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In re Estate of Klutts

Court of Appeals of Texas, Second District, Fort Worth

December 19, 2019

In the Estate of Wynell N. Klutts, Deceased

          On Appeal from the County Court Hood County, Texas Trial Court No. P08257

          Before Sudderth, C.J.; Gabriel and Wallach, JJ.



         I. Introduction

         In four issues in this dueling-wills case, Appellants Jan Margaret McKee, Donna Vick, and Paula Fuqua appeal the trial court's summary judgment for their stepbrother, Appellee Michael O. Kornegay. We reverse and remand.

         II. Factual and Procedural Background

         Fred and Wynell Klutts married in 1959; Michael was Wynell's son from a prior marriage, and Jan, Donna, and Paula were Fred's daughters from a prior marriage. Fred died in August 2007. Wynell died nine years later.

         Between August 2007 and August 2016, Wynell executed four wills-two in 2007, one in 2008, and one in 2010.

         In the first two wills, Wynell devised everything equally to the four children and appointed Michael and Jan as co-executors. In 2007, she also appointed Michael and Jan as her agents under a medical power of attorney and as attorneys in fact in a durable general power of attorney instrument that required them to act jointly or to agree in writing to exercise such authority separately. And Wynell executed a "Declaration of Guardian" that expressly disqualified Donna and Paula from serving as her guardian in the event that she someday needed one. From December 2007 to April 2008, Wynell transferred assets worth over $6.4 million-approximately $1.6 million each-to Jan, Donna, Paula, and Michael.

         Wynell executed a third will on July 24, 2008, in which she left everything to Michael and Jan in equal shares and stated that she had "deliberately made no provision herein for the benefit of [her] stepdaughters[] Donna . . . and Paula . . ., for good and sufficient reasons which [she did] not care to enumerate herein."[1] She appointed Michael as her executor, with Jan to be her executor only if Michael predeceased Wynell, resigned, or became legally incompetent to act as executor.

         Almost two years later, in April 2010, Wynell executed a statutory durable power of attorney appointing Michael as her sole attorney in fact. Six months after that, in October 2010, she executed another will, in which she devised 78% of a limited partnership to Michael, the remaining 22% to Jan, and everything else to Michael. In the 2010 will, she named Michael as her executor and Donald L. Barley, who prepared both the 2008 and 2010 wills, as the successor executor.

         After Wynell died in August 2016, Jan, Donna, and Paula sought to admit the 2007 will to probate. Michael challenged it, arguing that Wynell's 2008 and 2010 wills had revoked the 2007 will, and he sought to admit Wynell's 2010 will to probate.[2] In support of Jan as executor of Wynell's estate, Donna and Paula raised two grounds: undue influence by Michael and Wynell's lack of testamentary capacity with regard to the 2008 and 2010 wills.[3]

         Michael filed a traditional and no-evidence motion for partial summary judgment. In the traditional portion of his motion, he argued that the 2007 will was revoked by the 2008 and 2010 wills, both of which, he stated, were consistent with Wynell's desires when made, affirmatively negating an essential element of undue influence.[4] In the no-evidence portion of his motion, he argued that there was no evidence to support each of the elements of undue influence with regard to the 2008 and 2010 wills.

         In their response to Michael's motion, Jan, Donna, and Paula reminded the trial court that based on Michael's fiduciary relationship with his mother, he bore the burden of proof to show the absence of undue influence with regard to the 2008 and 2010 wills, preventing a no-evidence summary judgment in his favor. They directed the trial court to evidence that Michael had been Wynell's attorney in fact, had taken over Wynell's financial affairs after Fred died, and had drained what assets were left after various distributions to all four children until-in 2016-Wynell had less than $10, 000 in her estate; that when Wynell's probate attorney had declined involvement in drafting the 2008 will, Michael had engaged Barley to do it; and that when Wynell executed the 2008 will, she was taking large amounts of medication on a daily basis and was ultimately diagnosed with dementia and Alzheimer's, calling into question her testamentary capacity to execute both the 2008 and 2010 wills.

         The trial court granted summary judgment for Michael on the traditional ground with regard to the 2007 will's revocation by the 2008 will and on the no-evidence ground regarding undue influence. In its order, the trial court made no ruling about which of the remaining wills would be admitted to probate and referred to the 2008 will as "the purported will dated July 24, 2008." The order also contained a Mother Hubbard clause, stating that "[a]ll relief sought by Michael Kornegay in his First Amended Motion for Partial Summary Judgment filed June 5, 2018 not expressly granted herein is DENIED." The trial court then signed an order severing the claims disposed of by summary judgment into a new cause number.[5]

         III. Discussion

         In their first and third issues, Jan, Donna, and Paula argue that the trial court erred by granting the no-evidence portion of Michael's motion because Michael was the party with the burden of proof and by granting the traditional portion of Michael's motion because he did not conclusively prove that Wynell had testamentary capacity when she executed the 2008 will.[6]

         A. Burden of Proof in No-Evidence Summary Judgment Context

         With regard to a no-evidence motion for summary judgment, after an adequate time for discovery, the party without the burden of proof may move for summary judgment on the ground that no evidence supports an essential element of the nonmovant's claim or defense. Tex.R.Civ.P. 166a(i); see Burges v. Mosley, 304 S.W.3d 623, 628 (Tex. App.-Tyler 2010, no pet.) (holding that because defendant had burden of proof on affirmative defense, she could not properly move for no-evidence summary judgment on that ground); Reyes v. Saenz, 269 S.W.3d 675, 676-77 (Tex. App.-San Antonio 2008, no pet.) (op. on reh'g) (holding that trial court erred by granting no-evidence summary judgment to plaintiffs on their own claim); see also Estate of Danford, 550 S.W.3d 275, 282 (Tex. App.-Houston [14th Dist.] 2018, no pet.); Hon. David Hittner & Lynne Liberato, Summary Judgments in Texas: State & Federal Practice, 60 S. Tex. L. Rev. 1, 18 (2019) ("If a party has the burden of proof on claims or defenses, it may not properly urge a no-evidence summary judgment to challenge those claims or defenses."). In their first issue, Jan, Donna, and Paula argue that because Michael was an undisputed fiduciary, he bore the burden of rebutting the presumption of unfairness, making improper the trial court's grant of his no-evidence motion on undue influence.[7]

         The person challenging the validity of an instrument generally bears the burden of proving the elements of undue influence by a preponderance of the evidence. Quiroga v. Mannelli, No. 01-09-00315-CV, 2011 WL 944399, at *5 (Tex. App.- Houston [1st Dist] Mar. 17, 2011, no pet.) (mem. op.); see Rothermel, 369 S.W.2d at 922 ("The burden of proving undue influence is upon the party contesting [the will's] execution."). This general rule applies to transfers from parent to child. Quiroga, 2011 WL 944399, at *5. Such transfers, standing alone, do not give rise to a presumption of undue influence, leaving the burden with the party challenging the transaction's validity. See id.[8] This is because "nothing is more common or natural than for a [parent] to bestow gifts upon his [or her] children." Hager v. Hager, 127 S.W.2d 234, 238 (Tex. App.-Eastland 1939, no writ); see Beville v. Jones, 11 S.W. 1128, 1130 (Tex. 1889) (explaining that "[i]n the case of a gift from a child to the parent [, ] undue influence may be inferred from the relation itself; but never where the gift is from the parent to the child, and no suspicion whatever attaches to the latter," but adding that "there is no doubt that upon proof of the actual exercise of undue influence it may be set aside").

         However, in cases involving fiduciary relationships, a presumption of undue influence may arise, requiring the person receiving the benefit to prove the fairness of the transaction. See Danford, 550 S.W.3d at 281-82; Quiroga, 2011 WL 944399, at *5; Price v. Taliaferro, 254 S.W.2d 157, 163 (Tex. App.-Fort Worth 1952, writ refd n.r.e.) (noting that when "the ground of . . . undue influence is plead[ed], as in this case, against the devisee who occupies a confidential or fiduciary relation to the maker of the instrument, the burden rests on the devisee to show the fairness of the transaction by appropriate evidence," but holding that no presumption of unfairness arises merely from the fact that the deceased and devisee were siblings). And "a power of attorney creates an agency relationship, which is a fiduciary relationship as a matter of law." Miller v. Lucas, No. 02-13-00298-CV, 2015 WL 2437887, at *4 (Tex. App.-Fort Worth 2015, pet. denied) (mem. op.) (noting that a fiduciary owes his principal a high duty of good faith, fair dealing, honest performance, and strict accountability); see Bombardier Aerospace Corp. v. SPEP Aircraft Holdings, LLC, 572 S.W.3d 213, 231 (Tex. 2019) ("An agreement creating a power of attorney creates a fiduciary relationship."); Nat'l Plan Adm'rs, Inc. v. Nat'l Health Ins. Co., 235 S.W.3d 695, 700 (Tex. 2007) (noting that an agency relationship imposes certain fiduciary duties on the parties); Johnson v. Brewer & Pritchard, P.C, 73 S.W.3d 193, 200 (Tex. 2002) ("Under the common law of most jurisdictions, including Texas, agency is also a special relationship that gives rise to a fiduciary duty."). Thus, an attorney in fact, as a fiduciary, carries the burden of proof to overcome the presumption of unfairness that arises in self-dealing transactions. See Danford, 550 S.W.3d at 285; see also Tex. Bank & Tr. Co. v. Moore, 595 S.W.2d 502, 509 (Tex. 1980) (stating that a fiduciary relationship puts on a profiting fiduciary "the burden of showing the fairness of the transactions"); Healey v. Healey, 529 S.W.3d 124, 135 (Tex. App.-Tyler 2017, pet. denied) ("A fiduciary may not use his position to self-deal.").

         Michael argued to the trial court, see infra n.14, and argues on appeal that because Danford, a 2018 opinion, was decided after the effective date of the amendment to Estates Code Section 751.101, it does not apply here. However, the law in effect at the time Danford was decided was the same law that was in effect in the instant case, and the facts here are quite similar to those present in Danford. In Danford, the deceased executed a will naming Robert Stawarczik[9] as the executor and sole beneficiary of her estate on the same day in 2010 that she executed a general power of attorney in his favor. 550 S.W.3d at 278. All of these documents were executed at the deceased's home in front of witnesses whom Stawarczik had brought and who had not previously met her. Id. Her nephews opposed the will's admission to probate, arguing that she had lacked testamentary capacity and that Stawarczik had exercised undue influence over their aunt. Id. at 278-79.

         Stawarczik filed a traditional and no-evidence motion for summary judgment, arguing in his no-evidence motion that there was no evidence of the lack of testamentary capacity or undue influence. Id. The nephews responded by attaching a copy of the general power of attorney appointing Stawarczik as their aunt's agent, id. at 279, and argued that this evidence of a fiduciary relationship shifted the burden of proving lack of undue influence to Stawarczik. Id. at 285. The court agreed, holding that when the nephews presented some evidence of a fiduciary relationship-i.e., Stawarczik's appointment as attorney-in-fact on the same day as the will's execution- this raised a presumption of undue influence sufficient to defeat Stawarczik's no-evidence motion.[10] Id. at 285-86.

         Michael contends that in Danford, the Fourteenth Court improperly interpreted the unfairness presumption applicable to a fiduciary in self-dealing transactions and relies on the analysis of the Beaumont Court in Fielding v. Tullos to contend that this a rebuttable presumption. No. 09-17-00203-CV, 2018 WL 4138971, at *7 (Tex. App.- Beaumont Aug. 20, 2018, no pet.) (mem. op.). In Fielding, the estate's independent administrator (the deceased's niece) challenged the deceased's having changed the beneficiary designation on his accounts to his caretaker, complaining that a fiduciary relationship had existed between the deceased and the caretaker that gave rise to a presumption of undue influence. Id. at *1, *5. The caretaker moved for summary judgment on undue influence.[11] Id. at *2-3. In her response, the administrator pointed out that the caretaker had signed one of the account agreements as "agent" and that the deceased had executed a power of attorney for his accounts naming the caretaker as his agent. Id. at *3.

         While the Beaumont court in Fielding did hold that the presumption is a rebuttable presumption that is extinguished with the offering of contrary evidence, not one that shifted the ultimate burden of proof of unfairness, id. at *7, none of the cases cited in Fielding regarding this burden-shifting proposition involved undue influence in a fiduciary self-dealing situation. See id. (citing Hot Head, Inc. v. Safehouse Habitats (Scot.), Ltd., 333 S.W.3d 719, 730 (Tex. App.-Houston [1st Dist.] 2010, pet. denied) (involving trademark infringement); Long v. Long, 234 S.W.3d 34, 37 (Tex. App.-El Paso 2003, pet. denied) (involving the characterization of marital property on divorce); All Am. Builders, Inc. v. All Am. Siding, Inc., 991 S.W.2d 484, 489 (Tex. App.-Fort Worth 1999, no pet.) (involving trademark infringement and citing Gen. Motors Co. v. Saenz, 873 S.W.2d 353, 359 (Tex. 1983) (involving products liability)); Tex. Nat. Res. Conservation Comm'n v. McDill, 914 S.W.2d 718, 724 (Tex. App.-Austin 1996, no writ) (involving an employment dispute); Garza v. City of Mission, 684 S.W.2d 148, 152 (Tex. App.-Corpus Christi 1984, writ dism'd w.o.j.) (involving employment termination)). Accordingly, we are unpersuaded by Michael's argument.

         To the contrary, Danford and case law from the supreme court and other courts of appeals reflect that in situations involving self-dealing in fiduciary or confidential relationships, a presumption of unfairness arises that shifts both the burden of production and the burden of persuasion to the fiduciary seeking to uphold the transaction. See Moore, 595 S.W.2d at 509; see also Stephens Cty. Museum, Inc. v. Swenson, 517 S.W.2d 257, 260 (Tex. 1974) (observing that when a fiduciary relationship existed between sisters and their brother, who was operating under their power of attorney and who was also a director of the museum to which the sisters had made a contribution that they later sought to set aside, "[u]nder such conditions, equity indulges the presumption of unfairness and invalidity, and requires proof at the hand of the party claiming validity and benefits of the transaction that it is fair and reasonable"); Archer v. Griffith, 390 S.W.2d 735, 740 (Tex. 1964) (noting that after respondent "established that the conveyance was executed and delivered during the existence of the attorney-client relationship, the burden was on petitioner to show that his acquisition of the interest conveyed by the deed was fair, honest[, ] and equitable"); Int'l Bankers Life Ins. Co. v. Holloway,368 S.W.2d 567, 576 (Tex. 1963) ("Contracts between a corporation and its officers and directors are not void but are voidable for unfairness and fraud with the burden upon the fiduciary of proving fairness."); McAuley v. Flentge, No. 06-15-00051-CV, 2016 WL 3182667, at *7 (Tex. App.-Texarkana June 8, 2016, pet. denied) (mem. op.) (citing Swenson, 517 S.W.2d at 260; Archer, 390 S.W.2d at 740); Jorda ...

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