Valdez v. Hollenbeck

• Decision Date: 12 June 2015
• Docket Number: No. 13–0709,13–0709
• Parties: Robert Valdez, Individually and as Administrator of the Estate of Pierre V. Bernard, Deceased, and Fidelity and Casualty Company of New York, Petitioners, v. David Hollenbeck, Individually and as Successor Administrator of the Estate of Pierre V. Bernard, Deceased, Will Frances Baron, John Bernard Baron, Bernard Rae Bernard Box, Daryl Bernard, Marcus Bernard, Barbara Streff Grachek, Pam Streff Myers, Steve Streff, Scott Streff, Yvonne Baron 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 Grogan, in their capacity as Joint Independent Executrix of the Estate of Charles Rogers, Deceased, Respondents
• Court: Texas Supreme Court

465 S.W.3d 217

Robert Valdez, Individually and as Administrator of the Estate of Pierre V. Bernard, Deceased, and Fidelity and Casualty Company of New York, Petitioners

v.David Hollenbeck, Individually and as Successor Administrator of the Estate of Pierre V. Bernard, Deceased, Will Frances Baron, John Bernard Baron, Bernard Rae Bernard Box, Daryl Bernard, Marcus Bernard, Barbara Streff Grachek, Pam Streff Myers, Steve Streff, Scott Streff, Yvonne Baron 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 Grogan, in their capacity as Joint Independent Executrix of the Estate of Charles Rogers, Deceased, Respondents

No. 13–0709

Supreme Court of Texas.

Argued February 24, 2015

OPINION DELIVERED: June 12, 2015

Nancy Hesse Hamren, Coats Rose Yale Ryman & Lee, P.C., 9 Greenway Plaza, Suite 1100, Houston TX 77046, (713) 653–7362, (713) 651–0220, nhamren @coatsrose.com (Primary), for Petitioner Fidelity and Casualty Company of New York.

John D. Wennermark, Law Offices of John D. Wennermark, 1924 N Main Ave, San Antonio TX 78212– 3942, (210) 226–626, (210) 225–135, johnwennermark @hotmail.com (Primary), for Petitioner Robert Valdez.

Beth Elaine Watkins, beth.watkins@watkinsappeals.com (Primary), Shannon Kathleen Dunn, shannon.dunn@watkinsappeals.com (Primary), Law Office of Beth Watkins, 926 Chulie Drive, San Antonio TX 78216, (210) 225–6666, (210) 225–2300, Vick Putman, Putman & Putman, Inc., Tower Life Bldg–28th Floor, 310 S Saint Marys St, San Antonio TX 78205–3172, (210) 226–022, vputman @putmanlaw.com (Primary), for Respondent David Hollenbeck, et al.

Opinion

Justice Guzman delivered the opinion of the Court.

For more than a decade, a rogue probate clerk looted millions of dollars from the estates of Bexar County residents who had died intestate. Discovery of the crime spree generated a number of civil disputes, including this case, which involves an intestate estate defrauded of more than half a million dollars. More than a decade after the estate's administration had closed—and more than three years after learning the estate had been significantly undervalued—the intestate's heirs petitioned the probate court by statutory and equitable bills of review to re-open the estate, alleging the estate administrator breached fiduciary duties and fraudulently concealed information about the estate's assets. The probate court denied the statutory bill of review, but granted the equitable bill of review and set aside the orders closing probate. The heirs successfully litigated their claims against the administrator and were awarded damages against the administrator and his surety. The court of appeals affirmed. 410 S.W.3d 1 (Tex. App.—San Antonio 2013).

The threshold issue here is whether the equitable bill of review was timely filed. Generally, a bill of review allows a party to challenge a judgment after the time for filing a motion for new trial or an appeal has expired. Recognizing the importance our legal system places on the finality of judgments, courts generally allow bills of review only in limited circumstances or as authorized by statute. An equitable bill of review must ordinarily be filed within four years of the date the judgment is signed unless extrinsic fraud is established or an express limitations period is prescribed by statute. See Tex. Civ. Prac. & Rem. Code § 16.051 (prescribing four-year residual statute of limitations if “there is no express limitations period”); PNS Stores, Inc. v. Rivera, 379 S.W.3d 267, 275 (Tex. 2012) (tolling limitations period because there was some evidence of extrinsic fraud). At the time of the events giving rise to this suit, Texas Probate Code section 31 provided that “no bill of review shall be filed after two years have elapsed from the date of [the probate court's] decision, order or judgment.” Act of March 17, 1955, 54th Leg., R.S., ch. 55, § 31, 1955 Tex. Gen. Laws 88, 97 (former Tex. Prob. Code § 31 ).¹ Section 31's plain language thus establishes a two-year limitations period for bills of review attacking a probate decision, order, or judgment. Although the heirs contend limitations was tolled, we need not decide whether and under what circumstances tolling doctrines might apply because the effect of any tolling would have ended more than two years before the heirs filed their bill-of-review petition. We therefore hold the heirs' bill of review is untimely. Accordingly, without reaching the merits of either the bill of review or the underlying claims, we reverse the court of appeals' judgment and render judgment for the administrator and the surety on the bill of review.

I. Factual and Procedural Background

This case is yet another in a series of suits stemming from the misconduct of a former Bexar County probate clerk, Melvyn Spillman, who stole millions of dollars from approximately 127 intestate probate estates he was tasked with handling in his capacity as a probate consultant with the medical examiner's office.² Spillman's victims included the estate of Pierre V. Bernard, from which he stole more than half a million dollars while administration of his probate estate was pending.

Bernard died January 25, 1994. Two days later Robert A. Valdez, a San Antonio attorney, applied to serve as administrator for Bernard's estate. Within a month, Valdez was appointed by the probate court as the personal representative and administrator of Bernard's estate. To secure his administration, Valdez filed a $260,000 surety bond issued by Fidelity and Casualty Company of New York.

With the necessary orders in place, Valdez promptly inspected Bernard's home for records and other information about assets Bernard owned at the time of his death. On March 3, 1994, Valdez filed an “Inventory and Appraisement of the Estate” with the probate court in which he valued Bernard's estate at $411,000, composed of $150,000 in real property and $261,000 in personal property (the March 1994 inventory). Valdez reported that Bernard's personal property was held in accounts at five different financial institutions.³ Valdez swore in the inventory that, to his knowledge, the list was “a full and complete inventory and list of the property and claims of the estate” and “that the true amount of cash belonging to said estate [was] correctly stated therein.” On March 10, 1994, the probate court approved the March 1994 inventory.

Two months later, an individual federal income tax return signed by a certified public accountant (CPA) was filed on Bernard's behalf for the 1993 tax year, which had ended about a month before Bernard's death. Schedule B of the return reported taxable interest income of $19,494 from ten financial institutions, including four banks not included in the March 1994 inventory.⁴ No account balances were listed for these accounts on the tax return, and it is undisputed that the tax return was not filed with the probate court. Nearly two years later, Valdez applied for payment of his attorney's fees and expenses. The application reflected Valdez had participated in preparation of the tax return, at least to some degree, because it contained line items of 2.15 hours on April 12, 1994, for “gather[ing] tax info for CPA” and 1.30 hours on April 20, 1994, for “telephone conversations with CPA, pay [ing] bills.” Valdez, however, never filed an amended estate inventory that identified any additional bank accounts that may have existed at the time of Bernard's death or any account balances that differed from those stated in the March 1994 inventory.

Instead, Valdez's “Account for Final Settlement” of the estate, filed with the court on May 8, 1996, listed assets that included “CD transfer[s]” totaling approximately $240,000 along with other receipts. Valdez reported the total value of the estate as $343,213.35 after payment of estate debts and expenses. The probate court ordered final settlement and distribution of the estate on June 14, 1996, and on October 4, 1996, signed an order (1) discharging Valdez as administrator, (2) discharging Fidelity from further liability on the adminstrator's bond, and (3) closing the estate.

Years later, Spillman was convicted of a host of offenses related to his theft. The criminal trial revealed Spillman had been pilfering estates in his charge for years.⁵ In April 2002, Edward L. Rishebarger, a certified public accountant, was appointed as receiver of the assets seized from Spillman and was tasked with determining the value of property misappropriated from the defrauded estates, including the Bernard estate.

In March and April 2003, Bernard's heirs learned that Spillman had misappropriated funds from his estate.⁶ In a letter dated April 21, 2003, Rishebarger provided the heirs with instructions for filing a claim for restitution from assets under receivership. Rishebarger, citing accounts at all of the banks listed on the 1993 tax return, estimated that Bernard owned $698,319.08 in personal property assets at the time of his death, which was considerably more than the $260,000 Valdez had reported. For some of the banks that had been identified on the March 1994 inventory Valdez had filed, Rishebarger found account balances greatly in excess of those Valdez had reported to the probate court.

In August 2003, Rishebarger filed a report recommending a plan for paying restitution claims. In that report, which was served on Bernard's heirs, Rishebarger concluded Spillman had ultimately stolen $522,834.79 from the Bernard estate. The court thereafter approved a distribution plan in which the Bernard estate would receive $56,878.65 in restitution.

The heirs named Bernard Baron, a first cousin of the decedent, to lead recovery efforts related to the estate. On March 8, 2005, Baron applied (1) to re-open administration of the probate estate to receive the approved distribution of receivership assets and (2) to be appointed...