Richard Nugent and CAO, Inc. v. the Estate of Janie Baker Ellickson
543 S.W.3d 243
Tex. App.2018Background
- In April 2007 Janie Ellickson (age 71) executed a durable power of attorney appointing Richard Nugent as her agent for real-estate transactions; Nugent agreed to assume fiduciary duties.
- Nugent (and his company CAO, Inc.) arranged/marketed repairs and sold Ellickson’s Galveston County house to Michael Womack on January 21, 2008 via a seller-financed note and deed of trust that allocated most payments to a "Property Trust" controlled by Nugent and some to Ellickson.
- Ellickson died June 9, 2008; Womack defaulted, Hurricane Ike damaged the house, and the property was foreclosed and sold January 6, 2009; foreclosure proceeds were deposited in a CAO account and split between the estate and Nugent’s trust.
- The Estate sued (2012) alleging breach of contract, promissory estoppel, and multiple breaches of fiduciary duty (including: diverting payments, structuring an unfavorable split, failing to ensure insurance, and failing to notify the estate of the foreclosure). Trial court found four fiduciary breaches, held CAO liable as Nugent’s alter ego, and awarded $163,843.64.
- On appeal the court (14th COA) held only the failure-to-notify-foreclosure claim was legally viable and supported by evidence; the claims based on the 2008 sale terms were barred by the 4-year statute of limitations; the insurance theory fell outside the power-of-attorney scope.
- The court reversed the alter-ego finding (rendering judgment for CAO, Inc.), affirmed the remaining liability finding against Nugent for failure to notify, but remanded liability and damages for further proceedings because the award may have been influenced by invalid theories.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether fiduciary-duty claims based on the January 21, 2008 sale terms are timely | Estate: accrual is the January 2009 foreclosure, so suit filed 2012 is timely | Nugent: claim accrued at the 2008 closing; four-year limitations bar the claims | Held: claims based on 2008 sale terms accrued at closing and are time-barred by limitations |
| Whether Nugent had a fiduciary duty to procure/maintain insurance on the property | Estate: as agent/trustee Nugent owed duties to protect property including insurance | Nugent: duty to insure was Womack’s obligation under the deed of trust and outside POA scope | Held: duty to maintain insurance was outside the scope of the power-of-attorney fiduciary relationship (no liability) |
| Whether Nugent breached a fiduciary duty by failing to notify the estate of the foreclosure sale | Estate: Nugent failed to notify executor before the Jan. 6, 2009 sale, preventing estate participation | Nugent: he informed executor Yeiter before the sale; testimony negates breach | Held: sufficient evidence (attorney testimony and letter) supports breach for failure to give timely notice; POA-based fiduciary duty extended to this act despite decedent’s death |
| Whether CAO, Inc. is liable as Nugent’s alter ego | Estate: CAO acted indistinguishably with Nugent; corporate veil should be pierced | Nugent/CAO: pleadings lacked specific alter-ego claim and evidence is insufficient | Held: pleadings insufficient but issue tried by consent; nonetheless evidence legally insufficient to pierce veil — CAO is not Nugent’s alter ego (judgment rendered for CAO) |
Key Cases Cited
- Williard Law Firm, L.P. v. Sewell, 464 S.W.3d 747 (Tex. App.—Houston [14th Dist.] 2015) (breach of fiduciary duty accrual principles)
- Dunmore v. Chicago Title Ins. Co., 400 S.W.3d 635 (Tex. App.—Dallas 2013) (real-estate-related fiduciary claims accrue at closing)
- Nat'l Plan Adm'rs, Inc. v. Nat'l Health Ins. Co., 235 S.W.3d 695 (Tex. 2007) (scope of agent fiduciary duties governed by the underlying relationship)
- Home Loan Corp. v. Tex. Am. Title Co., 191 S.W.3d 728 (Tex. App.—Houston [14th Dist.] 2006) (fiduciary duties do not extend beyond relationship scope)
- Bigham v. Southeast Texas Environmental, LLC, 458 S.W.3d 650 (Tex. App.—Houston [14th Dist.] 2015) (fiduciary duties may continue beyond termination of POA where benefits continued)
- Theus v. State, 845 S.W.2d 874 (Tex. Crim. App. 1992) (factors for balancing probative value vs. prejudice of prior convictions)
- City of Keller v. Wilson, 168 S.W.3d 802 (Tex. 2005) (legal-sufficiency review standards)
- Castleberry v. Branscum, 721 S.W.2d 270 (Tex. 1986) (standards for piercing the corporate veil / alter ego)
- SSP Partners v. Gladstrong Invs. (USA) Corp., 275 S.W.3d 444 (Tex. 2008) (piercing veil requires exceptional circumstances and injustice)
- Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378 (Tex. 2000) (remedy where verdict/award aggregates valid and invalid theories)