Court Opinion

ID: 9777980
Source: CourtListenerOpinion
Date Created: 2023-08-29 20:29:29.069621+00
Date Added: 2024-06-11T07:33:02.898945
License: Public Domain

*232OPINION ON MOTION FOR REHEARING
NYE, Chief Justice.
Our original opinion in this cause, 709 S.W.2d 225, ordered the trial court to set aside the post-judgment settlement agreement between the parties and to reinstate its initial judgment in favor of the Quinte-ros. Jim Walter Homes raises twelve points of error in its motion for rehearing, all involving the same issues raised in its original appellate brief. We believe that only the first two of these points deserve further discussion.
After a jury verdict and judgment had been rendered in their favor, the Quinteros joined an aggregate settlement agreement between Jim Walter Homes and several hundred other clients of their attorney, Hector Gonzalez. Under the terms of the aggregate settlement agreement between Jim Walter and attorney Gonzalez, Jim Walter gave $1.8 million dollars to Gonzalez for him to distribute to his clients once they agreed to settle their claims against Jim Walter. The amount of money the Quinteros were to receive under the settlement was much less than the judgment called for,1 largely because no one knew of the judgment’s existence and because Gonzalez did not inform the Quinteros of the existence and nature of all the other claims and of the participation of each person in the joint settlement, as required by DR-5-106 of the Code of Professional Responsibility.2 Gonzalez’s agent also told the Quinteros that they were to receive more money than anyone else, which was not true.
This Court held in a unanimous opinion that the agreement between the Quinteros and Jim Walter, being based on a violation of DR 5-106, was void and unenforceable. Jim Walter assigns error to that holding in its motion for rehearing.
Jim Walter Homes argues that the Fleming case that we relied upon should be limited to its facts; i.e., that only those contracts formed between attorneys which violate the Code can be void and unenforceable. See Fleming v. Campbell, 537 S.W.2d 118 (Tex.Civ.App.-Houston [14th Dist.] 1976, writ ref’d n.r.e.). Jim Walter also contends that the misconduct of the Quinteros’ attorney (Hector Gonzalez) should be imputed to the Quinteros in order to uphold the settlement agreement.
We disagree with both of these arguments. The Code was designed to protect the clients of attorneys and the public in general from the intentional wrongdoings and/or mistakes of attorneys. Gonzalez failed to comply with DR 5-106, a rule designed to protect clients by allowing them to make an intelligent, informed decision whether or not to participate in a joint settlement. Gonzalez denied the Quinteros that right. To impute his misconduct to the Quinteros in order to uphold the settlement would totally thwart the express public policy behind the Code of Professional Responsibility, which is to protect clients. The Quinteros, and all clients, are entitled to a vigorous and thorough enforcement of the Code’s Disciplinary Rules. This is especially true where lawyers generally are under a cloud of distrust and suspicion, and their public image has never been lower. The time to improve that poor public image is long overdue. It is up to the courts to take the initial step by giving notice that careless and unethical attorneys will not be tolerated. The public’s confidence and trust in attorneys can only be regained by thoroughly protecting the public from the consequences of attorneys’ violations of the Code of Professional Responsibility.
Nor is Jim Walter Homes the “totally innocent party” which it purports to be. The trial court, in its findings of fact num*233bers 28 and 29, found that Jim Walter reserved tjie right under the aggregate settlement agreement for its attorneys to review that amount allocated by Gonzalez to every settling plaintiff, and to disapprove of the amount allocated to any one of them. Jim Walter does not challenge these findings. According to paragraph 5 of the contract between Gonzalez and Jim Walter Homes, Jim Walter Homes had the right to reduce the $1.8 million dollar figure or to even cancel the contract if 21 or more of Gonzalez’s clients refused to settle their claims. Thus, both Jim Walter and Gonzalez had strong incentives to urge Gonzalez’s clients to settle. In fact, Jim Walter’s attorneys exercised their right of review by making several inquiries into some of the amounts Gonzalez assigned to his clients, which were to be deducted from the $1.8 million dollars.
Although Jim Walter’s attorneys knew of the Quinteros’ favorable jury verdict and the near-certainty it would be trebled under the old DTPA statute, they did not question the much smaller amount assigned to the Quinteros by Gonzalez as full settlement. They certainly should have. Thus, Jim Walter was not an “innocent” participant in the transaction between Gonzalez and the Quinteros. By retaining a right to review and by exerting an influence in the settlement process between attorney Gonzalez and his clients, Jim Walter became an active participant in the settlement process. Since the Quinteros’ consent to join the settlement was acquired only through a violation of DR 5-107 and through a misrepresentation by Gonzalez’s agent, Jim Walter, like Gonzalez, is es-topped from enforcing the settlement agreement against the Quinteros.
The Quinteros brought suit in 1978. Almost eight years later, Jim Walter Homes has them tied up in the courts to attempt to deny them their just recovery. Yet, Jim Walter’s attorneys testified that it really did not make a difference, under the terms of the aggregate settlement, to whom, or how, the $1.8 million dollars were distributed. A “slush fund” of nearly $100,000 existed which was to be used to provide extra payments to Gonzalez’s clients where necessary. That “slush fund” easily would have covered the amount of the Quinteros’ rightful judgment, at least for all but the forfeited note’s amount. Even if this fund proved inadequate, Jim Walter Homes, by choosing not to protect the Quinteros by ensuring them a fair amount in the $1.8 million dollar settlement, should be required to seek the difference from Gonzalez rather than force the Quinteros to bring a separate lawsuit against Gonzalez. We overrule Jim Walter’s first point of error on rehearing.
Our original opinion also holds that the trial court’s initial judgment properly awarded the Quinteros $41,252.80 for Credit Code violations by Jim Walter Homes. We relied on Jim Walter Homes, Inc. v. Schuenemann, 668 S.W.2d 324 (Tex.1984). Jim Walter Homes contends in its second point of error that Schuenemann is distinguishable. We disagree with this argument also.
As in the instant case, three instruments comprised the agreement between the Schuenemanns and Jim Walter Homes: a building contract, and installment note, and a lien contract. In Schuenemann, 668 S.W.2d at 329, the Supreme Court held that these latter two instruments violated the Credit Code. Since the relevant portions of the installment note and lien contract in the instant case are identical with those in Schuenemann, they obviously also violate the Credit Code.
Jim Walter Homes argued in Schuene-mann that a clause in the building contract prevented the installment note and lien contract from being violative of the Credit Code. Jim Walter Homes raises a similar argument here, involving a different clause. Although the Supreme Court in Schuenemann did discuss language in the building contract, the Court rejected Jim Walter Homes’ argument. The Court held:
Although at the outset we construed all three instruments together to determine the entire agreement between the parties, we conclude that for the limited *234purpose of determining the terms of acceleration for which the parties contracted, the clear terms of the acceleration provisions in the installment note and lien contract should be interpreted without reference to the description thereof contained in the building contract.
Schuenemann, 668 S.W.2d at 330 (emphasis in original). We do not look to the Quinteros’ installment contract to save the illegal provisions in the installment note and lien contract. “The court cannot depart from the expressed terms of the acceleration clauses contained in the installment note and lien contract to make lawful what the parties have made unlawful.” Id. at 332.
Jim Walter Homes also alleges that the Quinteros did not plead a cause of action under Sections 8.01 and 8.02 of the Credit Code, and that the granting of relief not pleaded or requested is improper. Paragraph V of the Quinteros’ “First Amended Petition” states “Chapter VIII of the Texas Consumer Credit Code provides for a penalty for violating the Code in an amount of twice the time price differential in default and deferment charges contracted for.” TEX.R.CIV.P. 47(a) provides that a petition must contain “a short statement of the cause of action sufficient to give fair notice of the claim involved....” We hold that the Quinteros’ petition adequately apprised Jim Walter Homes of the Quinteros’ claims against them under Chapter Eight of the Credit Code.
Jim Walter Homes’ Motion for Rehearing is overruled.
BENAVIDES, J., dissents.

. The first judgment was for $78,385.65, which included attorney's fees for trial; it also released the Quinteros from their installment note debt to Jim Walter Homes. Under the after-judgment settlement, the Quinteros were to receive only $13,687.00.

. Supreme Court of Texas, Rules Governing the State Bar of Texas art. XII, § 8 (Code of Professional Responsibility) DR 5-106 (1973).