Court Opinion

ID: 9641225
Source: CourtListenerOpinion
Date Created: 2023-08-22 17:25:39.251554+00
Date Added: 2024-06-11T09:19:38.448730
License: Public Domain

NYE, Chief Justice,
concurring.
I concur with the majority opinion expressed by Justice Kennedy that the recipient of a “full-payment check” may expressly reserve his rights concerning an additional amount in dispute between the parties by stating such a reservation on the (subsequently) negotiated instrument. Specifically, the Robinsons preserved their right in this case to contest Attorney Garcia’s claim for attorney’s fees. I also agree with the majority’s commentary in response to Justice Seerden’s dissenting opinion. Respectfully, the dissenting opinion is mistaken by asserting that the majority’s interpretation of section 1-207 constitutes unassigned error.
Nevertheless, the summary judgment favoring Attorney Garcia should be reversed because of the conflicting evidence presented by both the Robinsons and Garcia. This case requires a jury’s examination of the transactions between Attorney Garcia and the Robinsons as they relate to the attorney-client relationship and to professionalism within the legal community. As revealed below, this factual examination shows ample conflicting evidence that renders improper an affirmance of Garcia's summary judgment. I would sustain the Robinsons’ second and third points of error and reverse and remand this case for trial on the merits.
On several occasions prior to the institution of the underlying suit, Attorney Garcia performed legal services for the Robinsons. Through these services, the Robinsons and Garcia developed a mutually satisfactory professional relationship. Accordingly, the Robinsons sought Garcia’s professional advice and services when, in 1986, the Robin-sons’ business relationship with the Texas Commerce banking institutions eroded to the point that their legal rights were violated by those institutions. Attorney Garcia accepted responsibility for pursuing the claim and presented his employment contract to the Robinsons.
Garcia’s employment agreement established that 33½% of the “judgment entered on behalf of the clients [Robinsons]” would be set aside to him for attorney fees if the case was settled before trial. In the event of a trial, attorney fees would rise to 37½% of the total “judgment.” The contract further provided that in the event of an appeal to the Supreme Court of Texas, the attorney fees would be “an additional” but unspecified amount.1 The agreement also provided that Garcia bear all litigation expenses; however, “if recovery is realized herein” the expenses would be paid from the recovery.2
Garcia filed suit and the parties began discovery. Several weeks before the trial and without the Robinsons’ knowledge, Garcia hired Tom Matlock, a local attorney, to assist him in preparing for and during trial. Subsequently, on March 23, 1987, *250following a particularly harrowing third deposition of Mrs. Robinson, Garcia presented her with a new employment contract. Garcia explained that the case required the employment of another attorney to assist in trial preparation and for the trial itself. Garcia asserts in his pleadings that the consideration for this new agreement was that the Robinsons were not paying their litigation expenses despite an alleged oral agreement to do so. This was an apparent attempt by Garcia to prove an oral modification to the written contract’s provisions for payment of expenses. Garcia alleged that the new agreement essentially reimbursed Garcia for the payment of those expenses.
The alleged second fee agreement specified that 40% of the “total recovery” would be paid to Garcia as attorney fees should the matter be settled “after a lawsuit has been filed.” The contract also specified that an additional 5% of the total recovery would be taken as attorneys’ fees in the event of an appeal to an appellate court by any party. This agreement provided that all expenses incurred in the prosecution of the claim would be paid by the Robinsons from their portion of the recovery. However, should no recovery occur, Garcia would pay all expenses. Mrs. Robinson signed the agreement. The case proceeded to trial, and on May 20, 1987, the jury found for the Robinsons in the amount of $59,260,000.00.
Following the verdict, the parties began planning their appeal strategies. In June, 1987, Garcia once again approached the Robinsons stating that he required an even larger percentage of the total recovery than the second agreement. He explained that the financial institutions were amassing Texas’ most prominent appellate lawyers to appeal the verdict. To defend the verdict, Garcia needed the services of an experienced appellate attorney. Garcia told the Robinsons that he hired a specific, well-known Houston appellate attorney to prepare the appeal. Instead, Garcia hired John Lewis, another local attorney, to aid settlement negotiations and to prepare an appeal. The Robinsons assert that Garcia explained to them that this modification to the second employment contract would not be enforceable unless an appeal was taken.
With these assurances from Attorney Garcia, the Robinsons executed an Addendum to [the alleged second] General Contract of Employment for Legal Services. This addendum provided that in recognition of “the need to employ additional legal assistance to obtain a final judgment,” Garcia would receive as attorney fees 50% of the total recovery realized in the suit. Even this third arrangement would call for the deduction of expenses before the division of the recovery. This addendum purported to incorporate by reference the remaining provisions of the March, 1987, contract.
Thereafter, Garcia negotiated a $10,000,-000.00 settlement agreement by which 60% of the total settlement amount would be paid immediately and the remaining 40% would be paid in a few months. Garcia received the first installment and later tendered the Robinsons a check in the amount of $4,935,151.72. He explained that he calculated what the Robinsons were due under the terms of the final agreement with expenses in the amount of $64,848.28 charged to the Robinsons’ share of the recovery. The check contained the following restrictive endorsement by attorney Garcia:
acceptance in full and final settlement and in satisfaction of all claims Cause # C-1948-84-D (Our file # 797-84R)
The Robinsons returned the check to Garcia along with a letter demanding the $6,250,000.00 that they asserted was due under the provisions of the initial fee agreement.
Garcia then returned the check to the Rob-insons with a letter telling them to seek another lawyer’s opinion regarding the situation and to have that lawyer contact him. The Robinsons hired another attorney. They cashed the check and filed this suit seeking $1,314,848.28, the difference between Garcia’s check and the first fee agreement. This represented the remaining amount due under the initial fee agreement, plus damages. Before cashing the *251check, the Robinsons added the following endorsement:
Except for Disputed Attys fees and related claims Cause No. 87-35582 [the suit below]
Then, the Robinsons negotiated the check.
Garcia asserted that the third agreement between the Robinsons and him was valid and enforceable and that cashing the check that he tendered to them constituted a common law accord and satisfaction and that the Robinsons had no basis to contest his fee. The trial court denied the Robinson’s motion for partial summary judgment and granted Garcia’s motion for summary judgment, dismissing the Robinsons’ suit with prejudice. This appeal followed.
The Robinsons sought enforcement of the initial employment contract, claiming that the alleged subsequent agreements failed for lack of consideration. The Robin-sons also asserted that Garcia misrepresented facts and fraudulently induced them to execute the second and third agreements.
The relationship between an attorney and his client should withstand the closest possible scrutiny. This relationship must meet or exceed the highest possible moral test. Attorney-client dealings are subject to the same scrutiny, intendments, and imputations as a transaction between a trustee and his beneficiary. Archer v. Griffith, 390 S.W.2d 735, 739 (Tex.1964). In Archer, the Texas Supreme Court put this relationship another way, emphasizing that a contract for employment made in the course of the legal representation is subject to the presumption that such an agreement is tainted with fraud on the part of the attorney. See Cole v. McCanlies, 620 S.W.2d 713, 715 (Tex.Civ.App.-Dallas 1981, writ ref’d n.r.e.); Johnson v. Stickney, 152 S.W.2d 921, 924 (Tex.Civ.App.-San Antonio 1941, no writ).
An attorney is not legally precluded from contracting for just compensation with his client, but because of the special professional relationship, the contract must be fair, honest, reasonable, and made freely and voluntarily by the client after complete disclosure of all contract details. The client places confidence in his attorney that his legal problems will be resolved professionally with his interest being paramount. This client confidence gives the attorney an unequal advantage when negotiating a fee agreement. This is especially true during the course of representation. The Archer court reasoned that the attorney must bear the burden of showing that such an agreement is perfectly fair, adequate and equitable and that the attorney did not take advantage of the client’s confidence to create an unfair agreement. Archer, 390 S.W.2d at 739 (quoting Pomeroy, Equity Jurisprudence, § 960d (5th ed. 1941)).
In the present case, the record shows that Attorney Garcia used his position to make the Robinsons acquiesce to two increases in attorney’s fees after entering into an initial fee arrangement. Under the provisions of the first contract, Garcia would have received $3,750,000.00 in attorney’s fees. The (alleged) second contract would have raised the fee recovery to $4,000,000.00, exclusive of expenses. The addendum (the third contract) raised attorney’s fees to five million dollars. Garcia tendered the Robinsons a check for $4,935,-151.72, this being $5,000,000.00 less $64,-848.28 in claimed expenses, keeping $5,064,848.28 for himself.
It is apparent that the parties here were in an unequal bargaining position. Garcia had all of the money. The Robinsons had none. Had Garcia placed the settlement money into the court’s registry, the parties would have been more equal. Instead, Garcia told the Robinsons to seek another attorney’s advice if they did not agree with his disposition of the settlement funds.
The check’s restrictive endorsement stating that the amount was in full and final settlement and satisfaction of all claims in the Robinsons’ suit against the banking institutions, undoubtedly put the Robinsons in the disabling position of either accepting what Garcia wanted or being deprived of the amount that was indisputedly and rightfully theirs. If the Robinsons accepted Garcia’s check without reserving their rights to the disputed amount, they would have lost one and a quarter million dollars to Garcia. If they refused the check and *252waited until a subsequently determined lawsuit gave them what they alleged to be theirs, they would have lost, at least for the interim period, the benefit of the recovery and the interest it would have earned.
Ethical Consideration 9-6 of the Code of Professional Responsibility applicable during the creation of the initial and alleged subsequent fee agreements mandates the following:
every lawyer owes a solemn duty to uphold the integrity and honor of his profession; to encourage respect for the law and for the courts and the judges thereof; to observe the Code of Professional Responsibility; to act as a member of a learned profession, one dedicated to public service ... to conduct himself so as to reflect credit on the legal profession and to inspire the confidence, respect, and trust of his clients and of the public; and to strive to avoid not only professional impropriety but also the appearance of impropriety, (emphasis added)
Canons 9 and 1 of the Texas Code of Professional Responsibility3, emphasize:
Canon 9: A lawyer should avoid even the appearance of professional impropriety. Canon 1: A lawyer should assist in maintaining the integrity and competence of the legal profession.
There are several instances in which there is a question regarding whether an “appearance of impropriety” existed. Most notable are the circumstances and motivations surrounding and ultimately producing the alleged second and third fee agreements. Another is whether the fee agreements are conscionable. A third concerns the propriety of the restrictive language which Garcia added to the Robinson’s check.
Although most contingency fee arrangements are proper, DR 2-106 states that a lawyer shall not enter into such an arrangement for, charge, or collect an illegal or clearly excessive fee. Texas Code of Professional Responsibility, DR 2-106(A) (1988) (repealed).4 A fee is clearly excessive when, after a review of the facts, a lawyer of ordinary prudence would be left with a definite and firm conviction that the fee is in excess of a reasonable fee. Factors considered under DR 2-106(A) as guides in determining the reasonableness of a fee include:
(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
(2) the likelihood, if apparent to the client, 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 ...
(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 is fixed or contingent.5
Texas Disciplinary Rule of Professional Responsibility, Rule 1.04 (1990), the successor to DR 2-106, goes further by stating that contingent fee agreements shall be in writing and shall state the method by which the fee is to be determined. If there is a difference in the percentage or percent*253ages accruing to the lawyer in the event of settlement, trial, or appeal, the fee agreement shall state the percentage for each. Regarding the division of legal fees for services, Texas Rule of Professional Responsibility DR 2-107 (repealed) states that a division or agreement for division of a fee between lawyers who are not in the same firm shall not be made unless:
(1) the client consents to employment of the other lawyer after a full disclosure that a division of fees will be made.
(2) the division is made in proportion to the services performed and responsibility assumed by each ...
(3) the total fee of the lawyers does not clearly exceed reasonable compensation for all legal services they rendered the client.6
Courts will not enforce contracts made in contravention of the law or public policy of this State. Quintero v. Jim Walter Homes, Inc., 709 S.W.2d 225, 229-230 (Tex.App.-Corpus Christi 1985, writ ref’d n.r.e.); see also Woolsey v. Panhandle Ref. Co., 131 Tex. 449, 116 S.W.2d 675 (1938). The manner and means by which Garcia extracted two successively higher fee modifications from the Robinsons without full and candid disclosures should be given the closest scrutiny not only by the court but also by the State Bar Committee on Professional Conduct. The facts also indicate that Garcia may have promised additional services and additional lawyers for the higher fees. These factors, supported by evidence, create a fact issue.
A trial will allow Garcia the opportunity to disprove the legal presumption of overreaching and fraud surrounding the creation of the second and third agreements, in addition to determining whether they were illegal, or at their inception, clearly excessive. Furthermore, a trial will scrutinize the division of fees and the responsibility assumed by each attorney over and above the work that was to be performed by Garcia. See DR 2-107.
An attorney holds the best interests of his client in fiduciary trust. Whether occupying a position as formal fiduciary or the more informal position of “confidential relationship,” one standing in a position of advantage and having the benefit of inside information, holds a duty of disclosure and undivided loyalty to the person who has instilled that trust. When a person holds a position of trust and confidence for another, the failure to disclose facts which are his duty to disclose is as much a fraud as an actual misrepresentation of the true facts. Cartwright v. Minton, 318 S.W.2d 449, 453 (Tex.Civ.App.-Eastland 1958, writ ref’d n.r.e.).
Garcia essentially had control of the entire settlement amount. This control gave Garcia a position of power over his clients which they claim forced them to accept the monies Garcia tendered. If the Robinsons refused Garcia’s offer, they lost management of that portion of the recovery that was undisputed and the interest which would accrue from the principal of same. The Robinsons are entitled to a trial on the issue of whether Garcia, the fiduciary, acted in furtherance of his clients’ or his own best interests by tendering a payment-in-full check to the Robinsons.
Canon 9’s mandate to avoid the mere appearance of impropriety cannot be ignored. A lawyers’ adherence to this canon will ensure a spotless professional reputation and a respected status in the human community. Attorneys, because of their understanding of the law, must devoutly avoid all situations giving the appearance of improper advantages taken of their nonlegal brethren. The legal profession is ill-served when a lawyer abuses his client’s trust to afford himself monetary gain or to improve his position over the party who first placed his total trust in the attorney. Indeed, the entire legal profession is denigrated by the mere insinuation that one of its members might lack such professional and personal integrity.
*254The old canons, ethical considerations and disciplinary rules have been incorporated into the new Rules. They help set the standard by which a lawyer’s integrity is measured. An attorney must not only be ethical in representation of his client’s cause, he must also be completely ethical in client relations. Integrity may have had a price where, as here, the evidence raises a fact question regarding the extent of Attorney Garcia’s self-interest in assuring that he would be more than adequately compensated for his legal services.
Even at personal financial cost, an attorney must guard against the temptation of overreaching or indulging in fraudulent conduct when fees and client relations are involved. This case cries out for a full trial of all of the issues involved so that, ultimately, the public will praise, rather than condemn, the legal profession. Accordingly, I agree that this case should be REVERSED AND REMANDED for trial.

. The Robinsons presented evidence that because they were in bankruptcy proceedings, Garcia had to receive permission from the United States Bankruptcy Court not only to file the action against the financial institutions but also to assure the court that no fees would be assessed against the bankruptcy estate or the Rob-insons should they not prevail in their suit. The Robinsons allege that Garcia neither subsequently petitioned nor received permission from the court to amend the fee agreement. This evidence was not properly authenticated and, therefore, is not properly before this Court. Kotzur v. Kelly, 791 S.W.2d 254, 256-57 (Tex.App.-Corpus Christi 1990, no writ).

. This contract was silent regarding whether expenses would be deducted first with the balance divided among the parties as stipulated or whether the expenses would be deducted from the Robinsons’ or Garcia’s share. Garcia ultimately deducted all expenses from the Robinson’s share of the recovery.

. Supreme Court of Texas, Rules Governing the State Bar of Texas art. X, § 9 (Code of Professional Responsibility) Canon 1, 9 (1988) [hereinafter Texas Code of Professional Responsibility], was repealed in 1989 and replaced by Supreme Court of Texas, Rules Governing the State Bar of Texas art. X, § 9 (1990) [hereinafter Texas Disciplinary Rules of Professional Conduct or "the Rules"].

. Rule 1.04(a) of the new Texas Disciplinary Rules of Professional Conduct requires that the fee neither be illegal nor unconscionable. A fee is unconscionable if a competent lawyer could not form a reasonable belief that the fee is reasonable. Supreme Court of Texas, Rules Governing the State Bar of Texas, art. X, § 9, Rule 1.04(a) (1991).

.Section (B)(8) was modified in presently applicable Rule 1.04(b)(8) to require consideration of whether the fees are fixed or contingent on the results obtained or the uncertainty of collection before the legal services have been rendered.

. Currently codified as amended as Texas Disciplinary Rule of Professional Responsibility, Rule 1.04(d), (f) (1990).