Coleman, Marilyn M., Individually and as Administrator of the Estate of Earl D. Coleman v. Winn-Coleman, Inc., B.W. Moore and Peter Workin

Opinion issued April 17, 2003

In The

Court of Appeals

For The

First District of Texas

NO. 01-01-00656-CV

MARILYN M. COLEMAN INDIVIDUALLY AND AS ADMINISTRATOR

OF THE ESTATE OF EARL D. COLEMAN, Appellant

V.

WINN-COLEMAN, INC., B.W. MOORE, AND PETER WORKIN, Appellees

On Appeal from the 55th District Court

Harris County, Texas

Trial Court Cause No. 00-52549

O P I N I O N

This is an appeal from a summary judgment rendered in favor of appellees,

Winn-Coleman, Inc. (“WCI”), B.W. Moore, and Peter Workin, and against appellant,

Marilyn M. Coleman. The central issue in this case is whether a surviving spouse

is required to obtain a judicial declaration of heirship to sue to recover community

property in the form of a promissory note made payable solely to the deceased spouse.

Finding that no declaration of heirship is necessary, that Marilyn Coleman is entitled

to sue to recover on the note, and that summary judgment was improperly rendered

against her, we reverse and remand.

Facts

In September 1990, Earl Coleman and Houston B. Winn formed WCI. In July

1993, Moore purchased Winn’s shares in WCI. On July 15, 1994, Coleman and WCI

entered into an Agreement for Purchase and Sale, pursuant to which Coleman sold

his interest in WCI to WCI in exchange for a promissory note in the amount of

$280,000 payable to Coleman (the Promissory Note). In connection with the

Agreement and Promissory Note, Coleman, WCI, Moore, and Workin executed an

Escrow Agreement under which the parties agreed that, in the event of a default on

the Note, Coleman would receive 280,000 shares of common stock in WCI to be held

in escrow and released back to WCI as payments were made to Coleman for his

interest in the corporation. Moore signed the Promissory Note as chairman of the

board of WCI, and Workin agreed to serve as the escrow agent. The Promissory Note

was made payable in five equal installments, the first of which was due on April 1,

1995, and the last of which was due April 15, 1998.

Earl Coleman died intestate on January 28, 1995. He and Marilyn Coleman

had married on September 21, 1974, and were still married at the time of Earl’s death.

They had two children, Kendall Macari Coleman, born on June 6, 1977, and David

Macari Coleman, born on April 7, 1979. Earl Coleman was never married to anyone

else and had no other children. No one qualified as executor or administrator of the

estate.

No payments were made on the Promissory Note.

Procedural Background

In December 1999, Marilyn Coleman sent notice to WCI and Moore,

demanding payment on the Promissory Note; in July, 2000, she sent notice to Workin

demanding fulfillment of his responsibility as escrow agent. Neither WCI and Moore

nor Workin performed.

On October 15, 2000, Marilyn Coleman filed a pro se suit against WCI, Moore,

and Workin, individually and on behalf of the Estate of Earl Coleman, to recover the

sums due under the Promissory Note.

On December 11, 2000,WCI counterclaimed against Marilyn Coleman and the

Coleman Estate for breach of contract, fraud, and attorneys’ fees. None of the

defendants filed a general denial or affirmative defenses.

On December 14, 2000, Workin filed an individual motion for partial summary

judgment. Workin incorrectly alleged that Marilyn Coleman had sued appellees for

breach of contract, negligence, fraud, conversion, and intentional infliction of

emotional distress. He alleged that he was “only an agent for the escrow account and

does not claim any ownership in the contents of this account” and that the plaintiffs,

Marilyn Coleman and the Estate of Earl Coleman, had “never provided any evidence

they are entitled to any proceeds to the escrow account.” He further alleged that he

never undertook any obligation as escrow agent and no consideration was paid him

under the Promissory Note or as escrow agent. Finally, he alleged that Marilyn

Coleman had failed to demonstrate that she was the successor-in-interest to the

proceeds of the Promissory Note; therefore, he had no duty to deliver to her the stock

held in escrow. He set the motion for submission at 9:00 a.m. on January 8, 2001.

Also on December 14, 2000, Moore filed a motion for partial summary

judgment and set it for submission at 9:00 a.m. on January 8, 2001. Like Workin,

Moore alleged that he was not liable in his individual capacity, since he signed the

agreements only in his official capacity, as evidenced by the Promissory Note.

Moore also incorrectly alleged that Marilyn Coleman had sued appellees for breach

of contract, negligence, fraud, conversion, and intentional infliction of emotional

distress. Also like Workin, Moore alleged that there had been no determination of

Earl Coleman’s heirs and, therefore, Marilyn Coleman lacked the capacity to sue him.

On January 5, 2001, the same day they were engaged by Marilyn Coleman, and

three days after the January 2 deadline for filing a response to the motions for

summary judgment that had been filed on December 14, attorneys for Marilyn

Coleman and the Coleman Estate filed a “Motion for Leave to File a Response to

Defendants’ Motions for Summary Judgment or, Alternatively, Motion for

Continuance,” to permit them to respond to the outstanding motions for summary

judgment, replead, and take discovery. They simultaneously filed amended pleadings

and a response to Moore’s motion for summary judgment. In addition, they filed a

motion to abate to permit them to establish Marilyn Coleman’s right to sue on the

Promissory Note in the probate court in response to the defendants’ challenge to her

standing to bring the lawsuit.

Three days later, on January 8, 2001, without ruling on Marilyn Coleman’s and

the Coleman Estate’s motion for leave to respond or, alternatively, for a continuance,

the trial court granted Moore’s motion for partial summary judgment. On February

5, 2001, it granted Workin’s motion for partial summary judgment. That same day,

WCI, Moore, and Workin moved to dismiss Marilyn Coleman’s suit for lack of

standing and jurisdiction.

On February 9, 2001, Marilyn Coleman, Individually and as Administrator of

the Estate of Earl D. Coleman, filed her “Second Amended Petition,” alleging her

community property interest in the Promissory Note and her right to recover on the

Note as the unqualified community administrator of the Coleman Estate under section

160 of the Probate Code. She also alleged breach of contract against Winn-Coleman,

Moore (under the theory of alter ego), and Workin.

On February 14, 2001, the trial court denied the defendants’ motion to dismiss

and abated the case to allow Marilyn Coleman to file an application for declaration

of heirship. Marilyn Coleman filed an application for declaration of heirship in

Harris County Probate Court Number Three. The probate court has not yet ruled on

that application.

Despite the abatement, on April 4, 2001, WCI moved for summary judgment

in the trial court based on the statute of limitations for filing heirship proceedings.

The court granted WCI’s motion for summary judgment on May 29, 2001, and

dismissed Marilyn Coleman’s claims with prejudice. On June 20, 2001, WCI non-suited its counterclaims to create a final judgment. Marilyn Coleman appeals.

Issues

Appellant argues in four issues: (1) that the residual four-year statute of

limitations set out in section 16.051 of the Texas Civil Practice and Remedies Code

does not apply to proceedings to declare heirship under section 48 of the Texas

Probate Code; (2) that WCI did not have standing to raise the defense of limitations

for filing probate matters in the lawsuit while a separate proceeding to declare

heirship was pending in the statutory probate court; (3) that Marilyn Coleman was

authorized under section 160 of the Texas Probate Code to sue to recover sums due

under the Promissory Note, such that a proceeding to declare heirship was

unnecessary; and (4) that the trial court erred in granting Moore’s and Workin’s

individual motions for summary judgment because Marilyn Coleman did not have an

adequate opportunity to conduct discovery.

Standard of Review

In reviewing a summary judgment, we accept as true all evidence supporting

the nonmovant. Nixon v. Mr. Prop. Mgmt. Co., Inc. , 690 S.W.2d 546, 548-49 (Tex.

1985). All inferences are indulged in favor of the nonmovant, and all doubts are

resolved in its favor. Id. at 549. We should consider all summary judgment grounds

the trial court rules on and the movant preserves for appellate review that are

necessary for final disposition of the appeal when reviewing a summary judgment,

and we may consider other grounds that the movant preserved for review and the trial

court did not rule on in the interest of judicial economy . Cincinnati Life Ins. Co. v.

Cates , 927 S.W.2d 623, 626 (Tex. 1996). Summary judgment for the defendant is

proper when the proof shows that there is no genuine issue of material fact as to one

or more of the essential elements of the plaintiff’s cause of action. Black v. Victoria

Lloyds Ins. Co. , 797 S.W.2d 20, 27 (Tex. 1990). A defendant may show entitlement

to summary judgment by conclusively proving all elements of an affirmative defense.

Montgomery v. Kennedy , 669 S.W.2d 309, 310-11 (Tex. 1984).

Discussion

Marilyn Coleman’s Capacity to Sue to Recover on the Promissory Note

Marilyn Coleman’s first three issues concern proceedings to declare heirship.

In her first and second issues, Marilyn Coleman argues that the residual four-year

statute of limitations does not apply to proceedings to declare heirship and that WCI

did not have standing to raise the defense of limitations in the proceedings to declare

heirship filed by Marilyn Coleman in the probate court. In her third issue, Marilyn

Coleman argues that no proceeding to declare heirship is necessary in this case

because she is authorized under section 160 of the Probate Code to sue to recover on

the Promissory Note executed in favor of late husband, Earl Coleman. We consider

the third issue first.

Section 48 of the Probate Code: Proceedings to Declare Heirship

Section 48 of the Probate Code provides, in relevant part, that, when a person

dies intestate owning personal property and there has been no administration of the

estate in this state, the court of the county in which the property is found may declare

“who are the heirs and only heirs of such decedent, and their respective shares and

interests” in the decedent’s estate. Tex. Prob. Code Ann. § 48 ( Vernon 2003); see

Estate of York , 934 S.W.2d 848, 850 (Tex. App.—Corpus Christi 1996, writ denied).

It follows that, when ownership of property of the deceased is determined by

operation of law, heirship proceedings serve no purpose. We, therefore, must

determine whether Marilyn Coleman is the owner of the Promissory Note by

operation of law.

Sections 45 and 155 of the Probate Code: Community Property and Administration

of Community Property

Section 45 of the Texas Probate Code provides:

(a)On the intestate death of one of the spouses to a marriage, the

community property estate of the deceased spouse passes to the

surviving spouse if:

(1)no child or other descendent of the deceased spouse

survives the deceased spouse; or

(2)all surviving children and descendants of the deceased

spouse are also children or descendants of the surviving

spouse.

Tex. Prob. Code Ann. § 45.

Section 155 of the Code provides, “When a husband or wife dies intestate and

the community property passes to the survivor, no administration thereon, community

or otherwise, shall be necessary.” Tex. Prob. Code Ann. § 155; see also Fairbanks’

Estate v. Commissioner of Internal Revenue , 128 F.2d 537, 538 (5th Cir. 1942)

(holding a surviving husband entitled to administer community property without

appointment by the probate court).

The record establishes that Marilyn Coleman is the surviving spouse of Earl

Coleman, who died intestate, and that all children of Earl Coleman are also children

of Marilyn Coleman. If the Promissory Note was part of the community property

estate of the deceased spouse, Earl Coleman, it passed by operation of law to Marilyn

Coleman upon his death and no administration thereon was necessary. Tex. Prob.

Code Ann. §§ 45, 155. We must determine, therefore, whether the Note was

community property.

Subsections 3.002 and 3.003 of the Family Code: Community Property and

Presumption of Community Property

Community property consists of property, other than separate property, that is

acquired by either spouse during marriage. Tex. Fam. Code Ann. § 3.002 (Vernon

1998). A spouse’s separate property consists of the property owned or claimed by

that spouse before marriage, or acquired by the spouse during marriage by gift,

devise, or descent, or recovered for personal injuries sustained by the spouse during

marriage. Tex. Fam. Code Ann. § 3.001. Subsection 3.003(a) of the Family Code

provides:

(a)Property possessed by either spouse during or on dissolution of

marriage is presumed to be community property.

(b)The degree of proof necessary to establish that property is

separate property is clear and convincing evidence.

Tex. Fam. Code Ann. § 3.003.

The presumption, established by § 3.003 of the Family Code, that property

possessed by either spouse during or on dissolution of marriage is community

property applies to dissolution of marriage by death as well as by divorce. Evans v.

Evans , 14 S.W.3d 343, 346 (Tex. App.—Houston [14th Dist.] 2000, no pet.). To

overcome the presumption, a party must present clear and convincing evidence that

the property is separate property. Tex. Fam. Code Ann. § 3.003(b); Evans , 14

S.W.3d at 346 . To identify property as separate, the evidence must generally trace

and clearly identify it as such. See Tex. Fam. Code Ann. § 3.001.

The evidence in this case establishes that the Promissory Note was acquired by

Earl Coleman during marriage in exchange for his interest in Winn-Coleman, which

likewise was acquired during marriage. Because the Note was still possessed by Earl

Coleman at the time of his death, it was presumptively community property. See

Tex. Fam. Code § 3.003(a); Barnett v. Barnett , 67 S.W.3d 107, 111 (Tex. 2001). To

rebut that presumption, appellees had to establish by clear and convincing evidence

that the Note was Earl Coleman’s separate property. Appellees produced no evidence

clearly identifying the Note as separate property. We find, therefore, that the

Promissory Note is community property. We must next determine whether Marilyn

Coleman, as the surviving spouse of Earl Coleman, is entitled to sue to recover on the

Note.

Section 160 of the Probate Code: Powers of Surviving Spouse when No

Administration is Pending

Section 160 of the Probate Code provides:

When no one has qualified as executor or administrator of the estate of

a deceased spouse, the surviving spouse , whether the husband or wife,

as the surviving partner of the marital partnership, without qualifying

as community administrator as hereinafter provided, has power to sue

and be sued for the recovery of community property ; to sell,

mortgage, lease and otherwise dispose of community property for the

purpose of paying community debts; to collect claims due to the

community estate ; and has such other powers as shall be necessary to

preserve the community property, discharge community obligations and

wind up community affairs.

Tex. Prob. Code Ann. § 160 (Vernon 2003) (emphasis added).

Marilyn Coleman was the surviving spouse of the decedent, Earl Coleman, who

died intestate. Ownership of the Promissory Note, therefore, passed to her. Tex.

Prob. Code Ann. § 45. No one was qualified as administrator of Earl Coleman’s

estate, nor was administration necessary. Tex. Prob. Code Ann. § 155.

Under the plain language of section 160 of the Probate Code, Marilyn

Coleman, as surviving spouse, has the power to sue for the recovery of community

property without qualifying as community administrator and to collect claims due the

community estate. See Nelson v. Dallas Indep. Sch. Dist. , 774 S.W.2d 380, 382-83

(Tex. App.—Dallas 1989, writ denied) (husband was entitled to collect wife’s unpaid

teacher’s salary on behalf of estate where husband was married to wife on the day she

died and no one had qualified as administrator of wife’s estate when unpaid salary

collected). Since the Note is community property, her powers include the power to

sue to recover under the Note and to collect any other claims due the community

estate. See id.

Because we find that the Promissory Note is community property and Marilyn

Coleman, as the surviving spouse of Earl Coleman, is entitled to sue to recover on it

and to collect any other claims due to the community estate, we hold that the trial

court erred in entering final summary judgment against Marilyn Coleman and

dismissing her claims with prejudice.

We sustain Marilyn Coleman’s third issue. Because we find that no proceeding

to declare heirship is necessary in this case, issues one and two are moot.

Summary Judgment on Moore’s and Workin’s Individual Claims

In her fourth issue, Marilyn Coleman contends that the trial court erred in

granting Moore’s and Workin’s individual motions for summary judgment because

she did not have an adequate opportunity to conduct discovery.

Marilyn Coleman filed suit pro se on October 15, 2000. Workin filed his

individual motion for partial summary judgment on December 14, 2000 without

answering and, therefore, without having previously pleaded any of the grounds on

which he based his motion, including his alleged lack of standing to be sued in the

capacity in which he was sued, his claim that Marilyn Coleman had produced “no

evidence” that she was entitled to proceeds on the escrow account, and his claim that

Marilyn Coleman had failed to demonstrate that she was successor-in-interest to Earl

Coleman. Likewise, on December 14, Moore filed an individual motion for summary

judgment on the grounds that he, too, was not liable in his individual capacity and

that Marilyn Coleman lacked standing to sue him. He, too, had filed no answer and

had not previously pleaded the grounds on which he based his motion for summary

judgment.

Marilyn Coleman obtained counsel on January 5, 2001, three days after the

January 2 deadline for filing a response to Moore’s and Workin’s individual motions

for summary judgment. She immediately filed a motion for leave to respond to the

defendants’ motions for summary judgment or, alternatively, a motion for

continuance, seeking permission to respond to the outstanding motions for summary

judgment, replead, and take discovery; and she simultaneously filed amended

pleadings and a response to Moore’s motion for summary judgment.

On January 8, 2001, three days after the motion for leave to respond or for

continuance was filed, the trial court, without ruling on the motion, rendered

summary judgment in favor of Moore on his individual motion for partial summary

judgment; and on February 5, 2001, it granted Workin’s individual motion for

summary judgment. No discovery was taken, and none could reasonably have been

completed, in the time between the filing of defendants’ motions for summary

judgment, in lieu of answers, and the trial court’s final disposition of those motions.

The summary judgment rule clearly contemplates that the trial court will allow

parties a reasonable opportunity to conduct discovery before rendering summary

judgment. Chapa v. Garcia , 848 S.W.2d 667, 668 (Tex. 1992); Levinthal v. Kelsey-Seybold Clinic, P.A. , 902 S.W. 2d 508, 512 (Tex. App.—Houston [1st Dist.] 1994,

no writ). The purpose of discovery is to allow parties to obtain full knowledge of the

facts and issues before the disposition of their case. Chapa , 848 S.W.2d at 668 ;

Levinthal , 902 S.W.2d at 512 . Discovery is favored, and the rules that govern it are

to be liberally construed. Levinthal , 902 S.W.2d at 512 . Here, the opportunity to take

discovery was denied.

We hold that the trial court abused its discretion by rendering summary

judgment on Moore’s and Workin’s individual motions for summary judgment. We sustain Coleman’s issue number four.

Conclusion

We reverse the judgment of the trial court and remand this case to the trial

court for further proceedings in accordance with this opinion.

Evelyn V. Keyes

Justice

Panel consists of Justices Taft, Keyes, and Higley.