Kristen Sullivan D/B/A Celia's Closet v. Joe Mathews Pound and the Estate of Celia H. Pound ( 2021 )

Fourth Court of Appeals
San Antonio, Texas
OPINION
No. 04-20-00230-CV
Kristen SULLIVAN d/b/a Celia’s Closet,
Appellant
v.
Joe Mathews POUND and the Estate of Celia H. Pound,
Appellees
From the 216th Judicial District Court, Kerr County, Texas
Trial Court No. 17161A
Honorable N. Keith Williams, Judge Presiding
Opinion by: Irene Rios, Justice
Sitting: Patricia O. Alvarez, Justice
Irene Rios, Justice
Beth Watkins, Justice
Delivered and Filed: August 25, 2021
AFFIRMED
Kristin Sullivan appeals a take-nothing judgment rendered on her claims against Joe
Mathews Pound (“Pound”) and the Estate of Celia H. Pound. 1 In her sole issue, Sullivan argues
1
We note that Sullivan filed suit against the Estate of Celia H. Pound and this designation is reflected in the trial
court’s judgment. We recognize the estate of a deceased person is not a legal entity and cannot be sued as such.
Henson v. Est. of Crow, 734 S.W.2d 648, 649 (Tex. 1987). “A suit seeking to establish the liability of an estate should
be filed against the personal representative” of the estate. Miller v. Est. of Self, 113 S.W.3d 554, 556 (Tex. App.—
Texarkana 2003, no pet.). “However, in those instances where the suit names the estate, rather than the personal
representative of that estate, the trial court will be vested with jurisdiction if the personal representative is served with
citation and participates in the suit in his or her capacity as the personal representative of the estate.” Id. at 557. “In
such circumstances, the resulting judgment will be valid even if it names the estate rather than the personal
representative in his or her official capacity.” Id.; see also Est. of C.M. v. S.G., 937 S.W.2d 8, 10 (Tex. App.—Houston
[14th Dist.] 1996, no writ) (“A judgment against an estate individually is not necessarily void, however, if the personal
representative of the estate appears in or participates in the lawsuit.”). Here, Pound was served with citation as the
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the trial court erred when it denied her motion to disregard a jury finding that she should have
discovered the alleged wrongful conduct by December 31, 2012, a date outside the applicable
statutes of limitations. We affirm the trial court’s judgment.
BACKGROUND
Pound and Celia H. Pound (“Celia”) (collectively “the Pounds”) owned and operated a
boutique store called Celia’s Closet. Sullivan started working at Celia’s Closet when she was
thirteen years old and continued to work at the store through college as her schedule permitted. In
2010, after Celia was diagnosed with cancer, the Pounds decided to list Celia’s Closet for sale.
Sullivan informed Celia she was interested in purchasing Celia’s Closet and Celia directed
her to the listing broker who provided Sullivan with a business packet containing information
about the business, including financial statements and a business summary. Sullivan reviewed the
information with her grandmother, a successful businesswoman, and subsequently executed a
letter of intent to purchase Celia’s Closet on June 21, 2011. Sullivan purchased Celia’s Closet on
July 28, 2011.
Shortly after Sullivan took ownership of Celia’s Closet, the business began to falter and
struggled with cash flow. In 2015, Sullivan hired a business consultant and began reviewing the
financial information that had been provided by the Pounds before she purchased the business.
Sullivan discovered errors and discrepancies in the information and claimed these errors
misrepresented the financial health of the business. Celia’s Closet continued to lose money and
Sullivan had to close the business in 2017.
personal representative of the Estate of Celia H. Pound. In addition, Pound participated in the suit in his capacity as
the personal representative of the estate when he filed an answer to the lawsuit “as Independent Executor of the
ESTATE OF CELIA H. POUND” and continued to engage in that capacity throughout the case. See Price v. Est. of
Anderson, 522 S.W.2d 690, 692 (Tex. 1975) (holding the personal representative of an estate appeared and
participated in the case when the personal representative answered and engaged in the case in his capacity as personal
representative of the estate). While we are aware the estate is not an entity that can be sued, we use the term “estate”
only as a shorthand reference to Joe Mathews Pound as the independent executor of the Estate of Celia H. Pound.
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On February 17, 2017, Sullivan filed suit against Pound and the Estate of Celia H. Pound
(hereinafter, “Pound and the estate”) for breach of contract, promissory estoppel, unjust
enrichment, common law fraud, fraudulent inducement, breach of fiduciary duty, and negligent
misrepresentation. 2 Pound and the estate pled the affirmative defense of limitations. Sullivan pled
the discovery rule, asserting the statutes of limitations for her causes of action were tolled until she
discovered the Pounds’ wrongful conduct in 2015.
The case was tried before a jury. The jury found in favor of Sullivan on her claims for
promissory estoppel, breach of fiduciary duty, and negligent misrepresentation and awarded her
damages. However, in response to question 18 of the jury charge, the jury found that Sullivan, in
the exercise of reasonable diligence, should have discovered the Pounds’ wrongful conduct by
December 31, 2012. 3 Sullivan filed a motion to disregard the jury’s answers to question 18,
arguing the date determined by the jury was not supported by the evidence. The trial court denied
Sullivan’s motion to disregard the jury finding, determined Sullivan’s causes of action were barred
by the applicable statutes of limitations, and rendered a take-nothing judgment on all her claims.
This appeal followed.
DISCUSSION
In her sole issue, Sullivan argues there is no evidence supporting the jury’s finding that she
should have discovered the Pounds’ wrongful conduct by December 31, 2012, and the trial court
2
Negligent misrepresentation was added later when Sullivan amended her petition.
3
Question 18 stated:
By what date should Kristen Sullivan, in the exercise of reasonable diligence, have discovered either
or both of the Pounds[’] wrongful conduct, if any?
Answer with a date in the blank below.
Answer as to Joe Mathews Pounds: ___________
Answer as to Celia Pound: ___________
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should have disregarded this finding. Sullivan’s argument is premised on the assertion that there
must be evidence supporting the jury’s determination of the date certain: December 31, 2012.
Sullivan contends defense counsel’s closing argument was the only reference at trial to
December 31, 2012. Sullivan argues that—because counsel’s jury argument is not evidence—the
jury’s finding is not supported by the evidence.
Pound and the estate counter that Sullivan’s own testimony establishes she had the
information to discover the wrongful conduct, if any, on or before January 1, 2012. They further
argue the jury drew the reasonable inference that Sullivan should have been able to discover the
alleged misrepresentations within one year of obtaining all the necessary information. Thus,
Pound and the estate argue, the evidence is legally sufficient to support the jury’s finding and the
trial court properly denied Sullivan’s motion to disregard jury findings.
Standard of Review
“The denial of a motion to disregard a jury finding is reviewed as a no-evidence or legal
sufficiency issue.” Bell v. Castro, No. 04-11-00927-CV, 2012 WL 5874322, at *3 (Tex. App.—
San Antonio Nov. 21, 2012, no pet.) (mem. op.) (citing City of Keller v. Wilson, 168 S.W.3d 802,
823 (Tex. 2005)). We determine if legally sufficient evidence supports a finding by “view[ing]
the evidence in the light favorable to the verdict, crediting favorable evidence if reasonable jurors
could, and disregarding contrary evidence unless reasonable jurors could not.” City of Keller,
168 S.W.3d at 807; Est. of Montague v. Nat’l Loan Invs., L.P., 70 S.W.3d 242, 246 (Tex. App.—
San Antonio 2001, pet. denied) (“In determining whether there is no evidence to support a jury
verdict, we consider the evidence favorable to the jury’s verdict and reasonable inferences that
tend to support it.”). “Evidence is legally insufficient when the record discloses: (1) a complete
absence of evidence of a vital fact; (2) the court is barred by rules of law or of evidence from
giving weight to the only evidence offered to prove a vital fact; (3) the evidence offered to prove
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a vital fact is no more than a mere scintilla; or (4) the evidence establishes conclusively the
opposite of a vital fact.” Bell, 2012 WL 5874322, at *3 (citing City of Keller, 168 S.W.3d at 810).
Applicable Law
“Many of our Texas statutes of limitations . . . provide that a person must bring suit for the
specified cause of action not later than the applicable number of years after the day the cause of
action accrues.” Draughon v. Johnson, No. 20-0158, 2021 WL 2387430, at *4 (Tex. June 11,
2021) (quotations and alterations omitted). Sullivan’s causes of action were all subject to either
the four-year or two-year statute of limitations. See Stine v. Stewart, 80 S.W.3d 586, 592
(Tex. 2002) (holding the general four-year statute of limitations applies to actions for breach of
contract); Prestige Ford Garland Ltd. P’ship v. Morales, 336 S.W.3d 833, 836 (Tex. App.—
Dallas 2011, no pet.) (“A promissory estoppel cause of action is governed by a four-year statute
of limitations.”); TEX. CIV. PRAC. & REM. CODE ANN. § 16.004(a) (stating actions for fraud and
breach of fiduciary duty are governed by a four-year statute of limitations); HECI Expl. Co. v.
Neel, 982 S.W.2d 881, 885 (Tex. 1998) (acknowledging actions for unjust enrichment and
negligent misrepresentation are governed by a two-year statute of limitations).
“The discovery rule is a ‘limited exception’ to the general rule that a cause of action accrues
when a legal injury is incurred.” Archer v. Tregellas, 566 S.W.3d 281, 290 (Tex. 2018). “[W]hen
the discovery rule applies, accrual is tolled until a claimant discovers or[,] in the exercise of
reasonable diligence[,] should have discovered the injury and that it was likely caused by the
wrongful acts of another.” Childs v. Haussecker, 974 S.W.2d 31, 40 (Tex. 1998). “But once these
requirements are satisfied, limitations commence[], even if the plaintiff does not know the exact
identity of the wrongdoer.” Id.-5-
04-20-00230-CV
Analysis
Pound and the estate do not contest the applicability of the discovery rule to Sullivan’s
causes of action. Instead, the parties disagree on whether there is sufficient evidence to support
the jury’s finding that Sullivan, in the exercise of reasonable diligence, should have discovered the
Pounds’ wrongful conduct by December 31, 2012.
At the outset, we note Sullivan has not directed us to any authority, nor have we found any,
requiring direct evidence of the exact date chosen by the jury in response to a jury question on the
discovery rule. Without authority requiring direct evidence of a date certain, “[w]e must
determine, ‘whether the evidence at trial would enable reasonable and fair-minded people to reach
the verdict under review.’” Bell, 2012 WL 5874322, at *3 (quoting City of Keller, 168 S.W.3d at
827). Here, we review evidence of the alleged wrongful conduct that form the bases of Sullivan’s
causes of action and determine whether there is sufficient evidence to support the jury’s finding
that Sullivan should have, in the exercise of reasonable diligence, discovered the wrongful conduct
by December 31, 2012.
At trial, Sullivan testified that the Pounds committed the following wrongful acts in relation
to the sale and purchase of Celia’s Closet:
1. In the financials provided to Sullivan, the discounts from a discount program
were improperly calculated as sales and revenues.
2. The Pounds failed to disclose expenses Celia’s Closet would incur from
promotional programs the business was required to participate in by certain
vendors.
3. The Pounds excluded shipping expenses from the financials they provided
Sullivan before she purchased the business.
4. The Pounds did not disclose travel expenses associated with going to market
and trade shows.
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5. The financials excluded expenses for inventory taxes, and Sullivan was not
made aware of existing inventory tax liabilities before she purchased Celia’s
Closet.
6. The financials did not include all the utility expenses the business would incur.
7. The Pounds misrepresented Celia’s Closet’s profitability because “sometimes
[the Pounds] didn’t pay the rent.” 4
8. The Pounds misrepresented the value of the fixtures in Celia’s Closet that were
purchased by Sullivan because “they really weren’t worth as much as [she] paid
for them” and she “couldn’t take the fixtures and furniture out of the building.”
9. The Pounds misrepresented the value of the inventory because many of the
items were placed on sale, at or below cost, before the parties closed.
10. Sullivan was provided with an inaccurate representation of revenues because
Celia’s personal purchases and barters with other shop owners were improperly
reflected as sales even though the business never actually received cash for
these transactions. In addition, Celia made more personal purchases than she
disclosed.
On cross examination, however, Sullivan admitted she could have discovered each of these
instances of wrongful conduct on or before January 1, 2012. Sullivan admitted she was aware of
the discount program before purchasing the business and Celia’s QuickBooks data did not show
an expense category for the discount program. Moreover, Sullivan acknowledged she categorized
the discounts as expenses and could have compared her financials with the financials she received
from Celia as early as January 1, 2012. Sullivan further admitted, by January 1, 2012, she was
“aware of all the[] expenses” associated with vendor promotional programs as well as the shipping
costs that were excluded from the financial statements.
Additionally, during cross-examination, Sullivan testified she went to market “[w]ithin the
first three weeks of owning the business” and was aware of these travel expenses by January 1,
2012. As to the inventory taxes, Sullivan acknowledged she had to pay the undisclosed inventory
taxes in late 2011 and was, therefore, aware of inventory tax expenses by January 1, 2012. Sullivan
4
The Pounds owned the building that housed Celia’s Closet.
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further testified she knew what her utility expenses were within the first two months of taking
ownership of the business and conceded—“at the very latest, by [January 1, 2012]”—she could
have compared her utility expenses to the utility expenses on the financial statements she received
from the Pounds. When asked about rental expenses, Sullivan admitted the Pounds disclosed
annual rent of $57,600 as an expense in the financials they provided to Sullivan prior to her
purchase of the business. Moreover, Sullivan testified she negotiated rent at the lesser rate of
$36,000 annually, admitted she was aware she would have to pay rent, and acknowledged she
knew—“prior to [January 1, 2012]”—how this expense would affect the business.
Finally, during cross-examination, Sullivan admitted she had the right to inspect the
fixtures to determine their value and quality and “could have determined that [she] overpaid” for
the fixtures before January 1, 2012. Regarding the inventory, Sullivan admitted she was aware
some of the inventory she bought was placed on sale before the closing. Sullivan further admitted
she could have run reports prior to January 1, 2012, that would have revealed the discrepancies
resulting from Celia’s personal purchases and barters, but she never ran the reports.
On appeal, Sullivan argues she did not discover the Pounds’ wrongful conduct until after a
business consultant brought discrepancies to her attention in 2015. However, the discovery rule
would only operate to toll the statute of limitations until Sullivan discovered or, in the exercise of
reasonable diligence, should have discovered the Pounds’ wrongful conduct. See Childs,
974 S.W.2d at 40. Sullivan’s own testimony established she had all the necessary information to
discover the Pounds’ alleged wrongful conduct by January 1, 2012. Based on Sullivan’s
testimony, a rational juror could infer that a person exercising reasonable diligence should have
discovered the Pounds’ wrongful conduct within a year of having all the necessary information to
discover that wrongful conduct. Est. of Montague, 70 S.W.3d at 246 (“In determining whether
there is no evidence to support a jury verdict, we consider the evidence favorable to the jury’s
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verdict and reasonable inferences that tend to support it.”). Viewing the evidence in the light
favorable to the verdict, we conclude the evidence is legally sufficient to support the jury’s finding
that Sullivan should have discovered the Pounds’ alleged wrongful conduct by December 31,
2012. See City of Keller, 168 S.W.3d at 807. Sullivan’s sole issue is overruled.
CONCLUSION
The judgment of the trial court is affirmed.
Irene Rios, Justice
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