Bruce R. Lively v. J. Randle Henderson, Individually and as a Partner in Henderson & Hammon, L.L.P.

Affirmed and Memorandum Opinion filed November 13, 2007

Affirmed and Memorandum Opinion filed November 13, 2007.

In The

Fourteenth Court of Appeals

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NO. 14-05-01229-CV

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BRUCE R. LIVELY, Appellant

V.

J. RANDLE HENDERSON,

INDIVIDUALLY AND AS A PARTNER IN HENDERSON & HAMMON, L.L.P., Appellee

On Appeal from the 151st District Court

Harris County, Texas

Trial Court Cause No. 03-61821

M E M O R A N D U M  O P I N I O N

In this breach of contract and fiduciary duty case, Bruce R. Lively contends the trial court erred in granting summary judgment in favor of J. Randle Henderson individually and as a partner in Henderson & Hammon, L.L.P. because Henderson failed to establish, as a matter of law: (1) Bruce lacked standing; (2) the parties= Mutual Release negated Bruce=s claims; (3) Henderson did not owe Bruce a fiduciary duty; and (4) Henderson was entitled to a no-evidence summary judgment.  Bruce further asserts  the trial court erred in disposing of claims raised in his second amended original petition upon which Henderson did not move for summary judgment.  Because the terms of the release negate Bruce=s breach of contract claim and there is no evidence that Henderson owed Bruce a fiduciary duty at the time of any alleged breach, we affirm.

I. Factual and Procedural Background

When the events giving rise to this lawsuit occurred, Bruce was the sole shareholder of Lively Energy & Development Corp. (Ledco) and Harry Lively, Bruce=s father, was the sole shareholder of Lively Exploration Co. (Lexco).  Both companies were involved in oil and gas exploration and development, and Harry and Bruce had agreed to work together on pursuing various oil and gas projects. 

JIMCO Enterprises, Inc. was a pumping company owned by other individuals not involved in this lawsuit that, among other things, provided pumping services to several wells owned by Lexco.  In 1998, Bruce and Harry began efforts to jointly acquire JIMCO.  Henderson represented both Bruce and Harry in their joint effort to acquire JIMCO.  Harry, for reasons unknown and not relevant to this dispute, decided not to pursue the acquisition.  Bruce continued his efforts to acquire JIMCO, and  Henderson assisted Bruce in forming RWR Holdings, Inc. for purposes of the acquisition.  In turn, RWR became the sole shareholder of JIMCO, and Bruce was the sole shareholder of RWR.  Henderson represented Bruce and RWR through the acquisition of JIMCO, and, as a result, was aware of Bruce=s investments and obligations because he assisted Bruce in making the financial arrangements for the purchase.

After the JIMCO closing, a dispute arose between Henderson and Bruce regarding legal fees and Henderson=s representation of Bruce.  To settle those issues, Henderson and Bruce entered into a mutual release on July 6, 1999.  Under the terms of the release,  Henderson released Bruce from all claims for payment of legal services rendered in connection with the JIMCO acquisition and agreed to refrain from representing Harry in any claims for reimbursement relating to the JIMCO acquisition.   In return, Bruce released Henderson:

from all claims made, known and unknown, arising out of Henderson=s representation of Bruce R. Lively in the JIMCO acquisition, and without waiver of any conflict of interest that may arise in the future from Henderson=s representation of Harry B. Lively, inclusive of any corporation or entity owned or controlled by Harry B. Lively, in any matter affecting Bruce R. Lively from and after the date of this mutual release, does hereby release Henderson and J. Randle Henderson from any claims arising out of Henderson=s representation of Harry B. Lively, inclusive of any corporation or entity owned or controlled by Harry B. Lively, in any matter affecting Bruce R. Lively prior to the date of this mutual release.

(emphasis added) Although Henderson represented Harry subsequent to this date, he had no involvement with any of Bruce=s corporate entities thereafter. 

In the meantime, JIMCO continued pumping operations at Lexco=s wells under a pre-existing oral agreement for several months and Harry and Bruce continued to work together on other oil and gas activities. Bruce located a drilling operator, Kerns Oil & Gas Co. (Kerns), to develop some new wells on Lexco=s property.  Bruce turned over final negotiations between Kerns and Lexco to Lexco.  At the same time, Bruce was negotiating his own pumping agreement between JIMCO and Kerns for some of Kerns= existing wells on Lexco=s property.  Henderson had no involvement in any of these transactions on Bruce=s behalf. 

Before Kerns and JIMCO reached an agreement, however, Kerns bypassed JIMCO and hired JIMCO=s pumper directly to pump its wells on Lexco=s property.  On November 15, 1999, Henderson, on behalf of Lexco, notified Bruce, as president of JIMCO, that Aall services, including but not limited to pumping and consulting performed by JIMCO@ were terminated effective December 1, 1999.  This letter indicated that Kerns would be taking over the services previously performed by JIMCO.

Bruce filed suit against Henderson on November 6, 2003, alleging breach of the release and breach of fiduciary duty because of Henderson=s representation of Harry in terminating the Lexco/JIMCO pumping agreement.  After filing a general denial, Henderson responded with a traditional and no-evidence summary judgment motion.  In this motion, Henderson contended he was entitled to a traditional summary judgment because Bruce lacked standing to assert damages, the release negated Bruce=s claims, and there was no fiduciary relationship between Henderson and Bruce at the time of the alleged breach.  Henderson also asserted there was no evidence of a breach of the release or any damage to Bruce individually. Finally, Henderson alleged there was no evidence of (1) any fiduciary duty between Henderson and Bruce after July 1999, (2) breach of any fiduciary duty, or (3) any damage to Bruce, individually, resulting from any breach.  After various other filings by both parties, the trial court entered final summary judgment in favor of Henderson on September 6, 2005.  This appeal timely followed.

II. Standard of Review

We review the granting of summary judgment de novo.  Cruikshank v. Consumer Direct Mortg., Inc., 138 S.W.3d 497, 500 (Tex. App.CHouston [14th Dist.] 2004, pet. denied).  We may affirm a summary judgment only on grounds specifically stated in the motion.  Id.  Where, as here, the trial court=s order granting summary judgment does not specify on what grounds it was granted, it must be affirmed if any of the grounds asserted are meritorious.  Western Invs., Inc. v. Urena, 162 S.W.3d 547, 550 (Tex. 2005).

A defendant moving for a traditional summary judgment under rule 166a must conclusively disprove an essential element of the plaintiff=s cause of action or conclusively prove all the elements of an affirmative defense that would overcome plaintiff=s cause of action.  Cruikshank, 138 S.W.3d at 500.  A party may also move for summary judgment on the ground that there is no evidence of one or more essential elements of a claim or defense on which an adverse party would have the burden of proof at trial.  See  Tex. R. Civ. P. 166a(i); Western Invs., Inc., 162 S.W.3d at 550.   Once a no‑evidence summary judgment has been filed, the non‑movant must bring forth more than a scintilla of evidence to raise a fact issue on the challenged elements.  Cruikshank, 138 S.W.3d at 500.  In reviewing a summary judgment, we consider the evidence in the light most favorable to the non‑movant and resolve any doubt in the non‑movant=s favor.  Western Invs., Inc., 162 S.W.3d at 550.

III. Analysis

A.        Traditional and No Evidence Summary Judgment on Bruce=s Claims

In his first issue, Bruce contends the trial court erred in granting summary judgment because Henderson failed, as a matter of law, to establish that (1) Bruce lacked standing to assert damages on behalf of JIMCO or RWR, (2) the release negated Bruce=s claims, (3) Henderson owed no fiduciary duty to Bruce, and (4) Henderson was entitled to a no-evidence summary judgment.  Because we conclude that the clear wording of the release negates Bruce=s breach of contract claim and there was no evidence of at least one element of Bruce=s breach of fiduciary duty claim, we overrule his first issue.

1.         Breach of Contract

Bruce sued Henderson for breach of contract alleging Henderson breached the release because he represented Harry in matters affecting Bruce, i.e., termination of the Lexco pumping contract with Bruce.  Henderson filed a motion for summary judgment claiming, among other things, that the plain language of the release does not prohibit Henderson from representing Harry in the future. 

To recover under a breach of contract cause of action, a plaintiff must show: (1) the existence of a valid contract, (2) performance or tendered performance by the plaintiff, (3) breach of the contract by the defendant, and (4) damages sustained as a result of the breach.  Renteria v. Trevino, 79 S.W.3d 240, 242 (Tex. App.CHouston [14th Dist.] 2002, no pet.).  Henderson, as movant for summary judgment, had the burden to establish by competent summary judgment evidence that there was no genuine issue of material fact as to one or more essential elements of Bruce=s breach of contract cause of action.  See Elliott-Williams Co. v. Diaz, 9 S.W.3d 801, 803 (Tex. 1999). 

In construing a written contract, our primary goal is to ascertain the true intentions of the parties as expressed in the instrument. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003).  To do so, we must examine and consider the entire contract to ensure no provisions are rendered meaningless.  Id.  Finally, A[c]ontract terms are given their plain, ordinary, and generally accepted meanings unless the contract itself shows them to be used in a technical or different sense.@  Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex. 2005).

The release indicates it was entered into because Henderson had made a demand on Bruce for full payment for legal services rendered in connection with the JIMCO acquisition.  Bruce objected to paying all of Henderson=s fees because some of the fees occurred when Henderson represented both Bruce and Harry.  When Bruce and Henderson settled their dispute, they executed the mutual release, in which Henderson released Bruce from all claims for payment of legal services rendered in connection with the JIMCO acquisition and agreed to refrain from representing Harry in any claims for reimbursement relating to the JIMCO acquisition.   In return, Bruce released Henderson from any claims arising out of Henderson=s representation in the JIMCO acquisition and from any claims arising out of his representation of Harry in any matter prior to the date of the release. Bruce=s release was, Awithout waiver of any conflict of interest that may arise in the future from Henderson=s representation of Harry B. Lively, . . . in any matter affecting Bruce R. Lively from and after the date of this mutual release.@

Bruce alleges that the language in the release referencing non-waiver of future conflicts of interest is a contractual prohibition against any future conflict of interest.  However, the plain language of the release reflects that Bruce has not waived his remedies for any future conflicts of interest.  Thus, rather than prohibiting future conflicts, the release instead indicates Bruce has not waived his remedies for any future conflicts of interest that could arise from Henderson=s representation of Harry or Harry=s corporate entities.  Accordingly, because the wording of the release negates Bruce=s breach of contract claim, Henderson established no liability under the contract as a matter of law.

2.         Breach of Fiduciary Duty

In his second cause of action, Bruce alleged Henderson breached a fiduciary duty owed to him as a result of their former attorney-client relationship.  There are two types of fiduciary relationships: (1) a formal fiduciary relationship, arising as a matter of law such as that between an attorney and his client; and (2) an informal fiduciary relationship, based on a confidential relationship that may arise from other moral, social, domestic or personal associations.  See Stephenson v. LeBoeuf, 16 S.W.3d 829, 836 (Tex. App.CHouston [14th Dist.] 2000, pet. denied).  Bruce=s allegation of breach of fiduciary duty is limited to breach of the attorney-client relationship.  Thus, our discussion of the fiduciary relationship between the parties here is limited to those arising out of the attorney-client association.

An attorney has a fiduciary duty to his client when an attorney‑client relationship is created.  See Willis v. Maverick, 760 S.W.2d 642, 645 (Tex. 1988); Greene=s Pressure Treating & Rentals, Inc. v. Fulbright & Jaworski, L.L.P., 178 S.W.3d 40, 43 (Tex. App.CHouston [1st Dist.] 2005, no pet.). An attorney‑client relationship only arises when an attorney agrees to render professional services to a client.  Greene=s Pressure Treating & Rentals, Inc., 178 S.W.3d at 43.  This relationship may be expressly created by contract, or impliedly created through the parties= actions. Id.  In the absence of an agreement to the contrary, the attorney-client relationship and the concomitant fiduciary relationship terminates upon completion of the purpose of employment.  Stephenson, 16 S.W.3d at 836.

Here, the parties agree Henderson and Bruce had an attorney-client relationship for the purposes of acquiring JIMCO and that Henderson has not represented Bruce since the JIMCO acquisition. Bruce contends that the fiduciary attorney-client relationship extended beyond the JIMCO acquisition.  The cases cited by Bruce in support of his argument that this fiduciary relationship continued ad infinitum are inapposite. See Willis v. Maverick, 760 S.W.2d 642, 645 (Tex. 1988) (determining that discovery rule applies to legal malpractice cases because of the fiduciary relationship between attorney and client); Maryland Am. Gen. Ins. Co. v. Blackmon, 639 S.W.2d 455, 458 (Tex. 1982) (attorney-client privilege continues after attorney-client relationship ends); Archer v. Griffith, 390 S.W2d 735, 739 (Tex. 1964) (AThe [rule of trusteeship] . . . applies to a contract or other transaction relating to compensation provided the attorney‑client relationship was in existence at the time.@).             Further, nothing in our record indicates that this relationship continued beyond the acquisition of JIMCO.  Indeed, the dispute leading to the parties= release arose out of the JIMCO acquisition, and the parties agree that their attorney-client relationship terminated at that time.  Moreover, Bruce=s allegations of breach of fiduciary duty rest on Henderson=s representation of Lexco in terminating a service agreement with JIMCO, which is a separate legal entity from Bruce.  See Grain Dealers Mut. Ins. Co. v. McKee, 943 S.W.2d 455, 458 (Tex. 1997) (Corporate entities are separate and distinct from their shareholders, even when there is only one shareholder.). As such, Henderson had no attorney-client relationship with JIMCO and thus owed JIMCO no fiduciary duty.

Bruce has presented no evidence of a continuing attorney-client relationship between Henderson and Bruce after the date of the release.  He has likewise presented no evidence of any attorney-client relationship between Henderson and JIMCO.  Because Bruce presented no evidence of a fiduciary relationship, he has failed to present evidence of one or more essential elements of his claim.  Accordingly, the trial court properly granted Henderson=s no-evidence summary judgment on Bruce=s breach of fiduciary duty claim.  We overrule Bruce=s first issue.

B.        Bruce=s Amended Petition

In his second issue, Bruce contends the trial court erroneously disposed of claims he alleged in his second amended original petition not addressed by Henderson=s summary judgment motion.   However, Bruce did not bring any new claims in his amended petition; instead, he brought the same causes of action, breach of contract and fiduciary duty, both individually and in his capacity as president of JIMCO and RWR.  Bruce amended his petition in response to Henderson=s motion for summary judgment alleging that any damages resulting from Henderson=s alleged conflict of interest accrued to JIMCO, not Bruce.  Bruce contends that because he is the sole shareholder of JIMCO and RWR, he is entitled to bring an action on behalf of those corporations.

A plaintiff=s timely filed amended pleading supersedes all previous pleadings and becomes the controlling petition in the case regarding theories of recovery.  Tex. R. Civ. P. 65.  Ordinarily, a defendant is required to amend his motion for summary judgment to address any additional claims.  Espeche v. Ritzell, 123 S.W.3d 657, 663B64 (Tex. App.CHouston [14th Dist.] 2003, pet. denied).  However, if a motion for summary judgment is sufficiently broad to encompass later-filed claims, the movant need not amend his motion.  Id. at 664.  Henderson conclusively proved that any breach of contract claim brought by either Bruce, individually, or as a representative of JIMCO and RWR was negated by the plain language of the contract.  Because the grounds asserted by Henderson in his motion for summary judgment also vitiate the corporations= claims, we overrule Bruce=s second issue.^[1]

 C.       Henderson=s Cross Point Requesting Damages for Frivolous Appeal

Henderson requests an award for frivolous appeal damages.  Henderson contends that sanctions are appropriate because Bruce had no standing to assert the damages he alleged, ignored well-settled Texas law regarding the distinction between corporations and shareholders, Ablatently misread@ the release, and failed to present any evidence to support his theories of recovery. 

This court is authorized to award a prevailing party damages if we determine an appeal is frivolous.  See Tex. R. App. P. 45.  Although the granting of sanctions is within our discretion, a sanction should be applied only with prudence, caution, and after careful deliberation.  See Azubuike v. Fiesta Mart, Inc., 970 S.W.2d 60, 66 (Tex. App.CHouston [14th Dist.] 1998, no pet.). In determining the propriety of sanctions, we must view the record from the appellant=s point of view at the time the appeal was filed, and we may not consider any matter that is not in the record, briefs, or other papers filed in this court.  See Tex. R. App. P. 45; Azubuike, 970 S.W.2d at 66.  Furthermore, we must focus on whether appellant had a reasonable expectation of reversal or whether he merely pursued the appeal in bad faith.  Azubuike, 970 S.W.2d at 66.

Although the imposition of sanctions is within our discretion, we may do so only in circumstances that are truly egregious. Angelou v. African Overseas Union, 33 S.W.3d 269, 282 (Tex. App.CHouston [14th Dist.] 2000, no pet.). Factors to be considered in deciding whether to impose sanctions against an appellant include the failure to present a complete record, the raising of issues for the first time on appeal, the failure to file a response to a cross‑point requesting sanctions, and the filing of an inadequate appellate brief.  Tate v. E.I. Du Pont de Nemours & Co., Inc., 954 S.W.2d 872 875 (Tex. App.CHouston [14th Dist.] 1997, no writ).

Although most of Bruce=s arguments on appeal may be without merit, we do not agree the record in this case evidences egregious circumstances warranting sanctions.  Accordingly, we decline Henderson=s request.

The judgment of the trial court is affirmed.

/s/        John S. Anderson

Justice

Judgment rendered and Memorandum Opinion filed November 13, 2007.

Panel consists of Justices Yates, Anderson, and Hudson.^[2]

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^[1]  Moreover, Henderson points out that Bruce=s notice of appeal gives no indication that he is appealing in a representative capacity on behalf of his corporate entities. Bruce, in his individual capacity, is not legally the same person as Bruce in his capacity as president of JIMCO and RWR.  See Elizondo v. Tex. Natural Res. Conservation Comm=n, 974 S.W.2d 928, 931 (Tex. App.CAustin 1998, no pet.) (holding that because appellant did not perfect appeal in representative capacity, appellant was only before court in individual capacity).  Thus, Bruce is only before this court in his individual capacity, and we lack jurisdiction to consider any claims he may have as a representative of JIMCO or RWR.

^[2]  Senior Justice Hudson sitting by assignment.