holding that the transfer on death of a typical P.O.D. account is not a gift because no delivery is involved and the owner never divests title, dominion, or controlSummary of this case from Porter v. Denas
Submitted: March 24, 2004.
Decided: May 28, 2004.
On Appeal from the 172nd Judicial District Court, Jefferson County, Texas, Trial Court No. E-168,861.
Walter D. Snider, Snider Morgan, LLP, Beaumont, for appellant.
Richard L. Coffman, Sheldon, Jordan Dunham, LLP, Beaumont, for appellee.
Before MORRISS, C.J., ROSS and CARTER, JJ.
Edward Punts sued Hubert W. Wilson for breach of fiduciary duty and conversion in connection with Wilson's duties as independent executor of the estate of J.W. Kelly. Wilson moved for summary judgment, which the trial court granted, and Punts appeals. The issues concern whether payable on death (P.O.D.) accounts established by Kelly were part of his estate, and the effect of withdrawal of funds from those accounts by Wilson, the beneficiary, in his capacity as independent executor.
Wilson filed a counterclaim against Punts under TEX. CIV. PRAC. REM. CODE ANN. §§ 9.011-.012, 10.001-.004 (Vernon 2002), and Tex. R. Civ. P. 13, contending the litigation was groundless and brought in bad faith for the purpose of harassment. Wilson later dismissed that counterclaim.
Punts and Wilson were long-time friends of Kelly. Kelly maintained several accounts at Mobil Oil Federal Credit Union (Credit Union). He designated and signed each account as a P.O.D. account, with Wilson as the P.O.D. beneficiary. Kelly died January 15, 2001. His last will and testament provided for the disposition of his various properties and left his residual estate to Wilson and Punts, in equal shares. The Credit Union accounts were not referenced in the will. Kelly's will appointed Wilson as independent executor of his estate.
Mobil Oil Federal Credit Union was the original defendant in this suit, but Punts later dismissed it as a party.
Kelly's will provided for the disposition of his properties as follows:
(1) A bank checking account to Brenda McDaniel;
(2) A motor vehicle to Brenda Martin;
(3) $100,000.00 cash, a ring, a watch, a 30-30 rifle, and a .38 caliber Smith Wesson revolver to his son, Joe Ed Kelly;
(4) $1,000.00 cash to his daughter, Rebecca Sue Hamilton; and
(5) All the rest of his estate to Wilson and Punts in equal shares.
Wilson learned the Credit Union accounts were P.O.D. accounts, designating him as the P.O.D. beneficiary. During March and April of 2001, a total of $572,306.36 was paid to Wilson from the accounts. These funds were never listed in the inventory of Kelly's estate assets.
Punts sued Wilson for breach of fiduciary duty and conversion. Wilson denied the allegations and moved for summary judgment, contending the P.O.D. accounts were properly payable to him as the P.O.D. beneficiary and were not part of Kelly's estate. The trial court agreed, concluded there were no issues of material fact, and granted Wilson's motion for summary judgment.
Punts contends there are issues of material fact on his claim for breach of fiduciary duty. He contends Wilson breached his fiduciary duty to him as a beneficiary of the will by paying the funds directly to him instead of depositing the funds into Kelly's estate, thereby depriving him of his fifty percent residual share. He also contends Wilson breached his fiduciary duty by not accounting for the funds in the estate, breached his duty of full disclosure, his duty of good faith, fair dealing, loyalty, and fidelity over the estate's affairs, and his duty to refrain from self-dealing with the estate assets.
Punts does not raise any contention regarding his conversion claim. We therefore assume he has abandoned that theory of liability, as it is not supported by any argument on appeal. See May v. Nacogdoches Mem'l Hosp., 61 S.W.3d 623, 631 n. 13 (Tex. App.-Tyler 2001, no pet.).
Standard of Review
To prevail on a motion for summary judgment, a movant must establish that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law. TEX. R. CIV. P. 166a(c). Summary judgment for a defendant is proper when the defendant negates at least one element of each of the plaintiff's theories of recovery or pleads and conclusively establishes each element of an affirmative defense. Sci. Spectrum, Inc. v. Martinez, 941 S.W.2d 910, 911 (Tex. 1997); Wornick Co. v. Casas, 856 S.W.2d 732, 733 (Tex. 1993).
The movant has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985). However, once the movant establishes it is entitled to summary judgment, the burden shifts to the nonmovant to show why summary judgment should not be granted. Casso v. Brand, 776 S.W.2d 551, 556 (Tex. 1989). In reviewing a summary judgment, we accept all the nonmovant's proof as true and indulge every reasonable inference in the nonmovant's favor. Sci. Spectrum, Inc., 941 S.W.2d at 911. All doubts about the existence of a genuine issue of material fact must be resolved against the movant. Johnson County Sheriff's Posse, Inc. v. Endsley, 926 S.W.2d 284, 285 (Tex. 1996).
When a trial court's order granting summary judgment does not specify the ground or grounds relied on for its ruling, summary judgment will be affirmed on appeal if any of the theories advanced are meritorious. Star-Telegram, Inc. v. Doe, 915 S.W.2d 471, 473 (Tex. 1995).
Fiduciary Duty of Independent Executor
Generally, for a party to establish a claim for breach of a fiduciary duty, there must exist a fiduciary relationship between the plaintiff and defendant, the defendant must have breached its fiduciary duty to the plaintiff, and the defendant's breach must result in injury to the plaintiff, or benefit to the defendant. See Burrow v. Arce, 997 S.W.2d 229, 238-39 (Tex. 1999); Hawthorne v. Guenther, 917 S.W.2d 924, 934-35 (Tex. App.-Beaumont 1996, writ denied).
The relationship between an executor and the estate's beneficiaries is one that gives rise to a fiduciary duty as a matter of law. Huie v. DeShazo, 922 S.W.2d 920, 923 (Tex. 1996). An executor's fiduciary duty to the estate's beneficiaries arises from the executor's status as trustee of the property of the estate. Humane Soc'y v. Austin Nat'l Bank, 531 S.W.2d 574, 577 (Tex. 1975). Under the Probate Code, a decedent's estate immediately vests in the devisees, legatees, and heirs at law of the estate, subject to payment of the decedent's debts. TEX. PROB. CODE ANN. § 37 (Vernon 2003). The executor thus holds the estate in trust for the benefit of those who have acquired a vested right to the decedent's property under the will. See id.
The fiduciary duties owed to the beneficiaries of an estate by an independent executor include a duty of full disclosure of all material facts known to the executor that might affect the beneficiaries' rights. Montgomery v. Kennedy, 669 S.W.2d 309, 313 (Tex. 1984) (trustees of trust and executors of estate had fiduciary duty of full disclosure to beneficiary); see Huie, 922 S.W.2d at 923. A fiduciary also "owes its principal a high duty of good faith, fair dealing, honest performance, and strict accountability." Ludlow v. DeBerry, 959 S.W.2d 265, 279 (Tex. App.-Houston [14th Dist.] 1997, no writ). When an independent executor takes the oath and qualifies in that capacity, he or she assumes all duties of a fiduciary as a matter of law which, in addition to other duties, includes the duty to avoid commingling of funds. Humane Soc'y, 531 S.W.2d at 577; Geeslin v. McElhenney, 788 S.W.2d 683, 686-87 (Tex. App.-Austin 1990, no writ).
A fiduciary relationship existed between Wilson as independent executor and Punts as residuary beneficiary under the will, which included various duties, including the duty to refrain from commingling of funds and the duty to disclose all material facts. However, it is axiomatic that Wilson did not owe any fiduciary duty to Punts with regard to funds not included in Kelly's estate. Wilson contends the Credit Union accounts were valid P.O.D. accounts and were not part of Kelly's estate.
Payable on Death Accounts
P.O.D. accounts and other multi-party accounts are considered in the Probate Code. See TEX. PROB. CODE ANN. §§ 436-450 (Vernon 2003 Supp. 2004). P.O.D. accounts are created by a written agreement signed by the original payee. Tex. Prob. Code Ann. § 439(b). If the account is a P.O.D. account, on the death of the original payee, any sums remaining on deposit belong to the P.O.D. payee, if surviving. Id. Section 439A(b) provides a "Uniform Single-Party or Multiple-Party Account Selection Form." The form describes each type of account and the passage of the account funds on death. TEX. PROB. CODE ANN. § 439A(b). If a contract of deposit contains provisions substantially the same as in the form provided for in the Probate Code, that type of account is selected. TEX. PROB. CODE ANN. § 439A(a). Section 439A(b) provides for the designation of a P.O.D. account and describes the account as follows:
The party to the account owns the account. On the death of the party, ownership of the account passes to the P.O.D. beneficiaries of the account. The account is not a part of the party's estate.
There is no dispute as to whether Kelly properly designated the Credit Union accounts as P.O.D. accounts, with Wilson as the P.O.D. beneficiary. Kelly initialed beneath the language that designated the ownership of the account as P.O.D. and signed the member application and agreement at the bottom. The box that designates the account as "SINGLE-PARTY ACCOUNT WITH `P.O.D.' (Payable on Death) DESIGNATION" is checked, and Wilson is listed as the P.O.D. beneficiary. The language in the agreement also describes P.O.D. accounts with the statutorily required language. This agreement created a valid P.O.D. account with Wilson as the beneficiary. As the P.O.D. beneficiary, any sums remaining on deposit at Kelly's death belonged to Wilson and were not part of Kelly's estate. See Tex. Prob. Code Ann. §§ 439(b), 439A(b)(2). Wilson therefore did not owe any fiduciary duty to Punts with regard to the funds in the Credit Union accounts, as they were not included in Kelly's estate. The summary judgment evidence thus disproves as a matter of law at least one element of Punts' cause of action. As a result, the burden shifted to Punts to present evidence creating a fact issue. Walker v. Harris, 924 S.W.2d 375, 377 (Tex. 1996); Casso, 776 S.W.2d at 556.
Punts contends a fact issue exists because of the manner in which Wilson drew the funds out of the accounts. Punts contends Kelly told him and Wilson he intended for one half the Credit Union accounts to pass to Punts under the residuary clause of his will. Punts points out that, when Wilson withdrew the funds from the Credit Union accounts, all the checks were paid to "Hubert Wayne Wilson, Independent Executor, Estate of J.W. Kelly," or to "Hubert Wilson, Executor of Estate, J.W. Kelly." Punts contends that, when Wilson had the checks paid to him as independent executor rather than in his individual capacity, Wilson either gave the funds to Kelly's estate, or admitted the funds belonged to the estate. Punts contends that, by having the checks paid over and signed as independent executor, this amounted to an admission by Wilson that Kelly intended to have the funds in the Credit Union accounts included as part of the estate and thus pass under the residuary clause.
The intent of the decedent, however, must be determined from the agreement, and extrinsic evidence may not be offered to prove intent. Parker v. JPMorgan Chase Bank, 95 S.W.3d 428, 431 (Tex. App.-Houston [1st Dist.] 2002, no pet.); Chopin v. InterFirst Bank Dallas N.A., 694 S.W.2d 79, 83-84 (Tex. App.-Dallas 1985, writ ref'd n.r.e); see Sheffield v. Estate of Dozier, 643 S.W.2d 197, 198 (Tex. App.-El Paso 1982, writ ref'd n.r.e.) (finding all funds on deposit at death of party belong to survivor and intention of depositor as to use or ownership of those funds may not be considered). Section 439(b) makes a written agreement determinative of the existence of a P.O.D. account. If such agreement is complete and unambiguous, then parol evidence is inadmissible, as with written agreements generally, to vary, add to, or contradict its terms. See Ephran v. Frazier, 840 S.W.2d 81, 86 (Tex. App.-Corpus Christi 1992, no writ). Therefore, if the terms of an agreement pertaining to a P.O.D. account are clear, the parties may not introduce extrinsic evidence of intent.
The "MEMBER APPLICATION AGREEMENT" Kelly signed with the Credit Union is complete and unambiguous. It provides that, on his death, the funds in the Credit Union accounts are to belong to Wilson as the P.O.D. beneficiary and are not to be included in his estate. No extrinsic evidence of an oral statement by Kelly, or an apparent admission of that statement by Wilson, is admissible to controvert the written agreement.
The contention that Wilson's act of drawing the funds as the independent executor constituted a gift to Kelly's estate is also without merit. The requisites of a valid inter vivos gift are a clear intent on the part of the donor to make such a gift, accompanied by a present delivery of the property, of such character as to divest the donor of the title, dominion, and control over it, and an acceptance by the donee. Carnes v. Meador, 533 S.W.2d 365, 369 (Tex.Civ.App.- Dallas 1975, writ ref'd n.r.e.). None of these requirements are present. There is no clear intent to make a gift of the Credit Union funds by Wilson's act of drawing the account funds as independent executor of Kelly's estate. In addition, Wilson did not divest himself of the funds. He never deposited the funds in the estate account or included them in the estate inventory.
The Credit Union accounts were valid P.O.D. accounts, and the funds in those accounts belonged to Wilson as the P.O.D. beneficiary at Kelly's death. Extrinsic evidence of any statements Kelly made as to another disposition of those funds, or any possible admission by Wilson of another intended disposition, are inadmissible to controvert the validly written P.O.D. agreement. In addition, Wilson did not give the Credit Union account funds to the Kelly estate.
For these reasons, we affirm the judgment.