in the Estate of Benton Schulze, Jr. ( 2022 )

Reversed and Remanded and Memorandum Opinion filed March 8, 2022.
In The
Fourteenth Court of Appeals
NO. 14-20-00836-CV
IN THE ESTATE OF BENTON SCHULZE, JR.
On Appeal from the County Court at Law
Washington County, Texas
Trial Court Cause No. 91-456
MEMORANDUM OPINION
This appeal arises from a probate dispute. Appellant, Kay Lapaglia Schulze
Domel, appeals the trial court’s grant of summary judgment in favor of Appellee,
Evelyn Perry Leiber Schulze, contending the trial court erroneously granted
summary judgment and dismissed Kay’s claims with prejudice because (1)
Evelyn’s summary judgment motion failed to address Kay’s fraud claim; and (2)
the mediated settlement agreement Kay and Evelyn signed is latently ambiguous
regarding what rights, claims, and assets were settled by the parties in this probate
dispute. We reverse and remand.
BACKGROUND
Benton Schulze, Jr. died December 7, 1991, leaving his property in a
handwritten will to his wife, Evelyn Perry Leiber Schulze, and to his son from a
prior marriage, Benton W. Schulze III, “to share and share alike.” Evelyn filed an
Application for Probate of Will and Issuance of Letters of Administration in
December 1991, and the trial court signed an Order Admitting Will to Probate and
Authorizing Letters of Administration in January 1992. Evelyn filed an inventory
in June 1992, which the trial court approved, listing all of Schulze, Jr.’s property
and corresponding value, except for the value of “oil and gas leases and mineral
interests” which is listed as “unknown.”
In September 2001, Evelyn filed an Account for Final Settlement, in which
she listed (1) income received by Schulze, Jr.’s estate from leases, royalties, and
interest from 1995 to 2000; (2) debts of Schulze, Jr.’s estate; and (3) real and
personal property. Schulze III filed Objections to Account for Final Settlement
and Claims against Decedent’s Estate in January 2002, complaining that Evelyn,
among other things, failed to provide accounting information from 1992 to 1995 as
well as identify the sources for various cash receipts and royalty income. Evelyn’s
Account for Final Settlement was never approved by the court.
Schulze III died on December 9, 2006. His wife Kay, as an interested
person in Schulze, Jr.’s estate as the sole devisee of Schulze III, filed an
Application to Remove Independent Executrix and to Appoint Successor
Independent Executrix in February 2007. Kay requested Evelyn’s removal
because Evelyn (1) failed to file an Inventory, Appraisement, and List of Claims
within 90 days of qualification; (2) failed to “file an accounting as required by law
because her Account for Final Settlement was filed without the required vouchers
and/or receipts;” and (3) “has not performed her duties and has failed in the
2
performance of her duties as Independent Executrix because she has not made
progress in settling or distributing the Estate in over fifteen (15) years.”
In April 2007, the trial court ordered Evelyn and Kay to mediation. The
mediation resulted in a Rule 11 Memorandum of Mediated Settlement Agreement
(“the Agreement”), which Kay and Evelyn signed in May 2007. Among other
things, the Agreement stated that (1) it was signed in settlement of “any and all
claims belonging to Benton Schulze, III, his heirs, beneficiaries, assigns or anyone
claiming under him to assets and distributions of the” Schulze, Jr. estate; and (2)
Kay and Evelyn “waive and release any and all claims, judgments, and causes of
actions they have or may have against one another or against any personal
representative of the other.”
The parties filed a Joint Motion to Approve Settlement Agreement in July
2007, stating they have “entered into an agreement settling all issues between them
relative to [Schulze, Jr.’s estate] and move the Court to approve the Settlement
Agreement and authorize [Evelyn] to execute any and all documents necessary to
carry out the terms of the Settlement Agreement on behalf of the Estate of”
Schulze, Jr. The trial court signed an order in July 2007, approving the Agreement
and ordering Evelyn to execute all deeds, releases, or other necessary documents to
carry out the Agreement. In October 2007, Kay filed a Motion to Enforce Rule 11
Memorandum of Mediated Settlement Agreement requesting the trial court order
Evelyn to comply with the terms of the Agreement. Kay withdrew her motion in
May 2008, stating “[t]here is no need to pursue that motion” any longer.
In June 2015, Evelyn filed a Motion to Convert to Independent
Administration. A few weeks later, Kay filed an objection to the motion, stating
that Evelyn had provided no accounting for numerous mineral interests set forth in
the 1992 inventory and requesting Evelyn account for all mineral interests. In
3
August 2015, Kay filed a Motion to Demand Accounting, requesting Evelyn file
all past due annual accountings by September 1, 2015. In August 2015, the trial
court granted Kay’s motion and ordered Evelyn to file all past due annual
accountings no later than 60 days from the execution of the order. Evelyn filed an
Account of Estate in December 2015. The trial court signed an Account of Estate
Order in January 2016, approving the Account.
About six months thereafter, Kay filed a Motion to Inspect Supporting
Documentation of Account of Estate (1) stating she sent a letter to the trial court
requesting that it reject Evelyn’s Account of Estate but that the court did not see
the letter before signing its order; and (2) requesting to inspect supporting
documentation. Three days later, Evelyn filed a response, in which she, among
other things, claimed that “[e]xtensive discovery was conducted by attorneys
representing Benton Schulze, III and Kay. Any and all claims by either party were
settled at the mediation held on May 25, 2007 and the settlement was reduced to a
Rule 11 Agreement which was approved by the Court. Pursuant to the terms of the
Rule 11 Agreement, Evelyn has made all distributions required of her to Kay. Kay
has accepted the benefits of the Rule 11 Agreement and the distributions made to
her pursuant thereto.”
In July 2016, Kay filed an Amended and/or Supplemental Application to
Remove Independent Executrix and to Appoint Successor Independent Executrix,
claiming that “sufficient grounds appear to exist to support a belief” that Evelyn
has “committed fraud, embezzled or misapplied or is about to commit fraud,
embezzle or misapply or at a minimum has been negligent and/or breached her
fiduciary duties as Executrix.” Several days later, Kay filed a Petition for
Declaratory Judgment. In May 2017, Kay filed an amended petition seeking a
declaratory judgment that (1) she is “an interested person in the Administration of
4
the Estate of Benton Schulze, Jr.”; (2) Evelyn “breached her fiduciary duty as
Administratrix of the Estate of Benton Schulze, Jr.”; (3) the “Rule 11 Agreement is
void because Administratrix failed to obtain the Court’s approval prior to
negotiating and entering into the Settlement Agreement”; (4) the “Agreement is
void on grounds of extrinsic fraud”; (5) the “Agreement covers only the surface
property and personal property specifically enumerated therein, and in accordance
with the principles of contract law, additional subject matter not contained within
the Rule 11 Agreement is not part of the scope of the settlement”; and (6) the
Agreement contains a latent ambiguity so parol evidence should be considered to
show that Evelyn and Kay did not intend for the “Agreement to include the 106
mineral, oil and gas interests and mineral and/or royalty interests for which a value
was never ascertained.”
Evelyn filed an answer in May 2017, generally denying Kay’s allegation and
pleading the affirmative defenses of “accord and satisfaction, estoppel, fraud,
laches, payment, release, statute of limitations and waiver.” Evelyn also filed a
Motion to Dismiss for Lack of Jurisdiction, asserting that (1) the “Rule 11
Agreement was intended to be and on its face was a complete settlement of any
and all claims any party had against the other”; (2) Evelyn “has made all
distributions required of her to [Kay] pursuant to the terms of the Rule 11
Agreement. [Kay] has accepted the benefits of the Rule 11 Agreement and the
distributions made to her pursuant thereto”; and (3) Kay’s “alleged causes of action
should be dismissed due to lack of jurisdiction because [Kay] has no standing in
this matter [and] ceased to be an ‘interested person’ when she entered into the
settlement agreement and accepted the benefits therefrom.”
In December 2018, Evelyn filed a summary judgment motion, arguing (1)
Kay has “no standing to bring any action in this proceeding because she is no
5
longer an interested party” after she and Evelyn signed the Agreement settling
“any and all claims belonging to [Kay] or anyone claiming under Benton Schulze,
III”; and (2) it is “clear that all parties had the same knowledge or means of
obtaining the same knowledge and there was no fraud, misrepresentation,
concealment, or conduct otherwise inequitable on the part of [Evelyn] when the
Rule 11 Agreement was executed or at any other time.” About two months later,
Kay filed her response and asserted that (1) she is an interested person because the
Agreement “was not intended to settle any oil, gas and mineral leases, or mineral
and/or royalty interests in the Estate of Benton Schulze, Jr.”; (2) the Agreement is
clear and unambiguous and “was drafted to settle only the personal property and
surface property which was specifically identified within the four corners of the
Rule 11 Agreement, and that had been valued in the 1992 Inventory”; and (3)
alternatively, if there is an ambiguity in the Agreement, “there is a genuine issue of
material fact wherein the Court and/or a jury will need to consider all parol[]
evidence in a full trial on the merits.”
Evelyn filed her reply in July 2020, objecting to Kay’s summary judgment
evidence and arguing that Kay is no longer an interested party as defined by the
Texas Estates Code and has no standing to bring any action against Evelyn because
the Agreement unambiguously “states it is ‘in settlement of any and all claims
belonging to Benton Schulze, III, his heirs, beneficiaries, assigns or anyone
claiming under him to assets and distributions of the above described estate and the
parties agree as follows.’” The trial court held a hearing on Evelyn’s motion for
summary judgment in September 2020, at which Kay and Evelyn presented
argument.
The trial court signed a Final Summary Judgment on November 17, 2020,
stating that Evelyn’s summary judgment motion should be granted and finding that
6
Kay has “no standing in this matter and her Application to Remove Independent
Executrix and to Appoint Successor Independent Executrix and Petition for
Declaratory Judgment are dismissed with prejudice.” Kay filed a timely notice of
appeal on December 16, 2020.
ISSUES PRESENTED
Kay presents the following two issues on appeal:
(1) Because Evelyn’s motion for summary judgment did not address
Kay’s fraud claim, and Evelyn’s defense of release cannot defeat the
fraud claim, the probate court erred in granting summary judgment
and dismissing all Kay’s claims.
(2) At a minimum, the circumstances leading to the mediated Rule 11
Agreement reveal a latent ambiguity as to what Kay released, so the
probate court erred in finding it unambiguously released all her
previously undisputed half-interest in Benton Jr.’s estate.
ANALYSIS
We begin by addressing Kay’s first issue, in which she asserts that the trial
court erroneously granted summary judgment in favor of Evelyn, determining Kay
lacked standing and dismissing Kay’s claims when Evelyn’s summary judgment
motion (1) “only addressed her defense of release” and (2) did not address Kay’s
claim that Evelyn “fraudulently induced the Rule 11 Agreement and release” of
Kay’s half-interest in Schulze, Jr.’s estate. Kay contends that Evelyn “committed
fraud by failing to disclose material information about the estate’s assets prior to
entering the Rule 11 Agreement,” and when an administrator “misrepresents the
value of an estate to obtain a release from one of the beneficiaries, the beneficiary
retains standing to seek the administrator’s removal and recover damages for
fraud.”
Standard of Review
7
We review a trial court’s ruling on a motion for summary judgment de novo.
Tarr v. Timberwood Park Owners Ass’n, Inc., 556 S.W.3d 274, 278 (Tex. 2018);
Texan Land & Cattle II, Ltd. v. ExxonMobil Pipeline Co., 579 S.W.3d 540, 542
(Tex. App.—Houston [14th Dist.] 2019, no pet.). To prevail on a traditional
motion for summary judgment, the movant must show that no genuine issue of
material fact exists and that it is entitled to judgment as a matter of law. Tex. R.
Civ. P. 166a(c); Tarr, 556 S.W.3d at 278. Summary judgment for a defendant is
proper only when the defendant negates at least one element of each of the
plaintiff’s theories of recovery or pleads and conclusively establishes each element
of an affirmative defense. Hilburn v. Storage Tr. Props., LP, 586 S.W.3d 501, 506
(Tex. App.—Houston [14th Dist.] 2019, no pet.); see Tex. R. Civ. P. 166a(c).
“The purpose of a summary judgment is to ‘provide a method of summarily
terminating a case when it clearly appears that only a question of law is involved
and that there is no genuine issue of fact.’” G & H Towing Co. v. Magee, 347
S.W.3d 293, 297 (Tex. 2011) (per curiam) (quoting Gaines v. Hamman, 358
S.W.2d 557, 563 (Tex. 1962)). However, summary judgment may only be granted
upon grounds expressly asserted in the summary judgment motion. Id. at 297; see
also McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 341 (Tex. 1993).
Granting a summary judgment on a claim not addressed in the summary judgment
motion therefore generally constitutes reversible error. Magee, 347 S.W.3d at 297;
Chessher v. Sw. Bell Tel. Co., 658 S.W.2d 563, 564 (Tex. 1983) (per curiam).
Fraud Claim and Standing
We agree with Kay that the trial court erroneously granted summary
judgment in favor of Evelyn and determined Kay lacked standing when Evelyn’s
summary judgment motion failed to address Kay’s claim that Evelyn “fraudulently
induced the Rule 11 Agreement and release” of Kay’s half-interest in Schulze, Jr.’s
8
estate.
Kay asserted a fraud claim1 in her Petition for Declaratory Judgment, stating
in relevant part:
This action is brought pursuant to 35.005(3) of the Texas Civil
Practice & Remedies Code, which provides:
“[a] person interested . . . in the administration of . . . the estate
of a decedent . . . may have a declaration of legal relations in
respect to the . . . estate: (3) to determine any question arising in
the administration of the . . . estate[.]”
There is a real and justiciable controversy between the
Administrat[r]ix of the Estate of Benton Schulze, Jr. and Applicant.
. . . the actions of Administratrix of the Estate of Benton
Schulze, Jr. in concealing the oil, gas and mineral leases, and mineral
and/or royalty interests, constitute extrinsic fraud. Montgomery v.
Kennedy, 669 S.W.2d 309, 313 (Tex. 1984). Applicant relied upon
the disclosures provided by Administratrix, since the values for the
oil, gas and mineral leases, and the mineral and/or royalty interests
had never been valued since they were listed as “Unknown” on the
1992 Inventory. In discussions to settle the surface and personal
property contained within the Estate of Benton Schulze, Jr.,
Administratrix stated that the mineral leases and interests would be
settled at a later date, once their value was known. Applicant relied
upon this statement and Administratrix’s disclosure that the values of
the interests and leases were unknown. At the time the Rule 11
Settlement Agreement was signed, Administratrix breached her
fiduciary duty because she had knowledge of the values of the
mineral, oil, and gas leases, and the mineral and/or royalty interests
and/or when later learned of the same, but she failed to update the
inventory and disclose the values of the leases and interests to
Applicant.
“Like a broader common-law fraud claim, a fraudulent-inducement claim requires proof
1
that: (1) the defendant made a material misrepresentation; (2) the defendant knew at the time
that the representation was false or lacked knowledge of its truth; (3) the defendant intended that
the plaintiff should rely or act on the misrepresentation; (4) the plaintiff relied on the
misrepresentation; and (5) the plaintiff's reliance on the misrepresentation caused injury.” Int’l
Bus. Machs. Corp. v. Lufkin Indus., LLC, 573 S.W.3d 224, 228 (Tex. 2019).
9
Thus, Applicant seeks an alternative declaratory judgment that
the Rule 11 Agreement is void on grounds of extrinsic fraud.
Kennedy v. Hyde, 682 S.W.2d 525, 529 (Tex. 1984).
A release is a contract and, like any other contract, it is subject to avoidance on
grounds of fraudulent inducement. Italian Cowboy Partners, Ltd. v. Prudential
Ins. Co. of Am., 341 S.W.3d 323, 331 (Tex. 2011); Schlumberger Tech. Corp. v.
Swanson, 959 S.W.2d 171, 178 (Tex. 1997). “In other words, fraudulent
inducement is almost always grounds to set aside a contract despite a merger
clause, but in certain circumstances, it may be possible for a contract’s terms to
preclude a claim for fraudulent inducement by a clear and specific disclaimer-of-
reliance clause.” Italian Cowboy Partners, Ltd., 341 S.W.3d at 331; Schlumberger
Tech. Corp., 959 S.W.2d at 181. Accordingly, when an estate administrator
misrepresents the value of an estate in order to induce a beneficiary to execute a
release, the beneficiary has standing to assert a fraud claim as well as seek the
administrator’s removal. See McAdams v. McAdams, No. 07-01-0343-CV, 2002
WL 342639, at *6-7 (Tex. App.—Amarillo Mar. 1, 2002, no pet.).
Kay has standing to assert a claim that she was fraudulently induced to sign
the Agreement. See id. Here, the trial court seemingly presumed that the
Agreement was valid and there was no fraud. Although Kay pleaded a fraud
claim, Evelyn never addressed and proved as a matter of law that there was no
fraudulent inducement in this case. Instead, Evelyn made one conclusory
statement in her motion for summary judgment: “It is abundantly clear that all
parties had the same knowledge or means of obtaining the same knowledge and
there was no fraud, misrepresentation, concealment, or conduct otherwise
inequitable on the part of Schulze when the Rule 11 Agreement was executed or at
any other time.” Evelyn failed to explain why there was “no fraud,
misrepresentation, concealment” and did not point to any supporting evidence.
10
Because Evelyn’s summary judgment motion did not address Kay’s fraud
claim, the trial court reversibly erred by dismissing it. See Magee, 347 S.W.3d at
297-98. The trial court also reversibly erred in finding that Kay lacked standing
when it presumed the underlying Agreement was valid and not fraudulently
induced, despite Evelyn’s failure to prove as a matter of law there was no fraud.
See id. Accordingly, we sustain Kay’s first issue; therefore, we need not address
her second issue.
CONCLUSION
Having sustained Kay’s first issue, we reverse the trial court’s Final
Summary Judgment and remand this case to the trial court for further proceedings.
/s/ Meagan Hassan
Justice
Panel consists of Justices Jewell, Zimmerer, and Hassan.
11