Court Opinion

ID: 3084288
Source: CourtListenerOpinion
Date Created: 2015-10-16 02:27:58.007631+00
Date Added: 2024-06-11T11:42:19.365305
License: Public Domain

In The
                   Court of Appeals
     Sixth Appellate District of Texas at Texarkana

              _________________________

                   No. 06-11-00108-CV
             ______________________________

   STONEWALL FINANCIAL SERVICES CORPORATION,
    DOUGLAS W. BRADY AND THE LAW OFFICES OF
DOUGLAS W. BRADY, PC, D/B/A BRADY & COLE, PC, Appellants

                               V.

                  GARY CORONA, Appellee

        On Appeal from the 162nd Judicial District Court
                     Dallas County, Texas
                   Trial Court No. 08-01823

          Before Morriss, C.J., Carter and Moseley, JJ.
           Memorandum Opinion by Justice Moseley
                                        MEMORANDUM OPINION

        Stonewall Financial Services filed suit against Gary Corona, alleging that it held an

outstanding debt against Corona.1 During the progress of the lawsuit, attorney’s fees were

awarded against Stonewall. Ultimately, the trial court granted Corona’s plea to the jurisdiction

over the matter and ordered Stonewall’s case dismissed. Stonewall has appealed both the

dismissal based on the plea to the jurisdiction and the award of attorney’s fees against it as

sanctions. We reverse the trial court’s ruling on the plea to the jurisdiction; because that holding

will reinstate the lawsuit, we decline to address the point of error concerning attorney fee

sanctions.

The Parties and Their History

        Corona hired the law firm of Brady & Cole to represent him in litigation in February

2004 and paid the law firm an initial retainer of $10,000.00, with billing to be on an hourly basis

for services rendered. Within about two weeks after first retaining Brady & Cole, Corona

became dissatisfied with the representation and terminated the relationship.                        After Corona

terminated the attorney/client relationship, Brady & Cole sent Corona bills for services rendered

over and above the initial retainer. Corona informed Brady & Cole that he had no intention of

paying the disputed services, and Corona received no more statements for services after about

October 2004. Corona believed that the matter of the disputed billing had been dropped by Brady

& Cole. Despite Corona’s belief, in February 2008, he was sued by Stonewall, who claimed to

1
 Originally appealed to the Fifth Court of Appeals, this case was transferred to this Court by the Texas Supreme
Court pursuant to its docket equalization efforts. See TEX. GOV’T CODE ANN. § 73.001 (West 2005). We are
unaware of any conflict between precedent of the Fifth Court of Appeals and that of this Court on any relevant issue.
See TEX. R. APP. P. 41.3.

                                                         2
have been assigned Brady & Cole’s right to recover the past attorney’s fees.                     Months of

contentious discovery and litigation ensued, the details of which are not necessary to our

resolution of this matter.

        In May 2011, Corona filed a plea to the trial court’s jurisdiction, arguing that the

assignment from Brady & Cole to Stonewall was a sham transaction and that the assignment was

void as against public policy. Thus, argued Corona, Stonewall lacked standing to file suit based

on the assigned claim. Proceeding further, he maintained that since Stonewall lacked standing

or a justiciable interest in the alleged action between Corona and his former attorneys,2 the trial

court had no jurisdiction over Stonewall’s suit. Without providing the rationale employed, the

trial court granted Corona’s plea to the jurisdiction, dismissing the lawsuit.

The Plea to the Jurisdiction

        A plea to the jurisdiction challenges the trial court’s subject-matter jurisdiction. Bland

Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 554 (Tex. 2000). Because subject-matter jurisdiction is

a question of law, we review the trial court’s ruling on the plea de novo. Mayhew v. Town of

Sunnyvale, 964 S.W.2d 922, 928 (Tex. 1998). In deciding a plea to the jurisdiction, a court may

not consider the merits of the case, but must restrict its consideration to only the plaintiff’s

pleadings and the evidence relevant to the jurisdictional inquiry. County of Cameron v. Brown,

80 S.W.3d 549, 555 (Tex. 2002); Berry v. Bd. of Regents of Tex. S. Univ., 116 S.W.3d 323, 324–

25 (Tex. App.—Houston [14th Dist.] 2003, pet. denied). We accept the allegations in the

2
 The firm Brady & Cole was subsequently disbanded; Douglas Brady, of that firm, went on to start another firm.
Brady also was the president of Stonewall and represented Stonewall throughout these proceedings, including
arguing at trial and appellate oral arguments.

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pleadings as true in determining whether an incurable jurisdictional defect is apparent, rendering

it impossible for the plaintiff’s claims to confer jurisdiction on the trial court. Bexar Cnty. v.

Gant, 70 S.W.3d 289, 292 (Tex. App.—San Antonio 2002, pet. denied). A reviewing court

construes the pleadings liberally in favor of the plaintiff. City of Waco v. Lopez, 259 S.W.3d
147, 150 (Tex. 2008).

       As the party urging the plea to the trial court’s jurisdiction, it was Corona’s burden to

present conclusive proof of the trial court’s lack of jurisdiction. Tex. Dep’t of Parks & Wildlife

v. Miranda, 133 S.W.3d 217, 227–28 (Tex. 2004); see also City of Austin v. Rangel, 184 S.W.3d
377, 382 (Tex. App.—Austin 2006, no pet.). At the hearing on the plea to the jurisdiction, no

evidence was offered. Corona’s first amended plea to the jurisdiction contained his verification,

in which he stated he had read the plea, and the facts therein were within Corona’s personal

knowledge and true and correct.          Those pleadings recounted the history of Corona’s

attorney/client relationship with Brady & Cole, his dismissal of the law firm, the disputed billing,

the assignment to Stonewall, and a summary of the events during the current litigation (including

the grant of a summary judgment in Stonewall’s favor, which found a counterclaim brought by

Corona was barred by limitations).

       As stated, we consider Stonewall’s pleadings liberally in its favor. “[I]f a plea to the

jurisdiction challenges the existence of jurisdictional facts, we consider relevant evidence

submitted by the parties when necessary to resolve the jurisdictional issues raised, as the trial

court is required to do.” Miranda, 133 S.W.3d at 227. Corona’s sworn plea does not challenge

jurisdictional facts. Rather, the plea simply states the history and relationship of the parties and

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the litigation. Stonewall’s pleadings must be construed in its favor. Its petition alleged that

Stonewall is a Texas corporation, that Brady & Cole had a contractual relationship with Corona,

that Corona owed a balance under that contractual agreement, that Brady & Cole assigned its

rights under that agreement to Stonewall, and that Corona failed to respond to Stonewall’s

attempt to collect under the assigned agreement.              The petition sought damages under the

agreement between Brady & Cole and Corona in the amount of $26,856.25. Attached to the

amended petition were a summary of the amount allegedly owed, a copy of a written assignment

from Brady & Cole to Stonewall, and a copy of a demand letter from Stonewall to Corona.

Stonewall’s petition alleged sufficient facts to invoke the trial court’s jurisdiction. See First-

Citizens Bank & Trust Co. v. Greater Austin Area Telecomms. Network, 318 S.W.3d 560, 566,

569 (Tex. App.—Austin 2010, no pet.) (assignee has right to assert assignor’s contractual rights;

adequately pled facts to establish jurisdiction).

Corona’s Claimed Bases for Sustaining the Plea to the Jurisdiction

        Corona offers several reasons that he believes the trial court’s order on the plea to the

jurisdiction should be upheld.

        Corona first claims that since he terminated Brady & Cole’s representation for cause, no

liquidated damage could have been assigned. However, this is more in the nature of a potential

defense to the suit on the assignment than a jurisdictional bar to Stonewall’s suit.3 Similarly,

3
 Additionally, the cases cited by Corona for this argument, Rocha v. Ahmad, 676 S.W.2d 149, 156 (Tex. App.––San
Antonio 1984, writ dism’d), and Augustson v. Linea Aerea Nacional-Chile S.A., 76 F.3d 658, 662 (5th Cir. 1996),
involve contingency fee contracts, whereas the agreement between Brady & Cole and Corona was not a contingency
contract.

                                                      5
Corona’s argument that Stonewall did not demonstrate the reasonableness of the claimed

attorney’s fees4 is a matter of evidentiary sufficiency and is not jurisdictionally dispositive.

           Second, Corona claims that Brady, as part of the law firm Brady & Cole, impermissibly

disclosed confidential information to Stonewall, as part of the assignment.5 Stonewall counters

by arguing no confidential information was conveyed from the law firm to Stonewall; rather,

only when Corona replied to Stonewall’s discovery requests was any information which could

qualify as confidential produced.              Corona relies on an opinion from the Committee on

Professional Ethics for the State Bar of Texas, which concluded that an attorney may not sell

accounts receivable to a third-party factoring company without first obtaining from the client

consent to disclosure of confidential information. Tex. Ethics Comm’n Op. No. 464, 52 Tex.

B.J. 1200. “[Texas Committee on Professional Ethics] opinions are concerned with matters of

attorney discipline and are advisory rather than binding.” Sidley Austin Brown & Wood, LLP v.

J.A. Green Dev. Corp., 327 S.W.3d 859, 866 (Tex. App.––Dallas 2010, no pet.) (citing Labidi v.

Sydow, 287 S.W.3d 922, 929 (Tex. App.––Houston [14th Dist.] 2009, orig. proceeding)). There

was no evidence presented that indicates that any unauthorized disclosure of confidential

information actually took place. We do not need to determine (nor do we determine) whether the

cited ethics opinion was violated. Because the rulings of the Committee on Professional Ethics

4
    See Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex. 1997).
5
 We can find nothing in the record or briefing where Corona actually describes what confidential information was
disclosed––instead, he invokes the Professional Ethics Opinion discussed above, which stated, “In some cases, the
fact that the lawyer was engaged by the client may be confidential; in many cases, the nature of the legal services
resulting in the fee statement would be confidential; in most cases, the amount of the fee owing and the fact that the
fee has not been paid would be confidential.” Tex. Ethics Comm’n Op. No. 464, 52 Tex. B.J. 1200 (1989).

                                                          6
are binding on neither the trial court nor on us, we do not find any situation which would have

deprived the trial court of jurisdiction.

        Corona cites Polland & Cook v. Lehmann, 832 S.W.2d 729, 736 (Tex. App.—Houston

[1st Dist.] 1992, writ denied), which pointed out that if a contract “has not been performed in

accordance with requisites set forth in the disciplinary rules, performance may be excused as

against public policy.”      (Citing RESTATEMENT (SECOND)       OF   CONTRACTS § 181 (1979)).

Although it is possible that such an issue could be considered in determining whether Stonewall

should actually recover in its claim, this is not an issue which would serve to deprive the trial

court of jurisdiction to hear the matter. It does not appear to be authority for the assertion that

the violation of an ethical breach deprives the trial court of jurisdiction to hear the case.

Additionally, both Polland and Fleming v. Campbell, 537 S.W.2d 118, 119 (Tex. Civ. App.––

Houston [14th Dist.] 1976, writ ref’d n.r.e.), also cited by Corona, involved referral fees, not

contractual attorney’s fees. While it is true the Fleming court found the contract void and

unenforceable where there was not full disclosure of the fee splitting arrangement, that is not a

jurisdictional defect.

        Corona also argues the assignment from Brady & Cole to Stonewall was made with an

eye to depriving Corona of any counterclaims he may have had against Brady & Cole. In the

trial court hearing, he called the assignment an “artifice,” a “scheme,” and a “fraud.” He pointed

to the fact that attorney Brady wears multiple hats in this fact circumstance––he was a principal

in the law firm of Brady & Cole, he represented both that law firm and Stonewall in the

litigation, and he was the president of Stonewall. Both at trial and on appeal, Corona claimed

                                                7
that public policy precluded such an assignment. Corona further argued that for the same reason

that claims against an attorney for malpractice are not assignable, an attorney or law firm should

not be able to assign claims for unpaid legal fees. We observe that a claim against an attorney

for malpractice is not the same as a claim for unpaid legal fees; the nature of the claims are

sufficiently different that no parallel can be drawn from one to the other.

        Nothing presented for our review conclusively demonstrates the trial court was without

jurisdiction, and thus we find the trial court erred to grant Corona’s plea. We sustain Stonewall’s

first point of error.

Attorney’s Fee Sanctions Not Part of Final Judgment

        Because we find the case was improperly dismissed pursuant to the plea to the

jurisdiction, the case below is still pending and no final judgment has been rendered in it. Unless

specifically authorized by statute, Texas appellate courts only have jurisdiction to review final

judgments. TEX. CIV. PRAC. & REM. CODE ANN. § 51.014 (West Supp. 2012); see also Stary v.

DeBord, 967 S.W.2d 352, 352–53 (Tex. 1998). The attorney’s fees awarded were awarded as

sanctions for discovery abuse. Rule 215.3, upon which the district court relied in this case,

authorizes trial courts to impose appropriate sanctions upon persons who abuse the discovery

process. TEX. R. CIV. P. 215.3. The rule states that orders imposing such sanctions “shall be

subject to review on appeal from the final judgment.” TEX. R. CIV. P. 215.2(b)(8). There is no

provision for interlocutory appeal; “[d]iscovery sanctions are not appealable until the district

court renders a final judgment.” TEX. R. CIV. P. 215.2(b)(8); Bodnow Corp. v. City of Hondo,

721 S.W.2d 839, 840 (Tex. 1986) (per curiam).

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       We reverse the order of dismissal and remand the case to the trial court for further

proceedings.

                                         Bailey C. Moseley
                                         Justice

Date Submitted:     August 9, 2012
Date Decided:       September 18, 2012

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