Appeal from the County Court at Law No. 2 & Probate Court
Brazoria County, Texas Trial Court Cause No. PR30539-A
consists of Justices Boyce, Donovan, and Jewell.
WILLIAM J. BOYCE JUSTICE
Estate of Janie Baker Ellickson sued Richard Nugent and CAO,
Inc. asserting claims for breach of contract, breach of
fiduciary duty, and promissory estoppel in connection with
the sale of Ellickson's house. The trial court assessed
liability for breach of fiduciary duty and awarded damages
against Nugent and CAO, Inc. following a bench trial. We
affirm the trial court's judgment in part, reverse in
part, and remand for further proceedings consistent with this
and CAO, Inc., a company he owned and controlled,
participated in real estate transactions involving
71-year-old Janie Ellickson and a house she owned in
Galveston County, Texas. Central to this appeal is the
fiduciary relationship created when Ellickson signed a power
of attorney in favor of Nugent. The power of attorney
permitted Nugent to sell the Galveston County house on
Ellickson's behalf and execute documents related to the
sold the house to Michael Womack on January 21, 2008. Nugent
negotiated for a trust he controlled to receive $137, 004.40
from the sale; Ellickson was to receive $115, 926.80.
Ellickson died on June 9, 2008. Womack ceased to make the
required payments within a year of the sale, and the house
was sold for $20, 000 at a foreclosure sale on January 6,
estate sued Nugent and CAO, Inc. on July 10, 2012. The estate
asserted claims focusing on the fairness of the January 2008
sale terms; the failure to insure the house, which suffered
damage when Hurricane Ike came ashore in September 2008; and
Nugent's failure to notify Ellickson's estate of the
2009 foreclosure sale. The trial court conducted a bench
trial and concluded that Nugent committed four breaches of
fiduciary duty because he
• failed to direct all of Womack's payments to
• directed a disproportionate share of the 2008 sale
proceeds to a trust controlled by Nugent;
• failed to make sure Womack maintained insurance on the
• failed to notify Ellickson's estate of the 2009
trial court concluded that CAO, Inc. was liable as
Nugent's alter ego. It signed a final judgment awarding
$163, 843.64 in damages against Nugent and CAO, Inc. based on
Nugent's breaches of fiduciary duty.
appeal, Nugent and CAO, Inc. challenge the (1) legal
viability of the fiduciary duty breaches identified by the
trial court; (2) sufficiency of the evidence supporting
fiduciary duty breaches arising from the failures to insure
and give notice of the foreclosure sale; (3) sufficiency of
the estate's pleadings addressing CAO, Inc.'s
liability as Nugent's alter ego; (4) sufficiency of the
evidence supporting the trial court's conclusion that
CAO, Inc. is liable as Nugent's alter ego; and (5) trial
court's damages award.
chronology of relevant events will set the stage.
• January 3, 2007 - Ellickson signed a real estate sales
agreement with CAO, Inc. to sell her Galveston County house
to CAO, Inc. for $115, 000. Nugent signed on behalf of CAO,
Inc. as its president. This agreement expired because the
sale to CAO, Inc. did not close by June 1, 2007. The trial
court determined that the January 2007 contract
"continued to be honored by modification or novation
through act and limited documentation . . . ."
• April 27, 2007 - Ellickson signed a special durable
power of attorney for real estate transactions to permit
Nugent to sell the house. The power of attorney stated that,
by accepting the appointment, Nugent agreed to "assume
the fiduciary and other legal responsibilities of an
• January 21, 2008 - Ellickson, acting through Nugent as
her attorney-in-fact, signed a warranty deed conveying the
house to Womack.
â¢ Before the January 2008 sale, CAO, Inc. funded and
completed repairs on the house to make it "marketable
for sale." CAO, Inc. marketed the house and located the
â¢ A real estate lien note listed Womack as the maker and
the "Property Trust" as payee. At trial, Nugent
testified that he is the trustee of the "Property
Trust" and his individual retirement account is the
trust's beneficiary. The note obligated Womack to pay
monthly installments of $2, 107.76 over a ten-year period.
The note established the following payment schedule:
payments 1-4 to the Property Trust; payments 5-60 to
Ellickson; and payments 61-120 to the Property Trust. Under
this schedule, the Property Trust would receive 65 payments
totaling $137, 004.40. Ellickson would receive 55 payments
totaling $115, 926.80.
â¢ The deed of trust listed Womack as the grantor, the
Property Trust as the beneficiary, and Nugent as trustee. The
deed of trust obligated Womack to maintain insurance on the
house. The deed of trust provided that the Property Trust
could direct the trustee to foreclose on the house if the
grantor defaulted on the real estate lien note.
• June 9, 2008 - Ellickson died.
• July 24, 2008 - George Yeiter sent an email to Nugent
informing him that Yeiter would be the executor of
Ellickson's estate. Yeiter requested Nugent's
assistance in compiling the estate's inventory.
• August 17, 2008 - Nugent sent an email to Yeiter with
details of the January 2008 sale to Womack. Nugent stated
that Womack "got laid off from his job, " had
"scrambled to get another job, " and had missed one
payment on the house. Nugent stated that he told Womack to
"just catch it up as soon as he could."
• August 27, 2008 - Yeiter qualified as independent
executor of Ellickson's estate. • September 2008 -
Hurricane Ike damaged the house.
• October 5, 2008 - Nugent sent an email to Yeiter
asking whether Womack had been sending payments to
• January 6, 2009 - The house was sold at a foreclosure
sale to Entrust Retirement Services, Inc. for $20, 000. The
sale proceeds were deposited in an account owned by CAO, Inc.
Of these proceeds, $9, 440.84 was disbursed to the estate and
$10, 489.16 was retained by the Property Trust controlled by
Nugent. Entrust Retirement Services, Inc. sold the house for
$93, 000 on March 26, 2009.
• January 30, 2009 - Estate attorney Albert Giddens
mailed a letter to Nugent asking about the January 2008 sale
to Womack and the house's current condition. Giddens also
asked whether Nugent wanted help in foreclosing on the house.
By this time, the house already had been sold in a
foreclosure sale weeks earlier.
Trial Court Proceedings
estate sued Nugent on July 10, 2012, and asserted claims for
breach of contract, promissory estoppel, and breach of
estate named Nugent and CAO, Inc. as defendants in its first
amended petition. The estate asserted that Nugent acted
"as agent for his corporation, CAO, Inc."
parties proceeded to a bench trial in July 2016. At trial,
the evidence and testimony primarily focused on (1) the
structure of the real estate transactions at issue; (2) the
responsibility to insure the house; and (3) whether Nugent
failed to provide notice of the foreclosure sale to the
estate. Estate attorney Giddens testified that Nugent never
provided notice of the foreclosure sale to the estate. Nugent
testified that he informed executor Yeiter of the foreclosure
sale before it occurred. Challenging Nugent's
credibility, the estate questioned Nugent regarding his 2004
criminal conviction for theft in an amount greater than $200,
000, which arose from Nugent's earlier involvement in
separate real estate transactions.
findings of fact and conclusions of law, the trial court
determined that the estate failed to prove its breach of
contract and promissory estoppel claims. Addressing the
estate's only remaining claim, the trial court concluded
that Nugent committed four breaches of fiduciary duty by (1)
failing to have Womack's payments under the January 2008
real estate lien note made payable to Ellickson; (2)
negotiating for the Property Trust controlled by Nugent to
receive $137, 004.40 from the house sale while Ellickson was
to receive only $115, 926.80; (3) failing to make sure the
house was insured as required under the deed of trust; and
(4) failing to notify the estate of the foreclosure sale,
thereby chilling the sale and subjecting the estate to
trial court also found that Nugent and CAO, Inc. "acted
together, their roles and entities being indistinguishable
throughout the sale of the proceeds." The trial court
concluded that the estate was entitled to recover from Nugent
and CAO, Inc. It awarded $163, 843.64 in damages to the
estate plus pre- and post-judgment interest. The trial court
signed its final judgment on August 5, 2016. Nugent and CAO,
Inc. timely appealed.
and CAO, Inc. challenge the legal viability of the four
fiduciary duty breaches. They assert that two breaches
arising from the terms of the January 2008 sale to Womack -
payments to a recipient other than Ellickson, and
Nugent's negotiation for his trust to receive a
disproportionate share of the sale proceeds - are barred by
the applicable statute of limitations. They assert that Texas
Property Code section 51.0074 bars the two remaining
fiduciary duty breaches - failures to maintain insurance and
to give notice of the foreclosure sale - because this statute
forecloses a fiduciary relationship arising between a trustee
and a mortgagee under a deed of trust. See Tex.
Prop. Code Ann. § 51.0074(b)(2) (Vernon 2014).
also challenge the legal sufficiency of the evidence
underlying the trial court's findings that Nugent
breached his fiduciary duty by failing to maintain insurance
and failing to notify Ellickson's estate of the
foreclosure sale. Relying on Nugent's testimony, Nugent
and CAO, Inc. assert that Nugent gave notice of the
foreclosure sale to estate executor Yeiter. Appellants
contend that, to the extent the trial court discounted
Nugent's testimony because of Nugent's prior criminal
conviction, the trial court erred because the conviction is
inadmissible under Texas Rule of Evidence 609.
trial court concluded that CAO, Inc. is liable as
Nugent's alter ego. Nugent and CAO, Inc. challenge this
conclusion and assert that (1) the estate's pleadings
failed to give notice of its alter ego liability claim; and
(2) the evidence is legally insufficient to support an alter
appellants contest the law and evidence underlying the trial
court's damages award.
address these contentions in turn.
Only One of the Fiduciary Duty Breaches Is Legally
the four fiduciary breaches identified by the trial court
arose from the terms of the January 2008 sale to Womack:
failing to instruct Womack that payments be made payable to
Ellickson, and negotiating for the Property Trust controlled
by Nugent to receive a disproportionate share of the house
sale proceeds. The two remaining breaches address
circumstances that occurred after the January 2008 sale to
Womack: failure to maintain insurance on the house and
failure to notify the estate of the foreclosure sale.
statute of limitations forecloses breach of fiduciary duty
liability based on (1) directing sales proceeds to a
recipient other than Ellickson, and (2) orchestrating a
disproportionate distribution of sales proceeds to the trust.
The third breach based on the failure to insure the house is
foreclosed because the fiduciary duties Nugent assumed under
the power of attorney did not encompass procuring insurance.
As discussed more fully below, only the fourth breach
concerning notification of the foreclosure sale is legally
viable based upon the power of attorney.
The Statute of Limitations Bars Claims Arising from the Terms
of the January 2008 Sale
conclusions of law, the trial court stated that "all
applicable statute [sic] of limitations were continued by
estate contends that Nugent and CAO, Inc. "failed to
prove their limitations defense as a matter of law at
trial" and "never presented any evidence to prove
their defense." Nugent and CAO, Inc. present a
multifaceted limitations argument asserting that (1) the
estate's breach of fiduciary duty claims arising from the
January 2008 sale to Womack are barred by the statute of
limitations; (2) because the estate failed to plead or
present evidence of tolling, the trial court erred when it
concluded that the statute of limitations applicable to the
estate's claims was tolled; and (3) the applicable
tolling provision would not make the estate's claims
timely in any event. We agree with the appellants'
Nugent and CAO, Inc. preserved the limitations issue for
is an affirmative defense that must be specifically pleaded
and proved. Woods v. William M. Mercer, Inc., 769
S.W.2d 515, 517 (Tex. 1988); Trelltex, Inc. v. Intecx,
L.L.C., 494 S.W.3d 781, 785 (Tex. App.-Houston [14th
Dist.] 2016, no pet.). When a party asserts the affirmative
defense of limitations in a bench trial, the party must
request findings in support of that defense in order to avoid
waiving the issue ...