in Re: Expunction Request by Tommy Perkins, Jr. ( 2012 )

In The
Court of Appeals
Sixth Appellate District of Texas at Texarkana
_________________________
No. 06-11-00108-CV
______________________________
STONEWALL FINANCIAL SERVICES CORPORATION,
DOUGLAS W. BRADY AND THE LAW OFFICES OF
DOUGLAS W. BRADY, PC, D/B/A BRADY & COLE, PC, Appellants
V.
GARY CORONA, Appellee
On Appeal from the 162nd Judicial District Court
Dallas County, Texas
Trial Court No. 08-01823
Before Morriss, C.J., Carter and Moseley, JJ.
Memorandum Opinion by Justice Moseley
MEMORANDUM OPINION
Stonewall Financial Services filed suit against Gary Corona, alleging that it held an
outstanding debt against Corona.1 During the progress of the lawsuit, attorney’s fees were
awarded against Stonewall. Ultimately, the trial court granted Corona’s plea to the jurisdiction
over the matter and ordered Stonewall’s case dismissed. Stonewall has appealed both the
dismissal based on the plea to the jurisdiction and the award of attorney’s fees against it as
sanctions. We reverse the trial court’s ruling on the plea to the jurisdiction; because that holding
will reinstate the lawsuit, we decline to address the point of error concerning attorney fee
sanctions.
The Parties and Their History
Corona hired the law firm of Brady & Cole to represent him in litigation in February
2004 and paid the law firm an initial retainer of $10,000.00, with billing to be on an hourly basis
for services rendered. Within about two weeks after first retaining Brady & Cole, Corona
became dissatisfied with the representation and terminated the relationship. After Corona
terminated the attorney/client relationship, Brady & Cole sent Corona bills for services rendered
over and above the initial retainer. Corona informed Brady & Cole that he had no intention of
paying the disputed services, and Corona received no more statements for services after about
October 2004. Corona believed that the matter of the disputed billing had been dropped by Brady
& Cole. Despite Corona’s belief, in February 2008, he was sued by Stonewall, who claimed to
1
Originally appealed to the Fifth Court of Appeals, this case was transferred to this Court by the Texas Supreme
Court pursuant to its docket equalization efforts. See TEX. GOV’T CODE ANN. § 73.001 (West 2005). We are
unaware of any conflict between precedent of the Fifth Court of Appeals and that of this Court on any relevant issue.
See TEX. R. APP. P. 41.3.
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have been assigned Brady & Cole’s right to recover the past attorney’s fees. Months of
contentious discovery and litigation ensued, the details of which are not necessary to our
resolution of this matter.
In May 2011, Corona filed a plea to the trial court’s jurisdiction, arguing that the
assignment from Brady & Cole to Stonewall was a sham transaction and that the assignment was
void as against public policy. Thus, argued Corona, Stonewall lacked standing to file suit based
on the assigned claim. Proceeding further, he maintained that since Stonewall lacked standing
or a justiciable interest in the alleged action between Corona and his former attorneys,2 the trial
court had no jurisdiction over Stonewall’s suit. Without providing the rationale employed, the
trial court granted Corona’s plea to the jurisdiction, dismissing the lawsuit.
The Plea to the Jurisdiction
A plea to the jurisdiction challenges the trial court’s subject-matter jurisdiction. Bland
Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 554 (Tex. 2000). Because subject-matter jurisdiction is
a question of law, we review the trial court’s ruling on the plea de novo. Mayhew v. Town of
Sunnyvale, 964 S.W.2d 922, 928 (Tex. 1998). In deciding a plea to the jurisdiction, a court may
not consider the merits of the case, but must restrict its consideration to only the plaintiff’s
pleadings and the evidence relevant to the jurisdictional inquiry. County of Cameron v. Brown,
80 S.W.3d 549, 555 (Tex. 2002); Berry v. Bd. of Regents of Tex. S. Univ., 116 S.W.3d 323, 324–
25 (Tex. App.—Houston [14th Dist.] 2003, pet. denied). We accept the allegations in the
2
The firm Brady & Cole was subsequently disbanded; Douglas Brady, of that firm, went on to start another firm.
Brady also was the president of Stonewall and represented Stonewall throughout these proceedings, including
arguing at trial and appellate oral arguments.
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pleadings as true in determining whether an incurable jurisdictional defect is apparent, rendering
it impossible for the plaintiff’s claims to confer jurisdiction on the trial court. Bexar Cnty. v.
Gant, 70 S.W.3d 289, 292 (Tex. App.—San Antonio 2002, pet. denied). A reviewing court
construes the pleadings liberally in favor of the plaintiff. City of Waco v. Lopez, 259 S.W.3d
147, 150 (Tex. 2008).
As the party urging the plea to the trial court’s jurisdiction, it was Corona’s burden to
present conclusive proof of the trial court’s lack of jurisdiction. Tex. Dep’t of Parks & Wildlife
v. Miranda, 133 S.W.3d 217, 227–28 (Tex. 2004); see also City of Austin v. Rangel, 184 S.W.3d
377, 382 (Tex. App.—Austin 2006, no pet.). At the hearing on the plea to the jurisdiction, no
evidence was offered. Corona’s first amended plea to the jurisdiction contained his verification,
in which he stated he had read the plea, and the facts therein were within Corona’s personal
knowledge and true and correct. Those pleadings recounted the history of Corona’s
attorney/client relationship with Brady & Cole, his dismissal of the law firm, the disputed billing,
the assignment to Stonewall, and a summary of the events during the current litigation (including
the grant of a summary judgment in Stonewall’s favor, which found a counterclaim brought by
Corona was barred by limitations).
As stated, we consider Stonewall’s pleadings liberally in its favor. “[I]f a plea to the
jurisdiction challenges the existence of jurisdictional facts, we consider relevant evidence
submitted by the parties when necessary to resolve the jurisdictional issues raised, as the trial
court is required to do.” Miranda, 133 S.W.3d at 227. Corona’s sworn plea does not challenge
jurisdictional facts. Rather, the plea simply states the history and relationship of the parties and
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the litigation. Stonewall’s pleadings must be construed in its favor. Its petition alleged that
Stonewall is a Texas corporation, that Brady & Cole had a contractual relationship with Corona,
that Corona owed a balance under that contractual agreement, that Brady & Cole assigned its
rights under that agreement to Stonewall, and that Corona failed to respond to Stonewall’s
attempt to collect under the assigned agreement. The petition sought damages under the
agreement between Brady & Cole and Corona in the amount of $26,856.25. Attached to the
amended petition were a summary of the amount allegedly owed, a copy of a written assignment
from Brady & Cole to Stonewall, and a copy of a demand letter from Stonewall to Corona.
Stonewall’s petition alleged sufficient facts to invoke the trial court’s jurisdiction. See First-
Citizens Bank & Trust Co. v. Greater Austin Area Telecomms. Network, 318 S.W.3d 560, 566,
569 (Tex. App.—Austin 2010, no pet.) (assignee has right to assert assignor’s contractual rights;
adequately pled facts to establish jurisdiction).
Corona’s Claimed Bases for Sustaining the Plea to the Jurisdiction
Corona offers several reasons that he believes the trial court’s order on the plea to the
jurisdiction should be upheld.
Corona first claims that since he terminated Brady & Cole’s representation for cause, no
liquidated damage could have been assigned. However, this is more in the nature of a potential
defense to the suit on the assignment than a jurisdictional bar to Stonewall’s suit.3 Similarly,
3
Additionally, the cases cited by Corona for this argument, Rocha v. Ahmad, 676 S.W.2d 149, 156 (Tex. App.––San
Antonio 1984, writ dism’d), and Augustson v. Linea Aerea Nacional-Chile S.A., 76 F.3d 658, 662 (5th Cir. 1996),
involve contingency fee contracts, whereas the agreement between Brady & Cole and Corona was not a contingency
contract.
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Corona’s argument that Stonewall did not demonstrate the reasonableness of the claimed
attorney’s fees4 is a matter of evidentiary sufficiency and is not jurisdictionally dispositive.
Second, Corona claims that Brady, as part of the law firm Brady & Cole, impermissibly
disclosed confidential information to Stonewall, as part of the assignment.5 Stonewall counters
by arguing no confidential information was conveyed from the law firm to Stonewall; rather,
only when Corona replied to Stonewall’s discovery requests was any information which could
qualify as confidential produced. Corona relies on an opinion from the Committee on
Professional Ethics for the State Bar of Texas, which concluded that an attorney may not sell
accounts receivable to a third-party factoring company without first obtaining from the client
consent to disclosure of confidential information. Tex. Ethics Comm’n Op. No. 464, 52 Tex.
B.J. 1200. “[Texas Committee on Professional Ethics] opinions are concerned with matters of
attorney discipline and are advisory rather than binding.” Sidley Austin Brown & Wood, LLP v.
J.A. Green Dev. Corp., 327 S.W.3d 859, 866 (Tex. App.––Dallas 2010, no pet.) (citing Labidi v.
Sydow, 287 S.W.3d 922, 929 (Tex. App.––Houston [14th Dist.] 2009, orig. proceeding)). There
was no evidence presented that indicates that any unauthorized disclosure of confidential
information actually took place. We do not need to determine (nor do we determine) whether the
cited ethics opinion was violated. Because the rulings of the Committee on Professional Ethics
4
See Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex. 1997).
5
We can find nothing in the record or briefing where Corona actually describes what confidential information was
disclosed––instead, he invokes the Professional Ethics Opinion discussed above, which stated, “In some cases, the
fact that the lawyer was engaged by the client may be confidential; in many cases, the nature of the legal services
resulting in the fee statement would be confidential; in most cases, the amount of the fee owing and the fact that the
fee has not been paid would be confidential.” Tex. Ethics Comm’n Op. No. 464, 52 Tex. B.J. 1200 (1989).
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are binding on neither the trial court nor on us, we do not find any situation which would have
deprived the trial court of jurisdiction.
Corona cites Polland & Cook v. Lehmann, 832 S.W.2d 729, 736 (Tex. App.—Houston
[1st Dist.] 1992, writ denied), which pointed out that if a contract “has not been performed in
accordance with requisites set forth in the disciplinary rules, performance may be excused as
against public policy.” (Citing RESTATEMENT (SECOND) OF CONTRACTS § 181 (1979)).
Although it is possible that such an issue could be considered in determining whether Stonewall
should actually recover in its claim, this is not an issue which would serve to deprive the trial
court of jurisdiction to hear the matter. It does not appear to be authority for the assertion that
the violation of an ethical breach deprives the trial court of jurisdiction to hear the case.
Additionally, both Polland and Fleming v. Campbell, 537 S.W.2d 118, 119 (Tex. Civ. App.––
Houston [14th Dist.] 1976, writ ref’d n.r.e.), also cited by Corona, involved referral fees, not
contractual attorney’s fees. While it is true the Fleming court found the contract void and
unenforceable where there was not full disclosure of the fee splitting arrangement, that is not a
jurisdictional defect.
Corona also argues the assignment from Brady & Cole to Stonewall was made with an
eye to depriving Corona of any counterclaims he may have had against Brady & Cole. In the
trial court hearing, he called the assignment an “artifice,” a “scheme,” and a “fraud.” He pointed
to the fact that attorney Brady wears multiple hats in this fact circumstance––he was a principal
in the law firm of Brady & Cole, he represented both that law firm and Stonewall in the
litigation, and he was the president of Stonewall. Both at trial and on appeal, Corona claimed
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that public policy precluded such an assignment. Corona further argued that for the same reason
that claims against an attorney for malpractice are not assignable, an attorney or law firm should
not be able to assign claims for unpaid legal fees. We observe that a claim against an attorney
for malpractice is not the same as a claim for unpaid legal fees; the nature of the claims are
sufficiently different that no parallel can be drawn from one to the other.
Nothing presented for our review conclusively demonstrates the trial court was without
jurisdiction, and thus we find the trial court erred to grant Corona’s plea. We sustain Stonewall’s
first point of error.
Attorney’s Fee Sanctions Not Part of Final Judgment
Because we find the case was improperly dismissed pursuant to the plea to the
jurisdiction, the case below is still pending and no final judgment has been rendered in it. Unless
specifically authorized by statute, Texas appellate courts only have jurisdiction to review final
judgments. TEX. CIV. PRAC. & REM. CODE ANN. § 51.014 (West Supp. 2012); see also Stary v.
DeBord, 967 S.W.2d 352, 352–53 (Tex. 1998). The attorney’s fees awarded were awarded as
sanctions for discovery abuse. Rule 215.3, upon which the district court relied in this case,
authorizes trial courts to impose appropriate sanctions upon persons who abuse the discovery
process. TEX. R. CIV. P. 215.3. The rule states that orders imposing such sanctions “shall be
subject to review on appeal from the final judgment.” TEX. R. CIV. P. 215.2(b)(8). There is no
provision for interlocutory appeal; “[d]iscovery sanctions are not appealable until the district
court renders a final judgment.” TEX. R. CIV. P. 215.2(b)(8); Bodnow Corp. v. City of Hondo,
721 S.W.2d 839, 840 (Tex. 1986) (per curiam).
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We reverse the order of dismissal and remand the case to the trial court for further
proceedings.
Bailey C. Moseley
Justice
Date Submitted: August 9, 2012
Date Decided: September 18, 2012
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