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In re Estate of Aguilar

Court of Appeals of Texas, Fourth District, San Antonio

April 5, 2017

IN THE ESTATE OF Carlos AGUILAR, Deceased

         From the County Court at Law No. 2, Webb County, Texas Trial Court No. 2012-PB4-000048 L2 Honorable Jesus Garza, Judge Presiding

         MOTION TO STRIKE DENIED; REVERSED AND REMANDED

          Karen Angelini, Justice Marialyn Barnard, Justice Rebeca C. Martinez, Justice (dissent to follow)

          MEMORANDUM OPINION

          Marialyn Barnard, Justice

         This case arises out of an administration proceeding in Webb County in which appellants, Vanessa Arce and Eudelia Aguilar, co-administrators of the Estate of Carlos Aguilar, Deceased ("the Estate"), challenge the county court's order denying their motion to withdraw funds from the court registry for the payment of attorney's fees. On appeal, the co-administrators contend the county court erred in denying their motion because: (1) the county court had previously approved a contingency fee contract that provided for the payment of attorney's fees for litigation services rendered on behalf of the Estate, and (2) there was no evidence of improper attorney conduct. We reverse the county court's order denying the appellant's motion to withdraw funds and remand this cause for further proceedings consistent with this opinion.

         Background

         Carlos Aguilar died in May 2012 as a result of a car accident. Carlos was the passenger in a truck, which was struck by a u-joint that broke off a tractor-trailer owned by Heckman Water Resources, Inc. At the time of the accident, Carlos was thirty-one-years old. He was survived by: (1) his parents, Jose Luis and Eudelia Aguilar; (2) his wife, Vanessa and; (3) seven minor children, two of which he had with Vanessa, and five of which he had with his former wife, Clarissa Aguilar.

         Shortly after his death, Eudelia and Vanessa filed an application for letters of administration in Webb County Court at Law No. 2, seeking to be appointed co-administrators of Carlos's estate. According to the application, a necessity existed for the administration of the Estate because Carlos's assets needed to be distributed and "a wrongful death/survival claim need[ed] to be pursued against a responsible party."[1] After the application was filed, the county court appointed two attorneys ad litem, Rosaura Tijerina and Jesus Dominguez, to represent the minor children in the administration proceeding. See Tex. Prob. Code § 53(b) (current version at Tex. Est. Code Ann. § 53.104 (West 2014)) (setting out when court may appoint attorney ad litem).[2] Ms. Tijerina represented Carlos and Vanessa's two children, and Mr. Dominguez represented Carlos and Clarissa's five children. The county court subsequently held a hearing on August 15, 2012 on Eudelia and Vanessa's application. At the hearing, in addition to requesting appointment as co-administrators, Eudelia and Vanessa requested approval of a contingency fee contract regarding the wrongful death/survival action.

         A copy of a contingency fee contract was neither produced nor admitted into evidence at the hearing. However, the clerk's record contains copies of documents entitled "Contingency Fee Contract" by and between Vanessa and the Law Office of Hernandez and Castillo, P.C. and by and between Eudelia and the Law Office of Jose L. Solis. The contracts authorized the law firms to handle all claims arising out of any dispute associated with Carlos's death. The contracts further provided the law firms were entitled to forty percent of any recovery achieved as the result of any lawsuit. The clerk's record also contains copies of documents entitled "Consent to Refer or Associate, " which were signed by Vanessa and Eudelia. These documents authorized the law firms to refer any portion of the matter to another law firm - Hagood, Neumann, Huckeba, LLP - which would prosecute any claims regarding Carlos's death. The documents further provided that in the event of recovery, the law firms would equally divide the total fees recovered.

         Before approving the contingency fee contract, [3] the county court asked whether there was any objection. One of the attorneys ad litem, Mr. Dominguez, stated he had not seen the contract, but had spoken to Mr. Castillo who would provide him a copy shortly after the hearing. Mr. Dominguez further stated, "As soon as we see it and we sign off on it, if we sign off on it, we ask the court to approve the contract." The county court noted the requests and stated it "will approve that." The county court then appointed Vanessa and Eudelia as co-administrators of the Estate, granting them letters of administration. The order also provided:

The court hereby approves and ratifies the contingency fee contract signed by the parties in pursuit of any wrongful death litigation on behalf of Decedent. The court FURTHER ORDERS AND AUTHORIZES Jesus "Chuy" Dominguez and Rosaura "Wawi" Tijerina Ad Litems for the Minor Children to approve, sign, ratify and/or enter into contingency fee contracts with Jose Luis Castillo and/or Gene Hagood on behalf of the minor children.[4]

         The following year Vanessa and Eudelia, through Gene Hagood of Hagood, Neumann, Huckeba, LLP, filed a survival action on behalf of the Estate as well as wrongful death actions in their individual capacities against Heckman Water Resources, Inc. in Dimmit County District Court.[5] Carlos's father, Elsa Quiones - as next of friend of Carlos and Vanessa's two children, and Clarissa - as next of friend of her and Carlos's five children, were also listed as plaintiffs in the wrongful death suit. In November 2013, the case proceeded to a jury trial, which ultimately returned a verdict in favor of all the plaintiffs. In June 2014, the case was mediated and a settlement agreement was entered; the settlement agreement awarded the plaintiffs $13.5 million to be paid to each plaintiff "in proportion to the awards set forth in the trial court's amended final judgment." The agreement also provided that the settlement of the Estate's claims was contingent upon approval by Webb County Court at Law No. 2, the court overseeing the administration of the Estate. Thereafter, the co-administrators filed a motion in Webb County Court at Law No. 2, seeking approval of the settlement agreement on behalf of the Estate. Clarissa, as next of friend of her and Carlos's five minor children, filed a motion opposing approval of the settlement agreement.

         The motions were set for an expedited hearing. At the hearing, Clarissa argued the disputed settlement agreement involving the Estate was an improper aggregate settlement agreement because the attorneys representing the co-administrators - specifically, Mr. Castillo and Mr. Solis - settled the Estate's survival claims and the co-administrators' individual wrongful death claims together in violation of Rule 1.08(f) of the Texas Rules of Professional Conduct ("the Texas Disciplinary Rules"). See Tex. Disciplinary R. Prof'l Conduct 1.08(f), reprinted in Tex. Gov't Code Ann., tit. 2, subtit. G, app. A (West 2013) (prohibiting lawyer who represents two or more clients from entering into aggregate settlement agreement without client's consent). Clarissa also argued the co-administrators entered into the contingency fee agreement on behalf of the Estate without obtaining prior approval from Webb County Court at Law No. 2. See Tex. Prob. Code § 233(c) (current version at Tex. Est. Code. Ann. §351.152) (authorizing personal representative to enter into contingency fee contract that provides more than one-third recovery subject to court approval). Clarissa further alleged that because of the attorneys' actions, the attorneys should be prohibited from recovering any attorney's fees from the Estate's settlement proceeds and the Estate's settlement proceeds should be divided equally among Carlos's seven children.

         In response, the co-administrators claimed the settlement agreement involving the Estate was not an aggregate settlement agreement for reasons they could not disclose on the record due to confidentiality concerns. The co-administrators also argued they did not enter into a contingency fee arrangement without prior court approval. After considering the parties' arguments, the county court ordered the co-administrators to provide an unredacted copy of the proposed settlement "terms that pertain to the [E]state" to Clarissa to review at that time. The county court then broke for a short recess to allow Clarissa time to review the settlement terms and to allow the parties time to resolve the matter. When the parties failed to resolve their issues, the county court approved the co-administrators' settlement of the Estate's claims and ordered the settlement proceeds to be paid into the court registry until further court order. The record reflects approximately $656, 002.49 was deposited into the court registry, representing the Estate's share of the settlement proceeds. The county court then ordered the parties to appear for another hearing to discuss how the parties should divide the settlement proceeds, including the division of attorney's fees.

         Over the course of the next couple of months, the parties filed multiple motions and additional hearings were held. Many of the hearings involved Clarissa's requests to obtain a full and unredacted copy of the settlement agreement involving the Estate, remove Mr. Dominguez as attorney ad litem, and order Gene Hagood of Hagood, Neumann, Huckeba, LLP to forfeit the contingency fees he was claiming. At each of the hearings, Clarissa reiterated her arguments that the settlement agreement was an improper aggregate settlement agreement and the county court never approved the contingency fee agreement involving the Estate's survival cause of action. As part of these arguments, Clarissa alleged an improper fee-splitting arrangement existed between the co-administrators' probate attorneys - Mr. Castillo and Mr. Solis, the co-administrators' litigation attorney - Mr. Hagood, and Raul Vasquez, who represented Carlos's parents and Vanessa in their individual wrongful death claims. The county court ultimately denied Clarissa's request to remove Mr. Dominguez as attorney ad litem. The county court ordered the co-administrators to provide an unredacted copy of the settlement agreement involving the Estate to Mr. Dominguez, but not to Clarissa. By the end of 2014, Mr. Dominguez had withdrawn as attorney ad litem, and the county court granted a motion for contempt and sanctions against Vanessa for failing to provide a copy of the unredacted settlement agreement to him.

         In September 2015, the county court held a final hearing concerning a number of matters, including the matter at issue in this case, i.e., the co-administrators' "Motion For Withdrawal of Funds, " seeking to withdraw funds from the court registry for the payment of attorney's fees incurred by Gene Hagood as trial counsel for the co-administrators in the Dimmit County lawsuit. Attached to their motion was a copy of the August 15, 2012 order, wherein the county court approved a contingency fee contract "signed by the parties in pursuit of any wrongful death litigation on behalf of Decedent." According to the co-administrators, this order approved a contingency fee agreement authorizing Mr. Hagood to receive forty percent of any recovery achieved on behalf of the Estate in the Dimmit County proceedings. Clarissa, however, argued the co-administrators did not receive court approval of any contingency fee agreement regarding the Estate's claim in the Dimmit County proceeding prior to the performance of any services on behalf of the co-administrators. Clarissa contended such approval was statutorily required. See Tex. Prob. Code § 233(c) (current version at Tex. Est. Code. Ann. § 351.152). Clarissa further argued any contingency fee agreements that may have been ratified by the county court pertained only to the parties' individual wrongful death claims - not the Estate's survival claim. Clarissa also reiterated her allegations regarding the existence of an improper fee-splitting agreement.

         After hearing the parties' arguments, the county court took the matter under advisement, stating it would make a ruling in the next few days. Clarissa made one last request for the county court to have an in camera inspection of all the settlement agreements and fee-splitting agreements, if any; however, the record does not contain a copy of an order granting Clarissa's request. The county court later rendered an order, denying the co-administrators' motion to withdraw funds. The co-administrators then perfected this appeal.

         Analysis

         In their sole issue on appeal, the co-administrators contend the county court erred in denying their motion to withdraw funds from the court registry to pay attorney's fees earned as a result of litigation services rendered on behalf of the Estate. According to the co-administrators, the county court erred because: (1) it previously rendered an order, approving and ratifying a contingency fee contract that provided for the disputed fees and that order was never challenged; (2) the ...


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