Estate of Herring, In re, 13-96-248-CV

• Decision Date: 05 March 1998
• Docket Number: No. 13-96-248-CV,13-96-248-CV
• Citation: 970 S.W.2d 583
• Parties: In re the ESTATE OF Ethel Arnetta HERRING.
• Court: Texas Court of Appeals

Page 583

970 S.W.2d 583

In re the ESTATE OF Ethel Arnetta HERRING.

No. 13-96-248-CV.

Court of Appeals of Texas,

Corpus Christi.

March 5, 1998.

Paula Waddle, Corpus Christi, for appellant.

Eric B. Tucker, Austin, Michael D. George, Corpus Christi, for appellee.

Before SEERDEN, C.J., and FEDERICO G. HINOJOSA and CHAVEZ, JJ.

SEERDEN, Chief Justice.

Lemuel O. Herring appeals from the trial court's take-nothing summary judgment against him on his claims for conspiracy and fraudulent transfer of community property by his wife, now deceased, to Jimmy Robert Keys, her son by a prior marriage. By a single point of error challenging the summary judgment, Herring complains that the trial court erred in concluding that all of his claims were barred by the statute of limitations. We reverse and remand.

Lemuel and Ethel Herring had been married for many years when Ethel died on April 9, 1990. During the course of their marriage, Ethel Herring on several occasions transferred funds and property from the community estate to Keys, her son by a prior marriage, allegedly without Lemuel Herring's knowledge.

Just over four years after Ethel Herring's death, Lemuel Herring filed on August 12, 1994, his Plaintiff's Original Petition as a suit incident to the administration of the Estate of Ethel Arnetta Herring. Herring sued both Katina Brauchle, his daughter and the administrator of his wife's estate, and Keys. Herring alleged that his wife and Keys conspired secretly to transfer community property to Keys. Accordingly, Herring claimed that he had been defrauded of his interest in the transferred community property and that he did not discover the fraudulent transfers until after his wife died. Specifically, Herring alleged a 1984 promissory note for $15,000 to attorney Joe F. Wheat for legal services rendered to Keys in connection with criminal charges against him, $8,000 in lease payments and a $15,000 judgment on default of payment on a 1985 vehicle lease for Keys, and additional payments to Keys exceeding $8,000 from the proceeds of the sale of a community property silver coin collection and the cash surrender value of insurance policies. Herring asked for damages including the value of his interest in the wrongfully transferred community property, and for damages to his credit rating which resulted from these transfers.

Keys filed a motion for summary judgment on the ground that the applicable statutes of limitations bar all of Herring's claims. ¹ The motion for summary judgment was heard on February 20, 1996, and on April 30, 1996, the trial court granted a take-nothing summary judgment against Herring on all claims. ²

A party moving for summary judgment has the burden of establishing that no genuine issue of material fact exists and that he is entitled to judgment as a matter of law. Nixon v. Mr. Property Management Co., 690 S.W.2d 546, 548-49 (Tex.1985). In deciding whether disputed material fact issues preclude summary judgment, evidence favorable to the nonmovant is taken as true; every reasonable inference is indulged in favor of the nonmovant and any doubt is resolved in his favor. Nixon, 690 S.W.2d at 548-49. To prevail on the basis of an affirmative defense, a movant must conclusively prove all of the elements of the affirmative defense as a matter of law. Zale Corp. v. Rosenbaum, 520 S.W.2d 889, 891 (Tex.1975) (per curiam); Dallas Market Center Hotel Co. v. Beran & Shelmire, 865 S.W.2d 145, 147 (Tex.App.--Corpus Christi 1993, writ denied).

Specifically, a defendant seeking summary judgment on the basis of limitations must prove when the cause of action accrued and, when applicable, must negate the discovery rule by proving as a matter of law that there is no genuine issue of fact about when the plaintiff discovered or should have discovered the nature of the injury. Burns v. Thomas, 786 S.W.2d 266, 267 (Tex.1990); Weaver v. Witt, 561 S.W.2d 792, 794 (Tex.1977).

The two causes of action that Herring raised in his petition were civil conspiracy and fraudulent transfer of community property.

The statute of limitations for civil conspiracy is two years. Tex. Civ. Prac. & Rem.Code Ann. § 16.003(a) (Vernon Supp.1997); Nelson v. American Nat. Bank of Gonzales, 921 S.W.2d 411, 415-416 (Tex.App.--Corpus Christi 1996, no writ); Cathey v. First City Bank of Aransas Pass, 758 S.W.2d 818, 822 (Tex.App.--Corpus Christi 1988, writ denied). In addition, the discovery rule applies to conspiracy to commit fraud. Cathey, 758 S.W.2d at 822 n. 3. Accordingly, the statute of limitations would bar Herring's claims for conspiracy to the extent that Keys can prove that Herring knew or should have known of such claims on August 12, 1992, two years before he filed his petition.

Herring's cause of action for fraudulent transfer is based on the fiduciary relationship that exists between a husband and a wife as to the community property controlled by each spouse. See Zieba v. Martin, 928 S.W.2d 782, 789 (Tex.App.--Houston [14th Dist.] 1996, no writ); In re Moore, 890 S.W.2d 821, 827 (Tex.App.--Amarillo 1994, no writ); Carnes v. Meador, 533 S.W.2d 365, 370 (Tex.Civ.App.--Dallas 1975, writ ref'd n.r.e.). The breach of a legal or equitable duty which violates this fiduciary relationship existing between spouses is termed "fraud on the community," a judicially created concept based on the theory of constructive fraud. ³ Zieba, 928 S.W.2d at 789; In re Moore, 890 S.W.2d at 827; Jackson v. Smith, 703 S.W.2d 791, 795 (Tex.App.--Dallas 1985, no writ).

If a spouse disposes of community property in fraud of the other spouse's rights, the aggrieved spouse has a right of recourse first against the property or estate of the disposing spouse; and, if that proves to be of no avail, then the aggrieved spouse may pursue the proceeds to the extent of his community interest into the hands of the party to whom the funds have been conveyed. Carnes, 533 S.W.2d at 371.

In the present case, Herring has not only sued his late wife's estate, but also attempts to pursue the proceeds of community property transferred to Keys in breach of the fiduciary duty owed to him by his late wife and as a constructive fraud on his interest in the community estate.

Ordinarily, a claim of fraud or misrepresentation is a claim for a debt and, as such, is governed by a four-year statute of limitations. See Tex. Civ. Prac. & Rem.Code Ann. § 16.004(a)(3) (Vernon 1986); Williams v. Khalaf, 802 S.W.2d 651, 656-57 (Tex.1990). As a breach of fiduciary duty subsumes a claim of constructive fraud, it also is governed by a four-year statute of limitations. Tex. Civ. Prac. & Rem.Code Ann. § 16.051 (Vernon 1997); Perez v. Gulley, 829 S.W.2d 388, 390 (Tex.App.--Corpus Christi 1992, writ denied); Spangler v. Jones, 797 S.W.2d 125, 132 (Tex.App.--Dallas 1990, writ denied).

Generally, the statute of limitations does not commence to run until the fraud is discovered or until it might have been discovered by the exercise of reasonable diligence. Little v. Smith, 943 S.W.2d 414, 420 (Tex.1997); see also Ruebeck v. Hunt, 176 S.W.2d 738, 739 (Tex.1944). Similarly, when there has been a breach of fiduciary duty, the statute of limitations does not begin to run until the claimant knew or should have known of facts that in the exercise of reasonable diligence would have led to the discovery of the wrongful act. Little, 943 S.W.2d at 420; see also Slay v. Burnett Trust, 187 S.W.2d 377, 394 (Tex.1945).

Specifically, a cause of action to set aside a transfer of community property to a third party on the ground of constructive fraud is somewhat like a cause of action to set aside a conveyance by a debtor to a third party in fraud of his creditors, which is also regulated by the four-year residual statute of limitations and does not accrue, nor does limitations begin to run, until the fraud is discovered, or could have been discovered by the exercise of reasonable diligence. See Hoerster v. Wilke, 158 S.W.2d 288, 289-90 (Tex.1942); Eckert v. Wendel, 40 S.W.2d 796, 797 (Tex.1931); Tex. Civ. Prac. & Rem.Code Ann. § 16.051 (Vernon 1997).

Accordingly, the statute of limitations would bar Herring's claims for fraudulent transfer to the extent that Keys can prove Herring knew or should have known of such claims on August 12, 1990, four years before he filed his petition.

Keys sought to prove his affirmative defense of limitations by introducing summary judgment evidence including affidavits, the prior testimony of Herring, and answers by Herring to Keys' request for admissions. Herring and Keys each submitted their own affidavits making conclusory assertions that Herring either knew, or did not know, of the fraudulent transactions in question before his wife's death. Based solely on the affidavits, a fact question clearly remains.

However, to support the summary judgment in his favor, Keys relies primarily on a set of deemed admissions that resulted from Herring's failure to sign his answers to Keys' request for admissions.

Deemed admissions are competent summary judgment evidence. Flores v. H.E. Butt Stores, Inc., 791 S.W.2d 160, 162 (Tex.App.--Corpus Christi 1990, writ denied); Laycox v. Jaroma, Inc., 709 S.W.2d 2, 4 (Tex.App.--Corpus Christi 1986, writ ref'd n.r.e.). Moreover, deemed admissions may not be contradicted by other summary judgment evidence. State v. Carrillo, 885 S.W.2d 212, 214 (Tex.App.--San Antonio 1994, no writ); Whitworth v. Kuhn, 734 S.W.2d 108, 111 (Tex.App.--Austin 1987, no writ); see also Henke Grain Co. v. Keenan, 658 S.W.2d 343, 347 (Tex.App.--Corpus Christi 1983, no writ).

Texas Rule of Civil Procedure 169(1) states, in pertinent part, as follows:

The matter is admitted without necessity of a court order unless, within thirty days after service of the request, or within such time as the court may allow, or as otherwise agreed by the parties, the party to whom the request is directed serves upon the party requesting the admission a written answer or objection...