Byrd v. Woodruff

• Decision Date: 31 August 1994
• Docket Number: No. 05-93-00020-CV,05-93-00020-CV
• Citation: 891 S.W.2d 689
• Parties: Kassie Renee BYRD, Appellant, v. Katherine WOODRUFF, the Law Firm of Beggs & Woodruff, Jay Downs, and the Law Firm of Spears, Busch & Downs, Appellees.
• Court: Texas Court of Appeals

Page 689

891 S.W.2d 689

Kassie Renee BYRD, Appellant, v. Katherine WOODRUFF, the Law Firm of Beggs & Woodruff, Jay Downs, and the Law Firm of Spears, Busch & Downs, Appellees.

No. 05-93-00020-CV.

Court of Appeals of Texas Dallas.

Aug. 31, 1994.

Ben C. Martin, Joe Hill Jones, Dallas, for appellant.

Charles T. Frazier, Jr., Dwayne J. Hermes and Andrea M. Kuntzman, Dallas, for appellees.

Before BAKER, BURNETT and ROSENBERG, JJ.

OPINION

ROSENBERG, Justice.

This is a summary judgment case. Kassie Renee Byrd sued Katherine Woodruff and her former and current law firms for legal malpractice. She also sued her guardian ad litem, Jay Downs, and his law firm for breach of his duties as a guardian ad litem. The district court granted Woodruff and Downs summary judgment, without specifying the grounds for its ruling. Kassie asserts that the district court erred by granting summary judgment on any of the grounds raised in Downs's and Woodruff's motions.

We hold that a guardian ad litem appointed under rule 173 of the rules of civil procedure in the context of a settlement hearing has fiduciary duties to the minor and can be held liable for a breach of those duties. We conclude that the district court properly granted summary judgment on some of Kassie's claims against Downs and the Law Firm of Spears, Busch & Downs and on some of Kassie's claims against Woodruff and the Law Firm of Beggs & Woodruff. We affirm in part the summary judgments granted to Downs and his law firm and Woodruff and her law firm. We reverse the district court's judgment in all other respects and remand these remaining claims to the district court for further proceedings.

BACKGROUND FACTS

Kassie was involved in an accident with a riding lawn mower. Woodruff represented Kassie, a minor, in two separate lawsuits, styled:

Stephen Byrd and Debbie Byrd, individually and as next friend of Kassie Renee Byrd, a Minor v. Phillip Riddle, et al., filed in the 199th Judicial District Court of Collin County, Texas (Collin County suit); and

Stephen Byrd and Debbie Byrd, individually and as next friend of Kassie Renee Byrd, a Minor v. HCW, Inc. et al., filed in the 134th District Court of Dallas County, Texas (Dallas County suit).

The 134th District Court appointed Downs as Kassie's guardian ad litem in the Dallas County suit. Downs did not participate in the Collin County suit. Both lawsuits resulted in several settlements.

With respect to the Collin County suit, the record does not contain a statement of facts for the settlement hearing or a copy of the 199th Judicial District Court's final judgment. In the Dallas County suit, the parties reached the following three settlements:

(1) a settlement with Dr. Smilack in the amount of $10,000 of which Kassie was apportioned $4000 (Smilack settlement);

(2) a settlement with Humana of Texas in the amount of $45,000 of which Kassie was apportioned $19,000 (Humana settlement); and

(3) a joint settlement with Drs. Rosen and Glidden in the amount of $250,000 of which Kassie was apportioned $97,038.67 (Rosen & Glidden settlement).

The 134th Judicial District Court conducted a prove-up hearing on each of the settlement agreements.

At the prove-up for the Smilack and Humana settlements, Kassie testified that she believed the settlements to be in her best interest. Downs, the court-appointed guardian ad litem, testified that after reviewing the medical records and talking with Kassie and her parents, he believed that Kassie had suffered a considerable amount of damages. He further believed that proving proximate cause would be very difficult. Downs testified that, in light of the heavy burden to show proximate cause, the settlement was entirely fair and reasonable and in the best interests of Kassie and her parents. Downs requested the court to approve the settlements. The district court accepted the Smilack and Humana settlements and awarded Downs $1000 in guardian ad litem fees. The district court ordered that the sums apportioned to Kassie, $19,000 from the Humana settlement and $4000 from the Smilack settlement, be paid into the Dallas County court registry. The district court further ordered the Smilack settlement proceeds invested in an interest-bearing account.

At the prove-up for the Rosen & Glidden settlement, Kassie testified that she believed the settlement to be fair and equitable. Woodruff introduced a disbursement sheet showing the distribution of the settlement funds. The disbursement, however, was subject to estimated payments for certain litigation costs and medical expenses. Downs testified that he reviewed and approved the disbursement figures. The district court found that the compromise agreement was in Kassie's best interest and entered final judgment that the entire $250,000 settlement figure be paid into Woodruff's attorney trust account. The district court approved Downs's actions in compromising and settling the suit and fixed Downs's guardian ad litem fees at $3500.

Ten days after Kassie reached her majority age of eighteen, Kassie and her father and stepmother, Stephen and Debbie Byrd, met at Woodruff's office to execute a trust agreement for Kassie's benefit. The trust agreement appoints Stephen Byrd as trustee. The agreement creates an irrevocable trust, subject to the court's amendment, modification, or revocation. The trust property includes Kassie's settlement proceeds from the Rosen & Glidden, Smilack, and Humana settlements, and $12,500 plus interest from the Collin County suit. Under the trust agreement, Kassie is to receive various distributions until she reaches the age of forty, at which time the trust terminates. In executing the trust agreement, Kassie acknowledged under oath that: she was over the age of eighteen; she had been informed that, as a matter of law, she had the right to receive and manage all settlement proceeds that were the subject of the trust; she was under no coercion or threat to execute the trust agreement; and her decision to execute the trust agreement was made of her own free will.

A check for $79,616.22, representing the remaining Rosen & Glidden settlement proceeds, was drawn on Woodruff's attorney trust account the same day the parties executed the trust. ¹ Kassie endorsed the check and made same payable to "Stephen Byrd--Trustee." Kassie also instructed Woodruff to draft motions for the release of the settlement proceeds deposited in the Dallas County and Collin County court registries. The Collin County check was mailed. Debbie Byrd picked up the Dallas County check at Woodruff's office.

Kassie brought the present lawsuit against her parents, Woodruff and her former and current law firms, and Downs and his law firm. Downs and Woodruff moved for summary judgment. Four days before the summary judgment hearing, Kassie filed a second amended original petition. ² Kassie alleges that Downs, as her guardian ad litem, and Woodruff, as her attorney, were derelict in their duties regarding each settlement and the trust agreement.

The second amended petition alleges that Woodruff was negligent in failing to set up proper safeguards to protect the settlement proceeds in the Collin County suit. That petition asserts that the Collin County judgment provided for immediate payment of $6000 to Kassie, a minor at the time of receipt, and for $12,500 to be placed in the registry of the court and invested in an interest-bearing account until Kassie reached majority. ³ Kassie alleges that Woodruff should have directed the $6000 payment deposited in the court's registry and that Woodruff did not ensure that she received these settlement monies upon reaching the age of majority. The petition asserts that Kassie's step-mother, Debbie Byrd, obtained the checks and forged Kassie's name, depriving her of the funds.

Kassie further claims that Downs and Woodruff were derelict in their duties by placing the Smilack settlement proceeds in the Woodruff trust account instead of putting the funds in the court's registry to be properly invested in an interest-bearing account. She also alleges that Downs and Woodruff failed to obtain and pay her the settlement proceeds when she reached majority. Further, Kassie asserts that Downs and Woodruff did not invest the Humana settlement proceeds and did not ensure that she received these funds upon reaching majority.

Regarding the Rosen & Glidden settlement, Kassie claims that Downs and Woodruff were negligent in allowing a judgment that did not sufficiently allow the parties to ascertain their rights and obligations under the judgment and that they failed to apportion any of the $250,000 settlement proceeds to her. She alleges further that Downs and Woodruff allowed settlement proceeds made on her behalf in the amount of $170,383.78 to be paid to third parties without court authorization.

The petition additionally alleges that Downs and Woodruff drafted an irrevocable trust agreement that names Stephen Byrd as trustee, Debbie Byrd as successor trustee, and Katherine Woodruff as second successor trustee. Kassie alleges that Downs and Woodruff failed to ensure compliance with Chapter 142 of the Texas Property Code in establishing the trust. She also asserts that Downs and Woodruff allowed an irrevocable trust document to be drafted when by its terms such a document is revocable; they did not advise her that the trust was revocable; they either failed to advise her, or improperly advised her, on the safety of trust funds; and they either advised her to enter into an invalid trust agreement or failed to advise her that the trust agreement was invalid. Kassie further alleges that Downs and Woodruff did not arrange for the payment of court costs to her. Kassie also asserts claims for exemplary damages and attorney's fees against Downs and Woodruff.

Neither Woodruff nor Downs amended their motion for summary judgment after Kassie filed the second amended petition. After the summary judgment hearing, the district court...