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Estate of Stegall

Court of Appeals of Texas, Second District, Fort Worth

November 21, 2019

Estate of Randall Cross Stegall, Deceased

          On Appeal from Probate Court No. 1 Tarrant County, Texas Trial Court No. 2013-PR00717-2-1-A.

          Before Kerr, J., and Gonzalez, J. [1]

          MEMORANDUM OPINION

          Elizabeth Kerr Justice.

         When Priscilla Stegall's husband died in 2013, she was appointed independent executor of his estate. In that capacity, she sold her late husband's law firm, which included a title company, to the two attorneys who had been working at the firm when he died. After the sale, Priscilla continued to work at the law firm as its office manager and as an escrow officer. The firm's new owners fired her several months later, and she sued them, the law firm, and the attorneys who had represented her and the estate in the sale of her late husband's firm. The probate court granted summary judgment against her on all claims and entered a take-nothing judgment. In five issues, Priscilla challenges the probate court's subject-matter jurisdiction and the propriety of its summary-judgment rulings. We will reverse and remand in part and affirm in part.

         I.

         Background

         Priscilla was married to Randall Cross "Randy" Stegall, an attorney and the sole manager and member of The Stegall Firm, PLLC. The Stegall Firm had offices in Southlake and Flower Mound and operated both a law firm and a fee office for a title company. Priscilla, a nonlawyer, worked for the Stegall Firm as its office manager and as an escrow officer. According to her, most of the Stegall Firm's revenue came from the its title business. Attorneys Matthew Schultz and Dustin Kellar started working for the Stegall Firm shortly before they became licensed in November 2012.

         On February 27, 2013, Randy died unexpectedly. His will named Priscilla as the estate's executor and sole beneficiary. Tarrant County Probate Court Number Two appointed Priscilla as the independent executor of Randy's estate.

         On Randy's death, his estate became the Stegall Firm's sole member. But because Priscilla is not an attorney, no ownership interest in the firm could pass to her. In her independent-executor capacity, she approached Schultz and Kellar about buying the Stegall Firm; they expressed interest, and the parties began discussing sale terms and how the business would operate moving forward.

         The parties agreed on a purchase price of $50, 000, plus all proceeds from the planned sale of the firm's Flower Mound office, in exchange for the estate's ownership interest in the Stegall Firm. But according to Priscilla, the firm was actually valued at about $1, 000, 000 because of her pending closings, book of business, experience, skill, and contacts. She claimed that an accountant advised her that it would save her and the firm significant tax liability if part of the purchase price was paid to her as salary for her continued employment. She thus intended to use an employment agreement to "capture the value of the title business and firm."

         During the sale negotiations, the parties discussed an employment agreement to be entered into between Priscilla and the firm. Priscilla claims that in March 2013, everyone agreed to a ten-year employment agreement, with Priscilla being a "silent partner" receiving an annual salary of $150, 000 plus a percentage of the monthly title premiums and escrow fees.

         In early May 2013, Priscilla hired Dustin Sparks, an attorney with Geary, Porter, and Donovan, P.C., to represent her individually and as executor of Randy's estate in the sale of the Stegall Firm to Schultz and Kellar. Schultz and Kellar retained their own counsel, Phil Ruais.

         Sparks and Ruais worked together to prepare the sale documents, and they discussed a possible employment agreement for Priscilla. But as the May 28, 2013 closing date approached, [2] the employment agreement's terms remained in flux, and Priscilla claims that on closing day, the parties agreed to reduce the employment agreement's duration to a five-year term. The sale closed as scheduled, but Priscilla and the firm-now known as Schultz and Kellar, PLLC (the SK Firm)-never signed an employment agreement. Even so, Priscilla continued to work there.

         By September 2013, Priscilla was unhappy with the way Schultz and Kellar were running the firm. Worried that she could be fired, Priscilla met with Sparks that month regarding the employment agreement. Sparks advised her that because there was no written employment agreement, she was free to work elsewhere, but Priscilla decided to stay at the SK Firm.

         Six months later, in March 2014, the SK Firm fired Priscilla. A little over a year later, Priscilla-in her individual capacity only-sued Schultz, Kellar, and the SK Firm (collectively, the SK Defendants) in Tarrant County District Court for claims arising from her termination and from the sale of the Stegall Firm to Schultz and Kellar.

         The SK Defendants' answer included a verified denial challenging Priscilla's ability to recover in her individual capacity and an affirmative defense challenging her standing to sue. The SK Defendants also specially excepted to Priscilla's pleadings, and the district court ordered her to amend her petition to "set forth distinctively the claims and damages [she was] asserting against Defendants in her individual capacity and the claims and damages [she was] asserting against [them] as the Execut[or] of the Estate of Randall Stegall." In response, Priscilla amended her pleadings to assert claims against the SK Defendants also in her capacity as executor of Randy's estate: breach of contract, fraudulent inducement, fraud, negligent misrepresentation, and breach of informal fiduciary duty. Specifically, Priscilla-as-executor alleged that Schultz and Kellar used the promise of an employment agreement to induce her to sell the Stegall Firm to them for less than its fair market value and that the estate was thus injured.

         The SK Firm then counterclaimed against Priscilla in her capacity as executor for breach of contract and conversion, claiming that the estate had failed to deliver all the assets that the SK Firm had purchased from the Stegall Firm. In June 2016, the SK Defendants successfully moved to transfer the case to Tarrant County Probate Court Number Two, the court in which Randy's will was probated.

         Meanwhile, in March 2016, Priscilla, individually, sued Sparks and the Geary Porter firm (collectively, the GPD Defendants) in Dallas County District Court for legal malpractice in representing her in the sale of the Stegall Firm. In July 2016, Priscilla amended her petition to also sue the GPD Defendants in her estate-executor capacity, claiming that they were also negligent in representing the estate in the sale. Priscilla then successfully moved to transfer the legal-malpractice case from Dallas County District Court to Tarrant County Probate Court Number Two and to consolidate it with the case against the SK Defendants. Soon after, the presiding judge of Tarrant County Probate Court Number Two recused herself on her own motion, and the consolidated case was assigned to Tarrant County Probate Court Number One.

         In December 2016, the SK Firm filed an amended pleading abandoning its counterclaims against Priscilla in her capacity as executor. See Tex. R. Civ. P. 62, 65. The following month, Priscilla amended her petition for the eighth time. Individually and in her capacity as executor, she alleged (1) a breach-of-contract claim against the SK Defendants; (2) claims against Schultz and Kellar for fraudulent inducement, fraud by nondisclosure, fraud by partial disclosure, negligent misrepresentation, and breach of informal fiduciary duty; and (3) a legal-malpractice claim against the GPD Defendants.

         The GPD Defendants and the SK Defendants all moved for summary judgment. The GPD Defendants moved for summary judgment on limitations, arguing that the two-year statute of limitations barred Priscilla's legal-malpractice claim because that claim accrued in either May or September 2013 but Priscilla did not sue until March 2016, well after limitations had run. The SK Defendants moved for summary judgment only on Priscilla's breach-of-contract claim, arguing that there was no valid and enforceable employment agreement because the parties never had a meeting of the minds on its material terms and, alternatively, the alleged agreement was unenforceable under the statute of frauds. The probate court granted both motions without stating the grounds on which it relied for its rulings.

         Priscilla then amended her petition for the ninth time to seek a declaration that she rather than the estate owned "all claims, property, assets[, ] and anything of value that was formerly owned by Randy Stegall or his Estate" and that "she individually is the proper party to assert any and all claims that could have ever belonged to the estate or Randy Stegall as the sole devisee of his Last Will and Testament."

         After that last amendment, Schultz and Kellar moved for summary judgment on Priscilla's remaining claims: fraudulent inducement, fraud by nondisclosure, fraud by partial disclosure, negligent misrepresentation, and breach of informal fiduciary duty. With respect to the fraud-based and negligent-misrepresentation claims, Schultz and Kellar argued that Priscilla unjustifiably relied on their representations. They also argued that no informal fiduciary relationship existed. The trial court granted the motion, found that Priscilla's declaratory-judgment action was thereby moot, and signed a final take-nothing judgment against her.

         Priscilla has appealed and raises five issues: (1) the probate court lacked jurisdiction over the case when it transferred the case from district court; (2) even if the probate court had jurisdiction at the time of transfer, it lost jurisdiction when the SK Firm nonsuited its claims against the estate; (3) the trial court erred by granting the GPD Defendants' summary-judgment motion on their limitations defense; (4) the trial court erred by granting summary judgment for the SK Defendants on Priscilla's breach-of-contract claim; and (5) the trial court erred by granting summary judgment for Schultz and Kellar on Priscilla's remaining tort claims.

         II.

         Appellate Jurisdiction

         Before we address Priscilla's appellate complaints, we must consider our jurisdiction. The GPD Defendants have moved to dismiss this appeal, arguing that we lack jurisdiction because Priscilla's notice of appeal was untimely filed. The GPD Defendants contend that Priscilla's appellate deadline ran from August 16, 2017-the date the trial court signed an order granting Schultz and Kellar summary judgment on Priscilla's last remaining claims-because that order was a final judgment. Priscilla responds that her deadlines started to run from August 29, 2017-the date the trial court signed its final judgment-because that judgment modified the August 16 order. See Tex. R. Civ. P. 329b(h).

         In its August 16, 2017 "Order Granting Defendant's Motion for Partial Summary Judgment on All Remaining Claims," the trial court recited that it had reviewed "all timely filed pleadings, the Motion, Plaintiff's Response, and the evidence and arguments of counsel" and dismissed with prejudice the "remaining causes of action for fraudulent inducement, fraud by nondisclosure and partial disclosure, negligent misrepresentation[, ] and breach of informal fiduciary duty." The order stated that "[t]his is a final judgment and disposes of all parties and all claims and is appealable." See In re Elizondo, 544 S.W.3d 824, 827-28 (Tex. 2018) (orig. proceeding) (concluding that an order or judgment not following a trial on the merits is final if it disposes of all pending claims and parties or if it clearly and unequivocally states that it does).

         On August 29, 2017, the trial court signed a "Final Judgment." In this order, the trial court recited that it had granted the SK Defendants' two summary-judgment motions. The trial court also found that Priscilla's only remaining claim, for a declaratory-judgment, was moot because the trial court had dismissed her other claims with prejudice. The trial court ordered a take-nothing judgment, and the judgment closed by stating that "[t]his JUDGMENT is final, disposes of all claims and parties, and is appealable" and by ordering execution to issue.

         A trial court retains plenary power to vacate, modify, correct, or reform its judgment for 30 days after it signs the judgment. Tex.R.Civ.P. 329b(d). If the trial court modifies, corrects, or reforms the judgment "in any respect" during that time, "the time for appeal shall run from the time the modified, corrected, or reformed judgment is signed." Tex.R.Civ.P. 329b(h). "[A]ny change, whether or not material or substantial, made in a judgment while the trial court retains plenary power, operates to delay the commencement of the appellate timetable until the date the modified, corrected or reformed judgment is signed." Check v. Mitchell, 758 S.W.2d 755, 756 (Tex. 1988); see Arkoma Basin Expl. Co. v. FMF Assocs. 1990-A, Ltd., 249 S.W.3d 380, 391 (Tex. 2008) ("Thus, appellate deadlines are restarted by an order that does nothing more than change the docket number or deny all relief not expressly granted."); Lane Bank Equip. Co. v. Smith S. Equip., Inc., 10 S.W.3d 308, 313 (Tex. 2000) ("[A]ny change made by the court under subpart (h) prior to losing jurisdiction, even a clerical change, will restart the appellate timetable.").

         The trial court's August 29 judgment-signed during the trial court's plenary power-modified the August 16 judgment by expressly finding Priscilla's declaratory-judgment claim moot and dismissing it with prejudice, as well as by expressly entering a take-nothing judgment and ordering execution to issue. See Tex. R. Civ. P. 329b(d). The August 29 judgment thus restarted the appellate timetable.[3] See Tex. R. Civ. P. 329b(h); see also Tex. R. App. P. 4.3(a); Arkoma Basin Expl., 249 S.W.3d at 391; Lane Bank Equip., 10 S.W.3d at 313; Check, 758 S.W.2d at 756. On September 27, 2017, Priscilla timely moved for a new trial, see Tex. R. Civ. P. 329b(a), thereby extending her deadline to file her notice of appeal to November 27, 2017, see Tex. R. App. P. 26.1(a)(1). Priscilla timely filed her notice of appeal on November 13, 2017. See id.

         Because Priscilla timely filed her notice of appeal, we hold that we have jurisdiction over this appeal. See id. We therefore deny the GPD Defendants' dismissal motion.

         III.

         The Probate Court's Jurisdiction

         In her first and second issues, Priscilla argues that the probate court lacked subject-matter jurisdiction when it transferred the SK Defendants' case from district court to itself and that even if the probate court had jurisdiction at the time of transfer, it lost jurisdiction when the SK Firm nonsuited its breach-of-contract and conversion claims against the estate.

         A. The probate court's transfer power

         In parts of her first two issues, Priscilla challenges the probate court's transferring her suit against the SK Defendants to itself.[4]

         1. Applicable law

         The SK Defendants moved to transfer venue from Tarrant County District Court to Tarrant County Probate Court Number Two in accordance with Estates Code Section 34.001. See Tex. Est. Code. Ann. § 34.001. A transfer under this section is "essentially a specialized form of venue transfer for matters relating to a probate proceeding pending in a probate court." In re Estate of Aguilar, 435 S.W.3d 831, 833 (Tex. App.-San Antonio 2014, no pet.); see Gonzalez v. Reliant Energy, Inc., 159 S.W.3d 615, 622 (Tex. 2005) ("The transfer of a case [under former Probate Code Section 5B[5] pertains to venue, not jurisdiction."). Section 34.001 provides that a statutory probate court[6] may transfer to itself from a district court (1) "a cause of action related to a probate proceeding pending in the statutory probate court" or (2) "a cause of action in which a personal representative of an estate pending in the statutory probate court is a party."[7] Tex. Est. Code. Ann. § 34.001(a). Priscilla contends that the probate court improperly transferred the case under Section 34.001 because Randy's estate was closed at the time the SK Defendants moved to transfer the case, and thus there was neither a probate proceeding nor an estate pending in the probate court. See In re John G. Kenedy Mem'l Found., 159 S.W.3d 133, 144 (Tex. App.-Corpus Christi-Edinburg 2004, orig. proceeding) (determining that "[t]he word 'pending' does not describe a closed estate" and concluding that an estate must be pending to trigger a probate court's transfer power under former Probate Code Section 5B).

         2. Analysis

         A probate court's jurisdiction attaches at the time the application for the probate of a will is filed. In re Blankenship, 392 S.W.3d 249, 257 (Tex. App.-San Antonio 2012, no pet.). Once the probate court's jurisdiction attaches, it continues until the estate is closed. Id.

         As noted, Priscilla filed an application to probate Randy's will and was appointed independent executor of his estate, which succeeded Randy as the Stegall Firm's sole member upon his death. Because Priscilla is not an attorney, she could not own an interest in or share in the profits from the Stegall Firm. See generally Tex. Disciplinary Rules Prof'l Conduct R. 5.04, reprinted in Tex. Gov't Code Ann., tit. 2, subtit. G, app. A (Tex. State Bar R. art. X, § 9). Randy's will allowed Priscilla, as executor, to sell estate property for the purpose of administering the estate.[8] See generally Tex. Est. Code Ann. §§ 356.002 ("Power of Sale Authorized by Will"), 402.052 ("Sale of Estate Property Generally"). As part of her administration of the estate, Priscilla, as executor, sold the firm to Schultz and Kellar.[9] Cf. Tex. Disciplinary Rules Prof'l Conduct R. 5.04(d) ("A lawyer shall not practice with or in the form of a professional corporation or association authorized to practice law for a profit if . . . a nonlawyer owns any interest therein, except that a fiduciary representative of the estate of a lawyer may hold stock or interest of the lawyer for a reasonable time during administration[.]"). Priscilla's claims against the SK Defendants and the GPD Defendants arise from her sale (in her capacity as the estate's executor) of the Stegall Firm to Schultz and Kellar.

         "Traditionally, independent estate administrations have not been formally closed in Texas." 2 Thomas M. Featherstone, Jr., et al., Texas Practice Guide Probate § 13:1 (2018-19 ed.), Westlaw (database updated Nov. 2018). The Estates Code, however, allows an independent executor to formally close an estate by filing a closing report or a notice to close the estate after

[a]ll of the debts known to exist against the estate have been paid, or when they have been paid so far as the assets in the independent executor's possession will permit, when there is no pending litigation, and when the independent executor has distributed to the distributees entitled to the estate all assets of the estate, if any, remaining after payment of debts . . . .

Tex. Est. Code Ann. § 405.004. But an independent executor is not required to close the administration by filing a report or notice. See id. § 405.012. In the absence of a formal estate closing, an independent administration is considered closed when all debts and claims against the estate have been paid, the estate's assets have been distributed, and there is no need for further administration. See Blankenship, 392 S.W.3d at 257-58; In re Estate of Rowan, No. 05-06-00681-CV, 2007 WL 1634054, at *3 (Tex. App.-Dallas June 7, 2007, no pet.) (mem. op.); Tex. Commerce Bank-Rio Grande Valley, N.A. v. Correa, 28 S.W.3d 723, 729 (Tex. App.-Corpus Christi- Edinburg 2000, no pet.).

         Here, Priscilla never formally closed the estate, although while the SK Defendants' venue-transfer motion was pending, she filed a notice to close the estate pursuant to Estates Code Section 405.006. See Tex. Est. Code Ann. § 405.006. But that notice was ineffective, for a simple, statutory reason: there was litigation pending. See id. § 405.004 (stating that an independent executor may file a notice to close the estate "when there is no pending litigation"); In re Estate of Bean, 206 S.W.3d 749, 759 (Tex. App.-Texarkana ...


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