Roberta West v. Sherry Laree Hamilton Proctor, Individually and as of the Estate of Clifford Hamilton ( 2011 )

NO. 07-10-00484-CV
IN THE COURT OF APPEALS
FOR THE SEVENTH DISTRICT OF TEXAS
AT AMARILLO
PANEL C
OCTOBER 24, 2011
ROBERTA WEST, APPELLANT
v.
SHERRY LAREE HAMILTON PROCTOR,
INDIVIDUALLY AND AS EXECUTRIX OF THE
ESTATE OF CLIFFORD HAMILTON, APPELLEE
FROM THE 237TH DISTRICT COURT OF LUBBOCK COUNTY;
NO. 2006-534,940; HONORABLE LESLIE HATCH, JUDGE
Before QUINN, C.J., and HANCOCK and PIRTLE, JJ.
OPINION
We overrule appellant’s September 23, 2011 motion for rehearing. However, we
withdraw the opinion issued in this cause on September 8, 2011, and substitute the
following in its place.
Appellant, Roberta West, appeals a take nothing judgment on her claims of
breach of contract, breach of fiduciary duty, fraud, and for reformation of contract
asserted against appellee, Sherry Laree Hamilton Proctor, individually and as executrix
of the estate of Clifford Hamilton.1 We will affirm.
Background
Hamilton was married to West’s sister, Dee, and he and West had a close
relationship. Throughout the 57 years of this relationship, Hamilton helped West with
various legal and business transactions. As an example, Hamilton helped West get her
land into the federal CRP program and helped advise her through two divorces.
In 1999, Panhandle Brine contacted Hamilton about the possibility of obtaining a
lease to extract salt water from West’s property. Hamilton contacted West regarding
this offer indicating that he thought that West could make good money from the lease.
West told Hamilton to go ahead with the deal, and that she trusted him to negotiate it for
her. Hamilton informed West that he wanted a fee for negotiating the lease. While
West and Hamilton agreed that Hamilton would receive a fee under the lease, there was
a wide disparity between the two regarding the amount of that fee. West believed that
Hamilton would receive a one-time payment of fifteen percent of the first royalty
payment. Hamilton believed West had agreed to his receiving a third of all royalty
payments paid under the lease.
On November 17, 1999, Hamilton called West to inform her that a representative
of Panhandle Brine was there with the lease contract. West, Hamilton, and the
Panhandle Brine representative then went to a notary and West signed the lease. Even
1
For purposes of clarity, references to “Proctor” will refer to Sherry Laree
Hamilton Proctor, both individually and as appellee in this appeal, while references to
“Hamilton” will refer to Clifford Hamilton.
2
though this was the first time that she had seen the contract, West did not read it
because she did not want to take up too much of the notary’s time, and because she
trusted Hamilton.
A month or two after West signed the lease, she read it. While she did not
understand much of the contract, she did notice that the contract provided that Hamilton
would receive one-third of the royalty payments which were due on the 25th of each
month. This provision was in clear conflict with West’s understanding that Hamilton
would receive a one-time payment of fifteen percent of her first royalty payment. West
had trusted Hamilton to “do what was right” by her, but she did not feel like this change
to the terms of the agreement “was doing what was right.” However, West did not
confront Hamilton or take any other action to rectify this discrepancy because she did
not want to cause a conflict within the family.
Under the terms of the lease, West received two-thirds and Hamilton received
one-third of each monthly royalty payment for years without any objection raised by
West. Finally, in 2006, West met with an attorney regarding the terms of the lease
contract. During this meeting, West discovered that the lease included terms such as
modifications to the lease required Hamilton’s approval, Hamilton’s interest in the lease
would run to his heirs and assigns, and the lease would continue indefinitely so long as
there was production under it. West filed the instant suit against Hamilton in May of
2006.
Hamilton filed a motion for summary judgment on the basis that West’s claims
were barred by the applicable statutes of limitation. The trial court granted summary
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judgment in favor of Hamilton. However, this Court reversed the summary judgment on
the bases that Hamilton failed to identify the date upon which West’s claims accrued
and negate application of the discovery rule. See West v. Hamilton, No. 07-07-0235-
CV, 2008 Tex.App. LEXIS 7694, at *7-*10 (Tex.App.—Amarillo Oct. 9, 2008, no pet.).
While the case was awaiting trial, Hamilton died.2 As a result, West amended
her pleadings to name Proctor as the defendant both individually and in her capacity as
executrix of Hamilton’s estate. The case was tried to a jury on August 16th and 17th of
2010. After hearing the evidence, the jury returned a verdict finding Hamilton breached
his agreement with West, breached the fiduciary duty he owed to West, and committed
fraud. However, the jury also found that West, “in the exercise of reasonable diligence,
[should] have discovered all of the false, misleading, or deceptive acts or practices of
Hamilton” on November 17, 1999, the date that the lease contract was signed. Before
judgment was issued by the trial court, West filed a motion to disregard jury findings.
This motion was heard and overruled by the trial court. On October 1, 2010, the trial
court entered judgment that West take nothing by her suit. West appeals from this
judgment.
West presents two issues by her appeal. Her first issue contends that the trial
court erred in denying her motion to disregard jury findings, specifically Question Seven
regarding the date that West should have discovered her claims against Hamilton. Her
second issue contends that the trial court erred in its determination that Proctor was not
liable in her individual capacity.
2
Prior to Hamilton’s death, his deposition was taken. Thus, all references to
Hamilton’s testimony refers to this deposition.
4
Issue One: Limitations
By her first issue, West contends that the trial court erred in failing to disregard
the jury’s finding that West, in the exercise of reasonable diligence, should have
discovered her claims against Hamilton on November 17, 1999, the date that the salt
water lease contract was signed by the parties to that contract. The significance of this
jury question is that the statute of limitations on each of West’s claims had run long
before she filed suit, so application of some legal principle that defers the accrual of
West’s causes of action was necessary for her claims to survive Proctor’s claim that
limitations barred the present suit. In support of this issue, West contends that
limitations was deferred due to Hamilton’s fraudulent concealment of her claims,
limitations was deferred by the discovery rule under the law of the case doctrine and
under the applicable law, and the evidence was legally and factually insufficient to
support the jury’s discovery rule finding.
a. The Law of Limitations Generally
Statutes of limitations are intended to compel plaintiffs to assert their claims
within a reasonable period of time while the evidence is fresh in the minds of the parties
and witnesses. Computer Assocs. Int’l, Inc. v. Altai, Inc., 918 S.W.2d 453, 455 (Tex.
1996). When the legislature has established a limitations period for a claim, a claimant
must file his cause of action within the applicable limitations period or risk losing the
claim. See City of Murphy v. City of Parker, 932 S.W.2d 479, 481-82 (Tex. 1996). An
applicable limitations period begins to run when a cause of action accrues. See F.D.
Stella Prods. Co. v. Scott, 875 S.W.2d 462, 464 (Tex.App.—Austin 1994, no writ).
5
Generally, a cause of action accrues and the limitations period begins running
when a wrongful act causes some legal injury, even if the fact of injury is not discovered
until later, and even if all resulting damages have not yet occurred. S.V. v. R.V., 933
S.W.2d 1, 4 (Tex. 1996); Advent Trust Co. v. Hyder, 12 S.W.3d 534, 538 (Tex.App.—
San Antonio 1999, pet. denied). This principle that a cause of action accrues when a
wrongful act causes some legal injury is known as the “legal injury rule.” See Murphy v.
Campbell, 964 S.W.2d 265, 270 (Tex. 1997). However, there are two categories of
cases where accrual is deferred. One of these exceptions applies when a cause of
action is fraudulently concealed from the plaintiff. See Wright v. Greenberg, 2 S.W.3d
666, 675 (Tex.App.—Houston [14th Dist.] 1999, pet. denied). The other exception,
known as the “discovery rule,” is for certain categories of cases in which the nature of
the injury is inherently undiscoverable and the evidence of injury is objectively verifiable.
See S.V., 933 S.W.2d at 6; Advent Trust, 12 S.W.3d at 538.
In the present case, the trial court submitted jury questions relating to West’s
claims for breach of contract, breach of fiduciary duty, and fraud. The applicable
limitations period for breach of fiduciary duty and fraud is four years. TEX. CIV. PRAC. &
REM. CODE ANN. § 16.004(a)(4), (5) (West 2002). Likewise, an action for breach of
contract is governed by a four-year statute of limitations. See id. § 16.051 (West 2008);
Smith v. Ferguson, 160 S.W.3d 115, 123 (Tex.App.—Dallas 2005, pet. denied) (residual
four-year limitations period applies to actions for breach of contract).
West and Hamilton signed the lease contract with Panhandle Brine on November
17, 1999. Therefore, because any legal injury suffered by West by virtue of Hamilton’s
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actions relating to the lease arose on that date, unless one of the exceptions to the
general rule applied, West’s causes of action accrued on November 17, 1999, and she
would have been required to file suit no later than November 17, 2003. West filed the
instant suit in May of 2006.
b. Fraudulent Concealment
West contends that she pled and proved the application of fraudulent
concealment to her claims and, therefore, the application of the bar of limitations is
negated as a matter of law. Proctor responds that West waived this argument by failing
to request that a proper charge be submitted to the jury, and that, if not waived, there
was insufficient evidence that Hamilton concealed the facts underlying West’s causes of
action or that West exercised reasonable diligence.
One of the exceptions to the legal injury rule is when a cause of action is
fraudulently concealed from the plaintiff. See Wright, 2 S.W.3d at 675. A defendant is
estopped from relying on limitations as an affirmative defense when the defendant is
under a duty to make a disclosure but fraudulently conceals the existence of the cause
of action from the party to whom it belongs. Id. However, the estoppel ends when the
party learns of facts or circumstances that would lead a reasonably prudent person to
inquire and thereby discover the concealed cause of action.3 Id.
3
Because of the nature of our resolution of West’s fraudulent concealment claim,
we need not address the issue of when West learned of facts that gave rise to her duty
to inquire into any concealed cause of action. However, our review of the record leads
us to believe that West learned facts sufficient to invoke her duty to inquire into any
potentially concealed cause of action when she read the lease contract a month or two
after she signed it.
7
While fraudulent concealment can defer accrual of a cause of action under
limitations, West, as the party seeking to avoid application of limitations, had the burden
to plead and secure a finding of fraudulent concealment. See Advent Trust, 12 S.W.3d
at 541. The elements of fraudulent concealment are: 1) an underlying tort; 2) the
defendant’s knowledge of the tort; 3) the defendant’s use of deception to conceal the
tort; and 4) the plaintiff’s reasonable reliance on the deception. Id. A party asserting
any form of equitable estoppel must have reasonably relied on the defendant’s
misrepresentations or concealment. Id.
In the present case, the fraud question that was submitted to the jury, and upon
which West premises her avoidance of limitations due to fraudulent concealment,
instructed the jury on the substantive, common-law tort of fraud based on a failure to
disclose when there is a duty to disclose. Specifically, the jury was instructed that,
Fraud occurs when –
a. a party fails to disclose a material fact within the knowledge of
that party.
b. the party knows that the other party is ignorant of the fact and
does not have an equal opportunity to discover the truth.
c. [t]he party intends to induce the other party to take some action
by failing to disclose the fact, and
d. the other party suffers injury as a result of acting without
knowledge of the undisclosed fact.
This instruction tracks the applicable language of the pattern jury charge for fraudulent
breach of a duty to disclose. See STATE BAR OF TEXAS PATTERN JURY CHARGES PJC
105.4 (2002). The next jury question asked the jury to determine the amount of
damages caused by Hamilton’s fraud and/or breach of agreement. The question after
that asked the jury, “By what date should [West], in the exercise of reasonable
8
diligence, have discovered all of the false, misleading, or deceptive acts or practices of
Hamilton.”
Viewing the charge as a whole, it is clear that the fraud question that was
submitted to the jury involved the substantive tort of fraud, rather than a claim of
fraudulent concealment as an avoidance of the statute of limitations. See Advent Trust,
12 S.W.3d at 542. This becomes even more clear by virtue of the fact that it would not
be appropriate to ask the jury causation and damages questions regarding a theory of
avoidance as these questions are appropriate only to a theory of liability. Id.
Because West failed to submit fraudulent concealment to the jury, she has
waived this theory of avoidance of the statute of limitations.
c. Law of the Case
West also contends that this Court’s prior opinion determined that West “pleaded
or otherwise raised the issue of fraudulent concealment,” and, as such, Hamilton bore
the burden of negating the discovery rule.4 However, significantly, this Court’s prior
opinion reviewed the trial court’s grant of summary judgment in favor of Hamilton. See
West, 2008 Tex.App. LEXIS 7694, at *1. Law of the case does not apply when either
the issues or facts presented at successive appeals are not substantially the same.
See Hudson v. Wakefield, 711 S.W.2d 628, 630 (Tex. 1986).
4
While West conflates fraudulent concealment and the discovery rule throughout
her brief, each of these exceptions to the injury rule are distinct and characterized by
different substantive and procedural rules. See S.V., 933 S.W.2d at 4.
9
“[O]n motion for summary judgment, the burden is on the defendant to negate the
discovery rule by proving as a matter of law that no issue of material fact exists
concerning when the plaintiff discovered or should have discovered.” Woods v. William
M. Mercer, Inc., 769 S.W.2d 515, 518 n.2 (Tex. 1988). “However, where the case
proceeds to trial with a fact question as to when the plaintiff discovered, it is the plaintiff
who benefits by the discovery rule who must ensure that such an issue is submitted
[and proven].” Id. at 518, 518 n.2.
This Court’s prior opinion simply concluded that Hamilton failed to establish his
entitlement to summary judgment because he did not meet his summary judgment
burden to establish as a matter of law when West’s cause of action accrued, and to
negate the discovery rule. See West, 2008 Tex.App. LEXIS 7694, at *8-*9. As such
and due to the differences in the burden of proof governing this Court’s prior opinion
and those that applied to the trial on the merits, we conclude that the law of the case
doctrine does not apply. See Hudson, 711 S.W.2d at 630.
d. Applicability of the Discovery Rule
Next, West contends, and Proctor essentially concedes, that the discovery rule
applies to the claims West asserted in this case.
Accrual of a cause of action is deferred in cases in which the nature of injury is
inherently undiscoverable and the evidence of injury is objectively verifiable. See S.V.,
933 S.W.2d at 6. Accrual, in these cases, is deferred until the plaintiff knows or in the
exercise of reasonable diligence should know of the wrongful act and the resulting
injury. Advent Trust, 12 S.W.3d at 538. This is known as the “discovery rule.” Id.
10
The evidence in this case establishes that Hamilton owed West fiduciary duties
by virtue of their long-standing relationship and prior business transactions. See
Consol. Bearing & Supply Co. v. First Nat’l Bank, 720 S.W.2d 647, 649 (Tex.App.—
Amarillo 1986, no writ) (generally discussing factors in determining when a confidential
relationship becomes a fiduciary relationship). The establishment of a fiduciary
relationship is significant because the Texas Supreme Court has held that a fiduciary’s
misconduct may be inherently undiscoverable. See Willis v. Maverick, 760 S.W.2d 642,
645 (Tex. 1988); Slay v. Burnett Trust, 143 Tex. 621, 187 S.W.2d 377, 394 (1945).
However, the person to whom a fiduciary duty is owed is relieved of the responsibility of
diligent inquiry into the fiduciary’s conduct only so long as that relationship exists. S.V.,
933 S.W.2d at 8. When the fact of a fiduciary’s misconduct becomes apparent, the
person owed the fiduciary duty is no longer relieved of the duty to exercise reasonable
care and diligence to discover the existence of a cause of action. See id.; Willis, 760
S.W.2d at 646.
As a result of the fiduciary relationship existing between West and Hamilton, we
conclude that the discovery rule applied to West’s present causes. As such, West was
relieved of the duty to inquire into whether Hamilton properly discharged his fiduciary
duties in negotiating the lease contract. However, once it became apparent that
Hamilton had breached his fiduciary duties by securing an unauthorized benefit to
himself under the salt water lease, West was held to the duty to exercise reasonable
care and diligence to discover the existence of a cause of action.
11
e. Legal and Factual Sufficiency of Evidence Supporting Jury’s Finding
West contends that the evidence supporting the jury’s finding that, “in the
exercise of reasonable diligence, [West should] have discovered all of the false,
misleading, or deceptive acts or practices of Hamilton” by November 17, 1999, the date
that the lease contract was signed, is legally and factually insufficient. Proctor responds
contending that the evidence that West failed to exercise reasonable diligence to
discover the present causes is sufficient.
When a party challenges the legal sufficiency of the evidence supporting a jury
finding, we consider the evidence in the light most favorable to the finding and indulge
every reasonable inference that supports it. See City of Keller v. Wilson, 168 S.W.3d
802, 822 (Tex. 2005). We credit favorable evidence if a reasonable jury could and
disregard contrary evidence unless a reasonable jury could not. Id. at 827. If the
evidence would permit reasonable and fair-minded people to reach the finding under
review, the legal sufficiency challenge fails. Id. When a party challenges the factual
sufficiency of the evidence, we consider all of the evidence and will set aside the finding
only if the evidence supporting the finding is so weak or so against the overwhelming
weight of the evidence that the finding is clearly wrong and manifestly unjust. Cain v.
Bain, 709 S.W.2d 175, 176 (Tex. 1986). In conducting our review, we are mindful that
the jury is the sole judge of the credibility of the witnesses and the weight to be given
their testimony. City of Keller, 168 S.W.3d at 819; Hinkle v. Hinkle, 223 S.W.3d 773,
782 (Tex.App.—Dallas 2007, no pet.).
12
Viewing the evidence supporting the jury’s discovery rule finding in the light most
favorable to the finding, we find the evidence to be legally sufficient. The evidence
establishes that West and Hamilton disagreed about the amount of compensation
Hamilton would receive for brokering the salt water lease. West testified that she had
agreed to Hamilton receiving a one-time payment of fifteen percent of the first royalty
payment. Hamilton told West on multiple occasions that he wanted a third of whatever
the lease paid. Thus, the disagreement about Hamilton’s compensation was known to
West before she ever saw the lease contract. The evidence also establishes that West
did not read the lease contract at the time that she signed it. However, a month or two
later, when West did read the lease, it was apparent to her that the lease provided that
Hamilton would receive one-third of each monthly royalty payment. Indulging all
reasonable inferences in favor of the jury’s finding, a reasonable jury could have
concluded that West’s prior knowledge that she and Hamilton disagreed about
Hamilton’s compensation was sufficient to put West under a duty to verify that the terms
of the lease contract reflected her agreement. Since simply reading the contract would
have revealed West’s claim, we conclude that the evidence supporting the jury’s
November 17, 1999 discovery rule finding is legally sufficient.
However, viewing the jury’s discovery rule finding without the prism of viewing
the evidence in the light most favorable to the finding yields a slightly different result.
While the evidence still establishes that West was aware that Hamilton wanted more
compensation than she had agreed to, the evidence does establish that West and
Hamilton were in a fiduciary relationship when Hamilton negotiated the lease. As such,
it was reasonable for West to trust that Hamilton negotiated the lease in accordance
13
with the terms she had agreed to. See S.V., 933 S.W.2d at 8. Thus, West was under
no duty to read the lease prior to signing it. Consequently, the jury’s finding that, in the
exercise of reasonable diligence, West should have discovered her claims against
Hamilton on November 17, 1999, is so against the great weight of the evidence as to be
clearly wrong.
While the jury’s finding of the specific discovery date is not supported by factually
sufficient evidence, West bore the burden of proving that accrual of her causes of action
was deferred until May of 2002 or after.5 As previously addressed, all of West’s claims
are subject to a four-year statute of limitation. Statutes of limitation are affirmative
defenses, and a defendant that raises the defense bears the initial burden to plead,
prove, and secure findings to sustain its plea. Woods, 769 S.W.2d at 517. In response,
a plaintiff may seek the benefit of the discovery rule, which is a plea in confession and
avoidance. Id. However, when a plaintiff contends that the discovery rule applies to
defer accrual of a cause of action, the plaintiff so contending bears the burden of
proving and securing favorable findings thereon. Id. Thus, in the present case, for
West to overcome Proctor’s assertion of limitations, West bore the burden of proving
and securing a jury finding that she did not know or, in the exercise of reasonable
diligence, should not have known of Hamilton’s wrongful acts until May 2002 or later.
Advent Trust, 12 S.W.3d at 538. In other words, West’s sufficiency issue must
challenge the jury’s failure to find that the discovery rule applies in a manner that
prevents limitations from barring her claims against Proctor. When the party with the
5
As West’s present suit was filed in May of 2006, to avoid being barred by the
applicable statutes of limitation, West’s causes of action must not have accrued earlier
than May of 2002.
14
burden of proof appeals from a jury’s failure to find in its favor, the party must show that
the failure to find is so against the great weight and preponderance of the evidence as
to be clearly wrong. See Cropper v. Caterpillar Tractor Co., 754 S.W.2d 646, 651 (Tex.
1988); Canal Ins. Co. v. Hopkins, 238 S.W.3d 549, 557 (Tex.App.—Tyler 2007, pet.
denied).
While we have concluded that the jury’s November 17, 1999 discovery rule date
is not supported by factually sufficient evidence, the jury’s finding that West failed to
meet her burden of proving that the discovery rule did not prevent limitations from
barring her claims is not so against the great weight and preponderance of the evidence
as to be clearly wrong. While the fiduciary duty Hamilton owed to West relieved West of
the duty to read the lease at the time she signed it, once West read the lease and noted
that it differed from the terms that she had agreed to, West was under the duty to
exercise reasonable care and diligence to discover whether she possessed a cause of
action against Hamilton. See Willis, 760 S.W.2d at 646. Clearly, after reading the
lease, West could have confronted Hamilton about the terms of the lease or sought
review of the terms of the lease by other counsel. However, West testified that she did
not confront Hamilton about the lease’s compensation terms because West did not want
to cause problems within her family. West ultimately sought review of the lease by
outside counsel, but she did not do so until 2006, at least six years after her duty to
exercise reasonable care and diligence to discover any claims she might have under
the lease arose. Thus, we conclude that the evidence establishes that West should
have discovered the existence of the presently asserted causes of action no later than
the end of January of 2000. As such, her suit, filed in May of 2006, was outside of the
15
applicable statutes of limitation periods, and the jury’s failure to find that West
established that the discovery rule deferred accrual of her causes of action until May of
2002 or later is not so against the great weight and preponderance of the evidence as to
be clearly wrong. See Cropper, 754 S.W.2d at 651; Canal Ins. Co., 238 S.W.3d at 557.
Consequently, we conclude that the evidence is factually sufficient to support the jury’s
failure to find in West’s favor.
For the foregoing reasons, we overrule West’s first issue.
Issue Two: Capacity
By her second issue, West contends that the trial court erred in ruling that
Proctor is not liable in her individual capacity. West’s contention is premised on the fact
that Proctor did not file a verified denial of capacity, and did not object to being named
to the suit in her individual capacity. Proctor responds that there was no evidence to
support a charge against Proctor in her individual capacity.
While it is true that a denial of liability in the capacity in which one is being sued
requires a verified denial, see TEX. R. CIV. P. 93, a failure to do so does not create
liability that is not supported by the evidence. In the present case, West cites to two
instances in which Hamilton testified that the lease granted him the right to transfer his
rights under the lease to his daughter. However, there is no record evidence that
Hamilton ever took this action during his life or even that Proctor would receive any
portion of Hamilton’s interest in the lease as a beneficiary of Hamilton’s estate. As
such, we agree with Proctor that the trial court did not err by not charging the jury
16
regarding Proctor’s individual liability as there was no evidence to support such a
submission.
We overrule West’s second issue.
Conclusion
Having overruled both of West’s issues, we affirm the judgment of the trial court.
Mackey K. Hancock
Justice
17