Eastman v. Biggers

434 S.W.2d 439, 1968 Tex. App. LEXIS 2240

• Court: Court of Appeals of Texas
• Decided: July 12, 1968
• Docket: 17106
• Status: Published

Opinions

DIXON, Chief Justice.

On May 22, 1967 appellant Alice O. Mc-Gehee Eastman, joined as plaintiff by her husband, filed suit against Dallas C. Big-gers and other defendants for alleged fraud committed in the year 1937 — thirty years prior to the time of the filing of the suit. Appellants seek actual damages in the approximate amount of $400,000 and exemplary damages of $500,000.

Mrs. Eastman charges that in 1937, Dallas Biggers, who was then employed by her as her attorney-at-law, entered into a conspiracy with L. J. Wardlaw and J. J. Jenkins to conceal from her and they did conceal from her the fact that she owned an interest in Lots Nos. 1, 2 and 3, Block 117, in the Townsite of Kilgore, Gregg County, Texas, which was and is valuable oil property.

Wardlaw and Jenkins are both deceased. Their heirs, beneficiaries and representatives are named as defendants. They will be referred to as the Wardlaw Group and the Jenkins Group.

In 1937 appellant was Mrs. Alice O. McGehee, widow of Frank K. McGehee. In June of 1939 she married E. F. Eastman, her present husband.

Mrs. Eastman alleges that in 1937 she knew that as the widow of Frank K. Mc-Gehee she owned an interest in Lots 4 to 11 inclusive in Block 117 in the Townsite of Kilgore, Texas, on which property producing oil wells were being operated. L. J. Wardlaw, as agent of the owners, was operating the oil lease on said property. Mrs. Eastman, then Mrs. McGehee, became dissatisfied with Wardlaw’s operation and employed Dallas Biggers to investigate. Biggers discovered that Frank K. McGehee had also acquired an interest in Lots 1, 2 and 3 in the same Block 117. Title to this interest had been placed in the name of W. B. Pearce as trustee for McGehee. According to Mrs. Eastman, Biggers concealed the fact that she owned an interest in Lots 1, 2 and 3 and entered into a conspiracy whereby J. J. Jenkins was to be shown as the owner of said interest.

Biggers, in both his pleadings and in a deposition denies that he was guilty of any fraud in representing Mrs. Eastman. He further pleads the two and four year statutes of limitations, Articles 5526 and 5529, Vernon’s Ann.Civ.St.; and also that on February 20, 1941 for a valuable consideration, Mrs. Eastman and her husband executed a written release of all her causes of action, claims and demands whatsoever against Biggers.

The Wardlaw Group and the Jenkins Group, nonresident defendants, filed pleas of privilege. Appellants controverted said pleas.

Biggers filed a motion for summary judgment. The court sustained the motion and entered judgment in favor of Biggers. The court then sustained the pleas of privilege of the Wardlaw Group and the Jenkins Group.

Appellants have taken an appeal from both the summary judgment and the orders sustaining the pleas of privilege.

APPEAL FROM SUMMARY JUDGMENT.

A. LIMITATIONS.

In their first point of error appellants attack the holding of the court that appellants’ cause of action was barred by the statutes of limitation.

The record includes the pleadings of the parties and the depositions of Biggers, Mrs. Eastman and her husband, E. F. Eastman.

Mrs. Eastman’s position is that she did not know in 1937 that she owned an interest in Lots 1, 2 and 3 and that she did not learn that she owned said interest until the year 1965 when her son learned of it in the course of an inquiry into other matters; and that under the circumstances she did not fail during the intervening years to exercise reasonable diligence to discover the fraudulent concealment practiced by Biggers, Wardlaw and Jenkins. This suit was filed within two years after she says she learned of the fraud in 1965.

We agree with appellants that the legal principles applicable to cases of fraudulent concealment and the statutes of limitation are as follows:

1. Fraud prevents the running of limitations until (a) the fraud is discovered, or (b) “by the exercise of reasonable diligence might have been discovered.”

2.Where a fiduciary relationship exists between the parties, such as that between attorney and client, diligence does not exact as prompt and searching an inquiry into the conduct of the attorney as if the parties were strangers, or were dealing with each other at arm’s length. However the fact that a fiduciary relation exists does not justify a party in neglecting every precaution until something occurs to arouse his suspicions.

Many authorities could be cited in support of the above legal principles, but we shall cite only a few: Polk Terrace, Inc. v. Curtis, 422 S.W.2d 603, 605 (Tex.Civ.App., Dallas 1967, writ ref’d n. r. e.); Courseview, Inc. v. Phillips Petroleum Co., 158 Tex. 397, 312 S.W.2d 197, 204-205 (1958) ; Sherman v. Sipper, 137 Tex. 85, 152 S.W.2d 319, 137 A.L.R. 263 (1941); Boren v. Boren, 38 Tex.Civ.App. 139, 85 S.W. 48 (Tex.Civ.App., Dallas 1905, writ ref’d) ; Bass v. James, 83 Tex. 110, 18 S.W. 336 (1892); Cooper v. Lee, 75 Tex. 114, 12 S.W. 483 (1889); 37 Tex.Jur.2d 202-207, 208 ; 34 Am.Jur. 129, 135; 54 C.J.S. Limitations of Actions §§ 184, 189, pp. 175, 188.

The undisputed facts in this case when tested in accordance with the above principles impel us to conclude as a matter of law that Mrs. Eastman either knew, or in the exercise of reasonable diligence should have discovered the alleged fraud of Biggers more than four years before she filed this suit in 1967. The trial court properly sustained Biggers’ plea of limitation.

The undisputed facts on which we base our conclusion are as follows:

1. On February 28, 1938 W. B. Pearce executed a conveyance to Mrs. Alice O. McGehee of an undivided one-half interest in and to Lots 1, 2 and 3 of Block 117, of the Town of Kilgore. This conveyance was recorded in the Deed Records of Gregg County, Texas, on March 3,1938.

2. On June 3, 1938 Mrs. Alice O. Mc-Gehee, for a consideration of $2,750 agreed to sell and assign to Biggers her interest in the above Lots 1, 2 and 3. Appellant admits she signed the agreement and that she retained a copy of it which was still in her possession in 1967.

3. In September 1938 Mrs. McGehee became dissatisfied with the services of Biggers as her attorney. She testified that she had lost confidence in him. Their relationship as attorney and client was terminated by Mrs. McGehee in December 1938.

4. Appellant admits that she executed an assignment to her son, Frank B. Mc-Gehee, in 1957 of an interest in Lots 1, 2 and 3, which assignment was recorded in the Deed Records of Gregg County. She stated in said assignment that she was the owner of part of the working interest in leases under Lots 1, 2 and 3.

5. In 1957 she filed with the United States Government a gift tax return in which she stated that she had given her son one-fourth of her interest in oil and gas leases as well as lease and well equipment on Lots 1, 2 and 3.

6. In 1958 she filed another gift tax return containing recitations of another gift to her son of an interest in Lots 1, 2 and 3.

In their brief appellants stress the fact that at the time the alleged fraud was perpetrated the fiduciary relationship of attorney and client existed between Biggers and Mrs. McGehee (Eastman) hence the latter is to be excused for not sooner discovering the fraud. We find ourselves unable to agree with appellants.

The fiduciary relationship ended in 1938. Mrs. Eastman had lost confidence in Big-gers. Their relationship became unfriendly and adversary. Mrs. Eastman shopped around for attorneys to represent her in pressing her claims against Biggers. She succeeded in obtaining the services of E. W. McMannis, her uncle, an attorney of the State of Iowa, in whom she had complete confidence. McMannis came to Dallas. He was present when the settlement and release agreement was concluded in 1941. The short-lived fiduciary relationship between Biggers and Mrs. Eastman will not avail Mrs. Eastman for her failure for the next twenty-nine years to discover the alleged fraud.

The means were at hand for Mrs. Eastman readily to have discovered the alleged fraud long before the four year period preceding her filing of this suit. Mrs. Eastman says that she signed without reading the several documents enumerated earlier in this opinion. In all of them she asserted an interest in Lots 1, 2 and 3. The law does not permit a person to close his eyes to facts which would put him on inquiry in the exercise of reasonable diligence to discover fraud. The Deed Records of Gregg County were open to Mrs. Eastman for her inspection. They constitute constructive notice of her claim of title. Sherman v. Sipper, 137 Tex. 85, 152 S.W.2d 319, 321, 137 A.L.R. 263 (1941); Boren v. Boren, 38 Tex.Civ.App. 139, 85 S.W. 48 (Tex.Civ.App., Dallas 1905, writ ref’d). Moreover it must be remembered that for twenty-nine years prior to the filing of suit Mrs. Eastman had in her exclusive possession the written contract dated June 3, 1938 by the terms of which she agreed to sell Biggers her interest in Lots 1, 2 and 3 for a consideration of $2,-750. See Cooper v. Lee, 75 Tex. 114, 12 S.W. 483 (1889).

Appellants’ first point of error is overruled.

B. SETTLEMENT AND RELEASE.

In their second point of error appellants assert that the written settlement and release agreement of February 20, 1941 did not include the fraud which is the basis of this suit. Again we must disagree with appellants.

The settlement and release agreement was executed and acknowledged before a notary public by Mrs. Eastman and her husband with the written approval of her attorney, E. W. McMannis.

The instrument is general in its terms. In consideration of an overriding oil interest conveyed by Biggers to Mrs. Eastman the latter released Biggers “completely and fully” from “any and all causes of action, claims and demands of every kind or nature whatsoever which we, or either of us, now have or may hereafter have * * * growing out of or which might grow out of any and all transactions and sales heretofore had between Dallas C. Biggers and the parties hereto, or either of them.” (Emphasis ours.)

Appellants say the release does not include Biggers’ alleged fraudulent concealment of her interest in Lots 1, 2 and 3 because at the time she signed the release she had not yet discovered that she owned an interest in the three lots. Yet at the time she signed the release she had in her possession a signed copy of the contract whereby she agreed to sell Biggers her interest in Lots 1, 2 and 3. This certainly comes within the category of “transactions and sales heretofore had” with Biggers.

There was also on record at the time a deed from W. B. Pearce (who had acted as trustee for Mrs. Eastman’s husband in taking title to the property) to Mrs. Mc-Gehee (Eastman) conveying title to a one-half undivided interest in Lots 1, 2 and 3.

Mrs. Eastman says that she did not read the instrument before signing it. This is not a valid reason for setting the release aside. There is no showing that anyone tried to prevent her reading it. At this time no fiduciary relationship existed between Mrs. Eastman and Biggers. Thigpen v. Locke, 363 S.W.2d 247, 251 (Tex.Sup.1962) ; Indemnity Ins. Co. v. W. L. Macatee & Sons, 129 Tex. 166, 101 S.W.2d 553, 556 (1937). Moreover, Mrs. Eastman had the benefit of the services and advice of her own attorney, E. W. McMannis. We think the court properly held that the settlement and release agreement included and concluded Mrs. Eastman’s claims against Biggers with respect to Lots 1, 2 and 3. Rough v. Southwestern Bell Telephone Co., 426 S.W.2d 579 (Tex.Civ.App., Dallas 1968, writ ref’d); Dial Temp Air Conditioning Co. v. Faulhaber, 340 S.W.2d 82 (Tex.Civ.App., Dallas 1960, writ ref’d n. r. e.) ; Posey v. Posey, 386 S.W.2d 884 (Tex.Civ.App., Fort Worth 1965, no writ) ; 2 Tex.Jur.2d 629-630. Appellants’ second point of error is overruled. The court properly rendered summary judgment in favor of Biggers.

APPEAL IN RE PLEAS OF PRIVILEGE.

In their third and fourth points of error appellants complain of the court’s orders sustaining the pleas of privilege of the Wardlaw Group and the Jenkins Group.

In their controverting pleas appellants seek to invoke Subdivisions 4 and 29a of Art. 1995, V.A.C.S. to retain venue in Dallas County as to the nonresident defendants. For these subdivisions to be applicable it was necessary for appellants to prove their cause of action against the resident defendant. Gray v. Gulf Oil Corp., 416 S.W.2d 875 (Tex.Civ.App., Fort Worth 1967, no writ). By overruling appellants’ first and second points we have held that appellants do not have a cause of action against Biggers, the resident defendant. It follows that Subdivisions 4 and 29a are not available to appellants to retain venue in Dallas County. Appellants’ third and fourth points are overruled.

The judgment of the trial court is affirmed.