Lederer v. Lederer

• Decision Date: 30 August 2018
• Docket Number: NO. 14-17-00671-CV,14-17-00671-CV
• Citation: 561 S.W.3d 683
• Parties: Howard F. LEDERER, Appellant/Cross-Appellee v. James C. LEDERER, Susan Lederer Russell, Kathleen T. Lederer and Marjorie E. Lederer, Appellees/Cross-Appellants
• Court: Texas Court of Appeals

561 S.W.3d 683

Howard F. LEDERER, Appellant/Cross-Appellee

v.James C. LEDERER, Susan Lederer Russell, Kathleen T. Lederer and Marjorie E. Lederer, Appellees/Cross-Appellants

NO. 14-17-00671-CV

Court of Appeals of Texas, Houston (14th Dist.).

Opinion filed August 30, 2018

Rehearing Denied October 9, 2018

Sean Farrell, Shawn McKee, Casey Jon Lambright, Houston, TX, for Appellants.

Frank N. Ikard Jr., Adam Herron, Laurellen Ratliff, Austin, TX, for Appellee.

Panel consists of Justices Boyce, Donovan, and Wise.

OPINION

Ken Wise, Justice

In this dispute over the interpretation of a joint ownership agreement concerning real estate investment property, appellant contends that he is entitled to additional compensation in the form of a "15% override" for services rendered as coordinating agent based on the affirmative votes of the owners of a majority interest. Appellees, a small group of interest owners who voted against the 15% override, contend that the joint ownership agreement does not provide for the compensation appellant seeks and that any modification to the agreement must be approved by unanimous consent. The trial court disposed of the issue on cross-motions for summary judgment and, after a bench trial on attorney’s fees, rendered a final judgment in favor of appellees.

On appeal, appellant contends that the trial court erred in granting appellees' motion and denying his motion on the 15% override. Appellant also contends that the trial court erred in requiring him to reimburse attorney’s fees and pay attorney’s fees to appellees. Appellees have filed a cross-appeal complaining that the trial court erred in allowing appellant’s expert to testify on attorney’s fees and in failing to award appellees the full amount of their attorney fees. For the reasons explained below, we affirm in part and reverse in part and remand.

FACTUAL AND PROCEDURAL BACKGROUND

I. The Facts

In 1973, David Adickes, Steven Zax, Miles Glaser, Don Yarborough, and Don Evans entered in a Joint Ownership Agreement (JOA) for the purchase of real estate investment property in north Harris County (the Property). Adickes and Zax received undivided interests in the Property of 50% and 20% respectively, and the others received 10% undivided interests. At some point after that, Glaser and Evans sold their interests to Adickes.

Under the JOA, each owner was entitled to receive his proportionate share of the net income derived from the Property and was obligated to pay his proportionate share of the liabilities and obligations "arising from or incident to the ownership or operation of the Property." To secure each owner’s obligation to perform under the JOA, the owners agreed to convey record title to the Property to a "Trustee" empowered to, among other things, foreclose on the interest of a defaulting owner. The JOA also provided for a "Coordinating Agent" to manage the payment of expenses, liabilities, and obligations relating to the Property on behalf of the owners. Adickes was named the initial Coordinating Agent, and he also became Trustee of the Property.

In 1974, Adickes contributed his 50% ownership interest to the Tri-Bro Joint Venture in partnership with a company owned by investor A.C. Lederer. That same year, Zax contributed his 20% interest to the Zax Joint Venture in partnership with investor Paul A. Lederer. The joint venture agreements acknowledged that the undivided interests in the contributed property were subject to the JOA. The interests of all parties to this lawsuit flow from one or both of these joint ventures. The only remaining property interest not included in either joint venture was Don Yarborough’s 10% interest.

George W. Lederer, the father of appellant Howard F. Lederer (Howard), was named Trustee on behalf of both the Tri-Bro Joint Venture and the Zax Joint Venture. The joint venture agreements also provided that the property contributed to them would be deeded to George W. Lederer as Trustee. According to Howard, he succeeded his father as Trustee and Coordinating Agent.

Over the years, ownership interests in the Property changed through sale, assignment, or inheritance. In 2005, Steven Zax filed a lawsuit to clarify his ownership interest under the JOA. The lawsuit was resolved by a 2006 "Settlement Agreement and Agreement to Clarify Interests" by and between Zax, a group of heirs and assigns, and others (Settlement Agreement). In 2006, a similar dispute about Adickes’s then-existing ownership interests and his interest in the Tri-Bro Joint Venture was resolved in an "Agreement to Clarify Interests" by and between Adickes, various successors and assigns of A.C. Lederer’s interest in the Tri-Bro Joint Venture, and others (Agreement to Clarify).

Both the Settlement Agreement and the Agreement to Clarify recognized Howard as the successor Trustee under the JOA and directed that title to the subject property be deeded in Howard’s name as Trustee.¹ Both agreements also recited that Howard, as Trustee, "shall be entitled to receive a fee (which is currently set at $200 per month) for serving as Trustee and Coordinating Agent under the [JOA]."

In early 2015, Howard sent the interest owners a letter informing them of upcoming property sales and distributions. In the letter, Howard detailed his efforts to preserve the ownership interests and provide a profitable return on the original investment in the Property.² He also stated that Adickes "thought that I should be rewarded for shepherding this deal for all." Specifically, Howard stated that Adickes approved of Howard’s request for "a fifteen percent overriding share on all 2015, 2016 and future sales."

Howard included with the letter a voting form for the interest owners to approve or disapprove each of four property sales and the 15% override. Unlike the letter, the voting form was worded to request "a success sharing, revenue override of fifteen percent (15%) from all future distributions from our joint ownership venture for Howard Lederer" rather than a percentage of property sales.

While over eighty-eight percent of the interest owners approved the 15% override, a group representing eight percent of the interest owners voted against it. Some of the disapproving interest owners indicated that although they agreed Howard should be compensated for his efforts, they felt that his request for a 15% overriding interest was "exorbitant" or "egregious." Some also argued that the JOA required all owners to approve the override.

II. The Lawsuit

In May 2015, interest owners James C. Lederer, Paul R. Lederer, John L. Lederer, Susan Lederer Russell, Kathleen T. Lederer, and Marjorie E. Lederer (the Lederer Parties), all of whom had voted against Howard receiving the 15% override, filed suit against Howard in a Harris County district court. Invoking the Texas Trust Code, the Lederer Parties asserted individual and derivative claims on behalf of all owners for breach of fiduciary duty and breach of contract, removal of Howard as Trustee, as well as actual and exemplary damages, an accounting, and attorney’s fees. The Lederer Parties later added a request that the court enjoin Howard from, among other things, taking the 15% override.

After an unsuccessful mediation, the Lederer Parties filed two traditional summary judgment motions, one of which challenged whether Howard was entitled to the 15% override. Howard responded to both motions with a traditional and no-evidence motion for summary judgment and request for declaratory judgment on his entitlement to the 15% override. The trial court denied both parties' motions in July 2016.

In early 2017, the Lederer Parties filed a "Motion to Re-Urge the Parties' Cross-Motions for Summary Judgment on Defendant’s 15% Override." In their motion, the Lederer Parties contended that Howard’s entitlement to the 15% override was the "single controlling legal issue" in the case and that "[t]he determination of this legal issue turns solely on the interpretation of an unambiguous contract." The Lederer Parties argued that the JOA: (1) provides for compensation to the Coordinating Agent in one limited circumstance that does not apply to Howard; (2) does not otherwise provide for compensation to the Coordinating Agent; and (3) cannot not be changed "except by written instrument signed by all Owners." Therefore, the Lederer Parties asserted, the JOA did not authorize the 15% override because Howard did not obtain the approval of all the interest owners.

In response to the Lederer Parties' motion to re-urge, Howard agreed that his entitlement to the 15% override was "an over-arching issue" and that the trial court "need only read the JOA and decide/interpret the rights of the parties." He also noted that the issue was the basis for his request for declaratory relief.³ Beyond that, however, Howard disputed the Lederer Parties' interpretation of the JOA. Howard relied on another provision of the JOA authorizing the owners of the majority interest in the Property to decide "all matters relating to the ... management ... [and] operation of ... the Property," which, he asserted, gave the majority "the power over compensation." Further, Howard argued, no one was voting to amend the JOA; they were simply voting to reward him for his management of the Property, so unanimous consent was not required.

On March 1, 2017, the trial court granted the Lederer Parties' motion to re-urge their traditional motion for summary judgment on Howard’s 15% override and denied Howard’s motion for summary judgment and declaratory judgment. The trial court further declared that "[Howard] is not entitled to a 15% Override." The Lederer Parties then nonsuited their remaining claims, leaving only the issue of attorney’s fees.

Howard filed a motion to clarify the declaratory judgment order. After considering the motion, response, evidence, and arguments of counsel, the trial court denied Howard’s motion to clarify.

On May 1, 2017, the issue of attorney’s fees was tried to the court. The attorneys for each...