GENE EARL LEDOUX, Appellant v. HAROLD LEDOUX AND RUSSELL LEDOUX, Appellees
NO. 09-97-024 CV
COURT OF APPEALS OF TEXAS, NINTH DISTRICT, BEAUMONT
1998 Tex. App. LEXIS 5517
May 7, 1998, Submitted
August 27, 1998, Opinion Delivered
NOTICE: [*1] PURSUANT TO THE TEXAS RULES OF APPELLATE PROCEDURE, UNPUBLISHED OPINIONS SHALL NOT BE CITED AS AUTHORITY BY COUNSEL OR BY A COURT.
SUBSEQUENT HISTORY: Petition for Review Denied December 31, 1998. Motion for Rehearing Overruled September 25, 1998.
PRIOR HISTORY: On Appeal from the 1-A Judicial District Court Jasper County, Texas Trial Cause No. 14,981.
DISPOSITION: AFFIRMED.
JUDGES: Before Walker, C.J., Burgess and Stover, JJ.
OPINION BY: EARL B. STOVER
OPINION
OPINION
Appellant Gene LeDoux ("Gene") appeals a jury verdict in favor of appellees Harold LeDoux ("Harold") and Russell LeDoux ("Russell"), who sued Gene for fraud, conversion, and breach of fiduciary duty regarding their mother's estate.
BACKGROUND FACTS
Pauline LeDoux, the mother of the three litigants herein, executed her will on October 10, 1985, and a codicil in April 1987. The will and codicil provided for certain specific bequests, including a $ 125,000 gift to Gene. If sufficient monies remained on deposit in any financial institution after payment of the specific bequests, then, according to the provisions of the will and codicil, the other two sons would likewise receive $ 125,000 each. Anything remaining beyond those bequests would be divided equally among them.
In June 1987 Mrs. LeDoux executed a Trust Agreement naming Allied Merchants Bank as trustee. [*2] 1 The trust assets, listed in an attached schedule, had a value of $ 276,533.15. Approximately a year later, on July 29, 1988, Mrs. LeDoux revoked the trust whereupon in August 1988 the bank sent her a $ 213,858.39 "trust check" closing out the trust. On the same day that she revoked the trust, Mrs. LeDoux executed a general power of attorney naming Gene as her attorney in fact.
1 The trust was later transferred to MBank.
In February 1991 Russell filed an application for guardianship over the person and estate of Mrs. LeDoux, who died on September 7, 1991, prior to any disposition of the guardianship action. Upon his mother's death, Gene probated her will as a muniment of title. Although Gene, Harold, and Russell were named as independent co-executors under the will, Gene gave no notice of the probate to his brothers. After discovering Gene's actions, Russell and Harold filed an application for appointment of co-independent executors and included within their petition allegations against Gene of fraud, breach [*3] of fiduciary duty, and conversion. After the trial court appointed the three brothers as co-executors under the will, the litigation over Mrs. LeDoux's estate continued.
Harold and Russell amended their petition and requested, in addition to damages for the pleaded causes of action against Gene, his removal as executor. In the meantime, the parties filed inventories of the estate. Gene's inventory claimed the total value of the estate at the time of Mrs. LeDoux's death was $ 12,620. Of that total, $ 2,620 was money in a bank account; the remaining $ 10,000 was the estimated value of household goods, furnishings, and personal effects. The inventory of Harold and Russell valued Mrs. LeDoux's financial assets at $ 371,033.15 and mineral interests at $ 157,761.35. The total value of the estate, according to Harold and Russell, was in excess of $ 500,000.
A jury rendered a verdict against Gene for conversion, fraud, and breach of fiduciary duty and awarded damages in the amount of $ 250,000, along with $ 25,000 for attorney's fees. Throughout trial, Gene defended himself against his brothers' allegations by claiming that the assets in question were all a gift from his mother and that [*4] his conduct was in accordance with his mother's instructions. On appeal, appellant raises the following points of error:
Point One: The trial court erred in denying appellant's motion for directed verdict.
Point Two: There is insufficient evidence to sustain the verdict of the jury.
Point Three: The findings of the jury were against the great weight and preponderance of the evidence.
SUFFICIENCY OF THE EVIDENCE
We consider the sufficiency points first. In points of error two and three, appellant claims the evidence is legally and factually insufficient to support the verdict against Gene for conversion, breach of fiduciary duty, and fraud. 2 When reviewing a legal sufficiency point, this court must consider only the evidence and inferences tending to support the trial court's finding, disregarding all contrary evidence and inferences. Continental Coffee Prods. Co. v. Cazarez, 937 S.W.2d 444, 450 (Tex. 1996). If there is more than a scintilla of evidence to support the jury's findings, this court may not overturn the judgment on legal sufficiency grounds. Sherman v. First Nat'l Bank in Center, Texas, 760 S.W.2d 240 (Tex. 1988). If we determine the findings are supported [*5] by legally sufficient evidence, we must then review the factual sufficiency of the evidence by weighing and considering the evidence both in favor of, and contrary to, the challenged findings. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986). The jury's findings must be upheld unless they are so against the great weight and preponderance of the evidence as to be manifestly unjust or erroneous. Pool v. Ford Motor Co., 715 S.W.2d 629, 635 (Tex. 1986).
2 Appellant's argument in his third point of error that the jury findings are "against the great weight and preponderance of the evidence" is a factual insufficiency point.
In their third amended petition, Harold and Russell allege Gene breached his fiduciary duty as the attorney-in-fact under his mother's power of attorney by squandering the assets in her estate. The appointment of an attorney-in-fact creates an agency relationship which, as a matter of law, involves a fiduciary relationship. Sassen v. Tanglegrove Townhouse Condominium Ass'n, 877 S.W.2d 489, 492 [*6] (Tex. App.-- Texarkana 1994, writ denied). A fiduciary owes a duty of loyalty and good faith, strict integrity, fair and honest dealing, and strict accountability. Kinzbach Tool Co. v. Corbett-Wallace Corp., 138 Tex. 565, 160 S.W.2d 509, 512-13 (1942); Arce v. Burrow, 958 S.W.2d 239, 246 (Tex. App.--Houston [14th Dist.] 1997, writ filed). There is a general prohibition against the fiduciary's using the relationship to benefit his personal interest, except with the full knowledge and consent of the principal. Hawthorne v. Guenther, 917 S.W.2d 924, 934 (Tex. App.--Beaumont 1996, writ denied). Fiduciaries may not benefit from their own misdeeds or use the effects of their own actions as a shield from liability. Arce, 958 S.W.2d at 246. Even when the exercise of an agent's duties is placed in the agent's absolute discretion, the agent still must use good faith and act reasonably in the discharge of them, or he can be held liable to the principal for the resulting damages. Sassen, 877 S.W.2d at 492.
In addition to a formal fiduciary duty which exists as a matter of law, there are also certain informal, confidential relationships which give rise to a [*7] fiduciary duty. An informal duty may arise from a moral, social, domestic or purely personal relationship of trust and confidence. Associated Indem. Corp. v. Cat Contracting, Inc., 964 S.W.2d 276, 287 (Tex. 1998). A confidential relationship exists where influence has been acquired and abused, and confidence has been reposed and betrayed. Crim Truck & Tractor Co. v. Navistar Int'l. Transp. Corp. 823 S.W.2d 591, 594 (Tex. 1992). A fiduciary duty in such circumstances is not created lightly. Associated Indem. Corp., 964 S.W.2d at 288.
In the instant case, Gene owed both a formal and informal fiduciary duty to his mother. If Mrs. LeDoux was competent at the time she signed the power of attorney, Gene's fiduciary duty as her attorney-in-fact was a formal one and exists as a matter of law. If, on the other hand, she was not competent, Gene's duty toward her was still that of a fiduciary, albeit a duty based on an informal, confidential relationship. The evidence demonstrates he undertook to manage her financial affairs. From his own testimony, it is evident his mother reposed trust in him; he obtained substantial benefits as a result of her trust and confidence in him. In such [*8] circumstances, equity recognizes that the beneficiary in the transactions is a fiduciary and under an obligation to establish the fairness of the transactions. See Texas Bank and Trust Co. v. Moore, 595 S.W.2d 502, 507-509 (Tex. 1980); Evans v. First Nat'l Bank of Bellville, 946 S.W.2d 367, 379 (Tex. App.--Houston [14th Dist.] 1997, writ denied).
As noted above, the record in this case reveals Mrs. LeDoux executed an agreement in June 1987 in which she created a revocable trust naming the bank as trustee. Gene testified the idea of a trust for Mrs. LeDoux's assets was the product of a conversation between Harold and himself. After that conversation, Gene took Mrs. LeDoux to see the attorney, James Black. Gene agreed that one of the reasons he and Harold felt the trust arrangement was appropriate was because their mother could not mentally take care of her finances.
On July 29, 1988, Mrs. LeDoux revoked the trust agreement and on the same day executed a power of attorney naming Gene as her attorney-in-fact. Harold and Russell claimed she was mentally incompetent to do so and presented evidence at trial in support of that allegation. On August 8, 1988, some ten days [*9] after the revocation of the trust, MBank, the trustee, sent Mrs. LeDoux a $ 213,858.39 cashier's check as distribution of the monies in the trust. 3 Out of the approximate $ 213,000 figure, a $ 125,000 certificate of deposit (CD) was put in Gene's name. Another $ 50,000 was divided among three CDs ($ 30,000, $ 10,000, $ 10,000) and, according to Gene, was to be used for his mother's medical costs and whatever Gene needed. Gene testified that Mrs. LeDoux had already told him there was a CD under his name at First National Bank in Port Arthur. He claimed the money was a gift from his mother and further claimed she directed him to put the $ 125,000 in his name and to divide up the $ 50,000 into three CDs. The $ 38,858 remainder went into a checking account into which Mrs. LeDoux's social security and royalty checks were deposited. Her income each month from those checks was from $ 1,400 to $ 2,000.
3 The record also reveals there was also a $ 125,000 Federal Home Loan Bank bond in the trust, which the $ 213,858.39 check did not include. What happened to the monies represented by the bond is unclear in the record, although Gene testified it may at some point have been sent to him or Mrs. LeDoux by the bank.
[*10] When Gene first brought his mother to live with him, she stayed a month or two in the back bedroom of his house. In July 1987 she paid $ 21,000 for a trailer, the title of which she put in Gene's name. The trailer, which was set up behind Gene's house, became Mrs. LeDoux's residence. According to Gene, his mother gave him the trailer, and for that reason he did not consider it part of her estate. Gene further testified the $ 7,577 from the June 1988 sale of Mrs. LeDoux's house in Port Arthur was also a gift to him.
As the basis for their contentions of breach of fiduciary duty, fraud, and conversion, Harold and Russell contend their mother was mentally incompetent when she revoked the trust and executed the power of attorney. That being the case, those actions were void, and Gene's conduct in "squandering" his mother's assets and disposing of her estate for his own personal gain amounted to breach of fiduciary duty, conversion and fraud. In response to the comment by appellees' attorney during cross examination that $ 296,742.78 went into the account, and $ 295,238.80 was withdrawn from the account from June 1987 until it was closed in 1990, Gene's response was: "[Mom] more or [*11] less run (sic) the show."
The pertinent portion of the Texas Probate Code's definition of "incapacitated person" (previously called "incompetent person") is as follows:
An adult individual who, because of a physical or mental condition, is substantially unable to provide food, clothing, or shelter for himself or herself, to care for the individual's own physical health, or to manage the individual's own financial affairs.
TEX. PROB. CODE ANN. ß 3(p) (Vernon Supp. 1998). 4
4 The former definition of "incompetent persons" was "persons non compos mentis, mentally disabled persons, insane persons, common or habitual drunkards, and other persons who are mentally incompetent to care for themselves or to manage their property and financial affairs." Act of May 9, 1985, 69th Leg., R.S., ch. 159, ß 1, 1985 Tex. Gen. Laws 692, amended by Act of May 27, 1995, 74th Leg., R.S., ch. 1039 ß 4, 1995 Tex. Gen. Laws 5146. The present portion of the act regarding management of one's property and financial affairs remains substantially unchanged.
[*12] The evidence concerning Mrs. LeDoux's mental competence, or lack of it, came from four persons: her three sons and James Black, the attorney who represented her on legal matters through the years.
Gene testified he brought his mother to live with him in May 1987. He was concerned about her state of mind, because she had been "acting kind of funny from her normal practice in life." Her conversation was not the same. "She seemed excited all the time and upset about something" and talked about losing things and people breaking into her house. Gene was afraid of leaving her alone. After discussing the problem with Harold, Gene took Mrs. LeDoux to see Dr. Picard and informed him of Mrs. LeDoux's conduct. According to Gene, Dr. Picard thought she was overmedicating herself and suggested that Gene bring her home to live with him for a while. As it turned out, Mrs. LeDoux lived with Gene from April 1987 until she died in 1991, with the exception of a stay in the nursing home toward the end of her life. Gene testified that "her condition changed after she got up there with me. It's no miracle. I got her off drugs for six months." As Gene explained, "My mother got back to her old self for [*13] almost a year."
Harold's opinion of his mother's mental state contrasted sharply with that of Gene. According to Harold, he was getting as many as five phone calls a day from his mother. Apparently, this was shortly before Mrs. LeDoux came to live with Gene. Her mind was filled with fantasies, which were just "amazing." Harold suggested that Gene take her to a doctor and inform the doctor of her fantasies. According to Harold, both he and Gene knew their mother was "absolutely helpless" and could not carry on a conversation. For that reason, they both agreed there was no way she could manage her money. "That's why we put it in a trust." As an example of his mother's state of mind, Harold described how on one occasion when he visited his mother at Gene's house, she did not recognize him (Harold). Another time, she called Harold by his cousin's name and again failed to recognize him. In December 1987 Mrs. LeDoux spent five weeks with Harold in Dallas. According to Harold, she "had not improved one iota." Although she was sweet, calm, and nice, she could not carry on a conversation or recall memories or events. "That was not my mother. That was a sweet, old lady, but she was a shadow [*14] of my mother." Harold testified he came to see her after the five week Christmas visit in 1987, but each time there was no improvement.
Like Harold, Russell LeDoux testified his mother was not mentally competent. However, Russell's testimony reveals he had little, if any, contact in the months immediately preceding and the months subsequent to the revocation of the trust and execution of the power of attorney. Mrs. LeDoux's last visit in his home was in the first part of 1987, a date prior to her coming to live with Gene. Russell testified he tried to talk to his mother by phone, but Gene would cut him off during those calls. On one occasion when he tried to see Mrs. LeDoux, Russell stated that Gene refused to let him do so. Since Russell had no communication with his mother around the time of the trust revocation or the creation of the power of attorney, his testimony is not probative concerning her mental competence.
At trial, James Black, 5 Mrs. LeDoux's attorney, testified he prepared the 1985 will for Mrs. LeDoux, the April 1987 codicil, the 1987 trust agreement, and the July 1988 revocation of trust agreement and power of attorney. He further declared that Mrs. LeDoux [*15] had the mental capacity to understand the bequests and gifts she made of her property at the time she executed her will in 1985. In 1987 she came into his office and informed him she wanted to make some changes to the bequests in her will. In Black's opinion, she appeared to understand what she was doing then as well. When she signed the trust agreement, Black explained to her what the trust was. Although she told Black she really did not want to put her money in a trust, she agreed to go along with the idea. She told him her sons wanted her money to be in a trust managed by the bank. However, she also wanted the trust to be revocable so that she might withdraw the money at her discretion. Black was of the impression she created the trust to keep peace in the family. In addition to the other legal work he had done for Mrs. LeDoux, Black also prepared the revocation of the trust which Mrs. LeDoux executed on the same day as the power of attorney. At that meeting she handed Black a paper containing a list of things she wanted him to do concerning the trust and informed him she wanted Gene to have full control of all her money and to manage her business. In Black's opinion, on the day [*16] she signed the revocation of the trust agreement and the power of attorney, Mrs. LeDoux understood she was giving certain controls of financial powers and wealth to Gene.
5 Along with Gene LeDoux, James Black was sued for fraud, conversion, and breach of fiduciary duty. The trial court granted Black's motion for summary judgment against Harold and Russell, and Black is not a party on appeal.
On cross examination of James Black, appellees' attorney sought to establish by circumstantial evidence that no gift to Gene was made. Black testified that when Mrs. LeDoux made a gift of oil and gas interests in 1984 to her sons, she executed a United States Gift Tax Return. At that time Black informed her that whenever she made such a gift, she needed to file a tax return on it. Other than the gift of mineral interests to her three sons, the record contains no gift tax return or income tax return signifying a gift by Mrs. LeDoux of her assets to Gene. Although Gene maintains his mother gave him such a gift, Black testified [*17] Mrs. LeDoux never informed Black of it.
Mr. Black's testimony regarding Mrs. LeDoux's mental capacity on the day she executed the power of attorney and revoked the trust agreement is direct evidence. However, evidence of incompetency at other times can be used to establish incompetency on the day the document was executed if it demonstrates that the condition persists and has some probability of being the "same condition which obtained at the time of [the document's] making." See Croucher v. Croucher, 660 S.W.2d 55, 57 (Tex. 1983) (quoting Lee v. Lee, 424 S.W.2d 609 (Tex. 1968)). Appellees' evidence falls within the latter category. Like Gene's assertions, Harold's testimony is probative of Mrs. LeDoux's mental capacity. Though Harold was not present on that day, he presents evidence of his mother's mental capacity in a time frame sufficiently close in time to be probative evidence.
The jury is the sole judge of the credibility of the witnesses and the weight to be given their testimony. TEX. R. CIV. P. 226a(III); Jaffe Aircraft Corp. v. Carr, 867 S.W.2d 27, 28 (Tex. 1993). In resolving contradictions and conflicts, jurors may choose to believe all, part, or none [*18] of the testimony of any witness. Greater Houston Transp. Co. v. Zrubeck, 850 S.W.2d 579, 590 (Tex. App.--Corpus Christi 1993, writ denied). The trier of fact heard the witnesses and had an opportunity to observe their appearances and demeanor, to weigh their testimony, and to evaluate their respective qualifications and biases, if any. Kerckhoff v. Kerckhoff, 805 S.W.2d 937, 940 (Tex. App.--San Antonio 1991, no writ). Thus, the jury could believe Harold and not believe Gene and James Black regarding Mrs. LeDoux's mental competence and the alleged gift of her estate to Gene. Presented with evidence of Gene's conduct regarding the assets of the estate and Mrs. LeDoux's mental state, the jury found Gene breached his fiduciary duty. This court cannot substitute its opinion as to the credibility of each witness or the weight to be given the testimony. Based on our review of the evidence, we conclude the jury's finding is both legally and factually sufficient to support the judgment.
The jury verdict on damages is a general verdict, and there is no separation of damages for the findings of breach of fiduciary duty, conversion, and fraud. Therefore, we have no way of ascertaining [*19] how much of the $ 250,000 damage award was intended for each cause of action or whether the entire amount is to be applied to one cause of action alone or some combination of the three. No objection was made to the broad form submission of damages. See Transmission Exchange, Inc. v. Long, 821 S.W.2d 265, 272 (Tex. App.--Houston [1st Dist.] 1991, writ denied). Therefore, having found the evidence is sufficient to sustain the finding of breach of fiduciary duty, we need not address the other causes of action in our sufficiency review. Points of error two and three are overruled.
MOTION FOR DIRECTED VERDICT
In point of error one, appellant contends the trial court erred in denying his motion for directed verdict, which was predicated on alleged judicial admissions made by Harold and Russell in their answers to interrogatories. Question Number 2 in the interrogatories asked:
Identify by name, address, telephone number and relationship with Applicants, if any, (including job title and description) all potential parties to this litigation, including any person or entity whom you claim is or may be liable for the damages Applicants seek to recover.
Appellees, through their attorney, [*20] answered as follows:
2. a. Russell F. LeDoux
. . . .
b. Harold A. LeDoux
. . . .
c. James M. Black [attorney for appellant]
. . . .
Appellant contends that since he was not listed as a party to the litigation or as a person who is or may be liable for damages, the appellees thereby judicially admitted "they have no case against the Appellant," and the motion for instructed verdict should have been granted.
We do not agree. Appellees' interrogatory answers were unverified, and, as such, do not comply with the rules. See TEX. R. CIV. P. 168(5). Consequently, they are of no effect and do not constitute a judicial admission. See Estate of Riggins, 937 S.W.2d 11, 17 (Tex. App.--Amarillo 1996, writ denied). The trial court did not err in denying appellant's motion for directed verdict. Point of error one is overruled.
The judgment of the trial court is affirmed.
EARL B. STOVER
Justice
Submitted on May 7, 1998
Opinion Delivered August 27, 1998
Before Walker, C.J., Burgess and Stover, JJ.
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