in Re Tom Thomas, Dan Sheehan and Marc Culp, Individually and as Successor to the Interest of Thomas, Sheehan & Culp, L.L.P ( 2016 )

ACCEPTED
14-16-00495-CV
FOURTEENTH COURT OF APPEALS
HOUSTON, TEXAS
7/8/2016 11:51:01 AM
CHRISTOPHER PRINE
CLERK
No. 14-16-00495-CV
FILED IN
14th COURT OF APPEALS
In the Court of Appeals HOUSTON, TEXAS
For the Fourteenth District of Texas 7/8/2016 11:51:01 AM
CHRISTOPHER A. PRINE
Clerk
In Re Tom Thomas, Dan Sheehan, and Marc Culp, Individually and as Successors
to the Interest of Thomas, Sheehan & Culp, LLP, Relators
From the Probate Court Number Two (2)
of Harris County, Texas
Honorable Mike Wood, Presiding
Real Party in Interest Legacy's Motion to Reconsider Order Granting Motion
for Emergency Stay of Proceedings
M A C I N T Y R E , M C C U L L O C H , STANFIELD
& YOUNG, L L P
By.- /s/ W. Cameron McCulloch
W. Cameron McCulloch
State Bar No. 00788930
cameron.mcculloch@mmlawtexas.com
Christopher C . Burt
State Bar No. 24068339
christopher.burt@mmlawtexas.com
2900 Weslayan, Suite 150
Houston, Texas 11021
(713)572-2900
Counsel for Real Party in Interest Legacy Trust
Company, in its capacity as the court-appointed
Receiver for the Article I V Trust created by the Last
Will and Testament of Katherine Pillot Barnhart
5631319v2
Identity of Parties and Counsel
Relators and Movants for Counsel in Trial Courts and for
Emergency Stay Mandamus Petition and Motion for
Emergency Stay
Tom Thomas, Dan Sheehan, and Marc S. Culp
Marc Culp, as successors to Thomas, State Bar No. 05212700
Sheehan & Culp L L C ("Relators" or mculp(S)cdhllp .com
CULP & DYER, L.L.P.
TSC"), plaintiffs and counterclaim 222 East McKinney Street, Suite 210
defendants Denton, Texas 76201
(940) 484-2236 - Telephone
(940) 484-4436 - Facsimile
Real Party in Interest, Defendant, Counsel in Trial Courts and for
and Counterclaim Plaintiff Mandamus Petition and Motion for
Emergency Stay
Legacy Trust Company, N.A., in its W. Cameron McCulloch
capacity as court-appointed Receiver State Bar No. 00788930
of the Article I V Trust under the Last cameron.mcculloch@mmlawtexas .com
W i l l and Testament ofKatherine Christopher C. Burt
Pillot Lee Bamhart ("Legacy" or State Bar No. 24068339
"Receiver") christopher.burt@mmlawtexas.com
M A C I N T Y R E , M C C U L L O C H , STANFIELD
& YOUNG, L L P
2900 Weslayan, Suite 150
Houston, Texas 77027
(713)572-2900
Respondent
The Honorable Mike Wood
Presiding Judge, Harris County
Probate Court No. 2
Harris County Civil Courthouse
201 Caroline
6"^ Floor
Houston, T X 77002
713-368-6710
5631319v2
Procedural History
Relators Tom Thomas, Dan Sheehan, and Marc Culp, individually, and as
successors to the interest o f the law firm o f Thomas Sheehan & Culp, LLP ("TSC"
or "Relators") sued Legacy Trust Company, in its capacity as the court-appointed
Receiver for the Article I V Trust created by the Last W i l l and Testament o f
Katherine Pillot Bamhart ("Legacy"), to coUect a contingent fee they claim is due
them under a 1995 attorney fee agreement with their clients Susan Camille Lee and
Susan Campbell Gibson for representation in Lee v. Lee in Harris County Probate
Court Number Two (2) (the "Probate Court"). TSC however filed their Original
Petition in the 162'^'* Judicial District o f Dallas County on April 20, 2016 (the
"Dallas L a w s u i f ) . Legacy was appointed Receiver over the Trust by the Probate
Court. Legacy filed, in the Dallas Lawsuit, a Plea in Abatement and Motion to
Transfer that challenged the venue o f the Dallas court, and subject to those
motions, an Answer and Counterclaim that asserted among other things that TSC
had only a fee agreement with their clients Susan Camille Lee and Susan Campbell
Gibson, and not any trustee o f the Trust, and in any event were barred by the Final
Judgment awarding attorneys' fees entered by the Harris County Probate Court i n
Lee V. Lee. See Tab 1.
On May 13, 2016, Legacy filed a motion asking the Probate Court to transfer
the Dallas County Lawsuit to the Probate Court under Texas Estates Code § 34.001
5631319v2 1
as it was a matter related to a probate proceeding pending i n the Probate Court.
The Probate Court granted Legacy's Motion. Legacy served discovery requests on
TSC regarding their breach o f contract action.^ Relators subsequently filed their
Petition for Writ o f Mandamus pending in the above numbered and styled case. A t
its most basic level, Relators have asserted that the Probate Court does not have
jurisdiction such that it could transfer the litigation to itself from 16T" Judicial
District Court i n Dallas County under Texas Estates Code § 34.001. Relators now
have filed a Motion for Emergency Stay o f Proceedings seeking to avoid having to
produce discovery in this matter and the Court subsequently granted the request for
Emergency Stay on July 8, 2016.
Save for TSC's upcoming deadline to respond to discovery requests from
Legacy, Legacy represents to the Court that there are no other pending deadlines in
place for this case at the present time.
No matter whether TSC's claims move forward in the Probate Court or
Dallas County District Court, TSC w i l l have to respond to discovery properly
requested by Legacy. TSC is simply seeking to avoid making discovery available
on its own claims for reasons unknown.
See Tab 1 to Relator's Motion for Emergency Stay of Proceedings.
5631319v2 0
Argument and Authorities
1. The Emergency Stay Serves Only to Delay Necessary
Proceedings, Prejudicing Legacy.
A. Absent compelling circumstances, a stay is improper.
The request for an emergency stay is an extraordinary measure provided for
in the Texas Rules o f Appellate Procedure. See T E X . R . A P P . P. 52.10. The
Supreme Court o f Texas has provided that "[f]or a court o f appeals to stay
proceedings i n the trial court while it considers an interlocutory appeal increases
delay and expense and should not be done absent compelling circumstances."
Coal, of Cities for Affordable Util. Rates v. Third Court of Appeals, 1^1 S.W.2d
946, 947 (Tex. 1990) (per curiam). No such compelling circumstances exist here.
B. No compelling circumstances exist for a stay.
Relators' sole basis for requesting a "stay o f the trial court's proceedings" is
to avoid having to respond to Legacy's discovery about their claims against
Legacy. Relators have shown no "compelling circumstances" for avoiding
discovery. Regardless o f whether TSC's Petition for Writ o f Mandamus is ruled on
by this Court prior to August 15, or i f that petition is granted or denied, it w i l l not
change i n any way the need for TSC to respond to discovery requests from Legacy
about TSC's own claims. The discovery w i l l remain necessary and probative for
the resolution o f this matter either by settlement or trial, regardless o f whether the
lawsuit proceeds in the Probate Court or District Court i n Dallas County. The
5631319v2 3
Court's stay o f the proceedings does nothing more than further protract this
litigation and require the further delay and expense that the Texas Supreme Court
warned against in Coal, of Cities. See Coal, of Cities, 1^1 S.W.2d at 947.
Relators have conceded that Legacy has already agreed to an extension o f
the time period for which TSC may respond to Legacy's discovery requests until
August 15, 2016. A true and correct copy o f the proposed discovery response
extension agreement that counsel for Legacy has sent to counsel for Relators is
attached to this pleading within Tab 2. Relators admitted i n their own Motion for
Emergency Stay that they have tentatively agreed to such relief.^
Contrary to Relators' bald assertion, they have shown no prejudice by
ongoing discovery in the trial court. They argue, without citing any authority, that
they carmot send discovery to Legacy without "risk o f waiver o f arguments made
in TSC's plea in abatement." Even i f that were true, that is easily avoided by a
Rule 11 agreement as Legacy has offered not to assert such a waiver. A true and
correct copy o f counsel for Legacy's offer to stipulate that responding to discovery
would not waive Relators' plea in abatement is attached to this pleading within
Tab 3.
On the other hand. Legacy and the beneficiaries o f the Trust over which
Legacy is the Receiver are prejudiced by this stay. Legacy is charged by the order
^ Motion for Emergency Stay at 6.
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of the Probate Court appointing Legacy as Receiver for the Article I V Trust under
the Last W i l l and Testament o f Katherine Pillot Lee Bamhart with performing the
functions o f the trustee o f that Trust, which includes the mandatory distribution o f
income o f the Trust. Relators claim they are owed over $ 1 million to be paid from
the Trust based on events that occurred twenty years ago, a disputed liability that
nevertheless affects Legacy's ability to make distributions from the Trust to its
beneficiaries.
Prayer
For the foregoing reasons, Legacy Trust Company, i n its capacity as the
Receiver for the Article I V Trust created by the Last W i l l and Testament o f
Katherine Pillot Bamhart, respectftilly requests that this Court (1) reconsider the
Realtors' Motion for Emergency Stay o f Proceedings and the Order granting the
same; (2) upon reconsideration, deny Relators' Motion for Emergency Stay o f
Proceedings, and (3) grant such other and further relief as Legacy may show itself
justly entitled to receive.
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Respectfully submitted,
M A C I N T Y R E , M C C U L L O C H , STANFIELD
i& Y O U N G , L L P
By; /s/ W. Cameron McCulloch
W. Cameron McCulloch
State Bar No. 00788930
cameron.mcculloch@mmlawtexas.com
Christopher C. Burt
State Bar No. 24068339
christopher.burt@mmlawtexas.com
2900 Weslayan, Suite 150
Houston, Texas 77027
(713)572-2900
(713) 572-2902 (FAX)
Counsel for Real Party in Interest Legacy Trust
Company, in its capacity as the court-appointed
Receiver for the Article I V Trust created by the Last
Will and Testament of Katherine Pillot Barnhart
5631319v2 6
Certificate of Service
I do hereby certify that a copy o f Real Party i n Interest Legacy's Motion to
Reconsider Order Granting Motion for Emergency Stay of Proceedings was served
on the following counsel on this the 8th day o f July, 2016 by U.S. Postal Mail,
facsimile, and electronically.
M r . Marc S. Culp The Honorable Mike Wood
Culp & Dyer, L L P Presiding Judge, Harris County
222 E. McKinney Street, Suite 210 Probate Court No. 2
Denton, Texas 76201 Harris County Civil Courthouse
(940) 484-4436 201 Caroline Houston, Texas 77002
mculp@cdhllp.com 713-368-6710
(the "Probate Court")
Neil Kenton Alexander John Porter
kalexander@porterhedges .com j ohn.porter@bakerbotts .com
Eric M . English Keri D . Brown
eenglish@porterhedges.com keri .bro wn@bakerbotts .com
Jorma Summers Baker Botts, L L P
j summer@porterhedges.com One Shell Plaza
Porter Hedges, L L P 910 Louisiana Street
1000 Main St., 36" Floor Houston, Texas 77002
Houston, Texas 77002 (713)229-1522
(713)226-6614
Daniel J. Sheehan Thomas Zabel
dsheehan@dsa-law.com Zabel Freeman
John M . Phalen, Jr. tzabel@zflawfirm.com
jphalen@dsa-law.com 1135 Heights Blvd.
Daniel Sheehan PLLC Houston, Texas 77008
Campbell Center I I , Suite 100 (713)802-9114
8150 N . Central Expressway
Dallas, Texas 75206
(214)468-8803
5631319v2 7
By; /s/ W. Cameron McCulloch
W. Cameron McCulloch
State Bar No. 00788930
cameron.mcculloch@mmlawtexas.com
Christopher C. Burt
State Bar No. 24068339
christopher.burt@mmlawtexas.com
2900 Weslayan, Suite 150
Houston, Texas 77027
(713)572-2900
(713) 572-2902 (FAX)
Counsel for Real Party in Interest Legacy Trust
Company, in its capacity as the court-appointed
Receiver for the Article I V Trust created by the Last
Will and Testament of Katherine Pillot Barnhart
5631319v2 8
Appendix
5631319v2 9
T A B L E OF C O N T E N T S
T A B 1 - Legacy's Motion to Transfer Venue, and Subject to Motion to Transfer
Venue & Motion to Transfer Lawsuit to Statutory Probate Court,
Defendant's Original Answer, Plea in Abatement, and Counter Claim filed
in the 162"" Dallas County, Texas 1
T A B 2 - July 5, 2016 Proposed Rule 11 Agreement. 184
T A B 3 - July 1, 2016 CoiTcspondence regarding plea i n abatement stipulation.. 186
5631319v2 10
TAB 1
DALLAS COUNT
5/26/2016 3:28:02 PI
FELICIA PITR
DISTRICT CLER
CAUSE NUMBER DC-16-04570
TOM THOMAS, DAN SHEEHAN § IN THE 162nd DISTRICT
and MARC CULP, individually and §
as successors to the interests of §
Thomas, Sheehan & Culp, L.L.P., §
Plaintiffs, §
§
V. § COURT OF
§
LEGACY TRUST COMPANY, §
N.A., in the capacity as RECEIVER §
FOR THE ARTICLE IV TRUST §
created by the Last Will and §
Testament ofKatherine Pillot Lee § •
Barnhart, Deceased, §
Defendant. § DALLAS COUNTY, TEXAS
Defendant Legacy's Motion to Transfer Venue
Defendant Legacy Trust Company, N.A., in its capacity as the court-appointed Receiver for
the Article TV Trust created by the Last Will and Testament of Katherine Pillot Lee Bamhart,
Deceased (hereinafter referred to as "Legacy"), respectfully moves the Court to transfer this lawsuit
to Probate Coxort No. 2 of Harris County, Texas because it is the only proper venue to hear this
dispute.
Background
Plaintiffs Tom Thomas, Dan Sheehan, and Marc Culp (hereinafter sometimes collectively
referred to as the "Plaintiff Lawyers"), who allege they are successors to the law firm of Thomas,
Sheehan & Culp, L.L.P., claim they are owed contingent legal fees from the Article IV Trust created
by the Last Will and Testament ofKatherine Pillot Lee Bamhart, Deceased (hereinafter referred to as
the "Article IV Trust"), for which Legacy is the Receiver appointed by Probate Court No. 2 of Harris
County, Texas. Legacy has its principal place of business in Harris County. The Plaintiff Lawyers
base their claim on the March 30, 1995 written fee agreement signed by Dan Sheehan, on behalf of
Thomas, Sheehan & Culp, LLP, and clients Susan Camille Lee (hereinafter referred to as "Ms. Lee"),
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individually, and Ms. Lee's daughter Susan Campbell Gibson (hereinafter referred to as "Ms.
Gibson"), individually, under which the law firm agreed to represent these clients for a mixture of
hourly fees and contingent fees in a lawsuit Ms. Lee filed in 1988 in Probate Court No. 2 of Harris
County, In the Estate of Katherine Pillot Lee Barnhart, Deceased — Susan Lee et al v. Ronald E. Lee,
Jr., individually, as Independent Executor of the Estate and as Trustee of the Article IV Trust under
the Last Will and Testament of Katherine Pillot Lee Barnhart, No. 137,506 (hereinafter referred to as
the "Probate Court Lawsuit").' The Probate Court Lawsuit was tried and a judgment entered in
1996, the judgment was modified on appeal in 2002, and Ms. Lee and Ms. Gibson were awarded
specific attorneys' fees paid from the Article I V Trust. The judgment also ordered defendant Ronald
E. Lee, Jr., a resident of Harris County, to reimburse the Article IV Trust for certain expenses. Per
Plaintiffs' Original Petition which is attached hereto as Exhibit " 1 " , the Plaintiff Lawyers claim they
are entitled to collect a contingent fee based on amounts collected in Harris County 1) in 1997 by the
Trustee of the Article IV Trust on the judgment entered in the Probate Court Lawsuit in 1996, 2) in
2015 by Legacy as court-appointed Receiver for the Article IV Trust in 2015, and 3) in 2016
pursuant to a settlement agreement approved in 2016 by Harris County Probate Court No. 2. The
Plaintiff Lawyers do not seek contingent fees awarded to their clients Ms. Lee and Ms. Gibson, but
rather from the Article IV Trust despite the fact that the Trustee of the Article IV Trust was not a
party to the fee agreement. See Exhibit "A" to Plaintiffs' Original Petition. There is ongoing
litigation in Harris County Probate Court No. 2 conceming the Article IV Trust to which Legacy, Ms.
Lee, and Ms. Gibson are parties. Plaintiff Sheehan in fact is counsel for Ms. Lee and Ms. Gibson in
that litigation.
' A copy of the alleged fee agreement between the Plaintiff Lawyers, Ms. Lee and Ms. Gibson is
attached to Plaintiffs' Original Petition at page 22 as Exhibit "A".
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Summary of Argument
A motion to transfer venue is the proper vehicle for a defendant to raise a challenge to the
plaintiffs venue choice. TEX. R. CiV. P. 86; Wichita Cty. v. Hart, 917 S.W.2d 779, 781 (Tex. 1996).
Legacy moves the Court to transfer venue of this lawsuit to Probate Court No. 2 of Harris County for
3 reasons:
1. Plaintffs'allegations ofvenue in Dallas County are incorrect.
2. Venue is proper in Harris County, and particularly in Probate Court No. 2 of Harris
County, because the claims asserted in this lawsuit directly involve prior judgments and
rulings of Probate Court No. 2 of Harris County, and ongoing litigation on related matters
in that court.
3. Dallas County is an inappropriate and inconvenient forum for the adjudication of this
dispute.
Legacy has previously filed a motion in Probate Court No. 2 of Harris County requesting
that court to exercise its power conferred under Texas Estates Code §34.001 to order this case
transferred from this Court to Probate Court No. 2 of Harris County. A hearing on that motion is set
for June 7, 2016. If that motion is granted, this motion will be moot.
Argument
1. Venue for this Lawsuit is Only Proper in Probate Court No. 2 of Harris
County.
Section 15.002(a) of the Texas Civil Practice and Remedies Code provides in relevant part
that, except where otherwise provided by statute, "all lawsuits shall be brought "(1) in the county in
which all or a substantial part of the events or omissions giving rise to the claim occurred; ... or (3)
in the county ofthe defendant's principal office in this state, if the defendant is not a natural person."
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Only if these provisions do not apply may the plaintiff sue in the county of his or her residence under
Section 15.002(a)(4).
Harris County is the only county where all or a substantial part of the events or omissions
giving rise to the claim occurred. The Article IV Trust (and the underlying probate of the will that
created the trust), the Receiver, the lawsuit through which the Plaintiff Lawyers claim their
contingency fee was earned, the payments to the Article IV Trust arising out of that lawsuit, Susan
Lee, and Susan Gibson - all ofthe people, acts or omissions giving rise to the cause of action - were
situated or occurred in Harris County.
1. A plain reading of the fee agreement shows that the Susan Lee was a resident of Harris
County at the time that she signed the agreement, and that the agreement pertained to a
lawsuit she had already filed in Harris County in 1988.
2. Ms. Gibson, Ms. Lee's daughter, was a resident of Harris County with her mother when
the agreement was signed in 1995, although she was attending Pine Manor College in
Massachusetts during the school year.
3. The sole basis on which the Plaintiff Lawyers claim they are entitled to collect the
additional contingency fee is that the Trustee and the Receiver for the Article IV Trust
collected money in Harris County pursuant to a Harris County judgment.
4. The situs of that Article IV Trust was maintained in Harris County since the Trust was
created by the Last Will and Testament of Katherine Pillot Lee Bamhart, Deceased,
probated in Harris County, and under the supervision of Probate Court No. 2 in Harris
County.
5. Legacy, as court-appointed Receiver of the Article IV Trust with all the powers of a
trustee, resides in Harris County, and thus the funds from which the Plaintiff Lawyers
seek to recover are located in Harris County.
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Therefore, venue of this lawsuit is proper only in Harris County, Texas. See TEX. CIV. PRAC.
& REM. CODE §15.002(a)(1).
Plaintiffs allege, correctly, that defendant Legacy is a nationally chartered non-depository
trust company with its principal place of business in Houston, Harris County, Texas. Movant is
not a natural person. Given the fact that Legacy's principal office is located in Harris County,
venue of the lawsuit is proper in Harris County, Texas. See TEX. Civ. PRAC. & R E M . CODE
§ 15.002(a)(3).
The Plaintiff Lawyers claim venue is proper in Dallas County under TEX. C I V . PRAC. &
R E M . CODE §64.052(b) which provides that "a suit against a receiver may be brought where the
person whose property is in receivership resides." However, §64.052(b) is a basis for proper
venue in Harris County, not Dallas County. Legacy is the Receiver for the Article I V Trust, and
as such, holds title to the assets of the Article IV Trust. Venue is proper in Harris County as
Legacy's principal place of business is in Houston, Harris County, Texas.
Texas Property Code §115.002(c-l) also provides that " . . . i f the settlor is deceased and an
administration of the settlor's estate is pending in this state, an action involving the interpretation
and administration of ... a testamentary tmst created by the settlor's will may be brought... (2)
in the county in which the administration of the settlor's estate is pending."^ In this case, the
Plaintiff Lawyers seek to have a contingent fee awarded to them from the Article IV Trust, a
testamentary trust created by Settlor Katherine Pillot Lee Bamhart (now deceased). The
administration of the Estate of Katherine Lee Pillot Lee Barnhart, Deceased is presently pending
^ Likewise, ESTATES CODE §33.002 provides that venue for a cause of action related to a probate
proceeding pending in a statutory probate court (other than a cause of action against a personal
representative for personal injury, death, or property damage) is proper in the statutory probate
court in which the decedent's estate is pending.
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in Harris County Probate Court Number 2. Venue of the lawsuit is therefore proper in Probate
Court No. 2 of Harris County.
Even i f venue were proper in Dallas County, there are compelling reasons for this Court
to transfer this case to Probate Court No. 2 in Harris County under TEX. CIV. PRAC. & REM. CODE
§ 15.002(b). Not only is venue unquestionably proper in that court, the following reasons make
transfer to that Court the only reasonable choice in the exercise of this court's power to transfer under
TEX. CIV. PRAC. REM. CODE §15.002(b:
1. Parties to this lawsuit are already parties to pending litigation involving
overlapping issues in Probate Court No. 2 of Harris County.
2. Plaintiffs' claims involve the interpretation of orders and judgments entered by
Probate Court No. 2 of Harris County. The Honorable Mike Wood, Judge of Probate
Court No. 2, presided over the trial and entered the very judgment that addressed both
attorneys' fees and the obligations of the trustee of the Article IV Trust at issue in the
Plaintiff Lawyers' claims for a contingent fee. Judge Wood is likewise supervising
Legacy as Receiver for the Article IV Trust.
3. Any judgment entered against Legacy as Receiver for the Article IV Trust in this
court must be referred to Probate Court No. 2, the court that appointed it Receiver, for
enforcement first under Texas Civil Practice & Remedies Code §64.055. Campbell v.
Wood, 811 S.W.2d 753, 756 (Tex. App.—Houston [1st Dist] 1991, no writ).
Under these circumstances, maintenance of the action in Dallas County, rather than in the
court that was and is directly involved in all matters pertinent to this dispute, would work an
injustice to Legacy and the beneficiaries of the Article I V Trust. The balance of interests o f a l l
parties clearly favors proceedings in Probate Court No. 2, and a transfer to that court will not
work any injustice as to any party.
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A, Probate Court No, 2 is already adjudicating related issues
involving the same parties.
The Plaintiff Lawyers' claims are but one part of an ongoing dispute entirely presided
over by Probate Court No. 2 since 1988 concerning the management ofthe Article I V Trust. The
most recent chapter of that dispute led to that court removing the Plaintiff Lawyers' client Ms.
Lee as a substitute trustee ofthe Trust, and the appointment of defendant Legacy as Receiver for
the trust. See Exhibit B to Plaintiffs' Original Petition, "Order Removing Trustee and
Appointing Receiver," dated June 18, 2015. Also actively in dispute before Probate Court No. 2
is Ms. Lee's claim that the terms ofthe settlement agreed to by Legacy and Mr. Ronald E. Lee,
Jr., under which Legacy has collected the judgment in favor ofthe Article IV Trust on which the
Plaintiff Lawyers seek to collect contingent fees, should not be approved by that court. See
Exhibit "2" to this Motion, "Defendant Susan Lee's Objections, Opposition, and Response to
Application to Approve Settlement Agreement." Dan Sheehan, a plaintiff here, is counsel for
both Ms. Lee and Ms. Gibson in the ongoing disputes in Probate Court No. 2. He served as lead
counsel for Ms. Lee in Probate Court No. 2 in a previous chapter, which is the basis for the
claims asserted in this lawsuit. It serves no legitimate purpose to involve a different court in a
different venue in the adjudication of this lawsuit.-^
B. Plaintiffs' claims require the interpretation and enforcement of
the orders and judgments of Probate Court No. 2.
Why did Sheehan and his former partners sue in Dallas, rather than in Probate Court No.
2? The answer probably lies in the fact that their claims are foreclosed by that court's Final
Judgment, dated October 25, 1996 in the very lawsuit to which the contingent fee agreement
^ The Local Rules of the Dallas District Courts recognize the desirability of transferring cases
"related to another case previously filed in or disposed of by another Court" in Rules 1.06 and
1.07. While these rules are not directly applicable here, the principle is the same.
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pertains, Susan Lee et al v. Ronald E. Lee, Jr., No 137,506. It is payments toward this same
judgment on which the Plaintiff Lawyers base their attorneys' fee claims. These same lawyers,
Ms. Lee, and Ms. Gibson were parties to a stipulation that was incorporated into that Final
Judgment dated October 25, 1996, which states in relevant part:
Based upon the stipulation of the counsel for the parties and the
undisputed or admitted facts, the Court finds that i) Susan C. Lee's
attomeys were paid reasonable and necessary fees of
$1,000,000.00 for the prosecution of this action; ii) attomeys
representing Susan C. Gibson, individually, and Susan C. Lee as
Trustee of the Article V Trust for Susan C. Gibson, were paid
reasonable and necessary fees of $500,000.00 for the prosecution
of this action . . . . The Court further finds that Plaintiffs are
entitled to judgment directing and authorizing the Executor of the
Estate and Tmstee of the Article IV Trust to reimburse Susan C.
Lee, individually and Susan C. Lee as Trustee of the Article Y
Tmst for Susan C. Gibson for the aforesaid attomeys' fees from the
assets ofthe Estate and/or the Article I V Trast, and after such
payment or reimbursement, Plaintiffs are not entitled to any
additional attorneys'fees for the trial of this action.
Final Judgment, October 25, 1996, Lee v. Lee, No. 137,506, p. 3 (emphasis added), attached as
Exhibit C to Plaintiffs' Original Petition at p. 037. Notwithstanding this order, under which the
Plaintiff Lawyers received their fees, they now claim they are entitled to additional contingent
fees. The proper court for interpreting and applying this order in this lawsuit is the one that
issued it - Probate Court No. 2. Moreover, it is Probate Court No. 2 that appointed and
supervises Legacy as Receiver for the Article I V Trust, and has power over the administration of
the Article IV Trust created by the Will of Katherine Pillot Lee Barnhart, whose estate was
probated in that court.
The same fee agreement on which plaintiffs base their claim was also the subject of a
previous jury trial before Judge Wood in Harris County Probate Court No.2, where another
lawyer claiming under it sued Ms. Lee to collect fees. Donna Kline v. Susan Camille Lee, No.
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137,506-403. See Exhibit J to Plaintiffs' Original Petition at p. 143. Plaintiff Sheehan defended
Ms. Lee in that lawsuit. (Neither the then-trustee of the Article IV Trust nor Legacy was a party
to that lawsuit.) The Plaintiff Lawyers now seek to have fees awarded to themselves under the
very same fee agreement that was previously litigated in Harris County Probate Court No. 2.
C. Allowing this lawsuit to proceed in Dallas needlessly duplicates
proceedings, wasting judicial resources.
Even i f a judgment were entered against Legacy here, Texas law would require the
Plaintiff Lawyers to go to Harris County Probate Court No. 2 to enforce it. When ajudgment has
been entered by a court against a receiver in its official capacity, the enforcement action must be
referred to the court that appointed the receiver. Campbell, 811 S.W.2d at 756; Tex. Civ. Prac. &
Rem. Code §64.055.
Conclusion
This Court should transfer venue of the lawsuit to Harris County. Probate Court No. 2.
Defendant Legacy Trust Company, N.A., respectfully requests that this Court (1) grant the Motion to
Transfer Venue in all respects; (2) transfer the above numbered and styled cause to Harris County
Probate Court No. 2, and (3) grant Legacy such other and further relief as it may show itself justly
entitled to receive.
[This space intentionally left blank.]
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R e s p e c t f u l l y submitted,
MACINTYRE MCCULLOCH^TANFIELD
& YOUNG, L L P
W. Cameron McCuUocI
State Bar No. 00788930
Adri Graves
State Bar No. 24049999
2900 Weslayan, Suite 150
Houston, TX 77027
(713) 572-2900
(713) 572-2902 (FAX)
Cameron.McCulloch@mmlawtexas.com
Adri.Graves@mmlawtexas.com
Attomeys For Defendant Legacy Trust Company,
as Court-Appointed Receiver of the Article IV Trust
under the Last Will and Testament of Katherine
Pillot Lee Bamhart
10
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CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing instrument was sent to the
following via United States Certified Mail, return receipt requested, via e-serve, and/or via
facsimile on this the '^{(fX^y
Mr. Marc S. Culp
Culp & Dyer, LLP
222 E. McKinney Street, Suite 210
Denton, Texas 76201
(940) 484-4436
Mr. Thomas A. Zabel
Zabel Freeman
1135 Heights Blvd.
Houston, Texas 77008
(713) 802-9114 (Fax)
Mr. Daniel J. Sheehan
Mr. John M. Phalan, Jr.
Mr. M . Patrick McShan
Daniel Sheehan & Associates, LLP
2501 North Harwood, Suite 1280
Dallas, Texas 75201
(214) 468-8803 (Fax)
Mr. John W. Porter
Ms. Keri Brown
Baker Botts, LLP
One Shell Plaza
910 Louisiana Street
Houston, Texas 77002-4995
(713) 229-1522 (Fax)
W. Cameron McCulloch
Adri A. Graves
11
0050733
EXHIBIT "1
UALUAa c u u
CiT-ESERVE 4/20/2016 1;25:3-
FELICIA PI
DISTRICT CL
f7 David Hernande
DC-16-04570
CAUSE NO.
TOM THOMAS, DAN SHEEHAN and IN THE DISTRICT
MARC CULP, individually, and
as successors to the interests
of Thomas, Sheehan & Culp, L.L.P.,
Plaintiffs,
v.
COURT OF
LEGACY TRUST COMPANY, N.A.,
in its capacity as RECEIVER FOR THE
ARTICLE IV TRUST created by
the Last Will and Testament ofKatherine Pillot
Lee Barnhart, Deceased,
Defendant. DALLAS COUNTY, TEXAS
P L A I N T I F F S ' ORIGINAL PETITION
TO THE HONORABLE COURT:
Plaintiffs, Tom Thomas, Dan Sheehan, and Marc Culp, individually, and as successors to the
interests of Thomas, Sheehan & Culp, L.L.P. ("TSC") (collectively, "Plaintiffs"), through its
undersigned counsel, brings this action primarily for the recovery of Plaintiffs' property in the
possession of Defendant, Legacy Trust Company, N. A., in its capacity as Receiver for the Article IV
Trust created by the Last Will and Testament ofKatherine Pillot Lee Bamhart, deceased (hereinafter
the "Receiver," "Legacy," or "Defendant"), and in addition or in the alternative, for a money
judgment against Defendant, and in support alleges:
D I S C O V E R Y C O N T R O L PLAN
1. The amount in controversy exceeds the minimum jurisdictional limits of this Court!
Plaintiffs intend to conduct discovery under Level 3 of T.R.C.P. 190.
PLAINTIFFS' ORIGINAL PETITION - Page 1
PARTIES AND SERVICE
2. Plaintiff, Tom Tliomas, is an individual residing in Dallas, Dallas Count}', Texas.
3. Plaintiff, Dan Sheehan, is an individual residing in Dallas, Dallas County, Texas.
4. Plaintiff, Marc Culp, is an individual residing at Lake Kiowa, Cooke County, Texas.
5. A t all times relevant to the matters placed at issue by this suit, Thomas, Sheehan and
Culp each have been duly Ucensed attorneys authorized to practice law in the State o f Texas.
6. At all times during the trial of the Lee v. Lee Litigation (defined below), Thomas,
Sheehan, and Culp were the only three partners in TSC.
7. Defendant, Receiver is a National Trust Bank, which is a non-depository trust
company operating under and subject to the control of the Office of the Comptroller of the Currency.
8. Receiver has its principal place of business in Houston, Harris County, Texas, and it
may be served with process by serving its registered agent for service of process, CT Corporation
System at 811 Dallas Avenue, Houston, Texas 77002.
J U R I S D I C T I O N AND V E N U E
Summary of Claim
9. By this action, Plaintiffs bring claims and request various relief against the Article IV
Trust created by the Last Will and Testament ofKatherine Pillot Lee Barnhart, deceased ("Article
I V Trust") for failing to deliver money and other property in its possession collected from the
judgment entered in the case styled Susan C. Lee, et al. v. Ronald E. Lee, et a l , which was finally
adjudicated in the Probate Court No. 2 of Harris County, Texas (the "Probate Court"), cause no.
137506-402. ("Lee v. Lee Litigation").
10. As specified more particularly below, this suit is brought against Defendant in the
capacity noted, because it now serves as the Receiver for the Article IV Trust.
PLAINTIFFS' O R I G I N A L PETITION - Page 2
11. Pursuant to the terms of that certain letter agreement dated March 30, 1995 (the
"Contingent Fee Agreement" or "CFA"), six percent (6%) of the money and other property
collected from the judgment entered in the Lee v. Lee Litigation was assigned to TSC and is now
owned by Plaintiffs.
12. Defendant has failed and refused to turn over that property to its true owners.
13. Attached as Exhibit " A " is a true and correct copy of the Contingent Fee Agreement.
Control of Article I V Trust
14. From inception of the Article IV Trust through approximately February, 2002, Ronald
Lee was. trustee of the Article IV Trust.
15. From and after approximately February, 2002 tlirough June 18, 2015, Susan Lee
served as trustee of the Article IV Trust.
16. On June 16, 2015, Ronald Lee filed a motion with the Probate Court seeking to
remove Susan Lee as trustee and to appoint a receiver for the Article IV Trust.
17. On June 18,2015, the judge ofthe Probate Court signed an order removing Susan Lee
as trustee of the Article IV Trust and appointing Legacy as receiver for the Article I V Trust ("June
18, 2015 Order").
18. Attached as Exhibit "B" is a true and correct copy ofthe June 18, 2015 Order.
19. Pursuant to paragraph 3 of the June 18,2015 Order, the Receiver was authorized and
directed to conduct a variety of business on behalf of the Article IV Trust, including, but not limited
to: (i) exercising all rights, powers and duties of the Trustee as authorized under the terms ofthe
Article IV Trust or the Texas Trust Code; (ii) marshalling and taking custody of all trust assets; (iii)
managing and directing all business and financial affairs; (iv) paying, compromising and settling all
trust debts; and (v) prosecuting, defending or settling all legal proceedings.
PLAINTIFFS' ORIGINAL PETITION - Page 3
Summary of Article IV Trust Judgment
20. On October 25, 1996, the Probate Court entered a multi million dollar monetary
judgment against Ronald Lee in favor of the Article IV Trust.
21. Pursuant to the terms of the CFA, TSC served as lead counsel for Plaintiffs through
entry of a final judgment in the Probate Court.
22. But for TSC's efforts, expertise and hard work the favorable Trial Court Judgment
would not have been obtained.
23. Attached as Exhibit " C " is a true and correct copy of the final judgment entered by
the Probate Court. ("Trial Court Judgment").
24. TSC was the only law firm representing Plaintiffs during the trial of the Lee v. Lee
Litigation and through entry of the Trial Court Judgment. ^
25. Thomas, Sheehan and Culp also each served in various roles when providing legal
representation through the lengthy appellate process that followed.
26. Following completion of an appellate process that began in the Houston Court of
Appeals, an appellate opinion and mandate was issued increasing the amount of the Trial Court
Judgment. ("Article IV Trust Judgment").
27. Attached as Exhibit "D" is a true and correct copy of the Houston Court of Appeals
opinion. ("Appellate Opinion in Lee v. Lee").
28. Attached as Exhibit " E " is a true and correct copy of the mandate issued in relation
to that appellate opinion. ("Appellate Mandate").
29. At the time Legacy was appointed to serve as receiver for the Article IV Trust in
2015, the Article IV Trust Judgment was still outstanding.
PLAIMTIFFS'ORIGINAL PETITION - Page 4 . .
Overview of Assets Recovered on Article I V Trust Judgment
30. On January 25, 2016, Legacy filed an application seeking approval of the Probate
Court to settle the Article IV Trust Judgment by Ronald Lee.
31. Attached as Exhibit "F" is a true and correct copy of Legacy's "Application to
Approve Settiement Agreement" filed with the Probate Court. ("Legacy's Application to Approve
Settlement Agreement").
32. Following an evidentiary hearing, the Probate Court entered an order granting
Legacy's Application to Approve Settlement Agreement.
33. Attached as Exhibit "G" is a true and correct copy of the order. ("Order Granting
Application to Approve Settlement Agreement").
34. Attached as Exhibit "A" to Legacy's Application to Approve Settlement Agreement is
a copy of the settiement agreement approved by that order. ("Legacy Settlement Agreement").
35. At pages 2,3, paragraph 7, the Legacy Settlement Agreement recites that the Article
IV Trust Judgment, "constitutes a debt owed to the Trust and an asset of the Article IV Trust."
36. At page 3, paragraph 8, the Legacy Settlement Agreement further recites that, "Mr.
Lee has made payment for the benefit ofthe Article IV Trust on the Judgment, including a payment
of $8 million in 2015." ("$8 Million Cash Payment").
37. Additionally, under the terms ofthe Legacy Settlement Agreement, paragraphs 15,16,
and 19, Ronald Lee was obligated to deliver, among other things, a $4 miUion promissory note ("S4
Million Promissory Note").
38. On information and belief, Ronald Lee has delivered and the Article IV Trust has
accepted the $8 Million Cash Payment, the $4 Million Promissory Note, and other consideration
recited in the Legacy Settiement Agreement in partial satisfaction of the Article IV Trust Judgment.
PLAINTIFFS' ORIGINAL PETITION - Page 5
39.. Despite Plaintiffs' assigned ownership interest in and to 6% of the recoveries under
the Article IV Trust Judgment, the Article IV Trust has failed and refused to deliver to Plaintiffs their
assigned portion of the consideration so received and accepted in payment of the Article IV Trust
Judgment.
Appeal from Probate Court Order Approving Legacy Settlement Agreement
40. Following entry of the Order Granting Application to Approve Settlement Agreement,
Legacy, on or about March 28,2016, filed a document in the Probate Court entitled, "Satisfaction of
.Tudgment."
41. In that document. Legacy represents that the Article IV Judgment "has been fully
paid, satisfied and discharged" based upon the terms of the Legacy Settlement Agreement.
42. Prior to Legacy's filing of the Satisfaction of Judgment, Susan Lee, on March 22,
2016, filed a notice of appeal seeking appellate review of the Probate Court's Order approving the
Legacy Settiement Agreement ("Susan Lee Appeal")
43. As ofthe filing of this suit, the Susan Lee Appeal remains pending.
44. On information and belief, Plaintiffs anticipate that Susan Lee w i l l contend in her
appeal, among other things, that the Legacy Settiement Agreement did not fully pay and satisfy the
Article IV Trust Judgment.
45. This lawsuit only seeks relief as to recoveries received by the Article IV Trust through
the time of the trial of this case, expressly reserving the right to seek further enforcement ofthe CFA
i f subsequent recoveries upon the Article IV Trust Judgment are received including, but not limited
to, any recoveries subsequently obtained as a result of the Susan Lee Appeal.
PLAINTIFFS' ORIGINAL PETITION - Page 6
Jurisdictional Basis for Suit
46. This Court has subject matter jurisdiction over this case, because the amount in
controversy exceeds the minimum jurisdictional limits of this Court.
Basis for Venue in Dallas Comity
47. Pursuant-to section 64.052(b) ofthe Civil Practices & Remedies Code ("CPRC"),
venue over this case is properly vested in Dallas County, Texas, because Thomas and Sheehan reside
in Dallas County, Texas and this is a suit against a receiver holding property belonging to Thomas
and Sheehan.
48. Pursuant to CPRC section 15.002(a)(1), venue over this case also is properly vested in
Dallas County, Texas, because the contractual relationship placed at issue by this suit was formed
and performed in material respects in Dallas County, Texas, and more generally, a substantial part of
the events giving rise to the claims raised by this suit occurred in Dallas County, Texas. More
specifically, the Contingent Fee Agreement was negotiated by means of telephone discussions,
telefax transmittals and mailings to and from Dallas, Texas, the CFA was signed by TSC in Dallas,
Texas, all billings for work performed under the CFA originated from Dallas, Texas, all payments
for such invoiced work were received in Dallas, Texas, much of the communication related to the
performance of the CFA emanated from Dallas, Texas, and a substantial amount of the worked
performed under the terms of the CFA was performed in Dallas, Texas.
49. Pursuant to CPRC section 15.003(a), venue over this case also is properly vested in
Dallas County, Texas, because joinder of one or more of the Plaintiffs is proper under the Texas
Rules of Civil Procedure ("TRCP"), venue as to each Plaintiff in Dallas County does not unfairly
prejudice another party to the suit, there is an essential need to have each Plaintiffs claim tried in
PLAINTIFFS'ORIGINAL PETITION-Page 7 :
Dallas County, and Dallas County is a fair and convenient venue for each Plaintiff and all persons
against whom this suit is brought.
FACTUAL A L L E G A T I O N S SUPPORTING C L A I M S
The Contingent Fee Agreement
50. In the spring of 1995, TSC took over lead counsel responsibility for handling
litigation brought by a sister, Susan Lee, against her brother, Ronald Lee.
51. The dispute arose over Ronald Lee's administration of an estate of their grandmother,
Katherine Pillot Lee Barnhart ("Katherine Barnhart"), and certain related trusts, including the
Article IV Trust.
52. At the time of suit filing, Ronald Lee was the executor ofthe estate and the trustee of
the Article IV Trust.
53. Ronald Lee and Susan Lee were the only beneficiaries under the terms of the Article
IVTrust.
54.. Before TSC accepted the engagement, the Contingent Fee Agreement was entered
into by and between TSC, Susan Lee, her daughter, Susan Gibson, and Donna Kline.
55. Susan Gibson was a beneficiary of another trust established under the terms of
Katherine Bamhart's will.
56. Donna Kline was a duly licensed attomey authorized to practice law in the State of
Texas, who had been involved in the representation of Susan Lee and Susan Gibson in the Lee v. Lee
Litigation before TSC was retained. . '
57. Sheehan, Kline, Susan Lee, and Susan Gibson each signed the Contingent Fee
Agreement on or about March 30, 1995.
PLAINTIFFS' ORIGINAL PETITION - Page 8
58. Pursuant to the terms of the CFA, TSC was to be compensated for handling the Lee v.
Lee Litigation through payment of fees based upon reduced regular hourly rates plus 6% of all
recoveries obtained.
59. TSC was fully paid all hourly fees charged under the terms of the CFA.
60. The contingent fee agreed to be paid expressly included any recovery obtained on
behalf of the Article IV Trust; however, neither Susan Lee nor Susan Gibson would be personally
liable for any such fee related to any such recovery obtained for such trust.
61. Instead, both Susan Lee and Susan Gibson agreed to support TSC's right to its
contingent fee interest in any recovery obtained on behalf of the Article IV Trust.
62. Susan Lee and Susan Gibson support the claims brought by this suit.
Outcome of the Lee v. Lee Litigation
63. Beginning in March 1995 through the end of that year, TSC expended hundreds of
hours in preparation diligently prosecuting the case and preparing it for trial, including the conduct of
a juiy trial for several days in the fall of 1995 before a mistrial was granted.
64. On January 3, 1996, a second jury trial was started in the Lee V. Lee Litigation. .
65. Following an aggressive prosecution of the case in a trial lasting well over a week, a
favorable jury verdict was obtained on behalf of Susan Lee, Susan Gibson and the Article IV Trust.
66. Following nine more months ofbriefing and argument addressing various post trial
motions, the Trial Court Judgment was entered.
67. Under the terms of the Trial Court Judgment, the Article IV Trust was granted a
monetaiy judgment against Ronald Lee for:
a. $840,002.00 for Ronald Lee's breach of fiduciary duty related to the Knollwood
Development, the River Bend Farm, and the Cap Rock Ranch;
• PLArNTiFFS'ORIGINAL PETITION - Page 9
b. $659,506.50 for payment to Ronald Lee of an unreasonable executor fee;
c. $919,702.12 for prejudgment interest related to the payment of the unreasonable
executor fee, plus accruing per diem interest at the rate of $180.69;
d. $163,550.00 for unreasonable office expenses; and
e. $157,969.90 for prejudgment interest related to the unreasonable office expenses,
plus accruing per diem interest at the rate of 44.81.
68. In total, the Article IV Trust was granted a principal monetary judgment recovery
against Ronnie Lee in the amount of $1,663,058.50;plus prejudgment interest atlO% per annum,
bringing the total judgment amount against Ronald Lee to $2,758,770.52. ("Principal Trial Court
Judgment Amount").
69. The Trial Court Judgment also provided for postjudgment interest on the Principal
Trial Court Judgment Amount at the rate of 10% per annum, compounded annually.
70. The Trial Court Judgment also expressly denied requested relief to remove Ronald
Lee as Trustee of the Article IV Trust.
71. But for TS C' s diligent and expert handling of the Lee v. Lee Litigation, the Article IV
Trust would not have obtained the large monetary sum awarded in the Trial Court Judgment.
72. A l l parties appealed from the Trial Court Judgment.
73. OnMay 17, 2001, the Appellate Opinion in Lee V.Lee was issued and reported at 47
S.W.3d767.
74. After the Texas Supreme Court refused petitions for review, the Houston Court of
Appeals issued the Appellate Mandate.
75. The appellate process lasted from October, 1996 through issuance ofthe Appellate
Mandate in February, 2002, a total of approximately 5 years and 4 months.
PLAINTIFFS'ORlGrNAL PETITION - Page 1 0
76. Thomas, Sheehan and Culp provided legal representation in this case throughout the
appellate process.
77. Pursuant to the Appellate Mandate, the Article IV Trust's judgment against Ronald
Lee was increased materially. ,
78. Under the terms ofthe Article IV Tmst's judgment against Ronald Lee as modified by
the Appellate Mandate, the Article IV Trust was granted an additional principal monetary judgment
against Ronald Lee in the amount of $ 1,53 8,843,50 for claims related to the payment of an excessive
executor's fee.
79. The Appellate Mandate also modified the Trial Court Judgment by: (i) rendering an
additional principal monetary judgment against Ronald Lee in the amount of $1,500,000.00 based
upon the conclusion that the Article IV Trust should not have been directed to reimburse Ronald Lee
for attorney's fees incurred when defending the Lee v. Lee Litigation; (ii) removing Ronald Lee as
trustee of the Article IV Trust; (iii) revising the calculation of prejudgment interest awards; and (iv)
directing Ronald Lee to pay all costs of the appeal.
80. In sum and as most material to this case, the Appellate Mandate reformed the Trial
Court Judgment to increase the principal amount of the monetary judgment awarded to the Article IV
Trust against Ronald Lee from $1,663,058.50 to $4,701,902.00, it revised calculations of
prejudgment interest, and it confirmed the award of postjudgment interest on all of the foregoing
sums at 10% per annum, compounded annually. ("Final Monetary Sum Awarded the Article IV
Trust").
81. But for the diligent and expert handling of the appeal by Thomas, Sheehan and Culp,
the Article IV Trust would not have obtained such a favorable outcome in the appeal.
PLAINTIFFS' ORIGINAL PETITION - Page 1 1
The Donna Kline Litigation
82. Before the Lee v. Lee Litigation proceeded to trial, Susan Gibson sent a letter to
Donna Kline demanding that Kline withdraw from her representation in the Lee v. Lee Litigation.
83. Kline honored the demand and withdrew from the representation in the fall of 1995.
84. Kline subsequently intervened in the Lee v. Lee Litigation to recover unpaid legal fees
arising in connection with work performed on two separate lawsuits, including the Lee v. Lee
Litigation. ("Kline Litigation").
85. The bulk of Kline's claim pertained to representation provided in the Lee v. Lee
Litigation under the terms of the Contingent Fee Agreement.
86. On June 27, 1996, the Probate Court signed an order severing the Kline Litigation
from the Lee v. Lee Litigation.
87. In the Severance Order, the Probate Court directed the Kline Litigation to proceed
forward under Cause No. 137,506-403.
88. . The Kline Litigation proceeded to ajury tirial beginning on July 15, 1997.
89. That trial produced ajury verdict favoring Kline.
90. Attached as Exhibit " H " is a true and correct copy ofthejury verdict rendered in the
Kline Litigation. ("Kline Jury Verdicf).
91. Following receipt of the Kline Jury Verdict, the Probate Court entered judgment in
favor of Donna Kline.
92. Attached as Exhibit " I " is a true and correct copy of the judgment rendered by the
Probate Court in favor of Donna Kline and against Susan Lee, individually and as trustee for Susan
Gibson, and Susan Gibson, individually. ("Kline Judgment").
PLAINTIFFS' ORIGINAL PETITION - Page 1 2
93. Among other things, the Kline Judgment awarded Donna Kline a monetaiy recovery
of $114,207.21 for unpaid hourly fees plus an additional $132,500.00 for attorney's fees incurred in
prosecuting the case.
94. The Kline Judgment also granted Donna Kline declaratory relief, as follows: "Based
upon the Jury's answer to Question 2, the Court makes declaratoryjudgment that Donna C. Kline has
a good, valid and subsisting interest in any recovery by Susan Camille Lee, individually and as
trustee for Susan C. Gibson, and Susan C. Gibson individually, pursuant to her contingent fee
contract of March 30, 1995."
95. The reference to the contingent fee contract of March 30,1995 is the same Contingent
Fee Agreement placed at issue in this case.
96. Susan Lee and Susan Gibson appealed the Kline Judgment to the Houston Court of
Appeals.
97. On January 13, 2000, the Houston Court of Appeals issued its final decision on
rehearing.
98. Attached as Exhibit" J " is a true and correct copy of the Houston Court of Appeals
Decision in the Kline Litigation. ("Appellate Opinion in Kline Litigation").
99. As material to this case, the Appellate Opinion in the Kline Litigation made the
following rulings related to the Contingent Fee Agreement:
a. In addition to agreements to pay both Kline and TSC at hourly rates specified,
"Defendants also expressly agreed to pay . a 10% contingency fee on any
'recovery.'" (Appellate Opinion in Kline Litigation, at *1);
PLAINTIFFS' ORIGINAL PETITION - Page 1 3
b. "It was further agreed that 40% of the 10% contingency fee would be paid to
Kline and that the remaining 60% would be paid to Thomas, Sheehan & Culp."
(M);
c. Based upon the jury verdict, the Probate Court in its judgment, "found that Kline
possesses 'a good, valid and subsisting interest in any recovery by [Defendants]
pursuant to her contingent fee contract. . . .'" {Id. at *2);
d. In response to contentions that the Contingent Fee Agreement was unfair and
invalid as to Kline, the Houston Court of Appeals reached the following factual
conclusions - (i) the CFA provided for the payment of hourly fees plus '"ten
. percent (10%) of all Recovery, i/a«7'(emphasis added)."; (ii) the CFA, "further
provided that' [cjontingency fees will be divided between us, sixty percent (60%)
to Thomas, Sheehan & Culp, L.L.P., andforty percent (40%) to Donna C. Kline.'
(emphasis added)."; and (iii) "The record shows that the agreement [CFA] was
executed by both Defendants." (Id.);
e. "The record in this case is replete with competent evidence to rebut the
presumption of unfairness concerning the contingent fee agreement [CFA]." (Id.
at*3);
f. "Indeed, the evidence in the record supports the inference that the agreement was
entered into freely and voluntarily by Defendants based upon their full
understanding of the affect of the contingent fee agreement [CFA]." (Id.);
g. "Defendants assert that the trial court erred in entering its declaratory judgment
which decreed that Kline possesses a 'valid and subsisting' contingent interest in
PLAINTIFFS' ORIGINAL PETITION - Page 1 4
any recovery obtained by Defendants in the underlying estate case, pursuant to
the contingent fee agreement of March 30, 1995 [CFA]." ( M at 7);
h. "The trial court's declaratory judgment merely decrees that the parties' contingent
fee contract is valid." ( M ) ;
i. " ' A trial court may construe a contract in a declaratory judgment suit either
before or after a breach occurs.'" ( M ) ;
j. "As to the effect of any potential dispute between the parties in this case, a
'declaratory judgment may be entered if it serves a useful purpose in resolving a
controversy between the parties, even if actual or potential disputes remain.' ...
. [citations omitted](emphasis added)." {Id. at 8);
k. "We note that the trial court did not enter a monetary award to Kline based upon
the contingent fee contract because the amount of Defendants' recovery in the
underlying estate has not been finally adjudicated [footnote omitted noting
that Lee v. Lee Litigation is currently on appeal]." (/J.); and
1. "We hold, therefore, that the trial court did not err in granting a declaratory
judgment, which decreed that Kline's contingent fee interest in Defendants'
monetary recovery is valid." {Id.).
100. Following issuance of the Appellate Opinion in the Kline Litigation, the Kline
Judgment became final.
101. On information and belief, the monetaiyjudgment awarded to Kline was paid in full.
PLAINTIFFS' ORtcrNAL PETrriON - Page 15
Monetary Recoveries Received and Accepted by the Article I V Trust
• 102. On information and belief based upon evidence currently available to Plaintiffs,
Ronald Lee has made or is making three separate sets of monetary payments toward satisfaction of
the Final Monetary Sum Awarded the Article IV Trust.
103. Plaintiffs only learned of the first and second payments during the course of
proceedings related to Legacy's Apphcation to Approve Settlement Agreement in 2016.
104. As to the first monetary payment. Legacy presented evidence during hearings on
Legacy's application that Ronald Lee paid the Article IV Trust the sum of $2,816,213.60 on January
9, 1997. .("January, 1997 Payment"),
105. Sheehan first learned of this payment in February, 2016, and Thomas and Culp only
learned of that payment about six weeks later.
106. The January, 1997 Payment was made roughly 2 1/2 months after entry of the Trial
Court Judgment in October of 1996.
107. At the time of the January, 1997 Payment, Ronald Lee was the trustee of the Article
IVTrust. •
108. Susan Lee did not become the trustee of the Article IV Trust until roughly 5 years
later when the Appellate Mandate was issued.
109. As to the second monetary payment. Legacy attached to its Application to Approve
Settlement Agreement a copy of the proposed settlement agreement between Receiver and Ronald
Lee.
110. At page 3, paragraph 8 of the recitals, the Legacy Settlement Agreement states, "Mr.
Lee has made payment for the benefit of the Article IV Trust on the Judgment [Final Monetary Sum
PLAINTIFFS'ORIGINAL PETITION - Page .16
Awarded the Articie IV Trust], including a payment of $8,000,000.00 in 2015." ("S8 Million
Payment").
111. This is the first occasion that Sheehan learned of this payment, and Thomas and Culp
only learned of that payment roughly one month before filing this litigation.
112. On information and belief, the third and final series of monetary payments are those
currently being made by Ronald Lee to the Article IV Trust pursuant to the terms ofthe $4 Million
Promissory Note.
113. Pursuant to the assignment in the CFA, Plaintiffs now own 6% of all such monies
currently in the hands of the Receiver.
Non Monetary Recoveries Received and Accepted by the Article I V Trust
114. Above and beyond the additional payments still to be made to the Article IV Tmst by
Ronald Lee pursuant to the terms of the $4 Million Note, the Legacy Settlement Agreement reflects
two other valuable, non monetary considerations received by the Article IV Trust.
115. First, at pages 5 and 6, paragraph 19 of the Legacy Settlement Agreement, Ronald Lee
releases specified alleged claims that Ronald Lee has against the Article IV Trust.
116. Six percent of the value of these releases constitutes part of the recovery assigned to
and now owned by Plaintiffs under the terms of the CFA. ("Release Value").-
117. Second, at page 4, paragraph 15, Lee is obligated to execute a deed conveying his
• interest in the River Bend Farm to the Article IV Trust. ("River Bend Property").
118. Six percent of the River Bend Property constitutes part of the recovery assigned to
and now owned by Plaintiffs under the terms of the CFA.
PLAINTIFFS' ORIGINAL PETITION - Page 1 7
CLAIMS
Breach of Contract
119. Plaintiffs incorporate Paragraphs 1 - 118, as if set forth fully here.
120. There is avaUd, enforceable contract by and between TSC, SusanLee, Susan Gibson
and the Article IV Trust to provide legal services under the terms of the Contingent Fee Agreement.
121. In addition or in the alternative to the above allegations, the Article IV Trust later
adopted and accepted the CFA when Susan Lee was acting as the trustee for the Article IV Trust.
122. In addition or in the alternative to the above allegations, the Article IV Trust ratified
the CFA before and/or after the time that Susan Lee was acting as the trustee for the Article IV Tmst.
123. More specifically, Susan Lee entered into the CFA on behalf of the Article IV Trust,
with and/or without authority to do so, and the Article IV Trust approved the CFA after acquiring
full knowledge of the terms and provisions of the CFA with the intention of giving validity to Susan
Lee's agreement to bind the Article IV Trust to the terms of the CFA.
124. In addition or in the alternative, the Article IV Trust ratified and is now bound to
honor the CFA, because it received and accepted benefits generated from the performance of the
CFA with full knowledge of TSC's assigned interest and contingent fee rights to monetary and other
recoveries obtained as a result of work performed by TSC under the terms ofthe CFA.
125. Under the terms of the CFA, TSC is the owner of 6% of every form of consideration
received and accepted in full, or alternatively, partial satisfaction of the Article IV Trust Judgment.
126. Plaintiffs are the successors in interest of TSC and they are the proper parties now
entitled to enforce the terms of the CFA.
127. TSC fully and/or substantially performed, tendered performance or was excused from
continued performance under the terms of the CFA.
PLAINTIFFS'ORIGINAL PETITION - Page 1 8
128. In accepting recoveries under the terms ofthe CFA without paying Plaintiffs their 6%
assigned, cbntingent fee interest, the Article IV Trust has dishonored the terms ofthe CFA and is
now wrongfully withholding Plaintiffs' right to full use and enjoyment of property Plaintiffs own.
129. More specifically, Plaintiffs seek an order directing the Receiver to turn over 6% of
all cash sums accepted in payment of the Article IV Trust Judgment, including, but not necessarily
limited to, 6%ofthe January, 1997 Payment and the $8 Million Payment, totaling $648,972.81 plus
interest at the highest rate allowed by law from date of receipt of each such payment until delivery of
the wi'ongfuUy possessed funds.
130. Additionally, Plaintiffs seek an order directing the Receiver to turn over 6% of all
cash sums accepted in payment of the $4 Million Promissory Note plus interest at the highest rate
allowed by law from date of receipt of each payment until delivery of the wrongfully possessed
funds.
131. In the alternative, Plaintiffs seek the recovery of a monetary judgment against the
Article IV Trust for the damage suffered by reason of its breach of the CFA equal to 6% of the
January, 1997 Payment, the $8 Million Payment and the payments received on the $4 Million
Promissory Note plus interest at the highest rate allowed by law from date of receipt of each payment
until delivery of the wrongfully possessed funds..
132. Additionally, Plaintiffs seek an order directing the Receiver to turn over 6%
ownership of the $4 Million Note, or alternatively, a monetary judgment against the Article IV Trast
for damages suffered by reason of the Article IV Tmst's breach of the CFA equal to 6% of the value
ofthe$4MillionNote.
133. Additionally, Plaintiffs seek an order directing the Receiver to tum over a 6% interest
in the River Bend Farm, or alternatively, a monetary judgment against the Article I V Trust for
PLAINTIFFS'ORIGINAL PETITION - Page ! 9
damages suffered by reason of the Article IV Trust's breach ofthe CFA equal to 6% of the value of
the River Bend Farm.
134. Additionally, Plaintiffs seek a monetai-y judgment against the Article IV Trust for
damages suffered by reason of the Article IV Trust's breach of the CFA equal to 6% of the Release
Value.
135. Plaintiffs also seek and are entitled to recover all reasonable and necessary attomey's
fees arising from work performed to prosecute this suit, including any and all appeals, in an amount
to be determined at trial.
136. Plaintiffs further seek and are entitled to the recovery of pre-judgment interest at the
highest rate authorized by law.
137. Plaintiffs further seek and are entitled to the recovery of post-judgment interest on all
of the monetary awards obtained from and after entry of this Court's final judgment until paid in full
at the highest rates authorized by law.
138. A l l conditions precedent to recovering the relief sought herein have occurred, will
occur or have been waived, including, but not limited to, the giving of all proper notices and
demands.
139. Based upon the doctrines of claim and issue preclusion. Defendant is barred from
denying any ofthe facts and/or claims established in the Kline Litigation, including, but not limited
to, those expressly recited in paragraph 99 above. •
PRAYER
140. WHEREFORE, Plaintiffs request that, on final trial, they have and recover the relief
sought in Claim 1, whether alleged primary or in the alternative, pre-judgment and post-judgment
interest on all monetary awards to the extent legally permitted at the highest rate allowed by law, and
PLAINTIFFS' ORIGINAL PETITION - Page 2 0
all other and fuilher relief, legal or equitable, general or special, to which Plaintiffs may show
themselves to be justly entitled, including, but not limited to, recovery of all court costs and any
other recoverable costs of this suit.
141. Plaintiffs demand trial by jury. Plaintiffs will remit the necessary fees and notices
accordingly.
Respectfully submitted,
CULP & DYER, L.L.P.
222 E. McKinney Street, Suite 210
Denton, Texas 76201
Telephone: (940) 484-2236
Telecopier: (940) 484-4436
By: I si Marc S. Culp
Marc S. Culp
State BarNo. 05212700
mculp@cdhllp.com
ATTORNEY FOR PLAINTIFFS
PLArNTiFFS' ORIGINAL PETITION - Page 2 1
EXHIBIT " A
PLAINTIFFS' ORIGINAL PETITION - Page 0 2 2
o
THOMAS, SaKtoui & CULP, LX.F.
ATTCWHSSfS A«0 COtlMSaOftS
1891 EiMsraeCT
(n«) i a i - o o »
. !•»«!».out*-
n u x BOAMO o r U O J K . t i a H O U U Z A K M
Maidi 30, 1955
Ms. Soaa C Lcc
Houston, TX 77019 "
MI; Stmn C Oibsoa
qfo Pine Minor Oallipte
P.O. Box 131
CSwitBnt Hlil, M A 02167
Re: No. 137;SDfr482
Sasan C. Lee, ti uL v. Ronald E. Lee, et at.
l» (be ProbaU Court No. 2
Harrit Conatjr, Teui
Dear Ml. Loe end Ml. aiiMon:
This ieUcr is to set foctli the team \spxL whldi we utd Dooo* C Kline iuve agieed lo
repnsenc Sunu C Lee and Susan C Oltlaon's ttttecestt in Utipdiqn agaliut Rooald E. Lee, Jr.,
Steven Oqduin and TMIOUS other lelaicd entities and penons.
We wil{ invexticate your dafaos, file mA oa your .betiBlf, {sepore the cme. tcy IIIB case,
appeal as necoaaty, and take such otiier aalon as is necessair to (xoteet and pursue your
uMerests. It is ow h«eitt to inppart the Wm of KatheriM
' OPT fee will be tbe sua ofc (a)rauoaabfehotrfyratesincluding Doiuu Kline at the rate
of S225 pK hour ai^i liiasnbe^ L.L.P. w i n work on tbe case with
Tom Tli6iMH('jMte at $300 per hour and D«ii Sbeefaan's lale at $250 per hoar, pha (b) ten {letceiit
(10%} ;pf dl Iteo" If any. Tix tena "Recoveiy" means all valuereceivedon your beimlf.
nlirectly or ioiibe^ wfcethetfayseOloneia, trial, or otherwise. It is posibte that you could
lecover iitaeti. a t ^ ittan auAi and in fllat event, oor ten peioent (lOX) fee shall be payable in
Uiid.X We wllf ii" cash only lo the extmt that our petcenlafe ^iplies to caah which you
recover. By exectitioa below, yoa l>en*y sell, transfer and astipi tea peicent (lOS) of aB of
neh jclaina io Thnnu, Sbedm & Ciilp, LLP. and Doom C Kline as part ofihis agrecinenL
EXHIBIT
Conndential information may have been redacted from the document in compliance with the Public Information Act.
A Certified Copy
Attest: 4/5/2016 c<>
Stan Stanart, County Clerk ?o / |\ \"%
Harris County, Texas | ^ •
Depot,. . "'••••-•-''P
PLAINTIFFS'DiirG IN A L PETITION - Page 023
M I , Sos«a C Gibjoo
Mtrch 30, 1995
The Recovery aay include the fcdlowing:
1 («) DMn»^e«foclI"IriesioffecedpcraoosalybyeEtIK^of yo^
iJtoiiM kave been distributed andet OK Wffl of KJtiuMine PiM
-WiB-) oc lelalBd tmtx ocestmles (the "Tinsts") (Iho 'Clients' Recovecy") and lost
income therefroni-,
(b) DraijBSfor ii\}oiicss«freted by the &rtiUe of Katherine 1 ^
"Estate') or the Ttwts, such as damages for mismanagement of tlie Estate's assets
oc foe excess fees (the "Estjm^Tmst's Recovery^; and
(c) Interest on the above a^nounts.
The Becovay afaaU «iot U»:lud6 aiBounts which arc mrady reaUocalcd bctvretm
and'Dvsts or between the Thists thesnselves.
tliB ccodngeat part of the fee shall be computed teptnitcty foe the aienli" Recovery and
the Estati^T5rosfs Reeorery, and youriiallonly be pcnooally liaMe foe contingent fees comptrted
on tbo OSmbf Raeov«ty. W« will look to lbs Estate oc Trurt, tet^ecUvely, for payment of any
ooocinient fet irKint oa the Estate ot Trust's Recovery, and sudi continient fee Intciest shall not
be dedtKtedfromC31eat^ Recovety. You ajree to support our request for peyment thereof In
all respects.
If •Uomeyx' fees ate awaided by ibe court, vj/hether nndsr Section H9C of the Texas
Protxu Obde, Section J i«.064 of the Tern Property C!ode, or other cooniiott law or statutoty
entltlenxoC, sucli Gees AtS. not be included in tlie cotnpuiatioa of Recovery.
Oontingeocy fees wiU be divided between us. sixty percent (60%) to 'HKXiias, Sheobsa
& Cujp. LJL.P., and foity percent (<0*) to Donna C KUne.
We bfllmooday for hputiy charges and expenses. In order tofcciliuteour prompt WUhij
and yoar psompt jjayment, we ie<|aiie tliat you deposit and liieQ maintain a balance In oor trust
ascouat of iCtSiPPO; atainst «Ueh we wiU bm htaddiflon,^
yon wfll Wasgcwi^SAi fix ihs paytnent of all oU-of-ppdcst cxpetises and wiE, as leqtKsted by
us. pay so^ dauvK ditect so that we will have no Kspotistbility or obligatian lo advance ootof-
pocist txpamt;. bi ooimectioa with the Iiti|;atioa, altiii3U|li we niay do so from time to time and
bOl you &x thoiM eqmscs.
Confidential information may have befen redacted from the document in compliance with the Public Information Act.
A Certified Copy
Attest; 4/5/2016 -v-M-.-.-
Stan Stanart, Couuty Clerk J
Harris Count)', Texas 5 • '
Deputy
PLAINTIFFS' ORIGINAL PETITION - Page 024
Mt. Sursn O Lec
Mt, Suisn C Gibson
Utick 30. 1995
Dcnld Siicehwi' or Tooi Thonus, ml pur election, dall be lead counsel for Susan Lec at
Irfal and E5oo»ut Kline slull be lead counsel for Susan Gibson, In terms of day^txJiy
nmnaj«nent of tlie case, counsel sliall be co-counsel in the litigation. The finn of Tlionias,
Shsclon Sc. Culp, L.LJP., sl«U have pcimsiy responsibilityfiarprcparatio:i of llie case for trial,
but the attoroeys shall advise and consult wllli each odisr.
We «riU not agree to a settlerocnt of Ihe case without your consent. Addilbnally, we will
not malcc any material agreements without your conseni. (
Yoa tnay lenninate this agreement at any time, and in the event you, choose lo do so, you
shall be rcspcaistbte fbr houriy charges and expenses only through the lime of sudi lerminalicBi;
Itowever, tht assigmnent to us often percent (10*) of the claims shaU survive such tettninalion
to ihc extent aBowcd by law.
Wettwyvoluntarily teoninate drfs agreement at any lime but If we do so and withdtaw
from your lepttaentMiao ptioc lo obtahiing a Recovery, we shall not be entUIcrf Iq 10* of any
Recxrvecy later lecelyed We will be entitled lo payment for aU lusirly fees and expsnscs
incuired as of Ihe dale of terminatiott.
If this letter accurately sets forth our agreement, please sign the original and return it lo
us.
Sincerely,
Donna C Kline
Donna C Kluie, Auotney at Law
Conndential information may have been redatted from the document in compliance with the Public Information Act.
A Certified Copy .v"^*
Attest: 4/5/2016 . t ''•
Stan Stanart, County Clerk I'cS'/ J\
Harris County, Texas = : ^'i".^Z^' :-js
PLAINTIFFS: ORIGINAL PETITION - Page 025
Wb. Suum C Lec 641^7-2003
M I , Susaa C. Gibson
Msidi 30. 1995
P»Ee 4
XXX-XX-XXXX
AGREED:
Swan Csmlile Lec
Susan C Olbsoti
Confidential information m a y have been redacted from the document in compliance with the Public Information Act.
v^
. ^ „_ • —— — '
A Certified Copy O^' "mf%.
Attest: 4/S/2016 4'.^.••''""{"'•: O^c-
Stan Stanart, County Clerk j o / |\ '"•-!?=%
Harris County, Texas = • • H
— ^ — - ~ — . " C * : : : ^
• PLArNTiFFS' OR-IGINAL PETITION - Page 026 .
EXHIBIT " B "
PLAINTIFFS' ORIGINAL PETITION - Page 027
Cause No. 137506-403
Estate of Katherine PiUot Lcc §
0 Barnhait, Deceased
o
a
m
Ronald E, Ixo, Jr.,
m
Plaintilf,
o
N
CD Susan Camille Lcc, individually, and §
r-
ID as TYustcc of the Article IV TYust §
O created by the last will and testament §
of Katherine Pillot Lee Bamhart, §
EJcccascd, and as Executor of the
Estate of Katherine PiUot Lcc
Barnhart, Deceased, §
4r'
Defendant.
Order Appointing Recdyer -
On this date, ctl*fi|^pi Rooald B. Lcc, JTr.'s ("Mr. Lcc") Motion to Remove
Tnwtec Putsoant toT^. iSfctode J113.082, and to Appoint Receiver Pursuant to Tex. Tiust
Code }114.008 (the "Motion"). The Ctowt, having reviewed the evidence presented, finds as
The Court has jurisdiction over this case and venue is proper in this
2. All necessary parties interested in this matter have aRwared.
3. The Ttust was created und« Article IV of the Last Win and Testament of
Katherine Pillot Lee Bamhart, which was admitted to probate in this C^ourt under Cause Number
137.506 ("the WUr).
PLAINTIFFS' ORIGINAL PETITION - Page 028
4, Since 2001, Susaa Camille Lee ("Ms. Leo") BiWtttfttSI the solo trustee
o
N of the Trust, ^P"*^
O
o 5, Section 113.082 of the Texas Trust Cq"K^djs that "a court may
0.
remove a trustee" if tbc trustee "violateei or attempted to"oIateC% terms of the trust," the
in trustee "failled] to malcc an accounting roqwrcd by law^•Oie""the trust," or in mstanccs
where tbe courtfinds"other cause forremoval."Tex. Tflfet"ffll 13.082.
o 6. Section 114.008 of the Texas Trast Code provides that "[a] court may
N
CO
r- appoint a receiver to take possession of trust property and administer the trost to icmcdy a breach
m
o of trust that has occurred oc might occur." ThaCtoort is authorized to appoint a receiver "in
any case in which a receiver may be appointed uSMCUje rules of equity." Tex. Civ. Ptac. &
Rem. Code ^,001 (tt)(6),
7. Mr. Leo, as lufenent inoRne beneficiary of the Trust, Is an hitcrcstcd
person. •^-»
8. Mr. tee r&c a pn»>r demand on Ms. Lee for an accountuig under Tex.
Trust Code §113,151 on 3aly*y^33flm Despite this demand, Ms. Leo has provided no
accountmg. in breach of tljjlTi9i|^B4y e Texas Trust Code.
9, is tbe-tmc of Imnuneat lurther harm to tho Trust by reason of the
failure of Ms, Leo t o * ^ ^ j | ^ ^ assets and liabilities of the Trust or provide an accounltag for
them, Bxemplifle^y ]hp faihae of Ms, Lec as Trustee timely to pay tbe real estate taxes on
Trust property;jMTii^i»jto protect the hitcrests of the Tnist In property that has been the
subject of c ^ e m n ^ ^ proceedings, the absence of any distributions of a portion of the "Rust's
income taSfj^JXIttmi Katherine hoc Stacy over a period of approximately 14 years despite the
manda^EBjlMAUion provisions of the Will creating tbe Trost, and the failure to provide tbe
PLAINTIFFS' ORIGINAL PETITION - Page 029
requested aixwrnting fofm Tixist imder Tex, Trust Code 5113.151. Such actions lod inactions
N by Ms, Lcc constitute a t ^ S ^ f fidociary duty, violate tbe terms of the Trust, and violate tbc
0
0
CL
Texas Tnist Code, wj..
10. The i"^s"val of Ms, Lec as Trustee is necessary fcx-the continued
tn administration and managcttBnt of thefiTrust and to avoid the threat of imnunentftirtbcrharm to
the Trost. T"ffP
0 11. Ms, Lee's breaches offiduciaryduty, her violation of the terms of the
03
r- Trust, and her violation of the Texas Trost Code justifrremovalunder Texas Trust Code
U3
0 S113.082(a}(l, 3, and 4), and dictate that IHi fair,reasonable,and equitable for a Receiver to be
appointed to act on behalf of the TWI.'
12. Legacy Trusiadl^Sny, N.A. ("Legacy") is qualified to serve as and
should be appointed as Receiver of the Tnist. ^.
13. Mr. Lcc is cn over hisreasonableattorneys' fees incurred in
conncc^n with the Motion under Tcxsj Trost Ofdo § 114.064 fkxim the Tnist,
It is therefore ordered ''H^ifff^
1. Ms, Lee is 1 las T r a ^ ponuant to Tex, Trust Code 5113.082.
2, Legacy U hereby ^pointed, pursuant to Tex, TVust Code 5 U 4,008, as
Receiver of the Trost, effective kmnetfiate^aw^ontinumg untilfiirtherOrder of this Court,
3. TheRecciveris and dhected to:
4
a. Exercise all ri and duties of tbe Trustee of the TVust
created under Arti at the Will, and all powen granted to
tiustces under tbeltacas 3]f|it Code;
PLAINTIFFS' ORIGINAL PETITION - Page 030
b. Marshal and take custody, control, and possession of all assets of
N
U the Trust, wherever situated, inchjding tbe income and profit
0
0 theiefrora, to insure such assets against hazards andrisks,and to
CL
attend to theraahjtcnanceof such assets;
io
In c. Manage and direct the btainess and fmiweial affairs of tho Trust
r-
iri and any asset or enrity owned or controlled by the Trust;
c
0 d. Retain otremove,as the Receiver deems necessary or advisable,
N
CD
any officer, director, independent contractor, employee, or agent of
to
o
tbe TVust (Including retained professionals);
e. Obtain, by pteseotation of this Order, all records pertaining lo the
assets, liabiUties, inoMtje, and expenses pertaining to the Trust
- ' . r %^ uJ . i ^ ' - t * . i J ^4 1 s m i
t Collect a i n n c o n » f i ^ M l ^ u s t i 5 ^ ^ h c S # ^ . ! l * « T r ^ a ^ F? IE" 1
or otherwise;
g. Make sudi ordinary and necessary transfers, payments,
distributions, and disbursements as tlic Receiver deems advisable
or proper for the maintenance and preservation of Trust assets or
con^liance with the obligations of the Trostce for the Trust;
h. Pay, compromise, or settle all debts of the Trustee pertaining lo
TVust property, mcluding but not limited to taxes, penalties, and
intctest owed by the Trustee with respect to Trust property,
i. Collect, comproralso, or settle all debts owed to the Trust;
-4-
«»«1S3V1
PLAINTIFFS' ORIGINAL PETITION - Page 031
Pay thereasonableattorneys' fees incurred by Mr. Lee ia
n connection with the Motion and tbc proceedings thereon;
N
0
0 Employ attorneys, accountants, investigators or other appropriate
X
agents to assist in the ideotificaJion of Trust assets and the
in collectioo of debts owed to the Trust;
in Prosecute, defend, and/or settle all legal proceedings (including
o lawsuits and arbitrations) brought by or against tbe Trustee of the
N
r- Trust, including but not limited to lawsuits for the condemnation of
UD
O real property in which the Tmst has an interest, HISD v. Susan
CamiUe Lee, Executor/Tntsiee of the Estate cf Katherine Pillot Lee
Bamhart, et al. No. 1038351, Harris County Court at Law No. 3,
n*»t5y OH priate fw tbe
iement of Bch 1 ^ {KtjbMh",
empJoyment*of anmslf&pert "^bs, £ 0 ^ s u .
Institute such legal pioceedings as the Receiver deems necessary
w advisable to obtain constructive ot acwal possession of assets of
tho Trust or lo recover damages suffered by the Trust; provided
however, that the Receiver shall have discretion not to pursue
litigation against Ms. Lee that is undertaken by beneficiaries of the
Trust for the benefit of tbe TnJSt;
Employ ai^iraisas to appraise the value of real property of the
Trust; and
• 5-
4WS133Y1
PLAINTIFFS' ORIGINAL PETITION - Page 032
o. Take any and all actionsreasonablynecessary and appropriate to
- exercise tbe powers, duties, and responsibilities set forth herein.
O
2 4. It is further ordered that the Receiver:
ID a. Shall, within sixty days of this Order, provide an inventory of all
in
Trust property that tbc Receiver has identified to the beneficiaries
of the Trust. If the Receiver subsequently identifies or comes Into
^ possession of additional property, then il shall provide a
CO
r- supplemental Inventory as soon as practical; and
to
^ b. Shall have the generalrighttoreimbursementfrom tbe property of
the Trost that a trusloc has under Article IV of the Will and under
§114.063 of the Texas Trost Code;^|Bd shall^ com]
sp#«|n
H(«.^ ^ v"^Tna^Bts,bU^p»niji^usi5^3SErlySr^
$25tto0 (dqpending on personnel invdved) for work conducted in
the idcntificatlMi and tracing of assets, and the detcrminanon of
amounts due to or due from bcncfldaiies.
5. It isfinthcrordered;
a. Receiver, its oBicen, directors and employees shall have the same
rights to exoneration andreimbursementprovided to a Troslee of
the Trust created under Artide fV of the Will and i j l 14.062-63 of
tbe Texas Trast Code.
b. Roceiver shall have no liability for any breach of trost consmittcd
by Ms. Lee unless Receiver becomes aware of tho breach of trust
PLAINTIFFS' ORIGINAL PETITION - Page 033
p* and (a) imptoperly penniu it to cootinuc thereafter, or (b) fails to
in
Ir"^l^e a reasonable effort to compel Ms. Lee to deliver property of
0.
^ ^ ^ ^ ^ shall have no liability for tbo loss or devaluing of
,propetl9l?f the Trust that occurs (1) prior to the date this Order is
the Court, or (2) prior to the Receiver having actual
o notice of tbe existence of the property as Trust property and tbe
N
CD ahiJity to exercise control over that property, whichever ia later.
r-
CD
0 6. Itis totherordere"atMs.Leesbail:
a. WfBIm scve"ys of the date of this Onlcr, provide copies of
ssion, custody, or control sufficient to identily
an real and persc|^al property owned by the Trust or by Ms, Lec as
T r u s t e ^ a ? ^ at any time while she served as Trustee of the
Trust to Rcceitfc;
b. Within s«|jiyj|y'of the date of this Order, provido records
sufficient l ^ ^ ^ | | j ^ l distributions and expcnditares of Trust
funds and BSlets during the time she served as Trustee of the Trust
tothBRoceivifc %
c. Wifljln seven OJ" of the date of this Order, jaovidc all financial
mstitutions a m f ^ J ^ ^ j l parties in the possession of assets or
records of tbe TrugJfJBL Lee as Trastee v(4th a copy of this
Order and p(OVid^rattW;|"fW><»' to cooperate with
4»SS1J5VI
5^
PLAINTIFFS' ORIGINAL PETITION - Page 034
tbc Receiver and provide noo-privilegcd inforroatioQ requested by
ibc Receiver directly to tbe Receiver,
O
O d. Within seven days of the date of this Order, provide written
a.
instnjctioos to all attocncys and accountants employed by her in
in her capacity as Trustee of the Trast to provide non-privileged
1^ Information requested by tbc Receiver rcgartiing these roattcis;
|y O c. Provide copies of tbc mstructioos described In subparagraph (c)
•d necessary fees of
$1,000,000.00 for the prosecution of this action; ii) attorneys n^resenthig Susan C. Gibson,
individually, aiid Susan C. Lcc as Trustee of the Artidc V Trust for Susan C. Gibson, were paid
reasonable and necessaryftcsof $500,000.00 fortiaeprosecution of this action; Ronald E. Lec,
• Jr.'s attomeys were paid reasonable and necessary fees of $1,500,000,00forthe defense of this
action; and iv) Ronald E. Lee, Jt.'s attorneys' fees of $1,500,000,00 have ahrcady been paid by or
reimbursedfromthe Estate and/or Artide IV Ttust, as previously emthoiiajcd by the Court, and he
is therefore not entitled to any additional )!«orncy's fees fo^ The Court fiirftcr
fmds that Plaintiffi an? entitled to judgment directing and authori
Trustee of the Article IV Trost to rcunbwsc Susan C Lee, individually and Stjsan C. Lee as Tmstee
ofthe Article V Trust for Susan C. Gibson for the aforesaid attwneys"ftcsfromthe a m * of the
Estate and/or the Article FV Trust, and after such payment OT leimbwcscineirt, PIahiti£& are not
entitled to any additional attomeys? feesfiwtihetrial of diisartion.
PLAINTIFFS' ORIGINAL PETITION - Page 040
B ascd upon the stipiil ation of th* fsatics aod ihc undispanai or admittodfects,tbc Court .ficdj
that rcasortablc and necessary attorneys' fcej for an ^>pc$i by either P]ain{i& or Dpcais are $300,000.00 and that r«ssOii^l<: and r«iiicssary attoni!^ fees for an apjical by
cither t^lajntjffs or Defendant to the Texas Suptetnc Court are $ 100,000.00. The Court fimbcr finds
that both Plaintiffs and I>efehdant are entidcd to payment of such additional aBomcy s" feesfiomdie
A r t j c l c l V Trust in the event that appeals arc takenfix)mthis judgment
B^scd upon tbcfindingsand cooclusioBs set forth abovCj the Courtfindsthat tbe Article IV
Trust is entitled to judgment against Ronald E. Lcc, Jr., in the total sum of $1,663,058.50, plus
prejudgment interest at the rate of 10% per anntnn, computed as simple interest, on each payment
set forth on Exhibit ''A" attached hereto and incorporated herein for »il purposes, rclatmg to the
executor's fee,firomthe date of each such payment until the thitc of judgment, pius prejudgment
interest at tbe rate of 10% per aimtmi, computed as simple interest, on c*«::h paytnent set fortii on
Exhibit "B" attached hereto and incotpctated herein for all purposes, relating to tbe office expenses,
•firomthe date of each sxKh payroent mtil the date of judgment Based upon thefiadmgsand
conclusiotis set forth above, tbe terms offtwLast Will and Testament ofKatherine P. Banahart, the
Court concluded that the office expenses in the amount of $163,550 arid all jw^udgmeat htterest we
allocable to income and that die other damages awarded agjuastRgpaldR Lee, Jr. in the amouat of
$U499,508,50 are allocable to principal. • I tt-v. .
A Final Judgment was previously signed b^ Ihis Court on August 21,1996. However,
becausetihatFinal lodgment contained an error wifii respect to piejud^nent interest, this Court has
vacated and set aside tho Final Judgnwajtclatcd August 21» 1996.
IT IS, THEREFORE:
-4-
PLAINTIFFS' ORIGINAL PETITION - Page 041
XXX-XX-XXXX
ORDERED^ ADJUDGED and DECREED lhat Plaindffi' Motion for. JwigoKat on tlie
Verdict Is GRANTED as to the foUovmig Jury Questions: Ic, td, K 2*. 2h, 4, 5d, 5btod9; that
PlaintiSs' Motion for Judgment on tbc Verdict is DENIED as to tbc foUowitig Jury Qvjestions: la,
lb, 3a, 3b, and 8; that Defendant's Motion for Judgment Nort Obstante Veredicto is DKflCED; that
Defendant's Motion to Disregard Jury Findings is GRANTED as to the following Jury Questions;
la, lb, 3a, 3b, and 8; and that Defendant's Motion to Disregard Jury Ficdings is DENIED as to the
following Jury Questions: 1 c, 1 d, le, 2a, 2b, 4, 5a, 5b and 9; it is fiirther
ORDERED, ADJUDGED and DECREED that the Trustee, on behalf of tfac Article fV Ttwt,
have and recover judgment against Ronald E Lee, Jr,, individually, in the amount of $1,663,058.50
together with i) prejudgment interest at therateof 10% per annum, computed as shni^e interest, on
each payment set forth on Exhibit "A" attached hereto and Ltx^rporsted herein fbr all purposes,
relating to tbc executor's fee, from the dale of each such payment until tbe date ofjudgnxait, plus
ii) prcjndginent interest at the rate of 10% per annuin, coinputcd as simple interest, on cad^
set forth on Bthibit "B" attached hereto and incorporated herein fot all purposes, relating to the
office expenses,fiomthe date of each such payment until the date of jtidgment, phis iii) post-
judgment interest on such total amount of $2,758,770.52 at d» rate of 10% per amuan, compounded
annxmQy,acaruingfiomwd after the date of diisjudgmeiitui^paM^ itisfintixr
OimERED^, ADJI^DGED aod DECREED that die Executor
Article rv Tmst are authoriaxd and directed to hamedi"y pay Susan C, Lee, individually, the
amount of $1.000,000 in tehnburswnent of attorneys'fees; it is fbtdie*
ORDERED, ADJIJDGED nod DECREED that the Executor of the Estate and T m ^
Article rv Trust are au&orized and directed to pay S & n C. Lee as Trustee ofthe Article V Tmst
for Susan C. Gibson, ^ ainount of $500,000, in leinaburscmcnt of attoincya!'fees;it b fiirflier
PLAINTIFFS' ORIGINAL PETITION - Page 042
XXX-XX-XXXX
ORDERED. ADJUDGED and DECREED iix^{ the- p^pnctxts hy Ronald E. Lcc, Jr.,
Executor ofthe Estaic and/or as^ Trustee of the Article lY Tnist, &0m the assets of such Estate and
Trust of his actomcys' fees in the amount of SI,500,000 for his dcfcoae of this sctiou arc hereby
authorized; it is further
ORDERED, ADJUDGED and DECREED that the Trustee of the Article IV Trust is
authorized and directed to pay $200,000.00 to Susan C. Lcc, individually, and $100,000.00 to
Susan C, Lec, as Trustee of tbc Article V Trust for Susan C. Gibson, mtivjevent that there is an
appeal to the Court of Appeals; it is further
ORDERED, ADJUDGED and DECREED that the Trustee ofthe Article W Trust is
authorized and directed to pay $300,000,00 to Ronald E. Lec, Jr., individually, m the event that there
is an appeal to the Court of Appeals; it is fisrthct
ORDERED. ADJUDGED and DECREED that the Trustee ofthe Article W Tmst is
authorized and directed to pay $67,000.00 to Susan C, Lec. mdividually, and $33,000.00 to Susan C.
- Lcc as Trustee of the Article V Tmst fw Sxjsan C. Gibson, in tho event of an ^jpealtothe Texas
Supreme Cotjrt; it is further
I ORDERED, ADJUDGED and DECREED that the Trustee of the Article IV Trost is
authori2ed attid directed to pay $100,000.00 tn Ronald E. Lec, Jr., hidividually, in the event thwe is
an appeal to dw Texas Supreme Court; it is fiatha
ORDERED, ADJUDGED and DECREED that the Plaintiffs' request to remove Ronald E
I ^ , Jr. as the Ind^jendcnt Executor of dw Estate is D"IED; it U farther
ORDERED, ADJUDGED and DECREED that the Plaioti£&' request to Ktmvtt Ronald R
Lec, Jr., as the Tmstee of the Article rv Ttnst is DE^aED.
PLAINTIFFS' ORIGINAL PETITION - Page 043
S45-r3~ori6
A!! v.Til5 shall issue- ihc appropriate umc 85 provided, by law. Costa sit taxed, against
Rortald E. Lcc, Jr., individually.
ALL OTHER RELIEF NOT EXPRESSLY GRA>nrED HEREIN IS DENIED.
SIGNED this ^ S " day of Q . 1996.
JUDGE PRESIDING
-7-
PLAINTIFFS' ORIGINAL PETITION - Page 044
EXHIBITED"
PLAINTIFFS' ORIGINAL PETITION - Page 045
Lee V, Lee, 47 S.W.3d 767 (2001)
Evidence was sufficient to support finding that
executor earned approximately $600,000 in fees,
47S.W.3d767 .
but not $2,8 million in fees that executor
Court of Appeals of Texas,
charged estate, for administering estate valued
Houston (14th Dist).
at $12.8 million; although one expert testified
Susan Camille LEE, Individually, and as Trustee that executor was not entitled to any fee because
he did not give beneficiaries an accounting for
of the Article V Trust for the Benefit of Susan C.
13 years, did not keep proper records, and spent
Gibson, and Derivatively on Behalf of the Article
$750,000 on experts to develop tract of land but
IV Trust and the Estate of Katherine Pillot Lee
did not develop it, and another expert testified
Barnhart, and Susan C. Gibson, Individually, and
that a $2.8 million fee was reasonable due to the
Derivatively on Behalf of the Article IV Trust and the , size and difficulty of administering estate.
Estate of Katherine Pillot Lee Barnhart, Appellants,
V, Cases that cite this headnote
Ronald E. LEE, Jr., Individually, as Trustee ofthe
Article IV Trust, and the Article V Tmst for the [2] Executors and Administrators
Benefit of Katherine Lee, and as Executor ofthe Proceedings and order for allowance
Estate of Katherine Pillot Lee Bamhart, Appellee. Applicability of personal representative
compensation statute to determine executor's
No. 14-97-00162-CV.
compensation could not be considered on
I •
May 17, 2001. i appeal in beneficiaries' suit against executor for
excessive executor fees, where executor had not
I raised issue of applicability of statute as ground
Rehearing Overruled May 17, 2001.
for his motion for judgment notwithstanding the
Beneficiaries brought action against executor of estate who verdict at trial level. V.A.T.S. Probate Code, §
also served as trustee of trust for breach of fiduciary 241.
duty and for charging excessive executor fees. The Probate
Cases that cite this headnote
Court, Harris County, Mike Wood, J., granted judgment
for executor. Beneficiaries appealed. The Court of Appeals,
Hudson, J., held that: (1) evidence was sufficient to support [3] Executors and Administrators
finding that executor earned approximately $600,000 in fees; #= Amount and Computation of Compensation
(2) evidence was insufficient to support finding that executor Estate tax deduction of $1.5 million for
failed to diversify the assets of the estate; (3) executor's executor fees could not be used to offset jury
alleged misconduct in administering estate was material, finding that executor charged estate $2.2 million
warranting his removal; (4) no evidence existed that trustee's more than he should have, although Internal
defense of beneficiaries' suit against him was in bad faith; and Revenue Service (IRS) could no longer assess
(5) executor was entitled to reimbursement of attomey fees additional taxes to estate following executor's
in defense of suit. reimbursement of excess fees; it was more
appropriate for estate to obtain benefit of
Affirmed in part, reversed and rendered in part. windfall than to let executor keep $1.5 million
in fees the jury found were excessive and
unreasonable.
West Headnotes (49) 1 Cases that cite this headnote
[Ij Executors and Administrators [4] Executors and Administrators
Evidence Forfeiture or deprivation of compensation
V'i'E'SlLAW •© 2016 rhornson pNeuters No claim to original U.S, Government Works,
PLAINTIFFS'ORIGINAL PETITION- Page 0 4 6 .
Lee V. Lee, 47 S.Vv'.Sd 767 (2001)
Executor fees couid not be forfeited as An appellate court may not second-guess the jury
equitable remedy for executor's alleged breach unless only one inference may be drawn from the
of fiduciary duty in administration of estate, evidence.
where beneficiaries had not requested forfeiture
of executor's fee in any pleading. Cases that cite this headnote
5 Cases that cite this headnote
[TO] Appeal and Error
Extent of Review
[5] Appeal and Error When deciding factual sufficiency questions, an
Sufficiency of Evidence in Support
Cases that cite this headnote
A court may set aside a factual finding only if the
evidence is so weak as to be clearly wrong and
[6] Evidence manifestly unjust.
Sufficiency to support verdict or finding
If there is more than a scintilla of evidence to Cases that cite this headnote
support the finding, a no evidence challenge
must fail. [121 Executors and Administrators
Evidence
Cases that cite this headnote
Evidence was insufficient to support finding
that executor failed to diversify the assets of
[7] Evidence estate by rejecting offers to purchase property
Sufficiency to support verdict or finding in beneficiaries' suit against him for breach of
A "scintilla of evidence" exists when the fiduciary duty, although executor received two
evidence offered to prove a vital fact is so weak offers to purchase the property, but rejected
as to do no more than create a mere surmise or them; unaccepted offers to purchase property
suspicion of its existence. were too uncertain to serve as proof and
no testimony was offered to determine if
Cases that cite this headnote prospective purchasers were' willing to meet
executor's terms of sale.
[8] Appeal and Error
6 Cases that cite this headnote
Total failure of proof
An appellate court should find there is no
evidence i f reasonable minds cannot differ [13] Executors and Administrators
from the conclusion that the evidence offered ^ Appeal and error
to support the existence of a vital fact laclcs Executor did not invite or waive error on
probative force. issue of whether measure of damages for
alleged wrongful failxu-e to sell property was
Cases that cite this headnote
sale proceeds plus interest in beneficiaries'
suit against him for breach of fiduciary duty,
[9] Appeal and Error although executor offered expert testimony that
1 ^ ^ Conclusiveness in General proper measure of damages for alleged wrongful
failure to sell property was sale proceeds plus
interest, where offer was made to counter
VVtSTLA'/'/
PLAINTIFFS' ORIGINAL PETITION - Pase 047
Lee V, Lee, 47 S.W.Sd 767 (2001)
beneficiaries' proposal for damages to include reviewing court must review all testimony in a
potential profits. light most favorable to the finding, considering
only the evidence and inferences that support the
Cases that cite this headnote finding and rejecting the evidence and inferences
contrary to the finding.
[14] Executors and Administrators
Cases that cite this headnote
Appeal and error
Executor's counsel's response to jury question
did not invite error in jury's determination [18] Appeal and Error
of damages for executor's alleged breach of Extent of Review Dependent on Nature of
fiduciary duty for failure to optimize profit on Decision Appealed from
estate property by failure to sell it when he had If there is more than a scintilla of competent
the opportunity to do so, although executor's evidence to support the jury's finding, then the
counsel's position was that jury had to determine judgment notwithstanding the verdict will be
the day, month, and year of when property should reversed.
have been sold, where judge told jury that they
had to make the less specific determination of Cases that cite this headnote
month and year when property should have been
sold. [19] Evidence
Amount for which property will sell; offers
Cases that cite this headnote
Unaccepted offers to purchase property are no
evidence of market value of property,
[15] Executors and Administrators
'v= Appeal and error 8 Cases that cite this headnote
Executor did not waive error by failing to
object to question put to jury on ground of [20] Executors and Administrators
insufficient evidence in suit against executor #=» Grounds in general
for alleged breach of fiduciary duty for failure
Executor's alleged misconduct was material
to optimize profit on estate property, where
in his administration of estate, warranting his
executor's motion for judgment notwithstanding
removal, although damages to estate were only
the verdict alleged that evidence supporting the
$ 1,00 for failure to sell and diversify assets
jury's findings was legally insufficient. Vernon's
and jury did not find that executor's actions
Ann,Texas Rules Civ.Proc, Rule 279,
constituted gross negligence, where executor
Cases that cite this headnote was found to have breached his fiduciary duty
in numerous respects and damages associated
with executor's breach of duty totaled $3 million,
[16[ Judgment V,A.T.S. Probate Code, § 149C.
Where there is no evidence to sustain
verdict Cases that cite this headnote
A trial court may disregard a jury's finding i f
there is no evidence to support the jury's finding. [21] Appeal and Error
Abuse of discretion
Cases that cite this headnote
A trial court abuses its discretion if its decision
is arbitrary, unreasonable, and without reference
[17] Appeal and Error to any guiding rules and principles,
#= Judgment
When reviewing the grant of a motion for 6 Cases that cite this headnote
judgment notwithstanding the verdict, the
WESTLAW •'•2016 I hotnssr'r, Reutors Mo dairn tn oricj-nal U y Goi/crnment Woi.^s
PT A m r i F F S ' nRTnrMAT. PKTTTinN - Pao-P n4R
Lee V. Lee, 47 S.W.3d 767 (2001)
Trial
[22j Executors and Administrators #=• Pleadings and Issues
^ Grounds in general
Trial
Although a trial judge is given discretion by Facts and Evidence
executor removal statute to determine whether
An instruction is proper if it assists the jury,
an executor's actions rise to the level of gross
is supported by the pleadings or evidence, and
misconduct, this discretion is not unlimited; an
acciuately states the law,
abuse of discretion occurs when the trial court
makes a legally unreasonable determination Cases that cite this headnote
given the factual-legal context in which it was
made. V.A.T.S, Probate Code, § 149C.
[271 Appeal and Error
2 Cases that cite this headnote 'VP' Cases Triable in Appellate Court
Whether terms are properly defined or the
[231 Appeal and Error instruction is property worded in a definition or
#•» Abuse of discretion instruction submitted to the jury is a question of
law reviewable de novo,
A trial court's determination is legally
unreasonable if the court failed to consider a fact 3 Cases that cite this headnote
shown in the evidence that was legally relevant.
Cases that cite this headnote [281 Appeal and Error
Failure or refusal to submit issues
[24| Appeal and Error Appeal and Error
Conduct of trial or hearing in general #=• Failure or refiisal to charge
The trial court's decision whether to submit a Error is reversible only if, when viewed in light
particular instruction or definition to the jury is of the totality of the circumstances, the refusal
reviewed for an abuse of discretion. to submit a question or instruction to the jury
probably caused the rendition of an improper
4 Cases that cite this headnote judgment.
Cases that cite this headnote
[251 Trial
#=» Definition or explanation of temis
[291 Trusts
Trial
#=* Proceedings
#«» Constmction and Effect of Charge as a
Whole Issue of removal of trustee under trustee removal
statute was valid theory raised by pleadings and
To determine whether an alleged error in the
evidence in beneficiaries' suit to remove trustee
charge is reversible, the reviewing court must
for breach offiduciaryduty, where beneficiaries
consider the pleadings, the evidence, and the
pled removal of trustee under trustee removal
charge in its entirety; as to instructions and
statute, and presented evidence of conduct that
definitions, the essential question is whether
jury found to be breaches of fiduciary duty.
the instruction aids the jury in answering the
V.T.CA,, Property Code § 113,082,
questions,
1 Cases that cite this headnote
2 Cases that cite this headnote
[301 Trusts
[261 Trial
•v=' Matters of law • = Mismanagement or misconduct in
execution of trust
PLAINTIFFS' ORIGINAL PETITION - Page 049
Lee V. Lee, 47 S.W.3d 767 (2001)
Trustee's breach of fiduciary duty and j u r y ' s beneficiaries an accounting for 13 years, he did
award of damages for breach of fiduciary duty not keep proper records, and he spent 5750,000
each constituted a basis for removal of trustee on experts to develop a tract of land in the estate
in beneficiaries' suit against trustee for breach but he did not develop it, V.T,C,A., Property
of fiduciary duty. V.T.CA., Property Code § Code § 114.064; V,A,T,S, Probate Code, § 149C
113,082.
Cases that cite this headnote
3 Cases that cite this headnote
[35| Executors and Administrators
{31] Trusts Application and proceedings thereon
Mismanagement or misconduct in Executor could recover attomey fees firom estate
execution of trust in defense of beneficiaries' attempt to remove
A breach of a fiduciary duty can constitute a him, despite evidence regarding executor's
material violations of a trust for the purpose of breach of duty, where there was no evidence
establishing a basis for removal of a trustee. showing that executor's defense against removal
V.T.CA., Property Code § 113,082. was made in bad faith,
Cases that cite this headnote 1 Cases that cite this headnote
[32] Trusts [36] Executors and Administrators
•i=» Mismanagement or misconduct in Custody and Management of Estate
execution of trust An executor acts in good faith when he or she
A jury award of damages for breach of a subjectively believes his or her defense is viable,
fiduciary duty can constitute a material financial if that belief is reasonable in light of existing law,
loss to the trast for the purpose of establishing
a basis for the removal of a trastee, V,T,C,A,, 4 Cases that cite this headnote
Property Code § 113,082.
[371 Trusts
1 Cases that cite this headnote
Proceedings
Trusts
[33] Trusts Costs
Grounds
Trastee was required to reimburse trast for
Alleged conflict arising from trustee's opposition attomey fees and costs incurred by beneficiaries
to beneficiaries' motion for judgment and his at trial and on appeal in beneficiaries' suit
attempt to reduce trast's judgment in action for against trustee for breach of fiduciary duty and
breach of fiduciary duty did not require his removal, although attomey fees and costs could
removal; such a conflict could arise any time a not be recovered against him under probate
beneficiary brought suit for damages against a code's attomey fee statute for his removal in his
trastee. role as trastee, where prosecution of claim to
remove trastee was inextricably intertwined with
Cases that cite this headnote
prosecution of beneficiaries' claims against him
for breach of fiduciary duty and removal in his
[34] Trusts role as executor. V.A.T.S, Probate Code, § 245.
f ~ Evidence
No evidence existed to support jury's finding that Cases that cite this headnote
trastee's defense of beneficiaries' suit against him
for breach of fiduciary duty was in bad faith,
[38] Stipulations
despite evidence that trastee did not give the
PLAINTIFFS' ORIGINAL PETITION - Page 050
Lee V. Lee, 47 S.W.Sd 767 (2001)
•if^ Construction and Operation in General
1 Cases that cite this headnote
Stipulation between parties as to reasonable
and necessary attomey's fees incurred by
beneficiaries' in their suit and appeal in action [42] Interest
against executor for breach of fiduciary duty Compound interest
and removal negated .requirement in attomey Prejudgment interest was properly computed as
fee statute in probate code that party seeking simple interest, not interest compounded daily,
recovery present evidence to enablejury or court in beneficiaries' suit against executor for breach
to determine what fees are recoverable by estate. of fiduciary duty; claim for prejudgment interest
V.A.T.S. Probate Code, § 245, was based upon common law since suit did
not fall within any of the prejudgment interest
3 Cases that cite this headnote statutes.
2 Cases that cite this headnote
[39] Costs
>sf» Form and requisites of application in
general [43] Executors and Administrators
A party is not required to segregate attomey fees '4^ Appeal and error
unless the party asserts multiple claims, some of Neither award of prejudgment interest, nor
which entitle the party to recovery of attomey accmal date of that interest, required executor
fees and some of which do not. to make point of error to preserve those issues
for appellate review in beneficiaries' suit against
Cases that cite this headnote executor for breach of fiduciary duty, although
executor had not raised those issues either at trial
[401 Costs level nor in his brief on appeal, where Court
'S= Form and requisites of application in of Appeals' award of prejudgment interest was
general new award of damages and was of automatic
There is an exception to the duty to segregate legal consequence since appellants pled for
attomey fees when the attomey's fees are prejudgment interest,
rendered in connection with claims arising out
2 Cases that cite this headnote
of the same transaction and when the claims are
so interrelated that their prosecution or defense
entails proof or denial of essentially the same [441 Appeal and Error
facts, ^ Effect of Failure to Assign Particular Errors
A point of error not preserved is not before the
1 Cases that cite this headnote
appellate court for review.
Cases that cite this headnote
(411 Trusts
Judgment and relief
Damages award was required to be paid to [451 Appeal and Error
the trust, and not to beneficiary directly, in #» Contentions other than those made on the
beneficiaries' suit against tmstee for breach hearing
of fiduciary duty, where beneficiary was not An assignment of error raised for the first time in
entitled to gross income, and was instead entitled an appellate motion for rehearing is too late to be
to "current net income" under will, which meant considered by an appellate court.
any tmst income, minus expenses. V,T,C.A,,
Property Code § 113,111, 6 Cases that cite this headnote
w£STLAW €> 201 r. I nornson Reuters No claim to or-qinal U S 'Government Worki.
PLAINTIFFS' ORIGINAL PETITION - Page 051
Lee V. Lee, 47 S.W.3d 767 (2001)
146] Interest Panel consists of Justices ANDERSON, HUDSON, and
Prejudgment Interest in General Senior Chief Justice MURPHY. *
"Prejudgment interest" is compensation allowed
by law as additional damages for lost use ofthe
money due as damages during the lapse of time *773 CORRECTED OPINION
between the accrual of the claim and the date of
judgment HUDSON, Justice.
1 Cases that cite this headnote This is an appeal from a judgment in a probate case in
which appellants sought removal of the executor/trustee
and sought damages for breaches of fiduciary duty and for
[47] Interest
excessive executor fees. After granting appellee's motion
^ Prejudgment Interest in General
for judgment notwithstanding the verdict and disregarding
The two legal sources for an award of several jury findings, the trial court rendered judgment:
prejudgment interest are general principles of (1) refusing to remove appellee as executor and trustee,
equity, and an enabling statute. and (2)awarding $2.8 million in damages and prejudgment
interest to the Article IV trust. Appellants raise eight issues
2 Cases that cite this headnote
and appellee brings three cross-points. In our corrected
opinion of February 8, 2001, this court affirmed in part and
[481 Interest reversed and rendered in part.
Particular cases and issues
Beneficiaries were entitled to prejudgment Appellants have filed a third motion for rehearing. We now
interest from date they filed their petition against withdraw our corrected opinion of Febmary 8,2001, and issue
executor for breach of fiduciary duty to date this corrected opinion, affirming in part and reversing and
preceding entry of judgment on $1.5 million rendering in part.
judgment, not from date of executor's alleged
breach, where first date executor received notice
of beneficiaries' claim that executor fees paid to Background
him were excessive and unreasonable was date
suit was filed. When Katherine Bamhart died in 1975, her will provided
that the bulk of her estate was to pass to a tmst (the "Article
I Cases that cite this headnote IV Tmst"). Bamhart's two children, appellant Susan Lee,
and her brother, appellee Ronald Lee, were each entitled
[49| Executors and Administrators to one-sixth of the income from the Article IV Tmst, and
Representation of creditors and distributees so much of the remaining two-thirds as necessary for their
health, support and maintenance, considering the "availability
An executor owes a duty to disclose all material
of funds from other sources." The remaining income was
facts affecting the beneficiaries' rights.
to go into separate tmsts for each of the grandchildren (the
Cases that cite this headnote "Article V Tmsts"). The Article V Tmsts were to distribute
income to the grandchildren to the extent necessary to provide
for their health, support and maintenance, also considering
the "availability offimdsfrom other sources."
Attorneys and Law Firms
As provided in the will, appellee was appointed executor of
*772 Thomas A. Zabel, Houston, Daniel J. Sheehan, Marc the will (and tmstee of the tmsts) and began administration
S. Culp, Dallas, for appellants. in 1976. Appellee filed the estate's inventory reflecting a
date of death value of $12.8 million. After negotiations that
Adam P.Schiffer, Thomas B. Greene, D. Gibson Walton, continued until 1992, appellee and the IRS agreed upon a
Marie R. Yates, R. Glen Rigby, Houston, for appellants.
WESTLAW 20IB f horrisr-r; Reuters No clatrn to ovyt.nl U S Government Wc^ks.
PLAINTIFFS' ORIGINAL PETITION - Page 052
Lee V. Lee, 47 S.W.3d 767 (2001)
taxable value of the estate assets of SI2 million. By this time, appellee did not respond to this offer because he found it to
federal and state inheritance taxes totaled approximately S7 be a bad proposal in that the offeror required high-density
million. Because the majority of the estate's assets were raw sewer capacity and would not pay for the portion of the
land, the estate was unable to pay the taxes it owed and the property within the flood plain. In 1984, appellee had received
trusts could not be funded. another unsolicited offer to buy the Pasadena property for
$2,3 million, which he did not accept because it was not a
In February 1980, appellee reached an agreement with the cash deal. Appellee did not make counteroffers to either of
IRS regarding the estate taxes due. The total amount due was these offerors. In 1984, appellee had also received a contract
$2,8 million, and the interest on that amount as of February offering $ 12,500 per acre for the Pasadena property. This was
1980 was approximately $475,000 (for a total debt to the not a cash offer and appellee did not make a cormteroffer.
IRS of approximately $3.5 million). The estate also owed
the State of Texas approximately $800,000 in inheritance Two family ranches were also in the estate: Cap Rock Ranch
taxes. Because the estate had little available cash, appellee and River Bend Ranch, Theseranchesincreased the estate's
continued to request extensions on these debts. Other debts debts because they incurred taxes and were unprofitable.
continued to amass, including ad valorem taxes on the various In 1990, River Bend Farm was leased for $20,000 per
parcels of real estate. year, Appellee did not believe he could sell the family
ranch because he and Susan Lee owned it jointly. Appellee
In December 1980, appellee accepted an unsolicited offer discussed the possibility of partitioning with Susan Lee's
to purchase 61 acres of a large tract on Westheimer Road attomey, but this never occurred.
for $ 19,5 million. The contract provided for payment in four
annual installments. Appellee funded the Article IV Tmst During 1990-91, appellee considered developing the
in 1982 with a deposit of $4 million. Appellant, Susan Lee, remaining Westheimer property into a residential subdivision
received her first distribution from the Article IV Tmst in to be called "Knollwood Trails," The development never
January 1983 in the amount of $ 15,784. received a loan and was ultimately abandoned. By 1991,
appellee had spent more than $700,000 on Knollwood.
Appellee testified that, by the time he ftinded the Article IV
Tmst, he had taken more than $ 1 million in executor fees. By In April 1994, K-Mart bought a 21 acre parcel of the
December of 1983, appellee had taken a total of $2,836,000 Westheimer tract for $8 million. The trial court ordered
in fees. Although the IRS initially disputed the amount of this that these sale proceeds along with other estate assets be
fee, they ultimately allowed the deduction of $1.5 million of transferred to the Article IV tmst. A year later, appellee
appellee's fee. fiinded the Article V tmst.
*774 In December 1985, appellee received a letter from Susan Lee brought suit individually and as tmstee of the
Susan Lee's attomey stating that she had never received an Article V Trust for the benefit of her daughter, Susan
accounting and demanding one at the eariiest possible date. Gibson, and derivatively on behalf of the Article IV Trast
This letter also asked about appellee's plans and expected and the Estate. Her daughter, Susan Gibson, was also a
distributions. Appellee did not produce an accounting in named plaintiff Although the original suit was for an
response to this request. In 1988, Susan Lee's attomey sent accounting and for removal o f appellee as executor and
appellee a certified letter requesting an accounting from tmstee, additional claims included breaches offiduciaryduty,
November 1975 to the present under section 149A of the conversion, fraudulent concealment, constractive fraud and/
Probate Code, This letter demanded receipt of the accounting or fraud, negligence, and gross negligence.
by December 17, 1988, and requested copies of all income
tax returns filed for the estate and any tmsts. Appellee did not The case was tried to ajury and the jury found that appellee
produce the accounting on the deadline and appellants filed had breached fiduciary duties, that he charged imreasonable
suit several days later. fees and expenses to the estate, that his fees and expenses
were unreasonable by approximately $2.2 million, that the
Appellee did not list the remaining Westheimer property breaches of fiduciary duty resulted in damages, and that
or the Pasadena property for sale. Although he received appellee defended against removal in bad faith. The jury also
an unsolicited offer to sell the remaining Westheimer tract, found that the breaches of fiduciary duty were not committed
WESTLAW 'V 3 ; i ' ; f ) - l l - f M n v j i , Keut<;K Nn ciaim to rui-jingf US, Govoinment Woiks
PI A r N T X T P P Q ' n w r r j r M A T PCTTTTHM _ P c m a n';'^
Lee V. Lee, 47 S.W.Sd 767 (2001)
with gross negligence. Appellee filed a motion for judgment Appellants contend the impact of the court's deduction is to
notwithstanding the verdict and to disregard jury findings. allow appellee to reap $1.5 million for his wrongful conduct
The trial court granted this motion in part, disregarding the as long as the fee results in a tax deduction. C\ting Anderson v.
jury's findings of breach of duty and damages for the *77S Armstrong, 132 Tex. 122, 120 S.W,2d 444 (1938), appellants
failure to sell the Westheimer and Pasadena property, the bad contend the remedy for excessive fees is return of the entire
faith defense finding, and found the following: amount with interest at the highest legal amount.
(1) the Article IV tmst was entitled to judgment against Appellee responds with three arguments: (1) the Probate Code
appellee in the amount of $840,000 (amount found by jury) supports the trial court's exercise of discretion to determine
for breach of fiduciary duty relating to the Knollwood the amount of the fee; (2) Burrow v. Arce. 997 S.W.2d
development;
229 (Tex. 1999)' supports a trial court determination of fee
(2) the Article IV Tmst was entitled to judgment against forfeiture; and (3) the "tax benefits rule" authorizes the trial
appellee in the amount of $1,00 (amount found byjury) for court to deduct the amount of tax savings realized.
the breach of fiduciary duty relating to River Bend Farm;
[2] We tum first to appellee's claim that section 241 of
(3) the Article IV Tmst was entitled to judgment against the Probate Code supports the trial court's decision to reduce
appellee in the amount of $1.00 (amount found by jury) for the jury's award. Section 241 concems compensation for
the breach of fiduciary duty relating to Cap Rock Ranch; personal representatives. This section provides that executors
and other representatives are entitled to receive a commission
(4) the Article IV tmst was entitled to judgment against of five percent of the gross fair market value of the estate.
appellee in the amount of $659,506.50 (consisting of the See TEX. PROB.CODE ANN. § 241 (Vemon Supp.2000).
$2.2 million of unreasonable executor fees less the tax This statutory amount has been held to represent a fair and
savings realized by the Estate from the deduction of such reasonable compensation, fee *776 In re Roots'Estate, 596
fees on the Estate's estate tax return) plus prejudgment S.W.2d 240, 243 (Tex.App.—Amarillo 1980, no writ). The
interest of 10% per annum, computed as simple interest; last sentence of section 241 provides that the "court may, on
and application of an interested person or on its own motion, deny
a commission allowed by this subsection in whole or in part
(5) the Article IV tmst was entitled to judgment against
i f (1) the court finds that the executor or administrator has
appellee in the amount of $163,550 for unreasonable office
not taken care of and managed estate property pmdently,,.,"
expenses.
M at § 241(a)(1).
The judge also awarded appellants' attomeys reasonable
Because the will provides for a reasonable fee for the
and necessary attomey's fees of $ 1.5 million and awarded
executor, both parties agree that section 241 is inapplicable
appellee's attomeys fees of $1.5 million, all reimbursable,
as it concems the amount of compensation appellee may be
from the Estate (plus additional amounts for appeal).
paid for his role as executor. This interpretation is supported
by case law. See, e.g., Stanley v. Henderson, 139 Tex. 160,
162 S.W.2d 95 (1942). Despite the inapplicability of the
Excessive Executor Fee subsection setting executor compensation, appellee argues
another subsection of this same statute applies, and gives the
[1] Appellants first challenge the trial court's reduction of trial court discretion, to reduce an executor's fee where there is
the excessive executor fee finding. The jury found that the a finding of impmdent management. Appellants, on the other
$2.8 million executor fee taken by appellee was unreasonable hand, claim that where, as here, the will sets compensation,
and excessive by approximately $2.2 million. The trial court no part of the staUite applies. In support of this argument,
reduced the jury's finding by $1.5 million, stating in the appellants cite Stanley.
judgment that he was awarding appellee $659,506.50, which
represented the jury finding of $2.2 million "less the tax We do not find Stanley dispositive on the question whether
savings realized by the Estatefi-omthe deduction of such fees the last sentence of section 241(a) applies to this issue. First,
on the Estate's estate tax return...." when the Stanley opinion issued, the last sentence of the
present version of section 241(8) was not yet part of the
VVESTLA'yV 1 {r«:r,son Routers. No claim to onynai U -.^ Govcrncierjt Wori-s
PT AT-MTTPF<;' ORTpTrKIAT, PFTTTTnN - Paae 054
Lee V. Lee, 47 S.W.3d 767 (2001)
statute. Second, Stanley does not address the issue presented [3] The trial court also did not reduce the jury's finding
here, whether the last sentence of section 241(a) applies on because there was no evidence supporting it. Instead, the trial
appeal to support a trial judge's decision to reduce a jury court specifically stated he was reducing the fees by deducting
finding of damages for charging an excessive fee. the amount of tax savings real ized by the estate. Therefore, we
must determine whether the trial court properly applied the
Because it provides for a standard fee, section 241 applies "benefits rule" to reduce the jury's finding. Appellee claims
in situations where the will does not set compensation, and the trial court properly applied the "benefits rule" under
the executor seeks compensation in the statutory amount Nelson v. Krusen, 678 S.W.2d 918 (Tex, 1984),
or for a greater amount. See, e.g., Weatherly v. Martin,
754 S.W.2d 790, 793-94 (Tex.App.—Amarillo 1988, writ Nelson addressed the question whether Texas should
denied). Therefore, this section is available for an executor to recognize a cause of action for wrongful life, 678 S,W,2d at
seek the statutory five percent or may be used by an opponent, 924, In reaching their decision to follow the majority of courts
or the trial court on its own motion, to deny the executor a fee, reftjsing to adopt such a cause of action, the Texas Supreme
in whole or in part. These applications of the statute, however, Court observed that one rationale for not allowing a cause of
are not relevant to this case because the will set compensation. action for wrongful life is that, in awarding damages, the court
must offset any special benefits to the plaintiff resulting from
First, appellee did not raise a section 241 objection to the negligence, See id. (with citation to RESTATEMENT
the fee questions on the ground that the questions were (SECOND) OF TORTS § 920 (1979)). Section 920 ofthe
within the trial court's discretion. Appellee also did not base Restatement of Torts allows considerafion of the value of
his objection to the jury's finding on section 241. Instead, benefits to the interest of the plaintiff that was harmed, to the
appellee argued in his motion for judgment notwithstanding extent this is equitable. See RESTATEMENT (SECOND) OF
the verdict that there was no evidence to support the TORTS § 920 (1979).
jury's finding. Appellee cited to the testimony of his expert
accountant, Greg Bardnell, who testified that, when tax Section 920A, however, augments section 920, providing
benefits and interest savings to the estate are considered, that "[p]ayments made to or benefits conferred on the
the $2.8 million in fees actually cost the estate only injured party from other sources are not credited against
$850,000. Citing In re Garvin's Will, 256 N.Y. 518, 177 the tortfeasor's liability, although they cover all or a part
N.E. 24 (1931), appellee claimed the amount of tax savings of the harm for which the tortfeasor is liable." Id. at 920A
must be considered. Appellee further argued that, even i f (emphasis added). This section of the Restatement is the
legally sufficient evidence supported the jury's finding of basis for the long-recognized "collateral source rule," which
unreasonableness, appellants could only recover the actual precludes a tortfeasor from obtaining the benefit of payment
cost to the estate of the excessive fees. ^ conferred upon the injured party from sources other than
the tortfeasor. See Castillo v. American Garment Finishers
In addition to the absence of an objecfion under section 241, Corp.. 965 S.W.2d 646, 650 n. 2 (Tex,App,—El Paso 1998,
the trial court did not, on its own motion, apply section no writ), In Texas, the collateral source rule has been held
241 to deny all or part of appellee's fee.. Instead, the issue to apply in cases where the injured party received insurance
of unreasonableness of the fee was submitted to the jury. benefits, see Brown v. American Transfer & Storage Co.,
Furthermore, the trial court did not apply section 241 in 601 S.W.2d 931,934 (Tex. 1980), generalfiringebenefits, see
granting the motion for judgment notwithstanding the verdict. McLemore v. Broussard, 670 S.W.2d 301, 303 (Tex.App.
In its final judgment, *777 the court specifically found that —Houston [1st Dist.] 1983, no writ), gratuitous services,
"the Article IV Trust is entitled to judgment against Ronald see Oil Country Haulers. Inc. v. Griffin. 668 S,W.2d 903,
E. Lee, Jr, in the total amount of $659,506,50 (which consists 904 (Tex.App.-Houston [14th Dist.] 1984, no writ), and
of the $2,198,355 of unreasonable executor fees found by worker's compensation benefits. See Lee-Wright, Inc. v. Hall,
the jury less the tax savings realized by the Estate from the 840 S.W,2d 572, 582 (Tex.App.-Houston [1st Dist.] 1992,
deduction of such fees on the Estate's estate tax returns)...." no writ).
Because section 241 was not raised as a ground for appellee's
motion for judgment notwithstanding the verdict, we may not Because the estate received a tax deduction from the IRS,
consider it on appeal. a source other than the tortfeasor in this case, it would
initially appear that the collateral source rule should prevent
PLAINTIFFS' ORIGINAL PETITION - Page 055
Lee V. Lee, 47 S.W.Sd 767 (2001)
appellee from obtaining the benefit of this deduction. More at 655, 106 S. Ct. 3143 (citing 15 U,S,C, § 77/ (2)), The out-
on point, however, are the cases regarding tax benefits. *778 of-pocket damages included the difference between the fair
Appellants cite LSR Joint Venture No. 2 v. Callewart, 837 value received and the fair value of what the defrauded party
S,W.2d 693, 697 (TeX.App.—Dallas 1992, writ denied), in would have received had there been no fraudulent conduct.
which the court, in dicta, notes its agreement with a Supreme Id at 661-62, 106 S.CL 3143 (citing 15 U.S.C. § 78bb(a)),
Court case, Randall v. Loflsgaarden, 478 U.S. 647, 106 Although the court held that rescission adds an additional
S.Ct. 3143, 92 L. Ed. 2d 525 (1986). In Randall, the Court measure of deterrence as compared to a purely compensatory
held that tax benefits may not offset a party's recovery. measure of damages, much of the reasoning supporting their
Appellee attempts to distinguish Randall on the grounds that ultimate conclusion is applicable to non-securities cases.
it "(1) dealt with income (not estate) taxes; (2) turned on
construction of securities fraud statutes; and (3) disallowed Although it involves a breach of contract claim. Powers v.
consideration of income tax benefits because ofthe statutory Powers. 714 S.W.2d 384 (Tex,App,—Corpus Christi 1986,
intent to punish and deter and because the tax benefit was no writ), addresses an argument analogous to the one made
speculative." Appellee claims the jury in this case found no by appellee in this case. In Powers, a woman sued her ex-
culpable mental state calling for punishment or deterrence, husband for breach of an agreement to pay monthly alimony.
the savings by the estate tax deduction is not speculative, See id. at 386. The trial court rendered judgment for the ex-
and the IRS can no longer assess additional estate taxes or wife for payment of the arrearage, costs, attomey's fees, and
disallow the deduction because the time for doing so has post-judgment interest. See id. On appeal, the ex-husband
passed. claimed the trial court erred in entering judgment against him
because his ex-wife failed to offer any evidence by which to
Randall involved allegations of securities fraud. See 478 U.S. calculate her alleged damages. See id. at 388, '*779 More
at 650, 106 S. Ct. 3143. Petitioners asserted claims under § particularly, the ex-husband claimed the measure of damages
10(b) of the Securities Exchange Act of 1934 and § 12(2) "should have been the amount of unpaid alimony less the tax
of the Securities Act of 1933. See 478 U.S. at 651, 106 savings she realized on her non-alimony income as a result
S.Ct. 3143. Respondents argued petitioners' damages should of his failure to pay the entire amount of alimony due under
be reduced by the amount of tax benefits received from the contract." See id. In other words, the ex-husband argued
the security, comparing tax benefits to the section 12(2) that his ex-wife's tax burden increased proportionately by
deduction for income received. See id. at 652, 106 S. Ct. 3143. the amount of alimony she received in a year, and the less
The court found that tax deductions or credits are not taxable alimony he paid, the more of a tax savings she realized. See id.
events and cannot be classified as income. See id. at 657,
106 S. Ct. 3143. The court fiirther observed that, although The court presumed the ex-husband's complaint went to
one purpose of the section 12(2) rescission remedy is to mitigation of damages, in that he sought an offset for any tax
restore plaintiff to his position prior to the fraud, another savings realized by appellee. See id. at 389, First observing
purpose is to deter fraud and encourage full disclosure. See that the burden of proving the amount of damages that
id. at 659, 106 S.Ct, 3143, The court obsen'ed it was more would have been mitigated was on the breaching party, the
appropriate to allow the defrauded party to have the benefit court concluded that they were "unaware of any principle or
of a windfall than to let the fraudulent party benefit. See id. at authority which would allow an offset to the party who has
663, 106 S.Ct, 3143 (citing Tawgow v, Taylor, 344 F,2d 781 breached a contract for a 'tax savings' the non-breaching party
(1st Circuit)), cert, denied 382 U.S. 879, 86 S. Ct. 163, 15 'realized' as a result of the breach." Id.
L.Bd.2d 120 (1965). Because any recovery would be taxable
as ordinary income, the court believed arguments about a Only two other state courts have addressed deductibility of
windfall were greatly overstated. 478 U.S. at 663-64, 106 tax benefits from damages. In DePalma v. Westland Software
S.Ct. 3143. House. 225 Cal. App. 3d 1534, 276 Cal. Rptr. 214 (1990), the
appellant challenged the trial court's refusal to admit evidence
Although Randall did involve construction of securities of tax benefits. Appellant asserted that, by not admitting this
fraud statutes, the damages allowed by the statutes included evidence, the trial court applied the collateral source mle
rescission and out-of-pocket damages. The rescission and may have given the respondent a compensatory award
damages encompassed the consideration paid (with interest) exceeding statutory limitations. See 225 Cal.App,3d at 1538,
less the amount of income received on the security. 478 U.S. 276 Cal.Rptr, 214. The court first held that the collateral
WESTLAW rOlG i hnfT.'jrn I touter;, No claim to crigmaS U S. Government Wo'-ks
PLAINTIFFS'ORIGINAL PETITION - Page 056
Lee V. Lee, 47 S.W.3d 767 (2001)
source rule has never been extended to breach of contract and that higher cost by the tax benefits to which the clinic was
it was within the trial court's discretion to deny the appellant otherwise by law entitled. See id.
collateral source credit Sae id. at 1539, 276 Cal. Rptr. 21.4. In
addition to denying application of the collateral source rule, In response to these cases, appellee cites to Geeslin v,
the court asserted three reasons for refusing to consider tax McElhenney, m S,W,2d 683 (Tex.App,—Austin 1990, no
consequences as a mitigating factor in compensatory damage writ), for the proposition that, in determining the amount
calculations in breach of contract cases. See id. at 1540, of fee to which the executor is entitled, the trial court
276 Cal. Rptr. 214. First, the court found that the federal tax should balance the value of the executor's services against
benefits rule would cancel out most windfalls to plaintiffs in the harm done to the beneficiaries' interests. In Geeslin, the
that the government may recapture past tax benefits awarded court found the trial court acted within its authority under
to a taxpayer if in a later year an event occurs which changes section 241 of the Probate Code in reducing Geeslin's fee to
the basis of the premise upon which the deduction was 2.5% ofthe gross estate. See id. at 687.. Although the court
originally based. See id at 1540^1, 276 Cal. Rptr. 214. stated the reduced amount could reasonably be viewed as
Second, the court observed that estimating tax consequences commensurate with the value of Geeslin's services balanced
is speculative, time consuming, and conflising. See id. at against the harm done to the interests of the beneficiaries,
1541-42, 276 Cal. Rptr. 214. Finally, the court determined Geeslin did not involve a tax benefit offset Accordingly, we
that public policy was better served if the breaching party was find Geeslin distinguishable.
responsible for the full amount of compensatory damages.
See id. at 1545, 276 Cal. Rptr. 214, The court felt so strongly In the instant case, there was evidence of the deduction the
about public policy that it stated it would reject appellant's estate took for the fee, the interest accrued from the delay
argument even i f there were no tax benefit rule. See id. The in filing the return, the reduction in interest based on the
court cited to the Supreme Court's holding in Randall, in fee deduction, and the accounting fees incurred during the
which the court had held it more appropriate to give the years preceding final settlement of the estate tax debt. The
defrauded party the benefit of a windfall, and stated that the jury obviously considered this evidence and decided that,
court likewise "favors parties who honor their promises, not regardless of the deduction afforded the estate, $2,2 million
those who breach them," See id at 1546, 276 CalRptr, 214. of the total fee taken was excessive and unreasonable.
The Supreme Court of Montana reached a similar result Based on our review of case law and the record, we find
in a suit by a partnership of doctors against an accounting the trial court erred in deducting $1,5 million from the jury's
firm for failing to note the adverse impact the recommended finding. First, no authority supports an offset for tax benefits.
reorganization and liquidation of a corporation would have We are unpersuaded by appellee's argument that the trial
on the partnership's industrial revenue bond financing. See court's offset should be upheld because the IRS can no longer
Billings Clinic v. Peat Marwick Main & Co., 244 Mont, 324, assess additional estate taxes. Our concern is with the parties
797 P,2d 899 (1990), On appeal, the accounting firm claimed before this court. Furthermore, we agree with the policy
it was entitled to an offset for the tax benefits the individual discussed in Randall and DePalma. As the Supreme Court
doctors received by proceeding with reorganization. See 797 stated ".., it is more appropriate to give the defrauded party
P,2d at 912, The district court refused to allow evidence of the benefit even of windfalls than to let the fraudulent party
tax benefits. See id. at 913, The supreme court found no keep them." 478 U.S, at 663, 106 S,Ct, 3143, Under the facts
entitlement *780 to an offset for tax benefits because the of this case, it is more appropriate for the estate to obtain the
objective of compensatory damages is to restore the damaged benefit of a windfall than to let appellee keep $1,5 million in
party to the position the party would have attained had the fees the jury found was unreasonable,
tort or breach not occurred. See id. The court added that,
had the accounting firm done its job, the clinic would have [4] We next tum to appellee's argument that the Arce case
had the benefit both of the tax benefits arising from the supports the trial court's mling. The Texas Supreme Court
reorganization, and the lower cost of the favorable tax-exempt has recently affirmed, in part, this court's opinion in the u4rce
status of industrial revenue bonds. See id. The failure of this case, recognizing fee forfeiture as a remedy for breach of
bond financing resulted in a higher interest cost for the loans fiduciary duty in the lawyer-client relationship. See Burrow
required for construction of an addition to the clinic. See id. V, Arce, 997 S.W.2d 229 (Tex. 1999). Appellants argue that
Thus, the court reasoned there would be no equity in reducing Arce is inapplicable because it concems a remedy for breach
WESTLAW . 2'.M;. iiu... • • Keni::,: N :lid. at 246. A review of the petition in this case, of its existence. See Kindred v. Con/Chem, Inc., 650 S,W,2d
however, reveals no specific pleading of the remedy of fee 61, 63 (Tex, 1983), In application, we should find there is
forfeiture. Instead, appellants sought actual damages in the no evidence " i f reasonable minds cannot differ from the
form of excessive fees *781 taken by the executor. Neither conclusion that the evidence offered to support the existence
side mentioned forfeiture in the Uial court. Appellee did not of a vital fact lacks probative force," Id. An appellate court
argue that the claim of excessive fees was one within the may not second-guess the jury unless only one inference may
trial court's discretion and did not cite any case law regarding be drawn from the evidence. See Ross v. Green, 135 Tex, 103,
the equitable remedy of forfeiture either during the charge 118, 139 S,W,2d 565, 572(1940),
conference or in his motion for judgment notwithstanding the
verdict. During the charge conference, appellee did not object Appellants offered expert testimony from James P, Bevans, a
to the questions conceming the excessive fee arid damages. In certified property manager for 25 years and former regional
his motion for judgment notwithstanding the verdict, appellee manager of the Tmst Department at NationsBank, Bevans
argued the evidence was legally insufficient to support the testified that, to properly evaluate fees, he considered the
finding or, alternatively, the estate did not suffer damages in size of the estate, the diversity of assets, and the complexity
the amount found by the jury. of administration, including tax considerations, Bevans
observed that, based on his experience with comparable
Even a liberal reading of the petition does not reveal a request estates, an approximate fee of $300,000 would have been
for a partial or total forfeiture of the executor's fee. Appellants reasonable. Afler reviewing the estate and appellee's actions,
clearly claimed that the taking of an uiueasonable fee was Bevans concluded appellee was not entitled to any fee. In
in itself a breach of fiduciary duty. Because there was no support of his opinion, Bevans offered the following: (1)
pleading for the equitable remedy of forfeiture, we hold that appellee did not give the beneficiaries an accounting for 13
Arce does not apply to this case. years; (2) appellee did not keep proper records; (3) 80-90% of
the estate's assets were non-productive real estate and *782
Having found in favor of appellants on their first issue, we the farms and ranches were operated at a loss for 20 years; (4)
turn to appellee's first cross-point, claiming that the evidence appellee did not fransfer property to a tmst for 18-20 years;
is legally and factually insufficient to support the jury's (5) appellee took his fee while there was a huge IRS debt with
finding of $2.2 million in unreasonable executor fees. In interest continuing to accme; and (6) appellee spent $750,000
his argument, appellee considers the evidence relating to the on experts regarding development of a Westheimer tract when
factors articulated in Arce for use by the judge in determining he had no experience in development. The record shows that,
the amount of fee to be disgorged. Because we have found although his 'mother died in 1975, appellee did not fully fund
Arce inapplicable to the facts of this case, we will not utilize the Article IV tmst until 1984 and did not fund the Article V
these factors, but will instead review the record for evidence tmst until 1995. Bevans stated that the $2,8 million fee was
supporting the jury's finding that $2.2 million of the fee taken unbelievable and outrageous.
by appellee was unreasonable,
This testimony is some evidence supporting the jury's finding
[5] (61 [71 [81 [91 Because the burden of pro-'Dulei« N o c l a i m to o n
PLAINTIFFS'-ORIGINAL PETITION - Page 058
Lee V. Lee, 47 S.W.3d 767 (2001)
the evidence is so weak as to be clearly wrong and manifestly evidence of improper and unacceptable actions by appellee as
unjusL See Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986). executor. We overrule cross-point one.
In addition to considering the testimony of Bevans, we
must also consider the evidence presented by appellee.
Failure to Sell Westheimer and Pasadena Properties
Appellee testified that, in taking his fee, he considered
the will language, , which allows him to take a just and [12] Appellants next challenge the trial court's decision
reasonable fee, and he considered an unidentified insurance to disregard the jury findings that appellee breached his
publication showing fees for similar estates in Texas and other fiduciary duties by failing to sell the Westheimer and
jurisdictions. Appellee testified it was his decision to take a Pasadena properties. By cross-point, appellee claims the
range of fees, rather than a percentage of the value of the evidence is legally and factually insufficient to support the
estate. Appellee took his fee in a series of payments from jury's findings in questions l(a)-(b) and 3.
1981-83 ranging in amounts from $5,000-375,000. Appellee
conceded he did not prepare a written analysis of how he Question 1 (a) asked the jury whether appellee breached his
determined his fee and he kept no time records of his efforts. fiduciary duty by failing to sell the Westheimer property.
Appellee also agreed thai he did not consult an attomey or Question 1 (b) asked whether appellee breached his fiduciary
conduct legal research about customary fees. Although he duty by failing to sell the Pasadena property. Question 3 asked
took the fee in the early 1980s, appellee testified that he knew the jury the date appellee reasonably should have sold the
the estate administration would continue for a long time. properties, the dollar amount of proceeds that would have
been received from such a sale, and the dollar amount of
Appellee also produced several witnesses that testified about proceeds that would be received if the property were sold
the tax and interest savings the estate realized as a result today. In response to questions 1(a) and (b), the jury found
of appellee's taking the $2.8 million fee. Gregory Edward that appellee breached his fiduciary duty' by failing to sell the
Bardnell, a CPA, testified that approximately $2 million of the two properties. In response to quesfion 3, the jury found the
fee was deductible, meaning that the estate effectively paid Westheimer property should have been sold in May 1981, the
only $850,000 of appellee's fee. Bardnell also testified that, proceeds from such a sale would have been $42 million, and
had appellee merely paid the estate taxes and not paid himself the proceeds if sold today would be $24.5 million. As to the
a fee, the estate would have saved only $85,000 in interest on Pasadena property, the jury found the property should have
the IRS debt. Bardnell had no opinion of the reasonableness sold in July 1978, the proceeds from such a sale would have
of appellee's fee. been $1.6 million, and the proceeds, if sold today, would be
$2,485,500.
Milton L. Schultz, an accountant who performed work for
the estate, testified that deducting the executor fee and other In his motion for judgment notwithstanding the verdict,
administration expenses was his idea, Schultz added that he appellee argued that there was no evidence to support the
believed the fee was reasonable in light of the size of the estate jury's findings in response to questions 1(a), 1(b), and 3. The
and the difficulties of administration, including the lack of trial court agreed with appellee's legal insufficiency argument
liquidity. Schultz characterized appellee's administration and and disregarded the answers to jury question l(a)-(b) and 3.
ability to pay the taxes and preserve the bulk of the estate as
"nothing short of genius." [13] Appellants first assert that appellee invited or waived
error because appellee requested question 3, but we find
We find that the evidence supporting the jury's finding is nothing in the record indicafing that appellee requested this
not so weak that the finding is clearly wrong and manifestly question. Appellants next argue waiver because appellee's
unjust Based on the evidence presented by Bevans, thejiiry attomeys objected to the damages measure sought by
could have determined that appellee was entitled to no fee. appellants. Appellants sought a measure of damages that
Instead, the jury determined that appellee was entitled to included potential profits had Appellee timely sold the
approximately $600,000, which is approximately 5% of the properties and invested the sale proceeds in a diversified
estate value at the time of Katherine Bamhart's *783 death. portfolio of stocks and bonds. Appellee disagreed with this
We refiise to second-guess the jury when there is ample measure, and argued the proper measure was sales proceeds
plus interest.
WeSTLAVV
PLAINTIFFS' ORIGINAL PETITION - Page 059
Lee V. Lee, 47 S.W.3d 757 (2001)
593(Tex.l986). In reviewing the grant of a motion for
Appellee's disagreement with appellants' measure of damages judgment notwithstanding the verdict, the reviewing court
did not invite or waive the error complained of here. Appellee must review all testimony in a light most favorable to the
offered the testimony of Professor Johanson, who rejected finding, considering only the evidence and inferences that
appellants' proposed measure as improper and testified that support the finding and rejecting the evidence and inferences
the proper measure was sale proceeds plus interest. Appellee contrary to the finding. See Navarette v. Temple Indep. Sch.
was not advocating sale proceeds as the proper measure Dist. 706 S.W.2d 308, 309 (Tex.1986). I f there is more
of damages, but was countering appellants' proposal for than a scintilla of competent evidence to support the jury's
damages to include lost profits. We do not find appellee's finding, then the judgment notwithstanding the verdict will be
objection and offer of testimony to constitute invited error. reversed. See Mancorp v. Culpepper, 802 S.W.2d 226, 228
(Tex. 1990).
[14] Appellants also argue that appellee invited or waived
error by statements made during jury deliberations. The jury Appellee claims questions 1 and 3 did not, as appellants
sent a question to the trial judge regarding thepart of question suggest, ask whether he breached a duty to diversify assets,
3 asking the date appellee should have sold the Westheimer transform nonproductive assets into productive assets, and
and the Pasadena properties. The jury asked whether "date" generate income, but instead, asked the jury whether appellee
referred to year, or month and year. The trial judge told the breached a duty to accept two specific offers. Appellee asserts
parties he replied "month and year," and asked the attomeys there is no evidence supporting a finding that he had a duty to
if they had any objections to this reply. Appellee's attomeys acceptaMay 1981 offer to purchase the Westheimer property
objected and asked that the reply inform *784 the jury or a July 1978 offer to purchase the Pasadena property.
that they must give the day, month, and year. Rather than Appellee fiuther argues there is no evidence that any sales
objecting to "month and year," appellants' attomeys stated: pursuant to these two offers would have yielded the proceeds
"We can take it from the end of the month if that's going to found by the jury.
be their problem. 1 think that's narrowing in too specifically."
The court decided to let the jury answer month and year. Although the evidence reveals a number of unaccepted offers
for the Pasadena and Westheimer properties, the jury's finding
The statement of appellants' counsel during this discussion of breach in May 1981 for the Westheimer property relates
indicates they acquiesced in the "month and year" reply. to a May 1981 offer by a Mr. Carothers. The date found by
Furthermore, this discussion does not show that appellee's the jury of July 1978 for the Pasadena property relates to
counsel requested "month and year." Rather, this was the the July 1978 offer for the Pasadena property made by U.S.
suggestion of the trial judge. We do not find that appellee's Homes. By failing to object to the jury question requesting the
counsel invited error by asking for more specificity than the month and year appellee should have sold the two properties,
•judge. appellants acquiesced in the jury finding a date that related to
specific offers.
[15] Likewise, appellee did not waive error by failing to
object to question 3 on the ground of insufficient evidence. The evidence showed the Westheimer property did not have
A party may challenge legal sufficiency for the first time high-density sewer capacity and appellee testified that he
after the verdict regardless of whether the submission of delayed the sale of this property because he knew it would
the question was requested by the complainant. See TEX.R. be worth more i f it had sewer capacity In May 1981, Mr.
CIV. P. 279. By asserting in its motion for judgment Carothers offered to purchase part of the Westheimerproperty
notwithstanding the verdict that the evidence supporting the for more than $40 million. *785 Appellee did not respond
jury's findings was legally insufficient, appellee preserved to this offer because he believed it was a poor proposal in
this complaint for appellate review. See id. that it required high-density sewer capacity and it included no
payment for the portion of the property that was in the flood
J16] (17] [18] Having found no waiver or invited plain. Appellee conceded that he did not attempt to negotiate
error, we tum to appellants' challenge to the disregarding eitheroffer. Neither Carothers nor his principal, Loh, testified
of the jury answers. A trial court may disregard a jury's whether they would have accepted a modified arrangement
finding if there is no evidence to support the jury's finding. regarding the Westheimer property.
See Aim v. Aluminum Co. of America. Ill S.W.2d 588,
weSTlA'KV © 2016 1 norrison Routers. No claim to ongmal U.S. Government Works.
PLAINTIFFS' ORIGINAL PETITION - Page 060
Lee V. Lee, 4-7 S.W.3d 767 (2001)
The evidence further showed that, in Juiy 1978, U.S. Homes Probate Code as mandatory because the language in these two
offered $1.5 million for the Pasadena property, and later statutes is similar. Section 149C of the Probate Code states
raised that offer to $1.64 million. Appellee testified he that a trial court may remove an independent executor on the
rejected this offer because it was not a cash offer. No following grounds:
representative from U.S. Homes testified. Therefore, there
is no evidence that, had appellee negotiated, U.S. Homes (1) the independent executor fails to return within ninety
would have accepted a modified arrangement regarding the days afler qualification, unless such time is extended by
Pasadena property. Appellants' expert, Lucian Morrison, order of the court, an inventory of the property of the .
testified that appellee should have responded to the offers and estate and list of claims that have come to his knowledge;
negotiated for different terms than those in the original offers.
(2) sufficient grounds appear to support belief that he
Morrison did not state that appellee should have accepted the
has misapplied or embezzled, or that he is about to
original offers from U.S. Homes or Carothers.
misapply *786 or embezzle, all or any part of the
property committed to his care;
[19] Texas courts have long held that unaccepted offers
to purchase property are no evidence of market value of (3) he fails to make an accounting which is required by
property. See Hanks v. Gvlf, Colorado & Santa Fe Ry. Co., law to be made;
159 Tex. 311, 320 S.W.2d 333, 336-37 (1959); Southwestern
Bell Tel. Co. v. Wilson, 768 S.W.2d 755, 762 (Tex.App.- (4) he fails to timely file the notice required by Section
Corpus Christi 1988, writ denied). The courts have found this 128 A of this code;
evidence uncertain and speculative. See Hanks, 320 S.W.2d
at 337. Evidence of an unaccepted offer does not establish the (5) he is proved to have been guilty of gross misconduct
good faith of the person making the offer. See id: or gross mismanagement in the performance of his
duties; or
If unaccepted offers are too uncertain to serve as proof of the
(6) he becomes an incapacitated person, or is sentenced
market value of a parcel of property, they are likewise too
to the penitentiary, or from any other cause becomes
uncertain to serve as proof of the dollar amount of proceeds
legally incapacitated from property performing his
appellee would have obtained if hehad sold the two properties
fiduciary duties.
on the dates found by the jury. Because the jury was advised
to find a month and year when the properties should have TEX. PROB.CODE ANN. § 149C (Vemon Supp2000).
been sold, the jury necessarily focused on the dates of specific
offers and unaccepted offers are no evidence of the dollar Section 113.082 of the Property Code govems removal of a
amount of proceeds appellee would have received hadhe sold tmstee. This section states a court may remove a tmstee and
the properties, Accordingly, we find no error by the trial court deny part or all of the tmstee's compensation if;
in disregarding thejury's answers to questions 1(a), 1 (b), 3(a),
and 3(b). Having found no error in the trial court's actions, we (1) the tmstee materially violated or attempted to violate
need not reach appellee's cross-poinL the terms of the tmst and the violation or attempted
violation results in a material financial loss to the tmst;
(2) the tmstee becomes incompetent or insolvent; or
Removal of Appellee as Executor and Trustee
(3) in the discretion ofthe court, for other cause.
[20] Appellants next challenge the trial court's refusal to
remove appellee as executor and trustee. Appellants also TEX. PROP.CODE ANN. § 113.082(a) (Vemon 1995).
complain of the trial court's refusal to submit requested
questions relating to removal. In reviewing a trial court's removal of a tmstee under a
prior version of section 113.082, the supreme court held that
Appellants initially raise an issue of statutory construction. removal was not discretionary with the trial court, despite the
Appellants contend that, because the supreme court has use ofthe word"may."5'eey4fe«v. Da/)/, 661 S.W.2d9l 1,913
construed section 113.082 of the Trust Code as mandatory (Tex. 1983). Because the supreme court has found removal
in nature, we should likewise construe section 149C of the mandatory under section 113.082, ^ appellants argue removal
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Lee V. Lee, 47 S.W.Sd 767 (2001)
should also be mandatory under section 149C. Absent any higher and additional duties, some of which might not even
clear directive from the supreme court, however, we decline exist absent the fiduciary relationship.
appellants' invitation to construe the clear language of section
149C to find that removal of an executor is mandatory. Id. at 684-85, The court concluded that gross misconduct or
mismanagement, at a minimum, includes: "(1) any willful
omission to perform a legal duty; (2) any intentional
1. Removal as Executor commission of a wrongfiil act; and (3) any breach of a
[21] Appellants contend the trial court's decision not fiduciary duty that results in actual harm to a beneficiary's
to remove appellee as executor constituted an abuse of interest." Id. at 685 (emphasis omitted).
discretion because the evidence shows appellee did not timely
file an inventory, misapplied property committed to his care, In determining whether the trial coirrt abused its discretion,
failed to timely file a proper accounting, and was found to the Geeslin court held there were seven legally relevant
have breached his fiduciary duty in numerous-respects. A factors to cons ider:
trial court abuses its discretion if its decision is arbitrary,
unreasonable, and without reference to any guiding rules and (1) the higher quality of ethical and moral conduct
principles. See Goode v. Shoukfeh. 943 S.W.2d 441, 446 implicit in Geeslin's fiduciary status;
(Tex. 1997).
(2) the degree of harm sustained by the beneficiaries'
interest, owing to Geeslin's conduct;
Gross misconduct or gross mismanagement is a ground for
removal of an executor. See TEX. PROB.CODE ANN. § (3) the public policy in favor of independent
149C (Vemon Supp.2000). In Geeslin v. McElhenney. 788 administration, due to the salutary purposes served by
S.W.2d 683 (Tex.App,—Austin 1990, no writ), the court that method of administration;
reasoned that the statutory terms "gross mismanagemenf and
"gross misconduct" do not encompass ordinary negligence. (4) the sufficiency of a bond to protect the beneficiaries'
Nonetheless, the court recognized that an executor owes the interest i f a bond is given under section 149 of the
duties of a trustee: Probate Code;
He holds property interests, not his own, for the benefit (5) the complexity of the estate;
of others. He manages those interests under an equitable
obligation to act for the others' benefit and not his (6) whether Geeslin's acts and omissions resulted from
own. He is a "fiduciary" of whom the law requires professional advice, or whether they occurred in the face
an unusually high standard of ethical or moral conduct of such advice; and
in reference to the beneficiaries and their interests.
(7) the distinction between willful conduct and
His "duties" are more than the ordinary "duties" of
inadvertent acts and omissions generally.
the marketplace. They connote fair dealing, good faith,
fidelity, and integrity. He may have additional *787 Id. In applying these factors, the Geeslin court upheld the
duties that he would not have in an ordinary business trial court's removal ofthe executor because (1) Geeslin knew
relation—a duty of full disclosure, for example, and a about an additional estate tax liability, and did not act to
duty not to use the fiduciary relationship for personal limit the interest and penalty, but paid himself commissions
benefit except with the full knowledge and consent of and paid other estate obligations; and (2) Geeslin used estate
the beneficiaries, "It is against public policy to allow fiinds to pay pension-plan liabilities and used estate fiinds to
persons occupying fiduciary relations to be placed in make terminating distributions to pension-plan participants.
positions in which there will be constant danger of a Id. at 686-87. The court noted that Geeslin commingled
betrayal of tmst by the vigorous operation of selfish funds despite warnings from his attomey and accountant that
motives," commingling might be prohibited. See id. at 687,
Thus, the statutory criteria ("gross misrhanagement" and
Appellee claims appellants misread Geeslin and that it does
"gross misconduct") are necessarily elastic. They must be
not hold the trial court may remove an executor for breach
sufficiently narrow to exclude ordinary negligence, yet
of a fiduciary duty that results in actual harm. Indeed,
sufficiently broad to include a fiduciary's breach of his
appellee argues that, because Geeslin does not so hold, the
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Lee V. Lee, 47 S,W-3d 767 (2001)
trial court properly denied appellants' requested questions. as appellee strongly argues, preclude removal, but we may
Appellee reasons that if a breach of duty resulting in harm consider it in reviewing the trial court's mling.
were sufficient to support removal, any minor breach could
constitute gross misconduct. We disagree with appellee's The evidence showed, and appellee admits, he did not file
reasoning. Although Geeslin does state that a breach of an accounting in a timely manner. The jury found breaches
fiduciary duty resulting in actual harm to a beneficiary's of fiduciary duty by appellee in the failure to sell the
interest may be sufficient to constitute gross misconduct, this Westheimerproperty, failure to sell the Pasadena property, in
holding is tempered by the application of seven factors for the the mismanagement of the River Bend Farm and Cap Rock
court to consider in determining whether a breach of fiduciary Ranch, and in the expenditure of estate fimds on the attempted
duty resulting in harm should result in removal. See id. at 685. Knollwood development. Because we have upheld the trial
We believe appellee's fears *788 about removal for minor court's decision to disregard the jury's findings relating to
infractions are unfounded. Consideration of the seven factors the Westheimer and Pasadena properties, the court could not
would, in our opinion, allow a trial court to determine whether consider these breaches of duty in considering whether to
the breach of fiduciary duty is of sufficient magnitude to merit remove appellee as executor. As to the findings regarding
removal of the executor. River Bend Farm and Cap Rock Ranch, the jury only found
damages to the estate of SI ,00 for each. As to the expenditure
We also disagree with appellee's statement that the trial of estate fiinds with respect to Knollwood, the jury found
court denied appellants' requested question 11 because damages of $840,000. The jury also found unreasonable fees
he disagreed with appellants' interpretation of Geeslin. of $2.2 million.
Appellants submitted the following question; "Did Ronald
Lee grossly mismanage any part of the property committed to Because there were findings of breaches of fiduciary duty
his care as executor?" In refusing to submit these questions, and substantial actual damages, we must determine whether,
the trial judge stated; in light of the seven Geeslin factors, the trial court abused
its discretion in refusing to remove appellee as executor. We
THE COURT: The instructions and begin with the overall consideration that appellee's position
questions submitted as Plaintiffs A as executor, being fiduciary in nature, requires that we
through F are denied. I will say hold appellee to a higher ethical and moral standard. This
on the record what I have said off consideration must be tempered, however, by consideration
the record, and that is that there's of the public policy in favor of independent administration
a finding of either gross negligence and the undisputed complexity of this estate. Of equal
or a breach of fiduciary duty and importance, are the substantial damages to the beneficiaries'
damage. I would find that under interest. The damages for excessive fees and for the failed
the Probate Code to be grounds for Knollwood development total more than $3 million. Appellee
removing the tmstee, anyway. And , did not consult professionals with respect to the amount
so I don't think those questions, of fees he took, but he did consult some professionals
those particular ones, are necessary. conceming the Knollwood development Indeed, many of
the expenses involved with Knollwood are those *789 of
When denying appellants' requested question, the trial judge professionals appellee consulted. Finally, we must consider
stated the question was unnecessary because the removal whether appellee's actions were willful or inadvertent. The
question could be answered from the jury's responses jury did not find that appellee's actions constituted gross
to questions regarding breach of fiduciary duty or gross negligence. Nonetheless, the evidence does not indicate
negligence. The trial judge's statement is consistent with our that appellee's taking of an excessive fee or his excessive
interpretation of Geeslin. expenditures on the Knollwood development were merely
inadvertent acts,
Based on Geeslin, the trial court could have considered the
jury's findings regarding breaches of fiduciary duty in making [22] [23) Although the trial judge is given discretion by
his decision regarding removal, either as executor or as statute to determine whether an executor's actions rise to the
tmstee. The jury's failure to find gross negligence does not. level of gross misconduct, this discretion is not unlimited.
An abuse of discretion occurs when the trial court makes
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PLAINTIFFS' ORIGINAL PETITION - Paee 063
Lee V. Lee, 47 S.W,3cj 767 (2001)
a legally unreasonable determination given the facUial-legal denied). *790 An instmction is proper if it assists the jirry,
context in which it was made. See London v. Jean-Paul is supported by the pleadings or evidence, and accurately
Budinger, Inc., 724 S.W.2d 931, 939 (Tex.App.—Austin states the law. See Perez v. Weingarten Realty, Investors,
1987, no writ). In other words, the trial court's determination 88! S.W,2d 490, 496 (Tex,App,—San Antonio 1994, writ
is legally unreasonable if the court failed to consider a fact denied). Whether terms are properly defined or the instmction
shown in the evidence that was legally relevant. See id. at property worded is a question of law reviewable de novo. See
939--10. M.N. Dannenbaum, Inc. v, Brummerhop, 840 S,W,2d 624,
631 (Tex,App.—Houston [14th Dist] 1992, writ denied).
In this case, we cannot say that the trial court necessarily Error is reversible only if, when viewed in light of the totality
failed to consider any of the Geeslin factors. While we may of the circumstances, the refusal to submit a question or
not have reached the conclusion the trial court made in light instmction probably caused the rendition of an improper
of the factors, this is not the standard. Having considered judgment See St. James Transp. Co. v. Porter, 840 S,W.2d
the statute, the Geeslin factors, and the evidence, we cannot 658, 664 (Tex.App.-Houston [1st Dist,] 1992, writ denied);
say the trial court abused its discretion in rellising to remove TEX,R.APP. P. 44.1(a)(1),
appellee as executor.
[29] [301 Because appellants pled for removal of appellee
as tmstee under section 113,082, and presented evidence
2. Removal as Trustee of actions the jury found to be breaches of fiduciary duty,
Grounds for removal of a trustee under section 113.082 we hold that the issue of removal under the statute was a
include a material violation or an attempt to violate the valid theory raised by the pleadings and evidence. Although
terms of the trust that results in a material financial loss appellants requested a question regarding a statutory ground
to the trust 5ee TEX. PROP.CODE ANN. § 113,082(a)(l) for removal, appellee claims appellants "are not tme to the
(Vemon 1995). Appellants requested a question (question record when they tell this Court that they asked the trial court
13) very similar to the language of the statute: "Did Ronald to submit a question to the jury in language substantially
Lee grossly mismanage or materially violate the terms of identical to the specific statutory ground for removal of
the Article IV Tmst resulting in a material financial loss tmstee under § 113,082,,,." Appellee argues that requested
to that tmst?" The trial judge refiised to submit appellants' question 13 would have negated the statutory requirement of
requested quesfion because the judge believed he could make a material violation giving rise to a material financial loss
the determination of mismanagement or material violations by permitting the jury to answer "yes" if it found any breach
from the submitted questions regarding breaches of fiduciary of fiduciary duty resulting in harm or a material violation
duty and gross negligence. ^ Appellants claim the refirsal to resulting in material harm. We disagree.
submit requested question 13 was reversible error.
Requested question 13 asked the jury to determine whether
[24] [25] [261 [271 PSl Rule 278 provides that thq)pellee grossly mismanaged or materially violated the terms
court must submit questions raised by the written pleadings of the Article IV Tmst resulting in a material financial loss
and evidence. See TEX.R. CIV. P. 278. See also Elbaor to that tmst The instmction to that question stated: "You are
V. Smith, 845 S.W.2d 240, 243 (Tex.1992) (interprefing instmcted that 'gross mismanagement' means any breach of
Rule 278 as a nondiscretionary directive). The decision a fiduciary duty that results in actual harm to a beneficiary's
whether to submit a particular instmction or definition is interest." Rather than appellee's more tortured constmction of
reviewed for an abuse of discretion. See State Farm Lloyds this question, we read this question to allow the jury to answer
V. Nicolau, 951 S,W.2d 444, 451 (Tex.1997). To deteranine "yes" i f the jury found a material financial loss suffered by
whether an alleged error in the charge is reversible, the the trast as a result of either; (1) a breach of fiduciary duty
reviewing court must consider the pleadings, the evidence, that resulted in actual harm; or (2) a material violation of
and the charge in its entirety. See Island Recreational the Article IV Trast, In other words, we believe the question
Dev. Corp. v. Republic of Tex. Sav. Ass'n, 710 S.W.2d presents "gross mismanagemenf and "material violation of
551, 555 (Tex.1986). As to instmctions and definitions, the Article IV Trasf as the two types of actions by a trastee
the essential question is whether the instmction aids the that could result in a material financial loss to the trast.
jury in answering the questions, See Harris v. Harris, 765 Therefore, this question substantially tracks the language of
S.W.2d798, 801 (Tex.App.—Houston [14th Dist] 1989, writ section 1 13,082.
YvfS-lLAVV r ' - i u i ; : rb!%n.;-.n Hci.ile"> ciaun l o Oitj-^'oi U Govoi'on'icnt Wo;K:;i
PLAINTIFFS' ORIGINAL PETITION - Page 064
Lee V. Lee, 47 S.W.3d 767 (2001)
In Akin, the trial court had removed the trastee piusuant to
In reviewing appellee's brief, we note that some of appellee's jury findings that the trastee had developed such hostility
defensive arguments tend to support appellants' claim that the toward certain beneficiaries that his decisions as trastee in
trial court should have submitted the requested question 13. administering the tmst funds would probably be influenced
Appellee argues in his brief that "whether a breach of duty is a adversely to those beneficiaries' interests, 661 S.W,2d at
'material violation' and whether afinancialloss is 'material' 912, There was also a finding that the tmstee had acted
are necessarily fact questions,,.." Appellee continues, "the improperly with b^st fimds. See id. at 913. The court of
finding that expenditures on BCnollwood were $840,000 too appeals reversed, holding that removal was not warranted.
much cannot substitute for the missing fact finding that those See id. at 912. In the supreme court, a beneficiary argued
expenditures constituted a material violation resulting in a that former section 39 of the Texas Tmst Act (now section
material loss," As to the executor's fee, appellee observed that 113.082)^ allowed removal of a tmstee to be discretionary
fact issues as to materiality of the breach and the loss are not and that the appropriate standard of review was the "arbitrary
conclusively established. As to the late filing ofthe inventory and unreasonable" standard. See id.
or the delay in providing an accounting, appellee reasons that,
even if these items were undisputed, they "cannot substitute
Although the former statute provided (and the current statute
for the missing fact finding that any such breaches constituted
continues to provide) that a tmstee may be removed for
a material violation causing any material loss,"
a ground _ specified in the statute (material violation of
tmst resulting in material financial loss, incompetence, or
*791 [31) [32] Nonetheless, we believe the trial judge's insolvency) or "for other cause, in the discretion of the
reasoning was correct when he stated he could determine court having jurisdiction," the Akin court found that this
removal from jury answers regarding breach of fiduciary
statute "does not make removal of a trustee a discretionary
duty or gross negligence. We agree with the trial court that
act on the part of the trial court and hence subject upon
breaches of fiduciary duty can constitute material violations
review to the 'arbitrary and unreasonable* standard," See id.
of the trust. Furthermore, we believe that jury awards of
The court observed that the portion of the statute allowing
damages for breaches of fiduciary duty can constitute a
removal for other causes "in the discretion ofthe court having
material financial loss to the trust. Accordingly, we find no
jurisdiction," was meant to insure that the grounds of removal
error by the trial court in refusing to submit requested question
were not expressly limited to those enumerated, but may
13,
include others that the trial court, in its discretion, deems
proper. See id.
Even without submission of requested question 13, there are
jury findings of breach of duty that the trial court should have
Because no issue was submitted to the jury regarding
found to be material violations of the trast. These include the
improper conduct or mismanagement by the tmstee, and such
jury's finding of breach of fiduciary duty with respect to the
conduct was not established as a matter of law, the Akin court
expenditures on the Knollwood development and the taking
found that removal for mismanagement of tmst funds was not
of an excessive fee. There are also juryfindingsof substantial
*792 warranted. See id. As for the jiuy findings regarding
damages, including $840,000 for Knollwood expenditures,
trastee hostility, the court first noted that ill will or hostility,
and $2,2 million in excessive fees, that constitute, as a matter
standing alone, was an insufficient ground for removal. See
of law, material financial losses to the trast.
id. The court then stated:
Appellants argue that removal is mandatory if there is a Article 7425b-39 [now section
material violation resulting in a material financial loss to 113.082] of the Texas Tmst
the trast. Indeed, the supreme court appears to hold that Act sets out circumstances which
removal is not discretionary. See Akin v, Dahl, 661 S,W,2d warrant the removal of a trastee
911, 913 (Tex,1983). Appellee rejects this interpretation of from office. Should the trier of
Akin and claims XhsXAkin merely notes, in dicta, that removal fact affirmatively find that one
is mandatory for an enumerated statutory ground. We are of the enumerated circumstances
unpersuaded that we may ignore the court's holding as merely has occurred, the tmstee will be
dicta. removed. Additionally, should the
trier o f fact find that hostility, ill
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PLAINTIFFS' ORIGFNAL PETITION - Page 065
Lee V. Lee, 47 S,W.3d 767 (2001)
w i l l , or other factors have affected
the trustee so that he cannot properly
Bad Faith Defense
serve in his capacity, the trustee w///
be removed. [34] Appellants next claim the trial court erred in not
requiring appellee to bear his own attomey's fees and costs
See id. at 914 (emphasis added). We understand this passage
because the jury found appellee defended the lawsuit in
to mean that a trustee will be removed if the trier of fact
bad faith. Section 149C permits an independent executor to
finds the evidence shows the trustee has committed one of the
recover necessary expenses, including attomey's fees, if he
enumerated acts or one of the acts, not enumerated, but which
or she defends an action for removal in good faith. TEX.
the trial court, in its discretion, deemed a proper ground for
PROB.CODE ANN. § 149C (Vemon 1980). In granting
removal.
appellee's motion for judgment notwithstanding the verdict,
the trial court disregarded the answer to question 8, finding
Although the jury in Akin had found the tmstee's hostility
that appellee defended the suit in bad faith. In a cross-point,
"probably" would affect his performance, the supreme court
appellee claims there was legally and factually insufficient
held this finding was insufficient to support removal. See
*793 evidence to support thejury's finding that he defended
id. Instead, the court held that there had to be a finding
this lawsuit in bad faith.
that the tmstee's hosdlity does or will affect his performance
as a tmstee. See id. Accordingly, the court's discussion of
Appellee argues that even i f there is a finding of bad faith
removal for an enumerated ground could be constmed to be
defense, an executor is entitled to attomey's fees where
dicta. Nonetheless, the court also states that a tmstee "will be
he prevails against attempted removal. In support of this
removed" for hostility, a ground not enumerated, but found
argument appellee cites Miller v. Anderson, 651 S.W,2d
by the trial court in its discretion to be a proper ground for
726 (Tex, 1983), In Miller, the court was constming secdon
removal. See id.
243 of the Probate Code, which allows an executor to
recover firom the estate his necessary expenses, including
By saying "will be removed," rather than "may be
reasonable attomey's fees, when the executor defends the
removed," the court constmes the statute to be mandatory
will in good faith, and "with just cause, for the purpose
and not discretionary. Although the court's statement was
of having the will or alleged will admitted to probate,
unnecessary to the holding, we constme this statement to be
whether successfiil or not,..," TEX, PROB,CODE ANN, §
judicial dictum deliberately made for guidance of the bench
243 (Vemon Supp,2000), The supreme court upheld the
and bar and, therefore, binding on lower courts. See Ex parte
trial court's award of attomey's fees to the executor even
Harrison, 741 S,W,2d 607, 609 (Tex,App,—Austin 1987,
though there was no affirmative finding of good faith. See
orig, proceeding). Although we disagree with t h e c o u r t ' s
651 S.W.2d at 728, The court observed that in prior cases,
constmction because the plain language of the statute is
where the wills were denied probate, a showing of good
discretionary in nature, we are constrained to follow supreme
faith and just cause was necessary to show a benefit to the
court precedent.
estate compensable under section 243, See id. (citing Russell
V, Moeling, 526 S.W.,2d 533 (Tex. 1975) and Huff v. Huff,
[33] Appellants also argue appellee has a conflict of interest
132 Tex. 540,124 S.W.2d327 (Tex. 1939)). The Miller comt
that requires his removal. The alleged conflict arises from
found that a benefit to the estate was proven when the will
appellee's opposition to appellants' motion for judgment and
his attempt to reduce the tmst's judgment. Such a conflict was admitted to probate. ^ 651 S.W.2d at 728.
could arise anytime a beneficiary brought suit for damages
against a tmstee. Therefore, we decline to find a conflict of Secfion 243 is phrased similarly to secfion 149C, which
interest under these circumstances. Because we find that the provides that an executor "who defends an action for his
breaches of duty found by the jury and the total of $3 million removal in good faith, whether successful or not, shall
in damages consfitute a material violation of the tmst resulting be allowed out of the estate his necessary expenses and
in a material financial loss, we hold the trial court had a disbursements, including reasonable attomey's fees,..." TEX.
mandatory duty to remove appellee as trastee. Accordingly, PROB.CODE ANN, § 149C(c) (Vemon 1980), Although the
the trial court erred in reflising to remove appellee as tmstee. language of the two statutes is somewhat similar, we are
unconvinced that the holding in Miller applies to the facts of
this case. In Miller, there was no finding of good faith and the
iTimcnl Works
Lee V, Lee, 47 S.W.Sd 767 (2001)
supreme court held that the lack of this finding did not prevent of the executor fee taken, the estate's need for cash at
recovery of attomey's fees. 651 S.W.2d at 728. ffolding the time appellee took the fee, the failure to provide a
that a finding of good faith is unnecessary under certain proper accounting, the use of estate fiinds to pay personal
circumstances does not inescapably lead to the conclusion expenses, and the failure to transfer the estate's assets to its
that an affirmative finding of bad faith should be ignored. We beneficiary until 19 years after his mother's death. Although
cannot say that, based on its holding in Miller, the supreme this testimony supports liability as to breach of fiduciary
court would disregard an affirmative jury finding of bad faith. duty, it does not necessarily support a finding that appellee
Although appellee was successfial in avoiding removal as an defended this lawsuit in bad faith. Rather, to support thejury's
executor, removal was a discretionary determination made finding, there must be some evidence that appellee's defense
by the trial judge. In addition to finding many breaches of against removal was in bad faith.
fiduciary duty by appellee, the jury found that appellee had
defended the lawsuit in bad faith. Although the jury charge phrased the "good faith"
requirement negatively, we construe the jury's affirmative
[35] Although a trustee may also be removed under section finding to be a finding that appellee did not defend against
113.082 of the Property Code, there is no "good faith" removal in good faith. The jury charge did not define
requirement in the statute allowing recovery of fees. Section "bad faith." The statute, which includes the "good faith"
114.064 provides that the court "may make such award requirement, also contains no definition of "good faith."
of costs and reasonable and necessary attomey's fees as Furthermore, we have discovered no case law addressing the
may seem equitable and just." TEX. PROP.CODE ANN. § meaning of "good faith" under this statutory provision.
114.064 (Vemon 1995). Thus, the grant or denial of attomey's
fees to a trustee is within the sound discretion of the trial In different contexts, "good faith" can be a subjective or an
court, and a reviewing court will not reverse the trial court's objective standard. For example, under the Texas Business
judgment absent a clear showing that the trial court abused its and Commerce Code, "good faith" is defined as honesty
discretion by acting *794 without reference to any guiding in facL See TEX. BUS. & COM.CODE ANN. § 1.20(19)
rules and principles. See Lyco Acquisition 1984 Ltd. v. First (Vemon Supp.2000). The Texas Supreme Court has held
Nat'lBank. 860 S.W.2d 117,121 (Tex.App.—Amarillo 1993, that the test for good faith is the actual belief of the party
writ denied). Because removal of a trustee does not require a and not the reasonableness of that belief See La Sara
good faith finding, the jury question in the instant case only Grain v. First Nat'l Bank, 673 S.W.2d 558, 563 (Tex.1984);
concems appellee's entitlement to recover attomey's fees as Holeman v. Landmark Chevrolet Corp., 989 S.W.2d 395, 399
an executor. (Tex.App.-Houston [14th Dist,] 1999, writ denied). Unlike
this subjective standard, the courts have adopted an objective
As stated previously, a trial court may disregard a jury's standard where official immunity is asserted. See City of
finding if there is no evidence to support thejury's finding. Lancaster v. Chambers, 883 S.W.2d 650, 656 (Tex. 1994),
See Aim v, Aluminum Co. of America, 111 S,W,2d 588, The supreme court observed that this test, like the test under
593 (Tex, 1986), In reviewing the grant of a motion for federal immunity law, is one of objective reasonableness,
judgment notwithstanding the verdict, the reviewing court without regard to whether the official acted with subjective
must review all testimony in a light most favorable to the good faith. See id. This objective standard provides that an
finding, considering only the evidence and inferences that officer acts in good faith in a pursuit case i f "a reasonably
support the finding and rejecting the evidence and inferences pmdent officer, under the same or similar circumstances,
contrary to the finding. See Navarette v. Temple Indep. Sch. could have believed that the need to immediately apprehend
Dist., 706 S,W,2d 308, 309 (Tex, 1986). If there is more the suspect outweighed a clear risk of harm to the public in
than a scintilla of competent evidence to support the jury's continuing the pursuit." Id.
finding, then the judgment notwithstanding the verdict will be
reversed. See Mancorp v. Culpepper, 802 S.W.2d 226, 228 Under other circumstances, a combination of subjective
(Tex. 1990). and objective standards has been found appropriate. In the
context *795 of a whistle blower action, the supreme
In support of the jury finding of bad faith defense against court considered the public and private concerns involved
removal, appellants cite generally to the five weeks of and the subjective and objective standards of "good faith,"
testimony regarding appellee's conduct, including the amount and decided on a combination of the two standards. See
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PLAINTIFFS'ORIGINAL PETITION-Page 067 •
Lee V. Lee, 47 S.W.3d 767 (2001)
Wichita County v. Hart, 917 S.W.2d 779, 784 (Tex,1996), must protect the beneficiaries' interest in the estate proceeds.
The court held that "good faith" in the whistle blower context At the same time, we must preserve an executor's ability to
means that; "(1) the employee believed that the conduct fulfill the obligations of the position, exercising judgment
reported was a violation of law and (2) the employee's in handling the often complicated decisions involved in
belief was reasonable in light of the employee's training and administration of an estate. Accordingly, we believe a fair
experience," Id In reaching this holding the court considered balancing of these interests is achieved by adopting a standard
the United States Supreme Court's discussion of objective and of good faith that combines the subjective and objective tests.
subjective standards for "good faith" in Wood v. Strickland, We hold that an executor acts in good faith when he or she
420 U,S, 308, 95 S.CL 992, 43 L,Ed.2d 214 (1975), subjectively believes his or her defense is viable, if that belief
is reasonable in light of existing law. This standard should
In Wood, the Court addressed whether an objective or protect all but the plainly incompetent executors or those who
subjective standard should apply in a section 1983 action willfully breach their fiduciary duties, ^
where the school official claimed immunity. See id. at 314-
15, 95 S.Ct 992. The court held;
The record contains much evidence regarding appellee's
breaches of duty, but appellants do not point to, and we
The disagreement between the
have not located, any evidence showing that appellee's *796
Court of Appeals and the District
defense against removal was made in bad faith. We have
Court over the immunity standard in
located no evidence that appellee subjectively believed his
this case has been put in terms of
defense was in bad faith and no evidence that his defense
an "objective" versus a "subjective"
had no reasonable or arguable basis. Accordingly, the trial
test of good faith. As we see it,
court properly disregarded thejury's finding of bad faith and
the appropriate standard necessarily
allowed appellee to recover his attorney's fees.
contains elements of both. The
official himself must be acting
sincerely and with a belief that he
is doing right, but an act ... can Refusal to Require Reimbursement
be no more justified by ignorance for Appellants' Attorney's Fees
or disregard of settled, indisputable
law,.. than by the presence of actual [37] In a separate issue, appellants claim the trial court
malice. should have required appellee to reimburse the Article IV
Tmst for appellants' attomey's fees and costs incurred in the
M a t 321, 95 S.Ct 992. prosecution of this case. Section 245 of the Probate Code
provides;
The standards referenced in Rule 13 are particularly
illuminating. Rule 13 provides that an attomey or party's When the personal representative
signature on a pleading constitutes a certificate by them of an estate or person neglects the
that "to the best of their knowledge, informadon, and performance of any duty required
belief formed after reasonable inquiry the instmment is not of him, and any costs are incurred
groundless and brought in bad faith or groundless and brought thereby, or if he is removed for
for the purpose of harassment" TEX.R. CIV. P. 13. Under cause, he and the sureties on his
this mle, courts presume pleadings are filed in good faith and bond shall be liable for costs of
will not impose sanctions absent good cause, the particulars removal and other additional costs
of which must be set out in the order. See id. "Groundless," incurred that are not authorized
in the context of Rule 13, means "no basis in law or fact expenditures, as defined by this
and not warranted by good faith argument for the extension, code, and for reasonable attomey's
modification, or reversal of existing law." Id. fees incurred in removing him
and in obtaining his compliance
[36] In the context of an action to remove an executor, we regarding any statutory duty he has
believe we must balance the interests of the beneficiaries with neglected.
the public policy in favor of independent administration. We
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PLAINTIFFS' ORIGINAL PETITION - Page 068
Lee V. Lee, 47 S.W.3d 767 (2001)
were claims of violations of appellee's statutory duty of care.
TEX, PROB.CODE ANN. § 245 (Vemon Supp.2000), The Appellants also sought appellee's removal as executor and as
courts have held that this statute allows the beneficiaries tmstee. Although fees may not be recovered under section
to recover the attomey's fees they incurred in removing 245 for seeking removal of appellee as tmstee, our review of
an executor in recovering the effects of an executor's the record shows that this effort and the facts supporting this
neglect of his statutory duties. See Barnett v. Barnett, 985 claim were inextricably intertwined with the facts regarding
S,W,2d 520, 535 (Tex,App.—Houston [1st Dist] 1998, writ removal as executor and for breaches of duty. There is an
granted); Lawyers Sur. Corp. v. Larson, 869 S,W.2d 649,653 exception to the duty to segregate when the attomey's fees are
(Tex, App,—Austin 1994, writ denied). rendered in connection with claims arising out of the same
transaction and when the claims are so interrelated that their
[38] Appellee argues that appellants are not entitled to prosecution or defense entails proof or denial of essentially
recovery of fees under section 245 because they requested the same facts. See Stewart Title Guar Co. v. Sterling, 822
no finding by the jury or the trial court as to what amount S,W,2d 1, 11 (Tex. 1991). Because we find the prosecufion
of attomey's fees were incurred in obtaining appellee's of the claim to remove appellee as tmstee was inextricably
compliance with any statutory duty he neglected or in intertwined with the prosecution of appellants' other claims,
removing him as executor. Case law has held that a party we find this case falls within the recognized exception to
seeking recovery under section 245 must present evidence to segregation. Therefore, the trial court erred in refusing to
enable the court to determine what fees are recoverable by the apply section 245 to require appellee to reimburse the estate
estate. See Larson, 869 S,W,2d at 652; Fillion v. Osborne, 585 for the fees incurred by appellants.
S.W,2d 842, 845 (Tex.Civ.App.—Houston [1st Dist] 1979,
no writ). The parties stipulated to reasonable and necessary On rehearing, both parties ask that we also mle with respect
attomey's fees and thus, no request for a finding by the jury to appellate attomey's fees. In the judgment the trial court
or trial court was required, awarded both parties $300,000 in fees for appeal to the court
of appeals and $100,000 for seeking review in the Texas
[39[ Appellants respond that neither evidence nor Supreme Court. These fees were to be paid by the Tmstee for
segregation of fees was required. A party is not required to the Article IV tmst Appellants ask that we hold that appellee
segregate fees unless the party asserts multiple claims, some must also reimburse the Article IV trast for the awards of
of which entitle the party to recovery o f fees and some of appellate attomey's fees to appellants.
which do not See Green Int'l, Inc. v. Solis, 951 S.W.2d 384,
389 (Tex, 1997), Appellants argue that because all of their
As discussed above, section 245 of the Probate Code provides
claims concerned alleged mismanagement of the estate and
that an estate may recover reasonable attomey's fees incurred
sought removal of appellee as executor and tmstee, there were
in removing the executor and in obtaining the executor's
no claims for which appellants were not entitled to recovery
compliance regarding any statutory duty he neglected. TEX.
of fees.
PROB.CODE ANN. § 245 (Vemon Supp.2000), Regarding
appellate attomey's fees, appellee raises the same complaint
The statute allows the estate to recover attomey's fees he raised regarding trial court fees; Appellee claims that
expended for the following two actions: (1) removing the appellants did not segregate their fees between claims for
executor, and (2) compelling compliance with statutory which reimbiusement is available under section 245 and
duties. See TEX, PROP,CODE ANN, § 245 (Vemon claims for which reimbursement is not available. We have
Supp,2000), Statutory duties include: (1) giving notices already held that segregation was not required because the
required by statute; (2) approving, classifying, paying, or
claims were intertwined. This holding extends to appellate
rejecting claims against the estate; and (3) delivering to those
attomey's fees. Accordingly, we hold that under section
entitled exempt property and allowances for support. See id.
245, appellee must reimburse the Article IV tmst, and not
at § 146. An executor is also charged with the duty to use
appellants individually, for appellants' stipulated appellate
reasonable care in that he must care for the property of the
attomey's fees.
estate as a pmdent man would take of his own property. See
id at § 230.
Both parties agree that any award of attomey's fees should
bear postjudgment interest at 10% per annum, compounded
*797 [40] All of appellants claims for damages involved annually (a) from the date of judgment as to the stipulated
allegations of breach of fiduciary duty and, therefore, these
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PLAINTIFFS' ORIGFNAL PETITION - Page 069
Lee V. Lee, 47 S.W.Sd 767 (2001)
$ 1.5 million in trial court attomey's fees, (b) from the date of one-third (#) of the current net income of the tmst, and
this courts' judgment as to fees for appeal to this court, and to the extent such income is insufficient for the following
(c) from the date of the supreme court's ruling on petition for purpose shall distribute currently such amounts from the
review as to the award for fees on appeal to the supreme court. remaining two-thirds l-i) of such current net income as
may be necessary and required to provide for the health,
maintenance and support of [her children, or the survivor],
Exclusion of Evidence of Appellants' Damages Model taking into consideration the availability offimdsfirom other
sources." Thus, Susan Lee was entitled to one-half of the one-
Appellants next challenge the trial court's exclusion of third (one-sixth), of current net income.
evidence of appellants' damage model that was designed
to illustrate what a pmdent executor would have done The statutory definition of income is the return derived
with the sale proceeds from the U.S. Home and Carothers fiom the use of principal. See TEX. PROP.CODE ANN. §
contracts. Because we have held that the evidence regarding 113.102(a) (Vemon 1995). Examples of income are rent on
the unaccepted offers by U.S. Homes and Carothers was real property and interest on money lent. See id, Section
speculative and constituted no evidence of damages for 113.102 instracts the trastee to charge expenses against
breach of fiduciary duty to sell the properties, we need not income in accordance with section 113.111. See TEX.
address this issue. PRORCODE ANN. § 113.102(c) (Vemon 1995). Section
113.111 requires the tmstee to charge against income all
ordinary expenses incurred in administration, management,
or preservation of tmst property, reasonable allowances
*798 Refusal to Award Damages Directly to Susan Lee
for depreciation on improvements, and, unless the court
[41) Appellants contend that, because Susan Lee has a directs otherwise, court costs and fees on periodic judicial
accountings and other judicial proceedings conceming the
' l(y beneficiary interest in the Article IV trast income,
income interest. See TEX. PROP.CODE ANN. § 113.111
she was entitled to a recovery of ' I f , of the judgment (Vemon Supp.2000).
damages representing tmst income. In support of this
argument, appellants cite Comment H to section 282 ' ofthe The will gives appellant, Susan Lee, an interest in "current
Restatement of Tmsts; net income," not gross income. Therefore, she was entitled to
any Article IV tmst income, minus expenses as described in
section 113.111. She was not entitled to tmst income before
Disposition of the Proceeds Recovered. Where the trast deduction of expenses. Accordingly, the trial court properly
is of such a character that i f the trastee had brought an awarded the damages to the Article IV tmst and not to Susan
action against the third person, the proceeds would be Lee directly.
immediately payable to the beneficiary, the beneficiary
is entitled to keep whatever he recovers from the third
person under the mles stated in Subsection (2) and (3).
RESTATEMENT (SECOND) OF TRUSTS § 282 cmt. Prejudgment Interest
H (1959). Secfion 282, however, addresses when a
1. Simple or Compound Interest
beneficiary may maintain a suit against a third person.
It does not concern suits by beneficiaries against the [42] Appellants next complain that the trial court awarded
tmstee. Accordingly, we do not find Comment H prejudgment interest *799 at the rate of 10% per annum,
applicable. computed as simple interest, when the award should be
10% per annum, compounded daily. Appellants contend that,
Unless a trastee is under a duty to pay money immediately and
because the claims in this case do not fall within any of the
unconditionally to the beneficiary, the beneficiary may only
prejudgment interest statutes, the case is controlled by Cavnar
sue to compel the tmstee to restore money to the trust. See
RESTATEMENT (SECOND) OF TRUSTS § 198 & omts. V. Quality Control Parking. Inc., 696S.W.2d549 (Tex.1985),
B-D (1959). Katherine Bamhart's will provided in Article which provides for interest compounded daily.
IV that the tmstee was to distribute equally to her children,
Although we agree with appellants that prejudgment interest
and to the survivor between her children^ "at least quarterly,
in this case is not controlled by statute, the case on which
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PLAINTIFFS' ORIGINAL PETITION - Page 070
Lee V, Lee, 47 S.W.3d 767 (2001)
appellants rely was overruled after appellants filed their brief. [461 [47j "Prejudgment interest is 'compensation allowed
In Johnson & Higgins of Texas, Inc. v. Kenneco Energy, by law as additional damages for lost use of the money
Inc., 962 S.W.2d 507, 532 (Tex. 1998), the supreme court due as damages during the lapse of time between the
held that prejudgment interest in cases conhoUed by common accraal of the claim and the date of judgment'." Id. at 528
law is to accrue at the rate for postjudgment interest and it (quoting Cavnar v. Quality Control Parking, Inc., 696 S.W.2d
is computed as simple interest Accordingly, the trial court 549 (Tex.1985)). The two legal sources for an award of
properly computed the prejudgment interest in this case as prejudgment interest are general principles of equity, and an
simple interest enabling statute. See Kenneco, 962 S.W.2d at 528. Statutory
provisions for prejudgment interest apply only to cases
involving claims *800 of wrongfiil death, personal injury,
2. Accrual Date for Calculation of Prejudgment interest property damage, and condemnation. See TEX. FIN.CODE
[431 In his first motion for rehearing, appellee claimed that ANN. §§304.102,304.201 (Vemon Supp.2000). Because the
prejudgment and postjudgment interest should be awarded on claims in this case do not fall within the statutory provisions,
the $1.5 million in executor fees required to be reimbursed an award of prejudgment interest in this case is governed by
by appellee. Although appellee did not contest the imposition the common law. See Kenneco, 962 S.W.2d at 530.
of prejudgment interest he claimed that it should be awarded
pursuant to Johnson & Higgins of Texas, Inc. v. Kenneco
[481 Appellants argue that prejudgment interest accraed
Energy, Inc., 962 S.W.2d 507 (Tex. 1998). The parties
from the dates Ronald Lee paid himself executor fees.
disagreed on the date from which prejudgment interest should
Because Lee paid himself fees in a number of payments over
accrae. Appellants also complained that appellee had not
a two-year period, appellants have provided a chart depicting
preserved this issue for review because he did not raise this
the various payments and the amount of interest on each, with
complaint either in the trial court or in his brief in this court.
a total amount due of $2,051,311.79. Appellee disagrees with
appellants' calculation and contends that appellants' argument
[44] [45| We tum first to the preservation issue. A point is based on the approach described in the Cavnar case, in
of error not preserved is not before the appellate court for contravention to the more recent Kenneco case.
review. Allright, Inc. v. Pearson, 735 S.W.2d 240, 240
(Tex. 1987). An assignment of error raised for the first time
In Kenneco, the court held that "under the common law,
in an appellant's motion for rehearing is too late to be
prejudgment interest begins to accrae on the earlier of (1) 180
considered. Washington v. Walker County, 708 S.W.2d 493,
days after the date a defendant receives written notice of a
497 (Tex.App.—Houston.[ 1st Dist.] 1986, writ refd n.r.e.).
claim or (2) the date suit is filed." See id. at 531. A " 'claim'
is 'a demand for compensation or an assertion of a right to
The trial court awarded prejudgment interest, according to the
be paid'." See id. Appellee contends the first date he received
law in existence at that time, which held that prejudgment
notice of a claim with regard to executor fees paid, was the
interest began to accrae six months fi-om the date of the
date suit was filed. We have not located in the record an eariier
occurrence giving rise to the cause of action. Cavnar, 696
date of notice of a claim with respect to the executor fees.
S,W.2d at 555. The prejudgment interest at issue here,
however, does not concern the prejudgment interest on the
[49] Appellants next argue that accraal of prejudgment
trial court awards we have upheld. Instead, the prejudgment
interest under Kenneco would nullify appellee's duty of
interest at issue here concems interest on the $1.5 million
disclosure as a fiduciary. Appellants base this argument on
this court is rendering in favor of appellants. An award
the following premisses: (1) an executor owes a duty to
of prejudgment interest on this new award of damages is
disclose all material facts affecting the beneficiaries' rights,
an automatic legal consequence since appellants pled for
see Huie v. DeShazo, 922 S.W.2d 920, 923 (Tex.1996); and
prejudgment interest. Neither the award of prejudgment
(2) courts have historically required breachingfiduciariesto
interest, nor the accraal date of this interest required a point
pay prejudgment interest from the date the breaches occurred.
of error for preservation. Because the date of this new award
See, e.g., Ward v. Maryland Cas. Co., 140 Tex. 124, 166
implicates case law that succeeds Cavnar, we must consider
S.W.2d 117, 119(1942).
whether the Cavnar rale regarding accraal of prejudgment
interest applies..
Despite the previous holdings that breachingfiduciariesmust
pay prejudgment interestfi-omthe date of breach, the Kenneco
ivesfLAw Kciue; •oi.ivci
PLAINTIFFS' ORIGINAL PETITION - Page 071
Lee V, Lee, 47 S.W.3d 757 (2001)
in excessive executor fees, in addition to the $659,506,50
court held that the rule it announced applied to all cases that
previously awarded by the trial court, for a total award of
do not fall within the statutory guidelines for prejudgment
$2,198,355.00 in excessive executor fees; (2) reverse the
interest. See 962 S.W.2d at 531. By making no exception
portion of the judgment denying plaintiffs' request to remove
for breach of fiduciary claims, the supreme court impliedly
Ronald Lee as the Tmstee of the Article IV tmst and we render
overruled all cases contrary to Kenneco. Therefore, we are not
judgment removing Ronald Lee as Tmstee ofthe Article IV
persuaded to create an exception to the Kenneco rule in cases
tmst; and (3) we order the following: (a) that Ronald Lee
involving breaching fiduciaries.
reimburse the Article IV tmst for appellants' stipulated $1.5
million in trial court attorney's fees; (b) that Ronald Lee
We hold that the date of accmal of prejudgment interest on
reimburse the Article IV tmst for the appellants' stipulated
the SI.5 million award rendered by this court is July 28,
$300,000 in appellate attomey's fees; (c) that, in the event
1993, the date of filing of Plaintiffs' First Amended Petition.
either party appeals to the Texas Supreme Court, Ronald Lee
The prejudgment interest on those trial' court damage awards
shall reimburse the Article IV tmst for appellants' stipulated
upheld by this court accmes as the trial court mled, according
$100,000 attomey's fees; (d) that the Article IV tmst, on
to Cavnar.
behalf of appellants, recover from appellee prejudgment
interest on the $1,538,848.50 in excessive executor's fee
The Kenneco court further held that prejudgment interest
awarded by this judgment at the rate of 10% per annum,
accmes at the rate for postjudgment interest and it is to be
computed as simple interest, from the date of notice ofthe
computed as simple interest. See id. at 532. The rate of interest
claim, July 28, 1993, through the date preceding the day of
is 10%. See TEX. FIN.CODE ANN. § 304.003 (Vemon
entry of judgment, October 24, 1996; (e) that the Article IV
Supp.2000).
tmst, on behalf of appellants, recover postjudgment interest
at the rate of 10% per annum, compounded annually, on the
Accordingly, we hold that appellants are entitled to
total of (i) the excessive executor fees awarded by this court
prejudgment interest on the $ 1.5 million in excessive executor
($1,538,848,50), (ii) the excessive executor fees awarded
fees required to be reimbursed, at the rate of 10% per annum,
by the trial court ($659,506,50), and (iii) the prejudgment
computed as simple interest from the date of notice of the
interest awarded on those amounts, from the date of the trial
claim, July 28, 1993, to the day preceding entry of judgment,
court's judgment, October 25,1996; and (f) that appellee shall
October 24, 1996. Appellants are entitied to postjudgment
reimburse the Article IV tmst for postjudgment interest at
interest on this award calculated from the date of judgment,
10% per annum, compounded annually (i) from the date of
October 25, 1996.
the trial court's judgment as to appellants' $1,5 million in trial
court attomey's fees, (ii) from the date of this court's judgment
as to fees for appeal to this court, and (iii) from the date of
*801 Conclusion the supreme court's mling on petition for review as to the
award for fees on appeal to the supreme court. We affirm the
We find the trial court erred: (1) in deducting $1.5 million , remainder of the judgment
from the jury's finding of excessive fees; (2) in refiising to
remove appellee as tmstee; and (3) in refiising to require
appellee to reimburse the estate for appellants' attorney's fees. All Citations
Accordingly, we (1) reverse the portion of the judgment
awarding the Article IV tmst $659,505.50 and render 47 S.W,3d 767
judgment that the Article IV tmst recover $1,538,848.50
Footnotes
* Senior Chief Justice Paul C. Murphy sitting by assignment
1 In his brief, appellee cited to Arce v. Burrow, 958 S,W,2d 239 (Tex.App.-Houston [14th Dist] 1997, writ granted). Since
submission of this case, the Texas Supreme Court has Issued its opinion affinning in part, and reversing and remanding
in part. See Burrow V. Arce, 997 S,W.2d 229 (Tex.1999).
2 This amount represents the estate tax cost of $660,000, less $144,087 the estate would have owed in interest if appellee
had not paid himself $2.2 million of the total fee.
PLAINTIFFS'ORIGINAL PETITION - Page 072
L e e V. L e e , 47 S.W.3d 767 (2001)
3 Appellee also cites Deloitte. & Touche v. Weller, 1997 WL 572530 (Tex.App.—Amarillo 1997), op/n/of7 withdrawn and
superseded on rehearing, 976 S.W.2d 212 (Tex.App.—Amarillo 1998, writ denied) The We//eropinion to which appellee
cites was withdrawn on rehearing and the substitute opinion does not address the "benefits rule." See Deloitte & Touche
V. Weller, 976 S.W.2d 212 (Tex.App.—Amarillo 1998, writ denied). Accordingly, we do not discuss this case.
4 We address the AWn holding in further detail later in this opinion.
5 In his response brief, appellee claims that the trial court "determined that'cause' would exist to remove if the jury had found
gross negligence." Appellee then states that appellants did not complain below and do not complain on appeal that gross
negligence is not a legally valid basis for removal. Because the jury refused to find gross negligence, appellee reasons
the trial court properly declined to remove appellee as trustee. Appellee misrepresents the trial court's determination.
The trial court actually said he could find grounds for removal if there was a finding of e/Y/rer gross negligence or breach
of fiduciary duty and damages.
6 The former statute has been rewritten upon codification to set out the grounds in an enumerated fashion; however, the
language of the statute remains the same. Compare Act of April 14,1993, 48th Leg., R.S., ch. 148, § 39, 1943 Tex. Gen.
Laws 232, 246 (repealed) wrth TEX. PROP.CODE ANN. § 113.082 (Vernon 1995).
7 This holding seems to fly in the face of the plain language of the statute. The statute allows recovery of attomey's fees
if the executor defends the will in good faith and with just cause, whether or not he or she is successful in admitting the
will to probate. See TEX. PROB.CODE ANN. § 243 (Vernon Supp.2000). Although the recovery of fees is expressly not
tied to success in admitting the will to probate, It is tied to good faith defense. By holding that a finding of good faith was
inapplicable where the executor was successful in admitting the will to probate, the court ignored the statutory language
and tied recovery of fees to success in admitting the will.
8 This is somewhat similar to the standard for official Immunity, which has been held to protect "all but the plainly
incompetent or those who knowingly violate the law." Courson v. McMillian, 939 F.2d 1479,1487 (11th Cir.1991) (quoting
Ma//ey V. Br/ggs, 475 U.S. 335, 341, 106 S.CL 1092, 89 L. Ed. 2d 271 (1986)).
9 Appellants incorrectly cite to section 294, but 294 has no Comment H. Appellants apparently intended Comment H under
section 282, which concems suits in equity by beneficiaries.
End of D o c u m e n t © 2016 T h o m s o n R e u t e r s . N o claim to original U.S. G o v e r n m e n t Worlds.
Vv'ESTLAW (•'.• 2016 1 hom$or> Routers- :^JQ csaim to onginai v.i^ Gcvor^imtni Works.
PLAINTIFFS'ORIGINAL PETITION - Page 073
PLAINTIFFS' ORIGINAL PETITION - Page 074
0%e jrssi«te«®S% Oasisr* srf
NO. 14-97-<»l*2-CV
SUSAN CAMD4JBUES, nSSOTVIDUAl-i-Y, AND
AS TitUaTKB OF THE ARTJO-B V TRUST TOR Cwwvty. (Tr. C l . No. I
T H B USNVfTT or SVSAN C . OQISON. AND
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IBAJIJWART.
T O T H K r R O A A T X C O t W T NO. 1 O r HAMU8 COUNTV,
PLAINTIFFS' ORIGINAL PETITION - Page 075
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PLAINTIFFS' ORIGINAL PETITION - Page 077
EXHIBIT "
PLAINTIFFS' ORIGINAL PETITION - Page 078
25, 2 0 1 6 9;33AM M V LLP flo, 6 3 1 2 P. - 5 / 4 5
Cause No. 137506-403
Estate ofKatherine Pillot Lee Bamhart, § In the Probate Court
Deceased §
No. 2 of
§
Susan Carnille Lee, et al,. §
§
Plaintiffs, §
§
V. § Harris County, Texas
§
Ronald E, Lee, Jr„ et al,
§
Defendants, §
APPLICATION TOAPPROVE SETTLEMENT AGREEMENT
TO THE HONORABLE JUDGE OF SAID COURT;
COMES NOW Applicant LEGACY TRUST COMPANY, in its capacity as the Court
appomted Receiver of the Testamentary Trust created under Article IV of the Last Will and
Testament of Katherine Pillot Lee Barnhart (hereinafter referred to as "Applicant"), and in
yuppurl Ihtjrcof would respectfully show unto the Court the following;
BACKGROUND
1, The Last Will and Testament of Katherine Pillot Lee Bamhart (hereinafter
referred to as the "Will") created a Trust under Article IV ofthe Will (hereinafter referred to as
the "Article IV Trust") for the benefit of Katherine Pillot Lee Bamliart's two children, Ronald
Ellsworth Lee, Jr. (hereinafter referred to as "Mr. Lcc") and Susan Camille Lee (hereinafter
referred to as "Ms. Lee"), and Katherine Pillot Lee Bamhart's grandchildren.
2. ByordcrofthisCoiutinleev. lee, Case No, 137,506403 dated June 18,2015,
(hereinafter referred to as the "June 18, 2015 Order"), the Court removed Susan Camille Lee as
PLAINTIFFS'ORIGINAL PETITION - Page 079
n, 25, 2 0 1 6 9;33AM M Y LLP Wo, 6 3 1 2 ' P. 6 / 4 5
Trustee of the Article N Trust and appointed Applicant to serve as a Receiver for the Article TV
Truiit pursuant to Section 114.038 of the Texas Property Code.
3, The June 18, 2015 Order, among other things, ordered the following with regard
to the Article IV Trust:
"3- The Receiver ia authorized and directed to:
a. Exercise all rights, powers and duties of the Trustee ofthe Trust created
Under Article IV of the Will, and all powers granted to trustees Under the Texas
Tmst Code;
i. Collect, compromise, or settle all debts owed to the Trust;
m. Institute such legal proceedings as the Receiver deems necessary
or advisable to obtain constructive or actual possession of assets of the Trust or to
recover dawages suffered by the Trust; provided however, that the Receiver shall
have discretion not to pursue litigation against Ms, Lee that'is undertaken by
beneficiaries of the Trast for the benefit of the Trust;
0. Take any and all actions reasonably necessary and appropriate to
exercise the powers, duties, and responsibilities set forth herein.
4. Ajudgment was entered against Ronald E. Lee in Lee v. Lee (Case No. 137,506,
Harris County Probate Ct. No. 2), as modified by the decision in Lee v. Lee, No, 14-97-00162-
CV, 47 S.W,3d 767 (Tex. App. ~ Houston, 2001), and reflected in the Mandate issued by the
Fourteenth Court of Appeals dated February 8, 2002 and the subsequent Order Granting
Application for Writ of Scire Faciaa and to Revive Dormant Judgment from this Court under
Cause No. 137,506-402 which was filed on December 7, 2012 (hereinafter collectively referred
to as the "Judgmenf), The Judgment included an award to the Article IV Trust of 31,538,848.50
representing excess executor fees Which were previously collected by Mr. Lee, in his capacity as
the Independent Executorftorathe Estate of Kathcruie Pillot Lee Bamhart, Deceased (which
21 P a g e
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reduced the amoimt that passed under the Bamhart Will to the Article IV Trust); legal fees of
$1,900,000, and prejudgment interest of $499,177.16, totaling $3,938,025,66, plus post- .
judgment interest. The Judgment, together with all rights associated therewith - including but not
limited TO principal, attorneys' fees, interest, and court, costs, constitutes a debt owed to the
Article rv Trust, and is therefore an asset of the Article IV Trust.
5. A controversy exists between Mr. Lcc and the Article IV Trust regarding the
amotmt, if any, that remains outstanding on the Judgment after all credits due Mr. Lcc and
payments made by Mr, Lee are applied. ,
6. The Article IV Trust and Mr, Lee have each held undivided interests in property
known as the River Bend Farm, consisting of approximately 640 acres in Wharton County,
Texas. Mr. Lee acquired a twenty-five percent undivided interest in this propertyfromthe estate
of his father, Ronald Ellsworth Lcc (Sr.). The Article IV Trust acquired afiftypercent interest
under the Barnhart Will.
7. The Article IV Trust and Mr. Lee have each held undivided interests in property
known as the Cap Rock Ranch, consisting of approximately 6,431 acres, in Real County, Texas.
Mr, Lee acquired a twenty-five percent imdlvided interest in this propertyfromthe estate of his
father, Ronald Ellsworth Leo (Sr.). The Article IV Trust acquired afiftypercent interest under
the Bamhart Will.
8. A controversy exists regarding the ownership, management,. and accounting for
revenues and expenses of River Bend Farm and Cap Rock Ranch between the Article IV Trust
and Mr. Lee,
9. Mr, Lee and Applicant, as Receiver of the Article IV Trust, desire to settle and
compromise disputes between them so as to (1) facilitate cooperation between Applicant, as
Receiver ofthe Article IV Trust, and Mr. Lee with respect to the continued administration ofthe
PLAINTIFFS'ORlGrNAL PETITION - Page 081
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Axticle IV Trast; (2) reduce expenses otherwise Hkely to be incuited by both Applicant and Mr,
Lee in conjunction with the claims and disputes which presently exist between them; (3) provide
certainty in the management of the affairs of the Article IV Trust and Mr, Lec; (4) preserve and
enhance the value of River Bend Farm and Cap Rock Ranch and provide for efficient and
effective management of these valuable properties; and avoid partition of one or both properties
which likely would impair the value of the properties to the dehiment of the Article IV Trust and
Mr, Lee; and (5) resolve any and all issues related to the Judgment.
10. The proposed terms of settlement between Applicant and Mr. Lee arc set forth in
tiie Settlement Agreement and related settlement documents, all of which are collectively
attached hereto as Exhibit "A," For reference purposes, the Settlement Agreement and related
settlement documents (see attached Exhibit "A") will hereinafter be referred to as the
"Settlement Agreement",
REQUEST FOR AUTHORITY TO ENTER INTO SETTLEMENT AGREEMENT
11. As set forth throughout Texas case law (and more specifically Section 64.004 of
the Texas Civil Practice &, Remedies Code), the rules of equity generally govern all matters
regarding receiverships. See Harrington v. Schuble, 608.S,'W.2d 253 (Tex. Civ, App,—^Houston
[I4th Dist,] 1980, no writ) (expressing that the mles of equity govern receiverships and to
conform witli the rules of equity, the receiver should have applied to the court for authority to
take action on the sale of real property); see also TEX. CFV. PRAC. &. REM. CODE §64,004.
12. Furthermore, Texas case law supports that a receiver obtain court approval prior
to compromising or scttlmg claims. See Knox v. Damascus Corp., 200 S.W,2d 656, 659-60
(Tex. Civ. App.—Galveston, 1947, no writ) (although judgment appointing the receiver granted
the power to "institute such suits as might be necessary to enforce his order, judgment and
PLAINTIFFS'ORIGINAL PETITION - Page 082. '
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decree," the court maintained that the receiver obtain express authority from die court prior to
•settling claims),
13. As detailed above, the June 18, 2015 Order expressly grants to Applicant, as
Receiver of the Article IV Trust, the power to "Collect, compromise^ or settle all debts owed to
the Trust" and - . . "institute such legal proceedings as the Receiver deems necessary or advisable
to obtain constructive or actual possession of assets of the Trust or to recover damages suffered
by the Trust; provided however, that the Receiver shall have discretion not to pursue litigation
against Ms, Lcc that is undertaken by beneficiaries of the Trust for the benefit of the Tmst," .
14. In an attempt to comply with the rules of equity, and in an abundance of caution,
Applicant is filing this Application for Authority to Enter into Settlement Agreement for the
purpose of obtaining the Court's approval ofthe Settlement Agreement. By and through the
filing of this Applicatioti and a corresponding Notice of Hearing, Applicant hereby represents to
the Court that it has provided appropriate notice regarding the Application to all parties in this
matter.
15. For all of the reasons which are Stated above. Applicant respectfiilly requests that
the Court approve the terms of the Settlement Agreement, and authorize Applicant to enter into
the Settlement Agreement on behalf of the Article IV Tmst. In support of Applicant's request in
this regard, Applicant alleges and thereon believes that the Settlement Agreement is in the best
interests of the Article TV Tmst,
WHEREFORE, PREMISES CONSIDERED, Applicant respectfully requests (i) that that
the Court approve the terms of the Settlement Agreement; (ii) that the Court find that the
Settlement Agreement is in the best interests of the Article IV Trust; (iii) that the Court grant
AppUcant, in its capacity as the Receiver ofthe Article IV Trust, the authority to enter imo the
Settlement Agreement on behalf of the Article IV Trust; and (iv) that Applicant have and recover
5|Page • '
PLAtNTIFFS'ORIGINAL PETITION - Page 083
n. 25, 20 1 6 9:34AM M [/,. i UP No, 6 3 1 2 P, ! 0 . / 4 5
such other and farther rehef as it may show itself justly entitled to receive.
Respectfully submitted,
MACINTYRE MCCyLL0CH S;
& YOUNG,
W. CAMERON McCULLOCH
State Bar Number 00788930
ABRJ A. GRAVES
State Bar Number 24049999
2900 Weslayan, Suite 150
Houston, Texas 77027
(713)572-2900
(713) 572-2902 (FAX)
Cameron • McCulloch(@,mml awtexas .com
Adri. Gray cs@mmlawtexas .com
ATTORNEYS FOR APPLICANT LEGACY TRUST
COMPANY, IN ITS CAPACITY AS THE RECEIVER
FOR THE ARTICLE IV TRUST
6I Pag e
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CERTIFICATE OF SERVICE
ify' that a true and correct copy of the foregoing inshument was sent to the
/ia"United States Certified Mail, return receipt requested, and/or via facsunile on this
day of January, 2016:
Mr. Eric M, EngUsh
Mr. Neil Kenton Anderson
Ms. Amy TcUcgcn
Porter Hedges LLP
1000 Mam Street, 36* Floor
Houston, Texas 77002
(713)228-1331 (Fax)
Mr. Thomas A. Zabel
Zabel Freeman
1135 Heights Blvd.
Houston, Texas 77008
(713) 802-9114 (Fax)
Mr. Daniel J. Sheehan
Mr. John M, Phelan, Jr,
Mr. M, Patrick McShan
Daniel Sheehan & Associates, LLP
2501 North Hanvood, Suite 1280
Dallas, Texas 75201
(214) 468-8803 (Fax)
Mr. John W. Porter
Ms, Keri Brown
Baker Botts, LLP
One Shell Plaza
910 Louisiana Street
Houston, Texas 77002-4995
(713)229-1522 (Fax)
W. Cameron McCulloch
Adri A, Graves
7| P a g e
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Settlement Agreement Between'Ronald Ellsworth Lee, Jr. and Legacy Trust
. Company as Receiver for the Trust Created under Article IV of the Will of .
... , ; ' . Katherine Pillot Lee Barnhart
Recitals: ' •
•1. ' Under the Last Will and Testament of Katherinfi Pillot lee. Bamhart admitted to
probate inftarrisCounty, Texas under Cause Number 137,506 (the "Barnhart WilP'), trusts were
created for the benefit of her childiren and grandchildren.', One. of the trusts created was under
Axticlb.IV of the Bamhart Will (the/*Articlc IV Trust"). :••
•2- . kpnald Ellsworth Lee, Jr.- ("Mr. Lee'') is'the son of Katherine PiUot Lcc Bamhart,
and a bcneficiary .under the Article TV Trust- As suchj he is entitled to inandatory distributions of
ashareof the income of the'Article .IVTrust • '
.,3. • No distributions, of iucome-of the Axticle IV Trnst have been made'to
more than, ten years,.notwitbstanding the fact that the Trust had net income and.in many years '
reported to the Internal.Revenue Service that .^Ir. Lee had tait^ble income, attribntable to the
Artide IV'Tnast. „•;' ...... ''•:;'' . '• .'••.••.
'• 4- ' Mr. Ixe- filed suit against Susan Camille Lee ("Ms, Lee"), Trustee of. the Artide •
iV. xrust, m Lee v. i.ee,': uasc No.' l37,iU6-403, Hariis.Cbxmty" Probafc Court NoV 2,'.seeking
removal of Ms. Lee as.Trustce, and damages suffered by Mr.'.Lce and'the Artidc IV Trust,for •
• which Ms-' Lec was'responsible as Trustee, among 'other thirty. ("Mr.. lie's L^wsuilf'),' ' • '. ;
,5. By order of the- Harris Couiity. Probate Court No. 2 in Lee v. Lee,. Case No.
.137,506-403 dated'juuc. 18,-2015/0*Jmic'.X8, 2Gl5.0rdeO""^ remoybd Ms: Lee as'
Trustee of the Article.IV .Trast and appointed Legacy Tirast Company'.asi Receiver for the Article
IV Trust ("Lcga:cy" or the.."Rcceivcr"). The jiine, 18, ioiS Order, among other things, ordered; ,
"3. The. RcccivM is authorized'and directed to:" ,.
'5168145 • ' -'^ • ' •' •.-•;•• •••• ; •'•
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" ' - a. Exercise all rights, powers and dutiesof the-Trustee of the Trust created
under Article IV of the 'Wih, and all powers granted to. trustees under theTexa,? ,
Trust Code; . ' ' ,- , ; • \ • .• ' • '
- c. • ' Manage and direct the- business and financial affairs of the Trust
• and any asset or entity owned or controlled by the .Trust; • •
h • • '' Collect^ coihpromise, or settle all debts owed to the. Trust; -
' ' . - . m- , • Institute such legal proceedings 35 the Receiver deems necessary
• or advisable to obtain constmctive.or actual possession of assets of the Tmst or to .
recover damages suffered by the Trust; provided however, that the Receiver shall -
, have discretion not to pursue litigation against Ms. -Lec that; is undertalcen by ' .,
beneficiaries of the Trust for the benefit of the Trust; • •'
' • . 0- - Take any and iaU actioifs reasonably necessary aEd..ippropriate to
'fcxercisethe powers, duties, arid resporisibilities set forth herein,- , '• ' • „
. . , 6. : Mr. Lee, on hi& own behalf and that of hi^i successors and assigns, and Legacy as
•• Receiver ofthe Axticle IV Tfustaiid on behalf of the Article IV Trust, andLegacy's Successors as '
Receiver and/or Trustee, -are the parties to thia Agreemeaat • •• '
7. A judgment Vi^as entered ag^iiast Mr. L.e6 in Xee.v.Xee (Case No.. 1-37"^
County Probate Ct. No. 2), as modified-by tho decision hi Lee v'-Lec, .;No.- 14-97-00162-CV, 47
S.W.3d 767 (Ic-x.: App. - Houston^ -2001), and refl.ected in the Mandate issued by the Equrteeiith.
. Court .df Appeals dated February. 8, 2002 andthe. Order .Granting Application .for Writ of Scire
Facias.and.to Revive Bormant Judgment of £b Harris Cpmity-Pjbobatc Court.No.-'2-m Cause No;.
. 137,506-402, filed Decemi7er'7,2J6l2 {th0 "Judgment'-)- thfe. Judgment included an award to the
•Article IV Trust of $1,33.8,845^0 reprosentiiig excess.'executor' fees collected by Mr,- Lec as
P L A I N T I F F S ' O R l d l N A L PETITION - Page 088
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• Independent Executor from. the Estate of ICatherme Pi)lot I-ee Barnhart (which reduced the ,
amount that passed under the Barnhart Will [o the Article IV'Trust); legal fees of $1,900,000,
and prejudgment interest of $499,177,16, totaling $3,938,025,66, plus postjudgment .interest. The
• • Judgment .'and all rights associated therewith, including-hiit'not limited to principal, attorneys''
fees, interest, and court costs, constitutes a debt owed- to the'Trust and an asset of the Article IV.' ,
•Trust. • •• . •• . '• . , - •- .- ' ' ' .'
8. Mr. Lee lias made-payment-for the benefit of the Article IV Trust on tlic .
Judgment, incluclmga'payraent of $8,000,000 ia2015.' ' ' • ...
9. ' Mr. Ixe disputes-whether any amount remdna outstanding on the Judgment aft"
crediting amounts that were due hhn.from the Article IV Trust and his payments to the Article
.IVTrust. . ' - •• ••. -''•/•• •'' ••-' .. . •
10. A controversy exists between Mr. Lee- and the Article IV Tnist regarding the
amount,' if .any, that rem'aiijS 'outstanding on the Judgment after all credits due "Mr. Lec and
payments.made by. Mr. Lee are applied. ' •
'• ,' 11. The Article,rv Trost and Mr.-Lee have each held undivided interests in property'.
known as the River Bend Farm,:consistingof.apprdxima'tely, 640. acres .in Wharton County,
Texas. Mr. Lee acqaued-a twenty-five percent-undivi'ded interest-in .this propertyfromthe estate
of his father, flonaM Ellsworth Lcc (Sr.); The Article IV Tnist acqukcd a fifty percent interest'
under the Barnhart Will.,'.,•'-•'•••;-.-.' ••'••-..';.•.••••,-,/ ]•.••• •• • .-.-
- 12. - . The-Artick IV Trust and.Mr. tec have each- held undivided' interests in property.
•known as tbe Cap Rock Ranch, consisting of approximatdly 6,431'aaes, in Real County, Texas.
Mr. Lee acquired a twenty-fiye percent undivided- interest ia this' property from the estate of his
51B514.5 , '.' . '• ,' • . ' , ' • - • ; "~ • •• ••• ,-'. -•' •• .'. ' ' •"• •" . •• .'.• • .. . •• .'.'
PLAINTIFFS'ORIGINAL PETITION - Page 089
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father, Ronald EUsworUvLee (Sr!).. The Artide IV Trust acquired a fifty percent interest under • • ,
the Barnhart Will- • / .' '"
• • 13V A controversy exists regarding the ownership, marragcmcut, and accounting for • ,
revenues and'expenses of River Bend ^arro! and Cap, Rock Ranch between the. Axticle IV Tmst • • .
and Mr. Lee. • • • • ' , •• • •, \ •, • ' ••' . •' . • , ' .
14. Mr. Lee and Legacy as Receiver of the Axticle IV Trust- desire to settle and -'
compromise disputes between them so as . to (1) facilitate cooperation- between-Legacy as •
Receiver of the Article IV Trust and as a ifidudary. to,Mr. Lee with respect to the Article XV
Trust, (2) reduce expenses otlicrwise likely to' be iucurrcd by each of thcnri associated with the
• • clakns and disputes betweeu them, (3) provide certainty iu the management of the affairs of Mr.
Lee and of the Article IV Trust, (4) preserve and enhance the value of River Bend Farm and Cap ,
- Rock Ranch and provide for efficient and effective management of these valuable properties, and ,'
• avoid partition of them which hkely would impah the value; of them to both Mr. Lee and the -
Article IVTrust;.and (5) resolve any and all issuesrelatedto the Judgment,'. • . - '.^ . ^ •
' Aixordmgly, Mr, Lee and Legacy as Receiver agree as fdUowsr ''^ •;• • • '
Agreements: - -
. .. 15.-. • On the Qosing -Date (defined belov/), Mr.'.Lee will' execute a. deed" to. Legacy-
Trust Company as Receiver of the Article TV Tnisfto the River Pend Farm m. Wharton 'County;
. -Texas Substantially in the form attached as.Extobifl.- '. ••-
• 16. .. .- On the Closing .Date, MrL'Lee will exetnte' a Rrorcdssory Note to Legacy Trust;'
. Company as Receivcir of the Artidc IV Trust substantially.-m the form attached as Exhibit 2 in-,.
tlie amount of $4,000,000.; - . - ' • ' ' • ' . .- - .' • • ' . .. ' • - • • ' •'; . • - ' ,-
, •' 6166.145' ,' • . "• '• ' .' •..;.•'_. •. ''• ' ',••,..-, ' - .' " ' / • - ' , ' ,--.•!•
PLAINTIFFS'ORIGINAL PETITION - Page 090
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17. On the Closing Date, Mr. .Lee will execute tlie AgrccmcQt. Respecting Certain .''
Rrospective Real Estate Acquisitions by, Legacy;'Trust Company/subatantiaily in'ih'e' form
attached as Exhibits. •• , / ../,••••.•..'.'..•••••• .••.'•.••.••'.;••,;•
18. ' Effective, upon the Closing Date'.and.in cohsidcratibn of the- transactions and
releases described in Paragraphs 15,16,19, and 20, Legacy as Rcceiver of the Article W. Trust
and on behalf of the Article IV Trust and Legacy's successors as Receiver and/or Trustee shall.
• a. • scU and convey the Judgment, including but not Emited to all principal, attorneys'
• fees, interest and court costs thereon and associated with the Judgment to Mr.'
Lee, and agrees to file a Satisfa.ction of Judgment iriXee vi iee (Cas6.No-
. '• 137,506, Harris County Probate Q. No. 2) substantially in. the form of Exhibit .4, •
.: acloiDwledging that the Judgment has been fuUy satisfied; . • '
. ' . . b. . ' record in the deed records ofajl jurisdictions in which the Judgment has been •.
'. abstracted a Bill of Sale substantially in the fomx attached.as Exhibit 5; . . ..•
c. agrees to ijiderrmify and hold.harmless.Mx: Ixefiromall claims based upon the : •
'. •' • Judgment; and • •"'••'••. • ; .• y - \
d; • ' releasesMr. Lee, his successors, and assignsTrom all liability under or related to •,
claims for amounts due from Mr, Lee oh account of his owfiership of an
. • • undivided 25 per cent interest iti River Bend Farm and an undivided 25 per c"^
interest in Cap Rock Raack .
19. . Effective upon the Closing.Date and'in consideration of the transactions and
, releases, dcscri'bed in Paragraph 18, Mr. Lee op Ms own behalf and' that of his successors and
assigns releases Legacy as Receiver of'the Article tV Trhst and. its successors, as Receiver, and/or,
. Trustee of the Article IVTrust from the foUowiag claims: . ' , .
• a.- Claims of Mr. Lee fox his daiuages, inten^st, or other expenses because amounts due .
to himfromthe Article WTrust for his share of . income of the Artide IV Trust with
. • respect to the mandatory distribution of one^third of the Axticle TV Trust's net income
for all periods prior to December 31,2013, produced from revenue actually collected
on a cash basis by the Trust prior, to December 31,2013 were oir. will be paid or
• credited to him untimely,
b. Claims of Mr. Leo for payments of income pro duced fcomi revenue actually collected
. on a cash basis by the trust prior tp, December 31,2014 fbir bis health, maintenance,
5168145 • • ,• • ' ., " . • ;..' . ] • '• ••'•'••.'••'.''' • '
PLAINTIFFS'ORIGINAL PETITION - Page 091
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., •. ; • and support in excess of the mandatory distribution of one-third of the Axticle;IV
Trust's'n.etincome ,' •• ' • .. •' •• .' , . •
. -. ,' c. Clauns against the Article IV Trost for attorneys'fees kcuired.by Mr. Lee prior to . •
June 30,2015 not prtviously reimbursed by Legacy as,Receiver.'
d. Qaims for tmstee's fees and trustee's expenses due Mr. I^e prior to'Jmie 3 0 , ^ .
e. Claims against the Article IV Trost for attorney^'' fees mcurrcd by Mr. Lee in •
cormection with die Judgment or this Settlement Agre'ement. • •. • •
,t Claims for expenses'of the Trust incmred tod p'aid by Mr^
. for which he has not been previously reimbursed.' •
g. Claha5 against the Artidc IV Tmst related to the accountmg treatmcn" .
• and the allocation of trust receipts and expenses' between principal and mcora6 prior ;
. . to December 31,2013; provided that Mir. Lee reserves his right to assert any claim or
, argument regarding'allocation of any proceeds from the sale or disposition otreal •,.
. ..• property occurring after such. date. .; .'
h. • Claims that the Judgment is dormant, lapsed, invalid, or unenforceable, •, ' ' .
i. • ClaimS to equitably reform or inodify the Judgment based on the ineq'uitable and'. •
improper acoual of interest/. • • •
j. Claims regarding calculation of th:e Judgment and interest thereon, including clainis
. that interest should have been suspended and. not charged following Mr, L«6's
• attempts to sctde the .Judjgment and ids request fOr a trust accounting in J^y 2014. .
k. ''Qalms for damages suffered ph account of his twenty-five p.er cent iiitcresti" ••
' . . ' Bend Farm, ' ' ' , . , ' ' • •'. •'•
.• ; 20^ . . For the • avoidance .of • doubt,' the parties agree'"that:- Mr. Lee by the releases •
dcscri'bed in Paragraph 19 docs wot release aad expressly-retains: ' . '. ''
a»- Any and all claims of Mr. Lee, indivi^aUy, as trustee.df aiiy trust created under the '
BarnhartWiU, asabencfidary of the Article iV •
Trust, agamst Susan CaroiUe Lee, individua""^
. . under the Barnhart 'Will, including but not limited to' Mr. Lee's right to pursue such..
. (^ainis and to obtain'his share of the benefits thereftom,
b. Any and all clainis of Mt. .Lee, individually, as trastese of any trust created under the
Bamhart Will, and as a beneficiary of the Article IV Trust to a share of any . . •
• distribution for any reasonfromthe Axticle IV Trust made oxi or after January 1,
. •2014. • • ' . • „'•'..• . •
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PLAINTIFFS' ORIGINAL PETITION - Page 092
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c' Any an.d all claims for )ns share of momss or cdmpeasation received by the Article
• IV Trust after December 3 1 , 2 0 1 3 jn any manner even if it relates to events or
obligations prior to Deceinbcr 3 1 , 2 0 1 3 , including but not limited to ( 1 ) any recovery
obtained by or oh behalf of the Article W Trust after December 31,, 2013 from any ,
person or entity by reason of events occurring .or, injuries suffered by the Articie IV •
Trust at any time, and (2) any. claim rcgardmg allocation of any proceeds from the
sale of real property of the Article IV Tmst occurring after December 3 1 , 2 0 l 3 v .'
21. Either party to this Agreement may require,approval of Harris County Probate ''
Court No. 2 to the terms hereof as a condiEo|i precedent to the obligations of Paragraphs 15-2p
hereof. Legacy will file a motion seeking' that approval to the terms hereof within fourteen days
of the Effective Date, of this Agreement, .Mr. Lee'.agrees to support a motion to approve this •
Agreement
Ronald E . L The mipaid principal balance of this Note ,from time to time •
Qutstandiug shall accrue, interestfromthe- date of this Note until maturity at an.
• annual feed rate .of fourperceot (4.0%) per armum. ,
4. FaVnij^rit' Td^tlttL^!i.', Payments of principal and accmed interest shall be made .
quarterly in the amount of $500,000 principal, plus accrued interest, begiojiiug
• 91 .days from the date hereof, with.a.final payment of remaining principal and
mterest due two years from the date hereof, .. • ' •
, S. • Calcolatiott of' Interest. Interest will'be calculated on the basis of achial number
• ,of days elapsed (deluding the first day but excluding the last day) during a
,• , calejjdar year consisting of 3.65 or 366 days, as the case niay be,' . .
, 6, .yrepayhlgnt. Maker may prepay this Note in whole or. in part at any tune .
vrithout being requhed to pay any peiialty or prendum for such privilege. All
prepayments under this Note,, whether designated as payments of principal or
interest, shall be applied to the principal or interest of this Note or to .expenses
provided herein, or any combmation of the foregoing, as'dnccted by the Payee
or the holder of this Note at its option and .in its sole disaetion. , •
,' 5I55684y7^ '•. V. • ' .' '
PLAINTIFFS' ORIGINAL PETITION - Page 098
n, 2 5 . 201 6 9;39Ali M ^ Y UP No, 6 3 1 2 - P, 2 5 , / 4 5
7. Msmnm Rat&. • Regardless of any provision in this Note,, all other agreements;
. documents, and instruments iii favor of Payee ever delivered in-connection with
or under this Note; and all renewals, extensions, amBudmenLs, modifications,
••' • supplements, restatements, and replacements of, or substitutions for, any of the .
, foregoing (collectively, the "Loan Docummts"), it is the intention of 'Maker and
'. Payee that Payee not (a) contract for, charge, take, reserve, receive, or apply, as.
-• • interest on all or any part ofthe principal bf this Note any amount in excess of
the Maximum Rate or^ an amount calculated based on the Maximum Rate (the
"Maximum Amomf), or (b) receive any unearned interest, in violation of any .•
• applicable law. If any acceleration of the matoiity of this Note or any paym,ent •.
under this- Note or. any other Loan Document produces a rate in excess of ttie
'Maximum Rate or if Payee' shall for .any reason .receive any' such unearned
interest or if. any. transacdoh contemplated hereby or, by any other ,Loan
•• Document would otherwise be usurious, under applicable law, theA '(i) the. ,,
aggregate of,,ail iaterest under applicable,-usury-laws'that is'cohhacted for,,
charged, taken,.reserved, received or applied under this Note, .the other Loan •
- Dodumente, Or-otherwise shall , under-no circumstances exceed the Maximum
Amount, (ii) neither Maker, nor .any .other-mdividual, .partnership, limited
.partnership, 'corporation, limited-liability company, business trust, joint stock,
company, trust, •'-linincoiporated ' assoeiation, joint ' venture, syndicate, '
• governmental authority or other , entity or organization.-Of whatever nature shaU
. be obligated to pa.y the amount of'such interest to the extent that il is m excess of
the Maximum Anaount, (iii) any excess or unearned interest shall, be deemed to
be and shall.be treated as a partial prepayment or repayment of principal and any
remaining excess or unearned interest will'be refunded to Maker, and (iv) the
• provisions of this Note'and the tain. Documents shall irxunedlately be deemed
. reformed,, -without the necessity of the. execution, of any'new document' or
. instrument, so as to comply., with .all applicable usury laws: In. determining
whether interest .paid-or payable exceeds the Maximum Rate or the Maxiuium
Amount, Payee shall,'to the maximum extent pennitted under applicable law (w)
• treat aU advances' uiidsr this Note and the other Loan Documents' as' a single
extension of credit, (x) chaiacteiiJEe any non-principal payment as an expense,
fee or premiuih rather than as interest, (y) , exclude voluiitary prepayments or
repayments and their effects, and (z) amortize, prorate, allocate and spread the
total amount, of inter^t throughout the entire contemplated term of thijs Note.
However, if the Note is paid In fiiil before the end of its full contemplated term,
and if the interest received -for its acttial 'period of existence exceeds the
Maximum Rate or the Maximum'Amount, Payee shall refund ,any excess (and
, Payee may not, to the extent permitted by law, be subject to any penalties
provided by .any laws for contraciing', for,'charging, taking, reserving or
receiving interest in excess of the Maximum Amount). If the laws of the State
; of Texas are applicable for purposes of detennining the "Maximum Rate" or the
."Maximum Amount," the, "Maximmn Rate" may not exceed the "weekly
ceiling" from time to time ia effect nnder Chapter 303 of the Texas Finance
Cpde, as amended and In effect from time to.time.
2
'. - ' 5155684V7. . ~• ".'.• •, .- , '••.. .
PLAINTIFFS' ORIGINAL PETITION - Page 099
25, 2 0 1 6 9:40AM M M Y UP No, 6 3 1 2 ' P. 2 6 / 4 5
8. fi^fiuUs: The term "Default' means, the occnrrehcc of any one of more of the •
, following.events:- , " ' ' .' •. '•' . '
.a. The failure of Maker to pay any .part'of the principal or interest under
this Note when and as requited to he paid. . . • ' •• •' • .
• b,-' Maker (i) voluntarily scela;' consents to, or acquiesces in.the.beneJat. of •
Tide 11 of the United States Code or any other applicable liquidation,
conservatorship, bahkmptcy, fraiudulent transfer, assignment for the
.• , . benefit of. . creditors,. .'inoratprium, ' rearrangement,-. receivership,
insolvency, reorganization, suspension of payments, ,or similar debtor -,-
, rehef laws of the United-States or other applicable jurisdictions from ,
-'tinre to .time in e:5ect and affectihg the rights.of-creditors .generally
. • . ' ' (^'X>ebtor Relief Lixw^'), (ii) becomes a party to or is made the subject of
- • any -proceeding provided for by any Debtor Relief Law (other than as a '
creditor or claimant), and (A) the petition is not contoovcrted within 10
days and is not.diismissed within 60- days, or (B) an order for relief is
. • entered under Title 11 of the United.States Code, (iii) makes an-
. assignment for. the benefit pf Creditors, ot (iv) fails, (of admits in writing
it§ inability) to pay its debts generally as they become due. -•
If a Default occurs,, after the expiration of any .applicable grace or notice and
opportunity to cure.periods, the holder p,f this Note shall be entitled to (i) declare
the entire unpaid principal, of, and all' accmed and unpaid interest on, this Note
immediately due and payable, without notice of intent to accelerate,, notice of •
. acceleration, any other notice, dcinandi or presentment, all of which are hereby
waived, (ii) exercise its offset rights under Section 11, or (iii) proceed to protect,.
enforce, and exercise any other right or remedy to which the holder may be'
: entitled by agreement, at law, or in equity. ,' .'
9/ -NO-WaiVgr. No delay on 'the part of 'tire holder of this Note'm' the exercise of
. any right or remedy available'.to the holder shall operate as a waiver of such'
. right or remedy.' No single or 'pardal exercise 'of a particular right or'remedy
• shall operate, as a w:aiver of that particular right or remedy, or any other right or'
remedy.'•'..'.'''- , '•. ' • •.' :.'.- -. ..'.,''
10. Waiver. Except as provided in this Note, Maker and any party which may be of '
. become habl'c fof the payment of any. amounts'due under this' Note (including
any surety, endorser, or guarantor) jointly and severally waive (to the extent
pennitted by law) all • applicable exemption rights (whether arising by
. . constitution, , law, or otherwise), all 'valuatiQn and . appraisement rights,
.presentment- and demand for payment, protest^ notice of- protest , and
noppayment, notice of the intention, to accelerate, and'notice of acceleration and •
agree that their liability on this Note shall not be affected by any renewal; or
extension in the time of payroent hereof, by any indulgences, or by any release
or change in any security for the payment of fhis Note, and hereby consent to
-• '5j5S(584v7 - , ' - ..' '•• ; ;-• : '. .'• •. ••' •. . -'..' •' '. •• . "
PLAINTIFFS'ORIGINAL PETITION-Page 100 . ' '
Jan, 25, 2 0 1 6 - 9:40AM. - M ••--4 Y LLP. No. 6 3 1 2 • P, 2 7 / 4 5
:•• any and all renewals, extensions,indulgences, releases,-or changes, regardless of
• the number of such renewals, extensions, indulgences, releases; or, changes. •. •
• 11' ^kr'Q,tt EigllM. While a Defauh exists, Payee.is hereby authorized at any time,
; • and from titftt to tunc, to the fullest extent permitted hy law, to set off and apply
any other debt or income attoy-time owingfayPayee or the Micle'IV.'IV"
or for the .credit or the account of Maker, against the oiitatandmg'principal ,.
• amount of this- Note, interest, • and. other amounts due under this ,,Note (the
''Obligation")/tv&n if Payee has not made demand under, this Note and the
. Obligation .is unmatured. Payee agrees to promptly notify Maker after any such •
setoff and application is m,ade;j?rov/ifedr/^a/the faflure to give such notia shall
, not affect the validity of such set off and application;' Therightsof Payee and
•the Article IV Trtist under this Section 11 arc in addition to other/rights and
• remedies (mcluding other rights of set off) that Payee and the Article .IV Trust
may have! ... ' .•• . •• ,•.,•.• . .. •. -.
• • .. -12. WmMs4 Mi^m" This Note, and Maker's performance of this Note, is an' ,
unsecured obligation of Maker, • • • • •
• 1.3- AaKlii&MsTSS;- This Note shall be construed, and its pcrforxhance enforced, in
. accordance with the laws of . the State of Texas and, as. applicable, tho laws of the
United States of America.,'. .. ' . ' " . ' \ ,'. , .
.' 14- fetSifeMlg:^. • Payee shall have aU rights, remedies, and recourses granted •..
in this Note and the Loan Documents and those available at law or equity and,
the satne (a) shall be cumulative'and concurrent, (b) may be pursued sepatately,
,. ., siicccssively, or concurreiitly-against Maker or any other liable party .or against''
'- any. one or more of them .in such order as Payee, in its sole discretion, shall
determme, (c) may be exercised as often as occasion therefor shaU arise, it being •
..agreed by Maker.-and any other' liable party that the exercise or failure to '
. . exercise, any .of the same shall .in no event be construed as a waiver or release
, . thereof or ofany ptherright,remedy, or recomse, and (d) are intm^
. shall be, nonexclusive,: ' ''-, ' -• ' •;
15. W A i v m m.
! i m y : TRIAL, VACR VXUTY mmxo mmm
WAIVES, t o r m FULLEST EXTENT PERMTTTED B Y A F F U C A B L E
LAW, ANY BIGHT I T MAY HAVE TO A T R I A L BY JURY IN ANY
L E G A L PROCEEDING D I R E C T L Y OR INDIRECTLY ARISING OUT
OF OR RELATING TO THUS NOTE, T H E OTHER L<)AN
DOCUMENTS OR T H E TRANiSACIIONS CONTEMPLATED H E R E B Y
(WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
..' •• THEORY).. .
16, ENTIRE AGREEMENT. THIS NOTE (AS AMENDED OR R E P L A C E D
FROM TIME TO TIME) AND T H E OTHER W R I T I E N LOAN
DOCUMENTS EXECUTED BY MAKiaa AND P A Y E E {OR B Y M A E ^
FOR T H E BENEFIT O F PAYEE) REPRESENT TBDE FINAL
•• ' 5155(S94v7 .- , .. ; . . ; ' . ' . .• . • . •' ''• ' • •[ '•' •• . . . '' ,
PLAINTIFFS'ORIGINAL PETITION-Page 101 ' • . .. .
J a n , 25, 2 0 1 6. 9 ; 4 1 A M M I Y LLP No. 6 3 1 2 " . P, 2 3 , / 4 5
AGREEMENT- BETWEEN MAKER AJSDO' PAYEE AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF TRIOR, CONTEMPOItANEOXJS,
OR SUBSEQUENT ORAL AGREEMENTS BY MAiOER AND PAYEE..
I H E R E A R E NO UNWRITTEN ORAL AGREEMENTS BETWEEN
MAKER AND PAYEE. THIS PARAGRAPH IS INCLUDED HEREIN
PURSUANT TO SECHON 26.02 OF. THE . TEXAS BUSINESS AND
COMMERCE CODE, AS AMENDED FROM TIME TO TIME. :
• 51556S4Y7 .• ••. . •-. y •- •
PLAINTIFFS' ORIGINAL PETITION - Page 102
Jan. 2 5 , 2015' 9;41AM-, VU P Jo, 6 3 1 2 - P. 2 9 / 4 5
Exhibii 2
MAKER::
Ronald Ellsworth Ixe, Jr,
:. ; • . . . Signature. Page to Unsecured Pxontissory Note
PLAINTIFFS'ORIGINAL PETITION - Page 103
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.Exhibit:3 . • . . •• '' .' '•• , ' ' , , . , ;'
Agreement Respecting Certain Prospective Real Estate
Acquisitions by Legacy Trust Company on BehaJI of the
Article IV trust
Recitab ' ' • '
1. Under tHc Last Will and Testament of Katliorine PiUot Lec Bamiiart admitted to probate in •
. . Harris, County, Texas nnder Cause Number 137,506 (tbfe "Bamliart WilV"), trusts were •
. created for tbe benefit of her children and grandchildreri. One of the trusts created was under
Article IV of the Barnhart Will (the "Article IV Trust^O-' . • • ' .', '''' ' •'
2, Ronald EHsworth Lee,'Jr. ("Mr. Lee") is the.son of Katherine Pillot Lee Bamhart, and'a •
benefioiary uEider the Article IV Tmst. • ;• . •. , • .'
3- Snsan Camille Lee is die daughter of Kathcriiic Pillot Lee Barnhart, and a beneficiary under
• the Article IV, Trust;, .,v .• , ,' ' ' - . • . ' • • • .
4. By order of the Harris Gounty Probate'Court No, Z ini^e v. Lee, Case No. 137^506-403
dated June 18,2015, ("June 18,2015 Order"),'the court appomted Legacy Trust Company as .
Receiver fbr the Article.W. Trust ("Legacy" or the "iE^i"" • ; '
5. .The Article IV Tmst and Mr. Lee haye each held, undivided interests' in property, known as
the River Bend Farm, consisting of approximately 640 acres in Wharton County, Texas. Mi,
. Lee acquired a twenty-jSve percent undiyided interest in this propertyfromthe estate of his
. &tbcr, Ronald Ellsworth Lee (Sr,); Susan Camille Lee also acquired a twenty-five percent
' undivided interest in this property fi»m the estate of Ron'ald BUsworth Lee (Sr.), The Article •
: ,1V Trust acquired a'fifty percent hiterest under the Barnhart Will.
, 6.. The-Article IV Tmst and Mr. Lee hav^ each held undivided interests in property known as
the Cap Rock Ranch, consisting of approximately 6j431 acres, in Real Comity, Texas. Mr.
' . - Lec acquired a twenty-five percent undivided interest in this property from the estate of his '
father, Ronald Ellsworth.Lcc. (Sr.):'Susan Camille Lee.also' acquired a twenty-five percent .
undivided Interest m this propertyfipbm.thc'estateof RonahJ Ellsworth Lee (Sr.).Thc Article.
' IV Trust acquired afiftypercent uiterest under the Bainh^
7. The Article IV Trust owns propetty'known as Rim Rock Ranch, coosisticig of approximately
,. . 1,200 aaes ro Real County,.Texasadjoinmg Cap Rock Rarich^ '•
' 8. • The First Codicil to the Last Will and Testament of Katherine PiJlot Lee Bamhart provides in
'part: • ' ; ' . • . . • . , • ' . '. /••. /• . .• ' ..'•'•; • ' •• • : ' • • • '
. "3. Notwithstanding any provision of my WiU and this First •
Codicil.to the contrary, or seemingly to the contrary, during the
. . lifetune ofraydaughter Susan Ixe Gibson,-no Executor, TriK
. Co-Trustee serving hereunder shall have thcrightor authoril;y to ,
sell, dispose or in any manner, partition or rnortgage any of the.
' 5217039'•.''•: ' ...-',•'••:'• ••,••.,'.••• ..^ . ' • ' ' • ' • , . - " ^ / . . •-' .-' . •'/•'•.! . -
PLAINTIFFS'ORIGINAL PETITION- Page'l04
25. 2016 9;42AM . M ^, . Y LLP No, 6312.- -P, 31/45
Exhibits • • , ' ' • .
5-foUowixjg properties wiihout the; prior written consent
, • • daughter: [ ' • '. . .' . • . •
... My .interest irrdre'iUvcr Bend Farm, Whartori Courity. •
Texas,'same bemg 640 acres of land, more ore less, situated in the • ' •
. A, Somerviile Survey, Block 4, Abstract,62, Wharton County,. . "
• • -. • Texas,'and .the'Caprock Ranch''and the'RitnrockRatich,'said ' ' •
. Ranchesbemg situatcdmRcalCounty, Texas, about twelve miles
• north of the town of Reagan.'Wells, Texas, containing 7,680 acres, ;
'. more or less, and bemg situated in T.W.N.G.R.R,Co., Block,No. • '• •
.'• • ' • •'• 13, Real County Texas.".-.' •"..• ' . ., . ' . • , ' / . . ' •• •
9. Mr. Lcc' and Legacy as Receiver of the Article FV Trast desire to'preserve and enhance the,
value of River Bend Farm .and Cap Rock Ranch and provide for efficient and effective • . . .
pianagement of these valuable properties, and WOid partition of them which likdy would
impair the value of them.
10. Mr, Lee has agreed to convey and Legacy as Receiver of the Article W Tmst and on behalf
of the Article IV Trust has .agreed, to acquhe Mr- Lee's Interest in' River.Bend Farfn, more
pardcularly described.in a Deed dated" ';, 2016, as part of a Settlement Agreement
. between'Mr. Lec and Legacy as Receiver. • •,
.. . I L Accordingly, Mr. Ixe and Legacy as the Receiver agree-as follows: , , • • .
Agreements ' ;• .. .-.,'',' . ' • ' , . . ••
12. For andincoBsideradon of the sum ofTBN AND NO/lbo DOLLARS ($10.00) cash and
other good and valuable consideration Mr. Lefe hereby consents to the pmchasc by Legacy .
Trust Company as Receiver of the Article IV. Trust and on behalf of the Article IV Tnist of
a. Susan Camille Lee's tw-enty-fiV6;percent (25%) itt'Cap Rpck Ranch
• . conditioiis and for a gross purchase price not to exceed .$3,400,000-00, provided
however,- that Susan Camille Lec also provides irrevocable written consent that any .
' Receiver or. Trustee of the Articie IV Trust may sell, dispose of in any manner,
. ,, partition or mortgage the properties known as Cap Rock Ranch and Run Rock Ranch,
b, Susan Camille Lee's tweuty-jS-ve percent (25^) in. River JBehd Farm under cirstomary
conditions and at a price riot greater than the appraised value of Susan CamiUe Lee's
• twenty-five percent kitcrest as 'determined by a third party qualified appraiser, provide
... hqwevef, that Susan'CamiUe Lce'also provides, irmv-ocable written .consent that ^ y •
' .. . • Receiver or Trustee of the Article IV Trust may sell, dispose of in any manner,
partition or'mortgage the property knO'Wn as River Bend Farm;
13. The Effective Date of thi^ Agreement is. . ' \ ,.2016.. . .
52J7039
PLAINTIFFS' ORIGINAL PETITION - Page 105
n, 25, 2 0 1 6 9;42AM • M M y LLP No, 6 3 1 2 • P, 3 2 / 4 5
Exhibits
•Ronald E. Lee, Jr.
THE STATE OF TEXAS •;. / §•• . • •••••, .
COUNTY OP HARRIS •„ I • ' . " ' , . •'' ; " '
• Theforegoinginstrument.-Was actoiowledged before me on this_ •' ; day of
2015,byRonaIdBl]sworthLee,;r.. .." ..•.••• . . ' . • • . .;
• •:• .NOTARY f UBLIC, m and for
• •;.. THE STATE OF TEX^S •
Legacy Trust Company as Receiver of the Article I V Trust under tie Last WiU and
Testament of Katherine PiUot Lee Bamhart
By-.; 1:. •. :
"• Edward R. Naumes •
THE STATE OF TEXAS ' - • ' .r'V"': . •-. " ' • '.
.. COUNTY OF.HARRIS . §'' •• •• • • ,• ' • • ' .
The foregoing instrument was acknowledged before inc on this day of ^
'2016, by Edward R Naumes as President of Legacy' Trust Company:' •'. • ' ••
NOTARY PUBUC, in and for
THE STATE O F TEXAS
5217039 • , ' .
PLAINTIFFS' ORIGINfAL PETITION - Page 106
1, 25, 2 0 1 6 9; 42AM Uk '/LLP io, 6 3 1 2 • P, 3 3 / ^
Exhibit 4
Cause No,. 137506;402'
Estate of Katherine Pillot L e e - § - l i t the P r o b a t e C o u r t -
Barnhart, Deceased '• •'§
• '" • • • ..• ••• . ^ • • • § - •. No.2.of.,
• • • • • §
Snsan Camille Lee, et al,
§
Plaintiffs, § •
V, Harris County, Texas
P-Onald E. . 1 , ^ , Jr., et al, §
§
Defendants. §
Legacy Trust Conipany, Receiver of, the Aiticle I V Trust under the Last W i l l ' •
and Testament of Katherine Pillot Lee Bamhart probated iii this Court, notifies the
Court that fire, original judgment in Lee v.' Xee (Case No. -137,506,. Harris County
Probate ,Ct. No. 2),.as modified by the-decision in Lee v. l e e , ' No. 14-97-00162^
CV, 47 S'.W.3d 767 (Tex. App. - Houston, 2001), .and reflected in, the Mandate
issued by the f^ourteenth Court of Appeals, dated February 8,, 2002 and the Order
(Granting Application for Writ of Scire Fadas and to Reyiye Dormant Judgment of
tire Harris County Probate Coiirt No. 2 in Cause No,'137^06-402, filed December
•7, 2Cil2, a copy of which is attached hereto as Exhibit. A' (the "Judgment"), has
been M l y paid, satisfied, and is discharged. '.
'•Dated:; • - , ' ' • ; " ,' '•• ^ '• . ' ' -
1
, 5151537 ,- :. • ' . • :.•
PLAINTIFFS' ORIGINAL PETITION - Page 107
J a n , 2 5 , . 20 1 6 - 9:43AM M k .. Y LLP Mo, 6 3 1 2 P, 3 4 , / 4 5
. Exhibit 4
Respectfully sub'mitted,-
Attorneys for Legacy Trast
Company as Receiver of the Artide
IV Trust lUBder the Last Will and
Testament ofKatherine Pillot Lee
Bamhart
••• 515X537- •• ,. •: •. . , ;- •: ..; •
PLAINTIFFS'ORIGINAL PETITION - Page 108
an, 2 5 . 2 0 1 6 - 9:43AM M M -cr V LLP t^o, 6 3 1 2 - P. 3 5 , / 4 5
BxhibU 4
Certificate of Service
' •. This-is to certify that.a troc and correct copy of the,foregomg document was served via
• email upon the following counsel pf record for Defendant on ^ 2016;,
baniel J. Sheehan • ......
^shcehSn^d" • .. . • • '• .-. .'•
John M. Phalen, Jr. ' ,, '
jpix^dcu'OdBa-)aw..com. ' ',• . •'. ' • ' . • .\ •
M. Patrick fvlcShan . , ',• .
pffl(Lshaii@dsa-hiw,<»m ' •' ' '. • • . .'. .
Daniel, Sheehan & Associates, LLP ' • .• • . .. ' . •
2501N. Harwood Street,. Suite 1280. •. ' • • ' .. '
•DaUas,XX75201 , " '
.Thomas Zabel ' ' .'• •' ' •
.ZabelFreeman ' •, . ...
1135 Heights Boulevard • ,. .. . ' • '
Houston,TX7700? ' ' V
tz^tfaelt^thiwrtrm^com • • . •; ' • • • •• • '•.
Eric M. English, • ' ' ' •."
Neil Kenton Alexander .
Fcrtter Hedges LLP '
.1000 Main St., 36* Floor
Houston, TX 77002 "
.fcalexanderi^porterheds"eo
. John W; Porter • . ' -
. Texas Bar No. 16149990
' jc^tf.portKtiio^bidcsrbdttsxom
ICeri D. Brown •
ikKr}-br0wn(^ak6.Tb<^tt8:ebiti,
910 Louisiana Street ' .
Houston^ Texas 77002 . •
.•••;3
5151537
PLAINTIFFS' ORIGINAL PETITION - Page 109
an, 25, 2 0 1 6 ' 9 : 4 3 A M •; M . T LLP: Wo. 6 3 1 2 - P, 3 6 , / 4 5
Exhibii 5
'•• • '. ' , . . ., '..Bill of Sab;.. ••• ; .. ' •
' THE STATE OF TEXAS §;. •. •.
• • • • • • • § ••. KNOW ALL MEN BY THESE PRESENTS'•
. COUNTY OF HARRIS ' ' • •, , ' •
That Legacy Trust Company as ReceiVet and on behalf of the .Article IV
TiTist createa under, the Last Will and Testament of Kjatherine Pillot Lee Barnhart
admitted to pirobate in Harris County Probate Court No. 2, Cause No. 137,506,
herein called "Seller", for and i n cojisideration .of the sum of Ten and .No/100 Dollars /
. (.$10.00) and other valuable consideration to the undersigned pajd by the• Buyer hereta
nanied, the receipt of whicH is hereby acknowledged, has GRANTED, BARGAINED,
SOLD .ANP CONVEYED, and by these presents does GRANT, BARGAIN, S E I i : AND
CONVEY, unto Ronald EUsworth .Lee, Jr.,'of HARRIS County, Texas,, herein called '
., "Buycif', all ofthe followmg described property;^ ' • • . •
The Jnctgmeiit in faior of the Article IV Trust entered in tee v, lee,
(Case No. 137,506, HaA-ris County Probate C t No. 2)^ . as modified by
the decision in Lee v. Lee^ No. 14-^97-00162-0?, 47 S.W.3d 767 (Tex,
App- Houston, 2001), as reflected in the Mandate Issued by the
Fourteenth Court of Appeals dated Fcbni^ry S^ 2002 and the Order
Granting Application for Writ of Scire Fadas and to Reyive Dormajut ,.
Jadgment of the Harris County Probate Court No, 2, jn Cause No. .
, 137,506-402,. filed December, 7, 2012, together with ail principal^.
attorneys' fees, interest, and court costs on or associated with such ;
• Judgment. '.•
, .. TO HAVE AND t o HOLD the above described Jwigmeht, .together w i ^
• singular the- rights and appurtenances thereto in' anywise belonging unto'the said Seller,
• and unto Setter's,successors and:assigns foreveirj.and'ScIlcr does hereby bind itself, its
successors and assigns; to WARRANT AND FOREVER' DiEFEND all and singular the
.. said preroiscs imto the said Buyer, .Buyer's heirs, eiecutors, administrators and assigns
PLAINTIFFS' ORIGINAL PETITION - Page 110
J a n , 25, 2 0 1 6 ' 9 : 4 4 A M , .M . Y LLP. , .. - Mo, 6 3 1 2 'P, 31/45
Exhibits •• • •.•
' agaifl-vSt every person whomsoever ,lawfully claimLag or to daitn the same or any part
thereof, by throagli or nnder Seller, but not .otherwise. , ' . : '
EXECUTEDtMs; \ day of . ' „,2016. . • \' '
•• / SELLER: / .• • /; . '
Legacy .Trust Company as Receiver and on.
, Behalf of the Article IV Trust created mxder
• /• the . Last .Will and Testament of Katherine
• Tillot Lee Bamhart admitted to probate in
' • .• . Harris Gounty Probate Court No. 2, Cause
• • No. 137,506 , . • ,' '
B y : . • . ' : ' '•• ' • " •
Name: Edward R. Naumes
Title: President . and. Chief Executive
Officer'.
PLAINTIFFS' ORIGINAL PETITION - Page 1 1 1
11,25, 20 1 6 9; f y i - ^ Y LLP lo, 5 3 1 2 P, 3 8 / 4
Exhibits
THE S T A m OF TEXAS §
COUNTY OF HARRIS . . , §
. . Before iDC^ . , ' on thia day of ^2016,
personally appeared Edward R. Naumes,'President and Chief.Executive Officer of
Legacy Trust Cornpany as Receiver and on Behalf of the , Article IV Trast created under
.die Last Wiir and Testament of Katherine, PUlot Lee Barnhart admitted' tq- probate , in
Harris Comity Probate Court No. 2, Cause No. .137,506, known to nie to be the person
. whose-name is subscribed to the foregoing instromc'nt and acknowledged to me that he,
executed the same for the purposes and consideration therein expressed. . '
Notary Publicin and for the State of Texas
[SEAL] •
' Printed Name of Notary: ,
. My Commission Expires:
BUYER'S ADDRESS;
Ronald Ellsworth Lee, Jr.'
3114 Mid Lane , - ;
Houston, TK'77027 .
5174445
PLAINTIFFS' ORIGINAL PETITION - Page 1 1 2
n, 25, 20 1 6 • 9 ; 4 4 A M M M Y LLP No, 6 3 1 2 - P, 3
Draft -1/11/2016 , . ' •
Agreement Respecting Conduct of the Litigation in Lee v.
Lee, Case No. 137,506-403
Recitab ' ,. ' •. ,'• ... ..
1. • Under the Last Will and Testament of KathcrineTillot Lee Bamhart admitted to probate in .
. Harris County, Texas under Cause Nuinber 137,506 (the ^'Bamhart .Will"), trusts were.'.
• createdforthe benefit of her children and gi-andchildrea One of the trusts- created was under
Article IV of the Bamhart WiU (the ".Article IV Trust"). ' ', '. . • " '
2'. ...Ronald Ellsworth Lec, Jr. ("Mr. Lee") is the.son of Katherine Pillot Lee Barrihartj and a'
' beneficiary under the Article IV Trust.-. •• . ' -, • •
3.- 'Katherine Lee Stacy ("Ms, Stacy') isttiedaughter'of Mr. Lee and a beneficiary under a Trust
estabhshed under the Barnhart Will that is a beneficiary of the Article lY Trust, • .
.4., Mr. Lee.filedsuit against Susan Camille l'cc ("Ms. Lee"), Tros'tee ofthe Article IV Trust; in
Lee y, Lee, Case No. 137,506-403, Harris County Probate.Court No, 2, seeking removal of
• Ms. Lee as Trustee, and damages suffered by MrJ Lee and the Article IV Trust during the
trusteeship of Ms. Lec ("Mr. Lee's Lawsuit").- , . ' ' • . • .••
5.' By order of the Harris County.Probate Court No. 2 in Lee v, Lee. Case No. 137,506-403 ;
• • dated June 18,.20l5,:("June 18', 2015 Order"), the court rcnlovcd Ms; Lcc as Trustee ofthe •
Article I'Y Trust and'appointed Legacy Trust Company as Receiverfor the'Article IV Trust
('Tegacy'or the''Rece.iVefO-The June 18, 2015: OrdCT, among'other things, or
'"3. The Receiver is authorized and directed to: •
. . • '• , . •• a. Exercise all rights, powers and duties of the Trustee of the Tmst created
under Article IV .of the WiU, and all pow;ers granted to. trustees under the. Texas
Trust.Code; •- . ' ' •' • . ': •.' ' , '• • :.' •
. 0. .. Manage and dncct the business andfinanciala-f&irs'of the Trust'
and any asset or entity owned or controlled by the Trust; • ,
m . 'Institute such legal proceedings as the Receiver deems necessary
. , or advisable to obtain constructive or actual possession of assets ofthe Trust or to
recover damages suffered by the Trust; provided however, that the Receiver shall
• have discretion not to pursue htigation against Ms. Lee that, is undertalcen by •
' ' beneficiaries. oftheTrust for the benefit of .the Trust;'
7. Mr.' Lee intends to pursue the claimsfiledin Mr. Lee's,Lawsuit, Ms.' Stacy has intervened as
. ah additional plaiiitiff iti'Mr. Lee's Lawsuit.. •
52383eOy2 • ' • . .' ' .'.'•• •.• •''.•'", ..' —'. ,' ' '. •
PLAINTIFFS'ORIGINAL PETITION- Page 113
n, 2 5 . 20 1 6 . 9 ; 4 5 A M • M M & t LLP h. 6 3 1 2 --P. 4 0 / 4 5
Draft-1/11/2016, '/ , ' , ' ' ' '. '. ' • • ''r • ' ' . /
Agreements • . •' . •• ' /••"•., ' .'
8. So as to avoid the duplication of expense and effort in connection with the claims asserted' in. '.
MF, Lee's Lawsuit, at least a portion of which may benefit the Article W Trust, Mr/Lee- and
•Ms. Stacy consent that Legacy shall have no obhgation to them to file pr proseciite a lawsuit •.
asserting claims against Ms. Lee for breaches- bf her obUgations while serving as Trustee of •
, the Article rv Trust •. • - , •', ' • •• .-• ' ' .••/ ,•,'•'/' / / • • ' ,
9. Legacy as- Receiver agrees £o reimburse Mr. Leo frorh the assets ofthe Article IV Trust for
his. reasonable and necessary attorneys' fees and htigation expenses (inclnduig but not
, limited to expert witness fees, expenses of attorneys, and court, costs) incurred in connection
' with claims agamst Ms. Lee for breaches of her obligations to the Article IV Trust while she •
• served as Trastee ofthe Article IV Trtist man aggregate amount np to $500,000. In the
event Mr. Lee bclicvcfii that additional reasonable and.ncccssary attorneys' fees and htigation' •
, expen$esshouldheincuiredinexccssof$500,000, ho may request Legacy to approve in
advance such additional expenditures, which approval Legacy will not unreasonably ;.
' . withhold.' • • • • •. . '' . .. . • . '•''•.
10. So as to avoid the duplication of expense and effort La connection with the claims asserted in
Mr,; Lee's Lawsuit, the parties agree that counsel for Mr. Lee shall take the lead work
. responsibility m pursuing the clainis in Mr, Lee's Lawsuit for which the Article IV Trust.
•. would be the principal beneficiary. Counsel for Ms, Stacy, while representing her interests
• professionally, will tdc.c secondary work rcsponsibiUty fbr pursuing these clain^ '
• duphcating work of Mr. Lee's counsel, '••
U , Legacy ieis Reoeiver agrees to reimburse Ms'. Stacy -from'the assets of the Article IV Trust for
• her reasonable and necessary.attorneys.' fees and htigation expenses (includmg.but not
limited to expert witness fees, expenses'of attorneys, and court costs) incuixed iu accordance
'. with the terms of paragraph 10 hereof m, an aggregate amount up to $100,000. In the event .
Ms, Stacy believes that additional reasonable and nebessary attorneys' fees and litigation
ecxpcnses should be incurccd m excess of SIOO.OOO, she may request Legacy to approve in'
advance such additional expenditures, which approval Legacy will not unreasonably •
withhold, '• '. " . ^ '/;, • / . . . ,' • ' . , . •
.12. Nothuig in this Agreement relieves Legacyfroriiwhatever'obligafions it may have to provide
iafqimation or otherwise cooperate with the beneficiaries of the Article IV Trust in pursuing.
. clahns agahist Ms, Lee for the benefit- of the Article IV Trust, to -adjust distributions to Ms;
: Lee. by.reason of monies Ms, Lee owes to the Article FV Trust, or to. defend claims asserted
by Ms,'Lee agaiiist Legacy as Receiver, ofthe Article r v Trust.
• , 523B360v2 ' .' .• . ' . , •.•' .'". .. ;
PLAINTIFFS' ORIGINAL PETITION - Page 114
J s n , 25. 2 0 1 6 • 9 ; 4 5 A M • M M ULP No, 6 3 1 2 • -P, 4 1 / 4 5
••. Draft~I/lI/20I6 • ' . ' . '
13, The Effective D ate of this Agreement is
Ronald E. Lee, Jr.
Katherine Lee Stacy . „
Legacy Trust Cotopauy as Recetver of the Article IV Trust nnder the Last, WiU and
Te$taiiicnt of Katherine Pillot Lee Bamhart , .
By - ' • • •/'.,./• .•' ••'"'./
Edward R. Naumes
.•3
J238360v2.
PLAINTIFFS' ORIGINAL PETITION - Page 115
EXHIBIT " G "
PLAINTIFFS' ORIGINAL PETITION - Page 116
PROBATE C0URT#2
m Cause No, 137506-403
ill Estate ofKatherine Pillot Lee Bamhart, In the Probate Court
o Deceased
o
a, No. 2 of
ii\ Susan Camille Lee, ct al.,
Plaintiffs,
V, Harris County, Texas
Ronald E. Lcc, Jr., et al.
Defendants.
ORPER GRANTING APPLICATTONTOAPPROVE SETTLEMENT AGREEMENT . .
4 • '» V k ^i of
Katherine Pillot L«B3BlJM»HBBcwa5w^e^ to as the "Article IV Trust"), and lhat the
HSWiveris h c r ^ granted authority to enter into the Settlement Agreement, and to sign all
PLAINTIFFS' ORIGINAL PETITION - Page 117
01
U!
O
a
a.
SIGNED on this _ day of
io
JGEPI^IDIKG
0 APPROVED:
w
n MACINTYRE MCCULLOCH .g?>\NFIELD
o & YOUNG, LLP
n
o
-••=>!»
State Bar Number 0075S930 m ^ r t v . '
ADRI A. GRAVES
State Bar Number 24049999 '"iT mi
2900 Weslayan, Suite 150*; '1*. r-
Houston, Texas 77027 sfn, „
(713)572-2900 ^ 3
(713) 572-2902 (FAJQi ..J-'
Can;eroaMcCulloc>|^mlawtexa3,coro 4?
AdriTGrivCT@iBml|t"?HW.'?W|
ATTORNEYS FOR APftlCAOTtTBOACY TRUST COMPANY,
IN rrS CAPACITY AiaiW|J?ECEIVER FOR THE ARTICLE IV
PLAINTIFFS' ORIGINAL PETITION - Page 118
EXHIBIT " H "
PLAINTIFFS' ORIGINAL PETITION - Page 119
652-^6-201 i.
NO. 137,506-403
^-€83482
ESTATE OF KATHERINE PILLOT § IN THE PROBATE COURT NO. 2
BARNHART, DECEASED §
i
DONNA C.KLINE §
§
V. §
§ OF
SUSAN CAMILLE LEE, Individually §
and as Trustee for SUSAN C. GIBSON §
§
and §
§
SUSAN C. GIBSON § HARRIS COUNTY, TEXAS
LADIES AND GENTLEMEN OF THE JURY:
This case is submitted to you by asking questions about the facts, which you mxist decide
from the evidence you have heard in this hial. You are the sole judges of the credibility of the
witnesses and the weight to be given then testimony, but in matters of law you must be govemed by
the insnuctions in this charge. In discharging yom responsibility on this jury, you will observe all
the inshuctions which have been previously given you. I shall now give you additional instructions
which you should carefully and snictly follow dming your deliberations.
1. Do not let bias, prejudice, or sympathy play any part in your deliberations.
2. In anivmg at your answers consider only the evidence uitroduced here under oath and such
exhibits, if any, as have been inteoduced for your consideration under the rulings ofthe court, that
is what you have seen and heard m this courtroom, together with the law as given you by the court.
In your deliberations you will not consider or discuss anything that is not represented by the evidence
in this case.
3. Since every answer that is required by the charge is important, no juror should state or
consider that any required answer is not important.
4. You must not decide who you think should win, and then hy to answer the questions
accordmgly. Simply answer the questions, and do not discuss or concem yourselves with the effect
of your answers.
5. You will not decide the answer to a question by lot or by drawing straws, or by any other
method of chance. Do not rehim a quotient verdict. A quotient verdict means that the jurors agree
to abide by the itssult to be reached by adding together each juror'sfiguresand dividing by the
-1-
PLAINTIFFS' ORIGINAL PETITION - Page 120
number of jurors to get an average. Do not do any trading on your answers; that is, one juror should
not agree to answer a certain question one way if others will agree to answer another question
another way.
6. You may render your verdict upon the vote of ten or more members of the jury. The same
ten or more of you must agree upon all the answers made and to the entire verdict. You will not,
therefore, enter into an agreement to be bound by a majority or any other vote of less than 10 jurors.
I f the verdict and all the answers therein are reached by unanimous agreement, the Presiding Juror
shall sign the verdict for the entire jury. If any jmor disagrees as to any answer made by the verdict,
those jmors who agree to allfindingsshall each sign the verdict.
These instructions are given you because your conduct is subject to review the same as that
of the witnesses, parties, attomeys, and the judge. If it should be found that you have disregarded
any of these instructions, it will be jury misconduct and it may require another trial by another jury;
then all of oirr time will have been wasted.
The presiding juror or any other who observes a violation ofthe court's instructions shall
immediately warn the one who is violating the same and caution the juror not to do so again.
When words are used in this charge in a sense which variesfromthe meaning commonly
understood, you are given a proper legal definition, which you are bound to accept m place of any
other definition or any other meaning.
Answer "Yes" or "No" to all questions unless otherwise mstructed,
A "Yes" answer must be based on a preponderance ofthe evidence, xmless that question
states specifically that a different standard should be used. In answering a question based on a
preponderance ofthe evidence, if you do notfindthat a preponderance ofthe evidence supports a
"Yes" answer, then answer "No."
The term "preponderance of the evidence" means the greater weight and degree of credible
testimony or evidence introduced before you and admitted in this case.
In answering a question based on a preponderance ofthe evidence, a fact may be established
by direct evidence or by circumstantial evidence or both. Afiictis established by direct evidence
when proved by documentary evidence or by witaesses who saw the act done or heard the words
spokert A fact is established by circumstantial evidence \^en it may be fairly and reasonably
inferred fiom other facts proven.
U3
c
cz
I —
no
CO
•2-
PLAINTIFFS' ORIGINAL PETITION - Page 121
652-r5-20l3
In determining the amount ofreasonableand necessary attorney's fees, the following factors
should be considered:
1. the time and labor involved, the novelty and difficulty of the questions involved, and
the skill required to perform the legal services properly;
2. the liklihood that the acceptance of the particular employment will preclude other
employment by the lawyer;
3. the fee customarily charged in the locality for similar legal services;
4. the amount involved and the results obtained;
5. the time limitations imposed by the client or the ckcumstanccs;
6. the nature and length of the professional relationship with the client;
7. the experience, reputation, and ability of the lawyer or lawyers performing the
services; and
8. whether the fee isfixedor contingent on results obtained or uncertainty of collection
before the legal services have been rendered.
-3-
PLAINTIFFS' ORIGINAL PETITION - Page 122
652-f6-ZOI4
QUESTION ONE
What reasonable amount, if any, is owed to Donna Kline for the necessary legal services she
performed for Susan Lee and Susan Gibson on an hourly basis under the contracts?
Answer in dollars and cents, if any.
Answer: ll^,lO?.U
r
-4-
PLAINTIFFS' ORIGINAL PETITION - Page 123
65H6-20I5
QUESTION TWO
Did Susan Lee and Susan Gibson discharge Donna Kline for good cause?
Answer "Yes" or "No".
Answer, /J Q •
You are instructed that a cUent has "good cause" to discharge an attomey if the attomey fails
to perform her duties in the manner that an attomey of ordinary skill and ability would have
performed her duties under the same or similar circumstances.
-5-
PLAINTIFFS' ORIGINAL PETITION - Page 124
QUESTION THREE
What is a reasonable fee for the necessary services of Donna Kline's attomeys in this case?
Answer in dollars and cents, if any.
Answer with an amount for each of the following;
a. For preparation and trial.
Answer: ^7S"^ooQ.oO .
b. For an appeal to the Court of Appeals.
Answer: ^ ^O,QO0-0O . —
c For making or responding to a petition for review to the Supreme Court of Texas.
Answer: ^7,^OO^oo .
d. If a petition for review is granted by the Supreme Court of Texas.
Answer: 4 , 0<^ »<0'0 •
-6-
PLAINTIFFS' ORIGINAL PETITION - Page 125
QUESTION FOUR B52~r6~Z0 I J
What is a reasonable fee for the necessary services of Susan Lee's and Susan Gibson's
attomeys in this case?
Answer in dollars and cents, if any.
Answer with an amount for each of the following:
a. For preparation and trial.
Answer: -"^
b. For an appeal to the Coxut of Appeals.
Answer;
c. For making or responding to a petition for review to the Supreme Court of Texas.
Answer: JS""^
d. If a petition for review is granted by the Supreme Court of Texas.
Answer:
-7-
PLAINTIFFS' ORIGINAL PETITION - Page 126
After you retire to tbe jury room, you will select your own presiding juror. Thefirstthing
the presiding jmor will do is to have this complete charge read aloud and then you will deliberate
upon yom answers to the questions asked.
It is the duty of the presiding juror:
1. to preside during your deliberations,
2. to sec that your deliberations are conducted in an orderly manner and in
accordance with the instructions in this charge,
3. to write out and hand to the bailiff any communications conceming the case
that you deshe to have deUvcrcd to the judge,
.4. to vote on the questions,
5, to write your answers to the questions in the spaces provided, and
6. to certify to your verdict in the space provided for the presiding jmor's
signatme or to obtain the signatmes of all the jmors who agree with the
verdict if your verdict is less than imanimbus.
You should not discuss the case with anyone, not even with other members of the jury, unless
all of you are present and assembled in the jury room. Should anyone attempt to talk to you about
the case before the verdict is retimied, whedier at the courthouse, at yom: home, or elsewhere, please
inform the judge of this fact
When you have answered all the questions you arc required to answer undertiieinstructions
of the judge, and your presiding juror has placed you answers in the spaces provided and signed the
verdict as presiding juror or obtamed the signatures, you will mform the bailiff at the door of the jury
room that you have readhed a verdict, andtiienyou will return into court with your verdict
Judge Presiding
-8-
PLAINTIFFS' ORIGINAL PETITION - Pasie 127
652-^6-2019
CERTIFICATE
We, the jury, have answered the above and foregoing questions as herein indicated, and
herewith return same into court as our verdict.
(To be signed by the presiding
juror if unanimous.)
Presiding Juror
(To be signed by all jurors
in agreement if not unanimous)
-9
PLAINTIFFS' ORIGINAL PETITION - Page 128
(1
653-r4-3255
)2-
m. 137,506^
__
ESTATE OP KATHERINE flUm § IN THE PROBATE COURT NO. 2
BARNHART, DECEASED j
±.
DONNACIOINE
V.
I OF
SUSAN CAMILLE LEE, Individually
isad M TnisSw fbr SUSAN C GIBSON
SUSAN COtDSON { HARRIS COUNTY, TEXAS
LADIES AND GENTLEMEN OF THE JURY:
This esse is submittedtoyoo by addag questkms sbout tbefocts,wfaidi you must decide
fitna^svidetiM jroabm heard in This tML Yott antfissdejudges of &e credibility of Oe
witnesses aad the iveigtAtobe gim tbdr test"
the itUOuctiooi in this dUB|^ In discbargisgycvie^MXt^bflityoQ this Jury, you wiUobserwaU
thetnrtnictioiiswhldibvvebempnwioudyg^myoti. I dbsOiKrw give you additional imtructiou
>^ch you shmiJd carefully Old itrictiyfoOowd o ^
L DoiwtletbUs,pR;}udioe,orsyiitp«thyplByai)9p8rtiiiyourdelibe
2, baniviiif atyouraarweisooatsldKoafythsevt"
eshibtts, If aay, m hav* \mn kctroducwd fbr yow ocH»id««tica ocdcr the rulingi of the cowt, that
is «ribat you haYC seen md heerd ia this oourtnxni, together
lhyoffli»mthe meamng common!
understood, you «» given a fxoper legal deflnitioa, which you ere boundtoaccept in place of any
other deflnitioa or toy other meaniiig.
Answer "Yea" or "No"toall quesdoQs wlesa otherwise instructed.
A "Yea" answer most be based oo a prepoodentnoe of ih« evidence, unless that question
statea ipecifloally that a diffiHteM statkbud should ba us^ In oaswering a question based on a
prqpotKkritMof the flvideo««;ifyoadoiW(fitdti»taprep evidence supports a
"Yes" answer, then answer
n* teem "pcepoodctaooe ofthe tvldedca" icMaas the greater weight and degree of credible
teatimooQf or avtdenoe introduced befbn you and admittedfaitUs caae.
In answering • questkw based OQ a pr^xstdanm of dM evidence, a SK^ may be estab
direct «vidmc« or t^eircusstandalevideoc* or both. Aftctisesti^iishedbydiroctevidetxe
wt>co pnvod by documentary evidence or by ^witntag^ who saw tha set done or beerd the words
ipolcea AfltcttaeatsibUshed by circumstantial svideaos whea It may befitiriyand reasonably
{nfixTcdfiomotherfitctsproven.
PLAINTIFFS' ORIGINAL PETITION - Page 130
653-i'4-3Z5r
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Aasvm ia doQns saai omts, i f say.
-4-
PLAINTIFFS'ORIGINAL PETITION - Page 132
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-5-
PLAINTIFFS' ORIGINAL PETITION - Page 133
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PLAINTIFFS' ORIGINAL PETITION - Page 137
EXHIBIT
PLAINTIFFS' ORIGINAL PETITION - Page 138
80-2973
NO. 137506-403
E S T A T E OF KATHERINE P I L O T S IN THE PRbBATE/fcOURT
EARNHARDT, DECEASED s
s
DONNA -C. K L I N E s
VS. ss NO. 2
s
SUSAN CAMILLE L ' E E , s
I n d i v i d u a l l y and a s TRUSTEE s
FOR SUSAN C. GIBSON s
s
AND s B56-63-2795
s
SUSAN C. GIBSON s
s
VS. s
s
GARY GROTE s OF HARRIS COUNTY, TEXAS
JTJgGHENT
BE I T REMEMBERED t h a t on t h e 1 5 t h day o f J u l y , 1997, came on
to be heard t h e a b o v e - s t y l e d and numbered c a u s e i n w h i c h Donna C.
Kline was Intervener and Plaintiff, and Susan Camille Lee,
individually and a s t r u s t e e f o r Susan C. G i b s o n , and Susan C.
G i b s o n were defendemts. A jury consisting o f P e t e r Hugo a n d 11
o t h e r good and l a w f u l men a n d women were s e l e c t e d t o h e a r t h e c a s e
and returned a verdict on J u l y 23, 1997, s i g n e d b y 11 members o f
the jury.
The Court having considered the verdict of the jury, the
testimony of the p a r t i e s , and having considered t h e argument o f
counsel, was of the opinion that Judgment should be for the
P l a i n t i f f / I n t e r v e n e r Donna C. K l i n e .
It i s t h e r e f o r e , ORDERED, ADJUDGED a n d DECREED t h a t Donna C.
Kline shall r e c o v e r of a n d from t h e D e f e n d a n t s S u s a n C a m i l l e L e e ,
individually and a s t r u s t e e f o r Susan C. G i b s o n , and Susan C.
-1-
PLAINTIFFS' ORIGINAL PETITION - Page 139
Gibson, Jointly and severally, the sura of $114,
CT
interest thereon a t t h e r a t e of s i x p e r c e n t ( 6 % ) p e r annum from W
I
October 26, 1995. I t i s f u r t h e r o r d e r e d t h a t Donna C. K l i n e shall
~4
r e c o v e r a t t o r n e y ' s f e e s i n t h e ainount o f $13 2,500.00, w i t h i n t e r e s t \ Jh
thereon f r o m d a t e o f Judgment a t t e n p e r c e n t ( 1 0 % ) p e r annum from
both L e e and Gibson j o i n t l y and s e v e r a l l y . I n t h e event t h e r e i s
no a p p e a l t o one o f t h e C o u r t s o f A p p e a l s o f T e x a s f o l l o w i n g e n t r y
of this Judgment, t h e amount of t h e Judgment w i l l be r e d u c e d by
remittitur i n t h e amount o f $30,000.00. I n t h e e v e n t t h e r e i s no
a p p l i c a t i o n f o r varit aff avrov f i l e d w i t h t h e Supreme C o u r t o f T e x a s
by a n y p a r t y f o l l o w i n g e n t r y o f t h i s Judgment, t h e amount o f t h e
J u d g m e n t s h a l l be r e d u c e d by r e m i t t i t u r by $7,500.00. I n t h e e v e n t
no p e t i t i o n f o r review i s g r a n t e d by t h e Supreme C o u r t of Texas
following e n t r y o f t h i s Judgment, t h e amount o f t h e Judgment w i l l
be reduced by r e m i t t i t u r i n t h e amount o f $ 2 0 , 0 0 0 . 0 0 . 656-63-Z796
Based o n t h e J u r y ' s answer t o Q u e s t i o n 2, t h e C o u r t makes
declaratory judgment t h a t Donna C. K l i n e h a s a good, valid and
subsisting interest in any recovery by Susan Camille Lee,
individually and a s t r u s t e e f o r Susan C. Gibson, and Susan C
Gibson individually, pursuant to her contingent f e e c o n t r a c t of
M a r c h 3 0, 1995.
I n t e r v e n o r / P l a i n t i f f Donna C. K l i n e s h a l l r e c o v e r a l l c o s t s o f
court and i n t e r e s t on a l l amounts awarded h e r e i n f r o m t h e d a t e o f
Judgment u n t i l p a i d a t t h e r a t e o f t e n p e r c e n t ( 1 0 % ) p e r annum.
It i s further ORDERED, ADJUDGED AND DECREED that the
d e f e n d a n t s c o u n t e r - c l a i m a n t s S u s a n C a m i l l e L e e , I n d i v i d u a l l y and a s
-2-
PLAINTIFFS' ORIGINAL PETITION - Page 140
T r u s t e e f o r Susan C. G i b s o n ("Lee") and S u s a n C. Glb^gp"("Gi^gon^)
t a l c e n o t h i n g on t h e i r c o u n t e r c l a i m s a g a i n s t Donna C. Kline.
On J u l y 11, 1997, came on for consideration the Motion f o r
Summary Judgment of T h i r d Party Defendant and Counter-Plaintiff
G a r y G r o t e . The c o u r t c o n s i d e r e d t h e Motion, t h e R e p l y , t h e summary
j u d g m e n t e v i d e n c e and t h e arguments o f c o x i n s e l and found t h a t t h e
M o t i o n s h o u l d be g r a n t e d , a s s e t f o r t h i n t h e c o u r t ' s O r d e r o f J u l y
11, 1997.
I t i s t h e r e f o r e ORDERED, ADJUDGED AND DECREED t h a > - ^
P l a i n t i f f s S u s a n C a m i l l e L e e , I n d i v i d u a l l y and a s T r u s t e e f o r S u s a n
C. Gibson ("Lee") and S u s a n C. G i b s o n ("Gibson") take nothing of
a n d f r o m T h i r d P a r t y D e f e n d a n t Gary G r o t e i n t h i s lawsuit.f356""63""2r9r
It is f u r t h e r ORDERED, ADJUDGED AND DECREED t h a t T h i r d Party
P l a i n t i f f G a r y G r o t e h a v e and r e c o v e r o f and from S u s a n C a m i l l e L e e
the amount o f T h r e e Thousand F i v e Hundred D o l l a r s ($3,500.00), i n
a d d i t i o n t o a t t o r n e y ' s f e e s o f $2,500.00 t h r o u g h t h e d a t e o f t h i s
J u d g m e n t ; a n d a d d i t i o n a l a t t o r n e y s f e e s o f $15,000.00 i f t h e c a s e
is a p p e a l e d t o t h e Covurt o f A p p e a l s , $15,000.00 i f a P e t i t i o n f o r
R e v i e w i s f i l e d w i t h t h e T e x a s Supreme Coxirt, a n d $15,000.00 i f t h e
T e x a s Supreme C o u r t g r a n t s a p e t i t i o n f o r r e v i e w .
All other r e l i e f r e q u e s t e d by any p a r t y that i s not granted
herein i s s p e c i f i c a l l y denied. z
RENDERED and SIGNED on this 1997.
u
CT, H o n o r a b l e Mike Wood
P r e s i d i n g Judge
CD -3-
PLAINTIFFS' ORIGINAL PETITION - Page 141
A p p r o v e d a a t o form o n l y :
9 09 F a n n i n
H o u s t o n , TX 77010-1063
Telephone: ( 7 1 3 ) 652-2419
Fax: ( 7 1 3 ) 652-2419
ATTORNEYS FOR DONNA C. K L I N E
WILSON, C R I B B S , GOREN & FLAUM, P.C.
S t a t 6 B a r No. 2 0446750
2200 L y r i c C e n t r e
440 L o u i s i a n a
H o u s t o n , T e x a s 77002
T e l e p h o n e : 713/222-9000
f a x : 713/229-8824
Examined p r i o r t o e n t r y but not approved a s t o form o r s u b s t a n c e
^ and without waiver of any objection or request for post-judgment r e l i e f .
BURNS, WOOLEY & MARSEGLIA, L . L . P .
M. S u s a n H a r d i e
S t a t e B a r No. 08957600
1111 B a g b y , S u i t e 4 900
H o u s t o n , TX 77002
T e l e p h o n e : 713/651-0422
f a x : 713/651-0817
-4-
PLAINTIFFS' ORIGINAL PETITION - Page 142
EXHIBIT " J "
PLAINTIFFS' ORIGINAL PETITION - Page 143
Lee V. KUne, Not Reported in S.W,3d (2000)
that, based upon thejury's findings, Kline possesses a good,
valid and subsisting interest in any recovery obtained by
2000 WL 19227
Defendants in the underlying estate case pursuant to Kline's
Only the Westlaw citation is currently available.
contingent fee contract.'
NOTICE: NOT DESIGNATED FOR PUBUCATION.
UNDER TX R RAP RULE 47.7, UNPUBUSHED Defendants assign twelve issues on appeal, alleging that
OPINIONS HAVE NO PRECEDENTIAL Kline failed to obtain necessary jury findings, challenging
VALUE BUT MAY BE CITED W I T H THE the sufficiency of the evidence to support the judgment, and
NOTATION "(not designated for publication)." that Grote's motion for summary judgment should have been
denied because it was unsupported by competent evidence
Court of Appeals of Texas, Houston (14th Dist.).
and did not dispose of all issues in the case. Defendants also
contend that "the trial judge should have been recused firom
Susan C. Lee, Individually, and Susan
the trial of this case." Lastly, Defendants assert that "the
C. LEE, Trustee for Susan C. Gibson,
trial court erred in not conditioning the award of appellate
and Susan C. Gibson, Appellants,
attomey's fees on a successful appeal." We affirm.
v.
Donna KLINE and Gary Grote, Appellees.
I. BACKGROUND
No. 14-98-00268-CV. Defendants retained Kline in July 1994. Kline was retained
I to represent Gibson in an action against Gibson's uncle, who
Jan. 13, 2000. was the executor of the estate of his and Lee's mother (Estate
On Appeal from the Probate Court No. 2, Harris County, ofKatherine Pillot Bamhart, Deceased). ^ Defendants agreed
Texas, Trial Court Cause No. 137,506-403. to pay Kline $225 per hour. Defendants were not satisfied
with the executor's management of a trust created pursuant to
Panel consists of Chief Justice MURPHY, Justices HUDSON the deceased's will, Defendants believed that disbursements
and FOWLER. into the trust accounts were not being made by the executor
pursuant to the terms of the trust.
OPINION ON REHEARING The law firm of Butler & Binion was lead counsel in the action
brought by Defendants. Kline was retained by Defendants to
FOWLER. "help and advise [Defendants] in regard to the handling of
the case" and to act as lead counsel on behalf of Gibson. The
*1 Defendants filed a motion for rehearing in this case.
executor was represented by the law firm of Vinson & Elkins.
See TEX.R.APP.P, 49.1. It is denied. However, our original
Butler & Binion withdrew from the case sometime in early
opinion is withdrawn and this substituted opinion is issued in
1995. Through Kline's efforts; the Dallas law firm of Thomas,
its stead.
Sheehan & Culp was retained to become Defendants' lead
counsel in March 1995. When this firm became lead counsel,
Donna Kline ("Kline") brought this action against Susan the fee agreement was modified. Defendants expressly agreed
C. Lee, Individually, and Susan C. Lee, Trustee for Susan to continue to pay Kline $225 per hour, $250 per hour for Don
C. Gibson, and Susan C. Gibson (individually as "Lee" Sheehan, and $300 per hour for Tom Thomas. Defendants
and "Gibson" or collectively as "Defendants") to recover also expressly agreed to pay a 10% contingency fee on any
attomey fees. Defendants filed a counterclaim against Kline "recovery ." It was fiirther agreed that 40% of the 10%
aiid Gary Grote ("Grote"), alleging legal malpractice. The contingency fee would be paid to Kline and that the remaining
trial court granted Grote's motion for summary judgment. 60% would be paid to Thomas, Sheehan & Culp.
The remaining claims proceeded to a jury trial. The trial
court instructed a verdict in Kline's favor on Defendants'
*2 The relationship between Defendants and Kline was
malpractice action. On Kline's action to recover attorney
fees, the jury found in favor of Kline and awarded her genuinely affable^ until September 1995, when Kline
$114,207.21. In its final judgment, the trial court found received correspondence from Gibson wherein the demand
was made to Kline to "withdraw from the case immediately."
WtSTLAW . fh.vr->.;-ri Routes No daim toonqsnai U.S tiOvar'-imcn* Wo-k>
PLAINTIFFS'ORIGINAL PETITION - Page 144
Lee V. Kline, Not Reported in S.W.3d (2000)
Kline obeyed Gibson's demand and withdrew from the case. Defendants assert that because the contingent fee agreement
I^rior to withdrawing, fCline received approximately 578,000 between Kline and Defendants was made during the existence
in attomey fees from Defendants, These attorney fees were of their attorney-client relationship, there was a "presumption
incurred between July 1994 and December 1994. Afler Kline of unfairness" of the agreement. They contend that the
withdrew, she billed Defendants for her time invested in their only way Kline could defeat that presumption was by
case between December 1994 and July 1995. Kline's attomey obtaining a jury finding that the agreement was fair and
fees for that period of time totaled $110,388.77. Defendants reasonable. In making this claim, defendants rely on Archer
refused to pay the bill and Kline intervened in the underlying V. Griffith, 390 S.W,2d 735 (Tex. 1964).. There, the supreme
estate case to recover her attomey fees. court held that where an attomey contracts with his or her
client for compensation during the existence of an attorney-
client relationship, there "is a presumption of unfairness or
Following a trial, the jury awarded Kline $114,207.21 for
invalidity attaching to the contract, and the burden of showing
"legal services she performed for [Defendants] on an hourly
its fairness and reasonableness is on the attomey," Id. at 739
basis under the contract." The jury also found that Defendants
(citations omitted); see also Robinson v. Garcia, 804 S.W,2d
did not discharge Kline for "good cause." Consequently, in its
238, 248 (Tex.App.-Corpus Christi 1991, writ denied).
judgment, the trial court found that Kline possesses "a good,
valid and subsisting interest in any recovery by [Defendants]
pursuant to her contingent fee contract,..." *3 Although Defendants did not request a jury instruction
conceming the fairness and reasonableness ofthe contingent
fee agreement, they did request that the trial court submit
II. DISCUSSION the following question to the jury: "Do you find from a
preponderance of the evidence that the making of the March
30, 1995 retainer agreement constituted an unconscionable
Jury Findings on Fairness of Contingent Fee Agreement
action or course of action with respect to the attorney's fees to
In Defendants' first issue, they aver that "Kline failed to be paid to Donna Kline?" ^ The trial court refused to submit
prove and to secure findings that she dealt fairly with Gibson Defendants' tendered question to the jury because there was
and Lee...." They contend that the contingent fee agreement "no evidence to support the elements in the definition of
was unfair and invalid because it was made after Kline was unconscionable conduct or course of action." The trial court
initially retained by Defendants. ^ also found no "evidence of taking advantage or lack of
knowledge or ability or experience or capacity or grossly
Kline's original fee agreement provided that Defendants unfair [because] there is [no] evidence on any of those points."
would pay Kline $225 per hour, plus expenses, for legal
services she performed in the underlying estate case. The Jury instructions and questions are proper only i f they
fee agreement between Defendants and Kline was modified are raised by the written pleadings and are supported
when Thomas, Sheehan & Culp was retained to join Kline in by the evidence.'^- ^/^obr v. Smith. 845 S.W.2d 240,
representing Defendants, On March 30,1995, Daniel Sheehan 243 (Tex.1992); Knoll v. Neblett, 966 S.W.2d 622, 633
drafted an agreement which outlined the terms of his firm's (Tex.App.-Houston [14th Dist.] 1998, no pet.); Bean v. Baxter
representation of Defendants in the underlying estate case. Healthcare Corp., 965 S.W.2d 656, 661 (Tex.App.-Houston
The agreement provided that "[o]ur fee will be the sum of: [ 14th Dist.] 1998, no pet.); see also TEX.R.CIV.P. 278 (West
(a) reasonable hourly rates including Donna Kline at the 1999), A trial court may properly refuse to submit an issue to
rate of $225 per hour and members of Thomas, Sheehan &
the jury where no evidence exists to warrant its submission.
Culp, L.L.P. who work on the case with Tom Thomas' rate
Elbaor, 845 S.W.2d at 243.
at $300 per hour and Dan Sheehan's rate at $250 per hour,
plus (b) ten percent (10%) of all Recovery, if any," (emphasis
Further, presumptions that are imposed by law must be
added). The agreement fiarther provided that "[cjontingency
supported by the evidence presented during trial in order to
fees will be divided between us, sixty percent (60%) to
be considered by the trier of facts. We note the following:
Thomas, Sheehan & Culp, L.L.P., andforty percent (40%) to
Donna C. Kline." (emphasis added). The record shows that Courts have frequently remarked that
the agreement was executed by both Defendants. presumptions are only intended to
take the place of facts and cannot
PLAINTIFFS' ORIGINAL PETITION - Page 145
Lee V. Kiine, Not Reported in S.W.Sd (2000)
be relied upon where the facts are In issues two, three, four, five and six, Defendants contend
shown; or that no presumption can that the trial court erred by entering its judgment against each
stand in the face of facts. According Defendant under "all three contracts." Defendants maintain
to such authorities a presumption is that they were not jointly and severally liable on each
an artificial thing, a mere house of contract. Defendants also assert that Defendant Susan C. Lee,
cards, which one moment stands with Tmstee for Susan C. Gibson was not a proper party to the suit
sufficient force to determine an issue, brought by Kline.
but at the next, by reason of the
slightest rebutting evidence, topples Defendants' allegations of trial court error in issues two
utterly out of consideration of the trier through six, inclusive, are waived. "Where a defendant does
of facts. not file a sworn pleading complaining of a defect of parties
before the case is called to trial, such defect is waived."
Combined American Ins. Co. v. Blanton, 353 S.W.2d847, 849 Sunbelt Const, Corp., Inc. v. S & D Mechanical Contractors,
(Tex.1962).
Inc., 668 S.W.2d 415, 418 (Tex.App.-Corpus Christi 1983,
writ refd n.r.e.); Allright, Inc. v. Burgard, 666 S.W.2d 515,
The record in this case is replete with competent evidence to 517 (Tex.App.-Houston [14th Dist.] 1983, writ refd n.r.e.);
rebut the presumption of unfairness conceming the contingent Butler V. Joseph's Wine Shop, Inc., 633 S.W,2d 926, 929-30
fee agreement. For example, Kline testified that "from the (Tex.App.-Houston [14th Dist.]' 1982, writ refd n:r.e.); see
time we started talking about contingency arrangements with also TEX.R.CIV.P. 93(4) (West 1999); Shawell v. Pend
[another law firm], [Defendants] said if someone is going to Oreille Oil & Gas Co., 823 S.W.2d 336, 338 (Tex.App.-
get a contingency fee, we want you to get part of it, because Texarkana 1991, writ denied) (a defendant must complain
you have done so much for us...."- Conversely, there was about a defect in the parties before the case is called to trial).
no evidence presented by Defendants to suggest that Kline's Thus, nothing is presented for appellate review.
forty percent contingent fee was unfair or unreasonable.
Indeed, the evidence in the record supports the inference
On rehearing, Susan C. Lee, Trustee, chastises this court
that the agreement was entered into freely and voluntarily by
for summarily disposing of five points of error; she claims
Defendants based upon their full understanding of the affect
that she was never a party to the suit in her capacity as
of the contingent fee agreement. See Archer, 390 S.W.2d at
tmstee. We beg to differ. By her Second Amended petition.
739.
Donna Kline sued-and served-Susan C. Lee in her capacity as
Trustee; Kline also sued Lee in that capacity in a supplemental
The presumption upon which Defendants rely "disappeared petition. Moreover, Susan C. Lee, Tmstee, appeared in the
like chaff in the wind" upon the introduction of Kline's suit of her own volition in a counterclaim and a third
evidence contradicting the applicable legal presumption. party petition. That pleading began as follows: "NOW INTO
See Praetorian Mutual Life Ins. Co. v. Humphreys, 484 COURT, Susan Camille Lee, individually and as Tmstee
S.W.2d 413, 417 (Tex.App.-Fort Worth 1972, writ refd for Susan C. Gibson, and Susan C. Gibson, and files this
n.r.e.). Thereafter, the presumption, previously existent, no their Third Amended Original Counterclaim combined with
longer constituted evidence. See id.; see also Sudduth v. Third Amended Original Third Party Petition complaining
Commonwealth County Mutual Ins. Co., 454S.W.2d 196,198 of Donna Kline and Gary Grote.,.." Unquestionably, Susan
(Tex. 1970). C. Lee, Trustee, was a party to the lawsuit, appeared in the
lawsuit, and requested affirmative relief from the trial court.
*4 Accordingly, there being no evidence of imfaimess or We overrule issues two through six.
unreasonableness in the record, a specific finding by the
jury that Kline's contingent fee agreement with Defendants
was fair and reasonable was not necessary. See Elbaor, 845
S.W.2d at 243. Defendants' first issue is overmled. Separate Jury Findings on "Each Contract"
Defendants contend in their seventh issue that Kline "invited
reversible error" by failing to obtain jury findings upon which
Parties an accurate judgment can be entered against them. They
contend that the trial court committed reversible error by
WESTLAW © 2015 Thomson Heutecs. No claim io ongmal U.S. Government Works.
PLAINTIFFS' ORIGINAL PETITION - Page 146
Lee V. Kline, Not Reported in S.W.3d (2000)
submitting one, broad question to the jury conceming the reverse ajudgment based upon error in the charge, Defendants
amount of attomey fees owed under the contracts, rather than must establish that the error complained of amounted to
submitting separate jury questions conceming the amount of such a denial of the rights of the Defendants that it was
attomey fees "owed under each contracL" reasonably calculated to cause, and probably did cause,
rendition of an improper judgment. See Insurance Co. of
*5 In interpreting Rule 277, our Supreme Court held that North America v. Morris, 928 S.W.2d 133, 143 (Tex .App.-
broad-form submissions "shall" be used "whenever feasible" Houston [14th DisL] 1996, no writ). Defendants must also
and that trial courts do not possess any discretion to submit establish that they "distinctly" and "specifically" objected
separate questions with respect to each element of a case. to the complained of question so as to have preserved the
Texas Dep't of Human Serv. v. E.B., 802 S.W.2d 647, issue for appellate review./(T/rfcv. Stale of Texas, 651 S.W,2d
649 (Tex. 1990). Broad-form submissions must be used "in 840, 844 (Tex.App.-El Paso 1983, no writ). Conceming
any and every instance in which it is capable of being the former. Defendants do not develop in their argument
accomplished," Id. The court also stated that broad-form how the trial court's complained of jury question caused the
questions reduce conflicting jury answers, thus reducing rendition of an improper judgment. See Insurance Co. of
appeals and avoiding retrials. Id. "Rule 277 expedites trials North America. 928 S.W.2d at 143, As to the latter, contrary
by simplifying the charge conference and making questions to Defendants' assertion in their brief, the record shows that
easier for the jury to comprehend and answer." Id. Defendants failed to distinctly and specifically object to the
complained of question submitted by the trial court to the jury.
Here, the trial court submitted the following, broad-form See Kirk, 651 S.W,2d at 844. Issue seven is overruled.
question to the jury: "What reasonable amount, if any, is
owed to Donna Kline for the necessary legal services she
performed for [Defendants] on an hourly basis under the
Good Cause
contracts?" The jury answered this question by awarding
Kline $114,207.21. The record shows that this amount was *6 In their eighth issue. Defendants contend that the jury's
entirely consistent with Kline's evidence. Kline testified that finding that Kline was not discharged by Defendants for
Defendants agreed to pay her $225 per hour, plus expenses, "good cause" was against the great weight and preponderance
for legal services. Kline testified that the amount of her unpaid of the evidence.
reasonable and necessary attomey fees and expenses related
to her time spent preparing the underlying estate case totaled The same standard of review applies in reviewing factual
$110,388.27. Kline also testified that she billed Defendants sufficiency challenges, regardless of whether the court of
an additional $3,818.94 for reasonableandnecessary attomey appeals is reviewing a negative or affmnative jury finding and
fees for representing Defendants in a suit involving one of regardless of which party had the burden of proof. Blonstein
Defendants' neighbors. Kline testified that the total amount V. Blonstein, 831 S.W.2d468, 473 (Tex.App.-Houston [I4th
owed to her on an hourly basis for legal services she Dist] 1992, writ denied). Afler consideration of all ofthe
performed for Defendants totaled $114,207.21. evidence, a verdict will be set aside only i f the evidence is
so weak or the finding is so against the great weight and
At trial, the only disputed fact related to Kline's hourly preponderance of the evidence that it is cleariy wrong and
attomey fees under the contracts was the amount owed by unjust. Id.; see also Lofton v. Texas Brine Corp., 720 S.W.2d
Defendants. The question submitted by the trial coxjrt was 804, 805 (Tex.1986). The trier of fact is the sole judge ofthe
framed to resolve that disputed fact. Triaf courts possess credibility of the witnesses and the weight to be accorded their
"broad discretion in framing questions to be submitted, testimony. Id. Therefore, in determining the sufficiency ofthe
'subject only to the requirement that the questions submitted evidence, appellate courts must recognize from the verdict
must fairiy submit the disputed issues for the jury's of the jury what the jury, in its discretion, chose to believe.
determination,' " Libhart v. Copeland 949 S,W.2d 783, 799 Shafer Plumbing & Heating, Inc. v. Controlled Air, Inc., 742
(Tex.App.-Waco 1997, no writ). We discern no abuse of trial S.W,2d 717, 720 (Tex.App.-San Antonio 1987, no writ). In
court discretion in submitting the complained of question. doing so, we must accept thejury's resolution of any conflicts
or inconsistencies in the evidence and testimony. Id. The jury
Further, assuming arguendo that the trial court should have is free to believe or disbelieve any witness' testimony in whole
submitted separate questions to the jury in this case, to or in part. Murphy v. Texas Farmers Ins. Co., 982 S.W.2d 79,
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85 (Tex.App.-Houston [1st Dist.] 1998, no pet. h,). The jury was instmmental in, inter alia, developing the portion of the
is entitled to disbelieve a witness even though that witness is estate case that resulted in Defendants receiving a verdict
neither impeached nor contradicted. Id. for S840,000 on the sale of property located on Westheimer,
Further, one of the key expert witnesses in the estate was Dr.
In Question Two, the jury in this case was asked, "Did Harold Stephen Grace. Dr. Grace is an expert "in litigation
[Defendants] discharge Donna Kline for good cause?" The consulting on complex business andfinancialmatters ." Kline
jury was instructed that "a client has 'good cause' to discharge brought Dr. Grace into the estate case in May 1995. Dr.
an attomey i f the attomey fails to perform her duties in Grace testified that Kline supplied him with all the necessary
the manner that an attomey of ordinary skill and ability documents he needed to develop a strategy and his testimony
would have performed her duties under the same or similar for the estate case. Dr. Grace testified that Kline possessed a
circumstances." The jury responded to Question Two in the cogent grasp of the issues involved in estate case. In preparing
negative. his testimony in the underlying estate case. Dr. Grace testified
that "my time sheets would reflect that the overwhelming
In their brief. Defendants contend that Kline's performance majority of my time, over 90 percent would be spent with
deteriorated "dramatically" afler the contingent fee Donna Kline." Dr. Grace testified that he and Kline developed
agreement was executed on March 30, 1995. No criticisms the strategy that he used to testify in the estate case. Defendant
were made of Kline's performance between the time she Susan Lee told Dr. Grace after he testified in the underiying
was retained in July 1994 and March 1995. To show that estate case that his testimony "was the high point ofthe trial."
Kline was discharged for "good cause" in September 1995,
Defendants rely .solely on criticisms of Kline's performance Reviewing all the evidence in the light of what the verdict
made at trial by Daniel Sheehan. First, Sheehan did not reveals the jury obviously believed, we cannot conclude that
testify in this case as an expert witness conceming whether the verdict "is contrary to the overwhelming weight of the
Kline met the appropriate standard of care. See Greathouse evidence as to be clearly wrong and unjust," See Shafer
V. McConnell, 982 S.W.2d 165, 174 (Tex.App.-Houston Plumbing & Heating, Inc., 742 S.W.2d at 721; see also
[1st Dist.] 1998, no pet.). Indeed, neither Sheehan nor any Blonstein, 831 S,W.2d at 473-74. Issue eight is overmled.
other witness in this case was designated as an expert
witness on legal malpractice,' Second, Sheehan was Kline's
co-counsel, not her employer, Kline was employed by Declaratory Judgment
Defendants. Sheehan's criticisms of Kline's performance,
In their ninth issue, Defendants assert that the trial court ened
testifying as only a fact witness,"^ are immaterial as to
in entering its declaratory judgment which decreed that Kline
whether Defendants discharged Kline for "good cause."
possesses a "valid and subsisting" contingent interest in any
Defendants direct this Court to no testimony in the record by
recovery obtained by Defendants in the underlying estate
Defendants to support a finding that Kline was discharged
by Defendants for good cause, Finally, conceming whether case, pursuant to the contingent fee agreement of March 30,
any of Sheehan's criticisms of Kline's performance were ever 1995.
communicated to Defendants, in their brief, Defendants rely
The purpose of the Uniform Declaratory Judgment Act is to
on Sheehan's testimony wherein he testified that he told
settle and afford relief from uncertainty and insecurity about
Defendants that "Kline was not of any real use to me in getting
rights, status, and other legal relations. Hasty, Inc. v. Inwood
the case ready."
Buckhorn Joint Venture, 908 S.W.2d 494, 499 (Tex.App.-
Dallas 1995, writ denied); see also TEX,CIV.FRAC,
*7 On the other hand, the record is replete with testimony
& REM.CODE ANN. §§ 37.001-.011 (Vemon 1997).
and evidence that shows Kline performed in a diligent manner
Defendants maintain that the trial court's declaratory
in preparing the underlying estate case. Kline testified that she
judgment in this case "does not terminate the uncertainty
prepared pleadings and motions, attended hearings, prepared
or controversy giving rise to [the] lawsuit." However,
intenogatories on behalf of Defendants, deposed several
Defendants do not identify in their brief what "uncertainty or
witnesses, secured expert witnesses, assisted in getting
controversy" remains. The trial court's declaratory judgment
Defendants' accounting and tax affairs in order, and prepared
merely decrees that the parties' contingent fee contract is
a portion of the jury charge that was ultimately utilized in
the trial of the underlying estate case. Kline testified that she
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valid. "A trial court may construe a contract in a declaratory issue of material fact exists on one or more of the essentia!
judgment suit either before or afler a breach occurs." Id. elements of the plaintiffs cause of action, or when the
defendant establishes each element of an affirmative defense
*8 As to the effect of any potential disputes between the as a matter of law. Id.; see also Black v. Victoria Lloyds Ins.
parties in this case, a "declaratory judgment may be entered if Co., 797 S.W.2d 20, 27 (Tex, 1990). A defendant who moves
it serves a useful purpose in resolving a controversy between for summary judgment has the burden of showing as a matter
the parties, even if actual or potential disputes remain. " Town of law that no material issue of fact exists on the plaintiffs
of Griffing Park v. City of Port Arthur, 628 S.W.2d 101, cause of action. Id.; see also Arnold v. National County Mut.
102 (Tex.App.-Beaumont 1981, writ refd n.r.e.) (emphasis Fire Ins. Co.. 725 S.W.2d 165, 166-67 (Tex.1987).
added). Indeed, "[t]he fact that other issues in the general
controversy remain uiu-esolved by a declaratory judgment *9 The function of a summary judgment is not to deprive a
does not deprive the court of the power and discretion to lifigant of its right to a full hearing on the merits of any real
render such a judgment." Id . (citation omitted); see also issue of fact but to eliminate patently unmeritorious claims
Hawkins v. Texas Oil & Gas Corp.. 724 S.W.2d 878, 891 and untenable defenses. Id.; Dallas Cent. Appraisal Dist. v,
(Tex.App.-Waco 1987, writ refd n.re.). G.T.E. Directories Corp. 905 S,W.2d 318, 319 (Tex.App,-
Dallas 1995, writ denied). The purpose of the summary
We note that the trial court did not enter a monetary award judgment mle is not to provide either a trial by deposition
to Kline based upon the contingent fee contract because or a trial by affidavit, but to provide a method of summarily
the amount of Defendants' recovery in the underlying estate terminating a case when it clearly appears that only a question
has not been finally adjudicated. See note 1, supra. All that of law is involved and that no genuine issue of material fact
remains is the calculation of Kline's contingent interest in remains. Id.
Defendants' recovery, if any. We hold, therefore, that the trial
court did not err in granting a declaratory judgment, which In a legal malpracdce case, as here, the plaintiff must prove
decreed that Kline's contingent fee interest in Defendants' a duty owed to him or her by the defendant, a breach of that
monetary recovery is valid. Issue nine is overruled. duty, injury proximately caused by the breach, and damages,
Schlager, 939 S.W.2d at 186; see also Peeler v. Hughes &
Luce, 909 S.W.2d 494, 496 (Tex.1995). A lawyer in Texas
is held to the standard of care which would be exercised by
Gary Grote's Motion for Summary Judgment
a reasonably pmdent attomey, based on the information the
In their tenth issue. Defendants assert that the trial court attomey has at the time of the alleged act of negligence. Id. To
erred in granting Gary Grote's mofion for summary judgment prevail in a legal malpractice action, a plaintiff must prove "a
on ( I ) Defendants' action for malpractice against Grote, and suit within a suit" by demonstrating that he or she would have
(2) Grote's action to recover attomey fees from Defendants prevailed in the underlying action but for his or her attomey's
which were incurred when Grote represented Defendants in a negligence. Id. at 186-87. Although proximate cause in a
lawsuit involving one of Defendants' neighbors. legal malpractice action is usually a question of fact, it may
be determined as a matter of law if the circumstances are
The standard of review to be followed in a summary judgment such that reasonable minds could not arrive at a different
is well-established. The movant has the burden of showing conclusion. Id. I f the attomey demonstrates that his failure to
that there is no genuine issue of material fact and that he act was not the cause of any damages to the client, a summary
or she is entitled to judgment as a matter of law. Schlager judgment may be proper. Id.
V. Clements. 939 S.W.2d 183, 186 (Tex.App.-Houston [14th
Dist.] 1996, writ denied). In deciding whether or not there is Defendants filed legal malpractice actions against Gary Grote
a disputed material fact issue precluding summary judgment, and Donna Kline. Their action was filed as a counterclaim
proof favorable to the non-movant will be taken as tme. Id. to Kline's action to recover attomey fees. As to Grote,
Every reasonable inference must be indulged in favor of the Defendants alleged that he represented Defendants on matters
non-movant and any doubts are resolved in his or her favor. unrelated to the underlying estate case during 1994-95.
Id.; see also Nixon v. Mr. Property Management Co., 690 Defendants alleged that Grote committed legal malpractice
S.W.2d 546, 548-49 (Tex.1985). Summary judgment for the because he breached his employment contract, was negligent
defendant is proper when the proof shows that no genuine in representing Defendants, breached fiduciary duties by
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charging excessive attomey fees and by communicating action. See Mackie v. McKenzie, 900 S.W.2d 445, 451-52
with a juror in the underlying estate case, was negUgent (Tex.App.-Texarkana 1995, writ denied); see also Klein v.
and grossly negligent in communicating with a juror in the Reynolds, Cunningham, Peterson & Cordell. 921, S.W,2d45,
underlying estate case, knowingly violated the Deceptive 49 (Tex.App.-Houston [1st Dist.] 1995, no writ). Further, the
Trade Practices Act (DTPA), relative to his representation of record shows that Defendants' causes of action against Grote
Defendants, and conspired with Kline to interfere with the were "patently unmeritorious." See Schlager, 939 S.W.2d at
underlying estate case by obtaining juror information sheets 186. The trial court did not en in granting Grote's motion for
and communicating with a juror in that case for the purpose summary judgment. Issue ten is overmled.
of causing a mistrial. "
Grote moved for summary judgment, contending that Recusal
he was entitled to a judgment as a matter of law
on Defendants' malpractice action and on his claim for In their eleventh issue. Defendants aver that the trial court
attomey fees. Defendants contend that Grote's motion for erred in refusing to recuse Judge Wood from the trial of this
summary judgment should have been denied because it was case.
unsupported by competent summary judgment proof and did
not dispose of all of the issues in the case. We disagree. Citing Rule of Civil Procedure 18b(2), Defendants contend
that Judge Wood possessed "personal knowledge of the
* 1 0 Grote asserted in his motion that he was entitied to evidentiary facts conceming the proceeding" and was a
summary judgment on Defendants' malpractice action and "material witness to the Kline and Grote matter in the
his attomey fees action because the attomey fees he charged [underlying estate] litigation." See TEX.R.CIV.P. 18b(2)
were reasonable and customary and that he was competent (West 1999). Defendant's eleventh issue is without merit. The
in performing the kind of legal services he performed for gist of Defendants' complaint is that Judge Wood acquired
Defendants. In support of his motion, Grote attached copies "personal knowledge" and was a "material witness" to the
of Defendants' responses to requests for admissions and a instant case because during the underlying estate case he
detailed affidavit which outiined his qualifications and which (1) heard , testimony conceming to Grote's communication
showed that his performance in representing Defendants with Juror Thomas, (2) made certain in-courtralings,and (3)
was consistent with the standard care of what a reasonable presided over the underiying estate case.
and pmdent attomey would have exercised based on the
information the attomey had at the time of the alleged act *11 Judicial mlings alone almost never constitute a valid
of malpractice. ''^ Grote also attached a copy of his billing basis for a recusal motion because they cannot possibly show
invoice which reflected the amount of attomey fees owed reliance by a judge upon extrajudicial sources. Ludlow v.
by Defendants. Further, as to Defendants' allegations that DeBerry. 959 S.W.2d 265, 271 (Tex.App.-Houston [14th
Grote violated the DTPA by failing "to exercise due care and Dist.] 1997, no writ). None of Judge Wood's knowledge of
diligence in representing Susan C. Gibson and Susan C. Lee the facts of the instant case, if any, resulted from extrajudicial
in the Estate case," the record clearly refutes this allegation. sources nor his "personal knowledge." See id. Further, there
Grote's summary judgment unequivocally establishes that is no provision contained within Rule 18b(2) that would
Grote never represented either Defendant in the underiying support Defendants' contention that Judge Wood was a
estate case. Finally, as to Defendants' allegations that Grote's "material witness" in the underlying estate litigation. See
communication with a juror in the underlying estate case TEX.R,CIV,P. 18b(2) (West 1999),
showed that he was involved in a conspiracy with Kline "to
interfere with or compromise" the underlying estate case, the There yvas no abuse of trial court discretion in denying
siimmary judgment proof and record shows that this claim Defendants' motion to recuse. See Hector v. Thaler, 927
S.W.2d 95, 99 (Tex.App.-Houston [1st Dist.] 1996, writ
is at best, meritless, and at worst, frivolous, ^ee note 13,
denied); see also TEX.R.CIV.P. 18a(f) (West 1999). Issue
supra.
eleven is overmled.
In sum, we hold, contrary to Defendants' contentions, that
Grote's summary judgment proof was not conclusory and
that it responded to all of Defendants' pled causes of
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is proper. See Internationa! Security Life Ins. Co. v. Spray,
Ailorney's Fees
468 S.W.2d 347, 349-50 (Tex.l97I). Finally, Defendants'
In their twelfth issue, Defendants contend that the trial court argument that Kline's appellate attomey's fee award should
erred in not conditioning the award of appellate attomey's have been conditioned upon Defendants' unsuccessful appeal
fees to Kline upon a successful appeal. In response to ajury is rendered moot by our decision to affirm the trial court's
question, the jury awarded Kline attomey's fees for the trial, judgment. See Siegler v. Williams, 658 S.W.2d 236, 241
for an appeal to the court of appeals, and for an appeal to (Tex.App.-Houston [1st DisL] 1983, no writ). Issue twelve is
the Texas Supreme Court. In the trial court's judgment, the overmled.
respective awards of attomey's fees to Kline were subject
to remittitur if no appeal was taken. In other words, no The judgment is affirmed.
attomey's fees would be awarded to Kline for appeals if
Defendants chose not to appeal the trial court's judgment. The
trial court's judgment conceming the award of attomey's fees All Citations
Not Reported in S.W.3d, 2000 WL 19227
Footnotes
1 See Lee, et al. v. Lee, et a/., No. 14-97-00162-CV {In re Estate of Katherine Pillot Lee Barnhart, Deceased ). The
underlying estate case is presently on appeal in this Court, assigned to another panel.
2 The underlying estate action was filed by Defendants in 1988.
3 The record shows that Defendants and Kline vacationed together in the Virgin Islands and exchanged gifts between July
1994 and July 1995.
4 The law firm of Thomas, Sheehan & Culp remained in the case as lead trial counsel. After the trial of the underlying estate
case In January 1996, the lawfirm was awarded $1,500,000 for attorney fees.
5 As we understand Defendants' first issue, they are not challenging the award of $114,207.21. This amount was awarded
to Kline based on her hourly billing rate of $225,
6 "Failure to submit a question shall not be deemed a ground for reversal of the judgment, unless Its submission,.m
substantially correct wording, has been requested in writing and tendered by the party complaining of the judgment."
TEX.R.CIV.P. 278 (West 1999) (emphasis added); Mason v. Southern Pacific Transp. Co., 892 S.W.2d 115, 117-18
(Tex.App.-Houston [1st Dist.] 1994, writ denied) (where party complaining of the judgment on appeal failed to tender a
written question to the trial court concerning the defendant's duty of care, point of error was waived on appeal); see also
note 8, infra. Defendants' tendered jury instmction appears to be consistent with their contention that Kline violated the
Texas Deceptive Trade Practices Act. See TEX.BUS. & COM.CODE ANN. § 17.50(a)(3) (Vemon Supp.1998). However,
the trial court instructed a verdict in Kline's favor on that issue.
7 We note that the issue regarding the fairness and reasonableness ofthe contingent fee agreement was not raised in any
of Defendants' pleadings or tendered jury questions in this case. See TEX.R.CIV.P. 278 (West 1999). Further, our review
of the record, including Defendants' motion for new trial, discloses that the fairness and reasonableness ofthe contingent
fee agreement was not an issue in this case at the trial level. See A. V.A. Ser/ices, Inc. v. Parts Indus. Corp., 949 S.W.2d
852, 854 (Tex.App .-Beaumont 1997, no writ); see a/so Steel v. Rhone Poulenc, Inc., 962 S.W.2d 613, 618 (Tex.App.-
Houston [1 st Dist] 1997, no pet.); Hughes v. Thrash, 832 S.W.2d 779, 788 (Tex.App.-Houston [1 st Dist.] 1992, no writ).
8 "Itiselementarythatundisputed factual issues need notbesubmittedtothejury"Kora//ndt/s., Inc. v. Security Connecticut
Life Ins. Co., 788 S.W.2d 138, 149 (Tex.App.-Dallas 1990, writ denied). As noted, Defendants' specific complaint on
appeal does not appear to have been a disputed factual issue at trial.
9 To establish compliance with the appropriate standard of care in a legal malpractice case, expert testimony is required.
Jatoi V. Decker, Jones, McMackIn, Hall & Bates, 955 S.W.2d 430, 434 (Tex.App.-Fort Worth 1997, pet. denied).
10 Lay or fact witnesses are subject to the general rule that a witness' testimony must be limited to facts which the witness has
personal knowledge, and a witness must not give a personal opinion or legal conclusion unless he or she is designated
as an expert witness. United Way of San Antonio, Inc. v. Helping Hands Lifeline Found., Inc., 949 S.W.2d 707, 713
(Tex.App.-San Antonio 1997, no writ).
11 Defendants' allegations stem from the following event: After a jury had been selected in the underiying estate case, Grote,
an attorney, was playing soccer with a team-mate and friend. Earl Thomas. Thomas mentioned that he was serving Jury
duty that day in a case involving a will dispute. Grote responded to Thomas by saying, "Oh, it's not the Lee case?" Thomas
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responded that indeed it was the Lee case. Grote informed Thomas, Inter alia, that because he was involved in litigation to
recover attorney fees from Lee that Thomas should report their conversation to the Judge the following moming. Thomas
followed Grote's instmctions and reported it to the Judge the following moming. The Judge declared a mistrial because of
Thomas' conversation with Grote, in addition to problems with at least four other Jurors. The judge noted that if Thomas
was theonly problem he would allow the trial to proceed but he could not allow it to proceed because another Juror stated
that she was suffering from intolerable pain and could not afford to sen/e, another juror stated that he was schizophrenic,
and another stated he had to be with his wife who was taken to an emergency room. The Judge concluded, "I have
reached the conclusion I am very uncomfortable with the Jury. I have never had a Jury that has been more creative with
excuses. It seems to be pandemic among them, and it's well, if you don't buy this excuse, I've got this excuse."
12 Notably, nowhere in Defendants' pleadings nor in Defendants' responses to Grote's motion for summary judgment, is an
attempt made to show that Defendants possessed any evidence to show that Defendants could prove the "suit within a
suit" by demonstrating that they would have prevailed in the action complained of but for Grote's alleged malpractice. See
Schlager, 939 S.W.2d at 186. Indeed, this Court is left in the dari( as to what it was that Grote did In the complained of
action that showed he committed legal malpractice or violated the DTPA. See Greathouse, 982 S.W.2d at 174 (summary
Judgment appropriate where plaintiff fails to raise a fact issue conceming the "suit within a suit" element of a legal
malpractice cause of action).
13 Attached to Grote's motion for summary Judgment are copies ofthe transcripts from Grote's and Juror Thomas' testimony
before the trial court concerning their communication.
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PLAINTIFFS'ORIGINAL PETITION - Page 152
EXHIBIT "2
CAUSE NO. 13-7506;.-403
ESTATE OF KATHERINE PILLOT LEE IN THE PROBATE COURT
BARNHART, §
§
RONALD E. LEE JR., §
§
Plaintiff, §
V, HARRIS COUNTY, TEXAS
SUSAN CAMILLE LEE, Individually and
as Trustee of the Article IV Trust created
by the Last Will and Testament of
Katherine Pillot Lee Barnhart, Deceased,
and as Executor ofthe Estate ofKatherine
Pillot Lee Bamhart, Deceased,
Defendant. PROBATE COURT NO. 2
DEFENDANT'S OBJECTIONS, OPPOSITION, AND RESPONSE TO
APPLICATION TO APPROVE SETTLEMENT AGREEMENT
Susan Camille Lee, Individually and formerly Trastee of the Article IV Trust (the
"Trusf) created by the Last Will and Testament ofKatherine Pillot Lee Bamhart, Deceased (the
"Bamhart Will"), and as Executor of the Estate of Katherine Pillot Lee Bamhart, Deceased,
("Defendant") files her Objections, Opposition, and Response to the Application to Approve
Settlement Agreement filed by Applicant Legacy Trust Company ("Legacy") in its capacity as
the court-appointed Receiver ofthe Testamentary Article IV Trust created by the Last Will and
Testament ofKatherine Pillot Lee Bamhart, Deceased, and in support thereof would respectfully
show as follows:
BACKGROUND
The Bamhart Will created the Trust for the benefit of Ronald Ellsworth Lee Jr. ("Ronald
Lee"), Susan Camille Lee ("Susan Lee"), and Katherine Pillot Lee Bamhart's grandchildren. On
June 18, 2015, the Court removed Susan Lee as Tmstee of the Trust and appointed Legacy to
serve as receiver for the Trust pursuant to TEX. PROP. CODE § 114.038. The Order provided that
Legacy was authorized to collect, compromise, or settle all debts owed to the Trust.
On January 25, 2016, Legacy fded its Application to Approve Settlement Agreement
("Application"), attaching an executed Settlement Agreement between Ronald Lee and Legacy,
dated as effective January 13, 2016. Among other things, the Settlement Agreement calls for a
settlement of the judgment against Ronald Lee in favor ofthe Trust, entered in 1996, arising out
of Lee V. Lee, Cause No. 137,506, Harris County Probate No. 2. The judgment was modified by
the Fourteenth Court of Appeals in Lee v. Lee, 47 S.W.3d 767 (Tex. App.-Houston [14th Dist.]
2001, pet. denied). The court of appeals rendered its opinion on May 17, 2001, the Texas Supreme
Court denied Ronald Lee's petition in December 2001, and the Fourteenth Court of Appeals issued
its mandate on February 8, 2002. On December 6, 2012, this Court entered an Order Granting
Application for Writ of Scire Facias and to Revive Dormant Judgment in Cause No. 137,506-402
("Judgmenf).
L The proposed Settlement Agreement is not in the best
interest of the Trust and should not be approved.
SUMMARY O F OBJECTION AND RESPONSE
The Court should not approve Legacy's Settlement Agreement with Ronald Lee because:
1. Settlement ofthe Trust's $26 million Judgment against him for less than
one-half of its value is not in the best interest of the Trust and violates
Legacy's fiduciary duties.
2. The proposed transfer of Ronald Lee's interest in the River Bend Fami
Property is of no benefit to the Trust because it already owns his interest.
DEFENDANT'S OBJECTIONS, OPPOSITION, AND RESPONSE TO
APPLICATION TO APPROVE SETTLEMENT AGREEMENT PAGE 2
A. The proposed settlement of the Judgment is grossly inadequate.
The proposed Settlement Agreement between Ronald Lee and Legacy allows Ronald Lee
to satisfy the Judgment in full, apparently for consideration that includes an alleged payment of
$8 million in 2015, and a promissory note in the amount of $4 million payable quarterly over a
period of two years at a 4% interest rate. This amount is woefully inadequate, less than one-half
of what is due under the Judgment.
Legacy's Application understates the amount of the Judgment against Ronald Lee by a
significant amount. The Application simply references a judgment totaling approximately $3.9
million "plus prejudgment interest." The actual amount of the Judgment is in excess of $4.3
million, and significant portions ofthe Judgment carry post-judgment interest at the rate of 10%
compounded annually back to October 1996, almost 20 years. When post-judgment interest is
calculated in accordance with the Fourteenth Court of Appeals' opinion, the total amount ofthe
Judgment as of February 2016 exceeds $26 million.^ Yet, the proposed Settlement Agreement
discharges the Judgment and sells the Trust's $26 million asset in retum for only $8 million, plus
a $4 million promissory note payable over two years. And, the promissory note carries only 4%
interest, compared to the Judgmenf s rate of 10%.
Ronald Lee and Legacy have colluded to relieve him of his obligations to the Trust. Legacy
asks the Court to find that the Settlement Agreement is in the best interest of the Trast. Yet, it
allows Ronald Lee to discharge this judgment (unpaid for 20 years) for less than 50 cents on the
dollar. It is not in the best interest of the Trust or its beneficiaries. Rather, it is only in Ronald
An approximate calculation ofthe Trust's Judgment against Ronald Lee with prejudgment and post-
judgment interest in accordance with the Fourteenth Court of Appeals' opinion is attached hereto as
Exhibit A.
DEFENDANT'S OBJEcnoNs, QpposraoN, AND RESPONSE TO
APPLICATION TO APPROVE SETTLEMENT AGREEMENT PAGES
Lee's interest, providing a windfall to him in violation of Legacy's duties as Receiver. While
Legacy has the authority to compromise and settle all debts owed to the Trust, it is also charged
with all duties of a trustee under the Trust.'- Legacy owes fiduciary duties to all beneficiaries of
the Trust to exercise good faith in protecting the assets of the Trust and discharging its duties as a
prudent person would ordinarily exercise in the management of his or her own affairs. The
agreement to allow Ronald Lee to satisfy the Judgment is in violation of Legacy's duties.
Based on the foregoing, Susan Lee requests that the Court deny Legacy's Applicafion to
Approve the Settlement Agreement and deny Legacy authority to enter into the agreement as
presented.
B. Ronald Lee's transfer of the River Bend Farm Property
is of no benefit to the Trust.
Legacy's Settlement Agreement also calls for the settlement of issues related to Ronald
Lee's interest in property known as the River Bend Farm Property, consisting of approximately
640 acres in Wharton County, Texas. Legacy's Application states that Ronald Lee acquired a 25%
interest in this property from the estate of his father and the Trust acquired a 50% interest under
the Bamhart Will. The agreement calls for Ronald Lee to deed his interest in the River Bend Farm
Property to Legacy. The problem here is that Ronald Lee has no interest in the River Bend Farm
Property. Legacy's Application fails to infonn the Court that Ronald Lee's interest in the River
Bend Farm Property was foreclosed upon for failure to pay taxes. Susan Lee as Trustee of the
Tmst later redeemed that interest. Therefore, the conveyance of Ronald Lee's interest in the River
Bend Farm Property is worthless to the Trust, because it already ovms his interest. Whatever
consideration is given to Ronald Lee for the value of his interest in the property for the transfer
^ Order Removing Trusting and Appointing Receiver f 3.a, June 18,2015.
DEFENDANT'S OBJECTIONS, OPPOSITION, AND RESPONSE TO
APPLICATION TO APPROVE SETTLEMENT AGREEMENT PAGE 4
should be nullilied. hi this regard, the purported Settlement Agreement is not in the best ofthe
Trust and Legacy's Application to Approve the Settlement Agreement in this regard should also
be denied.
WHEREFORE, PREMISES CONSIDERED, Susan Lee respectfully request that the
Court: (1) decline to approve the terms ofthe Proposed Settlement Agreement; (2) find that the
proposed settlement agreement is not in the best interest of the Trust; and (3) deny Legacy in its
capacity as receiver the authority to enter into the proposed settlement agreement on behalf of the
Trust. Susan Lee also request such other and further relief as which she may show herself justly
entitled.
Respectfully submitted,
DANIEL SHEEHAN P L L C
/s/Daniel J. Sheehan
DANIEL J. SHEEHAN
StateBarNo. 18174500
dsheehan@dsa-law. com
JOHN M . PHALEN JR.
StateBarNo. 15895300
jphalen@dsa-law.com
Campbell Centre II, Suite 100
8150 N. Central Expressway
Dallas, Texas 75206
(214)468-8899
(214)468-8803 Fax
ATTORNEYSFOR
DEFENDANT SUSAN C A M I L L E L E E
C E R T I F I C A T E OF S E R V I C E
The undersigned hereby certifies that a true and correct copy of the foregoing document
was served on all counsel of record on February 10, 2016, in accordance with TEX. R. CIV. P.
21a.
/s/Daniel J. Sheehan
DEFENDANT'S OBJECTIONS, OPPOSITION, AND RESPONSE TO
APPLICATION TO APPROVE SETTLEMENT AGREEMENT PAGES
EXHIBIT A
Lee y. Lee, 47 S.W.Sd 767, 801 (Tex. App.-Houston [14th Dist.] 2001, pet. denied)
EXCESSIVE EXECUTORS' FEES ATTORNEYS' FEES & COURT COSTS
TRIAL: :.:$^:500,pp|-^ Pius Post-Judgment lnterest •
""'•-.^iy.^'-''-'--'• •••• • •• : •• '•':':i.-"-'f -..•
$659,506
TOTAL: i$9,173,8635 "•$B!\/!@:10%Comp6uncieclAnnlial^
+ $1,538,848 ;^ 40/25/1996 to;2/26/2016:(19,3:years)
APPELLATE:
$2,198,355
10% SIMPLE TOTAL:
+ $333,417 — :;;::^?2/2|20p2:fe&
7/28/1993iTO,10/24/1996:
SUPREME : JM.00(3'^ •- " Plus Post-JudgmentintereBt'/
$2,531,772-
PLUS POST-JODGMENT IhmRESX COURT:
^ TOTAL:: •'•$379,749^:" ^$ldO,aQO@lD%OompoutTded;An^
EXCESSIVE FEES TOTAL:
TRIAL COURT
|:Sf®|Q/2||||i&to::;f/|l/2^
J i >$2,531^772:AT10%
•|i|ip§p-S::|||
i • COivIPOUNDED AHNIIALLY-:
$15,535,701 ||B-GC|iRf^
10/26/1996TO 2/26/2016
ATTORNEYS' FEES TOTAL $10,589,293
EXECUTOR'S FEES TOTAL $15,535,701
TOTAL $26,124,994
COSTS TOTAL $384,445
GRAND JUDGMENT TOTAL $26,509,439
DALLAS COUNT^
5/26/2016 4:02:53 PIV
FELICIA PITRE
DISTRICT CLERH
David Hernandez
CAUSE NUMBER DC-16-04570
TOM THOMAS, DAN SHEEHAN IN THE 162nd DISTRICT
and MARC CULP, individually and
as successors to the interests of
Thomas, Sheehan & Culp, L.L.P.,
Plaintiffs,
V. COURT OF
LEGACY TRUST COMPANY,
N.A., in the capacity as RECEIVER
FOR THE ARTICLE IV TRUST
created by the Last Will and
Testament of Katherine Pillot Lee
Bamhart, Deceased,
Defendant. DALLAS COUNTY, TEXAS
Subject to Motion to Transfer Venue & Motion to Transfer
Lawsuit to Statutory Probate Court, Defendant's Original
Answer, Plea In Abatement, and Counterclaim
Defendant Legacy Tmst Company, N.A., in its capacity as Receiver for the Article IV
Trust created by the Last Will and Testament of Katherine Pillot Lee Bamhart, Deceased
appointed by the Probate Court No. 2 of Harris County (hereinafter referred to as "Defendant or
"Legacy"), and, subject to its (1) Motion to Transfer Venue and (2) Motion to Transfer Lawsuit
to Statutory Probate Court, files this its Original Answer and Plea in Abatement, and in support
thereof would respectfully show the Court the following:
1. As stated above, Defendant is filing this pleading subject to the following two
pleadings:
a. Defendant's Motion to Transfer Venue which is being contemporaneously
filed with this Court under the above entitled and nrmibered cause; and
0050812
CAUSE NUMBER DC-16-04570
TOM THOMAS, DAN SHEEHAN § IN THE 162nd DISTRICT
and MARC CULP, individually and §
as successors to the interests of §
Thomas, Sheehan & Culp, L.L.P., §
Plaintiffs, §
§
v. § COURT OF
§
LEGACY TRUST COMPANY, §
N.A., in the capacity as RECEIVER §
FOR THE ARTICLE IV TRUST §
created by the Last Will and
Testament ofKatherine Pillot Lee §
Barnhart, Deceased, §
Defendant. § DALLAS COUNTY, TEXAS
Subject to Motion to Transfer Venue & Motion to Transfer
Lawsuit to Statutory Probate Court, Defendant's Original
Answer, Plea In Abatement, and Counterclaim
Defendant Legacy Trust Company, N.A., in its capacity as Receiver for the Article I V
Trust created by the Last Will and Testament of Katherine Pillot Lee Bamhart, Deceased
appointed by the Probate Court No. 2 of Harris County (hereinafter referred to as "Defendant or
"Legacy"), and, subject to its (1) Motion to Transfer Venue and (2) Motion to Transfer Lawsuit
to Statutory Probate Court, files this its Original Answer and Plea in Abatement, and in support
thereof would respectfully show the Court the following:
1. As stated above, Defendant is filing this pleading subject to the following two
pleadings:
a. Defendant's Motion to Transfer Venue which is being contemporaneously
filed with this Court under the above entitled and numbered cause; and
1IP ag e
0050812
b. Defendant's Motion to Transfer Lawsuit to Statutory Probate Court which was
filed in Harris County Probate Court Number Two (2) under Cause Number
137,506-403 on May 13, 2016.
Original Answer
General Denial
2. Defendant hereby asserts a general denial as to each and every allegation
contained in Tom Thomas, Dan Sheehan, and Marc Culp's (hereinafter sometimes referred to
collectively as the "Plaintiffs") Original Petition as authorized by Rule 92 of the Texas Rules of
Civil Procedure. Defendant requests that the Court require Plaintiffs to prove their claims,
charges, and allegations as required by the Constitution and the laws of the State of Texas.
3. Defendant respectfully reserves the right tq file an amended answer in response to
Plaintiffs Original Petition in the manner which is authorized by the Texas Rules of Civil
Procedure.
Verified Denial
4. Without waiving the foregoing general denial, Defendant hereby asserts the
following verified denial:
a. Defendant denies the existence of a valid contract (a.k.a. - a written fee
agreement) between the Plaintiffs and the Trustee of the Article I V Trust that was
created by the Last Will and Testament of Katherine Pillot Lee Bamhart,
Deceased (hereinafter referred to as the "Article IV Trusf).
2|P .i g e
0050812
Additional Defenses
5. Without waiving the foregoing general denial or verified denial, Defendant
hereby assets the following defenses:
a. Defendant asserts that a duly-authorized Trustee for the Article IV Trust did not
sign the written fee agreement, and, as a result, no Trustee ofthe Article I V Trust
(nor the assets of the Article IV Trust) are bound by the terms and provisions of
the agreement.
b. Defendant asserts the defense of res judicata;
c. Defendant asserts the defense of claim preclusion;
d. Defendant asserts the defense of issue preclusion;
e. To the extent that Plaintiffs seek to recover a contingent fee from Susan Lee's or
Susan Gibson's beneficial interest in the Article I V Trust by virtue of the fee
agreement. Defendant asserts that such a recovery is barred by the spendthrift
clause which is a part of the Article IV Trust;
f. Defendant asserts the defense of estoppel;
g. Defendant asserts the defense of quasi-estoppel;
h. Defendant asserts the defense of acceptance of benefits;
i. Defendant asserts the defense of laches; and
j. Defendant asserts the defense of limitations.
3I P aa c
0050812
k. Defendant asserts that plaintiffs' claims to entitlement to attorneys' fees are
barred by Texas Government Code §82.065(a).
Plea I n Abatement
6. Without waiving the foregoing general denial, verified denial, or defenses,
Defendant moves to abate these proceedings pending a ruling from Harris Coimty Probate Court
Number Two (2) on Defendant's Motion to Transfer Lawsuit to Statutory Probate Court which
Defendant previously filed with Harris County Probate Court Number Two (2) on May 13, 2016
under Cause Number 137,506-403.
Counterclaim
7. Subject to the foregoing Motion to Transfer Venue, Defendant Legacy Trust
Company, N.A., in its capacity as Receiver for the Article IV Trust created by the Last Will and
Testament of Katherine Pillot Lee Bamhart, Deceased appointed by the Probate Court No. 2 of
Harris County asserts the following counterclaims against Plaintiffs Tom Thomas, Dan Sheehan,
and Marc Culp.
8. Defendants Tom Thomas, Dan Sheehan, and Marc Culp have asserted claims
against Legacy for legal fees they claim are owed by the trustee of the Article IV Trust. Legacy
is the court-appointed Receiver for the Article IV Trust, invested with all the power of the tmstee
ofthe Article IV Trast.
9. The original trastee of the Article I V Trust was Ronald E. Lee, Jr. (hereinafter
referred to as "Mr. Lee"). Under the Last Will and Testament ofKatherine Pillot Lee Bamhart
(hereinafter referred to as the "Bamhart Will"), in the event Mr. Lee failed to serve as trustee, the
Article IV Trast was to be managed by co-trustees (1) Susan Camille Lee and (2) Texas
Commerce Bank, N.A. or any successor to that bank. In the event that Texas Commerce Bank,
' 4IPag e
0050812
N.A. or its successors failed to serve, another financial institution with trust powers was required
by the Barnhart Will to be appointed.
10. Mr. Lee was removed as trustee of the Article IV Trust on February 8, 2002. The
successor to Texas Commerce Bank, N.A. at that time was JP Morgan Chase Bank. JP Morgan
Chase Bank declined to serve as co-trustee after Susan Camille Lee specifically requested that it
not serve with her as co-trustee. Susan Camille Lee never sought or obtained the appointment of
a substitute co-trustee as required by the Barnhart Will and Texas law.
11. No agreement was ever signed by any trustee of the Article I V Trust with Tom
Thomas, Dan Sheehan or Marc Culp, or with the law firm of Thomas, Sheehan & Culp, L.L.P.,
for (1) the provision of legal services to the trustee of the Article I V Trust, (2) the payment of a
contingent fee for legal services to the trustee of the Article IV Trust or on behalf of the Article
IV Trust, or (3) the payment of a debt for legal services of another person. Notwithstanding the
lack of any such agreement, Messrs. Thomas, Sheehan and Culp have asserted claims against
Legacy in its capacity as court-appointed Receiver of the Article IV Trust for a contingent fee
based on collections by Mr. Lee as a former trustee of the Article IV Trust, collections by
Legacy as Receiver of the Article IV Trust, and asserted entitlement to collect a contingent fee
based on future collections by Legacy as Receiver of the Article I V Trust.
12. Susan Camille Lee was not a co-tmstee of the Article IV Trust when she signed
the contingency fee agreement in her individual capacity in 1995. In fact, she would not become
even a co-trustee for another seven years. When Susan Camille Lee eventually became a co-
trustee, she never sought or obtained appointment of a co-trustee as required under the Article IV
Trust, a clear violation of the terms of the Trust and the intent of Katherine Pillot Lee Barnhart
5IP a a e'
0050812
when she executed the Barnhart Will. Susan Camille Lee never had the power to bind the Article
IV Trust to the contingency fee agreement.
13. Legacy is placed at jeopardy based on these claims, and pursuant to T E X . CiV.
PRAC. & R E M . CODE §37.005 asks this Court to declare that, under the terms of the Barnhart
Will, the Article IV Trust, and Texas law, the purported March 30, 1995 contingency fee
agreement among Thomas, Sheehan & Culp, LLP, Susan Lee, and Susan Gibson does not today
bind a lawfully appointed Trustee or Receiver of the Article I V Trust. Legacy seeks this relief to
foreclose current and future claims by Plaintiffs against Legacy under the contingency fee
agreement.
14. Legacy further requests that this Court award reasonable and necessary attorney's
fees to Legacy as would be equitable and just and therefore authorized by T E X . CiV. PRAC. &
R E M . CODE §37.009.
15. Legacy further requests that pursuant to T E X A S PROPERTY CODE §114.064, this
Court make such award of costs and attomey's fees to Legacy as may seem equitable and just.
Prayer
WHEREFORE, PREMISES CONSIDERED, Defendant and Counterclaim Plaintiff
Legacy Trast Company, N.A., in its capacity as court-appointed Receiver of the Article I V Trust
under the Last Will and Testament of Katherine Pillot Lee Bamhart, respectfully requests that on
final hearing, the Court grant the following relief:
• A judgment from the Court that Plaintiffs take nothing by way of their lawsuit;
• A judgment from the Court that costs be adjudged against Plaintiffs;
• A n order that this matter is to be abated until such time as Harris County Statutory
Probate Court Number Two (2) has ruled on Defendant's Motion to Transfer
Proceeding to Statutory Probate Court;
6IPag e
0050812
A declaration that Legacy and any future Receiver or trustees of the Article IV
Trust have no obligation to pay additional fees to Tom Thomas, Dan Sheehan,
Marc Culp, or Thomas, Sheehan & Culp, LLP.;
An award from Tom Thomas, Dan Sheehan, and Marc Culp, jointly and severally
of Legacy's reasonable attorneys' fees incurred in connection with this matter;
And
Such other and further relief as Legacy may show itself justly entitled to receive.
Respectfully submitted,
M A C I N T Y R E M C C U L L O ^ ^TANFIELJ
& Y0DNG, LLP
W. Cameron McCulloch
StateBarNo. 00788930
A d r i Graves
State Bar No. 24049999
2900 Weslayan, Suite 150
Houston, T X 77027
(713)572-2900
(713) 572-2902 (FAX)
Cameron.McCulloch(^mmlawtexas. com
Adri. Graves(a)mmlawtexas. com
Attorneys for Legacy Trust Company, N.A. in its
capacity as Court-appointed Receiver of the Article
I V Tmst under the Last Will and Testament of
Katherine Pillot Lee Barnhart
Certificate of Service
I hereby certify that a t r u e ^ d correct copy of the foregoing instrument was sent to the
following via United Stam'^'Cmified Mail, retum receipt requested, via e-serve, and/or via
facsimile on this the ^day of May, 2016:
Mr. Marc S. Culp
Culp & Dyer, LLP
222 E. McKinney Street, Suite 210
Denton, Texas 76201
(940)484-4436
Mr. Thomas A. Zabel
Zabel Freeman
1135 Heights Blvd.
Houston, Texas 77008
(713) 802-9114 (Fax)
Mr. Daniel J. Sheehan
Mr. John M . Phalan, Jr.
Mr. M . Patrick McShan
Daniel Sheehan & Associates, LLP
2501 North Harwood, Suite 1280
Dallas, Texas 75201
(214) 468-8803 (Fax)
Mr. John W. Porter
Ms. Keri Brown
Baker Botts, LLP
One Shell Plaza
910 Louisiana Street
Houston, Texas 77002-4995
(713) 229-1522 (Fax)
"feron McCulloch
Adri A. Graves
I P ag e
0050812
VERIFICATION
STATE OF TEXAS §
COUNTY OF HARRIS . §
Before me, the undersigned authority, on this day personally appeared Sarah Snook, in
her capacity as a Vice President and Tmst Officer for Legacy Trast Company, N.A,, in its
capacity as the Receiver for the Article IV Trast created by the Last Will and Testament of
Katherine Pillot Lee Bamhart, Deceased, Sarah Snook (hereinafter referred to as the "Affianf')
is a person whose identity is known to me. After I administered an oath to Affiant, Affiant
testified as follows:
"My name is Sarah Snook. I am a Vice President and Trust Officer for Legacy Trast
Company, N.A,. Legacy Trast Company is the Receiver for the Axticle IV Trast created by the
Last Will and Testament ofKatherine Pillot Lee Bamhart, Deceased appointed by Harris County
Probate Court Number Two (2). I am capable of malcing this verification. I , have read the
foregoing pleading, which is entitled "Subject to Motion to Transfer Venue & Motion to
Transfer Lawsuit to Statutory Probate Court, Defendant's Original Answer, Plea In Abatement
and Counterclaim". With regard to paragraphs 4, 5 and 6 of the pleading, the facts stated in
these paragraphs are within my personal knowledge and are true and correct."
Sarah Snook, Vice President and Trast Officer for
Legacy Trost Company, N,A., ui its capacity as the
Receiver for the Article IV Trast created by the Last
Will and Testament of Katherine Pillot Lee
Bamhart,
Deceased
0050812 9|P9g.
.^Swoin-10 .and.subscribe.d.befQre^mei th© md6i:sigfi6d-authority,/em--this-the 24 -dtty-of -
May, 2016. A
lAJi
Notary Public, State of Texas
0050812 101P a g e
TAB 2
w. CAMERON MCCULLOCH, JR.
MMS&Y
MACINTYRE • McCULLOCH • STANFIELD YOUNG ROBERTS. MACINTYRE, JR.
PARTNER W. CAMERON MCCULLOCH, JR.
Cameron.mcculloch@mmlawtexas,com ROBERTB. STANFIELD
JILL WILLARD YOUNG
ADRIANNE ARCHER GRAVES
CHRISTOPHER BURT
THUY THAI GOTTLIEB
WILLIAM C. MCCULLOCH*
* OF COUNSEL
July 5,2016
Via E-Mail: amontgomery@cdhllp.com
Ms. Amanda Montgomery
Culp & Dyer, L.L.P,
222 E. McKinney Street, Suite 210
Denton, Texas 76201
Re: Cause Number 137,506-404; Tom Thomas. Dan Sheehan and Marc Culp,
Individually and as Successors to the Interests of Thomas, Sheehan & Culp,
L.L.P. vs. Legacy Trust Company, N.A., in its capacity as the Receiverfor the
Article IV Trust created by the Last Will and Testament of Katherine Pillot Lee
Barhnhart, Deceased; In Hanis County Probate Court Number Two (2)'
Dear Amanda:
This letter confirms our recent e-mail communications wherein we have agreed, on
behalf of our respective clients, to extend discovery response deadlines for the lawsuit which is
referenced above.
For purposes of this agreement, the term "Plaintiffs" shall collectively refer to your
clients, meaning Plaintiffs Tom Thomas, Dan Sheehan and Marc Culp, Individually and as
Successors to the Interest of Thomas, Sheehan & Culp, L.L.P. In addition, the term "Plaintiff,
for purpose of this agreement, shall refer to each of the Plaintiffs individually.
For purposes of this agreement, the term "Defendant" shall refer to my client, meaning
Legacy Trust Company, N.A., in its capacity as the Court appointed Receiver for the Article IV
Trust created under the Will of Katherine Pillot Lee Bamhart, Deceased.
Per our agreement, the deadline for the Plaintiffs to respond to Defendant's pending First
Requests for Disclosure, First Requests for Admission, Interrogatories and Requests for
Production to TSC shall be extended until August 15, 2016. The purpose ofthe aforementioned
extension is to provide Plaintiffs with sixty days within which to respond to Defendant's pending
discovery requests, as identified above.
' Prior to the entry of an Order Granting Motion to Transfer Lawsuit to This Statutory Probate Court by Harris
County Probate Court Number Two (2) on June 7, 2016, this lawsuit was pending in the 162"'^ Judicial District Court
of Dallas County, Texas under Cause Number DC-16-04570.
lOlli/ 001762 0051436
MACINTYRE • M c C U L L O C H - STANFIELD. Y O U N G , LLP 2900 W e s l a y a n , Ste ISO H o u s t o n , Texas 7 7 0 2 7 7 1 3 5 7 2 2V00 Fax 713 572 2902
Ms. Amanda Montgomery
Page 2
7/5/2016
Per our agreement, Defendant shall have sixty days within which to respond to the first
set of any written discovery requests which are propounded to Defendant by Plaintiffs, or by any
Plaintiff, for the lawsuit which is referenced above. Defendant's sixty day discovery response
period will begin to accrue on the date upon which Defendant, by and through my office, is
served with written discovery requests by Plaintiffs, or by any Plaintiff, for the lawsuit which is
referenced above.
If this letter accurately reflects your understanding of our agreement, please
acknowledge by signing below and returning it to us. Your cooperation in this regard is greatly
appreciated.
Should you have any questions, please call or e-mail me. My telephone number>a;
work is (713) 572-2900, and my e-mail address is Cameron.McCuUochfglmmlawtexas.com. | j
AGREED ON JULY , 2016:
CULP & DYER, L.L.P.
By: ^
Amanda Montgomery
ATTORNEY FOR PLAINTIFFS TOM THOMAS,
DAN SHEEHAN AND MARC CULP, INDIVIDUALLY
AND AS SUCCESSORS TO THE INTEREST OF
THOMAS, SHEEHAN & CULP, LLP.
TAB 3
Virginia Martinez
From: Cameron McCulloch
Sent: Friday, July 0 1 , 2016 11:54 A M
To: Amanda Montgomery
Cc: Marc Culp
Subject: RE: Cause N u m b e r 1 3 7 5 0 6 - 4 0 3 ; Susan Camille Lee, et al., vs. Ronald E, Lee, Jr., el al,; In
Harris C o u n t y Probate C o u r t N u m b e r T w o (2)
Amanda:
l e g a c y w i l l a g r e e t o r e s p o n d t o d i s c o v e r y requests f r o m TSC o n t h e same t i m e f r a m e t h a t TSC r e s p o n d s t o
Legacy's p e n d i n g d i s c o v e r y r e q u e s t s . For e x a m p l e , if w e agree t h a t TSC w i l l have 6 0 days t o r e s p o n d t o Legacy's p e n d i n g
d i s c o v e r y r e q u e s t s , Legacy w o u l d likewise have 60 days t o r e s p o n d t o d i s c o v e r y r e q u e s t s f r o m TSC Legacy w o u l d also
a g r e e t o a s t i p u l a t i o n t h a t TSC's p r o p o u n d i n g o t discovery r e q u e s t s t o Legacy d o e s n o t in any w a y c o n s t i t u t e a w a i v e r of
TSC's p e n d i n g piea in a b a t e m e n t a r g u m e n t . Let me k n o w if this p r o p o s e d s o l u t i o n is a c c e p t a b l e t o y o u .
You are c o r r e c t t h a t m y l e t t e r f r o m e a r l i e r t o d a y s h o u l d be c o n s t r u e d as Legacy being o p p o s e d t o y o u r M o t i o n
f o r E m e r g e n c y Stay. Thanks, Cameron
W Cameron McCuiioch
MaclNTYRE • McCULLOCH • STANFIELD • YOUNG, L L P
Please note our new a d d r e s s :
2 9 0 0 W e s l a y a n , S u i t e 150
H o u s t o n , Texas 77027
713-572-2900 (Telephone)
713-572-2902 fFax)
Cameron.iVlcCuiioch@mmlawtexas.com
From: Amanda M o n t g o m e r y [mailto:amontgomery@cdhllp.com]
S e n t : Friday, July 0 1 , 2 0 1 6 11:22 A M
To: Cameron McCulloch
Cc: M a r c Culp < M C u l p ( 5 ) c d h l l p . c o m >
Subject: FW: Cause N u m b e r 1 3 7 5 0 6 - 4 0 3 ; Susan Camille Lee, et al,, vs, Ronald E. Lee, Jr., ei al,; In Harris C o u n t y P r o b a t e
C o u r t N u m b e r T w o (2)
Cameron,
M a r c and I have r e v i e w e d t h e a t t a c h e d l e t t e r y o u sent t o d a y r e g a r d i n g a p o t e n t i a l BO^day e x t e n s i o n o n d i s c o v e r y
responses u n d e r a Rule 1 1 A g r e e m e n t . W h i l e w e a p p r e c i a t e t h e o f f e r o f a 3 0 - d a y e x t e n s i o n , t h e p r e m i s e o f t h a t a l l o w s
y o u t o receive d i s c o v e r y ( w i t h m o t i o n s still p e n d i n g ) , b u t w e w o u l d risk w a i v i n g o u r plea in a b a t e m e n t a r g u m e n t if w e
w e r e t o serve any d i s c o v e r y o n Legacy T r u s t d u r i n g this i n t e r i m p e r i o d . T h a t places TSC in an unfair p o s i t i o n , w h i c h is
w h y w e are p u r s u i n g a stay o f t h e p r o c e e d i n g s in the 14*'^ CoA, as I discussed t h i s m o r n i n g w i t h y o u r assistant. My hope
is t h a t y o u p r o m p t l y r e c e i v e d t h e message I p r o v i d e d t o h e r this m o r n i n g at a r o u n d 8:45 a.m., please n o t i f y m e if y o u did
n o t receive this message,
W e w i l l be filing this M o t i o n w i t h t h e CoA t o d a y , y o u r l e t t e r indicates t o us t h a t y o u a r e o p p o s e d to t h e IVIotion f o r
E m e r g e n c y Stay u n d e r TRAP 5 2 , 1 0 ,
Best Regards,
1
A m a n d a M o n tg o m e ry
F r o m : Marc Culp
S e n t : Friday, July 0 1 , 2 0 1 6 1 0 : 4 6 AM
T o : Amanda Montgomery
S u b j e c t : FW: Cause N u m b e r 1 3 7 5 0 6 - 4 0 3 ; Susan Camille Lee, e t a l . , vs. Ronald E. Lee, Jr., el a!,; I n Harris County
Probate Court N u m b e r T w o ( 2 )
F r o m : Virginia Martinez [rruailto:virgitiiaTnartinez(5)mmlawtexas.cofri]
S e n t : Friday, July 0 1 , 2 0 1 6 1 0 : 2 7 A'M
T o : Marc Culp
C c : ' s s n o o k @ l e g a c y t r u s t . c o m ' ; Legacy T r u s t C o m p a n y , N.A. (jcrow(a}|eqacytrust.corn); ' k a l e x a n d e r @ p o r t e r h e d g e s . c o m ' ;
C a m e r o n McCulloch
S u b j e c t : Re: Cause N u m b e r 1 3 7 5 0 6 - 4 0 3 ; Susan Camille Lee, e t a l . , vs. Ronald E. Lee, Jr., el a l , ; I n Harris County
Probate Court N u m b e r T w o ( 2 )
Re: Cause N u m b e r 1 3 7 5 0 6 - 4 0 3 ; Susan Camille Lee, e t a l . , vs. Ronald E. Lee, Jr., el al,; In Harris C o u n t y P r o b a t e C o u r t
N u m b e r T w o (2)
M r . Culp:
Please see t h e a t t a c h e d t r a n s m i t t a l l e t t e r in c o n n e c t i o n w i t h t h e above e n t i t l e d m a t t e r . If y o u are u n a b l e t o access t h e
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Virginia Martinez
MaclNTYRE • M c C U L L O C H • STANFIELD • YOUNG, L L P
2900 Weslayan, Suite 150
Houston, Texas 77027
(713) 572-2900 Telephone
(713) 572-2902 Fax
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