Beck v. Law Offices of Edwin J. Terry, Jr.

• Decision Date: 01 May 2009
• Docket Number: No. 03-07-00635-CV.,03-07-00635-CV.
• Citation: 284 S.W.3d 416
• Parties: Gary BECK; Law Insurance Agency f/k/a The G. Beck Company d/b/a The Beck Company; The Beck Benefits Company; and John Mueller's Barbecue, Inc., Appellants v. The LAW OFFICES OF EDWIN J. (TED) TERRY, JR., P.C.; John Ott, as Representative of the Estate of Edwin J. (Ted) Terry, Jr., deceased; James A. Vaught; and Karl E. Hays, Appellees.
• Court: Texas Court of Appeals

284 S.W.3d 416

Gary BECK; Law Insurance Agency f/k/a The G. Beck Company d/b/a The Beck Company; The Beck Benefits Company; and John Mueller's Barbecue, Inc., Appellants v. The LAW OFFICES OF EDWIN J. (TED) TERRY, JR., P.C.; John Ott, as Representative of the Estate of Edwin J. (Ted) Terry, Jr., deceased; James A. Vaught; and Karl E. Hays, Appellees.

No. 03-07-00635-CV.

Court of Appeals of Texas, Austin.

May 1, 2009.

Mike Stenglein, Brad Thompson, Ryan Downton, Dewey & LeBoeuf, L.L.P., Austin, and Jeffrey Kessler, Dewey & LeBoeuf, L.L.P., New York, NY, for Appellants.

Timothy J. Herman, Gregory M. Lowry, Segal, McCambridge, Singer & Mahoney, LTD, and Scott DeShazo, Herman, Howry & Breen, L.L.P., Austin, for Appellees.

Before Justices PATTERSON, PEMBERTON and WALDROP.

OPINION

BOB PEMBERTON, Justice.

Appellants, Gary G. Beck; Law Insurance Agency f/k/a The G. Beck Company d/b/a The Beck Company; The Beck Benefits Company; and John Mueller's Barbecue, Inc., appeal a district court judgment that they take nothing on claims against appellees, The Law Offices of Edwin J.(Ted) Terry, Jr. P.C.; John Ott, as Representative of the Estate of Edwin J. (Ted) Terry, Jr., Deceased; James A. Vaught; and Karl E. Hays. We will affirm the judgment.

BACKGROUND

This appeal arises from a suit brought by a client against attorneys who had represented him in a divorce. After seventeen years of marriage, Ruth Ann Beck filed for divorce against appellant, Gary G. Beck, in November 2000. The sole contested issue in the divorce concerned the property division; there were no children of the marriage. After initially retaining a Dallas-area family law firm, Beck eventually hired the late Edwin J. (Ted) Terry, an Austin-based family law attorney, in September or October 2001. At the time, Terry practiced in a sole proprietorship known as The Law Offices of Edwin J. (Ted) Terry. Appellees James A. Vaught and Karl E. Hays are family law attorneys who were then associates (employees) of Terry. Terry, Vaught, and Hays (collectively, the "Terry Defendants") were board-certified in family law by the Texas Board of Legal Specialization.¹ Beck and Terry executed a "Legal Services Contract" wherein they agreed that, among other terms, Terry would be the attorney-in-charge of Beck's case but that Hays and Vaught might also perform work on the matter.

A central issue in the divorce litigation concerned the characterization of assets and stock of three Texas corporations that were wholly owned, directly or indirectly, by Beck. Beck was the sole shareholder in Beck Benefits Company, which he had formed in 1987. Beck Benefits Company, in turn, was the sole shareholder in G. Beck Company, which he also had formed in 1987. Beck was president of both corporations, and through them he conducted a risk management or insurance consulting business. As Ms. Beck emphasized at trial, Beck's work included testifying as an expert witness in over one hundred court cases. Beck also traded or invested in real estate through the two corporations. At the time of the divorce, the entities held title to several parcels of real property in Austin. Beck had also formed John Mueller's Barbecue, Inc., which operated a restaurant and held real property and other assets. The value of the assets Beck held through the three corporations greatly exceeded the value of assets that Mr. Beck, Ms. Beck, or both held in their own names.

Beck claimed that when he first consulted with Terry about the representation, Beck expressed his desire to obtain a summary judgment that his stock in his wholly-owned corporations was his separate property. Because most of his assets were held through the corporations, Beck perceived such a ruling would lead Ms. Beck's counsel to "fold her tent ... because she would see that there's no big pile of money at the rainbow." The Terry Defendants, on Beck's behalf, subsequently filed a motion for summary judgment that his stock in Beck Benefits Company and G. Beck Company should be characterized as his separate property. Although Beck had formed both of the corporations during the marriage, Beck relied on a theory, originally devised by an expert hired by his prior divorce counsel, that his ownership interests could be traced back to separate property interests he had held in Beck Benefits Company's corporate predecessors. Ms. Beck filed a response attacking Beck's tracing theory, as well as a cross-motion for summary judgment that Beck's stock was instead properly characterized as a community asset. Ms. Beck further argued in her response that the evidence presented a fact issue as to whether the corporate forms should be disregarded under an alter-ego or corporate veil-piercing theory. See Castleberry v. Branscum, 721 S.W.2d 270, 271 (Tex.1986); Zisblatt v. Zisblatt, 693 S.W.2d 944, 953 (Tex.App.-Fort Worth 1985, writ dism'd). In support, Ms. Beck presented evidence that Mr. Beck had run approximately $650,000 in personal expenses through the corporations since 1990, had commingled personal and corporate assets, and had diverted community assets and opportunities to the corporations. The district court denied both motions.

A mediation was scheduled for February 4, 2002. A few days beforehand, Ms. Beck filed an amended petition adding Beck Benefits Company and G. Beck Company as defendants and asserting claims for alter ego, fraud on the community, and reimbursement. The mediation proceeded as scheduled. Terry attended the mediation with Beck, and was the sole attorney advising him there. The parties negotiated the property division into the evening hours and resumed the following morning, with Hays joining Terry in assisting with the negotiations. The parties eventually reached a settlement that day.

Beck agreed to a 57-43 percent division of the marital property. Of significance to this appeal, Beck and his counsel acquiesced in including his corporations' stock and their assets in the property the parties negotiated to divide, in effect conceding for purposes of settlement that both the corporations' stock and their assets were community property. It was agreed that Ms. Beck would receive certain bank account balances and other financial assets previously held by the corporations. Beck retained ownership of both the corporate stock and the corporate-held real estate assets, as he had desired. Because the value of these assets caused Beck's share of the property being divided to exceed the agreed-upon forty-three percent, it was agreed that he would execute an owelty note in Ms. Beck's favor in the amount of the excess—approximately $516,000—plus interest. It was further agreed that Beck would cause his corporations to consent to a lien on all of the real property they held to secure the entire amount of the indebtedness. The parties also agreed that Beck would secure confirmations from the superior lienholders on the corporate-held properties that the additional lien was not prohibited and would not trigger an event of default. To protect Ms. Beck's interest in the event Beck did not obtain the confirmations or consents, it was agreed that she would hold the stock certificates until the additional lien was perfected.

The parties memorialized their agreement in a "Mediated Settlement Agreement" under section 6.602 of the family code. See Tex. Fam.Code Ann. § 6.602 (West 2006). The Mediated Settlement Agreement provided, "THIS AGREEMENT IS NOT SUBJECT TO REVOCATION," and that, "The parties and their attorneys recognize that this provision means that either party is entitled to judgment on this Mediated Settlement Agreement as a matter of law." (Emphases in original). See id. § 6.602(b)(1) ("A mediated settlement agreement is binding on the parties if the agreement: ... provides, in a prominently displayed statement that is in boldfaced type or capital letters or underlined, that the agreement is not subject to revocation"). Beck signed the agreement in both his individual capacity and as president of G. Beck Company and Beck Benefits Company. See id. § 6.602(b)(2) (also requiring signature of each party to the settlement agreement). Terry signed the agreement as "Attorney for Gary Gene Beck." See id. § 6.602(b)(3) (also requiring signatures of attorneys for each party).

Later that day, the parties proved up the divorce and Mediated Settlement Agreement before the district court. Beck testified that he understood the entire deal memorialized in the Mediated Settlement Agreement, that he was compromising claims he had previously made that his businesses and other entities were his separate property,² that he was obligating his corporations to perform acts to effectuate the Mediated Settlement Agreement's terms, that Ms. Beck was receiving certain corporate-held financial assets that day, and that he could have gone to trial and obtained either a better or worse outcome than that to which he had agreed. Following his examination, the district court further inquired of Beck:

If I pronounce this today, it is effective today. The decree will then be presented in accordance with this, but you cannot go change any terms and conditions. And anything that you've submitted, then this will overrule. You can't change it just because you don't like it, or you get mad at each other. So you still want me to go and enter this, Mr. Beck?

Beck responded, "I do." Based on the evidence, the district court rendered judgment granting the divorce, approving the Mediated Settlement Agreement, and dividing the property as the parties had agreed.

Finalizing the divorce decree and ancillary documents proved to be a lengthy and contentious process. In the aftermath of the settlement, Beck testified that he consulted with an accountant and, at her suggestion, a corporate and tax lawyer, and determined that the settlement's structure was "unworkable" due to its impact on the corporations. During the months that followed, Beck, primarily with the assistance of...