Bernstein v. Portland Sav. and Loan Ass'n
| Decision Date | 04 March 1993 |
| Docket Number | No. 13-91-336-CV,13-91-336-CV |
| Citation | 850 S.W.2d 694 |
| Parties | Sidney T. BERNSTEIN, Appellant, v. PORTLAND SAVINGS AND LOAN ASSOCIATION, Appellee. |
| Court | Texas Court of Appeals |
Richard Crews, Jr., Douglas Kennedy, Thomas Nye, Brin & Brin, Corpus Christi, for appellant.
J. Norman Thomas, Harris & Thomas, Corpus Christi, for appellee.
Before KENNEDY, DORSEY and FEDERICO HINOJOSA, Jr., JJ.
After a jury trial, the trial court entered judgment for Portland Savings and Loan Association (Portland) and against Sidney Bernstein and the Estate of Sidney Bernstein for fraud, conversion, and civil conspiracy. By twenty-three points of error, Sidney Bernstein and the Estate of Sidney Bernstein 1 appeal. We reverse and render judgment for appellant in part and remand for a new trial on the remaining issues.
Portland conducted business with the brokerage firm of Legel, Braswell Government Securities during 1977 and 1978. In May 1978, the Federal Home Loan Bank Board notified Portland it wished to discuss Portland's financial position at the end of the month. Days before Portland officials travelled to Little Rock to meet with FHLBB officials, Portland's president gave approximately $1.36 million in Government National Mortgage Association (GNMA) bonds 2 to Legel Braswell for safekeeping in exchange for cash. John W. Roberts, a member of the Legel Braswell board of directors, testified that generally a broker would enter a safekeeping agreement and either simply hold onto the bonds or hold them as collateral for a loan. There was conflicting testimony as to whether Legel Braswell's attorney, Sidney Bernstein, drafted or approved either the written safekeeping agreement or the transaction itself. Unbeknownst to Portland, Legel Braswell then reregistered the bonds into its name and pledged them as collateral for a loan from Blyth, Eastman, Dillon & Co., Inc. to Legel Braswell.
Within a week of the safekeeping transaction and almost simultaneously with the FHLBB meeting, the Texas Savings and Loan Department (the Department) issued an order that Portland stop all speculative securities trading. The Department continued to investigate Portland and eventually placed it under voluntary supervisory control. Portland's president was dismissed.
As part of its investigation, the Department inquired into the status of the GNMA bonds. On September 21, 1978, in response to the Department or Portland's second inquiry, Legel Braswell accountant Dan Jones wrote Department Deputy Commissioner Jim Wright that the GNMA bonds had been reregistered in Legel Braswell's name and were pledged as collateral. A sheet of notes taken by Bernstein indicates that on that same day he participated in a telephone call during which he discussed the status of the bonds, including the possible illegal nature of the transaction. Portland's accountants and Legel Braswell's accountants met in early October to attempt to sort out the transactions between the entities. Wright directed Portland's attorney, Jim Harris, to schedule a meeting at Legel Braswell's offices in Florida to discuss rescission of all transactions between Portland and the brokerage company.
On November 2, 1978, Harris and Wright met with Bernstein and Legel Braswell's principals. Wright and Harris stressed the seriousness of Legel Braswell's position and pressed for rescission. Wright and/or Harris stated that if Legel Braswell would not agree to rescission, they would resort to legal action such as going to the Texas Attorney General, the Securities Exchange Commission, the Justice Department, or others. Any of these actions would have, at minimum, severely impaired Legel Braswell's ability to trade securities. The Legel Braswell representatives went off by themselves to discuss the matter. When they returned, Bernstein stated that Legel Braswell agreed to rescission. Legel Braswell gave Portland a $100,000 check as a good-faith deposit on the agreement. Harris testified that he understood that Legel Braswell was in a cash pinch, but had the wherewithal to make Portland whole. The parties did not agree to specific terms.
The parties next met on November 9, 1978, in Texas. Though Harris had expected to finalize terms of the agreement, no agreement was reached. Bernstein, however, expressly represented that Legel Braswell would make Portland whole. Bernstein drafted a proposed rescission agreement during or after this meeting. The Department and Harris rejected this proposal.
On November 15, 1978, Bernstein attended a meeting between Legel Braswell officials and bankruptcy attorneys. Portland contends that Legel Braswell determined to file bankruptcy at this meeting; as we will discuss below, the evidence does not support that argument. On November 20, 1978, Portland proposed another rescission agreement. On November 24, 1978, Bernstein sent a mailgram to Harris (with a copy to Wright) in which Legel Braswell agreed to a pay Portland $1,336,000 (the amount Portland proposed) "disposing of this matter providing mutual agreement on other terms and conditions contained in the agreement relating to parties, recitals, payments, schedule, and guarantee" (emphasis and commas added). Bernstein followed the mailgram with a letter, dated December 7, 1978, to Wright proposing yet another rescission agreement with additional collateral. Neither Portland nor Wright responded to this proposal until after Legel Braswell filed bankruptcy. Harris testified that this letter gave him "great concern", "spooked" him, and prompted him to seek authority to sue.
On December 13, 1978, Portland's board of directors gave Harris the authority to file suit against Legel Braswell. Meanwhile, Legel Braswell's principals apparently engaged in transactions which drained corporate assets. Portland did not file suit before Legel Braswell filed for Chapter 11 (reorganization) bankruptcy on January 4, 1979. The bankruptcy was converted to a Chapter 7 (liquidation) bankruptcy.
During the course of discovery in its suit against Legel Braswell, Portland found evidence it felt showed potential liability by Bernstein and his brother, Zayle Bernstein. 3 Portland filed this suit against the brothers in 1982. Sidney Bernstein died in 1985. Though the record on appeal contains suggestions of death, it reveals no formal substitution of parties and no amended petition reflecting his death. In 1990, Zayle Bernstein was granted summary judgment on all claims against him. The suit proceeded against Sidney Bernstein's estate.
The jury found that Bernstein intentionally committed fraud, conversion, and conspiracy. The jury found compensatory damages totaling $1,236,000 and exemplary damages of $2,472,000. The jury also found that Portland should have known of Bernstein's participation in the conversion on December 7, 1978. The jury further found that, before November 9, 1978, Portland investigated the original transaction between Portland and Legel Braswell and the financial condition of Legel Braswell. The court granted Portland's motion to ignore the findings on Portland's knowledge and investigation, clearing away potential statute of limitations bars to the entry of judgment against Bernstein. The court entered judgment against the Estate of Sidney T. Bernstein. Bernstein and his estate appealed.
We begin our discussion of the case by examining the validity of the judgment against the estate. We will then discuss the court's instruction, the evidentiary basis for certain findings, and the court's disregard of certain jury findings.
By point of error fifteen, appellant contends that the judgment is void on its face because it purports to hold the estate liable for damages. An estate is not a legal entity and is not a proper party in a lawsuit. Henson v. Estate of Bruce L. Crow, 734 S.W.2d 648, 649 (Tex.1987). "A suit seeking to establish the decedent's liability on a claim and subject property of the estate to its payment should ordinarily be instituted against the personal representative or, under appropriate circumstances, against the heirs or beneficiaries." Price v. Estate of Anderson, 522 S.W.2d 690, 691 (Tex.1975). If, however, the personal representative of the estate appears and participates in the case, a judgment involving "the estate" may validly bind the representative. Price, 522 S.W.2d at 692; Dueitt v. Dueitt, 802 S.W.2d 859, 861 (Tex.App.--Houston [1st Dist.] 1991, no writ); see also Henson, 734 S.W.2d at 649.
The purported personal representative of the estate participated in the case. The record indirectly reflects that Portland followed the procedure required when a defendant dies. 4 Court rules provide as follows:
Where the defendant shall die, upon the suggestion of death being entered of record in open court, or upon petition of the plaintiff, the clerk shall issue a scire facias for the administrator or executor or heir requiring him to appear and defend the suit and upon the return of such service, the suit shall proceed against such administrator or executor or heir.
TEX.R.CIV.P. 152. The suggestion of death was made in open court and supplemented by a record of suggestion of death dated February 21, 1986. The record of suggestion of death states that Zayle Bernstein is the personal representative of the estate of Sidney Bernstein. 5 In September 1986, Zayle Bernstein, by his attorneys, filed a motion for sanctions "individually and as Personal Representative of the Estate of Sidney T. Bernstein, by his attorneys." The motion was signed by one attorney and listed two others. The same party and attorney submitted a supplemental memorandum in support of that motion in October 1986. Though the transcript contains no other motions by anyone acting as the personal representative of the estate, the two listed attorneys later filed motions and amended answers on behalf of Zayle Bernstein...
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