in-re-franklin-salazar-jo-ann-patton-walter-virden-iii-rod-barber-chad ( 2010 )

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 2-09-405-CV
IN RE FRANKLIN SALAZAR; JO ANN
PATTON; WALTER VIRDEN, III; ROD
BARBER; CHAD BATES; JACK LEO IKER;
CORPORATION FOR THE EPISCOPAL
DIOCESE OF FORT WORTH; AND THE
EPISCOPAL DIOCESE OF FORT WORTH
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ORIGINAL PROCEEDING
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OPINION
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I. Introduction
Relators Franklin Salazar, Jo Ann Patton, Walter Virden, III, Rod Barber,
Chad Bates, Jack Leo Iker, Corporation for the Episcopal Diocese of Fort Worth
(the Corporation), and The Episcopal Diocese of Fort Worth (the Fort Worth
Diocese), Defendants in the underlying cause, have filed a petition for writ of
mandamus complaining of the September 16, 2009 order entered by
Respondent, Judge John P. Chupp of the 141st District Court, which granted in
part and denied in part Relators= motion to show authority under rule 12 of the
rules of civil procedure. See Tex. R. Civ. P. 12. Relators ask this court to order
the trial court to grant complete relief on their motion to show authority, bar
attorneys Jonathan Nelson and Kathleen Wells from representing the Corporation
and the Fort Worth Diocese in the underlying suit, and Adismiss the underlying
case insofar as it is purportedly brought on behalf of the Corporation or the [Fort
Worth] Diocese.@ We conditionally grant Relators= petition for writ of mandamus
and vacate our November 16, 2009 order staying further proceedings in the trial
court.
II. Background
The underlying suit involves a dispute over control of the property
belonging to the Fort Worth Diocese that is held by the Corporation. The suit
was brought by The Episcopal Church (TEC), also naming as plaintiffs the Fort
Worth Diocese and the Corporation, against Relators as Defendants. TEC
describes itself as Aa member of the Anglican Communion, a worldwide
fellowship of autonomous regional churches known as >Provinces,= each [of
which] forms its own constituent units [] within its own geographical territory.@
The Fort Worth Diocese, a Texas unincorporated association, was formed
in 1983 and thereafter entered into membership with TEC. The Corporation is a
Texas non-profit corporation that holds, manages, and administers all property
and funds acquired by gift, will, or otherwise for the use and benefit of the Fort
Worth Diocese. It is undisputed that Relator Iker was not appointed by TEC but
was duly elected by delegates at a regular meeting of the Fort Worth Diocesan
Convention as Bishop of the Fort Worth Diocese, pursuant to the Constitution of
the Fort Worth Diocese, and ordained in 1993. Upon his installation, Bishop Iker
automatically became Chairman of the Board of Trustees of the Corporation.
The other individual Relators were likewise not appointed but were duly elected
and received their offices as Trustees of the Corporation at a Fort Worth
Diocesan Convention.
In 2006, based on actions allowed by TEC that many believed violated the
traditional and foundational purposes of the Church, Relators filed Amended and
Restated Articles of Incorporation, allegedly in accordance with Texas law,
removing any reference to TEC in the Corporation=s affairs. At the two
immediately following Annual Conventions of the Fort Worth Diocese in 2007 and
2008, a majority of the delegates to those Diocesan Conventions voted to amend
the Fort Worth Diocese=s Constitution and to withdraw the Fort Worth Diocese
from membership in TEC. Then, on November 15, 2008, the Convention of the
Fort Worth Diocese voted to enter into membership, and entered into
membership, with the Anglican Province of the Southern Cone, a different
province of the Anglican Communion.
On November 20, 2008, a disciplinary review committee of TEC
announced that Bishop Iker had Aabandoned the communionA of the Church.
The Presiding Bishop of TEC declared that Bishop Iker was removed from the
Ordained Ministry of TEC and thereby Aceased to be a bishop@ of TEC or the Fort
Worth Diocese. In February 2009, the Presiding Bishop of TEC convened a
Aspecial meeting@ of the Fort Worth Diocesan Convention, consisting of the
minority that had not prevailed at the two previous annual conventions, and
elected Edwin Gulick as AProvisional Bishop@ of the Fort Worth Diocese and
Chairman of the Board of Trustees for the Corporation. The Convention further
voted to reverse the constitutional amendments adopted at the two previous
Conventions and declared all relevant diocesan offices of the Fort Worth Diocese
Avacant.@ Bishop Gulick then appointed replacements for all offices, including
the Trustees of the Corporation.
Bishop Gulick and the newly appointed Trustees (the Gulick Group)
retained Jonathan Nelson and Kathleen Wells as attorneys purportedly to
represent the Fort Worth Diocese and Corporation. Those attorneys, joined by
attorneys for TEC, then filed the underlying suit in the names of the Fort Worth
Diocese and the Corporation, but admittedly only on behalf of the Gulick Group,
against Bishop Iker and the elected Trustees who were purportedly removed and
replaced (the Iker Group), alleging that Bishop Iker is no longer a bishop of the
Church and that the five named Defendant Trustees of the Corporation have left
the Church. By the suit, TEC and the other two named plaintiffs seek control of
the church property, including the name and seal of the Fort Worth Diocese, and
a declaratory judgment as to the true identity of the current Bishop and Trustees
of the Corporation. In addition to Bishop Iker and those five named Defendant
Trustees, individually, the suit also names as a Defendant AThe Anglican
Province of the Southern Cone=s >Diocese of Fort Worth= holding itself out as >The
Episcopal Diocese of Fort Worth.=@
Relators answered and filed a third-party petition against the individual
members of the standing committee appointed by Bishop Gulick and a plea in
intervention by the Corporation. In response to a motion for summary judgment
filed by the plaintiffs, Relators filed a motion for continuance and their rule 12
motion to require Mr. Nelson and Ms. Wells to show their authority to prosecute
the suit on behalf of the Fort Worth Diocese and the Corporation.1 It is the trial
court=s order on the rule 12 motion from which Relators seek relief.
III. Standard of Review
Mandamus relief is proper only to correct a clear abuse of discretion when
there is no adequate remedy by appeal. In re Columbia Med. Ctr. of Las
Colinas, 290 S.W.3d 204, 207 (Tex. 2009) (orig. proceeding). A trial court
abuses its discretion if it incorrectly interprets or improperly applies the law. In re
1
Relators do not contest the authority of the attorneys for TEC to prosecute
the underlying suit on its behalf.
Dep=t of Family & Protective Servs., 273 S.W.3d 637, 642B43 (Tex. 2009) (orig.
proceeding); Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992).
Absent extraordinary circumstances, mandamus will not issue unless the
relator lacks an adequate remedy by appeal. In re Van Waters & Rogers,
Inc.,145 S.W.3d 203, 210B11 (Tex. 2004) (citing Walker, 827 S.W.2d at 839).
Whether a clear abuse of discretion can be adequately remedied by appeal
depends on a careful analysis of costs and benefits of interlocutory review. In re
McAllen Med. Ctr., Inc., 275 S.W.3d 458, 464 (Tex. 2008) (orig. proceeding). As
this balance depends heavily on the circumstances, it must be guided by analysis
of principles rather than simple rules that treat cases as categories. Id. An
appellate court should consider whether mandamus will allow the court to give
needed and helpful direction to the law that would otherwise prove elusive in
appeals from final judgments and whether mandamus will spare litigants and the
public the time and money utterly wasted enduring eventual reversal of
improperly conducted proceedings. In re Team Rocket, L.P., 256 S.W.3d 257,
262 (Tex. 2008) (orig. proceeding).
IV. The Rule 12 Order
After two hearings at which the trial court received affidavits, testimony,
documents, and arguments of the parties, the trial court entered an order titled
AOrder Granting Rule 12 Motion@ in which the trial court found that Mr. Nelson and
Ms. Wells Ahave not discharged their burden of proof that they were hired by
individuals holding positions at the time of [their] hiring within The [Fort Worth
Diocese] and [The Corporation] that are associated with Bishop Iker@ and barred
those attorneys from appearing in the trial court as attorneys Afor the [Fort Worth
Diocese] and [The Corporation] that is associated with Bishop Iker.@ However,
the order of the trial court did not bar Mr. Nelson and Ms. Wells from appearing in
the case on behalf of the Fort Worth Diocese and Corporation generally, nor did it
strike the pleadings on behalf of those entities after an authorized person failed to
appear.
Thus, Relators interpret the trial court=s ruling as a partial denial of their
requested relief and ask us to order the trial court to Agrant their motion to show
authority and to dismiss the underlying case insofar as it is purportedly brought
on behalf of the Corporation or the [Fort Worth] Diocese.@
In relevant part, rule 12 states:
A party in a suit or proceeding pending in a court of this state may,
by sworn written motion stating that he believes the suit or
proceeding is being prosecuted or defended without authority, cause
the attorney to be cited to appear before the court and show his
authority to act. . . . At the hearing on the motion, the burden of proof
shall be upon the challenged attorney to show sufficient authority to
prosecute or defend the suit on behalf of the other party. Upon his
failure to show such authority, the court shall refuse to permit the
attorney to appear in the cause, and shall strike the pleadings if no
person who is authorized to prosecute or defend appears.
Tex. R. Civ. P. 12 (emphasis added).
The emphasized language states that once the trial court finds the
challenged attorney has not met her burden of proof, the trial court Ashall@ take
two additional steps: (1) bar the challenged attorney from appearing in the case
and (2) strike the pleadings if an authorized person does not appear. Id. The
term Ashall@ as used in a statute is generally recognized as Amandatory,@ creating
a duty or obligation. Helena Chem. Co. v. Wilkins, 47 S.W.3d 486, 493 (Tex.
2001) (citing Tex. Gov=t Code Ann. ' 311.016(2) (Vernon 2005)). Because we
apply the same rules of construction to the rules of civil procedure as we apply to
statutes, we conclude that the requirements of rule 12 that follow from a finding
that the attorneys failed to discharge their burden of proof to show their authority
are mandatory. See BASF Fina Petrochemicals L.P. v. H.B. Zachry Co., 168
S.W.3d 867, 871 (Tex. App.CHouston [1st Dist.] 2004, pet. denied) (recognizing
principles of statutory construction apply to rules of civil procedure); In re R.C.M.,
No. 02-09-00080, 2010 WL 1267759, at *5 (Tex. App.CFort Worth Apr. 1, 2010,
no pet.) (mem. op.) (same); see also Helena Chem. Co., 47 S.W.3d at 493
(holding term Ashall@ is generally construed as mandatory); Thordson v. City of
Houston, 815 S.W.2d 550, 551 (Tex. 1991) (holding requirement of rule that
judge Ashall@ set hearing is mandatory).
Although the trial court found that Mr. Nelson and Ms. Wells did not meet
their rule 12 burden of proof, the trial court=s finding was only that they failed to
discharge that burden to show that they Awere hired by individuals holding
positions . . . within the [Fort Worth Diocese] and [The Corporation] that are
associated with Bishop Iker.@ Additionally, the trial court barred Mr. Nelson and
Ms. Wells only from appearing in the case as attorneys Afor the [Fort Worth
Diocese] and [The Corporation] that is associated with Bishop Iker@ and did not
strike the pleadings filed by Mr. Nelson and Ms. Wells on behalf of the Fort Worth
Diocese and the Corporation.
V. Contentions of the Parties
Relators contend that the trial court abused its discretion by not striking the
pleadings filed by Mr. Nelson and Ms. Wells in the names of the Fort Worth
Diocese and the Corporation because it is undisputed that these attorneys were
not hired by the duly elected Iker Group but by the Gulick Group, which merely
claims to be the new Provisional Bishop and five newly appointed Trustees that
have purported to sue in the names of the Fort Worth Diocese and the
Corporation. Relators argue that rule 12 is a proper vehicle to decide not only
whether an attorney has authority to represent a party in a particular suit but also
whether those hiring the attorney have authority to do so on behalf of the party
they purport to represent. Accordingly, Relators urge that the issue of the
authority of the Gulick Group to hire Mr. Nelson and Ms. Wells on behalf of the
Fort Worth Diocese and the Corporation should be decided based upon neutral
principles of law. See Jones v. Wolf, 443 U.S. 595, 603B05, 99 S. Ct. 3020,
3025B26 (1979) (holding civil courts may adopt neutral principles of law as means
of adjudicating intra-church property ownership disputes so long as resolution
entails no inquiry into religious doctrine).
Relying on the Constitution of the Fort Worth Diocese and the
requirements of the Texas Non-Profit Act as well as the Constitution and by-laws
of the Corporation, which holds title to the funds and endowments in question,
Relators argue that no persons other than the Individual Relators had authority to
hire attorneys for the Corporation or the Fort Worth Diocese, and because the
attorneys failed to establish any other person=s authority to do so, the trial court
abused its discretion in denying the motion with respect to the Corporation and
the Fort Worth Diocese.
Real Parties in Interest respond that the trial court actually denied Relators=
motion, as shown by the trial court=s comment during the hearing that the identity
issue would be better decided by a ruling on the merits than under rule 12. Real
Parties in Interest argue that the issue of the identity of the true Bishop and
Trustees lies at the heart of the suit, that a rule 12 motion is not an appropriate
vehicle for deciding that issue in the underlying case, and that the trial court acted
within its discretion by postponing that decision until the merits are decided in the
normal course of the litigation.
Real Parties in Interest further contend that, even if the trial court had
reached the identity issue, it would have been required to defer to TEC as the
sole arbiter of that issue, and that TEC has already determined that Relators C
Bishop Iker and the elected Trustees named as Defendants below C are no
longer serving as Bishop and Trustees of the Fort Worth Diocese and
Corporation but have abandoned the Fort Worth Diocese and vacated their
offices. Real Parties in Interest contend that, under the First Amendment, the
identity of the Bishop and the Trustees are Aecclesiastical@ questions and that this
Court must defer to the decision of TEC that the Gulick Group had the authority to
hire Mr. Nelson and Ms. Wells on behalf of the entities in question. See Serbian
E. Orthodox Diocese for U.S. of Am. and Canada v. Milivojevich, 426 U.S. 696,
710, 717, 96 S. Ct. 2372, 2381, 2384 (1976) (holding, under First Amendment,
decision of highest ecclesiastical tribunal of hierarchical church must be accepted
on matters of discipline, faith, ecclesiastical rule, custom, or law and that
defrocking of bishop was at Acore@ of ecclesiastical concern). Thus, Real Parties
in Interest argue that we should deny Relators= petition for writ of mandamus.
VI. Analysis
A. The Trial Court=s Abuse of Discretion
We do not reach the question of the true identity of the Bishop and
Trustees because we agree that the trial court deferred a resolution of that issue
pending a substantive motion or further proceedings on the merits, nor do we
express any opinion concerning the propriety of resolving this intra-church
dispute through litigation in a Texas state court. We do, however, apply the plain
language of rule 12 in the context of the proceeding as it has been presented to
us by the parties.
In that regard, neither side has challenged the trial court=s finding that Mr.
Nelson and Ms. Wells did not discharge their burden of proof that they were hired
by individuals holding positions at the time of their hiring within the Fort Worth
Diocese and the Corporation that were associated with Bishop Iker. Absent
such proof, while Mr. Nelson and Ms. Wells may be authorized to represent the
individuals who hired them, these attorneys have not established their authority to
represent or appear on behalf of the Fort Worth Diocese and the Corporation as
required by rule 12.
It is undisputed that there is only one Corporation and only one Fort Worth
Diocese, regardless of how those entities are named or characterized in the
underlying suit C whether as entities, as individuals Aholding themselves out@ as
those entities, or as individuals Aassociated with@ one or the other Bishop. There
is a single Fort Worth Diocese and Corporation, which both a majority and a
minority faction claim to control.2 The attorneys whose authority is challenged
are either authorized to represent those two entities or they are not. But the trial
2
Cf. De Zavala v. Daughters of the Repub. of Tex., 58 Tex. Civ. App. 19,
23B24, 124 S.W. 160, 162 (Tex. Civ. App.CGalveston 1909, writ ref=d)
(determining which of two factions constituted properly elected officers that
represented organization but noting that, in effect, actions of rival factions
constituted two separate corporations).
court has barred them from representing only the Corporation and the Fort Worth
Diocese associated with the Iker Group. We are aware of no statute or common
law rule allowing attorneys to prosecute a suit in the name of a corporation or
other entity on behalf of only one faction or part of that corporation or entity
against another part or faction.3
Additionally, we are guided by the rule emphatically stated in Rule 1.12 of
the Texas Disciplinary Rules of Professional Conduct that A[a] lawyer retained or
employed by an organization represents the entity,@ not its directors, officers,
employees, members, or other constituents. Tex. Gov=t Code Ann. Title 2, Subt.
G, App. A, Art. 10, ' 9, Rule 1.12 (Vernon Supp. 2009). This rule reflects
established law that A[i]n a corporation=s affairs, there is but one client C the
corporation.@ In re Marketing Investors Corp., 80 S.W.3d 44, 49 (Tex.
App.CDallas 1998) (orig. proceeding) (quoting Commodity Fixtures Trading
Comm=n v. Weintraub, 471 U.S. 343, 348, 105 S. Ct. 1986, 1991 (1985)). A
lawyer representing a corporation and the corporation have a fiduciary
relationship. See Bryan v. Bartlett, 435 F.2d 28, 37 (8th Cir. 1970), cert. denied,
402 U.S. 915 (1971). Thus, a lawyer may not be hired to represent a corporation
3
We express no opinion as to whether a derivative action may be
maintained by members of a non-profit entity on its behalf. See Flores v.
Star-Cab Co-Op. Ass=n, Inc., No. 07-06-00306, 2008 WL 3980762, at *7 (Tex.
App.CAmarillo, Aug. 28, 2008, pet. denied) (mem. op.) (noting lack of statutory
authority for and not deciding issue).
by one of two factions in the organization against the other faction. See Tex.
Gov=t Code Ann. Title 2, Subt. G, App. A, Art. 10, ' 9, Rule 1.12, cmt. 4.
Because the interests of the individuals within the Fort Worth Diocese and the
Corporation associated with Bishop Iker are adverse to those associated with
Bishop Gulick, by whom Mr. Nelson and Ms. Wells were hired, those attorneys
may represent the latter individuals but not the entities when they did not
discharge their burden of proving authority to do so.
The trial court did not determine on the merits which Bishop and which
Trustees are the authorized persons within the Corporation and the Fort Worth
Diocese, nor do we. The question of Aidentity@ remains to be determined in the
course of the litigation. For the purposes of the rule 12 motion, however, the
effect of the trial court=s order is that Mr. Nelson and Ms. Wells have not
established authority to represent the Fort Worth Diocese and the Corporation.
Given the mandates of rule 12, it was not within the discretion of the trial court not
to strike the pleadings filed by Mr. Nelson and Ms. Wells on behalf of the
Corporation and the Fort Worth Diocese and not to bar those attorneys from
participating in the cause on behalf of the Corporation and the Fort Worth
Diocese. See Thordson, 815 S.W.2d at 551 (holding, under language of rule
165a(4) requiring that judge Ashall@ set hearing on motion to reinstate as soon as
practicable, it was not within trial court=s discretion to fail to hold a hearing on
motion to reinstate). Therefore, the trial court clearly abused its discretion.
B. No Adequate Remedy by Appeal
Having held that the trial court clearly abused its discretion, we must still
determine whether Relators have an adequate remedy by appeal. The supreme
court has explained that A[m]andamus review of incidental, interlocutory rulings by
the trial courts unduly interferes with trial court proceedings, distracts appellate
court attention to issues that are unimportant both to the ultimate disposition of
the case at hand and to the uniform development of the law, and adds
unproductively to the expense and delay of civil litigation.@ In re Prudential Ins.
Co. of Am., 148 S.W.3d 124, 136 (Tex. 2004). However, the court has further
explained,
Mandamus review of significant rulings in exceptional cases may be
essential to preserve important substantive and procedural rights
from impairment or loss, allow the appellate courts to give needed
and helpful direction to the law that would otherwise prove elusive in
appeals from final judgments, and spare private parties and the
public the time and money utterly wasted enduring eventual reversal
of improperly conducted proceedings.
Id. This is an exceptional case justifying mandamus relief because the failure to
correct the trial court=s abuse of discretion would Aso skew[] the litigation process
that any subsequent remedy by appeal [would be] inadequate.@ Travelers
Indem. Co. of Conn. v. Mayfield, 923 S.W.2d 590, 595 (Tex. 1996) (orig.
proceeding) (granting mandamus relief where trial court=s abuse of discretion by
requiring a party to advance litigation costs of the opposition in addition to its own
expenses so Aradically skew[ed] the procedural dynamics of the case@ that any
subsequent remedy by appeal was inadequate); see also TransAm. Nat. Gas
Corp. v. Powell, 811 S.W.2d 913, 919 (Tex. 1991) (eventual remedy by appeal
from trial court=s interlocutory order imposing death penalty sanction is
inadequate because A[t]he entire conduct of the litigation is skewed@ by imposition
of the sanction).
Because a corporation cannot sue itself, the trier of fact will be
unnecessarily confused by presentations from two opposing factions who claim to
be the Corporation and the Fort Worth Diocese. Unless the trial court=s order is
modified to strike the pleadings filed by Mr. Nelson and Ms. Wells on behalf of the
Corporation and the Fort Worth Diocese and to bar those attorneys from
appearing in the underlying cause as attorneys of record for the Corporation and
the Fort Worth Diocese, confusion in the litigation will be perpetuated, including
the appearance that the issue is already resolved in favor of one party before the
questions of identity and title to the property held by the Corporation and the Fort
Worth Diocese are determined in the course of the litigation. Moreover, as the
parties are currently postured, any judgment against the Iker Group would be
reversible because the Iker Group was not shown to have authorized bringing this
suit on behalf of the Corporation or the Fort Worth Diocese. See City of Grand
Prairie v. Finch, 294 S.W.2d 851, 853 (Tex. Civ. App.CDallas 1956, no writ)
(noting that a finding that a party produced no evidence of the authority with
which the suit was prosecuted is ordinarily reversible error). An appeal after final
judgment would be inadequate because the time and money for trial as the
parties are currently named and aligned would be wasted in enduring a
proceeding that concludes without a binding judgment.4 Therefore, we hold that
Relators do not have an adequate remedy by appeal.
VII. Conclusion
We conditionally grant the writ of mandamus and direct the trial court to
modify its order of September 16, 2009 to follow the mandates of rule 12 and to
strike the pleadings filed by Mr. Nelson and Ms. Wells on behalf of the
Corporation and the Fort Worth Diocese and bar them from appearing in the
underlying cause as attorneys of record for those named plaintiffs. If the trial
court fails to do so, the writ will issue.
ANNE GARDNER
JUSTICE
PANEL: DAUPHINOT, GARDNER, and MEIER, JJ.
DELIVERED: June 25, 2010
4
We express no opinion on the merits of the underlying suit and simply
note that this is one of the possible difficulties that might occur if the trial court=s
order is not modified.