In Hodge v. Lindauer, an October 5, 2021 opinion from the Court of Appeals, Sixth Appellate District of Texas at Texarkana, the Court determined that a successor fiduciary and beneficiary of a Texas estate or trust was barred from asserting a claim for legal malpractice against an attorney retained by the former personal representative of the estate and trustee of the trust.
The Facts of Hodge v. Lindauer
Bessie Jeanne Worthy established a Trust in 2000 and named Larry Hodge and his children as beneficiaries upon her death. In 2007, Bessie appointed Larry as her power of attorney. In 2010, Larry became trustee of the Trust.
Larry was appointed as administrator of Bessie’s estate in February 2012.
Breach of Fiduciary Duty Case
In 2013, Rodney and Cheri, beneficiaries, sued Larry and alleged that he breached his fiduciary duties to Bessie as her power of attorney. Larry retained the Mitchell Law Firm to representative him. In 2016, a jury found Larry breached his fiduciary duties to Bessie.
In the pending case, Appellants alleged that Larry used funds from the Texas probate estate to pay Mitchell, even after denial of a motion to do so. Rodney and Cheri petitioned to remove Larry as trustee and as administrator.
Mitchell’s Federal Suit To Recover Denied Attorney’s Fees
Mitchell (the attorney who represented Larry in the breach of fiduciary duty action) filed a federal lawsuit seeking payment of his attorneys fees already denied by the Texas probate court. Larry retained Attorney Lindauer, on referral from Mitchell, to represent the Trust and Estate in the federal suit.
A few days after answering the federal action, Larry as trustee and administrator, Lindauer, and Mitchell entered an agreed final judgment awarding Mitchell $78,155.50. As a result of this agreed final judgment, Mitchell obtained a federal court judgment against the Trust and the Estate for the attorney fees Larry incurred on behalf of the Trust and the Estate in the probate court—including the fees incurred by Larry in unsuccessfully defending the Breach of Duty Case—that the probate court had previously denied.
Larry Is Removed as Trustee and Administrator and Appellants Sue Larry, Mitchell, and Lindauer
Larry was removed as trustee of the Trust and administrator of the Estate. Rodney was appointed as successor trustee and successor administrator.
Appellants filed suit against Larry and Mitchell and alleged causes of action against them for breach of fiduciary duty, conversion, fraud by nondisclosure, legal malpractice, and civil conspiracy under Texas law. Appellants then filed their second amended petition, joined Lindauer as a defendant, and asserted causes of action against Lindauer for breach of fiduciary duty, aiding and abetting a breach of fiduciary duty, aiding and abetting conversion, constructive fraud, fraud, civil conspiracy, legal malpractice and negligence in her legal representation of the Texas Estate and the Trust.
Lindauer’s Motions For Summary Judgment
Lindauer filed traditional and no-evidence motions for summary judgment. The court summarized the evidence:
The summary judgment evidence showed that, although Lindauer and Mitchell shared an office suite, Mitchell had not discussed the Breach of Duty case and only had a brief discussion with her regarding the referral of the Federal Suit. It also showed that Larry did not discuss with Lindauer the specifics of how Mitchell’s attorney fees were incurred. And it showed that Larry agreed that the Estate and the Trust owed the attorney fees to Mitchell. According to the summary judgment evidence, Lindauer knew— based on the complaint filed in the Federal Suit—that the attorney fees were related to legal services provided in a probate matter and a civil matter pending in Ellis County courts when she filed the answer in the Federal Suit. Finally, the summary judgment evidence showed that, a few days after the answer was filed, an agreed final judgment was entered in the Federal Suit awarding Mitchell $78,155.50, with Mitchell, Lindauer, and Larry, as administrator of the Estate and trustee of the Trust, signifying their agreement.
Who Has Standing To Bring a Claim For Legal Malpractice Related To an Estate Proceeding In Texas?
Texas courts have held that a beneficiary of an estate has no standing to assert a legal malpractice claim against the attorney who drafted the will or trust, that an estate beneficiary lacked standing to assert claims based on legal malpractice and breach of fiduciary duties on behalf of the estate against attorneys retained by the executor of the estate, and that a successor personal representative lacked standing to assert a legal malpractice claim against an attorney retained by the prior personal representative.
The Court stated:
In Texas, “[l]egal malpractice claims sound in tort.” Belt v. Oppenheimer, Blend, Harrison & Tate, Inc., 192 S.W.3d 780, 783 (Tex. 2006) (citing Cosgrove v. Grimes, 774 S.W.2d 662, 664 (Tex. 1989)). “The plaintiff must demonstrate ‘that (1) the attorney owed the plaintiff a duty, (2) the attorney breached that duty, (3) the breach proximately caused the plaintiff’s injuries, and (4) damages occurred.’” Id. (quoting Peeler v. Hughes & Luce, 909 S.W.2d 494, 496 (Tex. 1995)).
Texas courts have recognized that “an attorney owes a duty of care only to his or her client, not to third parties who may have been damaged by the attorney’s negligent representation of the client.” Barcelo v. Elliott, 923 S.W.2d 575, 577 (Tex. 1996). “Without this ‘privity barrier,’ the rationale goes, clients would lose control over the attorney-client relationship, and attorneys would be subject to almost unlimited liability.” Id.
In determining whether Rodney as trustee had standing to bring a legal malpractice claim against Lindauer for her representation in the Federal lawsuit, the Texas court looked to the identity of Lindauer’s client in that suit. In the traditional and no-evidence motions for summary judgment, Lindauer argued that her client in the Federal Suit was Larry, as administrator of the Estate and trustee of the Trust.
Appellants alleged in their petition that Lindauer had an attorney-client relationship with Larry as administrator of the Estate and trustee of the Trust during the Federal Suit and that Lindauer, therefore, was the attorney for the Estate and the Trust and owed them a fiduciary duty.
The Trustee Or Personal Representative of the Estate Is the Real Client, Not the Estate or the Trust
The Court reviewed Texas law regarding the attorney-client relationship being between the attorney and the personal representative or trustee, and not between the attorney and the estate or the trust:
In Texas, “[t]he term ‘trust’ refers not to a separate legal entity but rather to the fiduciary relationship governing the trustee with respect to the trust property.” Huie, 922 S.W.2d at 926. As the court noted, “It is [the trustee] that holds the trust property for the benefit of [the trust beneficiary], and it is [the trustee] that is authorized to hire counsel.” Id. (citing TEX. PROP. CODE ANN. § 113.018(a)). Consequently, “the trustee who retains an attorney to advise him or her in administering the trust is the real client, not the trust beneficiaries.” Id. at 925. Likewise, an estate is not a legal entity that can sue or be sued as such. Henson v. Estate of Crow, 734 S.W.2d 648, 649 (Tex. 1987); Price v. Estate of Anderson, 522 S.W.2d 690, 691 (Tex. 1975). The personal representative holds the property of the estate in a fiduciary capacity for the benefit of the beneficiaries of the estate. See Humane Soc’y of Austin & Travis Cty. v. Austin Nat’l Bank, 531 S.W.2d 574, 577 (Tex. 1975). The Texas Estates Code requires the personal representative to “recover possession of the estate and hold the estate in trust to be disposed of in accordance with the law.” TEX. EST. CODE ANN. § 101.003. Thus, the personal representative is the trustee of the property of the estate. Humane Society of Austin, 531 S.W.2d at 577. Further, it is the personal representative of the estate that is authorized to hire counsel and to be reimbursed for his services. See TEX. EST. CODE ANN. § 352.051(2) (personal representative entitled to “reasonable attorney’s fees necessarily incurred in connection with the proceedings and management of the estate”); Huff v. Huff, 124 S.W.2d 327, 328 (Tex. 1939) (noting under a prior statute that, “an independent executor, or an administrator, is authorized to employ an attorney to represent the estate during the course of administration, and to contract to pay him a reasonable fee” (citing Callaghan v. Grenet’s Estate, 18 S.W. 507 (Tex. 1886))). As a result, it is the executor or administrator of an estate who retains an attorney to advise him or her in administering the estate that is the real client. See Messner, 466 S.W.3d at 206 (holding legal malpractice claim against attorney retained by a prior personal representative of an estate belongs to prior personal representative, not successor personal representative); 13 see also Huie, 922 S.W.2d at 925.
Here, the pleadings show that Larry was trustee of the Trust and administrator of the Estate at the time of the Federal Suit, that he directed Lindauer in her defense of the Trust and the Estate in that suit, and that Lindauer had an attorney-client relationship with Larry as administrator of the Estate and trustee of the Trust during the Federal Suit. In addition, both Larry and Lindauer testified that Lindauer was retained by Larry as trustee of the Trust and administrator of the Estate to defend the Trust and the Estate in the Federal Suit. There are no pleadings and no evidence that any of the Appellants retained Lindauer in the Federal Suit, or for any other purpose. Rather, both the pleadings and the evidence show that, at the time of the Federal Suit, Larry was trustee of the Trust and administrator of the Estate and that, in those capacities, Larry retained Lindauer to defend the Trust and the Estate in that suit.
The Privity Barrier As a Bar To Texas Legal Malpractice Action Against Attorney Representing Personal Representative and Trustee
The Texas appellate court determined that Rodney as trustee lacked standing to assert the legal malpractice claims against Lindauer as counsel for Larry, the prior personal representative of the estate and trustee of the trust, stating:
[A]ny legal malpractice claim relating to Lindauer’s representation in the Federal Suit belongs to Larry who, as administrator and trustee, retained Lindauer to defend the Estate and the Trust. As in Messner, the privity barrier bars Rodney as Trustee, the successor administrator of the Estate and successor trustee of the Trust, from asserting a claim for legal malpractice against Lindauer related to her representation in the Federal Suit. Therefore, we find that Rodney as Trustee does not have standing to assert the legal malpractice claims against Lindauer. See id. Since the privity barrier bars beneficiaries of an estate or trust from asserting a claim for legal malpractice against an attorney retained by the personal representative of the estate or the trustee of the trust, we find that Rodney and Cheri do not have standing to assert their legal malpractice claims against Lindauer. See Estate of Nunu, 542 S.W.3d at 76.