In re Estate of Poe

• Decision Date: 28 August 2019
• Docket Number: No. 08-18-00015-CV,08-18-00015-CV
• Citation: 591 S.W.3d 607
• Parties: In the MATTER OF the ESTATE OF Richard C. POE, Deceased
• Court: Texas Court of Appeals

591 S.W.3d 607

In the MATTER OF the ESTATE OF Richard C. POE, Deceased

No. 08-18-00015-CV

Court of Appeals of Texas, El Paso.

August 28, 2019

ATTORNEY FOR APPELLEE: Robert M. Millimet, Brewer, Attorneys & Counselors, 1717 Main Street, Ste. 5900, Dallas, TX 75201.

ATTORNEYS FOR APPELLANT: Richard Munzinger, ScottHulse Pc, 1100 Chase Tower, 201 E. Main Drive, El Paso, TX 79901, Joseph L. Hood Jr., Windle, Hood, Norton, Brittain & Jay, LLP, 201 East Main Drive, Suite 1350, El Paso, TX 79901.

Before McClure, C.J., Rodriguez, and Palafox, JJ.

OPINION

ANN CRAWFORD McCLURE, Chief Justice

The genesis of this case is a father who had second thoughts about entrusting his son with control of a substantial commercial enterprise. Near death's door, the father issued, and then bought for himself, enough stock in the managing company to place control of the enterprise into his estate whose executors were the father's trusted confidants. Following the father's death, the aggrieved son filed this action, which based on jury findings, set aside the new stock issuance and returned control of the enterprise to the son. During a second phase of the trial, the son sued the confidants individually over a claimed conspiracy and for damages to the enterprise. That phase of the trial resulted in a directed verdict in favor of the confidants, an order to reimburse the father's estate for what was paid for the stock, and an award of attorney's fees well below that requested by the son.

Not satisfied with the result, both sides have appealed and raise a myriad of issues in this double appeal. We affirm in part, and reverse in part the judgment below.

I. FACTUAL BACKGROUND

The parties to this appeal are as follows. The defendants below, and Appellants here, include: (1) the Co-Executors of the Estate of Richard C. Poe, (Anthony Bock and Karen Castro); (2) The trustees of the Dick Poe Estate Trust, (Paul Sergent, Jr., Anthony Bock and Karen Castro); (3) the officers of Poe Management, Inc. (Paul Sergent, Jr., Anthony E. Bock, and Karen Castro). We collectively refer to these parties as Appellants. Paul Sergent, Jr., Anthony Bock, and Karen Castro were also sued as individuals. We collectively refer to them in that capacity as the "individual defendants." The plaintiff below, and Appellee/Cross-Appellant here is Richard C. Poe II. The suit arises from the following facts which we glean from the trial testimony and exhibits.

A. The Dick Poe Commercial Empire

Richard C. Poe, who commonly appeared in commercials as "Dick Poe," operated three car dealerships relevant here: (1) Dick Poe Toyota, (2) Dick Poe Chrysler, and (3) Dick Poe Dodge. We will refer to him in this opinion as Dick Poe, or more simply, Dick. At the time of his death, Dick was divorced. He had two sons, Troy Poe and Richard C. Poe II (who we refer to as Richard). Troy was born with cerebral palsy and is totally disabled. Richard, however, had grown up working in the dealerships, obtained a college degree in automotive management, and by 2015 was running a successful Honda dealership of his own. The other important players here are Paul Sergent, Jr., Dick's long-time lawyer, Anthony Bock, Dick's long-time accountant, and Karen Castro, a long-time comptroller for the three dealerships. We refer to them by their last names: Sergent, Bock, and Castro.

Dick Poe's several dealerships were held in three limited partnerships: (1) Dick Poe Imports, LP, (Toyota); (2) Dick Poe Motors I, LP, (Chrysler); and (3) Dick Poe Dodge I, LP. (Dodge). Real estate holdings and other investments were held in two other limited partnerships: Dick Poe Family Limited Partnership and Poe Investments, Ltd. The general partner, and thus the entity that controlled all five limited partnerships, is a closely held corporation, Poe Management, Inc. (or PMI as we will refer to it).¹ As the general partner, PMI held a small ownership interest (1% to 5%) in each of the five limited partnerships it managed. But importantly here, as the general partner, it controlled all five of those limited partnerships.

The ownership of the five limited partnerships varied. Dick owned indirectly through two corporations 95% of Dick Poe Motors, L.P. (the Chrysler dealership) and Dick Poe Dodge, L.P. The third dealership, Dick Poe Imports, L.P. (the Toyota dealership), was owned 95% by the Dick Poe Family Limited Partnership. In turn, that entity was owned in equal shares by the Troy S. Poe Trust, and Richard. The land and improvements for the Toyota dealership was owned by the other limited partnership, Poe Investments, which in turn was owned 80% by Richard, and 19% by Dick. Graphically depicted, the corporate structure and ownership by 2015 was as follows, with the corporations in the shaded squares and the ownership interest outlined in the clear squares:

PMI was formed in August of 2007. While the articles of incorporation allowed for 10,000 shares, only 1,000 shares were originally issued, and all were owned by Richard. None of the stock held preemptive rights and there was no shareholder's agreement. At the outset, Dick held an irrevocable proxy to vote Richard's shares until either Dick's death or December 31, 2017. In this way, ownership of PMI was held by Richard, but as the only director with a proxy for all voting shares, Dick controlled PMI and through it, the five limited partnerships that held the three dealerships.² The proxy, however, was jointly revoked on October 31, 2011, because Gulf States Toyota, the Toyota distributor, required it. Instead, for 2012 and each year thereafter Richard executed in August a "written consent" that would elect Dick as the sole director of PMI for the coming year or "until such other time as his successors are duly elected and qualified." Under this arrangement, on a yearly basis, Richard gave Dick control over PMI and the five limited partnerships for which it was the general partner. But as the only shareholder, Richard could have called a special shareholder's meeting and replaced Dick. Sergent had in fact advised Dick that Richard had the power to remove him as the sole director.

Aside from being the sole director, Dick was appointed the president of PMI. Richard held the vice president slot, and Sergeant was the corporation's secretary. But under PMI's bylaws, "[t]he business affairs of the corporation shall be managed by its Board of Directors" and Dick was the sole director. Richard testified the intent of this arrangement was that Dick would run the "family businesses" so long as he wanted to, and that upon Dick's death or retirement, control would pass to Richard. The arrangement also fit into an estate planning strategy where Dick could gift his ownership interest in the family businesses to his sons but remain active in the dealerships that he built. For instance, Dick had effectively transferred ownership of Dick Poe Toyota to his sons around 2010, yet he retained control through PMI.³

B. Dick's Wills

Dick executed a series of wills that reflected a changing view of his estate plan. According to a November 3, 2009 will, after some specific bequests to family and friends, three-fourths of the estate would have gone to Richard, and one-fourth to a trust set up for Troy (the Troy S. Poe Trust). Richard and Bock were also co-executors under the 2009 will. Dick's will of October 12, 2012, provided for a similar distribution and administration.

But in 2013, Dick's plan changed. That summer Dick discussed with his lawyer Sergent, and his accountant, Bock, the formation of a charitable foundation as a vehicle to donate some or all of his estate to charity. According to Bock, Dick also expressed a concern for Troy who had already outlived his life expectancy. Troy was primarily being cared for Angel Reyes, whom the trust had hired as a full-time care-taker. Dick purportedly feared that Richard would put Troy into an institution and discharge Angel after Dick's death. To that end, Dick executed a new will on October 24, 2013. After some specific bequests to other family and friends,⁴ he gave all the residue of his estate to a newly formed "Dick Poe Estate Trust" for the benefit of Richard, Troy, and the newly created Poe Foundation. He named five persons as co-trustees of the estate trust: Richard, Bock, Sergent, Castro, and Gerald Miller (the general manager for one of the dealerships). The trustees had discretion on how they would divide the estate residue between the beneficiaries. The will appointed Richard, Bock, and Castro as co-executors.

The plan changed one more time. According to both Bock and Sergent, they met with Dick on September 10, 2014, at which time Dick asked that Richard and Gerald Miller be removed as trustees of the estate trust. The change was documented in Dick's September 22, 2014 will that appointed only Bock and Castro as executors, and a new estate trust agreement that named Bock, Castro, and Sergent as trustees.⁵ Dick did not share the terms of this new will with Richard, who did not see it until after Dick's death.

Also, purportedly at this same meeting, Dick asked how he could regain control of his companies. Sergent told him the quickest and most efficient way was to buy stock in PMI. Sergent also contends the issue came up on November 3, 2014, when he again conferred with Dick on share issuance in PMI. Sergent claims that Dick said he was looking for a way to "stop Richard."

Sergent further claimed that three days after Dick signed the September 22, 2014 will, Dick called and wanted to discuss taking Richard out of the estate plan altogether. Sergent drafted a will to that effect, but Dick never signed it. According to Sergent, Dick came to his office to execute that will, but he appeared troubled. Sergent asked that he go home and think the matter over. Dick never mentioned the subject again.

C. Improvement to the Toyota Dealership

In 2014 and 2015, the Toyota dealership underwent a major face lift. Dick lent just over $15 million dollars to PMI to tear down...