Opinion
No. 10-15-00410-CV
08-23-2017
CAROLINE H. MARTINEZ, INDIVIDUALLY AND TRUSTEE OF THE CAROLINE H. MARTINEZ REVOCABLE LIVING TRUST, Appellants v. ROBERT MARTINEZ, Appellee
From the 170th District Court McLennan County, Texas
Trial Court No. 2014-1202-4
MEMORANDUM OPINION
This case involves a dispute between siblings, Appellant Caroline H. Martinez ("Caroline") and Appellee Robert Martinez ("Bob"), over ownership of certain real property. After a bench trial, the trial court entered a judgment in favor of Bob. In five issues, Caroline appeals the trial court's judgment.
Background
Chon and Elizabeth Martinez, Caroline's and Bob's parents, owned property upon which they had built a residence at 574 Friendly Oaks in the Friendly Oaks Addition in Bruceville, Texas. Bob moved to Texas in 1983 at his parents' request. He joined the military and served for over thirty years until his retirement. When he moved to Texas, Bob also joined in a property development enterprise with his father. Using Chon's funds and Bob's construction skills, they began purchasing lots in the Friendly Oaks Addition and building houses for sale. There were no formal documents memorializing their business relationship or real estate transactions. The profits and other funds used for construction, including money Bob had made on the various projects, were put in an account that Chon controlled. That account was to be used to construct mortgage-free houses for Bob and Caroline.
Bob had access to a "trim" account to be used for finishing out the various projects, but Chon was otherwise in charge of all issues related to the financing of the various real estate endeavors.
Chon and Elizabeth purchased the property at issue in this case in 1983. The approximately 4.9-acre tract abutted the property upon which they had built their residence in the Friendly Oaks Addition. The 4.9-acre tract was purchased initially with the idea that it might be divided and that houses for sale would be built as part of the family business. However, Chon subsequently decided that the property should be used as the location on which to build the mortgage-free houses for Caroline and Bob.
Bob assisted in building a house for Caroline on a portion of the 4.9-acre tract next door to their parents' residence. Bob contributed both labor and funds he had deposited into the family construction account. Chon and Elizabeth had also previously furnished, at least, the down payment for a house for Caroline at 446 Old Bethany Road, which was also located in the Friendly Oaks Addition. A "phantom" sale of this property back to Chon was used to defray some, if not all, of the costs in building Caroline's new residence. No deed was filed to memorialize this transaction.
Caroline's house, at 588 Friendly Oaks, was deeded to her in 1987. The land surrounding her house was less than one acre out of the 4.9 acres. A driveway was carved out between 574 Friendly Oaks and 588 Friendly Oaks to provide access to the mailbox on Friendly Oaks from the remainder of the 4.9-acre tract.
In 1990, Bob gave Elizabeth approximately $11,000, upon her request, as payment for the remainder of the 4.9-acre tract. Bob was then divorced in 1993, and his ex-wife, Judith Patterson, obtained a $750,000 judgment against him. An abstract of the judgment was filed in McLennan County in 1995.
At the hearing on her motion for new trial, Caroline attempted to introduce evidence that this money was repayment of a loan to their parents. The trial court excluded the evidence after determining that it was not newly discovered.
In 1996, Bob expressed interest in building his house on the unoccupied portion of the 4.9-acre tract. Shortly thereafter, Chon and Elizabeth deeded the remainder of the 4.9-acre tract to Caroline. Bob testified that he, Chon, and Caroline agreed that Caroline would transfer the property to him after he had completed his military service, although there were no written documents memorializing this agreement. Elizabeth testified that the impetus of putting the tract in Caroline's name was not only because Bob was in the military but also to protect the tract from Bob's ex-wife's judgment.
In 1998, Bob remarried, to Bonnie Wnenkowski, and began building a house on the 4.9-acre tract. Bob used his own money for the construction, which was completed by 2000. The original address of the disputed property was 145 Terrace Drive but was renamed 1 Chauna Way by Bob in 2010 after his daughter, whose name is Chauna. Bob did not request, nor obtain, Caroline's permission to change the name of the property.
In 2003, Bob's ex-wife's abstracted judgment expired and was not renewed. In 2004, Chon died intestate. In 2005, Bob was recalled to military service. He made Caroline the beneficiary of his military life insurance and subsequently transferred the title of all of his vehicles to her.
In 2005, while Bob was stationed at Fort Bliss in El Paso, Caroline formed the Caroline H. Martinez Revocable Living Trust, with herself as Trustee. Caroline conveyed all of the family real estate holdings to the Trust, including 1 Chauna Way. The Trust purported to provide Bob a life estate in 1 Chauna Way upon Caroline's death and named him the third successor trustee behind Caroline, their mother, and Caroline's daughter. Bob testified that he did not learn the specifics of the trust until after he had filed suit and depositions were taken. Caroline also testified that she did not bring the trust documents with her to El Paso, only the one-page agreement appointing Bob as a successor trustee.
Bob was deployed to Afghanistan in 2008 and returned to the United States after he was injured in 2009. Bob officially retired from the military in March 2010. As a result of his injuries, he had a number of surgeries and continued his convalescence until 2012. At that point, Bob requested that Caroline deed 1 Chauna Way to him. When it became clear that Caroline had no intention of doing so, Bob initiated the present suit.
Bob sued Caroline seeking a declaratory judgment that he is the sole owner of the property and seeking imposition of a constructive trust on the property in his favor. After a bench trial, the trial court entered a judgment that imposes a constructive trust in favor of Bob on the property, identified as Tracts One, Two, and Three in Exhibit A and attached to the judgment. The judgment identifies Bob as the sole owner of the property and divests Caroline of all rights, title, and interest in the property. Finally, the judgment directs Caroline to convey the property to Bob by warranty deed.
Exhibit A was not attached to the original judgment but was attached to a nunc pro tunc judgment signed on December 1, 2015.
The trial court made no findings of fact and conclusions of law; therefore, the trial court's judgment must be upheld on any legal theory that finds support in the evidence. Worford v. Stamper, 801 S.W.2d 108, 109 (Tex. 1990). We imply that the trial court made all necessary findings to support its judgment. Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 83 (Tex. 1992).
Issues 1 and 4
In her first and fourth issues, Caroline contends that the evidence is factually insufficient to prove that she made the oral contract that Bob claims she did—that she promised to convey the property to Bob after he had completed his military service—and that even if the evidence is factually sufficient to prove that she made the contract, the contract is barred by the statute of frauds. We address these two issues together.
The statute of frauds requires that certain agreements be in writing and signed by the party against whom enforcement is sought. TEX. BUS & COM. CODE ANN. § 26.01(a) (West 2015). The purpose of the statute is to "remove uncertainty, prevent fraudulent claims, and reduce litigation." Givens v. Dougherty, 671 S.W.2d 877, 878 (Tex. 1984); see also Rossmann v. Bishop Colo. Retail Plaza, L.P., 455 S.W.3d 797, 806-807 (Tex. App.—Dallas 2015, pet. denied). An exception to the statute of frauds exists when there has been a breach of a fiduciary, or confidential, relationship that requires the imposition of a constructive trust. Troxel v. Bishop, 201 S.W.3d 290, 297 (Tex. App.—Dallas 2006, no pet.).
"A constructive trust is an equitable, court-created remedy designed to prevent unjust enrichment." KCM Fin. LLC v. Bradshaw, 457 S.W.3d 70, 87 (Tex. 2015). It is "a legal fiction, a creation of equity to prevent a wrongdoer from profiting from his wrongful acts." Procom Energy, L.L.A. v. Roach, 16 S.W.3d 377, 381 (Tex. App.—Tyler 2000, pet. denied) (citing Ginther v. Taub, 675 S.W.2d 724, 728 (Tex. 1984)). The theory underlying the remedy of constructive trust is the equitable notion that the "acquisition or retention of the property is wrongful and that [the possessor of the property] would be unjustly enriched if [the possessor] were permitted to retain the property." KCM Fin. LLC, 457 S.W.3d at 88 (quoting Baker Botts, L.L.P. v. Cailloux, 224 S.W.3d 723, 736 (Tex. App.—San Antonio 2007, pet. denied)). "[T]he Statute of Frauds is not a bar to the creation of a constructive trust arising from an abuse of a confidential or fiduciary relationship in the context of a parol transaction." Procom Energy, L.L.A., 16 S.W.3d at 381.
To obtain a constructive trust, the proponent must prove: "(1) breach of a special trust or fiduciary relationship or actual or constructive fraud; (2) unjust enrichment of the wrongdoer; and (3) an identifiable res that can be traced back to the original property." KCM Fin. LLC, 457 S.W.3d at 87. Caroline challenges only the first element. She argues that the evidence is legally and factually insufficient to support the trial court's implied finding that there was a fiduciary or confidential relationship between her and Bob. She further claims that the trial court erred in impliedly finding that she breached any such relationship because the evidence is factually insufficient to support that she made the oral contract that Bob claims she did, i.e., that she promised to convey the property to Bob after he had completed his military service. Bob responds that there was sufficient evidence for the trial court to find the existence of a fiduciary or confidential relationship and its breach, therefore supporting the trial court's imposition of a constructive trust.
When both legal and factual sufficiency are raised, we must first examine the legal sufficiency of the evidence. Glover v. Tex. Gen. Indem. Co., 619 S.W.2d 400, 401 (Tex. 1981). When the party that had the burden of proof at trial complains of the legal insufficiency of an adverse finding, that party must demonstrate that the evidence establishes conclusively, i.e., as a matter of law, all vital facts in support of the finding sought. Dow Chem. Co. v. Francis, 46 S.W.3d 237, 241 (Tex. 2001). In reviewing the adverse findings for legal sufficiency, we consider all of the evidence in the light most favorable to the prevailing party, "crediting favorable evidence if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not." City of Keller v. Wilson, 168 S.W.3d 802, 807 (Tex. 2005).
A legal sufficiency challenge will be sustained when the record confirms either: (a) a complete absence of a vital fact; (b) the court is barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact; (c) the evidence offered to prove a vital fact is no more than a mere scintilla; or (d) the evidence conclusively establishes the opposite of the vital fact.Ford Motor Co. v. Castillo, 444 S.W.3d 616, 620 (Tex. 2014). In other words, anything more than a scintilla of evidence is legally sufficient to support the trial court's findings. City of Fort Worth v. Zimlich, 29 S.W.3d 62, 69 (Tex. 2000); see also Browning-Ferris, Inc. v. Reyna, 865 S.W.2d 925, 928 (Tex. 1993).
In reviewing a factual sufficiency issue, we must weigh all of the evidence in the record. Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex. 1996); Burnett v. Motyka, 610 S.W.2d 735, 736 (Tex. 1980). Findings may be overturned only if they are so against the great weight and preponderance of the evidence as to be clearly wrong and unjust. Ortiz, 917 S.W.2d at 772; Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986); see also Dow Chem. Co., 46 S.W.3d at 242. We must also remember that it is within the province of the factfinder, in this case the trial court, to determine the credibility of the witnesses and the weight to be given their testimony. O'Connor v. Miller, 127 S.W.3d 249, 254 (Tex. App.—Waco 2003, pet. denied). The trier of fact may believe one witness and disbelieve another, may resolve inconsistencies in the testimony of a witness, and may accept lay testimony over that of experts. McGalliard v. Kuhlmann, 722 S.W.2d 694, 697 (Tex. 1986). We may not pass upon a witness's credibility or substitute our judgment for that of the factfinder, even if the evidence might clearly support a different result. Maritime Overseas Corp. v. Ellis, 971 S.W.2d 402, 407 (Tex. 1998) (citing Pool v. Ford Motor Co., 715 S.W.2d 629, 634 (Tex. 1986)).
We first address whether the evidence is legally and factually sufficient to support the trial court's implied finding that there was a fiduciary or confidential relationship between Bob and Caroline.
Texas law recognizes that a relationship on which a constructive trust can be based may "arise not only from the technical fiduciary relationships . . . but may arise informally from 'moral, social, domestic or purely personal' relationships." Thigpen v. Locke, 363 S.W.2d 247, 253 (Tex. 1962); see also Burleson State Bank v. Plunkett, 27 S.W.3d 605, 611 (Tex. App.—Waco 2000, pet. denied) ("An informal relationship may give rise to a fiduciary duty where one person trusts in and relies on another, whether the relation is a moral, social, domestic, or purely a personal one."). Such relationships are deemed "confidential" and exist in cases in which "'influence has been acquired and abused, in which confidence has been reposed and betrayed.'" Swinehart v. Stubbeman, McRae, Sealy, Laughlin & Browder, Inc., 48 S.W.3d 865, 879 (Tex. App.—Houston [14th Dist.] 2001, pet. denied) (quoting Associated Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276, 287 (Tex. 1998)). The confidential relationship must exist "prior to, and apart from, the agreement made the basis of the suit." Associated Indem. Corp., 964 S.W.2d at 288.
"Subjective trust does not transform an arm's length dealing into a fiduciary relationship." Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171, 177 (Tex. 1997); Crim Truck & Tractor Co. v. Navistar Int'l Transp. Corp., 823 S.W.2d 591, 595 (Tex. 1992). Nor is a familial relationship alone sufficient to establish a fiduciary relationship. Gray v. Sangrey, 428 S.W.3d 311, 316 (Tex. App.—Texarkana 2014, pet. denied). However, "[w]hen the societal relationship is one of loving family members or close personal friends, the justification for and reasonableness of reposing trust one in the other is readily understandable." Young v. Fawcett, 376 S.W.3d 209, 214 (Tex. App.—Beaumont 2012, no pet.). What is required is trust and reliance upon another that leads to unjust enrichment obtained by benefit of taking an undue advantage. Id. Such confidential relationships "may arise when one party has dealt with another in a certain manner for a long period of time such that one party is justified in expecting the other to act in its best interest." Burleson State Bank, 27 S.W.3d at 611.
Caroline argues that while there may have been a confidential or fiduciary relationship between her and Bob at some point, there is no evidence or, alternatively, factually insufficient evidence that she had a fiduciary relationship with Bob in 1996 at the time of the alleged oral contract, i.e., at the time when she allegedly promised that she would convey the property to Bob after he had completed his military service. But a review of the evidence reflects that the Martinez family intermingled funds and executed real estate transactions without formal documentation, evidencing a degree of trust beyond that found in most families from the beginning of Chon's and Bob's construction enterprise, if not earlier. Furthermore, Caroline was as invested as the rest of the family in the enterprise in that she deposited the proceeds from the sale of her house at 446 Old Bethany Road into the family construction account. The first sale of 446 Old Bethany Road by Caroline was to Chon, who made a "phantom" transfer of funds to finance Caroline's new house. Although the house was purportedly sold to Chon, who had assisted in financing it initially when it was purchased before 1987, no deed was executed. Nor were any documents executed memorializing Chon's investment in the original purchase of the Bethany Road house.
Caroline again deposited the funds in the family account from the sale of the Bethany Road house when it was sold in 1998 to Bonnie.
Once Caroline's new house was built in 1987 with money from the family accounts, including funds Bob had earned separately and through his labor in the family enterprise, it was Bob's turn for a new home. Caroline trusted Bob to build her house and to do so in a financially prudent manner. Bob trusted in Caroline and his parents to allow him to build his own residence on the remaining property without dispute, which they did. This was evidenced by the fact that Bob gave Elizabeth approximately $11,000, at her request, for his portion of the 4.9 acres, although no deed or other writing memorialized the transaction, in keeping with their usual practice. It was not until Bob expressed his intent to construct his own house, and mindful of the pending $750,000 judgment against him, that the family decided a deed was necessary to protect the Chauna Way property. At that point, Bob testified that the family agreed, including Caroline, that the property would be placed in Caroline's name and that she would hold it until he had completed his military service. Bob trusted Caroline not only to hold the property for him, but to not inform his ex-wife of the sham transaction. That level of trust and confidence takes this beyond the usual familial relationship.
Caroline testified that she did not trust Bob; she trusted her dad when it came to investing funds into the family account. She testified that she gave any extra funds she had to Chon for "investment" purposes and that the construction of the house on the Chauna Way property was one such investment. She could not, however, identify any specific amounts invested, or any accounts from which such funds came, to support her claim that she invested in the Chauna Way property. Furthermore, Bob testified that all of the money received from the sale of 446 Old Bethany Road went to fund Caroline's new house at 588 Friendly Oaks, replenishing the family construction account and paying Caroline's bills—there was nothing left for Caroline to "invest" in the Chauna Way property. Even if some of Caroline's funds were intermingled in the family accounts that were then used to assist Bob in constructing his house, some of Bob's funds were included in the same accounts and were used to construct her house.
The trial court obviously credited Bob's testimony regarding his relationship with Caroline and discredited Caroline's testimony. As previously noted, it is within the province of the factfinder to determine the credibility of the witnesses and the weight to be given their testimony. O'Connor, 127 S.W.3d at 254. The trier of fact may believe one witness and disbelieve another, may resolve inconsistencies in the testimony of a witness, and may accept lay testimony over that of experts. McGalliard, 722 S.W.2d at 697. We may not pass upon a witness's credibility or substitute our judgment for that of the factfinder, even if the evidence might clearly support a different result. Maritime Overseas Corp., 971 S.W.2d at 407.
Considering all of the evidence in the light most favorable to Bob, we therefore conclude that the evidence is legally sufficient to support the trial court's implied finding that Caroline had a fiduciary or confidential relationship with Bob at the time of the alleged oral contract. Considering all of the evidence in the record, we also conclude that the trial court's implied finding of a fiduciary or confidential relationship between Bob and Caroline that predated the 1996 contract and deed is not so against the great weight and preponderance of the evidence as to be clearly wrong and unjust.
We next address whether the trial court erred in impliedly finding that Caroline breached the fiduciary or confidential relationship. In doing so, we must address Caroline's argument that the evidence is factually insufficient to support that she made the oral contract that Bob claims she did, i.e., that she would hold the property for Bob and convey it to him after he had completed his military service.
Direct evidence of such an agreement comes from Bob who testified that the family agreed, including Caroline, that the property would be placed in Caroline's name and that she would hold it until he had completed his military service. Circumstantial evidence also supports his claims. "The existence of an oral contract may be proved by circumstantial evidence as well as by direct evidence." Clower v. Brookman, 325 S.W.2d 440, 443 (Tex. Civ. App.—San Antonio 1959, no writ); see also PGP Gas Prods., Inc. v. Reserve Equip., Inc., 667 S.W.2d 604, 607 (Tex. App.—Austin 1984, writ ref'd n.r.e.); Peters v. Norris, 402 S.W.2d 216, 219 (Tex. Civ. App.—Houston 1966, no writ) ("In addition to the direct evidence relative to the agreement and the sale, there is strong circumstantial evidence showing that the parties not only intended to enter into a contract of sale but that they understood that they had done so."). The facts of this case are similar to those presented in fraud cases in which there may be little direct evidence of the parties' intent. While a party's intent is determined at the time he acts, his intent may be inferred from his subsequent acts. Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 434 (Tex. 1986).
Caroline's behavior and actions after 1 Chauna Way was deeded to her in 1996 support Bob's claim of an oral contract. Her acts are also sufficient to support the inference that she knew she did not really own the Chauna Way property. Caroline did nothing to maintain the Chauna Way property or to assert any control over it until after her father's death in 2004, although she testified Chon told her she could do whatever she wanted with the property. She did not change the boundaries of the properties, although she did not like the driveway separating her property from her parents' property. She did not remove a fence that separated 1 Chauna Way from her house at 588 Friendly Oaks until shortly after Bob initiated the present lawsuit. Finally, she did not use any of her own funds to cover any of the bills at 1 Chauna Way or to otherwise maintain the property.
Caroline also did not disclose to Bob her plans to form a trust into which she would transfer all of the family property, including 1 Chauna Way. Before her trip to El Paso in 2006, she promised to bring Bob a deed to the Chauna Way property, but she did not. She again promised to execute a deed transferring the property to him after he retired in 2009, but she never did. Finally, she had her attorney draw up a warranty deed transferring the property to Bob in 2012, but she never followed through with the transfer by signing it. There would have been no need for her to hide her plans for the property from Bob unless she knew it was in violation of their agreement. There would also have been no need to continually promise to transfer the property to him if she had not previously agreed to do so.
Bob's behavior and actions after 1 Chauna Way was deeded to Caroline also circumstantially support his claim of an oral contract and his ownership of the property. No reasonable person would have put the amount of money and effort that Bob did in the Chauna Way property without actually owning the land. Also, it would strain credibility to believe that Bob would build not one, but two, houses for Caroline without recompense. Further, Bob paid all of the bills on the property, including taxes and insurance, and paid for the necessary upkeep.
Caroline points to her own testimony, as well as the testimony of Elizabeth and Bonnie, to refute Bob's proof of an oral contract. She also points to the fact that Bob signed an affidavit of adverse possession and accepted his status as a successor trustee of Caroline's trust as contradicting his claim that the Chauna Way property actually belongs to him. But, as explained above, it is within the province of the factfinder, in this case the trial court, to determine the credibility of the witnesses and the weight to be given their testimony. O'Connor, 127 S.W.3d at 254. The trier of fact may believe one witness and disbelieve another, may resolve inconsistencies in the testimony of a witness, and may accept lay testimony over that of experts. McGalliard, 722 S.W.2d at 697. We may not pass upon a witness's credibility or substitute our judgment for that of the factfinder, even if the evidence might clearly support a different result. Maritime Overseas Corp., 971 S.W.2d at 407. Here, the trial court obviously credited the testimony that Caroline was only holding the property for Bob until after his military service was complete and discredited the testimony that the property was deeded to Caroline with no restrictions.
Bonnie testified that she and Bob lived in the Old Bethany Road house she purchased in 1998 until Bob built them a temporary structure on the land she purchased in Moody. The Moody house was completed in 2002. Bonnie further testified that she and Bob resided there until they separated in 2003 or 2004. She knew nothing of his living at the Chauna Way property while they were married. Bonnie stated that after they separated, Bob moved into Caroline's house at 588 Friendly Oaks while Caroline was living at 1 Chauna Way.
Bonnie further testified that she had a conversation with Chon regarding who actually owned 1 Chauna Way. Bonnie stated that Chon told her that he gave the property to Caroline because Bob might lose it because of the judgment. Chon told her he let Bob build the house at 1 Chauna Way to invest the proceeds of the sale of Caroline's former residence. Chon also said he conveyed all of the 4.9-acre tract to Caroline because she had earned it as an inheritance. Chon further told Bonnie that he transferred the property to Caroline so she could take care of her mother, herself, and the two granddaughters. Although no date was mentioned for this conversation, it could not have occurred prior to 1996 when the Chauna Way property was deeded to Caroline because Bonnie and Bob did not get back together until approximately two years later. Neither Bonnie nor Chon told Bob about this conversation.
Bonnie also testified that Bob did not spend a significant amount of money on the Chauna Way property. This was, however, based upon her review of her checking and Bob's checking accounts. There is no indication she had access to any of the family and/or construction accounts set up by Chon.
Bonnie also testified that Elizabeth told her the property was not Bob's. Bonnie said that during construction of the house at 1 Chauna Way, Bob allowed his mother, and possibly Caroline, to help decorate the interior. When Bonnie objected, Caroline and Elizabeth told her that 1 Chauna Way did not belong to Bonnie. Bonnie testified: "I was decorating, okay, or thinking about, this is what I would like to have for carpet. And I remember that Caroline and her mother said, no, we want this in there. And I said, but this is my house. And she said, when did you get that idea?" Nothing was said about whether or not the house was Bob's.
Bob testified that during his marriage to Bonnie, he was deployed to Guantanamo Bay and stayed with Bonnie while he was on leave. However, Bob stated that he used 1 Chauna Way as his permanent residence during that time and at all times thereafter. Much of Bob's personal property also remained at 1 Chauna Way. Bob testified that when he and Bonnie separated in 2004, he moved into 1 Chauna Way. Bob also stated that he considered the Chauna Way property his retirement home. Whether he moved in immediately after completion or at some later date does not affect his ownership of the property. The trial court obviously credited Bob's testimony over that of Bonnie, which it is entitled to do. See McGalliard, 722 S.W.2d at 697.
Elizabeth testified that she could not recall the purpose behind the purchase of the 4.9-acre plot or any of the early plans for the property. She also had no idea about the financing of either Caroline's or Bob's houses because Chon handled all of the finances and real estate. She stated that Chon conveyed 1 Chauna Way to Caroline because Bob was in the military and because of his liabilities from previous divorces.
Q. Now, when we took your deposition, you told us before Chon passed away, that he put the title to 1 Chauna Way in Caroline's name because Bob was going to be in the military; is that correct?Elizabeth further testified that Chon planned for the property to eventually pass to the granddaughters, although no date was given for that conversation.
A. Well, there was two reasons. That was one. And the other one, because of the trouble he had had in his personal life that was taking things away from him.
Q. And by that, do you mean in previous divorces?
A. (Nods head.)
Q. And that was a yes?
A. Yes.
Caroline testified that Chon told her he transferred the property to her because she had earned it as an inheritance. He told her, "Take care of your mother; take care of yourself; and if you can, the girls." That conversation took place a number of years after the Chauna Way property had been deeded to her. At the time the property was first deeded to her, Caroline testified that Chon told her she could do whatever she wanted with the property "because I did not like the way the boundaries, especially that strip. He says, Caroline, you're going to own it all, so do whatever you want to do. Don't worry about it." As previously noted, Caroline did nothing to exercise any ownership rights to the property until after Chon's death.
As it is entitled to do, however, the trial court again credited Bob's testimony that Chon did not intend for the Chauna Way property to pass to the grandchildren when it was first deeded to Caroline in 1996. The testimony of Caroline, Bonnie, and Elizabeth covers conversations that occurred years after the transfer to Caroline had occurred. As Bob testified, when the property was first divided in 1987, there were no grandchildren. Chon's desire to keep the property in the family was, at that time, satisfied by splitting the Chauna Way property between Bob and Caroline. Any later decision by Chon to leave the property directly to the grandchildren would have been ineffective as the Chauna Way property passed to Bob in 1987 when Caroline's house was built or, at the latest, in 1990 when he purchased it from Elizabeth. The testimony of Caroline, Bonnie, and Elizabeth also does not refute Bob's testimony that the property was put in Caroline's name only to protect it while he was in the military (and for the unstated reason—to protect it from his ex-wife's judgment).
Caroline also relies on Bob's testimony as proof that he acknowledged that the Chauna Way property was not his. He testified in a deposition, "She had - - she had the deed to the land. So she had the right to keep the land." Taken out of context, it could be some support for Caroline's claim of ownership. However, Bob further testified, "She did not have - - she did not have the right to go ahead and change her mind about the deed to a trust without some sort of conversation. That was absolutely wrong of her." The testimony was in regard to Caroline placing the Chauna Way property into a trust; it did not constitute an admission on Bob's part that Caroline was the true owner of the property.
Caroline finally points to the affidavit of adverse possession that Bob filed in 2012 as further acknowledgement that he knew the Chauna Way property was not his. The affidavit did not include any mention of the title to the property being transferred to Caroline to be held for Bob until after he retired from the military. But Bob testified that the affidavit was prepared after his consultation with an attorney who believed the affidavit would repair Bob's title problems. In at least one respect the affidavit had such an effect in that the McLennan County Tax Office changed its records to reflect Bob as the true owner of the 1 Chauna Way property after reviewing the affidavit and Bob's records showing his payment of the taxes. Of course, Caroline subsequently contacted the tax office and had the name on the account changed back.
Considering all of the evidence in the record, we conclude that the trial court's implied finding that Caroline made the oral contract that Bob claims she did is not so against the great weight and preponderance of the evidence as to be clearly wrong and unjust. Therefore, the trial court did not err in impliedly finding that Caroline breached their fiduciary or confidential relationship.
In light of the foregoing, the trial court properly imposed a constructive trust in favor of Bob on the property, excepting the oral contract from the statute of frauds. See Troxel, 201 S.W.3d at 297. Caroline's first and fourth issues are overruled.
Issue 2
In her second issue, Caroline asserts that the evidence is insufficient to establish a parol gift of the property to Bob. A parol gift of realty is another exception to the statute of frauds. Estate of Wright, 482 S.W.3d 650, 657 (Tex. App.—Houston [14th Dist.] 2015, pet. denied). We have already determined that the evidence was sufficient to support the trial court's imposition of a constructive trust in favor of Bob on the property, excepting the oral contract from the statute of frauds. See Troxel, 201 S.W.3d at 297. Accordingly, we need not reach this issue.
Issue 3
In her third issue, Caroline contends that Bob's claim is barred by the statute of limitations. The parties agree that a four-year statute of limitations applies to Bob's claim. See, e.g., Carr v. Weiss, 984 S.W.2d 753, 762 (Tex. App.—Amarillo 1999, pet. denied). The dispute is about when Bob's claim accrued.
A cause of action generally accrues "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." Ward v. Stanford, 443 S.W.3d 334, 346 (Tex. App.—Dallas 2014, pet. denied). The courts have recognized that "two exceptions may defer accrual of a claim—the discovery rule and the doctrine of fraudulent concealment." Friddle v. Fisher, 378 S.W.3d 475, 483 (Tex. App.—Texarkana 2012, pet. denied). The discovery rule, when applicable, defers the accrual of a claim until the date the plaintiff discovers or should have discovered, in the exercise of reasonable care and diligence, the nature of the injury. Willis v. Maverick, 760 S.W.2d 642, 644 (Tex. 1988). The doctrine of fraudulent concealment, when applicable, defers the accrual of a cause of action until the plaintiff discovers or should have discovered the deceitful conduct or facts giving rise to the cause of action. Earle v. Ratliff, 998 S.W.2d 882, 888 (Tex. 1999).
Caroline asserts that Bob's claim seeks to enforce an alleged oral contract that she agreed to convey 1 Chauna Way to him when he retired from the Army. Caroline claims that, according to the alleged contract, she therefore began holding the property in trust for Bob on the date that he retired from the Army—March 19, 2010. Caroline argues that limitations thus began running on that date, because, in the case of a constructive trust, limitations begin running on the date of the inception of the trust. See Mowbray v. Avery, 76 S.W.3d 663, 690 (Tex. App.—Corpus Christi 2002, pet. denied) ("In the case of a constructive trust, limitations begin running at the inception of the trust."). Caroline contends that the four-year statute of limitations had consequently run when Bob filed suit on March 24, 2014.
Bob responds that the discovery rule applies in this case and that limitations therefore began running sometime in 2012, which is when he learned of the action giving rise to his claim for a constructive trust. See Willis, 760 S.W.2d at 644. Bob asserts that he was thus well within the four-year statute of limitations when he filed his lawsuit on March 24, 2014.
Caroline argues that the discovery rule does not apply to defer the accrual of Bob's claim because Bob did not include it in his pleadings. A party's unpleaded issue, however, may be deemed tried by consent when evidence on the issue is developed under circumstances indicating that both parties understood the issue was in the case, and the other party failed to make an appropriate complaint. Frazier v. Havens, 102 S.W.3d 406, 411 (Tex. App.—Houston [14th Dist.] 2003, no pet.); see TEX. R. CIV. P. 67. The record in this case shows that Caroline was aware that Bob was asserting that his claim accrued when he learned, or should have learned through the exercise of reasonable diligence, of the action giving rise to his claim for a constructive trust. But Caroline made no objection to evidence that supported the discovery rule and never argued that the issue was not before the trial court. We therefore conclude that the application of the discovery rule was tried by consent. See TEX. R. CIV. P. 67; Frazier, 102 S.W.3d at 411.
Caroline additionally argues that the discovery rule does not apply because Bob's claim is essentially one for breach of contract and the supreme court has consistently refused to apply the discovery rule to such a claim. To support her proposition, Caroline cities Via Net v. TIG Ins. Co., 211 S.W.3d 310, 314 (Tex. 2006), Wagner & Brown, Ltd. v. Horwood, 58 S.W.3d 732, 737 (Tex. 2001), and HECI Exploration Co. v. Neel, 982 S.W.2d 881, 888 (Tex. 1998). But even if we accept Caroline's proposition that Bob's claim is essentially one for breach of contract and that the supreme court has generally refused to apply the discovery rule to breach-of-contract claims, the supreme court has made clear that it has not held that the discovery rule can never apply to breach-of-contract claims. See Via Net, 211 S.W.3d at 314. Instead, the supreme court has held that the application of the discovery rule is determined by whether the nature of the plaintiff's injury is both inherently undiscoverable and objectively verifiable. Wagner & Brown, Ltd., 58 S.W.3d at 734.
Caroline does not contest that the nature of Bob's alleged injury is objectively verifiable. See Howard v. Fiesta Tex. Show Park, Inc., 980 S.W.2d 716, 720 (Tex. App.—San Antonio 1998, pet. denied) ("An injury is 'objectively verifiable' if the presence of injury and the producing wrongful act cannot be disputed."). Caroline disputes, however, that the nature of Bob's alleged injury is inherently undiscoverable. Caroline argues that Bob's alleged injury is not inherently undiscoverable because he was, with due diligence, able to discover it within the prescribed limitations period. But the question is not whether the particular plaintiff was able to discover the injury at issue in the particular case within the statutory period; the question is whether the injury is the type of injury that by its very nature falls into the category of being inherently undiscoverable. Bankruptcy Estate of Harrison, 99 S.W.3d 163, 168 (Tex. App.—Corpus Christi 2002, no pet.) (citing Wagner & Brown, Ltd., 58 S.W.3d at 734-35).
An injury is inherently undiscoverable if it is, by its nature, unlikely to be discovered within the prescribed limitations period despite due diligence. Wagner & Brown, Ltd., 58 S.W.3d at 734-35. A fiduciary's misconduct is inherently undiscoverable. Haas v. George, 71 S.W.3d 904, 912 (Tex. App.—Texarkana 2002, no pet.) (citing Willis, 760 S.W.2d at 645). The reason underlying this decision is that a person to whom a fiduciary duty is owed is either unable to inquire into the fiduciary's actions or unaware of the need to do so. Id. Facts that might ordinarily require investigation likely may not excite suspicion where a fiduciary relationship is involved. Willis, 760 S.W.2d at 645.
Unlike in the breach-of-contract claims cited by Caroline, the evidence in this case supports that the parties had a fiduciary or confidential relationship. See Via Net, 211 S.W.3d at 314 ("Contracting parties are generally not fiduciaries."); HECI Exploration Co., 982 S.W.2d at 888 (in holding that discovery rule did not apply to breach-of-contract claim, supreme court distinguished case in which parties had fiduciary relationship). We have already held that the evidence is legally and factually sufficient to support the trial court's implied finding that Caroline had a fiduciary or confidential relationship with Bob at the time of the alleged contract. Bob further asserts that the evidence establishes that he, by exercising due diligence, first discovered in 2012 that Caroline was breaching the fiduciary relationship and was not going to convey the property to him. Caroline does not dispute this. Because the evidence is legally and factually sufficient to support that Bob's injury was therefore caused by a fiduciary's misconduct, we conclude that Bob's injury was the type of injury that is inherently undiscoverable. See Willis, 760 S.W.2d at 645; Haas, 71 S.W.3d at 912. The discovery rule thus applies in this case.
Because we have concluded that the discovery rule applies, Bob's claim accrued on the date he discovered or should have discovered, in the exercise of reasonable care and diligence, the nature of the injury. See Willis, 760 S.W.2d at 644. As just stated, Bob asserts that the evidence establishes that he, by exercising due diligence, first discovered the nature of his injury in 2012, and Caroline does not dispute this. We hold that Bob's lawsuit, which was filed on March 24, 2014, was therefore filed within the four-year statute of limitations. Caroline's third issue is overruled.
Issue 5
In her fifth issue, Caroline contends that the award of attorney's fees and costs should be vacated because the trial court's judgment should be reversed based on the reasoning in her first four issues. We, however, have not sustained any of Caroline's first four issues such that the trial court's judgment should be reversed. Accordingly, the award of attorney's fees and costs should not be vacated, and Caroline's fifth issue is overruled.
Conclusion
We affirm the trial court's judgment and dismiss Bob's motion to dismiss as moot.
Accordingly, we do not reach Bob's cross-point.
REX D. DAVIS
Justice Before Chief Justice Gray, Justice Davis, and Justice Scoggins (Chief Justice Gray dissenting)
Affirmed
Opinion delivered and filed August 23, 2017
[CV06]