Mary Harp Shankles v. J. Don Gordon, Hynds & Gordon P.C., David N. McNees D/B/A Law Offices of David N. McNees ( 2018 )

Vacated and Dismissed, and Opinion Filed August 27, 2018.
In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-16-00863-CV
MARY HARP SHANKLES, Appellant
V.
J. DON GORDON, HYNDS & GORDON P.C., AND
DAVID N. MCNEES D/B/A LAW OFFICES OF DAVID N. MCNEES, Appellees
On Appeal from the County Court at Law No. 5
Dallas County, Texas
Trial Court Cause No. CC-13-05746-E
MEMORANDUM OPINION
Before Justices Lang, Evans, and Schenck
Opinion by Justice Lang
This case involves a complicated web of claims, counterclaims, cross-claims, intervening
claims, and bankruptcy proceedings, including adversary proceedings, that commenced in 2004.1
All proceedings arose from the probate of Douglas Lee Shankles’s (the decedent) will, disputes
involving his widow, Mary Harp Shankles (Shankles), and claims Shankles made against her
former legal counsel. The litigation worked its way through the various proceedings culminating
1
These proceedings occurred in Grayson County Court at Law No. 1, cause no. 2004-72P (probate court), the 397th District Court, Grayson
County, cause no. CV-11-0095 (district court), the United States Bankruptcy Court for the Eastern District of Texas (bankruptcy court), cause no.
11-43075-BTR (main bankruptcy case) and adversary no. 1104227 (adversary proceeding), and Dallas County Court at Law No. 5, cause no. CC-
13-05746-E (county court).
in the county court’s final judgment.2 We address those proceedings since the county court’s
decision is largely based upon what transpired in the other proceedings.
On appeal from the county court’s judgment, Shankles raises four issues, arguing the
county court erred when it: (1) dismissed her claims for breach of fiduciary duty under section
27.005 of the Texas Civil Practice and Remedies Code, which is referred to as the Texas Citizens
Participation Act;3 (2) dismissed her claims for breach of fiduciary duty under section 27.005 of
the Texas Citizens Participation Act because she established a prima facie case for each essential
element of her causes of action; (3) granted summary judgment dismissing her claims for
professional negligence because there were genuine issues of material fact precluding summary
judgment; and (4) awarded J. Don Gordon, Hynds & Gordon P.C., and David N. McNees d/b/a
Law Offices of David N. McNees their attorneys’ fees pursuant to section 27.009(a)(1) of the
Texas Citizens Participation Act because it dismissed her claims for breach of fiduciary duty and
breach of the implied duty of good faith and fair dealing.4 In their responses, Gordon and Hynds
& Gordon, and McNees challenge Shankles’s standing to bring her professional negligence, breach
2
The final judgment consists of two documents: (1) the order granting motions to dismiss under Texas Citizens Participation Act; and (2) the
order granting defendants’ motions for summary judgment and defendants’ motions to determine fees and costs. The order granting motions to
dismiss under Texas Citizens Participation Act dismissed Shankles’s claims for breach of fiduciary duty and breach of the implied covenant of
good faith and fair dealing. The order granting defendants’ motions for summary judgment and defendants’ motions to determine fees and costs
ordered that Shankles take nothing on her claims for professional negligence, and awarded the defendants attorneys’ fees. Dispositive orders need
not appear in one document for a judgment to become final. See Azbill v. Dallas Cty. Child Protective Servs. Unit of Tex. Dep’t of Human &
Regulatory Servs., 860 S.W.2d 133, 137 (Tex. App.—Dallas 1993, no writ); Radelow-Gitten Real Prop. Mgmt. v. Parmex Foods, 735 S.W.2d 558,
560 (Tex. App..—Dallas 1987, writ ref’d n.r.w.). Since there can be only one final judgment rendered in any cause, the two orders are construed
as a single judgment. TEX. R. CIV. P. 301; see Port Distrib. Corp. v. Fritz Chem. Co., 775 S.W.2d 669, 670 (Tex. App.—Dallas 1989, writ dism’d
by agr.).
3
See Citizens Participation Act, 82nd Leg. R.S., ch. 341, §§ 1–2, 2011 Tex. Gen. Laws 961, 961–64 (codified at TEX. CIV. PRAC. & REM.
CODE ANN. § 27.001–27.011) (section one states, “This Act may be cited as the Texas Citizens Participation Act.”). Also, the Texas Citizens
Participation Act is sometimes referred to as an anti-SLAPP law‒the acronym standing for strategic lawsuit against public participation. KBMT
Operating Co. v. Toledo, 492 S.W.3d 710, 713 n.6 (Tex. 2016).
4
In her brief, Shankles stated she “is not appealing from the dismissal of her causes of action for breach of the [implied] covenant of good
faith and fair dealing in a special relationship.” Also, in her post-submission letter brief, Shankles stated she “abandoned her claims for breach of
the implied [covenant] of good faith and fair dealing in the [county] court and such claims are not the subject of this appeal.” However, Shankles
does challenge the county court’s award of attorneys’ fees under section 27.009(a)(1), which is based on the county court’s dismissal of both her
claims for breach of fiduciary duty and her claims for breach of the implied covenant of good faith and fair dealing under the Texas Citizens
Participation Act. Accordingly, we must address standing as to her claims for breach of the implied covenant of good faith and fair dealing. As
noted later, because Shankles has no standing to bring claims for breach of fiduciary duty and breach of the implied covenant of good faith and fair
dealing, the trial court does not have jurisdiction to award attorneys’ fees pursuant to section 27.009(a)(1).
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of fiduciary duty, and breach of the implied covenant of good faith and fair dealing claims against
them in the county court.5
We conclude Shankles does not have standing to bring her claims for breach of fiduciary
duty, breach of the implied covenant of good faith and fair dealing, and professional negligence.
The county court’s order dismissing Shankles’s claims for breach of fiduciary duty and breach of
the implied covenant of good faith and fair dealing under the Texas Citizens Participation Act is
vacated. Also, the county court’s order granting Gordon and Hynds & Gordon’s, and McNees’s
motions for summary judgment on Shankles’s claims for professional negligence is vacated. The
cause is dismissed for want of subject-matter jurisdiction.
I. FACTUAL AND PROCEDURAL CONTEXT
Below, we describe separately the factual and procedural histories in the various courts in
which proceedings involving this matter have taken place. For the most part, we describe the
factual and procedural histories in chronological order. However, we note that the record on appeal
contains only partial records of the proceedings that occurred in the probate court, district court,
bankruptcy court, and county court, so we describe what transpired to the extent shown by the
limited record.
The facts common to all proceedings show that in 1977 and 1978, the decedent acquired a
total of 187 acres of real property located at 7782 Plainview Road, Sherman, Grayson County,
Texas (187 acres). Shankles married the decedent in 1992. They did not have any children
5
In their briefs on appeal, the parties argued standing only with respect to Shankles’s professional negligence claims. However, we review
standing as to all of her claims, including her breach of fiduciary duty claims and breach of the implied covenant of good faith and fair dealing
claims, because standing is a component of a court’s subject-matter jurisdiction. See Waco Indep. Sch. Dist. v. Gibson, 22 S.W.3d 849, 851 (Tex.
2000); Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 446 (Tex. 1993). Accordingly, this Court requested that the parties file
supplemental letter briefs addressing whether Shankles had standing to bring the breach of fiduciary duty and breach of the implied covenant of
good faith and fair dealing claims. See TEX. R. APP. P. 42.3. All of the parties filed post-submission letter briefs as requested. As we previously
noted, in her post-submission letter brief, Shankles claimed that she had abandoned her claims for breach of the implied covenant of good faith and
fair dealing. Although Shankls does not challenge on appeal the actual dismissal of her claims for breach of the implied covenant of good faith and
fair dealing under the Texas Citizens Participation Act, she does challenge the county court’s award of attorneys’ fees, which were based on the
dismissal of her claims for both breach of fiduciary duty and breach of the implied covenant of good faith and fair dealing pursuant to that act.
Accordingly, we must also address Shankles’s standing with respect to her claims for breach of the implied covenant of good faith and fair dealing.
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together, but the decedent had five children from a previous marriage. Although the decedent and
Shankles lived on the 187 acres during their marriage, it was at all times the decedent’s separate
property. In 2003, the decedent was diagnosed with cancer. He died on January 14, 2004.
A. Probate Proceedings
On January 23, 2004, Shankles retained McNees to probate the decedent’s will. Then, on
February 4, 2004, McNees filed an application to probate the decedent’s will. In December 2006,
Shankles retained Gordon and his law firm, Hynds & Gordon, in addition to McNees, to represent
her in the probate matter. The probate case of that will was contested by the decedent’s children
until October 10, 2008, when the parties announced to the probate court that they reached a
settlement. On October 13, 2008, the probate court signed an order memorializing the parties’
agreement pursuant to Rule 11.6 Meanwhile, the parties worked to prepare a detailed, written
settlement agreement. On December 12, 2008, the probate court issued an order admitting to
probate a 1993 will.7 Shankles obtained separate counsel, David Stagner, to review the terms of
the proposed written settlement agreement. After his review, Shankles decided to go forward with
the settlement agreement. Finally, on August 14, 2009, Shankles and the decedent’s children
signed a written settlement agreement (2009 settlement agreement), which specified, in part, that
it was retroactively effective as of October 9, 2008. Also, in the 2009 settlement agreement, the
parties agreed to the admission of the 1993 will for probate with certain agreed revisions to its
terms, including that Shankles would receive ownership of the 187 acres effective as of January
14, 2004, which was the day of the decedent’s death. 8 On August 21, 2009, in accordance with
6
See TEX. R. CIV. P. 11 (agreements to be in writing).
7
Shankles offered three wills for probate that were alleged to have been made by the decedent after the 1993 will. One of those wills was
purported to have been signed by the decedent on the day of his death. That will was later found to be forged and fraudulent by the bankruptcy
court because Shankles signed it for the decedent, the notary was not present, the date of the will was incorrect, and it was not clear when the
witnesses signed it.
8
Later, the bankruptcy court found that Shankles’s 2009 settlement agreement, including the 2009 distribution deed, was “an agreement to
back date the effectiveness of the economic interest.” However, the bankruptcy court also found that “the fact that the parties agreed to back date
the effectiveness of the economic interest d[id] not change the date of her accrual for purposes of 11 U[.]S[.]C[.] [s]ection 5223(p).”
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the 2009 settlement agreement, the 187 acres was conveyed by the executrix of the estate to
Shankles through a “distribution deed” (2009 distribution deed) that was also made effective
retroactively to January 14, 2004. Shankles would later claim all of this 187 acres as her
“homestead” as of January 14, 2004.
Gordon, Hynds & Gordon, and McNees originally represented Shankles in the will contest
action on a contingency fee basis. However, Shankles did not have any liquid assets with which
to pay her attorneys. As a result, Gordon, Hynds & Gordon, and McNees requested that Shankles
execute promissory notes secured by 879 of the 187 acres for repayment of their fees. On August
14, 2009, Shankles executed two separate promissory notes (2009 promissory notes). Under the
terms of the 2009 promissory notes, the principal amount Shankles agreed to pay to Hynds &
Gordon was $221,910.68 (the first promissory note) and the amount payable to McNees was
$212,204.62 (the second promissory note). According to the terms of the 2009 promissory notes,
the principal amount was due on the earlier date of either the sale of the 87 acres securing the note
or August 14, 2010. Also, Shankles executed an affidavit, disclaiming a homestead interest in the
87 acres and stating that property was used as pasture.
B. District Court Proceedings
In 2011, Hynds & Gordon filed suit against Shankles to recover on the first promissory
note. The suit alleged Shankles was in default on the first promissory note and owed it the full
principal of the note, $221,910.68. Also, it sought “foreclosure of [Hynds & Gordon’s] security
interest in the collateral.” On July 1, 2011, McNees filed a petition for intervention, alleging
Shankles was in default of the second promissory note and she owed him the full principal of
$212,204.62. McNees also sought foreclosure of his security interest in the 87 acres specified in
9
In the record, the amount of land securing the promissory notes is also referred to as “approximately 80 acres.” We will refer to the amount
of property securing the note as “87 acres.”
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the deed of trust securing Shankles’s promissory note. On July 2, 2011, Shankles filed her first
amended counterclaims against Hynds & Gordon and third-party petition against Gordon and
Tohnie E. Hynds, alleging breach of fiduciary duty, violations of the Texas Deceptive Trade
Practices Act, and professional negligence. On September 21, 2011, Shankles filed a counterclaim
against McNees, alleging claims for breach of fiduciary duty and professional negligence. As to
the counterclaims and third-party claims for breach of fiduciary duty and professional negligence,
Shankles alleged: (1) when they “caused and instructed” her to waive her homestead rights, they
breached their fiduciary duties “by placing [their] own financial interest above that of [their]
client[, Shankles]”; and (2) Gordon, Hynds & Gordon, and McNees “drafted or accepted a Deed
on property distributed to [Shankles] which does not convey marketable title to her” and “[f]urther
litigation [would] likely be required to cure the title defect created by [their] [professional]
negligence.”
C. Bankruptcy Proceedings
1. Chapter 11 Proceedings
On October 5, 2011, Shankles filed a voluntary petition for relief under Chapter 11 of the
United States Bankruptcy Code.10 On December 7, 2011, the district court case was removed to
the bankruptcy court as an adversary proceeding. On February 15, 2012, Hynds & Gordon and
McNees filed separate proofs of claim in the bankruptcy case for the sums due on the 2009
promissory notes. On January 24, 2012, Hynds & Gordon filed its amended objections to
Shankles’s real property exemption and on January 25, 2012, McNees filed its amended objections
on the same basis in the adversary proceeding. 11 Both Hynds & Gordon and McNees objected to
Shankles’s real property exemption on the following bases: (1) Shankles, as a single person, was
10
Pursuant to Chapter 11, debtors typically attempt to file a “plan” proposing payment of their debts. See 11 U.S.C. § 1121.
11
Hynds & Gordon’s and McNees’s amended objections are not included in the record on appeal. In their post-submission letter briefs on
standing, they state that they filed their amended objections on January 24 and 25, 2012. Shankles does not dispute these filing dates.
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entitled to exempt only 100 acres as a homestead under Texas law; (2) Shankles was bound by her
representation in her affidavit that 87 acres of the 187 acres were not her homestead; and (3) under
section 522(p)(1) of the bankruptcy code Shankles’s homestead exemption was “capped” at
$146,450.12 On February 29, 2012, based on the trustee’s motion, the bankruptcy court signed an
order converting Shankles’s bankruptcy to a proceeding under Chapter 7.13 The trustee’s motion
was agreed to by Shankles, Hynds & Gordon, McNees and other creditors. Also, in the adversary
proceeding, the trustee objected to Shankles’s claimed homestead exemption on the grounds that
it was “capped” under section 522(p)(1) of the bankruptcy code.
2. Chapter 7 Proceedings
On May 29, 2012, the bankruptcy court held a hearing in the adversary proceeding on the
creditors’ and Chapter 7 Trustee’s objections to Shankles’s claim that the 187 acres was exempt
from her creditors under the homestead exemption. See 11 U.S.C. § 522; TEX. PROP. CODE ANN.
§ 41.002(b)(1) (West 2014). After the parties closed, the bankruptcy court dictated several
findings of fact and conclusions of law into the record. 14 One finding of fact was that Shankles
claimed the value of her homestead was $1.1 million. Also, the bankruptcy court concluded, that
Shankles was not entitled to the exemption she claimed and her exemption was “capped” at
$146,450.15 On June 7, 2012, the bankruptcy court signed a written order that: (1) overruled Hynds
12
Although their objections are not in the record on appeal, during the hearing on those objections, the bankruptcy court recited on the record
the basis on which they objected.
13
See 11 U.S.C. § 1112 (conversion or dismissal). Under Chapter 7 of the Bankruptcy Code, the process of liquidation of a debtor’s assets
typically occurs. A trustee typically takes charge of a debtor’s assets. See 11 U.S.C. §§ 701–727.
14
See FED. R. BANKR. P. 7052 (applying to adversary proceedings Federal Rule of Civil Procedure 52, which states, in part, the court’s
“findings and conclusions may be stated on the record after the close of the evidence or may appear in an opinion or a memorandum of a decision
filed by the court.”).
15
Specifically, the bankruptcy court concluded:
[Shankles] did not have an economic interest in the homestead property when she signed the settlement agreement. She
acquired one as a result of the settlement agreement. And the fact that the parties agreed to back date the effectiveness of
the economic interest does not change the date of her actual accrual for purposes of 11 U[.]S[.]C[.] [s]ection 522(p).
The [Bankruptcy] Court also notes [its] concern with the possibility that by allowing that provision [in the settlement
agreement] to determine when [Shankles] acquired an interest in [the] property, we would be effectively creating a way for
parties to contract around the 1,215 day statutory period.
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& Gordon’s and McNees’s objections that under Texas law Shankles was entitled to exempt only
100 acres of property as homestead and that she was estopped from asserting her homestead
exemption based on her prior representation disclaiming 87 acres of the 187 acres as her
homestead; and (2) sustained the Chapter 7 Trustee’s, Hynds & Gordon’s, and McNees’s
objections that the value of Shankles’s exemption in the 187 acres was limited to $146,450 under
section 522(p)(1) of the bankruptcy code.
On August 5, 2012, Shankles filed objections to Hynds & Gordon’s and McNees’s proofs
of claim in the main bankruptcy case, arguing, inter alia, they breached their fiduciary duties to
Shankles and the proofs of claims were secured by invalid and unenforceable liens. Meanwhile,
on August 8, 2012, the Chapter 7 Trustee replaced Shankles as the real party in interest in the
adversary proceeding. On September 24, 2012, the bankruptcy court signed a memorandum
opinion respecting the adversary proceeding, which included a recitation of the factual and
procedural background of the case that incorporated many of the oral findings of fact, and an order
denying Shankles’s motion for reconsideration. Shankles appealed to the United States Court of
Appeals for the Fifth Circuit, which affirmed the bankruptcy court’s order. Weisbart v. Shankles
(In re Shankles), 554 F. App’x 300 (5th Cir. 2014) (per curiam). On October 15, 2012, the
bankruptcy court consolidated Shankles’s objections to the proofs of claim, which were filed in
the main bankruptcy case with Hynds & Gordon’s suit originally filed in the district court, now
designated as an adversary proceeding.
Adding another dimension to the controversies, on October 4, 2013, Shankles filed suit
against Gordon, Hynds & Gordon, and McNees, as well as others, in the county court. As a result,
Hynds & Gordon and McNees each filed motions to enjoin Shankles’s county court litigation in
For all of the foregoing reasons, the [Bankruptcy] Court concludes that [the] [s]ection 522(p) cap applies.
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the bankruptcy court. On December 16, 2013, the bankruptcy court held a hearing on those
motions, and on December 17, 2013, in two separate orders, it denied those motions.
On September 24, 2014, the bankruptcy court signed an order approving a “settlement and
compromise agreement” between the Chapter 7 Trustee, Hynds & Gordon, Gordon, Hynds,
McNees and Shankles for “the purpose of settling the adversary proceeding and Shankles[’s]
objections.” In that agreement, the parties stated that the parties “desire[d] to settle the claims that
are property of the bankruptcy estate that were asserted, or which could have been asserted, in
the [adversary proceeding] and the Shankles Objections without prejudice to the rights of any of
them to pursue any claims, rights, objections or other positions which were not asserted, and could
not have been asserted, in the [adversary proceeding] or the Shankles Objections.” [Emphasis
added.] However, as to Shankles’s lawsuit in county court, paragraph I of the settlement and
compromise agreement specified:
Notwithstanding anything contained in this agreement, [Shankles] and [Hynds &
Gordon, Hynds, Gordon, and McNees] are specifically not waiving or giving a
release herein of whatever claims they may have in the Dallas County Lawsuit.
[Shankles] and [Hynds & Gordon, Hynds, Gordon, and McNees] disagree as to the
effect, if any, that this settlement may have on their respective rights in the Dallas
County Lawsuit. Neither [Shankles] nor [Hynds & Gordon, Hynds, Gordon, and
McNees] waive, relinquish, impair, or give up their rights to argue their respective
positions on any such issues. [Shankles] and [Hynds & Gordon, Hynds, Gordon,
and McNees] specifically reserve all of their respective rights to argue their
respective positions in the Dallas County Lawsuit.
Finally, as part of the settlement and compromise agreement, the Chapter 7 Trustee
released “any and all claims, . . . whether known or unknown, . . . that are or were property of the
bankruptcy estate which were asserted or could have been asserted . . . including but not limited
to . . . causes of action for legal malpractice, breach of fiduciary duty[,] and deceptive trade
practices.”
On October 10, 2014, the bankruptcy court signed an order on the joint motion to dismiss
the adversary proceeding filed by the Chapter 7 Trustee, Hynds & Gordon, McNees and Shankles,
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granting the motion, dismissing all of the claims in the adversary proceeding with prejudice, and
ordering the clerk of the court to “close” the adversary proceeding. The main bankruptcy case was
closed and the Chapter 7 Trustee discharged from further duties on August 29, 2017.16
D. County Court Proceedings
As indicated above, on October 4, 2013, Shankles filed her original petition in the county
court against Gordon, Hynds & Gordon, and McNees, alleging the following claims: (1)
professional negligence; (2) breach of fiduciary duty; and (3) civil conspiracy. On January 16,
2014, Gordon and Hynds & Gordon filed their first amended answer, plea to the jurisdiction, and
Rule 13 motion for the imposition of sanctions.17 The record reflects that McNees filed an answer
to the county court lawsuit as well as a plea to the jurisdiction and a motion for imposition of Rule
13 sanctions. The record does not show that Gordon, Hynds & Gordon, or McNees requested a
hearing on or that the county court ruled on their pleas to the jurisdiction or their motions for the
imposition of Rule 13 sanctions.
On January 20, 2014, Shankles filed her second amended petition against Gordon, Hynds
& Gordon, and McNees, alleging claims for professional negligence, breach of fiduciary duty, and
breach of the implied covenant of good faith and fair dealing.18 With repesct to her claims for
professional negligence, Shankles alleged that Gordon, Hynds & Gordon, and McNees “each
failed to properly represent [Shankles] and protect [Shankles’s] interests in the settlement of the
Probate Litigation because the January 14, 2004 ‘effective date’ of the 2009 Distribution Deed has
been determined to be invalid, ineffective, and unenforceable.” As to her claims for breach of
16
The bankruptcy court’s order closing the main bankruptcy case is not in the record on appeal. In her post-submission letter brief on
standing, Shankles states that her “[main] bankruptcy case was closed and [the Chapter 7 Trustee] discharged from further duties on August 29,
2017.” Gordon, Hynds & Gordon, and McNees do not dispute this fact.
17
See TEX. R. APP. P. 13 (effect of signing of pleadings, motions, and other papers; sanctions).
18
In the text of her claim for breach of the implied covenant of good faith and fair dealing, Shankles references a claim for breach of contract,
stating, “By reason of the foregoing, [Shankles] has been damaged as a direct and proximate result of [Gordon’s, Hynds & Gordon’s, and McNees’s]
breach of contract and the implied covenant of good faith and fair dealing contained therein.” However, neither the parties nor the county court
treated this case as including a claim for breach of contract.
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fiduciary duty, she alleged that Gordon, Hynds & Gordon, and McNees breached their fiduciary
duties when they “directly and unequivocally challenged and contested [Shankles’s] Texas rural
homestead exemption . . ., the enforceability and validity of the January 14, 2004 ‘Effective Date’
of the 2009 Distribution Deed, and the date on which [Shankles] acquired an economic interest in
the Homestead Property.” Further, with respect to her claims for breach of the implied covenant
of good faith and fair dealing, Shankles alleged that Gordon, Hynds & Gordon, and McNees
breached their duties “when they took [] actions to deprive [Shankles] of the Homestead Property
or her Texas homestead exemption for such property by challenging and contesting the validity
and enforceability of the effective date of the 2009 Distribution Deed.”
On January 21, 2014, Gordon and Hynds & Gordon filed their second amended motion to
dismiss under the Texas Citizens Participation Act, and on January 22, 2014, McNees filed his
amended motion to dismiss under the same act. Both motions sought dismissal of Shankles’s
claims for breach of fiduciary duty and breach of the implied covenant of good faith and fair
dealing.
On October 22, 2014, the county court signed an order granting Gordon and Hynds &
Gordon’s, and McNees’s motions to dismiss under the Texas Citizens Participation Act. The effect
of that order was to dismiss with prejudice Shankles’s claims for breach of fiduciary duty and
breach of the implied covenant of good faith and fair dealing. In that order, the county court
ordered that Gordon and Hynds & Gordon’s, and McNees’s motions for costs, fees, and expenses
under section 27.009(a)(1) of the Texas Citizens Participation Act were granted and the amounts
would be determined at a later date. Shankles appealed that order to this Court. On June 1, 2015,
this Court dismissed Shankles’s appeal of the county court’s order granting the motion to dismiss
for lack of jurisdiction. We concluded that the county court’s order did not dispose of Shankles’s
claims for professional negligence and remanded the case to the county court for further
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proceedings. See Shankles v. Gordon, No. 05-14-01444-CV, 2015 WL 3454429 (Tex. App.—
Dallas June 1, 2015, no pet.) (mem. op.).
On April 5, 2016, Gordon and Hynds & Gordon filed their first supplemental answer,
generally denying Shankles’s allegations and asserting as affirmative defenses res judicata,
collateral estoppel, judicial estoppel, and lack of standing. Then, on April 15, 2016, Gordon and
Gordon & Hynds filed a motion for traditional summary judgment on the basis that: (1) the county
court lacked subject-matter jurisdiction because Shankles lacked standing to bring her professional
negligence claims; (2) they established they were entitled to summary judgment on their the
affirmative defenses of res judicata and statute of limitations; and (3) the element of causation in
Shankles’s claim for professional negligence is negated as a matter of law. Also, on April 5, 2016,
Gordon and Hynds & Gordon filed a motion seeking an award of fees and costs under section
27.009(a)(1) based on the county court’s dismissal of Shankles’s claims for breach of fiduciary
duty and breach of the implied covenant of good faith and fair dealing under the Texas Citizens
Participation Act.
On April 15, 2016, McNees filed a separate motion for traditional summary judgment on
the basis that: (1) Shankles’s professional negligence claim was a compulsory counterclaim to
McNees’s claims for fees in the bankruptcy court so her claim is barred; (2) his affirmative
defenses of res judicata and statute of limitations barred Shankles’s claims; and (3) the undisputed
evidence shows that Shankles cannot prevail as to the elements of breach of duty and proximate
cause on her claim for professional negligence. On May 3, 2016, McNees filed a motion seeking
an award of fees and costs under section 27.009(a)(1) based on the county court’s dismissal of
Shankles’s breach of fiduciary duty and breach of the implied covenant of good faith and fair
dealing claims under the Texas Citizens Participation Act.
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On May 27, 2016, Shankles filed two separate responses to the motions for summary
judgment. In both of her responses, Shankles claimed that she had standing to bring her
professional negligence claims because they accrued in June 2012 after the bankruptcy case was
converted to a Chapter 7 proceeding and the trustee was appointed so they were not property of
the bankruptcy estate. In the alternative, Shankles argued that, even if her professional negligence
claims were the property of the bankruptcy estate, she had standing because: (1) the trustee was
aware of the county court suit and did not object, and her recovery in the suit may have to be turned
over to the bankruptcy estate; and (2) all property not administered in the bankruptcy case reverted
back to her at the closing of the bankruptcy case.
On June 3, 2016, the county court held a hearing on the motions for summary judgment.
On June 20, 2016, the county court signed an order granting Gordon and Hynds & Gordon’s, and
McNees’s: (1) motions for summary judgment, ordering that Shankles take nothing on her claims
for professional negligence; and (2) motions for fees and costs pursuant to section 27.009(a)(1)
based on the dismissal of her claims for breach of fiduciary duty and breach of the implied
covenant of good faith and fair dealing awarding Gordon and Hynds & Gordon their attorneys’
fees in the amount of $69,348.70 and McNees his attorneys’ fees in the amount of $32,590.50.
II. STANDING
In their briefs and post-submission letter briefs, Gordon and Hynds & Gordon, and McNees
argue that Shankles did not have standing to bring her claims for professional negligence, breach
of fiduciary duty, and breach of the implied covenant of good faith and fair dealing against them
in the county court. They claim that Shankles’s claims became the property of the bankruptcy
estate and only the trustee could pursue them. 19 Shankles agrees with Gordon and Hynds &
19
Gordon and Hynds & Gordon argue the trial court properly granted summary judgment, in part, because they proved their affirmative
defense of lack of standing. However, standing, a component of a court’s subject-matter jurisdiction, cannot be conceded or waived. Therefore, it
is not an affirmative defense. See Tex. Air Control Bd., 852 S.W.2d at 446 (standing component of court’s subject-matter jurisdiction); 6200 GP
–13–
Gordon’s, and McNees’s argument to the extent that a bankrupt debtor’s professional negligence
claims against the debtor’s attorneys become the property of the bankruptcy estate “if those
[]claims arose or accrued prior to the date of the debtor’s filing.” However, Shankles maintains
that her claims arose or accrued after her Chapter 11 proceeding was converted to Chapter 7 and
are not part of her bankruptcy estate.
A. Standard of Review
The question of standing is a legal question regarding subject-matter jurisdiction, so an
appellate court conducts a de novo review of a trial court’s ruling. Mayhew v. Town of Sunnyvale,
964 S.W.2d 922, 928 (Tex. 1998); Mazon Assocs., Inc. v. Comerica Bank, 195 S.W.3d 800, 803
(Tex. App.—Dallas 2006, no pet.); Nauslar v. Coors Brewing Co., 170 S.W.3d 242, 256 (Tex.
App.—Dallas 2005, no pet.). If the record presents a standing issue the parties have failed to raise,
courts must do so sua sponte. Fin. Comm'n of Tex. v. Norwood, 418 S.W.3d 566, 591 (Tex. 2013);
Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 445–46 (Tex. 1993); St. John
Missionary Church v. Flakes, 547 S.W.3d 311,316 (Tex. App.—Dallas 2018, pet. filed) (en banc)
(noting one issue supreme court has clearly and unequivocally directed appellate courts to consider
sua sponte is subject-matter jurisdiction).
B. Applicable Law
1. Standing
Standing is a component of a court’s subject-matter jurisdiction. See Tex. Air Control Bd.,
852 S.W.2d at 446; Nauslar, 170 S.W.3d at 248. Standing to sue can be predicated upon either
statutory or common-law authority. See Williams v. Lara, 52 S.W.3d 171, 178–79 (Tex. 2001);
Nauslar, 170 S.W.3d at 252.
L.L.C. v. Multi Serv. Corp., No. 05-16-01491-CV, 2018 WL 3154594, at *3 (Tex. App.—Dallas June 28, 2018, no pet. h.) (mem. op.) (noting that
“while standing is a jurisdictional issue, lack of capacity is an affirmative defense”); In re E.C., No. 02-13-00413-CV, 2014 WL 3891641, *1 (Tex.
App.—Fort Worth Aug. 7, 2014, no pet.) (mem. op.) (standing cannot be conferred by consent or waiver).
–14–
The general rules of standing apply unless statutory authority for standing exists. See
Williams, 52 S.W.3d at 178; Nauslar, 170 S.W.3d at 252. As a necessary component of a court’s
subject-matter jurisdiction, standing cannot be waived and can be raised for the first time on
appeal. See Tex. Air Control Bd., 852 S.W.2d at 445–46; Mazon, 195 S.W.3d at 803.
To have standing, the pleader bears the burden of alleging facts that affirmatively
demonstrate the court’s jurisdiction to hear the case. See Tex. Air Control Bd., 852 S.W.2d at 446;
Mazon, 195 S.W.3d at 803. However, when standing is challenged, the plaintiff has the burden to
prove facts that affirmatively show the plaintiff’s standing to bring the suit. See Bray v. Fenves,
No. 06-15-00075-CV, 2016 WL 3083539, at *7 (Tex. App.—Texarkana Mar. 24, 2016, pet.
denied) (mem. op.) (affirming judgment granting plea to jurisdiction and noting appellants had
burden to plead and, when challenged, to prove facts that affirmatively showed their standing to
bring the suit); see also Jay Kay Bear Ltd. v. Martin, No. 04-14-00579-CV, 2015 WL 6736776, at
*4 (Tex. App.—San Antonio Nov. 4, 2015, pet. denied) (mem. op.) (addressing whether appellant
had standing to appeal and noting when standing challenged on appeal, appellant bears burden of
making prima facie showing it holds legally cognizable interest that is prejudiced or injuriously
affected by trial court’s judgment).
Whether considering the standing of one plaintiff or many, with the notable exception of
class actions, the court must analyze the standing of each individual plaintiff to bring each
individual claim he alleges. See Heckman v. Williamson Cty., 369 S.W.3d 137, 152 (Tex. 2012).
This principle flows from two sources. See Heckman, 369 S.W.3d at 152. First, a plaintiff must
demonstrate that the court has jurisdiction over and the plaintiff has standing to bring each of his
claims. See Heckman, 369 S.W.3d at 152–53. The court must dismiss only those claims over
which it lacks jurisdiction. See Heckman, 369 S.W.3d at 153. Second, a plaintiff must demonstrate
that he, himself, has standing to present his claims. See Heckman, 369 S.W.3d at 153. This means
–15–
the court must assess standing plaintiff-by-plaintiff and claim-by-claim. See Heckman, 369
S.W.3d at 153.
A party’s lack of standing deprives the court of subject-matter jurisdiction and renders any
trial court action void. See In re Russell, 321 S.W.3d 846, 856 (Tex. App.—Fort Worth 2010,
orig. proceeding [mand. denied]). The denial of a claim on the merits is different from the
dismissal of a claim for want of jurisdiction. See DaimlerChrysler Corp. v. Inman, 252 S.W.3d
299, 307 (Tex. 2008). The absence of subject-matter jurisdiction may be raised in a motion for
summary judgment. See Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 554 (Tex. 2000).
However, a court does not render judgment that a plaintiff takes nothing, as it would if the
plaintiff’s claims failed on the merits. See DaimlerChrysler, 252 S.W.3d at 307. Instead, the court
must dismiss for want of jurisdiction. See Heckman, 369 S.W.3d at 153; DaimlerChrysler, 252
S.W.3d at 307. The denial of a claim on the merits is not an alternative to dismissal for want of
jurisdiction merely because the ultimate result is the same. See DaimlerChrysler, 252 S.W.3d at
307.
2. Property of the Bankruptcy Estate
Section 541 of the bankruptcy code broadly defines “property of the estate” as “all . . .
property, wherever located and by whomever held.” 11 U.S.C. § 541(a); see also Burgess v. Sikes
(In re Burgess), 438 F.3d 493, 496 (5th Cir. 2006) (en banc). Subsection (1) specifies that property
of the estate includes “[a]ll legal or equitable interests of the debtor in property as of the
commencement of the case.” 11 U.S.C. § 541(a)(1); see also Burgess, 438 F.3d at 496. The scope
of section 541 is broad, bringing into the estate all of the debtor’s legal and equitable interests
“wherever located and by whomever held.” 11 U.S.C. § 541(a)(1); see also Burgess, 438 F.3d at
496; State Farm Life Ins. v. Swift (In re Swift), 129 F.3d 792, 795 (5th Cir. 1997). Property rights
in legal causes of action include not only the causes of action themselves, but also any appellate
–16–
rights related to those causes. See Croft v. Lowry (In re Croft), 737 F.3d 372, 375 (5th Cir. 2013)
(per curiam). However, the bankruptcy code also provides a temporal limitation: property of the
estate is determined at “[t]he commencement of the case.” 11 U.S.C. § 541(a)(1); see also Burgess,
438 F.3d at 496. The case is commenced and the estate created when the bankruptcy petition is
filed. Burgess, 438 F.3d at 496. Also, any claim acquired after commencement of the bankruptcy
proceeding, but before conversion to Chapter 7, becomes the property of the bankruptcy estate.
See Store Chan Depumpo L.L.P. v. Thrasher, No. 05-14-00967-CV, 2016 WL 147294, at *4 (Tex.
App.—Dallas Jan. 13, 2016, no pet.) (mem. op.). The bankruptcy trustee is the real party in interest
with respect to claims falling within the bankruptcy estate and has exclusive standing to assert
claims that fall within the bankruptcy estate. 11 U.S.C. § 323; see also, e.g., United States ex rel.
Spicer v. Westbrook, 751 F.3d 354, 362 (5th Cir. 2014) (discussing undisclosed claims); Croft, 737
F.3d at 375; Douglas v. Delp, 987 S.W.2d 879, 882 (Tex. 1999).
While federal law determines what property interests of the debtor are the property of the
bankruptcy estate, the nature and existence of the debtor’s right to the property are determined by
state law. See Butner v. United States, 440 U.S. 48, 54–55 (1979); Title Max v. Northington (In re
Northington), 876 F.3d 1302, 1310 (11th Cir. 2017); Tidewater Fin. Co. v. Moffett (In re Moffett),
356 F.3d 518, 521 (4th Cir. 2004). To determine whether a debtor had a property interest in the
causes of action at the time the debtor filed for bankruptcy, courts must determine when the
debtor’s causes of action accrued under state law. See TMT Procurement Corp. v. Vantage Drilling
Co. (In re TMT Procurement Corp.), 764 F.3d 512, 524 (5th Cir. 2014); Swift, 129 F.3d at 795.
The accrual of a cause of action means the right to institute and maintain a suit, and
whenever one person may sue another, a cause of action has accrued. See Swift, 129 F.3d at 795
(citing Luling Oil & Gas Co. v. Humble Oil & Refining Co., 191 S.W.2d 716, 721 (Tex. 1946));
S.V. v. R.V., 933 S.W.2d 1, 4 (Tex. 1996) (cause of action accrues when wrongful act causes an
–17–
injury, regardless of when plaintiff learns of that injury or whether resulting damages have yet to
occur). Courts must be careful to extract accrual principles only and not principles of discovery
and tolling. See Swift, 129 F.3d at 796 n.18. The dates of accrual and the start of the running of
the statute of limitations may vary greatly and a cause of action can accrue for ownership purposes
before the statute of limitations has begun to run. See Swift, 129 F.3d at 796, 798.
When determining when a cause of action accrued, the focus is on the moment the injury
occurred. See Swift, 129 F.3d at 798. “A person suffers injury from faulty professional advice
when the advice is taken.” Murphy v. Campbell, 964 S.W.2d 265, 270 (Tex. 1997); see also
Murphy v. Mullin, Hoard & Brown L.L.P., 168 S.W.3d 288, 291 (Tex. App.—Dallas 2005, no
pet.); JC Project Mgmt. Servs., Inc. v. Kitchens, No. 12-17-00130-CV, 2018 WL 3203437, at *2
(Tex. App.—Tyler June 29, 2018, no pet. h.) (mem. op.). In a professional negligence or legal
malpractice case, the attorney’s conduct must raise only a risk of harm to the client’s legally
protected interest for the tort to accrue. See JC Project Mgmt., 2018 WL 3203437, at *2. For
breach of fiduciary duty claims, an injury occurs at the moment of the breach. See Suter v. Univ.
of Tex. at San Antonio, 495 Fed. App’x 506, 510 (5th Cir. 2012); Leigh v. Weiner, 679 S.W.2d 46,
48–49 (Tex. App.—Houston [14th Dist.] 1984, no writ). A cause of action for breach of the
implied covenant of good faith and fair dealing accrues when the injury-producing event occurs.
See Johnson & Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 515 (Tex. 1998)
(discussing accrual of claim for breach of duty of good faith and fair dealing when insurer denies
coverage and applying that reasoning to negligence claims).
C. Application of the Law to the Facts
Initially, we note that Shankles’s standing was challenged both in the trial court and on
appeal. Although Shankles addressed standing in her responses to the motions for summary
judgment and in her brief on appeal, her analysis of standing is devoid of authority, references to
–18–
evidence, and reasoning. In her post-submission letter brief addressing her standing with respect
to her claims for breach of fiduciary duty, Shankles provides a few citations to legal authority, but
does not provide references to record evidence. Shankles did not meet her burden. However, even
if she had met her burden, the record shows that Shankles’s claims for professional negligence,
breach of fiduciary duty, and breach of the implied covenant of good faith and fair dealing all
accrued before she filed for Chapter 11 bankruptcy protection or, at the latest, before her
bankruptcy proceeding was converted to a Chapter 7 proceeding. Accordingly, we address
Shankles’s standing to bring each individual claim that she alleged. See Heckman, 369 S.W.3d at
152 (court must analyze standing of each individual plaintiff to bring each individual claim he
alleges).
1. Professional Negligence Claims
First, we address standing with respect to Shankles’s professional negligence claims.
Shankles maintains that her professional negligence claims are not part of her bankruptcy estate
because they arose or accrued after her Chapter 11 bankruptcy was converted to a Chapter 7
proceeding, so she had standing to assert those claims on her own. Gordon and Hynds & Gordon
contend that: (1) Shankles’s professional negligence claims accrued pre-petition or, at the latest,
pre-conversion to Chapter 7, because she brought the counterclaims against them in the district
court suit before filing her bankruptcy petition; and (2) in the alternative, they argue that the
professional negligence claims were pre-petition claims because they accrued in August 2009
when Shankles signed the 2009 settlement agreement and accepted the “back dated” 2009
distribution deed respecting the 187 acres regardless of when she allegedly suffered damages.
McNees argues that: (1) Shankles’s professional negligence claims accrued pre-petition or, at the
latest, pre-conversion, because she brought the counterclaims for professional negligence in the
–19–
district court suit before filing her bankruptcy petition; and (2) in the alternative, the professional
negligence claims accrued when they concluded the underlying will contest in probate court.
The record shows Shankles asserted professional negligence claims against Gordon, Hynds
& Gordon, and McNees twice. First, in her counterclaims and third-party claims for professional
negligence in the district court case filed on July 1, 2011. Then, later she asserted claims for
professional negligence in the county court case filed on October 4, 2013. In the district court,
Shankles alleged that Gordon, Hynds & Gordon, and McNees “either drafted or accepted a Deed
on property distributed to [Shankles] which does not convey marketable title to her.” She claimed
that “[f]urther litigation [would] likely be required to cure the title defect created by [their]
[professional] negligence.” In the county court, Shankles alleged that Gordon, Hynds & Gordon,
and McNees “each failed to properly represent [Shankles] and protect [Shankles’s] interests in the
settlement of the Probate Litigation because the January 14, 2004 ‘effective date’ of the 2009
Distribution Deed has been determined to be invalid, ineffective, and unenforceable.”
We must determine when Shankles’s causes of action for professional negligence accrued
for purposes of ownership relative to the bankruptcy. See Swift, 129 F.3d at 798. Accordingly,
we focus on the moment the injury occurred. See Swift, 129 F.3d at 798. Shankles claims that she
was injured by Gordon’s, Hynds & Gordon’s, and McNees’s allegedly faulty professional advice
with respect to the 2009 settlement agreement and the 2009 distribution deed in the probate court.
That advice was given and taken before Shankles filed for Chapter 11 bankruptcy protection. See
Murphy, 964 S.W.2d at 270 (person suffers injury from faulty professional advice when advice is
“taken”); Murphy, 168 S.W.3d at 291; JC Project Mgmt., 2018 WL 3203427, at *2. Accordingly,
we conclude that any injury sufficient to give rise to Shankles’s claims for professional negligence
occurred before she filed for relief under Chapter 11, i.e., pre-petition, so the bankruptcy trustee
–20–
was the real party in interest and had exclusive standing to assert the professional negligence
claims. See 11 U.S.C. 541(a)(1); Burgess, 438 F.3d at 496.
2. Breach of Fiduciary Duty Claims
Second, we address standing with respect to Shankles’s breach of fiduciary duty claims.
Shankles maintains that her claims for breach of fiduciary duty accrued after she filed for
bankruptcy when Hynds & Gordon and McNees objected to her homestead exemption in the
bankruptcy court. 20 Also, she claims the Chapter 7 bankruptcy estate does not include any assets
she acquired after filing for bankruptcy and she did not suffer any “economic injury” until the
bankruptcy court sustained Hynds & Gordon’s and McNees’s objections to her homestead
exemption, which occurred after her bankruptcy was converted to a Chapter 7 proceeding. Gordon
and Hynds & Gordon, and McNees maintain that Shankles’s causes of action accrued, at the latest,
when they filed their objections to Shankles’s homestead exemption which occurred before her
bankruptcy was converted to a Chapter 7 proceeding.
Shankles asserted counterclaims for breach of fiduciary duty in the district court and claims
for breach of fiduciary duty in the county court against Gordon, Hynds & Gordon, and McNees.
In the district court, in her first amended counterclaim and third-party petition, Shankles claimed
that they “caused and instructed” her to waive her homestead rights, they breached their fiduciary
duties “by placing [their] own financial interest above that of [their] client[, Shankles].” In the
county court, she alleged that as licensed attorneys, Gordon, Hynds & Gordon, and McNees
“breached one or more of the fiduciary duties they owed to [her] as attorneys licensed to practice
law in the State of Texas.” She alleged that they breached their fiduciary duties when they “directly
and unequivocally challenged and contested [Shankles’s] Texas rural homestead exemption . . .,
20
In her post-submission letter brief, she argued “[Shankles] complained that [Gordon, Hynds & Gordon, and McNees] breached their
fiduciary duties to her when, in attempting to collect their contested legal fees, they successfully challenged in a bankruptcy proceeding the validity
and effectiveness of certain of the provisions of the deed for her homestead property, provisions which [Gordon, Hynds & Gordon, and McNees]
drafted or approved previously as her attorneys representing her in the transactions whereby she received the deed.”
–21–
the enforceability and validity of the January 14, 2004 ‘Effective Date’ of the 2009 Distribution
Deed, and the date on which [Shankles] acquired an economic interest in the Homestead Property.”
Shankles claimed that her damages included, inter alia, the loss of her Texas homestead
exemption.21
Again, we must determine when Shankles’s causes of action for breach of fiduciary duty
accrued for purposes of ownership in the bankruptcy, which requires us to focus on the moment
the injury occurred. See Swift, 129 F.3d at 798. The injury that Shankles claims resulted from
Gordon’s, Hynds & Gordon’s, and McNees’s alleged breach of fiduciary duty stems from one or
more of the following events: (1) the 2009 settlement agreement between Shankles and the
decedent’s children in the probate court proceedings where they agreed to “back date” her
ownership interest in the 187 acres and the 2009 distribution deed that “back dated” its effective
date; (2) her 2009 promissory notes, which were secured by 87 of the 187 acres for debts owed to
her attorneys and a disclaimer of a homestead interest in those 87 acres; (3) the proofs of claim
Hynds & Gordon and McNees filed in the Chapter 11 bankruptcy proceeding; or (4) the objections
to Shankles’s homestead exemption that Hynds & Gordon and McNees filed in the bankruptcy
proceeding. The first two of these events occurred before Shankles filed for bankruptcy protection
under Chapter 11, and the second two events occurred before her bankruptcy was converted to a
Chapter 7 proceeding. See Suter, 495 Fed. App’x at 510 (for breach of fiduciary duty claims,
injury occurs at moment of breach); Leigh, 679 S.W.2d at 48–49. Also, the record shows that the
trustee objected to Shankles’s claim that the 187 acres was exempt from her creditors’ under the
21
In her post-submission letter brief, Shankles argued her “breach of fiduciary duty claims did not arise until after her bankruptcy filing
because [she] did not suffer any economic injury until [Hynds & Gordon and McNees] object[ed] and the bankruptcy court’s rul[ed].” In support
of her argument, Shankles relies on the Texas Supreme Court’s reasoning in Atkins v. Crosland, 417 S.W.2d 150 (Tex. 1967) and this Court’s
opinion in Philips v. Giles, 620 S.W.2d 750 (Tex. Civ. App.—Dallas 1981, no writ), which followed and applied Atkins. She claims these cases
stand for the proposition that an injury resulting from erroneous advice does not occur until the economic injury or damages occur. However, in
Swift, the United States Court of Appeals for the Fifth Circuit expressly distinguished Atkins and disagreed with Philips because Swift’s claims
against State Farm were for negligence and breach of fiduciary for the legally flawed IRA which was found in bankruptcy not to be exempt. Swift,
129 F.3d at 797, 798 & n. 33, 799 & n.40, 800 n.43.
–22–
homestead exemption. Accordingly, we conclude that any injury sufficient to give rise to
Shankles’s claims for breach of fiduciary duty accrued pre-petition or at the latest pre-conversion,
so in either case, the bankruptcy trustee was the real party in interest and had exclusive standing
to assert the breach of fiduciary duty claims. See Store Chan Depumpo, 2016 WL 147294, at *4
(any claim acquired after commencement of bankruptcy proceeding, but before conversion to
Chapter 7 becomes property of bankruptcy estate).
3. Breach of the Implied Covenant of Good Faith and Fair Dealing Claims
Third, we address standing with respect to Shankles’s breach of the implied covenant of
good faith and fair dealing claims. Shankles does not address standing with respect to these
claims.22 Gordon, Hynds & Gordon, and McNees maintain that Shankles’s claims for breach of
the implied covenant of good faith and fair dealing accrued at the same time her claims for breach
of fiduciary duty accrued.
We have already concluded that any injury sufficient to give rise to Shankles’s claims for
breach of fiduciary duty accrued pre-petition or at the latest pre-conversion, so in either case, the
bankruptcy trustee was the real party in interest and had exclusive standing to assert the breach of
fiduciary duty claims. Like a claim for breach of fiduciary duty, a claim for breach of the implied
covenant of good faith and fair dealing accrues when the injury-producing event occurs. See
Johnson & Higgins, 962 S.W.2d at 515 (cause of action for breach of good faith and fair dealing
accrues when injury-producing event occurs). Accordingly, we conclude that any injury sufficient
to give rise to Shankles’s claims for breach of the implied covenant of good faith and fair dealing
occurred pre-petition or, at the latest, pre-conversion, so the bankruptcy trustee was the real party
in interest and had exclusive standing to assert the breach of the implied covenant of good faith
and fair dealing claims. See Store Chan Depumpo, 2016 WL 147294, at *4 (any claim acquired
22
Supra n.4 & 5.
–23–
after commencement of bankruptcy proceeding, but before conversion to Chapter 7, becomes
property of bankruptcy estate).
4. Bankruptcy Trustee Did Not Abandon the Claims
Shankles argues that the Chapter 7 Trustee was aware of this litigation and did not object
or seek to be substituted as the plaintiff, and all property not administered in a bankruptcy
proceeding by the Chapter 7 Trustee reverts back to the debtor at the closing of the case pursuant
to section 554(c) of the bankruptcy code. McNees responds that Shankles does not have standing
because the Chapter 7 Trustee did not abandon the claims permitting her to pursue them and the
claims could not have reverted back to her under section 554(c) of the bankruptcy code because
she filed her lawsuit in the county court before the bankruptcy proceedings were closed.
We disagree with Shankles. Once an asset becomes a part of the estate, the debtor’s rights
in the asset are extinguished unless the trustee abandons the asset pursuant to section 554 of the
United State Bankruptcy Code. See 11 U.S.C. § 554. 23 There is nothing in the record to show that
the Chapter 7 Trustee abandoned the claims for professional negligence, breach of fiduciary duty,
or breach of the implied covenant of good faith and fair dealing against Gordon, Hynds & Gordon,
or McNees. Further, in the settlement and compromise agreement, the Chapter 7 Trustee released
any and all claims that were the property of the bankruptcy estate that were asserted or could have
been asserted in the adversary proceeding.
23
Section 554 of the Bankruptcy Code states:
(a) After notice and a hearing, the trustee may abandon any property of the estate that is burdensome to the estate or that is
of inconsequential value and benefit to the estate.
(b) On request of a party in interest and after notice and a hearing, the court may order the trustee to abandon any property
of the estate that is burdensome to the estate or that is of inconsequential value and benefit to the estate.
(c) Unless the court orders otherwise, any property scheduled under section 521(a)(1) of this title not otherwise administered
at the time of the closing of a case is abandoned to the debtor and administered for purposes of section 350 of this title.
(d) Unless the court orders otherwise, property of the estate that is not abandoned under this section and that is not
administered in the case remains property of the estate.
11 U.S.C. § 554.
–24–
III. ATTORNEYS’ FEES
In issue four, Shankles argues the county court erred when it awarded Gordon, Hynds &
Gordon, and McNees their attorneys’ fees because: (1) dismissal of her claims for breach of
fiduciary duty and breach of the implied covenant of good faith and fair dealing was error; and (2)
Gordon, Hynds & Gordon, and McNees failed to establish their attorneys’ fees were reasonable,
necessary, actually incurred, or segregated as to the services provided and the tasks for which
attorneys’ fees were recoverable. We have already concluded that Shankles did not have standing
to bring her claims for breach of fiduciary duty and breach of the implied covenant of good faith
and fair dealing. The parties do not address how Shankles’s lack of standing affects the county
court’s award of attorneys’ fees under the Texas Citizens Participation Act. Generally, when a
court lacks subject-matter jurisdiction over a claim, the only action the court can take is to dismiss
the claim. See Am. Motorist Ins. v. Fodge, 63 S.W.3d 801, 805 (Tex. 2001) (“If a claim is not
within a court’s jurisdiction, and the impediment to jurisdiction cannot be removed, then it must
be dismissed.”); First State Bank of Cent. Tex. v. Lakeway Reg’l Med. Ctr., No. 03-13-00058-CV,
2014 WL 709221, at *5 (Tex. App.—Austin Feb. 20, 2014, pet. denied) (mem. op.); see also
DaimlerChrysler, 252 S.W.3d at 307 (denial of claim on the merits not an alternative to dismissal
for want of jurisdiction merely because ultimate result is same).
Under the plain terms of the Texas Citizens Participation Act, a trial court is required to
determine whether the nonmovant presented clear and convincing evidence of “each essential
element of the claim in question.” See CIV. PRAC. & REM. § 27.005(c); State Fair v. Riggs & Ray,
P.C., No. 05-15-000973-CV, 2016 WL 4131824, at *4 (Tex. App.—Dallas Aug. 2, 2016, no pet.)
(mem. op.). This is an inherently different inquiry from whether the movant presented evidence
to show the trial court possessed subject-matter jurisdiction. See State Fair, 2016 WL 4131824,
at *4.
–25–
Section 27.009(a)(1) of the Texas Citizens Participation Act provides that “(a) if a court
orders dismissal of a legal action under this chapter, the court shall award to the moving party: (1)
court costs, reasonable attorneys’ fees, and other expenses incurred in defending against the legal
action as justice and equity may require.” CIV. PRAC. & REM. § 27.009(a)(1). The plain language
of this statute requires the trial court to award attorneys’ fees when it dismisses the legal action
under the Texas Citizens Participation Act and does not address an award of attorneys’ fees when
the case is dismissed for lack of subject-matter jurisdiction. See CIV. PRAC. & REM. § 27.009(a)(1);
Ankrom v. Dallas Cowboys Football Club, Ltd., 900 S.W.2d 75, 81 (Tex. App.—Dallas 1995, writ
denied) (trial court did not have jurisdiction to award attorneys’ fees based on claims because trial
court did not have jurisdiction over claims); First State Bank, 2014 WL 709221, at *5 (Texas Rule
of Civil Procedure 677 does not contemplate award of attorneys’ fees when trial court, without
regard to merits, dismisses garnishment proceeding for lack of subject-matter jurisdiction, but
appellate court sua sponte remanded case to trial court, which had jurisdiction to award attorneys’
fees as sanctions, for consideration of whether Rule 13 sanctions were warranted); Angell v. City
of Garland, No. 05-89-001174-CV, 1991 WL 158667, at *4 (Tex. App.—Dallas Aug. 14, 1991,
writ dism’d w.o.j.) (not designated for publication) (Commission not entitled to attorneys’ fees
under section 143.015 of the Texas Local Government Code, which concerns appeals of
commission decision to the district court and states court may award attorneys’ fees to “prevailing
party,” because trial court lacked jurisdiction over matter and had no discretionary authority to act
except to dismiss cause); cf. Castro v. McNabb, 319 S.W.3d 721, 735–36 (Tex. App.—El Paso
2009, no pet.) (even though trial court did not have jurisdiction to make requested declaration, trial
court properly exercised jurisdiction to award attorneys’ fees under section 37.009 because
judgment on merits is not prerequisite to award of attorneys’ fees under Declaratory Judgments
Act, which authorizes trial court to award attorneys’ fees “[i]n any proceeding under the chapter”).
–26–
Accordingly, we conclude that section 27.009(a)(1) does not provide for an award of
attorneys’ fees to Gordon, Hynds & Gordon, and McNees when Shankles’s claims for breach of
fiduciary duty and breach of the implied covenant of good faith and fair dealing are dismissed for
lack of subject-matter jurisdiction. Because we have already concluded that Shankles did not have
standing to bring her claims for breach of fiduciary duty and breach of the implied covenant of
good faith and fair dealing, we need not address issue four.
IV. CONCLUSION
Shankles does not have standing to bring her claims for breach of fiduciary duty, breach of
the implied covenant of good faith and fair dealing, and professional negligence. The county
court’s order granting Gordon and Hynds & Gordon’s, and McNees’s motions to dismiss under
Texas Citizens Participation Act and order granting Gordon and Hynds & Gordon’s, and McNees’s
motions for summary judgment and motions to determine fees and costs are vacated.
We dismiss the cause for want of subject-matter jurisdiction.
/Douglas S. Lang/
DOUGLAS S. LANG
JUSTICE
160863F.P05
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Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
MARY HARP SHANKLES, Appellant On Appeal from the County Court at Law
No. 5, Dallas County, Texas
No. 05-16-00863-CV V. Trial Court Cause No. CC-13-05746-E.
Opinion delivered by Justice Lang. Justices
J. DON GORDON, HYNDS & GORDON Evans and Schenck participating.
P.C., DAVID N. MCNEES D/B/A LAW
OFFICES OF DAVID N. MCNEES,
Appellees
In accordance with this Court’s opinion of this date, the trial court’s order granting
appellees J. DON GORDON AND HYNDS & GORDON P.C.’s, AND DAVID N. MCNEES
D/B/A LAW OFFICES OF DAVID N. MCNEES’s motions to dismiss under the Texas Citizens
Participation Act is VACATED.
Also, the trial court’s order granting appellees J. DON GORDON AND HYNDS &
GORDON P.C.’s, AND DAVID N. MCNEES D/B/A LAW OFFICES OF DAVID N. MCNEES’s
motions for summary judgment and motions to determine fees and costs is VACATED.
The appeal is DISMISSED for want of jurisdiction.
It is ORDERED that appellees J. DON GORDON, HYNDS & GORDON P.C., DAVID
N. MCNEES D/B/A LAW OFFICES OF DAVID N. MCNEES recover their costs of this appeal
from appellant MARY HARP SHANKLES.
Judgment entered this 27th day of August, 2018.
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