D. Brent Lemon D/B/A Law Office of D. Brent Lemon v. Daniel Hagood

COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
§
D. BRENT LEMON D/B/A No. 08-15-00309-CV
LAW OFFICE OF D. BRENT LEMON, §
Appeal from
Appellant, §
County Court at Law No. 5
v. §
of Dallas County, Texas
DANIEL HAGOOD, §
(TC # CC-11-03989-E)
Appellee. §
OPINION
This appeal is the second go around between lawyers embroiled in a fee dispute. Daniel
Hagood acted as co-counsel alongside Shaw & Lemon in a construction defect case. The
lawyers were ultimately successful in obtaining a substantial judgment for their clients.
Everyone agrees that Hagood was entitled to twenty-five percent of the of the forty percent
contingency fee for his role in the case, which equates to ten percent of the total recovery. The
contingency fee issue became thorny, however, when both the judgment creditors and the
judgment debtor went into bankruptcy. The case became more complicated still when our
Appellant here, D. Brent Lemon, was hired as special counsel in the judgment debtor’s
bankruptcy case and recovered more than a million dollars for the bankrupt estate, much of
which was used to pay part of the judgment that Hagood had helped to obtain. Lemon was paid
substantial attorney’s fees through the bankruptcy for doing so, but nothing was paid to Hagood.
Upset with this state of affairs, Hagood sued Lemon over the unpaid fee in state court.1
Following the first trial of this fee dispute case, Hagood prevailed but the judgment was
reversed on appeal based on charge error. Lemon v. Hagood, 05-13-00132-CV, 2014 WL
3700687, at *4 (Tex.App.--Dallas July 24, 2014, no pet.)(mem.op.). Following the second trial,
Hagood prevailed again. For the reasons stated below, we reverse and render.
FACTUAL AND PROCEDURAL BACKGROUND
This tale begins with husband and wife Gary Carpenter and Julie Perez (the Carpenters)
who claimed that Holmes Builders, Inc. erred in the construction of their home. They hired
attorney Van Shaw to represent them in 1999, and signed a fee contract giving Shaw a forty
percent contingency in any recovery. At the time, Lemon was doing contract work for Shaw.
By 2000, however, Shaw and Lemon entered into a partnership (Shaw & Lemon) and the
Carpenters were represented by the partnership. On several occasions Shaw & Lemon had asked
Appellee Daniel Hagood to assist with the trial of various cases, and the partnership did so in the
Carpenter-Holmes Builders litigation. Hagood was to be paid twenty-five percent of the total
forty percent contingency fee out of any recovery. Hagood never had a written agreement with
the Carpenters. The general division of responsibilities dictated that Shaw and Hagood would
handle the trial, and Lemon would tend to motion practice matters, some discovery, and post-
trial collections or appeals.
The trial, held in the Fall of 2001, went well for the Carpenters. The jury’s answers
supported a verdict in excess of $1.8 million. The trial court, however, granted a judgment
notwithstanding the verdict that resulted in a take nothing judgment and saddled the Carpenters
1
This case was transferred to us by the Fifth Court of Appeals, and we apply its precedents to the extent they might
conflict with our own. See TEX.R.APP.P. 41.3.
2
with court costs. This turn of events contributed to the Carpenters filing for bankruptcy in
February 2002. The Carpenter’s claim against Holmes Builders, became an asset of the
bankruptcy estate for the benefit of the Carpenters’ creditors. The bankruptcy trustee2 filed an
application to employ Shaw and the firm of Shaw & Lemon as special counsel to pursue that
claim. Shaw and the firm would do so on the same fee basis that the Carpenters had agreed to.
Lemon then pursued an appeal of the JNOV that had been entered in the Carpenter-
Holmes Builders case. In March 2003, while that appeal was pending, Shaw and Lemon had a
falling out. Lemon opened his own office and took the Carpenter file with him. As for the cases
that Lemon took, he suggested that as each case “is resolved or remuneration received
(regardless of who has primary possession or responsibility) a distribution to the partners will be
made per our agreement.” The dissolution was less than friendly, leading to protracted litigation
beginning in 2003 and which is described in our record as “contentious” and “acrimonious.”3
The Carpenters wrote both Shaw and Lemon in December 2003 expressing their desire not to be
involved in the former partners’ disputes, and urged both to work collaboratively on the
Carpenters’ behalf, but they desired that Lemon be their sole point of contact.
Lemon was successful with the appeal. The Eastland Court of Appeals (on transfer from
the Dallas Court of Appeals) reversed the JNOV and remanded the case for entry of judgment in
accordance with the jury’s verdict. See Carpenter v. Holmes Builders, Inc., No. 11-02-00132-
CV, 2004 WL 306130 (Tex.App.--Eastland Feb. 19, 2004, pet. denied). On February 11, 2005,
the Texas Supreme Court denied Holmes Builders’ Motion for Rehearing of its Petition for
2
In a bankruptcy proceeding, the trustee manages (or liquidates) the estate of the debtor. 11 U.S.C. § 704(2016)(Chapter 7);11 U.S.C. § 1104 (2016)(Chapter 11).
3
Three appellate decision arose out of that litigation: Shaw v. Lemon, 427 S.W.3d 536 (Tex.App.--Dallas 2014, pet.
denied), cert. denied, 135 S.Ct. 1563 (2015); Shaw v. Lemon, 05-09-01081-CV, 2010 WL 348372 (Tex.App.--Dallas
Feb. 2, 2010, no pet.)(mem. op.); In re Shaw, 05-07-01040-CV, 2007 WL 2447275, at *1 (Tex.App.--Dallas Aug.
30, 2007, orig. proceeding)(mem. op.).
3
Review. Important here, on February 28, 2005, a motion was filed in the Carpenters’ bankruptcy
to sell the bankruptcy estate’s interest in the Carpenter-Holmes Builder’s case back to the
Carpenters. The bankruptcy court approved that sale on March 22, 2005, and in exchange for
$62,500, the Carpenters obtained the bankruptcy estates’ interest in the litigation claim “free and
clear of all liens, claims and encumbrances.”
On April 6, 2005, the state trial court in the Carpenter-Holmes Builders case entered a
judgment consistent with the court of appeals’ mandate, thereby giving the Carpenters a
judgment for $2,003,240 against Holmes Builders. Hagood received a copy of the trial court’s
new judgment in April 2005 and promptly wrote Lemon reminding him of his fee interest.
Lemon did not respond to Hagood’s letter, nor to two similar letters sent in July 2005 and August
2005. Lemon’s unresponsiveness convinced Hagood that “I was in for a war. I wasn’t going to
get my money easy.” To that end, Hagood retained his own counsel and in April 2006 filed an
intervention in the Carpenter-Holmes Builders state court litigation asserting his fee interest. He
was promptly informed that Holmes Builders had itself filed for bankruptcy and any intervention
seeking his fee interest in the state court case was a violation of the automatic stay.
In the Holmes Builders bankruptcy, the Carpenters and another couple complaining of a
defective home, the Galases, were the largest creditors. The initial filings apparently showed
few assets to pay those claims. The bankruptcy trustee, with court approval, then hired Lemon to
pursue two different claims to infuse assets into estate. One claim related to the denial of
coverage under a liability insurance policy in favor of Holmes Builders. The second group of
“alter ego” claims sought to return money improperly transferred out of the company. Lemon
was to be paid a thirty-four percent contingency for any sums he recovered, subject to review
and approval by the bankruptcy court. As a part of the application to employ him, Lemon filed
4
an affidavit stating “[m]y representation of [the Carpenters] has been terminated and I have
waived all claim for any recovery of attorney fees, for all past services, directly from [the
Carpenters].” He also swore that “[n]either I, my firm, nor any member therefor, insofar as I
have been able to ascertain has any current connection with the debtor, creditors, or any other
party in interest...” Hagood added himself to the master service matrix to monitor the progress
of the bankruptcy. By November 18, 2009, Lemon had secured a $500,000 settlement of the
insurance policy claim for the bankruptcy estate. The trustee proposed an interim distribution of
$252,539.70 to the Carpenters, and $157,648.66 to Lemon.4 Hagood objected to the Carpenters’
proposed interim payment and raised his entitlement to a portion of the recovery. The
bankruptcy judge allowed the interim payments, and in its order approving the Carpenter’s
payment, noted that $360,000 was available for payment to Hagood and the Galases, who had
also filed an objection. Lemon was also able to secure an additional $684,474.24 for the
bankruptcy estate through the alter ego claims. On August 6, 2010, the trustee filed a final report
which proposed to distribute an additional $324,068.40 to the Carpenters, $40,733.48 to the
Galases, and an additional fee award of $230,460.40 to Lemon. Hagood objected through his
bankruptcy counsel as no funds were designated for him.
The bankruptcy judge took up the objection at a hearing on November 3, 2010. During
the hearing, the judge raised concerns as to whether Hagood’s objection was procedurally
proper, suggesting an adversary proceeding was the appropriate procedure to raise this type of
claim. The judge was also concerned with Hagood’s standing and the timeliness of the claim.
The judge inquired whether Hagood should file suit against Lemon in state court.5 The hearing
4
The balance of the $500,000 was paid to the trustee and trustee’s counsel, and for litigation expenses.
5
The judge stated: “I’m wondering isn’t the appropriate avenue here for your client to maybe sue Lemon in state
court. I mean I’m not suggesting that, but he could sue Lemon in state court [or the Carpenters], I guess he could
5
was recessed, but prior to being reset, Hagood withdrew his objection. The bankruptcy judge
agreed to the final distribution including the additional fee award to Lemon. In all, Lemon’s
total fee awards for collecting $1,184,474.24 for the bankruptcy estate was $388,109.06.
Hagood then took his fee dispute to state court. In December 2010, he intervened in the
on-going litigation between Lemon and Shaw. Lemon successfully moved to strike the
intervention. Hagood then filed the suit from which this appeal arises on June 8, 2011. Hagood
sued only Lemon; he did not sue Shaw nor the partnership of Shaw & Lemon. Round one of this
suit resulted in a judgment in Hagood’s favor for $97,024.77 in breach of contract damages, and
an additional $125,000.00 in attorney’s fees. On appeal, the court held that the charge
erroneously referred to Hagood’s contract as a contingency in the fees “related to the Firm’s
representation” on the Carpenter case, and not twenty-five percent of the fees the firm received
under the contingent-fee agreement with the Carpenters. Lemon v. Hagood, 05-13-00132-CV,
2014 WL 3700687, at *4 (Tex.App.--Dallas July 24, 2014, no pet.)(mem.op.). The court
concluded that the error was harmful because it expanded the scope of Hagood’s compensation
under the agreement beyond that supported by the evidence at trial. Id.The court then reviewed the legal sufficiency of the evidence “under the charge that
should have been given, that is, one that stated Hagood’s compensation under his contract with
the firm was twenty-five percent of the fees received by the firm under the contingent-fee
agreement with the Carpenters.” Id. at *5. Finding the evidence was legally sufficient, the court
rejected the contention that because the firm had never received any funds, Hagood was owed
nothing. A reasonable jury could have determined that Lemon’s affidavit filed in the bankruptcy
court “made impossible the performance of the condition precedent to Lemon’s liability under
sue [the Carpenters] in state court and let a state court judge interpret whether he’s violating, you know, 523, and
whether his claim, if any, was discharged.”
6
Hagood’s agreement -- that the firm received funds under the Carpenter agreement.” Id. at *6.
“A reasonable juror could have determined that Lemon failed to cooperate by waiving the fee
agreement with the Carpenters and that this failure to cooperate breached the agreement with
Hagood.” While there was some evidence that Lemon breached the agreement with Hagood,
the case was reversed and remanded for a new trial because the charge was erroneous.
On remand the case was tried much as before, but with two different twists. For the first
time, Lemon claimed that he had no individual liability as a partner until a judgment was
obtained against the partnership of Shaw & Lemon. He raised this issue a few days after the
Texas Supreme Court handed down American Star Energy and Minerals Corporation v. Stowers,
457 S.W.3d 427 (Tex. 2015) which contains language consistent with Lemon’s claim. Because
Hagood never sued the partnership, Lemon contended that he could have no individual liability.
The second twist involved the sale order in the Carpenter bankruptcy (selling the claim back to
the Carpenters, free and clear of all liens and encumbrances). Lemon argued this order
extinguished Shaw & Lemon’s fee interest in the claim, and consequently Hagood’s dependent
interest as well. The trial court rejected a summary judgment and jurisdictional challenge built
around these arguments.
At trial, the jury found that Shaw and Lemon were in a partnership when Hagood was
asked to participate in the Carpenter litigation. The jury also found that Lemon failed to pay
Hagood for his services in trying the Carpenter lawsuit. The jury further found that Hagood is
excused from, and Lemon is quasi-estopped to complain about, any failure to first satisfy a
judgment against the partnership. The jury awarded Hagood $97,204 in damages for Lemon’s
failure to pay him as agreed, and awarded $207,608.75 in attorney’s fees. Hagood was also
7
awarded conditional awards of appellate attorney’s fees. Lemon brings nineteen issues for our
review. We begin with those issues reflecting the new arguments raised in the second trial.
NECESSITY OF OBTAINING A JUDGMENT AGAINST THE PARTNERSHIP
After the case was remanded for a new trial, Lemon claimed that Hagood was required to
have first obtained a judgment against the partnership before he could directly sue Lemon.6 At
the time of the first trial, precedent in the Dallas Court of Appeals held that there was no
requirement to first sue and obtain a judgment against the partnership before pursuing an
individual partner. Reagan v. Lyberger, 156 S.W.3d 925, 929 (Tex.App.--Dallas 2005, no
pet.)(“Reagan cites us to no cases, and we have found none, requiring that the partnership entity
be sued separately to hold the individual partners liable. We conclude Reagan’s challenges to
the judgment against him on the basis of partnership are without merit.”).7 Following remand of
this case, however, the Texas Supreme Court issued its opinion in American Star Energy and
Minerals Corporation v. Stowers, 457 S.W.3d 427 (Tex. 2015) which resolved the issue of when
limitations accrue against a partner for a partnership debt. Id. at 428. In deciding that issue, the
court wrote:
The statutory prerequisites to enforcement make a partner’s liability not only
derivative of the partnership’s liability, but contingent on it for all practical
purposes. If a partnership obligates itself to pay a sum or perform a service under
a contract, the individual partners, though liable for the obligation under the
[Texas Revised Partnership Act], cannot immediately be called on to pay or
perform in lieu of the partnership. In either case, the claim must be litigated
against the partnership so that its obligation is determined, reduced to damages,
and fixed in a judgment. See TEX.BUS.ORGS.CODE § 152.306(b)(2)(A). Second,
the plaintiff-creditor must have ninety days’ opportunity to satisfy that judgment
from the partnership’s assets. Id. § 152.306(b)(2)(C).
6
The issue was raised below by summary judgment, motion for directed verdict, and objection to the charge.
Lemon raises the issue here through a number of issues challenging: the legal basis for the liability question; the
evidence to sustain jury findings; and alleged improper wording of jury instructions (Issues Nine, Ten, Twelve,
Thirteen, Fourteen, Fifteen, Sixteen, and Seventeen). The issue is raised more globally in Issue Seven.
7
Lemon was in fact counsel of record in Lyberger.
8
Id. at 431.
The Statutory Exceptions
American Star derives the obligation to obtain a judgment against the partnership from
the Texas Revised Partnership Act, and we begin there.8 A Texas partnership is “an entity
distinct from its partners.” TEX.BUS.ORGS.CODE ANN. § 152.056 (West 2012). It can therefore
sue and be sued as an entity. See TEX.R.CIV.P. 28. A creditor must obtain a judgment both
against the partnership as an entity and the partner before the partner’s individual assets may be
executed upon, though this may be accomplished in the same lawsuit. This conclusion flows
from Section 152.306 (a) and (b). Subsection (a) provides that a “judgment against a partnership
is not by itself a judgment against a partner.” Id. It makes clear that a “judgment may be entered
against a partner who has been served with process in a suit against the partnership.” Subsection
(b) then provides that a creditor may proceed against a partner or a partner’s property only if a
judgment “is also obtained against a partner” which “remains unsatisfied for 90 days.” Section
152.306(b) is, however, subject to several exceptions found in Subsection (c):
(c) Subsection (b) does not prohibit a creditor from proceeding directly against
one or more partners or the property of the partners without first seeking
satisfaction from partnership property if:
(1) the partnership is a debtor in bankruptcy;
(2) the creditor and the partnership agreed that the creditor is not required
to comply with Subsection (b);
(3) a court orders otherwise, based on a finding that partnership property
subject to execution in the state is clearly insufficient to satisfy the judgment or
that compliance with Subsection (b) is excessively burdensome; or
(4) liability is imposed on the partner by law independently of the person’s
status as a partner.
8
Section 152.306 of the Business Organizations Code recodified Section 3.05(d) of the Texas Revised Partnership
Act without substantive change. Cf. TEX.REV.CIV.STAT.ANN. art. 6132b-3.05(d)(expired)(text available at Act of
June 19, 1993, 73rd Leg., R.S. ch. 917, § 1, 1993 TEX.GEN.LAWS 3887, 3893) with TEX.BUS.ORGS.CODE ANN. §
152.056 (West 2012).
9
Id.
Hagood focuses on the third exception, and argues that the Shaw & Lemon partnership
was devoid of assets or that litigating against it would have been excessively burdensome. We
disagree for two reasons. The first reason is procedural. Hagood raised this argument as one of
many responses to Lemon’s motion for summary judgment. The trial court denied the motion
without elaborating its reasons. Consequently, the court never made a specific finding that
partnership property was “clearly insufficient” to satisfy the judgment, or that suing the
partnership would have been “excessively burdensome.” The exception requires such a finding
from the trial court. Id. at § 152.306(c)(3).
The second reason is substantive. The exceptions found in Subsection (c) pertain to the
ninety-day waiting period, and not the requirement for obtaining the judgment against the
partnership. This conclusion follows from a construction of the statute. Statutory construction is
a legal question that we review de novo. In re ReadyOne Industries, Inc., 394 S.W.3d 680, 684
(Tex.App.--El Paso 2012, orig. proceeding), citing Entergy Gulf States, Inc. v. Summers, 282
S.W.3d 433, 437 (Tex. 2009). Our primary focus in statutory interpretation is to give effect to
legislative intent, considering the language of the statute, as well as its legislative history, the
objective sought, and the consequences that would flow from alternative constructions. Crown
Life Ins. Co. v. Casteel, 22 S.W.3d 378, 383 (Tex. 2000). We seek that intent “first and
foremost” in the statutory text. Lexington Ins. Co. v. Strayhorn, 209 S.W.3d 83, 85 (Tex. 2006).
We must “presume that every word in a statute has been used for a purpose and that every word
excluded was excluded for a purpose.” Emeritus Corporation v. Blanco, 355 S.W.3d 270, 276
(Tex.App.--El Paso 2011, pet. denied); Cornyn v. Universe Life Ins. Co., 988 S.W.2d 376, 379
(Tex.App.--Austin 1999, pet. denied).
10
Subsection (b) states two predicates before one may directly pursue a partner: (1) having
a judgment against the partnership; and (2) that judgment going unsatisfied for at least ninety
days. TEX.BUS.ORGS.CODE ANN. § 152.306(b).9 Significantly, subsection (c) allows a creditor
to proceed against a partner “without first seeking satisfaction from partnership property” if one
of the four exceptions are met. Id. [Emphasis added]. The proviso thus addresses only one of
the predicates -- the passing of the ninety-day satisfaction period. The proviso in fact uses the
same root word (“seeking satisfaction”) as is found in subsection (b)(2)(C)(“unsatisfied”
judgment against the partnership). The only construction that favors Hagood would assume the
Legislature used the phrase “without first seeking satisfaction from partnership property” as a
shorthand reference to both obtaining a judgment and the satisfaction period. But we must apply
the common and ordinary meaning of words. Jaster v. Comet II Const., Inc., 438 S.W.3d 556,
562 (Tex. 2014). The term “satisfaction” when used in the context of satisfaction of a debt
means “[t]he fulfillment of an obligation; esp., the payment in full of a debt.” Black’s Law
Dictionary (10th ed. 2014). It does not mean obtaining a judgment. And although the statement
was dicta, the Texas Supreme Court reached the same conclusion in America Star. The court’s
opinion describes the ninety-day period but notes that a creditor might “forego this satisfaction
period” if one of the four Subsection (c) exceptions are met. Am. Star, 457 S.W.3d at 435 n.2.
9
The text of that section reads:
(b) Except as provided by Subsection (c), a creditor may proceed against one or more partners or
the property of the partners to satisfy a judgment based on a claim against the partnership only if a
judgment:
(1) is also obtained against the partner; and
(2) based on the same claim:
(A) is obtained against the partnership;
(B) has not been reversed or vacated; and
(C) remains unsatisfied for 90 days after:
(i) the date on which the judgment is entered; or
(ii) the date on which the stay expires, if the judgment is contested by
appropriate proceedings and execution on the judgment is stayed.
11
We apply the plain meaning of words used in legislation “unless a different meaning is
apparent from the context or the plain meaning leads to absurd or nonsensical results.” Molinet
v. Kimbrell, 356 S.W.3d 407, 411 (Tex. 2011). While it might be argued that the exceptions
should apply equally to the judgment requirement as well as the satisfaction period, our role is
not to re-write legislation as we would see fit. We enforce statutes “as written” and “refrain from
rewriting text that lawmakers chose.” Summers, 282 S.W.3d at 443. As the Texas Supreme
Court in Jaster noted:
Though some might argue that this approach was not the best policy choice, ‘we
read unambiguous statutes as they are written, not as they make the most policy
sense.’ Even if the result seems to us to be unreasonable, ‘reasonableness is not
the standard for eschewing plain statutory language.’ That high standard is
absurdity, and we cannot say that this statute achieves an absurd result.
Jaster, 438 S.W.3d at 570. [Citations omitted]. We likewise conclude that the exceptions
pertain to the satisfaction period, and not the requirement to obtain a judgment.
Waiver and Estoppel as Exceptions
Hagood’s remaining response to American Star is found in the jury’s answers to
questions three and four. In question three, the jury found that Hagood was excused from
attempting to satisfy a judgment against Shaw & Lemon. The jury was instructed that it might
find the requirement excused if: (a) Lemon waived the requirement, i.e. he intentionally
surrendered a known right or engaged in intentional conduct inconsistent with claiming the right;
or (b) Lemon made it impossible for Hagood to perform the condition. In question four, the jury
found that Lemon was “quasi-estopped” to assert the requirement. “Quasi-estoppel” was defined
as a “rule to prevent a party from asserting, to another’s disadvantage, a right inconsistent with a
position previously taken by him.” The jury was told this “doctrine applies where it would be
unconscionable to allow a party to maintain a position inconsistent with one in which he
acquiesced, or of which he accepted a benefit.”
12
On appeal, Lemon argues that neither waiver nor estoppel can create direct liability for a
partner in the absence of a judgment against the partnership. In other words, as a matter of law,
questions three and four were improper and cannot excuse the failure to first obtain and attempt
to satisfy a judgment against the partnership. For this proposition, Lemon first cites Hruska v.
First State Bank of Deanville, 747 S.W.2d 783, 784-85 (Tex. 1988) which holds that a
misrepresentation by a homeowner could not create an equitable lien on homestead property, nor
could it estop a homeowner from denying the validity of a lien which violates the Texas
Constitution. Instead, a lien on a homestead can be created only in the manner set out in the
Constitution. Lemon reasons that a partner’s liability is similarly limited to that provided in the
Texas Revised Partnership Act, and it is not subject to waiver or estoppel.
Along the same line, Lemon relies on cases such as Ulico Cas. Co. v. Allied Pilots Ass’n,
262 S.W.3d 773, 777 (Tex. 2008) which hold that neither waiver nor estoppel can expand
coverage under an insurance policy. Waiver and estoppel preserve existing rights, but do not
create independent causes of action. Hruska, 747 S.W.2d at 785; Smith v. City of Lubbock, 351
S.W.3d 584, 588 (Tex.App.--Amarillo 2011, pet denied). Thus in the insurance context, waiver
and estoppel might deny an insurance carrier’s ability to invoke an exclusion from the insurance
policy, but cannot rewrite the policy to create coverage which never existed. Ulico Cas., 262
S.W.3d at 777.
We are unpersuaded by Lemon’s effort to invalidate waiver and estoppel as a matter of
law. Below he contended the requirement to obtain a judgment against the partnership was akin
to a condition precedent. If so, a condition precedent can be waived, and the waiver can be
inferred from the parties’ conduct. Sun Exploration and Production Co. v. Benton, 728 S.W.2d
35, 37 (Tex. 1987). In the insurance context, for instance, filing a proof of loss or notice of claim
13
are conditions precedent, but the failure to file them may be defeated by jury finding of waiver.
See American Teachers Life Ins. Co. v. Brugette, 728 S.W.2d 763, 764 (Tex. 1987); U.S. Fidelity
& Guaranty Co. v. Bimco Iron & Metal Corp., 464 S.W.2d 353, 357 (Tex. 1971).
Parties cannot, however, waive a mandatory statutory duty that is jurisdictional. Crosstex
Energy Services, L.P. v. Pro Plus, Inc., 430 S.W.3d 384, 391-92 (Tex. 2014). But not all
mandatory statutory duties are jurisdictional in nature. Id; Helena Chem. Co. v. Wilkins, 47
S.W.3d 486, 494 (Tex. 2001). A court must first determine if the duty is indeed mandatory, and
if so, if it is jurisdictional. To do so, we consider: (1) the plain meaning of the statute; (2)
whether the statute specifies the consequences for noncompliance; (3) the purpose of the statute;
and (4) the consequences from each possible interpretation. Crosstex Energy Servs., 430 S.W.3d
at 392; Helena Chem., 47 S.W.3d at 495. We should resist classifying a provision as
jurisdictional absent clear legislative intent to that effect. Crosstex Energy Servs., 430 S.W.3d at
392.
This statute plainly requires a judgment against the partnership, and some satisfaction
period to follow thereafter, but it contains no remedy for non-compliance. Nothing in the plain
language of Section 152.306 states that the Legislature intended the judgment-satisfaction period
to be jurisdictional. Cf. Crosstex Energy Servs., 430 S.W.3d at 392 (setting out example of
unequivocal language in Labor Code which makes certain filing deadlines jurisdictional). The
lack of any remedy for non-compliance in Section 152.306 weighs in favor of the requirement
being non-jurisdictional. See Helena Chem. Co., 47 S.W.3d at 495; see also Albertson’s, Inc. v.
Sinclair, 984 S.W.2d 958, 962 (Tex. 1999); Park v. Escalera Ranch Owners’ Assn., Inc., 457
S.W.3d 571, 588-89 (Tex.App.--Austin 2015, no pet.).
14
Section 152.306 creates an orderly process for pursuing satisfaction of partnership
obligations. Cf. UNIFORM PARTNERSHIP ACT § 307. cmt (Uniform Law Comm’n 2013)(“Subject
to the five listed exceptions, this subsection prevents a partner’s assets from being the first
recourse for a judgment creditor of the partnership, even if the partner is liable for the judgment
debt under Section 306.”). Statutory provisions that are included merely to “promot[e] the
proper, orderly and prompt conduct of business, are not generally regarded as mandatory,”
Chisholm v. Bewley Mills, 155 Tex. 400, 287 S.W.2d 943, 945 (1956). Were we to construe the
provision as mandatory and jurisdictional, a partner might raise a defect late into the litigation
and well after the limitation period for pursuing the partnership has passed. If the statute is
construed as mandatory, but not jurisdictional, a partner might still compel the addition of the
partnership to the litigation, but be subject to waiver or estoppel defenses based on that partner’s
conduct. Because one of the exceptions in 152.306(c) already includes the concept of waiver (an
agreement by the partner that Section 152.306(b) does not apply), there is little violence to the
underlying purpose of the statute if it be non-jurisdiction. Having considered all the factors, we
conclude that the Legislature did not intend to make the requirement to obtain a judgment against
the partnership jurisdictional. Accordingly, the waiver and estoppel questions were proper
questions for the jury.
Sufficiency of the Evidence to Support the Verdict
Pleadings to Support the Submitted Issues
We thus turn to Lemon’s attacks on the jury’s finding in questions three and four. He
first claims that there was no pleading to support the submission of impossibility, waiver, and
quasi-estoppel. “The live pleadings define the issues in a case.” Lehmann v. Har-Con Corp., 39
S.W.3d 191, 219 (Tex. 2001). “The judgment of the court shall conform to the pleadings . . . .”
15
TEX.R.CIV.P. 301. Hagood’s first amended petition was filed on May 11, 2015, and trial started
on May 19, 2015. That pleading asserted several defenses to the American Star argument,
including laches, waiver, and quasi-estoppel. The pleading was timely under TEX.R.CIV.P. 63.
Lemon’s argument, as we understand it, is that a pre-trial order entered before the first trial
required all amended pleadings to be filed by March 2, 2012. No new scheduling order was
issued after remand of the case following the first trial. Lemon apparently contends the first
amended petition was tardy under that prior pre-trial order.
By the same token, the same order required all motions for summary judgment to be filed
by June 29, 2012. Lemon filed several motions for summary judgment following remand, which
the trial court heard over Hagood’s objection. The trial court noted both parties’ timeliness
arguments, and stated that neither had filed a motion to strike, and overruled any timeliness
objection.
A trial court has the discretion to enter a pre-trial order with pleading deadlines that
prevail over those in our procedural rules. ForScan Corp. v. Dresser Industries., Inc., 789
S.W.2d 389, 393 (Tex.App.--Houston [14th Dist.] 1990, writ denied). The flipside of that
proposition is that a trial court has the discretion to change those deadlines. Even without a
formal ruling allowing a late filed pleading, we presume such a ruling when the record is silent
of any basis to conclude that the amended petition was not considered by the trial court, and no
surprise is shown. Goswami v. Metropolitan Savimgs and Loan Ass’n, 751 S.W.2d 487, 490
(Tex. 1988); Wilson v. Korthauer, 21 S.W.3d 573, 577 (Tex.App.--Houston [14th Dist.] 2000,
pet denied). Both conditions are met here. The trial court did in fact consider and submit the
requested defenses, and no surprise can be shown. The defensive matters were all set out and
16
argued extensively in the motion for summary judgment submitted a month before trial. There is
no claim of surprise here.
Thus the question before us is whether the trial court erred in considering the amended
pleading. We review that decision under an abuse of discretion standard. In re City of Dallas,
445 S.W.3d 456, 463-64 (Tex.App.--Dallas 2014)(orig. proceeding). That discretion is guided
by Rule 63 which requires a trial court to grant a leave to amend “unless there is a showing that
such filing will operate as a surprise to the opposite party.” TEX.R.CIV.P. 63. The burden to
show surprise or prejudice is on the party resisting the amendment. See Greenhalgh v. Service
Lloyds Ins. Co., 787 S.W.2d 938, 939-40 (Tex. 1990). An amendment adding a new cause of
action or defense operates as a surprise and is prejudicial on its face if it (1) reshapes the nature
of the case, (2) could not have been anticipated, and (3) prejudices the complaining party’s
presentation of the case. Thomas v. Graham Mortg. Corp., 408 S.W.3d 581, 593 (Tex.App.--
Austin 2013, pet. denied); Deutsch v. Hoover, Bax & Slovacek, L.L.P., 97 S.W.3d 179, 186
(Tex.App.--Houston [14th Dist.] 2002, no pet.).
We fail to find any surprise here. The motion for summary judgment and response
fleshed out the arguments of the parties well in advance of trial. And even though the defenses
were new, they certainly would not be unanticipated, and were prompted by Lemon’s late
asserted American Star arguments. We therefore overrule the several issues complaining of a
lack of proper pleadings.10
10
The amended petition did not specifically mention the impossibility defense, but impossibility was already raised
in this case. The Dallas Court’s opinion already upheld the sufficiency of the evidence for a liability question based
on an impossibility theory. If there were a pleading deficiency that precluded that theory, it should have been raised
in the first appeal. See Allen-Burch, Inc. v. Texas Alcoholic Beverage Com’n, 104 S.W.3d 345, 351 (Tex.App.--
Dallas 2003, no pet.)(when litigation results in an appeal followed by a remand to the lower court, the “law of the
case” doctrine bars re-litigation of any law points already decided). The trial court in this case made essentially the
same point, rejecting Lemon’s pleading assertion because the court of appeals opinion included impossibility as a
basis for its ultimate conclusion. We also overrule Issue Eleven which raises a challenge to the impossibility
defense based on a lack of pleadings.
17
Sufficiency of the Evidence to Support the Defenses
We sustain a legal sufficiency challenge when the fact finder’s decision is unsupportable
as a matter of law because: (1) there is a complete absence of evidence of a vital fact; (2) the
court is barred by rules of law or of evidence from giving weight to the only evidence offered to
prove a vital fact; (3) there is no more than a mere scintilla of evidence proving a vital fact; or (4)
the evidence conclusively establishes the opposite proposition of a plaintiff’s proffered vital fact.
City of Keller v. Wilson, 168 S.W.3d 802, 810 (Tex. 2005). We view evidence in the light most
favorable to the jury’s finding on a legal sufficiency challenge, indulging “every reasonable
inference” in the trial court’s favor. El Paso Independent School Dist. v. Pabon, 214 S.W.3d 37,
41 (Tex.App.--El Paso 2006, no pet.).
Excuse could be found under question three in at least two ways: waiver and
impossibility. As to waiver, many of the arguments below related to the fact that Lemon never
asserted the requirement to obtain a judgment against the partnership until well after the first
appeal. Hagood contends that American Star’s holding grows out of the Texas Revised
Partnership Act which has been the law for many decades. By waiting until the eve of the
second trial of this case, Hagood contended that Lemon waived any reliance on Section 152.306.
That argument ignores that American Star effectively overruled the holding in Lyberger which
governed cases in the within the district of the Dallas Court of Appeals. American Star was not
decided until after the first appeal of this case. Waiver was defined as the knowing and
intentional surrender of a right. There was no evidence of such a waiver here.11
11
The American Star holding is presaged in the Texas Supreme Court’s opinion of In re Allcat Claims Serv., L.P.,
356 S.W.3d 455, 463-64 (Tex. 2011). The court there outlined the evolution of the “entity” and “aggregate” theories
of Texas partnerships and concluded that the adoption of the 1993 TRPA “unequivocally embrace[d] the entity
theory of partnership by specifically stating . . . that a partnership is an entity distinct from its partners.” Id., quoting
TEX.REV.CIV.STAT.ANN. art. 6132b-2.01, Comment of Bar Committee--1993. Nonetheless, that case has no distinct
discussion of a requirement to first sue a partner, nor does it mention Lyberger.
18
Conversely, there was some evidence to support the jury’s finding based on Lemon’s
opposition to Hagood’s attempt to intervene into the earlier litigation between Shaw and Lemon.
That intervention sought to assert separate tort claims against Lemon, but it also claimed an
equitable interest in any partnership assets to the extent of Hagood’s claim, based on a claimed
breach of contract by the partnership.12 Lemon filed an opposition to the pleading which
succeeded in striking the intervention. Accordingly, we find some evidence of waiver based on
that act.
The jury’s answer to question four also excused the failure to obtain a judgment against
the partnership based on quasi-estoppel. That theory precludes a person from asserting, to
another’s disadvantage, a right inconsistent with a position previously taken. Lopez v. Munoz,
Hockema & Reed, L.L.P., 22 S.W.3d 857, 864 (Tex. 2000); Forney 921 Lot Dev. Partners I, L.P.
v. Paul Taylor Homes, Ltd., 349 S.W.3d 258, 268 (Tex.App.--Dallas 2011, pet. denied). The
doctrine applies when it would be unconscionable to allow a person to maintain a position
inconsistent with one in which he acquiesced. Lopez, 22 S.W.3d at 864; Paul Taylor Homes,
349 S.W.3d at 268; Mexico’s Industries, Inc. v. Banco Mexico Somex, S.N.C., 858 S.W.2d 577,
581 n.7 (Tex.App.--El Paso 1993, writ denied).
Though disputed, there is some evidence to support the jury’s quasi-estoppel finding. At
times, Lemon denied or at least equivocated on the existence of his partnership with Shaw.
During his litigation with Shaw, he claimed Shaw & Lemon was a partnership. After the trial of
the Shaw-Lemon suit, he testified in the first trial of this case that he did not believe Shaw &
Lemon was a partnership. During the second trial of this case, Lemon testified the he was in a
12
The intervention in part asserted: “As a direct and proximate result of the anticipatory breach or breach of the
agreement between Hagood and SHAW & LEMON, Hagood has incurred actual damages within the jurisdictional
limits of this Court.
19
partnership with Shaw. The jury thus heard testimony that Lemon had changed his position. By
agreeing to, then denying, then again agreeing to the existence of the partnership, Lemon urged
inconsistent positions that the jury might have believed was unconscionable. We overrule
Appellant’s issues challenging the judgment and jury findings based on the failure to obtain a
judgment against the partnership.
THE BANKRUPTCY ORDERS
Several of Lemon’s issues focus on the orders issued by the Holmes Builders bankruptcy
court awarding Lemon his fees (the Fee Orders). He also focuses on the order in the Carpenter
bankruptcy which sold the rights to the Holmes Builder claim to the Carpenters (the Sale Order).
In varying ways, Lemon contends that the judgment here is an improper collateral attack on
those orders, and that the bankruptcy courts had the exclusive jurisdiction to decide those
matters.13 While we reject Lemon’s contention that the Fee Orders bar the claim here, we
conclude otherwise as to the Sale Order.
The Fee Orders
Federal courts possess exclusive jurisdiction over bankruptcy cases, but state and federal
courts share concurrent jurisdiction over “all civil proceedings arising under [the Bankruptcy
Code], or arising in or related to cases under [the Bankruptcy Code].” 28 U.S.C. § 1334(a)-(b);
Graber v. Fuqua, 279 S.W.3d 608, 611 (Tex. 2009). There are exceptions to this concurrent
jurisdiction, one being that bankruptcy courts enjoy exclusive jurisdiction in the retention of
professionals to serve the bankruptcy estate. “The district court in which a case under title 11 is
13
Issue One contends the trial court lacked jurisdiction to collaterally attack the Fee Orders. Issue Two makes the
same claim with regard to the Sale Order. Issue Four makes essentially the same claim as to both the Fee Orders
and the Sale Order, but focuses on the absence of any issue or proof that those orders were void. Issue Three claims
the trial court’s judgment is barred by Section 504 of the Bankruptcy Code and Texas Disciplinary Rule of
Professional Conduct 1.04(f). Issue Ten asserts the trial court erred in submitting the breach of contract question as
there was no evidence to support the question or it was based on a non-existent duty.
20
commenced or is pending shall have exclusive jurisdiction . . . over all claims or causes of action
that involve construction of section 327 of title 11, United States Code, or rules relating to
disclosure requirements under section 327.” 28 U.S.C. § 1334(e)(2)(2006). Section 327
provides that “the trustee, with the court’s approval, may employ one or more attorneys,
accountants, appraisers, auctioneers, or other professional persons, that do not hold or represent
an interest adverse to the estate, and that are disinterested persons, to represent or assist the
trustee in carrying out the trustee’s duties under this title.” 11 U.S.C. § 327(a)(2015).
Accordingly, the fee that an attorney might earn in representing the bankruptcy estate,
even if filed in a state court action, is exclusively set by the bankruptcy court. Brown v. Gerdes,
321 U.S. 178, 181, 64 S.Ct. 487, 489, 88 L.Ed. 659 (1944)(so holding for attorney retained to file
suit in state court for benefit of bankruptcy estate). Congress was concerned with the regulation
of administrative expenses, including attorney’s fees, that might otherwise drain the bankruptcy
estate. Id. The bankruptcy court awards “administrative expenses” which may include
“reasonable compensation” for an attorney “based on the time, the nature, the extent, and the
value of such services, and the cost of comparable services.” 11 U.S.C. § 503(b)(4)(2016). The
fees can only be awarded following notice and hearing, and an attorney is prohibited from
splitting the fee with someone other than a “member, partner, or regular associate in a
professional association, corporation, or partnership.” Id; 11 U.S.C. § 504(b)(2)(2016). Thus,
for instance, an attorney properly employed by the trustee cannot pay a referral fee to another
lawyer outside of his or her firm without the bankruptcy court’s approval. In re Smith, 397 B.R.
810, 819 (Bankr. E.D. Tex. 2008). It matters not that the referral fee could have been negotiated
before the filing of the bankruptcy proceeding, or that the referral attorney is not a party to the
bankruptcy proceeding. Id.21
Lemon weaves these concepts into Issues One and Four which contend that only the
bankruptcy court had jurisdiction over the fee award. He contends “the primary basis of
Hagood’s claim originates with his accusation of misconduct by Lemon in executing” the
affidavit attached to the trustee’s application to employ him. Lemon then reasons that only the
bankruptcy court could regulate that matter. We first conclude that Lemon misconstrues the
basis of Hagood’s claim. Hagood does not challenge the legality of the affidavit, nor claim that
it was improper under bankruptcy court rules or procedures. Rather, Hagood’s claim is that
execution of the affidavit had an effect on a third party contract (the Hagood--Shaw & Lemon
contract) which was not before the bankruptcy court.
The earlier opinion of the Dallas Court of Appeals made the same point. In that appeal,
Lemon argued that because neither the firm nor Lemon received any funds under the contingent
fee agreement with the Carpenters, Hagood was not entitled to any money under Hagood’s
agreement with the firm. Lemon, 2014 WL 3700687, at *5-6. But there was sufficient evidence
to support a finding that Lemon and the firm did not receive any funds under the Carpenter
agreement because Lemon, had “waived all claim for and recovery of attorney fees . . . from
Gary Carpenter and Julie Perez” through the affidavit used to secure his position as special
counsel. Id. At the point he filed the affidavit, the contingency agreement was potentially an
asset of the partnership. And as even a former partner of Shaw & Lemon, he had some
responsibility to look after the partnership’s assets. Id. His act bound the partnership.
TEX.BUS.ORGS.CODE ANN. §§ 152.301, 152.302. Consequently, there was some evidence in the
first trial record that Lemon made impossible the performance of a condition precedent, and thus
cannot defend based on that non-performance. Id. at *6, citing II Deerfield Ltd. P’ship v. Henry
Bldg., Inc., 41 S.W.3d 259, 265 (Tex.App.--San Antonio 2001, pet. denied)(“It is elementary that
22
one who prevents or makes impossible the performance of a condition precedent upon which his
liability under a contract is made to depend cannot avail himself of its nonperformance.”).
As in the first trial, the Lemon’s affidavit was admitted in evidence. The affidavit’s
significance was not to show a violation of some bankruptcy rule or procedure. Rather it was
only a circumstance that determined the proof necessary to prosecute a claim based on a contract
existing wholly outside the Holmes Builders bankruptcy proceeding.
Somewhat more troubling is the measure of damages presented to the jury. Hagood
testified that he was entitled to the value of his services, which he quantified by reference to a
twenty-five percent share of what Lemon was paid through the bankruptcy. Hagood’s lawyer
argued for the same measure of recovery to the jury. And that is exactly the figure the jury here
used as damages for the breach of contract action. From this, Lemon contends that Hagood
sought a split of the fee that bankruptcy court awarded Lemon which is improper under
bankruptcy court rules. See 11 U.S.C. § 504(b)(2)(2016); In re Smith, 397 B.R. at 819.
Nonetheless, Lemon has not urged as a distinct issue error in the admission of the evidence of his
fee awards, nor urged a point based on the closing argument in the case. The jury’s charge did
not compel the jury to award any percentage of the fee awarded under the Fee Orders as the
measure of damages. Instead, it asked the jury to find a sum that “would fairly and reasonably
compensate Daniel Hagood for his damages, if any, that resulted from D. Brent Lemon’s failure
to pay him as agreed.”14 The reference to Lemon’s fee award was a convenient proxy for the
jury to determine the value of what could have been awarded had Lemon protected the
14
Lemon’s Issue Eight claims charge error in the contract damages question. The issue complains of refusing
Lemon’s requested issues, and claims the question failed to follow the wording required by the Lemon v. Hagood I
opinion. We find no proposed question by Lemon on the damages issue. We review the trial court’s charge under
an abuse of discretion standard. Webb v. Glenbrook Owners Ass’n, Inc., 298 S.W.3d 374, 380 (Tex.App.--Dallas
2009, no pet.), citing Tex. Dep’t of Human Servs. v. E.B., 802 S.W.2d 647, 649 (Tex. 1990). We find no abuse in
this circumstance where the trial court used a damages question mirroring the contract damages question from the
Texas Pattern Jury Charge. See Comm. on Pattern Jury Charges, State Bar of Tex., Texas Pattern Jury Charges:
Business Consumer Insurance Employment PJC 115.3 (2016). We overrule Issue Eight.
23
partnerships fee interest. We overrule issues One, Three, Four, and Ten as they pertain to the
Fee Orders.
The Sale Order
What we have said regarding the Fee Orders, however, cannot be said about the Sale
Order. When the Carpenters filed their own bankruptcy, their claim against Holmes Builders
became property of the bankruptcy estate. “Section 541 of the Bankruptcy Code provides that
virtually all of a debtor’s assets, including causes of action belonging to the debtor at the
commencement of the bankruptcy case, vest in the bankruptcy estate upon the filing of a
bankruptcy petition.” Kane v. Nat’l Union Fire Ins. Co., 535 F.3d 380, 385 (5th Cir. 2008)(per
curiam); see also 11 U.S.C. § 541(a)(2)(A)(a bankruptcy estate consists of, among other
property, “[a]ll interests of the debtor and the debtor’s spouse in community property as of the
commencement of the case that is . . . under the sole, equal, or joint management and control of
the debtor.”); Douglas v. Delp, 987 S.W.2d 879, 883 (Tex. 1999); Depumpo v. Thrasher, 05-14-
00967-CV, 2016 WL 147294, at *3 (Tex. App.--Dallas Jan. 13, 2016, no pet.). Moreover, the
bankruptcy court had exclusive jurisdiction over that asset. 28 U.S.C. § 1334(e). As we note
earlier, that asset of the bankruptcy estate was then sold back to the Carpenters, and was sold
“free and clear of all liens, claims and encumbrances.”
Lemon contends that “free and clear of all liens, claims and encumbrances” encompasses
the Shaw & Lemon’s contingency interest, effectively stripping it out of the claim. That
contingency interest is a necessary predicate for Hagood’s recovery. Courts have described an
attorney’s contingency interest in a client’s case in different ways. The Fifth Circuit describes an
attorney’s contingent fee agreement as an executory contract that converts to an equitable
interest upon recovery of a judgment. Missouri Pacific Railroad Co. v. Austin, 292 F.2d 415,
24
419 (5th Cir. 1961). The Fourteenth Court of Appeals concluded that after judgment, an attorney
who earns a contingency fee is an equitable owner (and not a mere claimant) to a portion of the
judgment. Madeksho v. Abraham, Watkins, Nichols & Friend, 112 S.W.3d 679, 689 (Tex.App.--
Houston [14th Dist.] 2003, pet. denied). A federal bankruptcy court concluded that the attorney
holds no more than a security interest. In re Equator Corp., 362 B.R. 326, 333 (Bankr. S.D. Tex.
2007), aff’d sub nom. Norman v. Havis, 06-30414, 2007 WL 2288045 (S.D. Tex. Aug. 6, 2007),
aff’d sub nom. In re Equator Corp., 261 Fed. Appx. 795 (5th Cir. 2008)(unpublished). However
actually described, a bankruptcy court order which extinguishes all liens, claims, and
encumbrances would on its face reach the attorney fee interest. A lien is defined as a “legal right
or interest that a creditor has in another’s property.” Black’s Law Dictionary (10th ed. 2014).
An attorney’s lien is defined as “[t]he right of an attorney to hold or retain a client’s money or
property . . . or to encumber money payable to the client (a charging lien) until the attorney’s
fees have been properly determined and paid.” Id. A “claim” can be defined as “any right to
payment or to an equitable remedy, even if contingent or provisional.” Id. An “encumbrance” is
defined as “[a] claim or liability that is attached to property or some other right and may lessen
its value, such as a lien or mortgage; any property right that is not an ownership interest.” Id.The Shaw-Lemon contingency interest in the Carpenter’s claim could fit any one of these
definitions. And if that interpretation of the order is wrong, we conclude that only the
bankruptcy court could clarify otherwise.
If the Sales Order expressly invalidates the attorney’s contingency interest, then Hagood
must somehow invalidate the order. Generally, a party cannot collaterally attack an order from
one court by challenging it in another. Browning v. Prostok, 165 S.W.3d 336, 345 (Tex. 2005).
One exception to this rule is when the challenged judgment is void. Browning v. Placke, 698
25
S.W.2d 362, 363 (Tex. 1985). A judgment is void only when it is apparent that the court
rendering the judgment “had no jurisdiction of the parties or property, no jurisdiction of the
subject matter, no jurisdiction to enter the particular judgment, or no capacity to act.” Id., citing
Austin Indep. Sch. Dist. v. Sierra Club, 495 S.W.2d 878, 881 (Tex. 1973).
Nothing here proves that the Sales Order is void. The trustee and the Carpenters were
parties to the proceeding. The Shaw & Lemon firm had been appointed in that bankruptcy
proceeding to pursue the claim. The bankruptcy court had subject matter jurisdiction over the
claim and the authority to dispose of it. As a part of “core proceedings” bankruptcy courts have
the authority to sell property and liquidate assets of the bankruptcy estate. See 28 U.S.C. §
157(b)(2)(N),(O)(2006). The bankruptcy court had the authority to condition the sale by either
including or not including liens. See Dallas County Tax Collector v. Andolina, 303 S.W.3d 926,
930 (Tex.App.--Dallas 2010, no pet.)(bankruptcy court approved sale of property, but subject to
liens of taxing authorities); Carney’s Lumber Co. v. Lincoln Mortg. Inv’rs, 610 S.W.2d 838, 842
(Tex.Civ.App.--Tyler 1980, no writ)(noting the authority of the bankruptcy court to make a sale
free and clear of all existing liens as a valid exercise of authority by the bankruptcy court.).
Hagood offers no argument that the bankruptcy court lacked the authority to enter the Sales
Order as it did.
Nor could the trial court interpret the Sales Order’s language of “free and clear of all
liens, claims and encumbrances” to apply to something other than the attorneys’ fee interest.
Even an interpretation of another court’s order can be the functional equivalent of an attack on
that order. Andolina, 303 S.W.3d at 931 (“The Andolinas may not now invoke the tax code and
seek a declaration which would require the trial court to interpret the bankruptcy court’s
treatment and result in a modification of the Taxing Authorities’ claims under the confirmed
26
plan.”); Depumpo, 2016 WL 147294, at *5 (“Mandel and SCD argue they only seek to interpret
the Final Judgment, not declare it void. However, similar considerations are at play when a
declaratory judgment is sought not to declare an earlier judgment void, but to have a court
merely ‘interpret’ a prior judgment.”); see also Browning, 165 S.W.3d at 346-47 (collateral
attack also includes relief other than revoking the prior order, if “it necessarily challenges the
integrity of the order and results in a review, perhaps a recalculation” of the matters at issue).
We conclude that at a minimum, Hagood’s claim turns on the interpretation of the Sale Order
which the trial court here could not do.
The Sale Order thus extinguished Shaw & Lemon’s fee interest in the claim. Hagood’s
interest in the contingency fee was dependent on Shaw & Lemon’s fee. In his words, “If we got
nothing, I got nothing.” When Shaw & Lemon’s fee interest was extinguished, so to was his
potential recovery. To recover compensatory damages, a breach-of-contract plaintiff must
establish that he suffered some pecuniary loss as a result of the breach of contract. Prudential
Sec., Inc. v. Haugland, 973 S.W.2d 394, 396 (Tex.App.--El Paso 1998, pet. denied).
As with the Fee Orders, Shaw & Lemon might be charged with breach of their agreement
with Hagood if they failed to protect their contingency interest leading up to the Sale Order.
Like the Dallas Court of Appeals earlier concluded with respect to Lemon’s action in the Holmes
Builder’s bankruptcy, a contracting party has an implied duty to cooperate in every contract in
which cooperation is necessary for performance of the contract. 2014 WL 3700687, at *6, citing
Case Corp. v. Hi-Class Bus. Sys. of Am., Inc., 184 S.W.3d 760, 770 (Tex.App.--Dallas 2005, pet.
denied)(“A duty to cooperate is implied in every contract in which cooperation is necessary for
performance of the contract.”). With sufficient evidence, a jury might have concluded that
27
Lemon or Shaw would have breached that duty if they sat on their hands as the trustee moved for
approval of a Sale Order that extinguished Hagood’s interest.
But we have no evidence regarding the backstory of the Sale Order. The record is barren
of any detail other than the Sale Order itself. It is unknown who if anyone represented the
Carpenters in that sale, or who negotiated the terms with the trustee. It is unclear if anyone
objected. Shaw was counsel of record for the trustee for the purpose of pursuing the claim, and
presumably he would have been alerted to the motion, but it is unclear if he objected, or if not,
whether any objection would have been sustained. While a jury had some evidence to conclude
that Lemon’s action with respect to the Fee Orders made collection by the Shaw & Lemon
partnership impossible, there was no similar evidence with respect to the Sale Order. 15 The date
of the Sale Order preceded the Holmes Builders bankruptcy, and renders any actions based on
Lemon’s conduct there irrelevant. We accordingly sustain Issues Two, Four, and Ten as they
pertain to the Sale Order. We sustain Issue Nineteen to the extent it challenges the attorney’s fee
recovery incurred for prosecuting this case if there is no valid underlying breach of contract
claim. In sustaining these issues, we reverse and render judgment that Hagood take nothing.
REMAINING ISSUES
Lemon has raised several additional issues, some carried over from his first appeal. He
contends in Issue Three that Disciplinary Rule 1.04 prevents any fee award as Hagood had no
15
We might envision several possible challenges to the Sales Order. Some authority suggests that a lien could only
be extinguished through an adversary proceeding where all affected parties are served and have an opportunity to
appear. See Cen-Pen Corp. v. Hanson, 58 F.3d 89, 93 (4th Cir. 1995)(noting Bankruptcy Rule 7001(2) expressly
requires initiation of an adversary proceeding “to determine the validity, priority, or extent of a lien or other interest
in property,” which would include filing a complaint and service of a summons). Beyond just the bankruptcy rules,
due process requires notice “reasonably calculated, under all the circumstances, to apprise interested parties of the
pendency of the action and afford them an opportunity to present their objections.” Mullane v. Central Hanover
Bank & Trust Co., 339 U.S. 306, 314, 70 S.Ct. 652, 657, 94 L.Ed. 865 (1950). The sparsity of information on how
the Sales Order came to be, however, denies us any latitude at this late stage to invoke any of these arguments, and
because Hagood’s brief both here and below intermingles discussion of the Fee Orders and Sale Order, we are hard
pressed to discern his specific reply to Sales Order issue.
28
written contract with the Carpenters. See Tex. Disciplinary Rules Prof’l Conduct R. 1.04(f),
reprinted in TEX.GOV’T CODE ANN., tit. 2, subtit. G, app. A (West 2013)(Tex.State Bar R. art. X
§ 9). He claims in Issue Five that Hagood is barred by res judicata because he first asserted this
very claim in the Holmes Bankruptcy which is now resolved by a final order. In Issue Six, he
contends that Hagood’s claims are barred by the statute of limitations. Finally in Issue Eighteen
he challenges the attorney’s fee award for prosecuting this case based on late disclosed evidence.
As did the Fifth Court of Appeals, we decline to rule on these issues in light of our holding on
the Sales Order.
CONCLUSION
In reference to Lemon’s American Star arguments, we overrule Issues Seven, Eight,
Nine, Eleven, Twelve, Thirteen, Fourteen, Fifteen, Sixteen, and Seventeen. Regarding his
arguments as to the Fee Orders, we overrule Issues One, Four, and Ten. We sustain Issues Two,
Four, and Ten as they pertain to the Sale Order and sustain Issue Nineteen as it pertains to the
award of attorney’s fee for prosecuting this case. We decline to rule on Issues Three, Five, Six,
and Eighteen. We reverse the judgment below and render judgment that Hagood take nothing.
July 26, 2017
ANN CRAWFORD McCLURE, Chief Justice
Before McClure, C.J., Rodriguez, and Hughes, JJ.
Hughes, J., not participating
29