in granting summary judgment for Norwest Bank on the issue whether Norwest Bank breached its fiduciary duty by failing to disclose that Texas law did not clearly require them to pay a proportionate part of the death taxes owed by Ora's estate. Appellants base their claim on a 1994 opinion prepared for Norwest Bank by outside counsel that concluded that there was no clear resolution of the death tax apportionment issue under Texas law.

Norwest Bank moved for summary judgment on this claim on the grounds that (1) the apportionment of taxes was correct under Texas Probate Code section 322(A)(b)(1), and (2) even if the apportionment was incorrect, it did not breach a fiduciary duty because it relied on the opinion of outside counsel and its own counsel in determining to apportion the taxes evenly. See Tex. Prob. Code Ann. § 322(A)(b)(1) (West Supp. 1997). ⁽²⁾

Section 322(A)(b)(1) requires that each person interested in the estate be charged a proportionate amount of the estate tax generated by its bequest. The requirement, however, is subject to the provision in section 322(A)(b)(2) that the will may provide otherwise. The legal opinion upon which appellants base their claim noted that no cases had interpreted what provision in the will may override the statutory requirement. It further considered whether Ora's direction that her "debts, funeral expense and death taxes . . .be paid out of my estate" could be interpreted as providing that the taxes be paid out of her residuary estate, thus overriding the statutory requirement that estate taxes be ratably apportioned. The cautiously worded opinion reviewed the law and concluded that, although the issue had not been decided by a court, Ora's direction that taxes be paid from her estate should "probably not" be interpreted as overriding the proportional apportionment requirement of section 322(A)(b)(1). In addition to the written opinion of outside counsel, Norwest Bank's in-house counsel concluded that the will could not be interpreted as overriding the proportional apportionment requirement. Acting on this advice, Norwest Bank apportioned the taxes to each beneficiary.

On appeal, appellants argue that the bank breached its fiduciary duty by not telling them that the legal memorandum concluded that there had been no clear resolution of the death tax apportionment issue. Appellants do not challenge Norwest Bank's assertion that section 322(A)(b) actually required it to ratably apportion the estate taxes; instead, they complain only that they are damaged because Norwest Bank did not tell them that the law regarding apportionment had not been settled. As discussed above, appellants must prove actual damages: not knowing whether the law was settled regarding apportionment did not harm them unless the law actually did not require apportionment. ⁽³⁾  

Further, without actual damages, exemplary damages are inappropriate. Twin City Fire Ins. Co., 904 S.W.2d at 665. And, as we conclude above, Texas Probate Code section 245 does not entitle appellants to attorney's fees because they do not allege a lack of compliance with a specific statutory duty; nor have appellants undertaken to argue on appeal that Norwest Bank was wrong on the merits. See Lawyers Surety Corp., 869 S.W.2d at 652. We overrule point of error two.

CONCLUSION

Finding no error, we affirm the trial-court judgment.

Before Justices Powers, Jones and Kidd

Affirmed

Filed: July 3, 1997

Do Not Publish

1. Bertram's estate was appraised at $154,542.97 on the federal estate tax return filed for the estate. Ora's estate was appraised at $841,914.81 on the federal estate tax return filed for the estate. The specific bequests to Patricia O. Porter, David B. Kinsey, and Lewis Kinsey, were for $50,000, $25,000 and $25,000, respectively.

2. Probate Code section 322A(b) provides:

(1) The representative shall charge each person interested in the estate a portion of the total estate tax assessed against the estate. The portion of each estate tax that is charged to each person interested in the estate must represent the same ratio as the taxable value of that persons' interest in the estate included in determining the amount of the tax bears to the total taxable value of all the interests of all persons interested in the estate included in determining the amount of the tax.

(2) Subdivision (1) of this subsection does not apply to the extent the decedent in a written inter vivos or testamentary instrument disposing of or creating an interest in property specifically directs the manner of apportionment of estate tax or grants a discretionary power of apportionment to another person. A direction for the apportionment or nonapportionment of estate tax is limited to the estate tax on the property passing under the instrument unless the instrument is a will that provides otherwise.

Tex. Prob. Code Ann. § 322A(b)(1), (2) (West Supp. 1997) (Emphasis added).

3. We do not reach the merits whether the clause in Ora's will overcomes the statutory requirement because appellants have neither raised that as a point of error nor briefed it. Specific grounds not argued on appeal are not before the appellate court. See Maranatha Temple, Inc. v. Enterprise Products Co., 893 S.W.2d 92, 106 (Tex. App.--Houston [1st Dist.] 1994, writ denied); Bradt v. West, 892 S.W.2d 56, 68-69 (Tex. App.--Houston [1st Dist.] 1994, writ denied).

had not been decided by a court, Ora's direction that taxes be paid from her estate should "probably not" be interpreted as overriding the proportional apportionment requirement of section 322(A)(b)(1). In addition to the written opinion of outside counsel, Norwest Bank's in-house counsel concluded that the will could not be interpreted as overriding the proportional apportionment requirement. Acting on this advice, Norwest Bank apportioned the taxes to each beneficiary.

On appeal, appellants argue that the bank breached its fiduciary duty by not telling them that the legal memorandum concluded that there had been no clear resolution of the death tax apportionment issue. Appellants do not challenge Norwest Bank's assertion that section 322(A)(b) actually required it to ratably apportion the estate taxes; instead, they complain only that they are damaged because Norwest Bank did not tell them that the law regarding apportionment had not been settled. As discussed above, appellants must prove actual damages: not knowing whether the law was settled regarding apportionment did not harm them unless the law actually did not require apportionment. ⁽³⁾  

Further, without actual damages, exemplary damages are inappropriate. Twin City Fire Ins. Co., 904 S.W.2d at 665. And, as we conclude above, Texas Probate Code section 245 does not entitle appellants to attorney's fees because they do not allege a lack of compliance with a specific statutory duty; nor have appellants undertaken to argue on appeal that Norwest Bank was wrong on the merits. See Lawyers Surety Corp., 869 S.W.2d at 652. We overrule point of error two.

CONCLUSION

Finding no error, we affirm the trial-court judgment.

Before Justices Powers, Jones and Kidd

Affirmed

Filed: July 3, 1997

Do Not Publish

1. Bertram's estate was appraised at $154,542.97 on the federal estate tax return filed for the estate. Ora's estate was appraised at $841,914.81 on the federal estate tax return filed for the estate. The specific bequests to Patricia O. Porter, David B. Kinsey, and Lewis Kinsey, were for $50,000, $25,000 and $25,000, respectively.

2. Probate Code section 322A(b) provides:

(1) The representative shall charge each person interested in the estate a portion of the total estate tax assessed against the estate. The portion of each estate tax that is charged to each person interested in the estate must represent the same ratio as the taxable value of that persons' interest in the estate included in determining the amount of the tax bears to the total taxable value of all the interests of all persons interested in the estate included in determining the amount of the tax.

(2) Subdivision (1) of this subsection does not apply to the extent the decedent in a written inter vivos or testamentary instrument disposing of or creating an interest in property specifically directs the manner of apportionment of estate tax or grants a discretionary power of apportionment to another person. A direction for the apportionment or nonapportionment of estate tax is limited to the estate tax on the property passing under the instrument unless the instrument is a will that provides otherwise.

Tex. Prob. Code Ann. § 322A(b)(1), (2) (West Supp. 1997) (Emphasis added).

3. We do not reach the merits whether the clause