in the Estate of Bertha M. Newsom Jones A/K/A Bertha Mae Newsom Jones ( 2012 )

COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI – EDINBURG
NUMBER 13-11-00664-CV
IN THE ESTATE OF BERTHA M. NEWSOM JONES A/K/A
BERTHA MAE NEWSOM JONES, DECEASED
On appeal from the County Court
of Jefferson County, Texas.
NUMBER 13-11-00692-CV
IN RE LINDA D. BURKE
On Petition for Writ of Prohibition.
MEMORANDUM OPINION
Before Chief Justice Valdez and Justices Garza and Benavides
Memorandum Opinion by Justice Garza
This appeal and parallel petition for writ of prohibition arise from a probate
proceeding. In the appeal,1 appellant/relator Linda D. Burke contends that the probate
court (1) lacked subject matter jurisdiction, and (2) erred by denying her motion for
directed verdict on an application to remove Burke as independent administrator of the
estate. In the original proceeding,2 Burke seeks an order prohibiting the probate court
from appointing a successor administrator in the case. We will affirm the probate
court’s judgment and deny the petition for writ of prohibition.
I. BACKGROUND
In 2006, Burke filed an application to probate the will of her deceased mother,
Bertha M. Newsom Jones a/k/a Bertha Mae Newsom Jones (“Bertha”). Bertha’s will
named Burke and her other children, appellees/real parties in interest Michael Van
Cleve Jones (“Michael”) and William F. Jones (“Billy”), as executors of her estate,3 and it
left all of her property to the three children. The will was probated and, with Michael’s
and Billy’s consent, letters testamentary were granted to Burke as independent executor
of the estate. See TEX. PROB. CODE ANN. § 145(a) (West Supp. 2011). An inventory,
appraisal, and list of claims were submitted and approved by the probate court.
Subsequently, believing that Burke was guilty of gross misconduct or gross
mismanagement of the estate, Michael and Billy filed an application to remove Burke as
independent administrator. See id. § 149C (West Supp. 2011). The application
1
Appellate cause number 13-11-00664-CV.
2
Appellate cause number 13-11-00692-CV.
3
In particular, Bertha’s will stated in relevant part as follows:
I am asking that Linda D. Burke named here with [sic] shall act as Executrix of this Will
and of my estate, and be assisted by Billy F. Jones II, Michael V.C. Jones. The three to
work together all the way. If for any reason at all one of the above named persons is
unable to fulfill his or her obligations pretaining [sic] to the estate of their mother Bertha
Newson-Jones [sic], Full power is granted to the remaining named persons, and that [sic]
this document will still be legal and binding in every respect.
2
specifically contended that Burke withdrew $111,376 from a Wells Fargo bank account
that had been funded with proceeds obtained from payable-on-death (“P.O.D.”)
accounts established by Bertha for her children’s benefit. The application also
contended that Burke: (1) “misapplied funds” belonging to the estate; (2) “spent
unnecessary funds” on maintaining certain real property belonging to the estate; (3) “is[
]making no productive effort” to sell that real property; and (4) advised Michael and Billy
through her attorney that “she was no longer going to pay current debts of the Estate
and the debts could be paid by [Michael and Billy].” Burke filed an answer denying the
allegations, and she then filed a plea to the jurisdiction, which the probate court denied.
A hearing was held on Michael and Billy’s application on August 31, 2011. Burke
was the only witness to testify. At the close of the hearing, Burke’s counsel orally
moved for a directed verdict; the probate court denied the motion. On September 6,
2011, the probate court rendered an order granting Michael and Billy’s application and
removing Burke as independent administrator. This appeal followed.4
After the notice of appeal was filed, the probate court filed findings of fact and
conclusions of law. The findings of fact were as follows:
1. That [Burke] failed to segregate estate and non-estate assets in her
administrations of the estate;
2. That Burke has made gross errors in accounting for estate assets
and disbursements;
3. That Burke has anticipatorily repudiated her fiduciary responsibilities
as Independent Administrator by refusing to pay ad valorem taxes
due on estate property;
4. That Burke expended significant estate funds without doing a
cost/benefit analysis of the financial effects such expenditures would
4
This appeal was transferred from the Ninth Court of Appeals pursuant to a docket equalization
order issued by the Texas Supreme Court. See TEX. GOV’T CODE ANN. § 73.001 (West 2005).
3
have on the estate;
5. That Burke expended estate funds on personal expenses which
included meals;
6. That Burke engaged in self-dealing by claiming payments from estate
funds for work allegedly done by her husband;
7. That Burke displayed a gross lack of attention to accounting for and
documenting expenses and disbursements of estate funds;
8. That Burke expended estate funds for non-perishable items such as
tools without accounting for such purchases as estate assets after
the date of purchase;
9. That Burke admitted to no understanding of her fiduciary
responsibilities to the estate[;]
10. That Burke’s actions showed an intent to manage the interests of the
estate for her own benefit rather than all beneficiaries;
11. That Burke grossly mismanaged the estate in her attempted handling
of the sale of the decedent’s homestead[.]
The conclusions of law included the following: “Sufficient grounds appear to support the
belief that Burke has misapplied and/or is about to misapply property committed to her
care” and “Burke is guilty of gross mismanagement of the estate in the performance of
her duties.”
II. DISCUSSION
A. Subject Matter Jurisdiction
By her first issue on appeal, Burke argues that the probate court lacked subject
matter jurisdiction to render the challenged order because there were “no justiciable
issues” properly before the court. Whether a court has subject matter jurisdiction is a
question of law that we review de novo. Tex. Dep’t of Parks & Wildlife v. Miranda, 133
4
S.W.3d 217, 226 (Tex. 2004); Tex. Natural Res. Conservation Comm’n v. IT-Davy, 74
S.W.3d 849, 855 (Tex. 2002).
Burke’s argument is based on the fact—undisputed by Michael and Billy—that
the Wells Fargo bank account was originally funded by proceeds from P.O.D. accounts,
and she notes that P.O.D. accounts do not become part of a decedent’s estate but
rather pass outside of probate. See TEX. PROB. CODE ANN. § 439A(b)(2) (West Supp.
2011) (promulgating a form to be used by financial institutions in establishing P.O.D.
accounts which states: “The party to the account owns the account. On the death of
the party, ownership of the account passes to the P.O.D. beneficiaries of the account.
The account is not a part of the party’s estate”); see also Punts v. Wilson, 137 S.W.3d
889, 892 (Tex. App.—Texarkana 2004, no pet.). Burke argues that, because the funds
in the Wells Fargo account were derived solely from Bertha’s P.O.D. accounts, “the trial
court did not have any subject-matter jurisdiction over said proceeds and could not
adjudicate any controversy concerning them.”
In support of her argument, Burke points to probate code section 145(h), which
states:
When an independent administration has been created, and the order
appointing an independent executor has been entered by the county court,
and the inventory, appraisement, and list aforesaid has been filed by the
executor and approved by the county court or an affidavit in lieu of the
inventory, appraisement, and list of claims has been filed by the executor,
as long as the estate is represented by an independent executor, further
action of any nature shall not be had in the county court except where this
Code specifically and explicitly provides for some action in the county
court.
Id. § 145(h). However, this statute does not categorically forbid the probate court from
conducting further proceedings after an inventory, appraisal, and list of claims has been
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filed; instead, it permits such further proceedings when “specifically and explicitly” called
for elsewhere in the probate code. And, section 149C of the probate code specifically
and explicitly provides as follows:
The county court, as that term is defined by Section 3 of this code,[5] on its
own motion or on motion of any interested person, after the independent
executor has been cited by personal service to answer at a time and place
fixed in the notice, may remove an independent executor when:
...
(2) sufficient grounds appear to support belief that the independent
executor has misapplied or embezzled, or that the independent
executor is about to misapply or embezzle, all or any part of the
property committed to the independent executor’s care;
. . . [or]
(5) the independent executor is proved to have been guilty of gross
misconduct or gross mismanagement in the performance of the
independent executor’s duties . . . .
Id. § 149C(a), (a)(2), (a)(5). Burke does not dispute that Michael and Billy are
“interested person[s]” or that she was properly served with citation. The statute
therefore clearly authorizes the probate court to exercise jurisdiction over an application,
such as that filed by Michael and Billy, alleging that an independent administrator of an
estate misapplied estate funds or exhibited gross misconduct or gross mismanagement
in her duties.6
5
“‘County Court’ and ‘Probate Court’ are synonymous terms and denote county courts in the
exercise of their probate jurisdiction, courts created by statute and authorized to exercise original probate
jurisdiction, and district courts exercising probate jurisdiction in contested matters.” TEX. PROB. CODE
ANN. § 3(e) (West Supp. 2011).
6
Burke also contends that subject matter jurisdiction did not lie because Michael and Billy’s
application failed to “specifically allege facts as to how [Burke] has been guilty of gross misconduct and/or
gross mismanagement and must specifically allege facts as to how [Burke] misapplied or embezzled
estate funds.” This is a misstatement of the law. A plaintiff should plead facts supporting jurisdiction but
specific allegations about subject matter jurisdiction are not required. Tex. Dep’t of Transp. v. Beckner,
74 S.W.3d 98, 103–04, 104 n.10 (Tex. App.—Waco 2002, no pet.) (citing Tex. Ass’n of Bus. v. Tex. Air
6
We overrule Burke’s first issue.
B. Motion for Directed Verdict
By her second issue, Burke contends that the probate court erred by denying her
oral motion for directed verdict. A directed verdict is proper when a defect in the
opponent's pleadings makes them insufficient to support a judgment, the evidence
conclusively proves a fact that establishes a party’s right to judgment as a matter of law,
or the evidence offered on a cause of action is insufficient to raise an issue of fact.
Koepke v. Martinez, 84 S.W.3d 393, 395 (Tex. App.—Corpus Christi 2002, pet. denied).
Evidence is legally insufficient to raise an issue of fact when: (1) there is a complete
absence of evidence of the fact; (2) the court is barred by rules of law or evidence from
giving weight to the only evidence offered to prove the fact; (3) the evidence offered to
prove the fact is no more than a mere scintilla; or (4) the evidence conclusively
establishes the opposite of the fact. City of Keller v. Wilson, 168 S.W.3d 802, 822–23
(Tex. 2005). We review all of the evidence in the light most favorable to the non-
movant, credit favorable evidence if reasonable jurors could, and disregard contrary
evidence if reasonable jurors could. Id. at 827.
Burke’s motion contended that Michael and Billy failed to establish any of the
elements listed in Texas Probate Code section 149C, subsections (a)(2) or (a)(5). See
TEX. PROB. CODE ANN. § 149C(a)(2), (a)(5). As noted, those subsections permit a
probate court to remove an independent administrator of an estate when “sufficient
Control Bd., 852 S.W.2d 440, 446 (Tex. 1993); TEX. R. CIV. P. 47, 78–82). In any event, if Burke believed
the allegations contained in the application to remove her as executor were insufficiently specific to
establish subject matter jurisdiction, it was incumbent upon her to file a special exception to that pleading.
See id. at 104 (“If the pleadings do not affirmatively establish subject matter jurisdiction, the proper
procedure for objecting is to file a special exception to require an amended pleading.”) (citing Peek v.
Equip. Serv. Co., 779 S.W.2d 802, 805 (Tex. 1989); Godley Indep. Sch. Dist. v. Woods, 21 S.W.3d 656,
661 (Tex. App.—Waco 2000, pet denied); TEX. R. CIV. P. 63, 90, 91). She did not do so.
7
grounds appear to support belief that the independent executor has misapplied or
embezzled, or that the independent executor is about to misapply or embezzle, all or
any part of the property committed to the independent executor’s care” or when “the
independent executor is proved to have been guilty of gross misconduct or gross
mismanagement in the performance of the independent executor’s duties . . . .” Id. §
149C(a)(2), (a)(5). In Kappus v. Kappus, the Texas Supreme Court noted that
subsection 149C(a)(2) “associates misapplication with embezzlement,” and therefore,
“we give these terms a related meaning and interpret them to authorize removal if the
trial court believes the executor was engaged in subterfuge or wrongful misuse.” 284
S.W.3d 831, 835–36 (Tex. 2009). The Kappus Court also noted that, in drafting
subsection 149C(a)(5), the Legislature did not use “misconduct or mismanagement” but
rather “gross misconduct or gross mismanagement.” Id. at 836. The use of the
adjective “gross,” which means “glaringly obvious” or “flagrant,” indicates that
“something beyond ordinary misconduct and ordinary mismanagement is required to
remove an independent executor.” Id.7
Burke testified that she, Michael and Billy each obtained approximately $34,000
from the P.O.D. accounts upon Bertha’s death. The three then voluntarily contributed
7
Prior to Kappus, courts generally held that “gross misconduct” and “gross mismanagement”
included (1) any willful omission to perform a legal duty, (2) any intentional commission of a wrongful act,
or (3) any breach of a fiduciary duty that resulted in actual harm to a beneficiary’s interests. See, e.g.,
Estate of Casida, 13 S.W.3d 519, 524 (Tex. App.—Beaumont 2000, no pet.). This standard is more strict
than the one stated in Kappus in that it allows removal of an executor upon a finding of “any” willful or
intentional malfeasance; Kappus, on the other hand, appears to require that such malfeasance also be
“glaringly obvious” or “flagrant.” See Kappus v. Kappus, 284 S.W.3d 831, 836 (Tex. 2009). The Kappus
decision controls. See City of Mission v. Cantu, 89 S.W.3d 795, 809 n.21 (Tex. App.—Corpus Christi
2002, no pet.) (“As an intermediate appellate court, we are bound to follow the expression of the law as
stated by the Texas Supreme Court . . . .”).
We note that neither party, in their appellate briefs, saw fit to cite Kappus, the pre-Kappus case
law, or any other law construing the applicable statute.
8
those funds—totaling $102,000—for estate expenses because the estate did not
originally have enough cash on hand. Burke testified that she also received $31,000
from a separate P.O.D. account. Burke testified that she opened a new bank account in
the name of the estate with all of these funds. At some point, Burke withdrew the
remaining balance in the estate expense account, totaling about $75,000, and she
opened a new account with those funds at Wells Fargo. With respect to the Wells
Fargo account, Burke was the owner and Michael, Billy, and Burke’s husband were
named as beneficiaries.
Burke further testified that, with the assistance of an attorney, she compiled a
report of estate income and expenses covering the period from March 23, 2006 to
December 31, 2007.8 The report, the accuracy of which was sworn to by Burke, was
filed with the probate court on March 27, 2008 and was admitted as evidence at the
August 31, 2011 hearing. The document reflected that, during the accounting period,
the estate paid out claims in the total amount of $68,147.08 and received income in the
total amount of $55,411.71. The estate expenses included, among other things, a
$1,134.14 payment to Burke for travel expenses, and a $4,443.43 payment to Burke for
“[l]odging & [f]ood expenses.”9 The estate receipts included, among other things,
$10,000 from a retirement fund of which all three parties were beneficiaries. 10 The
annual account did not reflect the $133,000 that Burke testified was voluntarily
contributed by herself and her brothers for estate expenses. The document
8
Burke acknowledged that, as an independent administrator, she was not actually required to file
an annual accounting report with the court. See TEX. PROB. CODE ANN. § 399 (West Supp. 2011)
(requiring dependent administrators to file annual accounting reports).
9
The estate also made cash disbursements of $35,043.27, all of which was attributable to the
upkeep and improvement of the estate’s real property.
10
Burke conceded that the proceeds from the retirement fund were not estate assets.
9
affirmatively stated that “[n]o property has come into the possession of the Independent
Executrix during this accounting period that has not been previously listed or inventoried
as property of the estate.” Burke agreed with Michael and Billy’s counsel’s statement
that “even though this annual account says there was $55,000 that came into [t]he
Estate, really there was $155,000 [sic] because of the $100,000 [sic] that the three of
you contributed[.]” The annual account stated that the estate had only $368.06 on hand
at the end of the accounting period.
Also introduced into evidence was a document listing all of the administration
expenses made out-of-pocket by Burke which were not included on the annual account.
These expenses, incurred from January 21, 2006 to September 29, 2010, total
$97,311.19. Burke testified that she is asking to be reimbursed for all of these
expenses, “over and above what was already paid out of [t]he Estate.” Counsel pointed
out that all but $12,578.47 of those expenses were incurred in 2006 and 2007 and that
the annual account submitted by Burke appears to state that she had already been
reimbursed for those amounts.
With respect to the sale of the estate’s real property, Burke testified that she had
entered into a contract with a buyer to sell the property, but the buyer reneged on the
initial agreement and instead demanded that Burke install new central air conditioning in
the house. Burke testified that she refused to do so because the existing air
conditioning unit had passed inspection. With respect to property taxes, the following
exchange occurred:
Q. [Michael and Billy’s counsel] Have the taxes been paid or is there a
plan to pay the taxes on the property for
2010?
10
A. [Burke] No. Taxes have not been paid.
Q. Did you instruct your lawyer to instruct
us that you weren’t going to be
responsible for paying the taxes and
that we should be responsible for it or
my clients?
A. I asked my attorney to write a letter and
ask my brother, Michael, since he was
working if he could pay the taxes since I
had paid the taxes for the last several
years. I had taken responsibility for
paying taxes on the house. I have taken
responsibility to pay the lawn care. I
paid the house insurance, all that has
come out of my pocket and I asked if he
could do it since the house is partially
his as well.
Q. All right.
A. I knew my brother, Billy, couldn’t do it,
but I figured Michael could do it. I have
been doing it the last four years.
Q. But you understand as the executor it is
your job to take those certain actions
and do those things, correct?
A. I just asked if he could do it.
Q. Okay.
A. I did not understand it was my
responsibility as executor to pay taxes
on a house that belonged to the three of
us. No, I didn’t understand that.
After both parties rested, the probate court asked Burke about several items on
the list of administration expenses that she asked to be reimbursed for. The court noted
that “[t]here were numerous charges in 2006 and 2007 to M & D Supply and Harbor
Freight, charges were for purchases of tools.” Burke explained that these purchases
11
were for “painting, it could have been hammers, wrenches, plumbing tools, whatever we
needed to make repairs in the house.”
Based upon the foregoing evidence, the probate court could have reasonably
determined that Burke committed gross misconduct or gross mismanagement of the
estate in her role as independent administrator, see TEX. PROB. CODE ANN. §
149C(a)(5), and that such misconduct or mismanagement was “glaringly obvious” or
“flagrant.” See Kappus, 284 S.W.3d at 836. In particular, the evidence supports the
probate court’s findings of fact that Burke: (1) “failed to segregate estate and non-
estate assets” in her administration of the estate; (2) “anticipatorily repudiated her
fiduciary responsibilities as Independent Administrator by refusing to pay ad valorem
taxes due on estate property”; (3) “expended estate funds on personal expenses”
including meals; (4) ”displayed a gross lack of attention to accounting for and
documenting expenses and disbursements of estate funds”; and (5) “expended estate
funds for non-perishable items such as tools without accounting for such purchases as
estate assets after the date of purchase.”11
The probate court did not err in denying Burke’s motion for directed verdict. Her
second issue is overruled.
C. Petition for Writ of Prohibition
In her petition for writ of prohibition, Burke requests that we command the
presiding judge of the probate court “not to hear [Michael and Billy’s application to
appoint a dependent administrator], which is scheduled for hearing on November 2,
11
In light of our conclusion that the evidence was sufficient to support the probate court’s
judgment under probate code section 149C(a)(5), regarding gross misconduct or gross mismanagement,
we need not address whether the court’s judgment was also proper under section 149C(a)(2), regarding
misapplication or embezzlement of estate assets. See TEX. R. APP. P. 47.1.
12
2011, until [Burke] has exhausted all of her appellate remedies allowed by law.” She
argues that the probate court lost its plenary power to appoint a successor administrator
at the time she filed her appeal. Burke also filed a motion for emergency stay of all
probate court proceedings, which we granted on November 1, 2011. Michael and Billy
filed a motion to reconsider the stay, noting that Burke “has entered into a contract to
sell the [estate’s] real property and is representing that she is still the Independent
Executor of the Estate.” We granted the motion to reconsider in part and rendered an
order on December 13, 2011 staying “all underlying proceedings, including any and all
actions purportedly taken on behalf of the estate or by a personal representative of the
estate” until further order of this Court.
Given our ruling on Burke’s two appellate issues, the issues raised in the petition
for writ of prohibition are now moot. We therefore deny the petition and lift the stay.
III. CONCLUSION
We affirm the judgment of the probate court. Further, Burke’s petition for writ of
prohibition is denied, and any and all stays previously imposed by this Court on probate
court proceedings or actions by purported administrators of the estate are hereby lifted
in their entirety.
________________________
DORI CONTRERAS GARZA
Justice
Delivered and filed the
27th day of August, 2012.
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