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In Estate of Nunu

Court of Appeals of Texas, Fourteenth District

November 2, 2017


         On Appeal from the Probate Court No. 1 Harris County, Texas Trial Court Cause No. 416781

          Panel consists of Justices Christopher, Busby, and Jewell.


          Tracy Christopher Justice.

         In this appeal, an estate's beneficiary seeks reversal of (a) the trial court's ruling that the beneficiary has no claim for forfeiture of opposing counsel's attorneys' fees, (b) the trial court's assumed denial of the beneficiary's challenge to the independent executor's entitlement to use estate funds to pay her attorneys' fees and expenses in this case, (c) the denial of the beneficiary's application to compel distribution of the estate, and (d) the denial of the beneficiary's motion to recuse the trial judge. We agree with the trial court that the beneficiary lacks standing to pursue a fee-forfeiture claim based on alleged deficiencies in opposing counsel's legal advice to the estate's independent executor. We also find no error in the denial of the motion to recuse. We do find error, however, in the trial court's failure to rule on the extent to which the independent executor's legal fees and expenses can be paid from the estate, and on its failure to order distribution of the estate as statutorily required. We accordingly affirm in part, reverse in part, and remand the cause to the trial court.

         I. Background

         Paul Nunu and his sister Nancy Nunu Risk are each beneficiaries of one-third of the estate of their mother, Rose Farha Nunu ("the Estate").[1] Nancy is the independent executor of the Estate, and she previously was represented in that capacity by Paul, who is an attorney. After Paul accused her of wrongdoing, Nancy instead employed attorneys W. Cameron McCulloch and Christopher C. Burt of the law firm of MacIntyre, McCulloch, Stanfield & Young, LLP ("MacIntyre McCulloch").

         The probate case originally had been assigned to statutory county Probate Court No. 4 in Harris County. In that court, Paul allegedly accused Nancy's attorney McCulloch of misconduct and moved to recuse the Honorable Christine Butts on the ground that McCulloch's father previously was the presiding judge of Probate Court No. 4.[2] After Judge Butts voluntarily recused herself, the case was transferred to statutory county Probate Court No. 1.

         A. Paul's Motion to Recuse the Trial Judge

         Paul then moved to recuse the Honorable Loyd Wright, presiding judge of Probate Court No. 1, alleging that Judge Wright is biased in favor of MacIntyre McCulloch. Judge Wright declined to recuse himself, and the judge assigned to hear the motion denied it.

         B. Paul's Claims Against Nancy and His First Application to Compel Distribution

         Paul alleged that Nancy, in her capacity as independent executor, breached her fiduciary duties to him and committed acts of negligence per se, gross negligence, gross mismanagement, gross misconduct, and actual fraud. He asked the court to enforce a forfeiture provision of his mother's will against Nancy, to remove her as independent executor, and to award him exemplary damages.[3]

         Paul also alleged that the Estate's heirs had agreed to the division of the Estate's real property in February 2014, but that Nancy demanded a release as a condition to distribution of the property. Nevertheless, on March 7, 2014, Paul drafted and delivered to Nancy a "Partition Agreement" and partition deeds that did not contain a release. Nancy refused to sign them. In April 2014, she hired MacIntyre McCulloch, and her new counsel drafted a "Settlement Agreement" containing a release. Paul would not sign that proposed agreement. Based on these factual allegations, Paul pleaded for declaratory relief and for Nancy's removal as independent executor on the ground that her insistence on a release as a condition for the distribution of the Estate's assets violated Texas Estates Code section 405.002(b). Paul also alleged that McCulloch and Nancy conspired to obtain an illegal release.

         On October 26, 2015, Paul filed an "Application to Compel Distribution, " in which he asked the trial court (1) to compel the distribution of all of the Estate's assets "as such estate existed on March 6, 2014"; (2) to order Nancy to "fulfill her prior agreement to partition and exchange the real property" of the Estate; (3) to order Nancy, in her individual capacity, to "pay all costs of delay including proration of ad valorem taxes and written assignment of all insurance policies"; (4) to "compel distribution of one[-]third of [a] note receivable as of March 6, 2014 ($18, 777) plus one[-]third of all interest payments from April 2012 to the present ($1, 500), plus one[-]third of all attorneys['] fees, and all jewelry and all other income or assets of the estate." In her response, Nancy pointed out that Paul had not asked the trial court to compel the distribution of the Estate's assets pursuant to the terms of Rose Farha Nunu's will. She also stated that the Estate had outstanding debts for legal fees and the fees and expenses of her expert witness, and that the distribution of the Estate's assets before resolution of the claims against her as executrix would be premature. The trial court found that "[a] necessity for administration exists for the Estate, " denied Paul's application, and set the case for trial.

         On the third day of the jury trial, Paul announced in open court that he was nonsuiting with prejudice all claims to enforce the will's forfeiture provision or to remove Nancy as independent executrix, reserving only his claims to compel distribution and to contest, and to request forfeiture of, the fees charged by Nancy's attorneys.

         C. Paul's Application for Attorney-Fee Forfeiture and Second Application to Compel Distribution of Assets

         After Paul's nonsuit, he filed his "Application for Attorney Fee Forfeiture and Second Application to Compel Distribution of Assets." In that document, he argued that all fees claimed by or paid to Nancy's attorneys should be forfeit, or that Nancy should be required to pay the fees herself rather than paying them from Estate funds. He also again asked the trial court to compel distribution of the Estate as it existed on the second anniversary of his mother's death and to compel distribution of the Estate in accordance with the unexecuted partition agreement. In her response, Nancy did not mention any of Paul's requests for relief concerning attorneys' fees. As for his second application to compel distribution, Nancy again stated that there was a continued need for administration because the Estate still had outstanding debts in the form of the attorneys' fees owed to MacIntyre McCulloch and the fees and expenses due to her expert witness.

         The trial court rendered a final judgment (1) recounting Paul's voluntary nonsuit of his claims against Nancy; (2) stating that the "Application for Attorney Fee Forfeiture" was heard; (3) finding that Paul "has no claims or causes of action for forfeiture against the attorneys representing [Nancy], as Independent Executrix of this Estate"; and (4) denying "the Application for Attorney Fee Forfeiture and any claims or causes of action relating thereto." The final judgment neither authorized Nancy to pay attorneys' fees from the Estate, nor ordered her to reimburse the Estate for attorneys' fees she already had paid with Estate funds. The trial court denied Paul's motion for rehearing or for a new trial, and Paul brought this appeal.

         II. Nancy's Threshold Issues

         Before reaching the issues Paul has presented for our review, we first must address Nancy's contentions that (a) we lack subject-matter jurisdiction over this appeal because Paul nonsuited his claims with prejudice, and (b) Paul waived the appeal by bringing an insufficient record.

         A. This Court's Subject-Matter Jurisdiction

         Nancy argues that we lack subject-matter jurisdiction over this appeal because Paul's voluntary nonsuit with prejudice rendered his claims moot. According to Nancy, there is no appealable judgment in this case "because the final judgment is a memorialization of the voluntary non-suit with prejudice that ended all previous controversies and specifically barred any future litigation, so there is no controversy to appeal."

         This argument misrepresents the record. The final judgment unambiguously establishes that Paul nonsuited many of his claims but specifically excepted others. This conclusion is further supported by an excerpt of the trial transcript that is attached to, and incorporated in, the final judgment. Together, the excerpt and the final judgment show that when Paul announced that he was nonsuiting his claims with prejudice, the trial court asked, "And would that nonsuit include any and all claims that could have been brought in this case?" Paul replied, "It would except for a rightful inheritance, all claims except maybe to compel distribution." Paul later added, "This is simply . . . just about attorney's fees now, and I informed Mr. McCulloch that I wanted him to compromise substantially on his claims and if he does that then this case will be over and gone and done." Thus, the excerpt establishes that Paul reserved his rights (1) to assert claims for his inheritance, (2) to apply for an order compelling distribution, and (3) to contest the fees charged by Nancy's attorneys. To this list, the trial court added that Paul reserved "any right [Paul] might have" to (4) claim forfeiture of attorney's fees charged by Nancy's attorneys.[4] The judgment and its attached excerpt from the trial transcript establish that Paul's nonsuit of his claims against Nancy did not render moot the issues presented in this appeal.

         B. Sufficiency of the Record

         Nancy next asserts that Paul waived his right to appeal because he did not request a complete transcript of the trial and all pretrial hearings, and in designating the clerk's record, "he included only 13 of the 418 entries on the docket sheet." Citing no supporting authority, Nancy asserts, "Nancy has no burden to request the record. Paul does." Nancy's premise is mistaken.

         A party need not request a reporter's record unless it is necessary to the appeal. See Tex. R. App. P. 34.1. Moreover, an appellant does not waive the appeal by failing to file a reporter's record. The appellate court can decide the appeal based on the briefs and the clerk's record. See Tex. R. App. P. 37.3(c); Samara v. Samara, 52 S.W.3d 455, 457 (Tex. App.-Houston [1st Dist.] 2001, pet. denied). If a reporter's record is necessary to the appeal, and certain other requirements have not been met, then we will presume that the omitted portion of the reporter's record supports the judgment. See Tex. R. App. P. 34.6; Bennett v. Cochran, 96 S.W.3d 227, 228-29 (Tex. 2002) (per curiam).

         As for the clerk's record, the Texas Rules of Appellate Procedure no longer place the burden on any party to designate items to be included in the appellate record, but instead permit any party-or the trial court, or the appellate court-to do so.[5] See Tex. R. App. P. 34.5(a) ("Unless the parties designated the filings in the appellate record by agreement under Rule 34.2, the record must contain copies of [the enumerated items]."); Tex.R.App.P. 34.5(b) (2) ("[A]ny party may file with the trial court clerk a written designation specifying items to be included in the record."); Tex.R.App.P. 34.5(c)(1) ("If a relevant item has been omitted from the clerk's record, the trial court, the appellate court, or any party may by letter direct the trial court clerk to prepare, certify, and file in the appellate court a supplement containing the omitted item."); see also In re K.M.L., 443 S.W.3d 101, 119 (Tex. 2014) (pointing out that respondent, who knew that the petitioner alleged a lack of notice, failed to request its inclusion in the clerk's record). Thus, for example, we are able to identify the claims that Paul nonsuited because we ordered the clerk's record supplemented to include his live pleading at the time of trial.

         Because we have subject-matter jurisdiction over this appeal, and Paul has not waived his right to appeal, we will decide the issues presented on the record before us.

         III. Paul's Issues Presented

         In his first issue, Paul argues that the trial court erred in failing to order that the attorneys' fees Nancy incurred in defending against this removal action are disallowed or forfeit.[6] In his second issue, Paul contends that the trial court erred in (a)denying each of his two motions to compel distribution of the Estate's assets, and (b)failing to order distribution in accordance with the alleged partition agreement. He asserts in his third issue that the judge assigned to hear his motion to recuse Judge Wright abused her discretion in denying the motion.

         IV. Claims Regarding Nancy's Attorneys' Fees

         Paul's first issue is directed to the trial court's ruling that he "has no claims or causes of action for forfeiture against the attorneys representing [Nancy]." Nancy's attorneys' fees are at issue because under Texas Estates Code section 404.0037,

[a]n independent executor who defends an action for the independent executor's removal in good faith, whether successful or not, shall be allowed out of the estate the independent executor's necessary expenses and disbursements, including reasonable attorney's fees, in the removal proceedings.

Tex. Est. Code Ann. § 404.0037(a) (West 2014). Nancy has used Estate funds to pay at least some of the attorneys' fees incurred in her defense in this suit.

         Paul challenges the payment of Nancy's attorneys' fees by (a) arguing that McCulloch and Burt were professionally negligent and breached fiduciary duties they owed to Nancy and to the Estate, or perhaps to the Estate's beneficiaries, and that as a result of this misconduct, their fees are forfeit under the Texas Supreme Court's holding in Burrow v. Arce; (b) seeking declaratory judgment that the fees should be forfeit or disallowed; and (c) arguing that the requirements of section 404.0037 for payment of attorneys' fees from Estate funds have not been met. We address each contention in turn.

         A. Forfeiture of Attorneys' Fees as a Remedy for an Attorney's Breach of Fiduciary Duty Under Burrow v. Arce

         Paul contends that, by the legal advice McCulloch and his co-counsel Christopher Burt provided to Nancy, the attorneys were professionally negligent and breached fiduciary duties they owed to Nancy and to the Estate or its beneficiaries. Citing Burrow v. Arce, 997 S.W.2d 229 (Tex. 1999), Paul maintains that as a result of these alleged deficiencies, he is entitled to pursue claims against McCulloch and Burt for fee forfeiture. Cf. id. at 241 (explaining that a client can pursue the equitable remedy of fee forfeiture for an attorney's "clear and serious violation of duty to a client" (quoting Restatement (Third) of the Law Governing Lawyers § 49 (Proposed Final Draft No. 1, 1996))). This argument fails for at least two reasons.

         1. Absence of a Pleading Making the Attorneys Parties to this Action

         First, a claim for forfeiture of attorneys' fees necessarily is a claim against the attorneys. The record contains no pleading in which Paul made McCulloch and Burt parties to this action.

         2. Absence of Standing

         Assuming that such a pleading exists and that the parties simply have failed to request its inclusion in the record, Paul lacks standing to assert a fee-forfeiture claim against opposing counsel. The Texas Supreme Court explained in Burrow that the equitable remedy of fee forfeiture is intended "to protect relationships of trust by discouraging agents' disloyalty" or other misconduct. Id. at 238, 240. Fee forfeiture accordingly is a remedy only for the breach of a duty arising from the agency relationship. See id. at 242-43. When the agency relationship is that of an attorney and client, "concern for the integrity of attorney-client relationships is at the heart of the fee forfeiture remedy." Id. at 244. The remedy accordingly is available to a client for an attorney's "clear and serious violation of duty to a client." Id. at 241.

         Paul, however, has not alleged any facts that would give rise to a relationship of trust between himself and opposing counsel. Paul does not contend that he is, or ever was, McCulloch's or Burt's client, and he has neither alleged nor proved any facts under which McCulloch or Burt owed Paul any duty with respect to the provision of legal advice. Paul therefore has no cause of action against McCulloch and Burt for breach of any duty arising from an attorney-client relationship. See White v. Bayless, 32 S.W.3d 271, 275 (Tex. App.-San Antonio 2000, pet. denied) ("An attorney's duties that arise from the attorney-client relationship are owed only to the client, not to third persons, such as adverse parties."). He instead has attempted to pursue claims against the attorneys based on their attorney-client relationship with Nancy.

         Although Paul asserts that Nancy's attorneys owe fiduciary duties to the Estate or its beneficiaries, he cites no authority in support of that assertion. He instead cites authorities stating that (1) an attorney owes fiduciary duties to a client, and (2) an executor owes fiduciary duties to an estate's beneficiaries. Given his reliance on such authorities, Paul appears to assume that these different relationships can be combined so that the Estate beneficiaries stand in the shoes of the attorneys' client, or that the attorneys stand in the shoes of the Estate's executrix. These are separate relationships, however, and the distinction between them cannot be ignored. Cf. Huie v. DeShazo, 922 S.W.2d 920, 922-25 (Tex. 1996) (orig. proceeding) (rejecting the argument that attorneys for trustees or executors can reveal attorney-client communications to the trust's or estate's beneficiaries because the attorney "is also working, in tandem with the fiduciary, for the benefit of the beneficiaries, " and instead holding that the attorney-client privilege protects communications between the trustee and the trustee's attorney from disclosure to the trust's beneficiaries (quoting Report of the Special Study Committee on Professional Responsibility- Counselling the Fiduciary, 28 Real Prop., Prob., & Tr. J. 823 (1994))).

         Although Paul complains of the legal advice that he speculates McCulloch or Burt provided or failed to provide to Nancy, Paul has neither alleged nor proved facts under which he has standing to assert claims for breach of a duty that opposing counsel owed to their client. Cf. McCamish, Martin, Brown & Loeffler v. F.E. Appling Interests, 991 S.W.2d 787, 792 (Tex. 1999) ("The general rule is that persons who are not in privity with the attorney cannot sue the attorney for legal malpractice."); Thompson v. Vinson & Elkins, 859 S.W.2d 617, 621 (Tex. App.- Houston [1st Dist.] 1993, writ denied) ("[T]hird parties have no standing to sue attorneys on causes of action arising out of their representation of others." (quoting Dickey v. Jansen, 731 S.W.2d 581, 582-83 (Tex. App.-Houston [1st Dist.] 1987, writ ref'd n.r.e.)). Paul has alleged no facts that would bring his claim for fee forfeiture within an exception to this general rule.

         Given the purpose that fee forfeiture is intended to serve, this equitable remedy does not extend to a litigant who is dissatisfied with the legal advice opposing counsel rendered to the litigant's adversary. We overrule this portion of Paul's first issue.

         B. Declaratory Judgment Concerning Forfeiture of Nancy's Attorneys' Fees

         Paul additionally states in his first issue that the trial court erred in finding that he "has no claims or causes of action for forfeiture against the attorneys representing [Nancy]." He contends that, as a devisee interested in a decedent's estate, he can pursue declaratory relief concerning fee forfeiture under Texas Civil Practice and Remedies Code sections 37.005(3) and 37.005(4). These parts of the Uniform Declaratory Judgments Act provide as follows:

A person interested as or through an executor or administrator, including an independent executor or administrator, a trustee, guardian, other fiduciary, creditor, devisee, legatee, heir, next of kin, or cestui que trust in the administration of a trust or of the estate of a decedent, an infant, mentally incapacitated person, or insolvent ...

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