Roy Long and Ernestine Long v. Richard Elliott and West Texas Centers for MHMR ( 2013 )

Opinion filed October 31, 2013
In The
Eleventh Court of Appeals
__________
No. 11-11-00307-CV
__________
ROY LONG; ERNESTINE LONG; GREGORY
HOLLINGSHEAD, INDIVIDUALLY AND AS NEXT FRIEND OF
KELCEY HOLLINGSHEAD, KLAYTON HOLLINGSHEAD,
AND KANYON HOLLINGSHEAD; KELCEY HOLLINGSHEAD;
HALL & HALL, L.L.P.; FORBES & FORBES; AND BURT L.
BURNETT, INDIVIDUALLY AND ON BEHALF OF THE MINOR
HOLLINGSHEAD CHILDREN, Appellants
V.
RICHARD ELLIOTT AND WEST TEXAS
CENTERS FOR MHMR, Appellees
On Appeal from the 32nd District Court
Nolan County, Texas
Trial Court Cause No. 18,701
OPINION
This case is a wrongful death and survival action. It arose from an
automobile accident in which Stacey Hollingshead was tragically killed. The trial
court entered a final judgment in this case on March 20, 2009. Richard Elliott and
West Texas Centers for MHMR (MHMR) appealed from the judgment. We
reversed the judgment of the trial court and remanded the case for further
proceedings consistent with our opinion. See Elliott v. Hollingshead, 327 S.W.3d
824 (Tex. App.—Eastland 2010, no pet.). We will refer to the earlier appeal as
Elliott I.
Following remand, the trial court held a hearing and, later, entered a final
judgment on remand. The following parties have appealed from the final judgment
on remand: Roy Long; Ernestine Long; Gregory Hollingshead, individually and as
next friend of Kelcey Hollingshead, Klayton Hollingshead, and Kanyon
Hollingshead; Kelcey Hollingshead; Hall & Hall, L.L.P.; Forbes & Forbes; and
Burt L. Burnett, individually and on behalf of the minor Hollingshead children.
We modify and affirm.
Background
At the time of the accident, Stacey was in the course and scope of her
employment with MHMR. Stacey, who had formerly been married to Gregory
Hollingshead, was survived by her minor children: Kelcey, Klayton, and Kanyon
Hollingshead. Stacey’s employer, MHMR, was a self-insured governmental entity
for workers' compensation purposes, and it was a member of a risk management
fund. After Stacey died, the risk management fund began paying weekly workers’
compensation death benefits to Stacey’s children.
As a result of Stacey’s death, Appellant Gregory Hollingshead, individually
and as next friend and guardian of the person of Kelcey, Klayton, and Kanyon,
filed a wrongful death suit against three defendants. Appellee Elliott, an attorney,
represented Hollingshead and the minor plaintiffs in the wrongful death suit. Roy
Long and Ernestine Long, Stacey’s parents, intervened in the wrongful death suit.
They were represented by the law firm of Appellant Forbes & Forbes. Later,
Appellant Hall & Hall, L.L.P., a law firm, joined the Forbes firm in the
2
representation of the Longs. Appellee MHMR, represented by Michael J.
Donovan, intervened in the suit. MHMR sought reimbursement for the workers’
compensation benefits that had been paid to the minor plaintiffs.
The Longs added additional defendants as parties in an amended plea in
intervention. The Longs, in the capacity of representatives of Stacey’s estate, also
added a survival action on behalf of the estate. Hollingshead, acting as next friend
and guardian of the minor plaintiffs, and MHMR also asserted claims against the
additional defendants. Upon motion by the Longs, the trial court realigned them as
plaintiffs. The trial court also appointed Burt L. Burnett as attorney ad litem for
the minor plaintiffs.
Hollingshead and the Longs agreed to settle the claims against all defendants
for a total of $4,016,461.99. On June 24, 2008, the trial court held a settlement
hearing. At the hearing, MHMR sought reimbursement for workers’ compensation
benefits paid to the minor plaintiffs and funeral expenses paid that totaled
$59,377.40. The attorney ad litem and the Longs’ counsel raised questions about
Elliott’s representation of the minor plaintiffs. After hearing evidence and
argument of counsel, the trial court approved the settlement. The trial court also
approved the claims of the Forbes firm and the Hall firm for attorney’s fees and
costs. The trial court approved the total amount of Elliott’s attorney’s fees but also
ordered that $200,000 of those fees be paid into the registry of the court pending a
possible appeal of the case. The trial court concluded that Elliott’s actions had
caused the attorney ad litem to incur additional attorney’s fees. Accordingly, the
trial court found that $15,000 of Elliott’s attorney’s fees should be paid toward the
attorney ad litem’s total approved fee of $40,000.
On July 21, 2008, the trial court entered a judgment approving the
settlement. In the judgment, the trial court ordered that the amount of $259,377.40
be paid into the registry of the court. This amount consisted of $200,000 of
3
Elliot’s attorney’s fees and $59,377.40 that MHMR sought to recover on its
subrogation claim. The trial court ordered that the funds were “to be disbursed on
further order of the Court as it relates to any additional attorney’s fees that may be
owed Richard Elliott and any funds that may or may not be owed to [MHMR].”
Hollingshead terminated Elliott from representing him and the minor plaintiffs.
Later, Hollingshead hired the Hall firm to represent him and the minor plaintiffs.
Elliott filed a plea in intervention in which he sought to recover the part of his
attorney’s fees that had been put into the registry of the court. Elliott and MHMR
filed notices of appeal from the judgment. However, because the judgment did not
dispose of all parties and claims, it was not a final, appealable judgment, and we
did not have jurisdiction to entertain the appeal at that time.
On February 27, 2009, the trial court held another hearing. On March 20,
2009, the trial court entered a final judgment approving the settlement. In the
judgment, the trial court allocated 75% of the settlement proceeds to the survival
claims brought on behalf of Stacey’s estate and 25% of the settlement proceeds to
the wrongful death claims. The trial court found that MHMR had paid $59,377.40
in past workers’ compensation benefits to the minor plaintiffs. The trial court
reduced the $59,377.40 amount by one-third for payment of attorney’s fees of
$19,792.47 to the plaintiffs’ attorneys and by a pro rata share of expenses of
$3,574.71 that it allocated to MHMR’s claim for reimbursement of past benefits
paid. Thus, the trial court concluded that MHMR was entitled to payment out of
the settlement proceeds on its subrogation claim for payment of past benefits in the
amount of $36,010.22.
In the judgment, the trial court determined MHMR’s advance against future
benefit payments to the minor plaintiffs, which is also known as a “payment
holiday.” In calculating the payment holiday, the trial court stated that MHMR had
subrogation rights “only in the net recovery by [the minor plaintiffs] for their
4
wrongful death claims.” As explained in our opinion in Elliott I, the trial court
concluded that MHMR had a payment holiday in the amount of $244,382.97.
Elliott I, 327 S.W.3d at 831.
In its judgment, the trial court found that Elliott breached the fiduciary duties
that he owed the minor plaintiffs in representing them in this case. Based on this
finding, the trial court found that good cause existed to require Elliott to forfeit
$100,000 of his attorney’s fees to the minor plaintiffs and to pay $15,000 of the
attorney ad litem’s fees.
The trial court ordered the district clerk to pay the funds that were in the
registry of the court as follows: (1) $100,000 to Elliott; (2) $36,010.22 to MHMR;
and (3) $143,460.55 to Stacey’s estate. The trial court ordered that the funds paid
to the estate were to be used solely for the benefit of the minor plaintiffs. The
payment to the estate included, among other funds, Elliott’s forfeited attorney’s
fees in the amount of $100,000, attorney’s fees out of MHMR’s subrogation
interest in the amount of $19,792.47, and a pro rata share of costs out of MHMR’s
subrogation recovery in the amount of $3,574.71.
In Elliott I, we reversed the trial court’s award of attorney’s fees of
$19,792.47 out of MHMR’s subrogation recovery to the plaintiffs’ attorneys and
remanded that issue to the trial court for further proceedings. Elliott I, 327 S.W.3d
at 836. After reviewing the evidence, we concluded that the trial court’s allocation
of 75% of the settlement proceeds to the survival claims, which amounted to more
than $3,000,000, was not supported by the evidence and that, “[a]t most, a minimal
allocation of the settlement proceeds to the survival claims may have been
justified, such as an award of funeral expenses.” Id. at 834. Thus, we also
remanded the issue of the allocation of the settlement proceeds to the trial court for
determination consistent with our opinion. Id. at 834–35. Also, we concluded that
the trial court erred by requiring Elliott to forfeit part of his attorney’s fees to the
5
minor plaintiffs because Hollingshead had not alleged a fee forfeiture claim on
behalf of the minor plaintiffs against Elliott. Id. at 837–38. Based on the absence
of pleadings, we held that the trial court abused its discretion by finding that Elliott
breached his fiduciary duties to the minor plaintiffs and by ordering that $100,000
of his attorney’s fees be forfeited. Id. at 838. For the same reason, we concluded
that the trial court erred by requiring Elliott to pay any part of the attorney ad
litem’s fees. Id.
After remand, the trial court held a hearing and then, on July 26, 2011,
entered its final judgment on remand. In the judgment, the trial court ordered that
MHMR was entitled to recover its full subrogation interest in the amount of
$59,377.40 for past benefits paid. The trial court did not award any attorney’s fees
to the plaintiffs’ attorneys out of MHMR’s subrogation recovery. The trial court
allocated 99.5% of the settlement proceeds to the wrongful death claims and 0.5%
of the settlement proceeds to the survival claims. Based on its allocation, the trial
court ordered that MHMR would receive an advance credit against future benefit
payments, or a “payment holiday,” in the amount of $2,040,622.60. The trial court
also ordered, among other things, that Elliott recover $100,000, which represented
the amount of attorney’s fees that the trial court had earlier required Elliott to
forfeit, from Stacey’s estate and that the attorney ad litem pay Elliott $15,000,
which represented the amount of attorney ad litem fees that the trial court had
earlier required Elliott to pay.
Issues on Appeal
Appellants present fifteen issues for review. In their issues, Appellants
contend that the trial court erred as follows: by failing to award attorney’s fees to
the plaintiffs’ attorneys out of MHMR’s subrogation recovery (Issues One, Two,
and Three); by failing to require MHMR to pay its pro rata share of costs and
expenses (Issue Four); by allocating 99.5% of the settlement proceeds to the
6
wrongful death claims and 0.5% of the proceeds to the survival claims (Issues
Five, Six, and Seven); by rendering Appellants Roy Long, Ernestine Long, and
Gregory Hollingshead, in their individual capacities, as well as the Hall firm and
the Forbes firm, jointly and severally liable for funds ordered to be paid to MHMR
in the final judgment on remand (Issues Eight, Nine, Ten, and Eleven); by
dismissing with prejudice all claims that were or that could have been asserted by
the parties (Issue Twelve); and by denying the minor plaintiffs leave to amend their
pleadings to assert claims against Elliott (Issues Thirteen, Fourteen, Fifteen).
The attorney ad litem presents three issues for review. In his issues, the
attorney ad litem contends that the trial court erred as follows: by ordering that all
causes of action that were asserted or that could have been asserted by the parties
were dismissed with prejudice (Issue One); by denying the plaintiffs’ motion for
leave of court to amend their pleadings and to join Elliott into the cause (Issue
One); by apportioning the settlement proceeds and ordering a credit against future
workers’ compensation benefit payments in a manner that was unsupported by
evidence (Issue Two); and by ordering an amount of, the propriety of, and the
payment source for attorney’s fees in a manner that was unsupported by evidence
(Issue Three).
Failure to Award Attorney’s Fees to Plaintiffs out of MHMR’s Recovery
In the final judgment on remand, the trial court awarded MHMR a
subrogation recovery of $59,377.40. The trial court’s judgment did not include an
award of any attorney’s fees related to MHMR’s subrogation recovery. In their
first three issues, Appellants contend that the trial court erred by failing to award
attorney’s fees out of MHMR’s subrogation recovery to the plaintiffs.
Specifically, Appellants contend in their first two issues that the evidence was
legally and factually insufficient to support an award of all attorney’s fees to
MHMR and that, therefore, the trial court abused its discretion in its award of
7
attorney’s fees. In their third issue, Appellants contend that the trial court erred by
failing to consider evidence that related to an award of attorney’s fees under
Section 417.003(c).
In Elliott I, we concluded that Section 417.003(c) of the Labor Code applied
to an award of attorney’s fees out of MHMR’s subrogation recovery. Elliott I, 327
S.W.3d at 836; see TEX. LAB. CODE ANN. § 417.003(c) (West 2006). Section
417.003(c) provides that, “[i]f an attorney actively representing the insurance
carrier’s interest actively participates in obtaining a recovery, the court shall award
and apportion between the claimant’s and the insurance carrier’s attorneys a fee
payable out of the insurance carrier’s subrogation recovery.” In apportioning the
attorney’s fees award, “the court shall consider the benefit accruing to the
insurance carrier as a result of each attorney’s service.” LAB. § 417.003(c).
We review a trial court’s award of attorney’s fees under Section 417.003(c)
for an abuse of discretion. Hartford Accident & Indem. Co. v. Buckland, 882
S.W.2d 440, 446 (Tex. App.—Dallas 1994, writ denied). The trial court conducted
the settlement hearing before it entered the judgment that was the subject of
Elliott I. The Hall firm and the Forbes firm represented the Longs at the settlement
hearing. As detailed in Elliott I, the Hall firm and the Forbes firm opposed any
recovery by MHMR on its subrogation claim. Elliott I, 327 S.W.3d at 836. The
Hall firm began representing the minor plaintiffs after the settlement hearing.
In Elliott I, we stated that, “[o]n remand, the trial court may fully reconsider
the attorney’s fee issue under Section 417.003(c).” Elliott I, 327 S.W.3d at 836.
Our instructions did not require the trial court to hear additional evidence on the
issue. After remand, the trial court conducted a hearing to consider the issue. The
trial court refused the plaintiffs’ requests to present additional evidence on the
attorney’s fee issue. No additional evidence was necessary for the trial court to
decide the attorney’s fee issue under Section 417.003(c) because the record
8
showed that the Hall firm and the Forbes firm opposed MHMR’s recovery. Based
on that opposition, the trial court could have reasonably concluded that no benefit
accrued to MHMR as a result of the services of the Hall firm and the Forbes firm.
See LAB. § 417.003(c). We conclude that the trial court did not abuse its discretion
by failing to award attorney’s fees to the Hall firm or the Forbes firm out of
MHMR’s subrogation recovery. Appellants’ first three issues are overruled.
Failure to Require MHMR to Pay Its Pro Rata Share of Costs and Expenses
Appellants contend in their fourth issue that the trial court erred by failing to
order MHMR to pay its pro rata share of case costs and expenses. Appellants rely
on Section 417.003(a)(2) of the Labor Code to support their contention.
Section 417.003(a) applies in cases in which an insurance carrier’s interest is not
actively represented by an attorney. LAB. § 417.003(a). In such cases, in the
absence of an agreement between the claimant’s attorney and the carrier, the trial
court must award to the claimant’s attorney out of the carrier’s recovery the
carrier’s proportionate share of expenses. Id. § 417.003(a)(2).
In Elliott I, we held that Section 417.003(a) does not apply to this case but,
instead, that Section 417.003(c) applies. Elliott I, 327 S.W.3d at 836.
Section 417.003(c) does not require the trial court to award a pro rata share of
expenses out of the carrier’s recovery to the claimant’s attorney. Therefore, we
conclude that the trial court did not abuse its discretion by failing to order MHMR
to pay a pro rata share of expenses out of its subrogation recovery to the minor
plaintiffs’ attorneys. Appellants’ fourth issue is overruled.
Joint and Several Liability on MHMR’s Recovery
In the final judgment on remand, the trial court ordered that MHMR was
entitled to recover its full subrogation interest in the amount of $59,377.40 for past
benefits it had paid the minor plaintiffs. The amount of $36,010.22 had previously
9
been paid to MHMR from the funds that were in the registry of the court. The trial
court ordered as follows:
Therefore, Intervenor MHMR shall recover the additional amount of
$23,367.18 from, jointly and severally, the Estate of Stacey
Hollingshead; Plaintiffs GREGORY HOLLINGSHEAD, Individually
and as Next Friend and Guardian of the Person of KELCEY
HOLLINGSHEAD, KLAYTON HOLLINGSHEAD and KANYON
HOLLINGSHEAD, Minors; ROY LONG and ERNESTINE LONG,
Individually and as Representatives of the Estate of STACEY
HOLLINGSHEAD, and as additional Next Friends of KELCEY
HOLLINGSHEAD, KLAYTON HOLLINGSHEAD and KANYON
HOLLINGSHEAD, Minors; Hall & Hall . . . ; and Forbes & Forbes.
The amount of $23,367.18, which had previously been paid to Stacey’s estate from
the funds that were in the registry of the court, was attributable to the trial court’s
earlier award of attorney’s fees of $19,792.47 out of MHMR’s subrogation
recovery to the plaintiffs’ attorneys and to the trial court’s earlier allocation of
$3,574.71 to MHMR as its pro rata share of expenses.
Appellants contend in their eighth through eleventh issues that the trial court
erred by holding Roy Long, Ernestine Long, and Hollingshead, in their individual
capacities, and the Hall and Forbes firms jointly and severally liable for the funds
ordered to be paid to MHMR in the final judgment on remand. In their eighth
issue, Appellants contend that “no pleadings, notice, or trial occurred” that would
have allowed the trial court to impose joint and several liability on these parties. In
their ninth and tenth issues, Appellants contend that the evidence was legally and
factually insufficient to impose joint and several liability. In their eleventh issue,
Appellants contend that the trial court erred by imposing joint and several liability
because parties that were necessary to the determination of the issue were not
before the trial court.
MHMR’s subrogation rights attached to the part of the settlement proceeds
10
that the minor plaintiffs recovered on their wrongful death claims. Elliott I, 327
S.W.3d at 833; Tex. Workers’ Comp. Ins. Fund v. Alcorta, 989 S.W.2d 849, 851–
52 (Tex. App.—San Antonio 1999, no pet.). Under Texas law, when a workers’
compensation beneficiary has received workers’ compensation benefits, the first
money paid to or recovered by the beneficiary in a third-party action against a
tortfeasor belongs to the workers’ compensation carrier, and until the carrier is paid
in full, the beneficiary has no right to any of the funds. Tex. Mut. Ins. Co. v.
Ledbetter, 251 S.W.3d 31, 33 (Tex. 2008); Argonaut Ins. Co. v. Baker, 87 S.W.3d
526, 530 (Tex. 2002). Any recovery from a third party by the beneficiary is
burdened by the carrier’s subrogation rights to the extent of any workers’
compensation payments made. Baker, 87 S.W.3d at 530. If there is a recovery by
a beneficiary against a third party, “rather than the [beneficiary] owning the money
and being forced to disgorge it, the carrier is first entitled to the money up to the
total amount of benefits it has paid.” Ledbetter, 251 S.W.3d at 35 (quoting Baker,
87 S.W.3d at 530). Until the carrier is paid in full, the beneficiary or his or her
representatives have no right to any of the funds recovered from the third party.
Capitol Aggregates, Inc. v. Great Am. Ins. Co., 408 S.W.2d 922, 924 (Tex. 1966).
In this case, the settlement proceeds totaled over $4,000,000. In the final
judgment on remand, the trial court allocated about $3,980,000 of the settlement
proceeds to the wrongful death claims. We have affirmed that allocation below.
The evidence at the settlement hearing showed that the minor plaintiffs received
$2,100,000 of the settlement proceeds in connection with the settlement of their
wrongful death claims. Those proceeds were used to purchase annuities for the
benefit of the minor plaintiffs before the trial court approved the settlement. The
evidence at the settlement hearing also showed that the Hall firm received about
$400,000 in legal fees and that the Forbes firm received about $450,000 in legal
fees from the settlement proceeds.
11
MHMR was entitled to the first money recovered by the minor plaintiffs on
their wrongful death claims. Ledbetter, 251 S.W.3d at 33. Until MHMR received
payment in full of its subrogation interest, neither the minor plaintiffs nor their
attorneys were entitled to receive any funds from the settlement proceeds. Capitol
Aggregates, 408 S.W.2d at 924. MHMR filed a plea in intervention in which it
sought reimbursement for the workers’ compensation benefits that had been paid to
the minor plaintiffs. MHMR’s plea provided notice of its subrogation claim to the
other parties and their attorneys. With notice of MHMR’s claim, the Hall firm and
the Forbes firm received substantial amounts of the settlement proceeds that related
to the minor plaintiffs’ wrongful death claims. Based on the evidence, we
conclude that the trial court did not abuse its discretion by imposing joint and
several liability for the funds ordered to be paid to MHMR on the following
parties: (1) Hollingshead, in his capacities of guardian and next friend of the minor
plaintiffs; (2) Roy Long and Ernestine Long, in their capacities as representatives
of Stacey’s estate and as additional next friends of the minor plaintiffs, (3) the Hall
firm, and (4) the Forbes firm.
The Longs were not workers’ compensation beneficiaries. Thus, MHMR
did not have a subrogation right in any recovery by the Longs on their wrongful
death claims. Elliott I, 327 S.W.3d at 833. The record does not contain evidence
that the Longs or Hollingshead in their individual capacities received any of the
settlement proceeds that were attributable to the minor plaintiffs’ wrongful death
claims. In the absence of such evidence, we conclude that the trial court erred by
holding Roy Long, Ernestine Long, and Hollingshead, in their individual
capacities, jointly and severally liable for the amount ordered to be paid to MHMR
in the final judgment on remand.
Appellants’ ninth and tenth issues are sustained to the extent Appellants
complain that the trial court erred by imposing joint and several liability on Roy
12
Long, Ernestine Long, and Hollingshead, in their individual capacities.
Appellants’ ninth and tenth issues are otherwise overruled. Appellants’ eighth and
eleventh issues are overruled.
Allocation of Settlement Proceeds to Wrongful Death and Survival Claims
In Elliott I, we concluded that the trial court’s decision to allocate 75% of
the settlement proceeds to the survival claims was not supported by the evidence.
Elliott I, 327 S.W.3d at 834. On remand, the trial court allocated 99.5% of the
settlement proceeds to the wrongful death claims and 0.5% of the proceeds to the
survival claims. Thus, the trial court allocated about $3,980,000 to the wrongful
death claims and about $20,000 to the survival claims. Based on this allocation,
the trial court ordered that MHMR was entitled to receive an advance credit against
future benefit payments in the amount of $2,040,622.20.
Appellants challenge the trial court’s allocation of the settlement proceeds in
their fifth, sixth, and seventh issues. In their fifth and sixth issues, Appellants
contend that there was legally and factually insufficient evidence to support the
allocation of 99.5% of the settlement proceeds to the wrongful death claims. In
their seventh issue, Appellants contend that the trial court erred by refusing to
conduct an evidentiary hearing after remand on the allocation of settlement funds
between the wrongful death and survival claims. The attorney ad litem contends in
his second issue that the trial court erred by adjudging an allocation of proceeds
and a credit against future benefits in manners that were unsupported by evidence.
We noted in Elliott I that there was no evidence at the June 24, 2008
settlement hearing that Stacey suffered before her death. Elliott I, 327 S.W.3d at
834. Based on the evidence, it appeared that Stacey died instantly on impact.
There was also no evidence that Stacey was aware of the impending accident.
Even if Stacey had been aware for a split second that the accident was about to
occur, that evidence would not have justified a substantial award for her mental
13
anguish. Id. We concluded in Elliott I that the record conclusively established that
the trial court should have awarded most of the settlement proceeds to the minor
plaintiffs’ wrongful death claims. Id.
After remand, Appellants requested the trial court to conduct an evidentiary
hearing. The trial court denied their request. Appellants did not present any
evidence by way of an offer of proof to show that more than a minimal allocation
of the settlement proceeds to the survival claims would have been justified. In
Elliott I, we remanded the allocation issue to the trial court for determination
consistent with our opinion. Elliott I, 327 S.W.3d at 835. We did not require the
trial court to conduct a further evidentiary hearing. Based on the record, we
conclude that the trial court did not abuse its discretion by allocating 99.5% of the
settlement proceeds to the wrongful death claims and 0.5% of the proceeds to the
survival claims. Therefore, we also conclude that the trial court did not err in
determining the amount of MHMR’s advance credit against the payment of future
benefits. Appellants’ fifth, sixth, and seventh issues and the attorney ad litem’s
second issue are overruled.
Minor Plaintiffs’ Claims Against Elliott
After remand, Appellants and the attorney ad litem on behalf of the minor
plaintiffs filed motions in which, among other things, (1) they sought leave of court
to amend their pleadings so that the minor plaintiffs could allege breach of
fiduciary duty claims against Elliott and (2) they requested the trial court to hold an
evidentiary hearing on their claims against Elliott. The following exchanges took
place at the June 21, 2011 hearing:
THE COURT: Based on what I’m hearing, and I’m of a mind to
get this eventually to a final disposition. I know that there are
ancillary issues that are not going to be resolved at this point,
fiduciary duties.
14
....
. . . And if there are other issues that Plaintiffs or Ad Litem feel
like need to be developed, I think it would be best for this to get to a
final disposition. And then if [there are] causes of action to be
pursued at that point, you can do that. But, submit what you believe is
the appropriate final judgment.
[ATTORNEY AD LITEM]: For clarification, do I have leave of
Court to amend pleadings and include those causes of action against
any of these parties including Mr. Elliott?
THE COURT: Not in this case, you do not.
[ATTORNEY AD LITEM]: Okay. I have to file a different --
THE COURT: Correct.
....
[ATTORNEY AD LITEM]: Okay. And if I understand correctly,
the Court will not have -- not entertain any further evidence or
evidentiary hearing?
THE COURT: No. I believe I have all the evidence [I need] to get
to a final judgment in this matter.
[ATTORNEY AD LITEM]: Okay.
THE COURT: I understand that there may be other issues that
need your position, but I think those would be best served outside of
this cause of action.
On July 26, 2011, the trial court entered its final judgment on remand. In the
judgment, the trial court ordered “that Defendants and their Insurers be declared
fully and finally discharged of and from any and all liability under the provisions
of this Judgment and the Settlement Agreement and Release” and “that all causes
15
of action that were asserted or could have been asserted by the parties are
dismissed with prejudice to the refiling of same.”
Appellants contend in their twelfth through fifteenth issues (1) that the trial
court erred by dismissing the minor plaintiffs’ claims against Elliott with prejudice,
(2) that the trial court erred by denying the minor plaintiffs’ motion for leave to
amend their pleadings to join Elliott as a party and to allege claims against him,
(3) that the trial court violated the minor plaintiffs’ due process rights regarding
their claims or potential claims against Elliott, and (4) that the trial court erred by
dismissing the minor plaintiffs’ claims against Elliott without hearing or due
process. Similarly, the attorney ad litem contends in his first issue (1) that the trial
court erred by dismissing the minor plaintiffs’ claims against Elliott with prejudice
and (2) that the trial court erred by denying the minor plaintiffs’ motion for leave
to amend their pleadings so that they could join Elliott as a party in this case and
assert claims against him.
Appellants and the attorney ad litem contend that the trial court dismissed
the minor plaintiffs’ claims against Elliott with prejudice and that, therefore, the
trial court effectively denied the minor plaintiffs the opportunity to litigate their
claims against Elliott in the future. Based on these contentions, Appellants and the
attorney ad litem argue that the trial court violated the minor plaintiffs’ rights to
due process of law. The attorney ad litem asserts that, in any future case, Elliott
will assert that the minor plaintiffs’ claims against him are barred by res judicata
and collateral estoppel based on the trial court’s final judgment on remand in this
case.
At the June 21, 2011 hearing, the trial court stated that the minor plaintiffs
could bring their claims against Elliott in another case. Based on the trial court’s
statements, the trial court certainly did not intend to dismiss any claims that the
minor plaintiffs might have against Elliott. In the judgment, the trial court ordered
16
“that all causes of action that were asserted or could have been asserted by the
parties are dismissed with prejudice to the refiling of same.”
Res judicata, or claim preclusion, bars a subsequent suit if the matters
asserted in the subsequent suit arise out of the same subject matter as a previous
suit and if the matters in the subsequent suit, through the exercise of reasonable
diligence, could have been litigated in the prior suit. Barr v. Resolution Trust
Corp. ex rel. Sunbelt Fed. Savs., 837 S.W.2d 627, 631 (Tex. 1992); In re N.R.T.,
338 S.W.3d 667, 678 (Tex. App.—Amarillo 2011, no pet.). The minor plaintiffs’
wrongful death claims against the defendants in this case arose as a result of the
April 12, 2006 automobile accident. The minor plaintiffs’ breach-of-fiduciary-
duty claims against Elliott arose as a result of Elliott’s conduct in the course of
representing them in the prosecution of their claims in this case. The minor
plaintiffs contend that Elliott breached his fiduciary duties to them on May 29,
2008, when he entered into a Rule 11 agreement that related to MHMR’s
subrogation claim. See TEX. R. CIV. P. 11. The minor plaintiffs’ claims against
Elliott did not arise out of the automobile accident that gave rise to their claims
against the defendants in this case, and the minor plaintiffs’ wrongful death claims
and breach-of-fiduciary-duty claims are against different parties. Because the
minor plaintiffs’ claims against Elliott did not arise out of the same subject matter
as that involved in this wrongful death case, res judicata will not bar the minor
plaintiffs’ claims against Elliott in a future suit.
Collateral estoppel, or issue preclusion, prevents the relitigation of identical
issues of fact or law that were actually litigated and essential to the final judgment
in a prior suit. Eagle Properties, Ltd. v. Scharbauer, 807 S.W.2d 714, 721–22
(Tex. 1991); MGA Ins. Co. v. Charles R. Chesnutt, P.C., 358 S.W.3d 808, 817
(Tex. App.—Dallas 2012, no pet.). The facts and issues that relate to the minor
plaintiffs’ claims against Elliott were not litigated and were not essential to the trial
17
court’s final judgment on remand. Therefore, collateral estoppel will not bar the
minor plaintiffs’ claims against Elliott in a future suit.
Applying the principles of res judicata and collateral estoppel, we conclude
that the trial court’s final judgment on remand did not dismiss the minor plaintiffs’
claims against Elliott with prejudice. The trial court did not deny the minor
plaintiffs the opportunity to litigate their claims against Elliott in another suit.
Because the minor plaintiffs may assert those claims in a different suit, the trial
court did not violate the minor plaintiffs’ due process rights by denying their
motion to amend their pleadings to allege claims against Elliott and by denying
their request for an evidentiary hearing on those claims.
A trial court is given a great deal of discretion in matters of joinder, and its
decision on such procedural issues will not be disturbed on appeal absent an abuse
of discretion. Varme v. Gordon, 881 S.W.2d 877, 882 (Tex. App.—Houston [14th
Dist.] 1994, writ denied); see Fireman’s Fund Ins. Co. v. McDaniel, 327 S.W.2d
358, 373 (Tex. Civ. App.—Beaumont 1959, no writ). A trial court’s decision on
the matter of the joinder of an additional party is “generally based on practical
considerations with a view to fair, orderly and timely prosecution and disposal of
pending litigation.” Fireman’s Fund Ins., 327 S.W.2d at 373. We review a trial
court’s ruling on whether to allow an amended pleading under an abuse of
discretion standard. Halmos v. Bombardier Aerospace Corp., 314 S.W.3d 606,
622 (Tex. App.—Dallas 2010, no pet.); Bell v. Moores, 832 S.W.2d 749, 754 (Tex.
App.—Houston [14th Dist.] 1992, writ denied). A trial court has discretion to
refuse an amended pleading when the amendment asserts a new cause of action or
defense. Halmos, 314 S.W.3d at 622.
In this case, the automobile accident that gave rise to the wrongful death and
survival claims occurred on April 12, 2006. The wrongful death suit was filed the
next month. The trial court held the settlement hearing on June 24, 2008. Before
18
that hearing, $2,100,000 of the settlement proceeds were used to fund annuities for
the benefit of the minor plaintiffs. At the June 21, 2011 hearing, the trial court
stated its desire to bring the wrongful death case to a final resolution. At that time,
the case had been pending for over five years. Allowing the minor plaintiffs to
assert new causes of action against Elliott in the wrongful death case would have
caused considerable delay in finally resolving the case. Based on the record, we
cannot conclude that the trial court abused its discretion by denying the plaintiffs’
and the attorney ad litem’s motions to amend the pleadings so that the minor
plaintiffs could assert claims against Elliott. Appellants’ twelfth through fifteenth
issues are overruled; the attorney ad litem’s first issue is overruled.
Elliott’s Attorney’s Fees
In Elliott I, we concluded that the trial court erroneously required Elliott to
forfeit $100,000 of his attorney’s fees to the minor plaintiffs and to pay $15,000 to
the attorney ad litem. Elliott I, 327 S.W.3d at 837–38. After remand, Elliott filed
a motion to recall distribution of settlement proceeds that was based on our
reversal of the trial court’s judgment. In the motion, Elliott requested the trial
court to order Stacey’s estate to return the $100,000 to him and the attorney ad
litem to return the $15,000 to him. In the final judgment on remand, the trial court
ordered Stacey’s estate and the attorney ad litem to pay those respective amounts
to Elliott.
In his third issue, the attorney ad litem contends that the trial court erred by
ordering Stacey’s estate to pay Elliott $100,000 and by ordering him to pay Elliott
$15,000. The attorney ad litem asserts that “[t]he trial court erred in adjudging the
amount of, the propriety of, and the payment source for attorney fees in a way that
was unsupported by evidence.”
Restitution after reversal of a judgment has long been the rule in Texas and
elsewhere. Miga v. Jensen, 299 S.W.3d 98, 101 (Tex. 2009). “On the reversal of
19
the judgment, the law raises an obligation in the party to the record, who has
received the benefit of the erroneous judgment, to make restitution to the other
party for what he has lost.” Id. (quoting Bank of U.S. v. Bank of Wash., 31 U.S. 8,
17 (1832)). Thus, a party who obtains a benefit through a trial court’s judgment
that is later reversed must return the benefit to the other party. Outdoor Sys.,
Inc. v. BBE, L.L.C., 105 S.W.3d 66, 74 (Tex. App.—Eastland 2003, pet. denied);
Currie v. Drake, 550 S.W.2d 736, 739 (Tex. Civ. App.—Dallas 1977, writ ref’d
n.r.e.). As Elliott did by filing his motion to recall distribution of settlement
proceeds in this case, a successful appellant is entitled to seek restitution in the
same proceeding without resorting to a new suit. Outdoor Sys., 105 S.W.3d at 75.
The amount of attorney’s fees that the trial court required Elliott to forfeit in its
earlier judgment is undisputed. The trial court required Elliott to forfeit $100,000
of his fees to the minor plaintiffs and to effectively forfeit $15,000 to the attorney
ad litem. Because we reversed the trial court’s earlier judgment, the trial court did
not err in the final judgment on remand by ordering Stacey’s estate and the
attorney ad litem to return those amounts to Elliott. Outdoor Sys., 105 S.W.3d at
75.
The attorney ad litem also contends that the trial court deprived him of
personal property without due process of law when it ordered him to pay Elliott
$15,000. The attorney ad litem states in his brief that “no pleadings, notice, or trial
occurred” that would have afforded him due process on such an award. First,
Elliott’s motion to recall distribution of settlement proceeds provided notice to the
attorney ad litem that Elliott sought to recover $15,000 from him. Second, Elliott
rightfully owned the erroneously forfeited funds. They were his personal property.
The funds were improperly disbursed to the attorney ad litem under a judgment
that was later reversed. Based on our reversal of that judgment, Elliott was entitled
to restitution of the funds from the attorney ad litem. Outdoor Sys., 105 S.W.3d at
20
75. The trial court did not deprive the attorney ad litem of personal property
without due process of law.
Next, the attorney ad litem contends that the trial court denied the minor
plaintiffs due process of law because it awarded the full payment of attorney’s fees
to Elliott without affording them the opportunity to plead their breach-of-fiduciary-
duty claims against Elliott and to prove those claims to a jury. As we concluded
above, the trial court did not violate the minor plaintiffs’ due process rights
because they may pursue their claims against Elliott in another case.
The attorney ad litem also contends that, in Elliott I, we mandated that the
award of attorney’s fees was to be “fully reconsidered” by the trial court on
remand. The attorney ad litem asserts that the trial court could not satisfy this
mandate without conducting an evidentiary hearing on issues related to the award
of Elliott’s attorney’s fees. Our opinion in Elliott I did not require the trial court to
hold an evidentiary hearing on any issue. In our analysis of the issue of an award
of attorney’s fees out of MHMR’s subrogation recovery, we concluded that, “[o]n
remand, the trial court may fully reconsider the attorney’s fee issue under Section
417.003(c).” Elliott I, 327 S.W.3d at 836. This statement related solely to Section
417.003(c); it did not relate to the attorney’s fees that Elliott received for
representing the minor plaintiffs. Additionally, by our use of the word “may” in
the opinion, we recognized the trial court’s discretion to determine the attorney’s
fee issue under Section 417.003(c).
For the above reasons, we conclude that the trial court did not abuse its
discretion by ordering Stacey’s estate and the attorney ad litem to return Elliott’s
wrongfully forfeited attorney’s fees to him. The attorney ad litem’s third issue is
overruled.
21
This Court’s Ruling
We modify paragraph (b) of page 3 of the trial court’s final judgment on
remand to provide as follows:
Therefore, Intervenor MHMR shall recover the additional amount of
$23,367.18 from, jointly and severally, the Estate of Stacey
Hollingshead; GREGORY HOLLINGSHEAD, as Next Friend and
Guardian of the Person of KELCEY HOLLINGSHEAD, KLAYTON
HOLLINGSHEAD and KANYON HOLLINGSHEAD, Minors; ROY
LONG and ERNESTINE LONG, as Representatives of the Estate of
STACEY HOLLINGSHEAD and as additional Next Friends of
KELCEY HOLLINGSHEAD, KLAYTON HOLLINGSHEAD and
KANYON HOLLINGSHEAD, Minors; Hall & Hall, P.O. Box 168,
Sweetwater, Texas 79556; and Forbes & Forbes, 711 Myrtle, El Paso
Texas 79901.
As modified, we affirm the judgment of the trial court.
TERRY McCALL
JUSTICE
October 31, 2013
Panel consists of: Wright, C.J.,
McCall, J., and Willson, J.
22