In re Robert Valdez, Individually & Bernard, Deceased, & Fid. & Cas. Co. of N.Y.,

• Decision Date: 24 April 2013
• Docket Number: No. 04–11–00739–CV.,04–11–00739–CV.
• Citation: 410 S.W.3d 1
• Parties: Robert VALDEZ, individually and as administrator of the Estate of Pierre V. Bernard, deceased, and Fidelity and Casualty Company of New York, Appellants, v. David HOLLENBECK, individually and as the successor administrator of the Estate of Pierre V. Bernard, deceased, Will Francis Baron, John Bernard Baron, Bernard Rae Bernard Box, Daryl Bernard, Marcus Bernard, Barbara Streff Grachek, Pam Streff Myers, Steve Streff, Scott Streff, Yvonne Barrone Fischer, Elizabeth Lamar, Kelly Lamar Loeffelholz, Jeanne Mary Lamar, John Lamar, David Lamar, Greg Lamar, Chris Lamar, Eric Lamar, Robert Rogers, Dana Rogers, John Rogers, individually, and Dana Rogers and Sherrie Ann Grogan, in their capacity as joint independent executrix of the Estate of Charles Rogers, deceased, Appellees.
• Court: Texas Court of Appeals

410 S.W.3d 1

Robert VALDEZ, individually and as administrator of the Estate of Pierre V. Bernard, deceased, and Fidelity and Casualty Company of New York, Appellants,

v.David HOLLENBECK, individually and as the successor administrator of the Estate of Pierre V. Bernard, deceased, Will Francis Baron, John Bernard Baron, Bernard Rae Bernard Box, Daryl Bernard, Marcus Bernard, Barbara Streff Grachek, Pam Streff Myers, Steve Streff, Scott Streff, Yvonne Barrone Fischer, Elizabeth Lamar, Kelly Lamar Loeffelholz, Jeanne Mary Lamar, John Lamar, David Lamar, Greg Lamar, Chris Lamar, Eric Lamar, Robert Rogers, Dana Rogers, John Rogers, individually, and Dana Rogers and Sherrie Ann Grogan, in their capacity as joint independent executrix of the Estate of Charles Rogers, deceased, Appellees.

No. 04–11–00739–CV.

Court of Appeals of Texas, San Antonio.

April 24, 2013.

John D. Wennermark, Law Offices of John D. Wennermark, San Antonio, TX, Nancy Hesse Hamren, Coats, Rose, Yale, Holm, Ryman & Lee, P.C., Houston, TX, for Appellant.

Vick Putman, Putman & Putman, Inc., San Antonio, TX, for Appellee.

Sitting: CATHERINE STONE, Chief Justice, KAREN ANGELINI and MARIALYN BARNARD, Justices.

OPINION

Opinion by: KAREN ANGELINI, Justice.

This appeal arises from a statutory and equitable bill of review proceeding to set aside orders signed by the probate court in 1996 that approved the account for final settlement and discharged Robert Valdez as administrator of the Estate of Pierre V. Bernard, deceased. In the underlying proceeding, after discovering that Melvyn Spillman, a former clerk with the Bexar County Clerk's Office, had stolen funds from bank accounts owned by the decedent, which had not been accounted for by Valdez in the estate's final settlement, the heirs to the estate filed a bill of review seeking to set aside the 1996 Orders. After the probate court conducted a bench trial in the bill of review proceeding, the court granted an equitable bill of review and set aside the 1996 Orders. The probate court then appointed David Hollenbeck to serve as successor independent administrator of the estate, and in an amended petition, Hollenbeck substituted in for the heirs. After a bench trial on the merits, the probate court signed a final judgment in favor of the estate, determining that actual damages to the estate were in the amount of $465,956.79. Robert Valdez, individually and as administrator of the Estate of Pierre V. Bernard, and the surety, Fidelity and Casualty Company of New York (“Fidelity”), appeal from the probate court's final judgment. On appeal, both Fidelity and Valdez argue that the probate court erred in granting the equitable bill of review. Fidelity also argues that at the trial on the merits, there was no evidence of proximate causation and that the probate court erred in awarding judgment to Hollenbeck against Fidelity for an additional sum of $78,035.62 in pre-judgment interest because it was error for the probate court to award judgment against Fidelity for any amount in excess of the amount of its bond. In addition, Valdez argues that (1) the probate court should not have admitted in evidence the estate's 1993 IRS tax return, and (2) there is no evidence of a meritorious claim or defense. We affirm the judgment.

Background

Pierre V. Bernard died on January 25, 1994. Shortly after Bernard's death, Melvyn Spillman, who at the time was an employee of the Bexar County Clerk's Office, called Robert A. Valdez, a local attorney, and told Valdez that an attorney needed to be appointed as administrator of Bernard's estate. On January 27, 1994, Valdez applied to be the administrator of Bernard's estate, and on February 23, 1994, the probate court appointed Valdez as administrator. Fidelity, as surety, issued an administrator's bond on behalf of Valdez, as principal, in the amount of $260,000. Valdez then went to Bernard's home for the purpose of looking for records or other items that might reflect what assets Bernard owned at the time of his death. Based on records Valdez found, he prepared an inventory and appraisement of the estate and filed it with the probate court on March 3, 1994. The inventory and appraisement indicated that the gross value of the estate was $411,000, including $150,000 in real property and $261,000 in personal property.

The inventory identified the following bank accounts owned by Bernard at the time of his death:

(1) Bank of the West in the amount of $100,000;

(2) NationsBank in the amount of $85,000;

(3) Eisenhower National Bank in the amount of $25,000;

(4) Guaranty Savings in the amount of $25,000; and

(5) Jefferson Bank in the amount of $25,000.

On March 10, 1994, the probate court approved the inventory. On May 2, 1994, a 1993 Federal Income Tax Return was filed on behalf of Bernard's estate. The 1993 Tax Return identifies the following institutions at which Bernard maintained accounts that earned taxable interest during tax year 1993:

(1) Bank of the West;

(2) Broadway Bank;

(3) Eisenhower Bank;

(4) Guaranty Federal Savings;

(5) IBC;

(6) Jefferson State Bank;

(7) NationsBank;

(8) Security National; and

(9) Eisenhower National.

Thus, the 1993 Tax Return listed institutions not included on the inventory filed with the court: Broadway Bank; IBC; and Security National. It also listed a second account at Eisenhower National.

On April 3, 1996, Valdez filed his Application for Payment of Attorney's Fees. On this application, Valdez billed 2.15 hours on April 12, 1994, for “gather [ing] tax info for CPA” and 1.30 hours on April 20, 1994, for “telephone conversation with CPA, pay bills.” On May 8, 1996, Valdez filed his account for final settlement, which did not include several of the bank accounts listed on the 1993 Tax Return. On June 14, 1996, the probate court signed an Order Approving Account for Final Settlement and Authorizing Distribution of the Estate. On October 4, 1996, the probate court signed an Order Closing Estate and Discharging Personal Representative, in which the court released and discharged Fidelity from any further liability on the bond.

Spillman, the former employee of the Bexar County Clerk's Office who had informed Valdez of the need for an administrator of Bernard's estate, was later charged with criminal acts stemming from fraud in various probate cases. On April 12, 2002, Edward L. Rishebarger, CPA, was appointed to serve as a receiver of the assets seized from Spillman and to assist the Bexar County District Attorney's Office in its investigation of Spillman. Rishebarger identified 127 estates against which Spillman had committed criminal acts. The Bernard Estate was one of these estates. Rishebarger was charged with the responsibility of ascertaining the value of the Bernard Estate at the time of Bernard's death and the amount stolen by Spillman. Rishebarger calculated the amount of personal property assets belonging to Bernard at the time of his death to be $698,319.08. He determined that Bernard owned the following bank accounts at the time of his death: (1) NationsBank in the amount of $83,390.70; (2) NationsBank in the amount of $3,697.78; (3) IBC in the amount of $100,000; (4) Security National in the amount of $5,050.00; (5) Jefferson Bank in the amount of $100,092.93; (6) Eisenhower Bank in the amount of $100,052.75; (7) Broadway Bank in the amount of $100,860.64; (8) Guaranty Federal (three accounts) in the amount of $105,174.28; and (9) Bank of the West in the amount of $100,000. Rishebarger concluded that Spillman stole $522,834.79 from the Bernard Estate.

In March and April 2003, Bernard Baron and other heirs of the Bernard Estate received a letter from Rishebarger, which informed them of a problem with the Bernard Estate involving Spillman. The heirs of the Bernard Estate met and decided to elect Bernard Baron, a cousin to Pierre V. Bernard, to be their leader with respect to matters relating to the estate. On September 2, 2003, Rishebarger sent the heirs a copy of his Report of Receiver and Motion for Court Authority to Approve Plan of Distribution and Payment of Fees and Expenses. Rishebarger's report listed $522,834.79 as the amount Spillman stole from the Bernard Estate.

In early 2004, Bernard Baron retained Don Stecker, an attorney. On March 8, 2005, Bernard Baron filed an application to re-open administration of the Bernard Estate and for Appointment as Successor Administrator. On May 9, 2005, pursuant to a distribution plan approved by a court, Rishebarger mailed a check in the amount of $56,878.00 to Stecker as counsel for the heirs. On May 31, 2005, the heirs sued Valdez for breach of fiduciary duties and Fidelity as surety on the bond issued to Valdez. During the pendency of this lawsuit, the probate court determined that it lacked jurisdiction to appoint Baron as Successor Administrator and/or reopen the Estate without first setting aside the prior court orders in the 1994 probate case. Thus, on December 11, 2006, the heirs filed a petition for bill of review.

The petition sought both a statutory and equitable bill of review to set aside the 1996 Order Approving Account for Final Settlement and Order Discharging Valdez. The petition asked for a statutory bill of review pursuant to section 31 of the Texas Probate Code. Section 31 provides that

[a]ny person interested may, by a bill of review filed in the court in which the probate proceedings were had, have any decision, order, or judgment rendered by the court, or the judge thereof, revised and corrected on showing of error therein; but no process of action under such decision, order or judgment shall be stayed except by writ of injunction, and no bill of review shall be filed after two years have elapsed from the date of such decision, order or judgment.

Tex. Prob.Code Ann. § 31 (West 2003). In the alternative, the petition alleged an equitable bill of review.

On December 14, 2007, a bench trial was conducted in the bill of review proceeding. The probate court denied the...