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England v. Kolbe

Court of Appeals of Texas, Third District, Austin

March 30, 2017

Susan England, Appellant
Janice Kolbe, as Guardian of The Estate of Edna Moon, Appellee


          Before Chief Justice Rose, Justices Goodwin and Bourland


          Jeff Rose, Chief Justice

         In this fraud and breach of fiduciary duty case, Susan England appeals the trial court's imposition of "death penalty" sanctions against her and, alternatively, the propriety of the damages awarded to Janice Kolbe as guardian for Edna Moon. We will reverse the sanctions order to the extent it denied England's demand for a jury trial on the issue of damages and remand for a new trial on damages alone. We affirm the trial court's order in all other respects.


         England and Kolbe are the two surviving children of Edna and Howard Moon. In the 2004 time frame, England was assisting her aging parents with their finances as her father suffered from dementia and her mother suffered from macular degeneration. England performed banking transactions, prepared income taxes, oversaw investment accounts, and managed various real properties owned by the Moons. Howard Moon died in January 2007, and Edna Moon was the sole beneficiary of his estate. England continued to assist her mother with finances through a power of attorney executed in February 2007 until approximately December 2011. At some point during this time, a family dispute arose over England's role in Moon's finances and the care Moon was receiving from England's son, Casey Lee, who lived with Moon and served as her caregiver. In July 2009, Kolbe and her late sister Barbara McHale contacted Adult Protective Services (APS) about England's use of Moon's funds. The APS investigation concluded that England had not improperly used Moon's funds.

         In December 2011, Moon revoked England's power of attorney and gave Kolbe power of attorney to assume her financial affairs. On behalf of Moon, Kolbe requested an accounting of Moon's finances from England and asked that she turn over all documents relating to Moon's financial affairs. England did not respond to the requests. In February 2012, Moon then initiated this suit for breach of fiduciary duty, fraud, conversion, and conspiracy to commit fraud against England and Lee.[1] Kolbe was appointed as guardian of Moon's estate in approximately March 2013.[2]

         Moon alleged in her petition that during the time England managed her finances, England withdrew funds from Moon's accounts, sold stocks and other investments, retained proceeds for her own use, and transferred additional funds of Moon's to her own bank accounts, all without permission. Moon also asserted that England engaged in real estate transactions with Moon's funds. Some of those transactions alleged England used Moon's funds to purchase properties titled in England's name alone and transferred Moon's interests in other properties to England via gift deeds.

         From the beginning of the suit, England's position was essentially that she did not manage her mother's finances; rather, she only assisted her mother when asked. As part of discovery, Moon served numerous discovery requests on England. In her responses from September 2012, England minimized her involvement in Moon's finances and stated that Moon held only five bank accounts at three different institutions. She further stated in her responses that she was the sole owner of the properties titled in her name and that no funds of Moon's had been used in the purchase of those properties. When asked to disclose any transfers of money or property from Moon or her late husband, England disclosed that Moon had transferred her interest in two pieces of real property, referred to by the parties as "Rest Haven" and "Ranch Road 12, " to England by gift deed. Rest Haven was later sold to a third party, and Ranch Road 12 was an income-producing rental property. England disclosed no stock transactions or other monetary transfers.

         England similarly testified in her deposition in November 2013 that she only helped Moon file income taxes, pay bills when Moon asked, and occasionally make deposits to and transfers from Moon's account. She stated that she deposited the rents from the Ranch Road 12 rental property into Moon's account on a monthly basis, even though Moon had transferred that property to her via gift deed.[3] With regard to transfers, England stated that Moon sometimes asked her to "park" funds ranging from $20, 000 to $40, 000 in England's savings account because Moon "didn't want large sums of money in her checking account." When asked about other accounts to which she may have transferred money, she said it was only to Moon's Frost Bank account and England's one savings account. England denied using the "parked" funds for her own benefit and stated that they were returned to Moon. She also asserted that she did not know much information about Moon's investments and denied receiving mail for Moon at her addresses, including bank and investment account statements. However, England admitted for the first time in her deposition that Moon had gifted her holdings in three stocks-Microsoft, Telefonica, and one other company that she could not recall. England further stated that she purchased at least four other pieces of real property with her own funds, referred to by the parties as "Hilliard Road, " "La Playa, " "Park Place, " and "Bonnyview." England lived in Port Aransas at both the La Playa and Park Place properties between 2007 and 2011.

         After England's deposition, when interviewing England's ex-boyfriend, Moon learned that England had at least four additional bank accounts at a different bank not previously disclosed in her discovery responses or deposition. As the case continued, Moon eventually discovered, through her own research, a total of twenty-four bank accounts at eight different institutions that held money for England or Moon. Only after Moon independently discovered the bank accounts and confronted England did England admit the existence of these additional accounts. Additionally, after testifying in deposition that Moon gave England three stock holdings, England amended her discovery responses but failed to include those stocks. Instead, she included the proceeds of the sale of two other stocks, AT&T and Altria, neither of which had been previously disclosed. Moon further discovered after obtaining copies of account statements from Schwab and other investment accounts that the statements had been mailed to England's address in Port Aransas, despite her denying she received them during her deposition. Moon filed a motion to compel and for sanctions based on this conduct by England. The trial court warned England not to "hide behind the log" in her discovery responses and, in July 2014, granted Moon's motion to compel and for sanctions. In its order, the trial court compelled England to respond to discovery, produce documents, and pay sanctions in the amount of $15, 000 and attorney's fees of $3, 000.

         In September 2014, England provided Moon with an expert report of Michael Turner, a certified public accountant, questioning some of the characterizations made in Moon's expert's report. However, in December 2014, less than thirty days before trial was scheduled in the matter, England produced a "Supplemental Forensic Accounting Report, " which included a full report of England's and Moon's accounts and showed, for the first time, that England had removed $694, 394 from Moon's accounts. The report also revealed that several real properties-Hilliard Road, La Playa, Park Place, and Bonnyview-had been purchased exclusively with Moon's funds but were titled in England's name alone, contradicting England's prior deposition testimony. At Turner's deposition in January 2015, he alleged for the first time a "silent partnership" between Moon and England. After this information was revealed in Turner's expert report and deposition, England was deposed again, at which time she admitted to managing Moon's financial affairs and that she had used Moon's funds for the purchase of the additional properties. She also testified that she had not disclosed the information previously because Moon did not want her other daughters to know about their arrangement. England further admitted that she had used funds from this "partnership" to pay legal fees, including the $18, 000 in sanctions and attorney's fees that the court had previously ordered, attorney's fees in the guardianship litigation involving Moon, and other personal litigation. Shortly after her deposition, England provided Moon a third expert report from Turner, which again changed the characterizations of England's use of Moon's funds. Turner later testified during the damages portion of the trial, at which time he withdrew as England's expert, refused to stand by the characterizations of funds made in his reports, and agreed that "England's explanations ha[d] morphed over the time [he had] worked with her."

         When these new facts and theories were revealed, Moon filed a second motion for sanctions requesting that the court strike England's pleadings, award Moon attorney's fees, establish a constructive trust on all of England's property obtained by her bad acts, and any other relief that the trial court deemed just. After a hearing, the trial court granted Moon's motion for sanctions, striking all of England's pleadings, granting Moon a default judgment on all issues of liability, and denying England's request for a jury trial on damages. In the trial court's March 11 order granting these sanctions, the court relied on Texas Rules of Civil Procedure 215 and 13; section 10.003 of the Texas Civil Practice and Remedies Code; and the court's inherent power as the bases for its sanctions. The trial court then held a damages trial in which it awarded Moon actual damages in the amount of $1, 458, 251; awarded punitive damages in the amount of $1, 000, 000; set aside and declared void the gift deeds for the Rest Haven and Ranch Road 12 properties; and imposed a constructive trust on certain assets of England, including her homestead, automobile, and bank accounts. After the denial of a motion for new trial, this appeal followed.


         England challenges the judgment of the court in thirteen issues. In her first and second issues, she asserts that the trial court's sanctions striking her pleadings and denying her a jury trial on damages were not directly related to the offending behavior and were excessive. See TransAmerican Nat. Gas Corp. v. Powell, 811 S.W.2d 913, 917 (Tex. 1991). She further asserts in her third issue that these sanctions violated her due-process rights. See id. In her fourth, fifth, and sixth issues, she argues that the trial court erred in relying on Texas Rules of Civil Procedure 13 and 215.5, as well as section 10.001 of the Texas Civil Practice and Remedies Code as the bases for its sanctions. England's final seven issues challenge the propriety of the trial court's damages award because it constituted a violation of the "one satisfaction" rule, improperly imposed a ...

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