Harrell v. Hochderffer

• Citation: 345 S.W.3d 652
• Decision Date: 26 July 2011
• Docket Number: No. 03–09–00007–CV.,03–09–00007–CV.
• Parties: Donald HARRELL and Shirley Temesgen, Appellants,v.Kris HOCHDERFFER, as Trustee of the Clark Family Trust, Appellee.
• Court: Court of Appeals of Texas

345 S.W.3d 652

Donald HARRELL and Shirley Temesgen, Appellants,

v.Kris HOCHDERFFER, as Trustee of the Clark Family Trust, Appellee.

No. 03–09–00007–CV.

Court of Appeals of Texas, Austin.

June 10, 2011.Rehearing Overruled July 26, 2011.

Nick Bhakta, Kuhn Doyle & Kuhn, PC, Austin, TX, for appellant.Don E. Walden, Law Office of Don E. Walden, Austin, TX, for appellee.Before Chief Justice JONES, Justices PURYEAR and HENSON.

OPINION

DIANE M. HENSON, Justice.

Appellants Donald Harrell and Shirley Temesgen appeal the trial court's denial of their motion for summary judgment and grant of partial summary judgment in favor of appellee Kris Hochderffer, in his capacity as trustee of the Clark Family Trust. The underlying dispute involves a personal-injury settlement received by the appellants' mother, Jessie Mae Clark, and stepfather, Rudie Clark, and a trust agreement entered into by Jessie Mae and Rudie.¹ Harrell and Temesgen sought a declaratory judgment that the proceeds Rudie received from the settlement and deposited into the trust represented community property. The trial court granted summary judgment in favor of Hochderffer, concluding that the settlement funds received by Rudie were separate property.

On appeal, Harrell and Temesgen contend that the trial court erred in issuing its order on summary judgment because as a matter of law, the settlement proceeds received by Rudie and deposited into the trust were the community property of Rudie and Jessie Mae. We affirm the trial court's order.

BACKGROUND

In 1999, Rudie and Jessie Mae Clark brought a personal-injury suit against a nursing home where Rudie had received treatment after suffering a stroke in 1997. The suit was pursued by the couple's daughter, Deborah Clark, as “next friend” of the couple. In the petition, Rudie and Jessie Mae alleged that the nursing home was negligent in its treatment of Rudie and that the nursing home's negligence led to the amputation of both of Rudie's legs. Rudie and Jessie Mae sought damages for past and future mental anguish experienced by Rudie, past and future pain and suffering experienced by Rudie, past and future disfigurement and impairment, Rudie's past and future medical expenses, and exemplary damages. Jessie Mae brought a separate claim for loss of consortium.

The parties eventually settled the lawsuit and executed a settlement agreement in June 2002. In the settlement agreement, Rudie and Jessie Mae each agreed to dismiss the suit in exchange for a separate lump sum. Specifically, the agreement stated: “Plaintiff Rudie Clark hereby agrees to dismiss the Action, with prejudice ... in consideration for the sum of $[redacted]. Plaintiff Jessie Mae Clark hereby agrees to dismiss the Action, with prejudice ... in consideration of the sum of $[redacted].” ² The agreement did not otherwise break down the settlement amounts according to the types of damages requested in Rudie and Jessie Mae's petition. Deborah signed the settlement agreement on behalf of each of her parents. On July 9, 2002, the trial court appointed a guardian ad litem for Rudie and Jessie Mae. On July 18, the trial court issued an order approving the settlement agreement and dismissing the personal-injury suit.

On November 5, 2002, Rudie and Jessie Mae executed a trust document titled, “The Clark Family Trust.” Hochderffer testified by affidavit that he was the trust manager of State Bank Trust and that State Bank Trust served as the trustee of the Clark Family Trust at the time the trust agreement was executed. ³ A document attached to the trust agreement, titled, “Schedule of Property,” lists the couple's contributions to the trust and characterizes the contributions as separate property:

Cash: $10.00 as the separate property of RUDIE CLARK and $10.00 as the separate property of JESSIE MAE CLARK.

Settlement proceeds on behalf of RUDIE CLARK from the [personal-injury settlement] in the approximate amount of $[redacted], as the separate property of RUDIE CLARK.

Settlement proceeds on behalf of JESSIE MAE CLARK from the [personal-injury settlement] in the approximate amount of $[redacted], as the separate property of JESSIE MAE CLARK.

Hochderffer testified by affidavit that shortly after the trust agreement was executed, Rudie and Jessie Mae's attorney delivered two checks to him that were to serve as Rudie and Jessie Mae's initial contributions to the Clark Family Trust. Copies of the checks in the record show that the checks were made payable to State Bank Trust. One of the checks was made out in the amount of $11,476.11 and included a notation stating “on behalf of Jessie Clark” on the memo line, and the other was made out in an amount that has since been redacted and included a notation stating “on behalf of Rudie Clark” on the memo line.

The trust agreement provided that any community property of the spouses would retain its character as community property and that any separate property of the spouses would retain its character as separate property. According to the trust agreement, the trustee “shall presume that all property added to the trust by a Settlor is the separate property of that Settlor unless designated as community property in writing at the time such transfer is made.” The trustee was also required to “keep separate, identifiable accounts for each Settlor's separate property” and “separate, identifiable accounts for any community property.” The trust agreement further provided that upon the death of both spouses, the trust estate would be divided into two separate shares, one share for the estate of Rudie and one share for the estate of Jessie Mae. Rudie's share would consist of his separate property and his interest in any community property in the trust estate, while Jessie Mae's share would consist of her separate property and her interest in any community property in the trust estate. Rudie's share would be held and administered for the benefit of Deborah. Jessie Mae's share would be divided equally among Deborah, Harrell, and Temesgen.⁴

Rudie died in October 2003, and Jessie Mae died in April 2006. In October 2006, Harrell and Temesgen filed suit against Deborah, alleging tortious interference with inheritance. Later, Harrell and Temesgen added Hochderffer as a defendant and sought a declaratory judgment that the personal-injury settlement proceeds received by Rudie and contributed to the trust were community property. They also sought a full and complete accounting of the Clark Family Trust. All of the parties filed motions for summary judgment, and the trial court granted Deborah's motion in its entirety and Hochderffer's motion in part.⁵ The trial court denied Harrell and Temesgen's motion for summary judgment. The trial court then severed its grant of Deborah's motion and partial grant of Hochderffer's motion from the rest of the cause so that the rulings could be appealed. Harrell and Temesgen now appeal the partial grant of Hochderffer's motion and the denial of their own motion.

STANDARD OF REVIEW

Summary judgments are reviewed de novo. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex.2005). To prevail on a motion for summary judgment, the movant must show that there is no issue of material fact and that it is entitled to judgment as a matter of law. TX Far West, Ltd. v. Texas Invs. Mgmt., Inc., 127 S.W.3d 295, 301 (Tex.App.-Austin 2004, no pet.). Evidence favorable to the non-movant is taken as true and every reasonable inference must be indulged in favor of the non-movant and any doubts resolved in its favor. Id.

When, as here, both parties move for summary judgment on the same issues, and the trial court grants one motion and denies the other, the appellate court considers the summary-judgment evidence presented by both sides, determines all questions presented, and if the reviewing court finds that the trial court erred, renders the judgment the trial court should have rendered. Id.

DISCUSSION

Harrell and Temesgen's arguments can be summarized in three issues on appeal. First, Harrell and Temesgen argue that the trial court erred in denying their motion for summary judgment and granting Hochderffer's motion because as a matter of law, the personal-injury settlement proceeds received by Rudie and subsequently contributed to the Clark Family Trust were community property, rather than separate property. Second, Harrell and Temesgen contend that Rudie and Jessie Mae never executed a valid partition agreement to convert the settlement proceeds from community property to separate property. Third, they argue that Rudie and Jesse Mae lacked the necessary mental capacity to execute the documents relied upon by Hochderffer to support his motion for summary judgment. We will address each of these contentions in turn.

Character of the Settlement Proceeds

In general, property possessed by either spouse during or on dissolution of marriage is presumed to be community property, absent clear and convincing evidence to the contrary. See Tex. Fam.Code Ann. § 3.003 (West 2006). Property owned or claimed by the spouse prior to the marriage is that spouse's separate property. Id. § 3.001(1) (West 2006). Of relevance to this appeal, a spouse's separate property also includes “recovery for personal injuries sustained by the spouse during marriage, except for any loss of earning capacity during marriage.” Id. § 3.001(3). In addition to the statutory exception for loss of earning capacity, courts have treated amounts recovered for medical expenses as community property. See Graham v. Franco, 488 S.W.2d 390, 396 (Tex.1972) (characterizing amounts recovered for payment of medical expenses as community property because payment of such expenses “is the burden of the community”). Amounts recovered for disfigurement, past and future mental anguish, and past and future physical pain and suffering are considered separate property. See Licata v. Licata, 11 S.W.3d 269, 273 (Tex.App.-Houston [14th Dist.] 1999, pet. denied)...