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©Jack W. Lawter, Jr. 2003

PRACTICAL ADVICE TO ESTATE CONCERNINGFIDUCIARY LIABILITY AND LITIGATION

JACK W. LAWTER, JR.Lawter & LawterAttorneys at Law

5615 Kirby, Suite 930Houston, Texas 77005

(713) 522-9400

HBA Wills & Probate InstituteFebruary 16, 2007

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I. WARNING SIGNS TO THE ESTATE PLANNER.. . . . . . . . . . . . . . . . . . . . . . . . . . . 1A. Checklist of Situations Which Increase the Risk of Litigation. . . . . . . . . . . . . . . . 1B. Potential Litigation Warrants Additional Care. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

II. DISCLOSURE OF INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1A. Communication Problems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1B. Lawyer-Client Privilege: Rule 503 of the Texas Rules of Civil Evidence. . . . . . . 2

1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22. General Rule of Privilege.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23. Who May Claim the Privilege. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24. Exceptions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

a. Furtherance of crime or fraud. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2b. Claimants through same deceased client. . . . . . . . . . . . . . . . . . . . . 3c. Breach of duty by a lawyer or client. . . . . . . . . . . . . . . . . . . . . . . . 3d. Document attested to by a lawyer. . . . . . . . . . . . . . . . . . . . . . . . . . 3e. Joint clients. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

C. Work Product Privilege: Rule 192 of the Texas Rules of Civil Procedure. . . . . . . 3D. Confidentiality of Information: Rule 1.05 of the Texas Disciplinary Rules of

Professional Conduct. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42. General Rule of Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43. Revealing Confidential Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44. Revealing Unprivileged Client Information.. . . . . . . . . . . . . . . . . . . . . . . . 55. A Lawyer Shall Reveal Confidential Information When Required To Do

So by Rule 3.03(a)(2), 3.03(b), or by Rule 4.01(b). . . . . . . . . . . . . . . . . . . 5E. Disclosure of Information During Estate Planning. . . . . . . . . . . . . . . . . . . . . . . . . 5F. Waiver of Attorney-Client Privilege. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

1. Disclosure of Communication. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52. Communication with Third Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53. Offensive Use Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

G. Production and/or Disclosure of Terms of a Will or Trust Document. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71. Delivery to the Court. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72. Delivery to a Ward's Guardian.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73. Delivery for In Camera Inspection.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

H. Disclosure of Information During Estate Administration. . . . . . . . . . . . . . . . . . . . 81. Checklist of Considerations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82. Attorney-Client Privilege Held by Personal Representative of Deceased

Client. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83. Trustee's Duty to Disclose Information to Beneficiaries. . . . . . . . . . . . . . . 8

a. Huie v. Deshazo, 922 S.W.2d 920 (Tex.1996). . . . . . . . . . . . . . . . 8

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b. InterFirst v. Risser, 739 S.W.2d 882 (Tex. App.--Texarkana 1987, nowrit). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

c. First City Nat'l Bank of Paris v. Haynes, 614 S.W.2d 605 (Tex. Civ.App.--Texarkana 1981, no writ). . . . . . . . . . . . . . . . . . . . . . . . . . . 9

4. Executor's Duty to Disclose Information to Beneficiaries. . . . . . . . . . . . . . 9a. Ertel v. O'Brien, 852 S.W.2d 17 (Tex. App.--Waco 1993, writ

denied). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9b. Coble Wall Trust Co., Inc. v. Palmer, 859 S.W.2d 475 (Tex. App.--

San Antonio 1993, writ denied). . . . . . . . . . . . . . . . . . . . . . . . . . . . 95. Privilege Effective until Waived or Found within an Exception. . . . . . . . 10

III. DOCUMENT REQUEST OR SUBPOENA FOR DOCUMENTS. . . . . . . . . . . . . . . 10A. Subpoena to Produce Files.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10B. Duty to Preserve Privilege. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

1. Attorney May be Liable for Disclosing Privileged Information. . . . . . . . 10C. Preservation of Privilege. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

1. Documents Requested of Accountants. . . . . . . . . . . . . . . . . . . . . . . . . . . 112. Documents Requested of Representatives. . . . . . . . . . . . . . . . . . . . . . . . . 113. Other Document Requests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114. Engagement Letter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

D. Burdensome or Expensive Requests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111. Independent Insulating Glass v. Street, 722 S.W.2d 798 (Tex. App.-- Fort

Worth 1987, writ dism'd). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112. Morris v. Texas Employers Ins. Ass'n, 759 S.W.2d 14 (Tex. App.--Corpus

Christi 1988, writ denied). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113. State Farm Mut. Auto Ins. Co. v. Engelke, 824 S.W.2d 747 (Tex. App.--

Houston [1st Dist.] 1992, no writ). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12E. Objections. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12F. Waiver of Objections. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

1. Conrad v. Wilson, 873 S.W.2d 467 (Tex. App.--Beaumont 1994, no writ)1.3G. Joint Defense Privileges.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13H. Involuntary Disclosure - Attorney-Client Privilege. . . . . . . . . . . . . . . . . . . . . . . . 13

IV. MAINTAINING CLIENT FILES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13A. Estate Planning Files After the Client's Death. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13B. File Maintenance Policy.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13C. Recommendations for File Maintenance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

1. Institute Either an "All or Nothing" System.. . . . . . . . . . . . . . . . . . . . . . . 142. "All" System.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143. "Nothing" System.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144. Maintain a System. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145. Never Mix Estate Planning Files with Other Client Matters. . . . . . . . . . . 146. Never Mix the Estate Planning Files of More than One Client. . . . . . . . . 14

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V. BILLING AND TIMEKEEPING RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14A. Attorney-Client Privilege May Not Apply to Bills. . . . . . . . . . . . . . . . . . . . . . . . 14B. Production of Bills. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14C. Waived Privilege. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14D. Time Entries.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14E. Recommendations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

1. If Litigation is Likely, Care Should be Taken With Itemized Bills. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

2. Use Care to Describe Sensitive Matters.. . . . . . . . . . . . . . . . . . . . . . . . . . 143. If Litigation is Likely, Use the Bill to Confirm the Client's Testamentary

Intent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

VI. HOW TO IMPROVE THE CHANCES THAT A WILL OR TRUST WILL BE VALID. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14A. Avoiding Claims of Undue Influence. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

1. Consider Potential Conflicts of Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . 152. Consider Relationships with Beneficiaries. . . . . . . . . . . . . . . . . . . . . . . . 153. Be Cautious About Who Gives You Instructions. . . . . . . . . . . . . . . . . . . 154. Remember Who Your Client Is. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155. Exclude Beneficiaries at Will Execution. . . . . . . . . . . . . . . . . . . . . . . . . . 156. Incorporate the Client's Input. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157. Think Like a Trial Lawyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

B. Avoiding Claims of Lack of Capacity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151. Make Sure You Are Comfortable that the Client Has Capacity. . . . . . . . 152. Create a Record. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153. Choose Your Witnesses Carefully. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164. Consider Memos or Affidavits from the Witnesses and the Notary

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165. Consider Videotape. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166. Deposition to Perpetuate Testimony. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167. Declaratory Judgment Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

C. Formalities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

VII. TORTIOUS INTERFERENCE WITH INHERITANCE RIGHTS. . . . . . . . . . . . . . 16A. Definition of Tortious Interference with Inheritance Rights. . . . . . . . . . . . . . . . . 16B. Restatement (Second) of Torts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16C. Restatement of Torts (Second) § 774B - Definition of Terms.. . . . . . . . . . . . . . . 17

1. Inheritance or Gift. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172. Gift. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

D. Tortious Interference v. Will Contest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17E. Jury Charge for Tortious Interference Cause of Action. . . . . . . . . . . . . . . . . . . . . 17F. Texas Cases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

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1. King v. Acker, 725 S.W.2d 750 (Tex. App.--Houston [1st Dist.] 1987, nowrit). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

2. Damages in King v. Acker. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183. Implications of King v. Acker for Probate and Trust Litigation.. . . . . . . . 184. Possible Cause of Action for Interference with Inheritance Expectancy. . 185. King and Neill Distinguished. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196. Evaluation of Contemplated Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . 197. Possible Elements of Tortious Interference in Texas.. . . . . . . . . . . . . . . . 19

a. Texas cases discussing interference with inheritance. . . . . . . . . . 20b. Texas cases discussing tortious interference with contract rights. 20

G. Safe Harbor for Estate Planning Lawyers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211. A Safe Harbor Has Not Been Defined in Texas. . . . . . . . . . . . . . . . . . . . 212. Clear Outside Parameters.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213. Defining a Likely Safe Harbor for Attorneys.. . . . . . . . . . . . . . . . . . . . . . 21

VIII. CONFLICTS OF INTEREST. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22A. General Rules - Rule 1.06 of the Texas Disciplinary Rules of Professional Conduct

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22B. Prohibited Transactions - Rule 1.08 of the Texas Disciplinary Rules of Professional

Conduct. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22C. Former Client - Rule 1.09 of the Texas Disciplinary Rules of Professional Conduct

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24D. Recommendations Regarding Conflicts of Interest. . . . . . . . . . . . . . . . . . . . . . . . 24

IX. ESTATE PLANNER AS WITNESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26A. Practical Tips. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26B. Rule 501. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27C. Rule 3.08. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27D. Case Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

1. May v. Crofts, 868 S.W.2d 397 (Tex. App.--Texarkana 1993, no writ). . 282. Anderson Producing Inc. v. Koch Oil Company, 929 S.W.2d 416 (Tex.

1996).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

X. REPRESENTING A FIDUCIARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29A. Duty of Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29B. Allocation of Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29C. Counsel the Fiduciary to Exercise Restraint When Expending Funds Held in

Trust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29D. Sometimes it is a Fiduciary's Job to Make a Decision. . . . . . . . . . . . . . . . . . . . . . 29E. Resignation is an Option. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29F. Be Careful What You Write. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29G. Be Careful What You Say. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30H. Settlement Negotiations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

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I. Correct Mistakes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30J. Use Common Sense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30K. Transactions By A Fiduciary with the Beneficiary. . . . . . . . . . . . . . . . . . . . . . . . 30

1. Sorrell v. Elsey, 748 S.W.2d 584 (Tex. App. - San Antonio 1988, writdenied). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

2. Miller v. Miller, 700 S.W.2d 941 (Tex. App. - Dallas 1985, writ ref’d n.r.e.).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

3. Texas Pattern Jury Charge Questions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 334. Third Parties Can Be Held Liable for a Breach of Trust. . . . . . . . . . . . . . 34

XI. RECOVERY OF ATTORNEY'S FEES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34A. Texas Probate Code Section 243: Allowance for Defending Will. . . . . . . . . . . . 34B. Texas Probate Code Section 245: When Costs are Adjudged Against Representative

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35C. Texas Probate Code Section 149C: Removal of Independent Executor.. . . . . . . 36D. Texas Trust Code Section 114.064: Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37E. Texas Trust Code Section 113.018: Employment of Agents.. . . . . . . . . . . . . . . . 37F. Texas Civil Practice and Remedies Code Section 37.009: Costs.. . . . . . . . . . . . 37G. Texas Civil Practice and Remedies Code Section 37.005: Declarations Relating to

Trust or Estate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

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PRACTICAL ADVICE TO ESTATE PLANNERS CONCERNING FIDUCIARY LIABILITY ANDLITIGATIONJack W. Lawter, Jr.

I. WARNING SIGNS TO THE ESTATEPLANNER

A. Checklist of Situations Which Increasethe Risk of Litigation. If any of the followingsituations exist, the estate planning lawyer shouldbe alert for potential future litigation:

1. Multiple marriages.

2. Children from prior marriages.

3. Marital problems.

4. Husband and wife substantially disagreeon the disposition of their estates.

5. One spouse has substantial separateproperty.

6. Substantial gifts or bequests to a girlfriendor boyfriend.

7. Any gift or bequest to a homosexualpartner.

8. Any gift in a litigious family or involvinga litigious beneficiary.

9. A child or other beneficiary is activelyinvolved in the estate planning process.

10. Extremely elderly or extremely ill client.

11. A deathbed will or deathbed transfers.

12. Almost any unusual gift or bequestinvolving a great deal of money.

13. During an estate or trust administration,any beneficiary who hires a lawyer.

14. During an estate or trust administration,any beneficiary who hires a trial lawyer (All of

your alarms should go off).

B. Potential Litigation WarrantsAdditional Care. If one or more of the warningsigns are present, additional care should beexercised by the lawyer to protect the client andthe lawyer. The estate planning lawyer should becareful to identify his or her client in anengagement letter and should carefully avoidgiving advice to any other party. The additionalrisks should be completely discussed with theclient.

II. DISCLOSURE OF INFORMATION

A. Communication Problems. In theprocess of handling contested matters, the authorhas found that estate planning attorneys oftenhave problems with communications whenpotential disputes arise. The following are someobservations taken from actual experiences:

1. Some estate planning lawyers tend to talktoo much prior to the client's death. Theinformation given to the estate planner by theclient is privileged and should not be revealed toa third party without express authorization fromthe client. The privilege is applicable even if thethird party is a C.P.A., insurance agent orfinancial planner in the absence of a waiver by theclient.

2. Some estate planning lawyers tend todecide for themselves whether a beneficiary orother family member has a legitimate complaintand to talk down to the person. This leads to anangry, frustrated beneficiary.

3. Some estate planning lawyers fail toidentify exactly who their client is in advance anddo not know to whom they should be disclosinginformation. It is permissible to represent anentire family, but in that case duties are owed tothe entire family and the lawyer should not

2

participate in actions which give rise to a conflictof interest.

4. Some estate planning lawyers will talkopenly to any friendly sounding person who callsabout client files.

5. Some estate planning lawyers fail to insistthat fiduciary clients keep beneficiaries informedwhich can lead to simple problems becoming bigproblems. If a beneficiary is contentious ordifficult, there is a very natural tendency to wantto avoid the beneficiary. However, the moredifficult a beneficiary is, the more disclosure thebeneficiary should receive.

6. Some estate planning lawyers fail torecognize conflicts when they represent more thanone family member and fail to recognize theirduties to keep all of their clients informed.

B. Lawyer-Client Privilege: Rule 503 ofthe Texas Rules of Civil Evidence

1. Definitions. As used in Rule 503:

a. A "client" is a person, public officer, orcorporation, association, or other organization orentity, either public or private, who is renderedprofessional legal services by a lawyer, or whoconsults a lawyer with a view to obtainingprofessional legal services from him.

b. A "representative of the client" is onehaving authority to obtain professional legalservices, or to act on advice rendered pursuantthereto, on behalf of the client.

c. A "lawyer" is a person authorized, orreasonably believed by the client to be authorized,to engage in the practice of law in any state ornation.

d. A "representative of the lawyer" is: (i)one employed by the lawyer to assist the lawyer inthe rendition of professional legal services; or (ii)an accountant who is reasonably necessary for thelawyer's rendition of professional legal services.

e. A communication is "confidential" if notintended to be disclosed to third persons otherthan those to whom disclosure is made infurtherance of the rendition of professional legalservices to the client or those reasonablynecessary for the transmission of thecommunication.

2. General Rule of Privilege. A client has aprivilege to refuse to disclose and to prevent anyother person from disclosing confidentialcommunications made for the purpose offacilitating the rendition of professional legalservices to the client and made: (1) between himor his representative and his lawyer or his lawyer'srepresentative, (2) between his lawyer and thelawyer's representative, (3) by him or hisrepresentative or his lawyer or a representative ofthe lawyer to a lawyer, or a representative of alawyer representing another party in a pendingaction and concerning a matter of commoninterest therein, (4) between representatives of theclient or between the client and a representative ofthe client, or (5) among lawyers and theirrepresentatives representing the same client.

3. Who May Claim the Privilege. Theprivilege may be claimed by the client, hisguardian or conservator, the personalrepresentative of a deceased client, or thesuccessor, trustee, or similar representative of acorporation, association, or other organization,whether or not in existence. The person who wasthe lawyer or the lawyer's representative at thetime of the communication is presumed to haveauthority to claim the privilege but only on behalfof the client.

4. Exceptions. There is no privilege underRule 503:

a. Furtherance of crime or fraud. If theservices of the lawyer were sought or obtained toenable or aid anyone to commit or plan to commitwhat the client knew or reasonably should haveknown to be a crime or fraud;

(i) Volcanic Gardens Management Co., Inc.v. Paxson, 847 S.W.2d 343 (Tex. App.--El Paso

3

1993, no writ). "Fraud" within the meaning of anexception to the attorney-client privilege is muchbroader than common law or criminal fraud andincludes commission or attempted commission offraud on the court or on a third person. Thecrime/fraud exception to the attorney-clientprivilege comes into play when a prospectiveclient seeks the assistance of an attorney in orderto make a false statement or statements of amaterial fact or law to a third person or court forpersonal advantage. See TEX. R. CIV. EVID.503(d)(1).

b. Claimants through same deceased client.As to communication relevant to an issue betweenparties who claim through the same deceasedclient, regardless of whether the claims are bytestate or intestate succession or by intervivostransaction. TEX. R. CIV. EVID. 503(d)(2).

c. Breach of duty by a lawyer or client. Asto a communication relevant to an issue of breachof duty by the lawyer to his client or by the clientto his lawyer;

(i) Scrivner v. Hobson, 854 S.W.2d 148(Tex. App.-- Houston [1st Dist.] 1993, no writ).In Scrivner, the exception to the attorney-client orattorney-work product privilege regarding thebreach of duty by a lawyer permitted clients todiscover documents in the attorney's file regardingthe actual basis for calculating the amount dueeach plaintiff in an environmental lawsuit. Theclients sued the attorney for legal malpractice forthe attorney's alleged settlement of a groupenvironmental lawsuit without their authority.The contents of the documents were relevant tothe clients' claims that the proceeds of theaggregate settlement agreement were improperlyand fraudulently distributed among the variousplaintiffs in the lawsuit. See TEX. R. CIV. EVID.503(d)(3).

d. Document attested to by a lawyer. As toa communication relevant to an issue concerningan attested document to which the lawyer is anattesting witness;

(i) Brown v. Edwards, 640 N.E.2d 401 (Ind.

App.--1 Dist. 1994). In Brown, the court held thatthe attorney-client privilege between testator andattorney in the creation of a will was waived.Here, a husband and wife entered into anenforceable contract not to revoke their mutual,reciprocal wills. The husband and wife chosetheir attorney and his assistant to witness thewills. By choosing their attorney and hisassistant, the husband and wife implicitlyrequested that the attorney and his assistantdefend the testamentary scheme against attack,regardless of any confidentiality which previouslymay have attached to the conversations among thefour. That is, at the time the husband and wifeintended that the attorney and his assistant shouldbe competent to divulge the scope of theirtestamentary intent with regard to the wills if themutual and reciprocal nature of the wills wereever questioned. Thus, the husband and wifewaived the attorney-client privilege. See TEX. R.CIV. EVID. 503(d)(4).

e. Joint clients. As to a communicationrelevant to a matter of common interest betweenor among two or more clients if thecommunication was made by any of them to alawyer retained or consulted in common, whenoffered in an action between or among any of theclients.

(i) Scrivner v. Hobson, 854 S.W.2d 148(Tex. App.--Houston [1st Dist.] 1993, no writ).Where parties display mutual trust in a singleattorney by placing their affairs in his hands, theattorney must disclose all opinions, theories, orconclusions regarding his clients' rights orposition to the other parties represented by theattorney in such matter. See TEX. R. CIV. EVID.503(d)(5).

C. Work Product Privilege: Rule 192 ofthe Texas Rules of Civil Procedure. Rule 192sets forth the forms and scope of discovery;protective orders; and definitions. TEX. R. CIV. P.192. Rule 192.5 concerns work product. Thework product of an attorney, subject to theexceptions of Texas Rule of Civil Evidence503(d), which shall govern as to work product as

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well as to attorney-client privilege, is protectedfrom disclosure by privilege.

D. Confidentiality of Information: Rule1.05 of the Texas Disciplinary Rules ofProfessional Conduct. Rule 1.05 provides asfollows:

1. Definitions. "Confidential information"includes both "privileged information" and"unprivileged client information." "Privilegedinformation" refers to the information of a clientprotected by the lawyer-client privilege of Rule503 of the Texas Rules of Evidence or of Rule503 of the Texas Rules of Criminal Evidence orby the principles of attorney-client privilegegoverned by Rule 501 of the Federal Rules ofEvidence for United States Courts andMagistrates. "Unprivileged client information"means all information relating to a client orfurnished by the client, other than privilegedinformation, acquired by the lawyer during thecourse of or by reason of the representation of theclient.

2. General Rule of Confidentiality. Exceptas permitted by paragraphs (c) and (d), or asrequired by paragraphs (e) and (f), a lawyer shallnot knowingly:

a. Reveal confidential information of aclient or a former client to:

(i) a person that the client has instructed isnot to receive the information; or

(ii) anyone else, other than the client, theclient's representatives, or the members,associates, or employees of the lawyer's law firm.

b. Use confidential information of a client tothe disadvantage of the client unless the clientconsents after consultation.

c. Use confidential information of a formerclient to the disadvantage of the former clientafter the representation is concluded unless theformer client consents after consultation or theconfidential information has become generally

known.

d. Use privileged information of a client forthe advantage of the lawyer or of a third person,unless the client consents after consultation.

3. Revealing Confidential Information. Alawyer may reveal confidential information:

a. When the lawyer has been expresslyauthorized to do so in order to carry out therepresentation.

b. When the client consents afterconsultation.

c. To the client, the client's representatives,or the members, associates, and employees of thelawyer's firm, except when otherwise instructedby the client.

d. When the lawyer has reason to believe itis necessary to do so in order to comply with acourt order, a Texas Disciplinary Rule ofProfessional Conduct, or other law.

e. To the extent reasonably necessary toenforce a claim or establish a defense on behalf ofthe lawyer in a controversy between the lawyerand the client.

f. To establish a defense to a criminalcharge, civil claim or disciplinary complaintagainst the lawyer or the lawyer's associates basedupon conduct involving the client or therepresentation of the client.

g. When the lawyer has reason to believe itis necessary to do so in order to prevent the clientfrom committing a criminal or fraudulent act.

h. To the extent revelation reasonablyappears necessary to rectify the consequences ofa client's criminal or fraudulent act in thecommission of which the lawyer's services hadbeen used.

4. Revealing Unprivileged Client

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Information. A lawyer may reveal unprivilegedclient information:

a. When impliedly authorized to do so inorder to carry out the representation.

b. When the lawyer has reason to believe itis necessary to do so in order to:

(i) carry out the representation effectively;

(ii) defend the lawyer or the lawyer'semployees or associates against a claim ofwrongful conduct;

(iii) respond to allegations in any proceedingconcerning the lawyer's representation of theclient; or

(iv) prove the services rendered to a client, orthe reasonable value thereof, or both, in an actionagainst another person or organization responsiblefor the payment of the fee for services rendered tothe client.

c. When a lawyer has confidentialinformation clearly establishing that a client islikely to commit a criminal or fraudulent act thatis likely to result in death or substantial bodilyharm to a person, the lawyer shall revealconfidential information to the extent revelationreasonably appears necessary to prevent the clientfrom committing the criminal or fraudulent act.

5. A Lawyer Shall Reveal ConfidentialInformation When Required To Do So by Rule3.03(a)(2), 3.03(b), or by Rule 4.01(b). SUPREME COURT OF TEXAS, RULES GOVERNING

THE STATE BAR OF TEXAS art. X, § 9 (Rules ofProfessional Conduct) Rule 1.06 (1995)[hereinafter TEXAS RULES OF PROFESSIONAL

CONDUCT].

E. Disclosure of Information DuringEstate Planning. Any confidentialcommunications made for the purposes offacilitating the rendition of professional legalservices to the client are privileged. The estate

planning lawyer should refuse to disclose anyconfidential information without the consent ofthe client. The most common exceptions areclaimants through the same deceased client, Rule503(d)(2), and joint clients, Rule 503(d)(5).

F. Waiver of Attorney-Client Privilege.Texas Rule of Civil Evidence 503(b) precludesthe discovery of communications betweenattorney and client. Under the rule, a client hasthe privilege to refuse to disclose and prevent anyother person from disclosing confidentialcommunications made for the purpose offacilitating the rendition of legal services to theclient. However, this privilege is not absolute andmay be waived. A client may waive the privilegeeither expressly or implicitly by conduct thatextinguishes an element of the privilege. U.S. v.Lipshy, 492 F. Supp. 35 (N.D. Tex. 1979).

1. Disclosure of Communication. Eventhough a communication is made in confidence toan attorney, the attorney-client privilege may belost if it is impliedly waived by a disclosure of thecommunication. Freeman v. Bianchi, 820 S.W.2d853 (Tex. App.--Houston [1st Dist.] 1991, nowrit). If a party discloses a communication, theattorney-client privilege is waived unless the partycan disprove the waiver or establish a limitedscope of waiver. Jordan v. Ct. of App. for FourthSup. Jud. Dist., 701 S.W.2d 644 (Tex. 1985);State ex rel. Simmons v. Peca, 799 S.W.2d 426(Tex. App.--El Paso 1990, no writ).

2. Communication with Third Parties. Aprivilege is waived when the party asserting theprivilege divulges the information to third parties.Atchison, Topeka and Santa Fe Ry. Co. v. Kirk,705 S.W.2d 829 (Tex. App.--Eastland 1986, nowrit). The attorney-client privilege is not waivedif the privileged communication is shared with athird person who has a common legal interest withrespect to the subject matter of thecommunication. Hodges, Grant & Kaufmann v.U.S. Government, Dept. of the Treasury, I.R.S.,768 F.2d 719 (5th Cir. 1985). Thus, the privilegeis not waived if the confidential communicationhas been made to attorneys for coparties in order

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to further a joint or common interest. Aiken v.Texas Farm Bureau Mut. Ins. Co., 151 F.R.D. 621(E.D. Tex. 1993). However, the attorney-clientprivilege does not protect communications that anattorney had with third parties and then forwardedto a client. TEX. R. CIV. EVID. 503(a). InMethodist Home v. Marshall, 830 S.W.2d 220(Tex. App.--Dallas 1992, no writ), the plaintiffsrequested "all writings and correspondencebetween ... [the home and the law firm whichrepresented the home] which related to [theplaintiffs] in this cause." The request coveredcommunications between the law firm and thirdparties, such as hospitals or social workers, thatthe law firm forwarded to the home. The courtheld that the attorney-client privilege of the homewould not protect these thi rd-partycommunications with the law firm. See Colton v.United States, 306 F.2d 633, 639-40 (2nd Cir.1962), cert. denied, 371 U.S. 951, 83 S. Ct. 505,9 L. Ed. 2d 499 (1963); Jordan v. Ct. of App. forFourth Sup. Jud. Dist., 701 S.W.2d 644, 648 (Tex.1985).

3. Offensive Use Waiver. Courts balancethe conflict between the desire for openness andthe need for confidentiality in attorney-clientrelations by restricting the scope of attorney-clientprivilege. See Duval County Ranch Co. v. AlamoLumber Co., 663 S.W.2d 627, 634 (Tex. App.--Amarillo 1983, writ ref'd n.r.e.); In re LTVSecurities Litigation, 89 F.R.B. 595, 600 (N.D.Tex. 1981). This balancing has led the court todetermine that a party's need for information canoutweigh the benefits associated with theattorney-client privilege. Such a situationprovides for a waiver by offensive use of theattorney-client privilege.

a. In Ginsberg v. Fifth Court of Appeals, 686S.W.2d 105 (Tex.1985), the Supreme Court heldthat the offensive waiver applied to the attorney-client privilege. Ginsberg involved a trespass totry title action. The plaintiff testified atdeposition that she was unaware that herownership of a building had changed until 1981.However, records revealed that the plaintiff toldher psychiatrist in 1972 that "the building wassold while [she and her husband] were in Padre

Island." Thus, the records contained informationwhich virtually established the defendant's statuteof limitation defense. The plaintiff resisteddisclosure of the records on the basis of thepsychotherapist-patient privilege. The courtrejected the plaintiff's claim of privilege. In sodoing, the court relied on the notion that "[a]plaintiff cannot use one hand to seek affirmativerelief in court and with the other lower an ironcurtain of silence against otherwise pertinent andproper questions which may have a bearing uponhis right to maintain his action." Id. at 108,quoting Pavlinko v. Yale - New Haven Hosp., 470A.2d 246, 251 (Conn. 1984). The court found thatthe facts in Ginsberg mandated that the plaintiffeither waive her claim for affirmative relief ormaintain her privilege and abandon her cause ofaction.

b. Six courts of appeals have considered theissue of waiver by offensive use in the attorney-client privilege. Of those six, five held that theoffensive waiver applied to the attorney-clientprivilege. The sixth held that offensive waiverwas limited to the facts of Ginsberg and was notapplicable to the attorney-client privilege. Theonly court to consider the issue and reject theoffensive use of waiver was the Cantrell court.Cantrell v. Johnson, 785 S.W.2d 185, 190 (Tex.App.--Waco 1990, no writ). The court noted thatthe case was not one in which proof of a defensemight be precluded if the discovery was notpermitted. While the court acknowledged that thedocuments might reveal the plaintiff's knowledgeand state of mind, relevant factors in the litigation,it determined these factors could be litigatedwithout undermining the attorney-client privilege.The court went on to find that the Ginsbergholding must be limited to the psychotherapist-patient privilege.

c. In Republic Ins. Co. v. Davis, 856 S.W.2d158 (Tex.1993), the Supreme Court concludedthat a better position would not be to limit theoffensive use of waiver as Cantrell did but toapply the Ginsberg offensive use waiver to theattorney-client privilege. The Court reasoned thatthe following factors should guide the trial courtin determining whether a waiver had occurred.

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First, before a waiver may be found, the partyasserting the privilege must seek affirmativerelief. Cf. Maryland Am. Gen. Ins. Co. v.Blackmon, 639 S.W.2d 455, 457-58 (Tex. 1982).Second, the privileged information sought must besuch that, if believed by the fact finder, in allprobability it would be outcome determinative ofthe cause of action asserted. Mere relevance isinsufficient. The confidential communicationmust go to the very heart of the affirmative reliefsought. Third, disclosure of the confidentialcommunication must be the only means by whichan aggrieved party may obtain the evidence. Ifany one of these requirements is lacking, the trialcourt must uphold the privilege. In Republic, theSupreme Court held that the appellant'sdeclaratory judgment was not seeking the type ofaffirmative relief that would result in an offensivewaiver of the attorney-client privilege.

G. Production and/or Disclosure of Termsof a Will or Trust Document

1. Delivery to the Court. When a person isnamed as executor in a will and after the testator'sdeath he has that will in his possession, it is hisduty to produce the will and it if appears to be avalid will to seek probate of the will. TEX. PROB.CODE ANN. §§75, 76 (Vernon 1980); SeePlummer v. Roberson, 666 S.W.2d 656 (Tex.App.--Austin 1984, writ ref'd n.r.e.). It is doubtfulthat the executor's obligation to deliver the willcould be enforced by a mere intruder having nopossible interest in the estate or in the propertywhich might be affected by the probate. On theother hand, anyone alleging a good faith beliefthat the will might affect his interests should bepermitted to compel its discovery. See Ryan v.Texas & P. R. R. Co., 64 Tex. 239 (1885). UnderTexas law, a personal representative may force thesurrender of any kind of papers belonging to thedecedent's estate. This would include any estateplanning documents sent to the decedent. If aperson having possession of any such papersrefuses to deliver them after having been orderedby the court to do so, he may be imprisoned untilsuch time as he complies. TEX. PROB. CODE ANN.§ 232 (Vernon 1980).

2. Delivery to a Ward's Guardian. When aperson is named guardian of a ward's estate, hehas no duty to recover possession of the ward'swill. The Texas Probate Code provides, "Theguardian of an estate, immediately after receivingletters of guardianship, shall collect and take intopossession the personal property, record books,title papers, and other business papers of the ward...." TEX. PROB. CODE ANN. § 771 (Vernon Supp.1995). In the case of Baumann v. Willis, 721S.W.2d 535 (Tex. App.--Corpus Christi 1986, nowrit), the court found that a "will" was notincluded in any of the definitions of "property"within the Property Code. Furthermore, the courtfound no cases which defined the word "will" asbeing "property" as defined by the Probate Code.While the court recognized that such definitionsare not all-inclusive, it did think such exclusionssignificant. The court found that the will does notin and of itself have value to the ward such as anote or security, nor is it a business papernecessary to conduct the business or affairs of theward. The court concluded that there was noreason for the guardian of the estate to havepossession of the will. Significantly, the courtnoted there was no allegation, or any evidencebefore the court, that the appellee had threatenedto destroy the document in question; nor did thecourt perceive or find any pleading or evidence ofhow the guardian's possession of the will could inany way effect the administration of theguardianship, or was necessary to the guardian, orhow its unavailability prevented the guardian fromperforming duties for the ward.

3. Delivery for In Camera Inspection.Section 865A of the Texas Probate Code providesthat the “guardian of the ward’s estate may applyto the court for an order to seek an in camerainspection of a true copy of a will, codicil, trust,or other estate planning instrument of the ward asa means of obtaining access to the instrument forpurposes of establishing an estate plan underSection 865 of this Code.” At the conclusion of ahearing on the application and on a finding thatthere is good cause for an in camera inspection,the court shall direct the person who has custodyof the document to deliver a copy to the court forin camera inspection only. If good cause exists,

8

the court shall release all or part of the instrumentto the applicant only for the purposes described inSubsection (a) of §865A. Subsection (g) of thestatute states that an attorney does not violate theattorney-client privilege solely by complying witha court order to release an instrument pursuant to§865A.

H. Disclosure of Information DuringEstate Administration

1. Checklist of Considerations. If a requestfor information is made to the attorneyrepresenting an executor or testamentary trusteethe following should be considered by theattorney:

a. Does the fiduciary owe a duty to theperson making the request for information?

b. Is the information privileged?

c. Has any privilege already been waived bydisclosing the information to someone other thanthe client?

d. If the information may be privileged, whoholds the right to waive such privilege?

e. Does the attorney owe duties to peopleother than the fiduciary thereby creating a conflictof interest?

f. Has the appropriate person waived anyexisting privilege?

g. Will a failure to make full disclosure be abreach of fiduciary duty?

h. Are personal feelings or tacticalconsiderations by the client overriding soundjudgment and fiduciary duties?

2. Attorney-Client Privilege Held byPersonal Representative of Deceased Client. Rule503(c) of the Texas Rules of Civil Evidenceprovides as follows:

The [attorney-client] privilege may be claimed by

the client, his guardian or conservator, thepersonal representative of a deceased client, or thesuccessor, trustee, or similar representative of acorporation, association, or other organization,whether or not in existence. The person who wasthe lawyers or the lawyer's representative at thetime of the communication is presumed to haveauthority to claim the privilege but only on behalfof the client.

3. Trustee's Duty to Disclose Information toBeneficiaries. One occupying a fiduciaryrelationship to another must measure his conductby high equitable standards and is under a duty tomake a full disclosure of all facts andcircumstances concerning his dealings with thetrust assets. Kinzbach Tool Co., Inc. v. Corbett-Wallace Corp., 160 S.W.2d 509 (Tex. 1942). Atrustee owes a duty to give to the beneficiary uponrequest complete and accurate information as tothe administration of the trust.

a. Huie v. Deshazo, 922 S.W.2d 920(Tex.1996). In Huie the trust beneficiary wasseeking to compel discovery, from an attorney, ofcommunications by a trustee to the attorneyrelating to trust administration in a suit by abeneficiary alleging that the trustee breached hisfiduciary duty. The Texas Supreme Court heldthat the attorney-client privilege applied tocommunications between a trustee and hisattorney, notwithstanding the trustee's fiduciaryduties to fully disclose all material facts to thebeneficiaries of the trust. The Court held thatonly the trustee, not the trust beneficiary, is theclient of the trustee's attorney and thebeneficiaries therefore may not discovercommunications between the trustee and attorneyotherwise protected under Texas Rule of CivilEvidence 503. The Court noted that Rule 503contains no exception applicable to fiduciariesand their attorneys.

b. InterFirst v. Risser, 739 S.W.2d 882 (Tex.App.--Texarkana 1987, no writ). In Interfirst, thecourt held that evidence was sufficient to sustaina jury verdict that a trustee bank had acted in badfaith and committed self-dealing in selling abeneficial owners' stock back to a closely held

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corporation. The court found that the trusteebank made little or no effort to get the best pricepossible for the stock, failed to publicize its sale,did not notify beneficiaries of the sale, did notobtain outside appraisals of stock and sold thestock back to the issuing company, which was oneof the bank's borrowers.

c. First City Nat'l Bank of Paris v. Haynes,614 S.W.2d 605 (Tex. Civ. App.--Texarkana1981, no writ). In First City, the court held thatevidence was sufficient in an action against a bankfor damages resulting from the bank'smismanagement of properties which it held in atrust for the plaintiffs to support findings that thebank breached its duty by, among other things,failing to keep the beneficiaries informed of thetrue condition of the trust.

4. Executor's Duty to Disclose Informationto Beneficiaries. The fiduciary standards of anexecutor of an estate are the same as the fiduciarystandards of a trustee. Humane Society of Austinand Travis County v. Austin Nat'l Bank, 531S.W.2d 574, 577 (Tex. 1975), cert. denied, 425U.S. 976, 96 S. Ct. 2177, 48 L. Ed. 2d 800. Thus,one occupying a fiduciary relationship to anotheris under a duty to make a full disclosure of allfacts and circumstances concerning his dealingswith the estate assets.

a. Ertel v. O'Brien, 852 S.W.2d 17 (Tex.App.--Waco 1993, writ denied). In Ertel, a bankwas appointed independent executor of thedecedent's estate, along with decedent's wife. Thebank kept all the estate records and actuallyfunctioned as the executor. The bank failed to paya debt of the estate, assuming that a company inwhich the decedent was part owner would, and thecreditor brought suit. The trial court held that thebank did not breach a fiduciary duty it had to thecreditor. However, the trial court did find thebank negligent in not obtaining in writing anagreement which stated that the company in whichthe decedent was part owner would assume thedebt or in failing to set aside a reserve to pay thedebtor's claims in case the company did not.

The court of appeals, however, found thatthe trial court erred in finding that the bank'snegligent handling of the debtor's claim did notconstitute a breach of fiduciary duty. The courtfound a trustee commits a breach of trust not onlywhen he violates a duty in bad faith, orintentionally although in good faith, or negligentlybut also where he violates a duty because ofmistake. The court held that the bank, while nota trustee, was liable for a breach of fiduciary dutybecause an executor of an estate is held to thesame high fiduciary duties and standards in theadministration of a decedent's estate as aretrustees. Humane Society v. Austin Nat'l Bank,531 S.W.2d 574, 577 (Tex. 1975), cert. denied,425 U.S. 976, 96 S. Ct. 2177, 48 L. Ed. 2d. 800.The court of appeals reversed the trial court's takenothing judgment granted in favor of the bank andremanded the plaintiff's case against the bank tothe trial court.

b. Coble Wall Trust Co., Inc. v. Palmer, 859S.W.2d 475 (Tex. App.--San Antonio 1993, writdenied). In Coble, the independent administratorof an estate brought suit in probate court againstthe estate's former temporary administratoralleging, among other claims, breach of fiduciaryduty based upon the temporary administrator'sfailure to make full disclosure to the plaintiffs.The court held the temporary administrator madefull disclosure to the plaintiffs for they wereinformed about the plan for the estate, the planwas revised and corrected according to theirdesires and their full approval was given beforethe plan was implemented by the probate court.Thus, the court found no breach of fiduciary duty.

5. Privilege Effective until Waived or Foundwithin an Exception. Attorney-client privilegeremains in effect until the person who then holdsthe privilege waives it or one of the exceptionsapplies.

III. DOCUMENT REQUEST ORSUBPOENA FOR DOCUMENTS

A. Subpoena to Produce Files. It is almosta certainty that an active estate planning lawyer

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will some day be served with a subpoena toproduce his or her files. This is not cause forpanic, but it is a reason to take actions to preservethe attorney-client and work product privileges.

B. Duty to Preserve Privilege. Theattorney has the duty of preserving the attorney-client and work product privileges. TEX. R. CIV.EVID. 503; TEX. R. CIV. P. 192; TEXAS RULES OF

PROFESSIONAL CONDUCT Rule 1.05.

1. Attorney May be Liable for DisclosingPrivileged Information. In Perez v. Kirk &Carrigan, 822 S.W.2d 261 (Tex. App.--CorpusChristi 1991, writ denied), the court held thatattorneys breached their fiduciary duty to a clienteither by wrongfully disclosing a privilegedstatement or by wrongfully representing that anunprivileged statement would be keptconfidential. A company truck driver wasinvolved in a fatal bus accident. Attorneys for thecompany visited the driver in the hospital after theaccident and obtained the driver's sworn statementconcerning the accident. The driver claimed thatthe attorney's told him that they were his lawyersand that anything he told them would be keptconfidential. After taking the driver's statement,the attorneys made arrangements for a criminaldefense attorney to defend the driver. Withouttelling either the driver or his criminal defenseattorney, the attorneys turned over the driver'sstatement to the district attorney's office. Partlyon the basis of the statement, the district attorneywas able to obtain a grand jury indictment of thedriver for involuntary manslaughter.

The driver brought action against theattorneys for, among other things, a breach offiduciary duty. The trial court granted summaryjudgment for the attorneys, and the driverappealed. The attorneys claimed that they did notbreach their fiduciary duty as the attorney-clientprivilege did not apply since third parties werepresent at the time the statement was given. Thecourt held that regardless of whether from anevidentiary standpoint the privilege attached, theattorneys obtained the driver's statement basedupon an understanding that it would be keptconfidential. Thus, the court found that the

attorneys breached their duty to the driver byeither wrongfully disclosing a privilegedstatement or by wrongfully representing that anunprivileged statement would be keptconfidential. Either characterization showed aclear lack of honesty toward, and deception of, thedriver by his own attorneys regarding the degreeof confidentiality with which they intended totreat the statement. The court also found that thedriver made a valid claim for emotional distressand mental anguish suffered as a result of thepublicity caused by his indictment, resultingpartly by the revelation of his statement to thedistrict attorney in breach of confidentiality. Thecourt reversed the trial court's summary judgmentfor the attorneys and remanded.

C. Preservation of Privilege. Rule 193 ofthe Texas Rules of Civil Procedure provides thatprivilege is an exception to the general rule thatevidence is admissible and discoverable under ourrules of procedure. Any party who seeks to denythe production of evidence must claim a specificprivilege against such production. The burden ison the party asserting a privilege from discoveryto produce evidence concerning the applicabilityof a particular privilege. C. G. Giffin v. TheHonorable R. L. Smith, 688 S.W.2d 112 (Tex.1985). See TEX. R. CIV. EVID. 501 and TEX. R.CIV. EVID. 503. Any party who seeks to excludedocuments, records or other matters from thediscovery process has the affirmative duty tospecifically plead the particular privilege orimmunity claimed and to request a hearing on thismotion. The trial court should then determinewhether an in-camera inspection is necessary. Ifsuch inspection is ordered by the trial court, thosematerials for which the inspection is sought mustbe segregated and produced to the court. Failureto follow the above procedure constitutes a waiverof any complaint of the trial court's action.Peeples v. Hon. Fourth Supreme Judicial Dist.,701 S.W.2d 635 (Tex. 1985).

1. Documents Requested of Accountants. There is no accountant-client privilege recognizedunder federal law. U.S. v. White, 326 F. Supp.459, aff'd 477 F.2d 757, aff'd 487 F.2d 1335, cert.denied 95 S. Ct. 132, 419 U.S. 872, 42 L. Ed. 2d

11

111. At least arguably under Texas law,communications between a client and anaccountant are not discoverable in manyinstances. Occ. Code § 901.457 (a). An attorneymay employ an accountant for the client's benefitin order for the communications from the client tothe accountant to qualify for the attorney-clientprivilege. The attorney's employment of anaccountant does not make the accountant an agentof the attorney but, rather, agency is determinedon the basis of the attorney's control of the workdone by the accountant. Parker v. Carnahan, 772S.W.2d 151 (Tex. App.--Texarkana 1989, writdenied).

2. Documents Requested of Representatives.The attorney-client privilege does not protectdocuments which are addressed to persons whoare not proven to be representatives of thecorporate client or even employees of thecorporation. TEX. R. CIV. EVID. 501(4), 503,503(a)(1, 2), (c); Cigna Corp. v. Spears, 838S.W.2d 561 (Tex. App.--San Antonio 1992, nowrit). However, the attorney-client privilege doesprotect documents which appear to have beenwritten by one attorney to another within thecorporation. Id. TEX. R. CIV. EVID. 503(b)(5).For example, a letter from the tax counsel for asubsidiary to the tax counsel for a parent wasprotected from disclosure by the attorney-clientprivilege and work-product privilege. The letterrelated to the tax consequences of certain actionsinvolving activities between the parent andsubsidiaries, and the letter was composed whollyof information constituting mental impressions,conclusions, opinion, and legal theories of theattorneys representing the subsidiary inadministrative proceedings before a foreign taxingauthority. U.S. v. Mobile Corp., 149 F.R.D. 533(N.D. Tex. 1993).

3. Other Document Requests. A litigantmust offer to make tax returns available to thecourt but is not required to present them at thetime of the hearing. Dyna Span Corp. v. Hoffman,754 S.W.2d 341 (Tex. App.--Dallas 1988,petition for writ of mandamus 756 S.W.2d 723).In Dyna, the defendants did not waive any claimof privilege for federal and state income tax

returns by failing to present them for in-camerainspection at the time of the hearing on the motionfor protective order.

4. Engagement Letter. It is wise to useengagement letters to define the client and theclient representatives. A client representative willfall within the umbrella of the attorney-clientprivilege. However, in family businesses andestate administrations the roles may be less thanclear. It is best to anticipate in advance who willbe involved in the legal representation and includeall such persons as "client representatives" in theengagement letter so that evidence will exist tosupport the assertion of a privilege.

D. Burdensome or Expensive Requests

1. Independent Insulating Glass v. Street,722 S.W.2d 798 (Tex. App.-- Fort Worth 1987,writ dism'd). Any party who seeks to excludematters from discovery on grounds that requestedinformation is unduly burdensome, costly orharassing to produce, has the affirmative duty toplead and prove the work necessary to complywith discovery. Otherwise, the trial court cannotmake an informed judgment on whether to limitdiscovery on this basis or place the cost forcomplying with the discovery. Failure to followthis procedure constitutes a waiver of anycomplaint of the trial court's action.

2. Morris v. Texas Employers Ins. Ass'n, 759S.W.2d 14 (Tex. App.--Corpus Christi 1988, writdenied). In Morris, the court of appeals held thatthe trial court did not abuse its discretion insustaining the appellee's objection to several ofthe appellant's interrogatories on the ground thatthey were unduly burdensome and not calculatedto lead to any discoverable evidence at the time oftrial. The appellee put on ample evidence tosupport its claim of burdensomeness. Appellee'sclaims supervisor testified he would have toreview each of appellee's files, tens of thousands,to comply with the request. While appellant'sattorney proposed an alternative method toaccomplish the task, it was one equallyburdensome. Furthermore, the court offered tosubpoena the individuals as an easier means to

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acquire the information, which the appellant'sattorney declined.

3. State Farm Mut. Auto Ins. Co. v. Engelke,824 S.W.2d 747 (Tex. App.--Houston [1st Dist.]1992, no writ). Plaintiffs objected to a discoveryrequest on the grounds that it was burdensome anddid not seek relevant information. Plaintiffs'representative claimed that plaintiffs had alreadyproduced requested reports for three years butwere unable to obtain reports prior to the threeyears because the information was not retrievable.The plaintiffs' representative also testified that shedid not know anything about the system that wasavailable to the plaintiffs for tracing theinformation from the time period requested butnot previously produced, nor had therepresentative been asked to find out thisinformation prior to her testimony. Therepresentative agreed that someone moreknowledgeable on the issue would have to beasked such questions. Plaintiffs did not producea more knowledgeable witness to testify. Basedupon the failure of the plaintiffs to presentspecific evidence that the request wasburdensome, the court of appeals could not saythat the trial court abused its discretion in orderingthe production.

E. Objections. Texas Rule of CivilProcedure 193.2, states, in pertinent part, "A partymust make any objection to written discovery inwriting...within the time for response. The partymust state specifically the legal or factual basisfor the objection and the extent to which the partyis refusing to comply with the request." TEX. R.CIV. P. 193.2(a). "A party must comply with asmuch of the request to which the party has madeno objection unless it is unreasonable under thecircumstances to do so before obtaining a rulingon the objection. If the responding party objectsto the requested time or place of production, theresponding party must state a reasonable time andplace for complying with the request and mustcomply at that time and place without furtherrequest or order". TEX R. CIV. P. 193.2(b). "Theparty making the objection or asserting theprivilege must present any evidence necessary tosupport the objection or privilege...at the hearing

or affidavits served at least seven days before thehearing...". TEX. R. CIV. P. 193.4(a). Thus, theattorney-client privilege may be relinquished orlost if privileged communications are admittedwithout objection. U.S. v. Moody, 923 F.2d 341,cert. denied 112 S. Ct. 80.

F. Waiver of Objections

1. Conrad v. Wilson, 873 S.W.2d 467 (Tex.App.--Beaumont 1994, no writ). In Conrad, thedefendants failed to meet their evidentiary burdenon their motion for protection, and they waivedany objections or privileges they had asserted.Plaintiffs brought a medical malpractice actionagainst a medical center and three doctors. Thetrial court entered a protective order in the suit,and the plaintiffs petitioned for mandamus. At thetrial court hearing on the motion for protectiveorder, the sole witness mentioned only themedical privilege and the peer review privilege.However, the motion for protective order assertedmany privileges such as overly broad, irrelevant,attorney work product, immaterial, partycommunication exemption, etc. Aside from themedical privilege and the peer review privilege,there was no evidence to support assertion of anyother privilege, exemption or immunity.Furthermore, the sole witness testified that, "Someof the things asked for are protected." The courtof appeals found this testimony was not directedto any specified document or set of documents,and was the equivalent of no evidence. As noevidence was presented, the court held the trialcourt could only deny the motion. Eli Lilly andCo. v. Marshall, 850 S.W.2d 155, 157 (Tex.1993); Walker v. Packer, 827 S.W.2d 833, 843(Tex. 1992). Thus, the court determined that thetrial court abused its discretion by granting themotion for protection and that mandamus was anappropriate remedy.

G. Joint Defense Privileges. When partiesbelieve that there is a mutuality of interest in acommon defense with regard to current or futurelitigation, the parties may enter into a jointdefense and confidentiality agreement. Thisagreement provides that any sharing by orexchange between the parties to the agreement of

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confidential information will be under a standinginvocation of a joint defense privilege of the sortacknowledged in a number of cases, includingWilson P. Abraham Const. Corp. v. Armco SteelCorp., 559 F.2d 250, 258 (5th Cir. 1977), UnitedStates v. Melvin, 650 F.2d 641, 645-46 (5th Cir.1981), and Gulf Oil Corp. v. Fuller, 695 S.W.2d769 (Tex. App.--El Paso 1985, no writ). Such anagreement allows the parties' attorneys andrepresentatives to be able to communicate freelywithout concern about a waiver of privilegesand/or exemption protecting confidential and/orprivileged information.

H. Involuntary Disclosure - Attorney-Client Privilege. "A party who produces materialor information without intending to waive a claimof privilege does not waive that claim under theserules or the Rules of Evidence if - within ten daysor a shorter time ordered by the court, after theproducing party actually discovers that suchproduction was made - the producing partyamends the response, identifying the material orinformation produced and stating the privilegeasserted. If the producing party thus amends theresponse to assert a privilege, the requesting partymust promptly return the specified material orinformation and any copies pending any ruling bythe court denying the privilege." TEX R. CIV. P.193.3(d).

IV. MAINTAINING CLIENT FILES

A. Estate Planning Files After the Client'sDeath. Estate planning files are unique amonglawyers' files because they are all subject toreview by third parties after the death of theclient. Estate planning files will no longer beprivileged after the death of the testator if a claimis made. TEX. R. CIV. EVID. 503(d)(2). Manytimes some of a will contestant's most usefulevidence comes from the files of the estateplanning lawyer.

B. File Maintenance Policy. Institute apolicy concerning the maintenance of estateplanning files. All of the estate planning filesshould be treated in the same way.

C. R e c o m m e n d a t i o n s f o r F i l eMaintenance

1. Institute Either an "All or Nothing"System.

2. "All" System. This means keeping everylast piece of paper and handwritten note relatingto the engagement. This is probably the bestsystem if it is followed very carefully. Theattorney needs to constantly be careful to makesure that client instructions and decisions arerecorded in the file and that notes and memos areaccurate. The attorney should make sure that thefile accurately reflects what occurred indiscussions with the client and consideration ofany important issues. Some firms even keepinternal drafts so that each step of the process canbe recreated at a later time. This is the bestsystem if everyone is careful. If the estateplanning attorney (or the staff) is sloppy orcareless, this is the worst system. For example, ifthe attorney made careful notes of an initialconference with the client, but fails to keep notesof a subsequent conference in which the clientchanges his or her mind, the file appears to reflecta mistake by the attorney.

3. "Nothing" System. This means onlyretaining the final instruments and anycorrespondence. This system increases thechances that the file will not contain anycontradictions or "evidence" to assist in a willcontest (or similar suit). This system also allowsfor human error. The author would recommendthis system to all but the most disciplined andcareful practitioners. Another advantage is thattestimony is simpler and more straight-forward ifthe only documents in the file are the finaldocuments. For example, "I do not rememberwhat Mr. Jones said to me twenty years ago, but Ialways draft my wills in accordance with myclient's instructions."

4. Maintain a System. Take the time todecide upon a file maintenance system and stickto it.

5. Never Mix Estate Planning Files with

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Other Client Matters. If a lawsuit is filed claimingthrough a deceased client, attorney-client privilegemay be waived for estate planning documents.The privilege would normally not be waived forother legal work such as advice concerning aclosely-held business. If the files are mixedtogether or all matters are in one file, it will makeit much more difficult to maintain the privilege.

6. Never Mix the Estate Planning Files ofMore than One Client. Open separate files forhusband and wife and maintain them separately.Otherwise, the estate planner is faced with adilemma when an appropriate request is made forinformation relating to one client but such requestwould require the attorney to reveal informationabout another client.

V. BILLING AND TIMEKEEPINGRECORDS

A. Attorney-Client Privilege May NotApply to Bills. Much like an estate planning file,the bills for estate planning may not be privilegedafter the death of the client if a claim is madethrough a deceased client.

B. Production of Bills. In cases whereattorneys' fees are claimed, the bills may have tobe produced. A claim for attorney fees is commonin both trust and probate cases.

C. Waived Privilege. If the bills areprivileged, the privilege can be waived.

D. Time Entries. Think before writingdown time entries. With an estate planning file,you have no way of knowing who will be readingthe bill and what they will be looking to find.

E. Recommendations

1. If Litigation is Likely, Care Should beTaken With Itemized Bills. An itemized billsometimes gives the lawyer who is challengingthe estate plan a road map to follow. In somecases, an itemized bill will reveal the estateplanning lawyer's thought processes and mayharm the client's interests. An itemized bill will

also reveal potential witnesses. If an itemized billhas to be prepared, the estate planning lawyershould be careful not to reveal confidentialinformation.

2. Use Care to Describe Sensitive Matters.In all situations, an estate planning lawyer shouldremember that people other than the client may bereviewing the entries some day. Care should beused to describe sensitive matters.

3. If Litigation is Likely, Use the Bill toConfirm the Client's Testamentary Intent. Forexample, "meeting with client in which clientconfirmed strongly that she wishes to leavenothing to her son and wants to take all stepsnecessary to avoid a will contest." Obviously, thistype of entry should only be made if the eventactually occurred.

VI. HOW TO IMPROVE THE CHANCESTHAT A WILL OR TRUST WILL BE VALID

All estate planning lawyers know thebasic rules for the creation of a will or trust. Thefollowing are recommendations to improve thechances of the estate plan being confirmed inlitigation. The recommendations are simply ideasto consider and are not to be consideredrequirements for a valid will or trust or mattersthat are required for a careful attorney. Some ofthe recommendations may not be appropriate insome situations.

A. Avoiding Claims of Undue Influence.

1. Consider Potential Conflicts of Interest.If litigation is likely, try to review the situationobjectively to determine if a conflict of interestexists. If the attorney has a personal interest inthe matter (such as a fiduciary appointment),make sure a written waiver is executed. SeeTEXAS RULES OF PROFESSIONAL CONDUCT Rule1.06. If a bequest is made to the attorney, obtainseparate counsel for the client.

2. Co ns ider Re la t ionsh i ps wi thBeneficiaries. If the estate planning lawyer has along, close relationship with one of the

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beneficiaries named in the will, the objectivity ofthe attorney may be questioned. This is a fairlycommon problem because families tend to all usethe same lawyer or law firm. Although it is notunethical to represent more than one familymember on legal matters (with proper disclosure),a close relationship with one of the beneficiariescan be used to show bias on the part of theattorney in favor of such beneficiary.

3. Be Cautious About Who Gives YouInstructions. An estate planning lawyer shouldtake great care to confirm that instructions abouta will or trust come from the client and notanother family member. Sometimes this isdifficult if the client is ill or elderly. Ifinstructions come from a family member, theestate planner should insist on a private meetingwith the client to insure that the document reflectshis or her wishes. This can occur at the time theinstrument is executed or before. At times, theestate planning attorney may have completeconfidence in the instructions given to him bysomeone other than the client, but to avoid theperception that the attorney is taking instructionsfrom someone other than the client, the attorneyshould confirm the instructions by meeting withthe client to execute the instrument or by letter (orboth).

4. Remember Who Your Client Is. In familysituations, it is sometimes confusing about whothe attorney represents. This is a mistake, but ithappens. When drafting a will or trust, keep inmind who you are representing and that you aresupposed to be looking out only for their interests.If a conflict exists, have someone else draft thedocument.

5. Exclude Beneficiaries at Will Execution.Make sure beneficiaries are not physically presentwhen the will is executed.

6. Incorporate the Client's Input. Make surethe comments or changes to any drafts are theclient's and not a beneficiary's comments.

7. Think Like a Trial Lawyer. Try to look atthe situation objectively and think about how even

"innocent" facts could be made to look likewrongful or improper conduct.

B. Avoiding Claims of Lack of Capacity

1. Make Sure You Are Comfortable that theClient Has Capacity.

a. Consider consulting with the client'sdoctor concerning capacity.

b. Consider reviewing hospital or medicalrecords of client.

2. Create a Record. Have the testatoranswer the basic questions needed to showcapacity in the presence of witnesses.

a. Who are the natural objects of his/herbounty?

b. What property does he or she own?

c. What instrument is being executed?

d. What does the instrument do?

3. Choose Your Witnesses Carefully. Willthis person be an effective witness at a trial? Willyou be able to find them?

4. Consider Memos or Affidavits from theWitnesses and the Notary. If litigation is aconcern, an affidavit or statement from thewitnesses and the notary will help bolster theirtestimony. Do not put words in the witnesses'mouths. Let them describe what happened in theirown words.

5. Consider Videotape. Video willexecutions are not always a good idea. Often thevideotape is better evidence for the contestantthan the proponent. If you decide to use a video,do not ask leading questions and try to make theclient look as good as possible. If in doubt, do notuse videotape.

6. Deposition to Perpetuate Testimony. If acontest is a virtual certainty and the client is

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willing, a deposition of the client can be takenregarding the will and the testator's intent.

7. Declaratory Judgment Action. Somelawyers believe that a declaratory judgment actioncan be brought during the testator's lifetime todeclare the will valid. This theory raises somepotential issues which have not been addressed bythe courts.

C. Formalities. If you suspect that a willcontest is a possibility, make sure you supervisethe execution of the instrument and follow theformalities strictly in the presence of thewitnesses. Always say the same things and followthe same procedures when wills are executed sothat you can later testify that you did these thingseven if you cannot remember the executionceremony.

VII. TORTIOUS INTERFERENCE WITHINHERITANCE RIGHTS

A. Definition of Tortious Interference withInheritance Rights. Tortious interference withinheritance rights was recognized by the Texasappellate courts in 1987. As discussed in moredetail below, Texas has not yet defined the scopeof the tort, and the elements are unclear.However, the cases from other states support thefollowing elements of the tort:

1. existence of an expectancy of inheritanceor gift;

See Brandes v. Rice Trust, Inc., 966 S.W.2d 144(Tex.App.—Houston [14th Dist.] 1998, writdenied). In Brandes testator's sister and herchildren brought action against Rice University,alleging tortious interference with inheritancerights and intentional infliction of emotionaldistress arising out of testator's deathbed gift tothe university of $4 million in bonds. The trialcourt granted summary judgment for Rice Trust,Inc. because plaintiffs had no right of expectancyfrom the testator's will because by the terms of thewill, he did not leave them the property that wasin dispute. (The plaintiffs had already lost a willcontest).

2. intentional interference with theexpectancy;

3. the interference was tortious, such asfraud, duress or undue influence;

4. the defendant's actions proximatelycaused damage to the plaintiff (i.e. plaintiff wouldhave inherited but for defendant's actions); and

5. damages.

B. Restatement (Second) of Torts. TheRestatement of Torts defines intentionalinterference with inheritance or gift as thefollowing:

One who by fraud, duress or other tortiousmeans intentionally prevents another fromreceiving from a third person an inheritance or giftthat he would otherwise have received is subjectto liability to the other for loss of the inheritanceor gift. Restatement of Torts (Second) § 774B.

C. Restatement of Torts (Second) § 774B -Definition of Terms

1. Inheritance or Gift. "Inheritance" is usedto include any devise or bequest that wouldotherwise have been made under a testamentaryinstrument or any property that would have passedto the plaintiff by intestate succession. Thus, thetort applies when the testator has been induced bytortious means to make his will or not make it;and it applies also when he has been induced tochange or revoke his will or not to change orrevoke it. It applies also when a will is forged,altered, or suppressed.

2. Gift. "Gift" is used to include in thebroad sense any donation, gratuity, or benefactionthat other would have received from the thirdperson. It includes, for example, a beneficiarydesignation under an insurance policy that theactor interferes with by tortious means.

D. Tortious Interference v. Will Contest

1. A will contest is an action to contest the

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probate of the will, to contest the validity of awill, or to assert an interest in the estate becausea will is ineffective, because another will exists,or because the decedent breached a contract tomake or revoke a will.

2. A tortious interference action does notchallenge the probate or validity of a will. Rather,the action seeks damages from a third partybecause of the plaintiff's loss of an expectancy.The tort action accrues when the wrongful act iscomplete. This may be before the testator's death,after the testator's death, or even after the probateproceedings have ended. In cases involving wills,Texas may require that inheritance rights beestablished by winning a will contest before theaction will be available.

E. Jury Charge for Tortious InterferenceCause of Action. The following is a jury chargethat was submitted for a tortious interferencecause of action in one of the author's HarrisCounty cases:

Do you find from a preponderance of theevidence that the defendant tortiously interferedwith the plaintiff's right to inherit property fromthe testator?

_______ YES ______ NO

INSTRUCTION

You are instructed that a party tortiouslyinterferes with another's inheritance rights whenhe: (1) participates in or receives benefits from awrongful or tortious act; (2) proximately causesan event which prevents or interferes with aninheritance of another person; (3) and this resultsin damages or loss to that person.

INSTRUCTION

You are instructed that fraud, misconduct,an illegal action and intentional invasion of orinterference with property or property rights,causing injury without just cause or excuse,constitute tortious or wrongful acts.

What sum of money, if any, if paid incash, do you find from a preponderance of theevidence would fairly and reasonably compensatethe plaintiff for his losses or injury, if any,proximately caused by the defendant's tortiousinterference?

$_____________________

F. Texas Cases.

1. King v. Acker, 725 S.W.2d 750 (Tex.App.--Houston [1st Dist.] 1987, no writ). In King,the decedent's wife transferred stock to herselfusing a forged power of attorney and filed anapplication to probate a forged 1982 will. Theplaintiffs, who were beneficiaries under aprevious will, brought a will contest andprevailed. After prevailing in the will contest, theplaintiffs brought suit against the wife, herattorney, and the "witnesses" to the forged will.The case against the attorney and witnesses wassevered before trial. At trial, a jury found that thedecedent's wife had maliciously conspired totortiously interfere with the inheritance rights ofthe beneficiaries under the actual will of thedecedent and awarded the beneficiaries punitivedamages.

On appeal, it was initially noted thatTexas courts had never addressed the issue ofwhether such a cause of action existed. The courtheld that "a cause of action for tortiousinterference with inheritance rights exists inTexas" and affirmed the trial court's award ofactual and punitive damages. The court based itsdecision on:

a. decisions from other jurisdictions;

b. Restatement (Second) of Torts § 774B(1977);

c. the recognition of a cause of action fortortious interference in other contexts by Texascourts; and

d. previous cases implying that interferencewith inheritance rights is an actionable tort.

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2. Damages in King v. Acker.

a. The court approved recovery of thetemporary administrator's commission on stockthat had to be redeemed because of the acts of thedefendant.

b. The court did not allow recovery of thehandwriting expert's fees because such fees werelitigation expenses.

c. The jury awarded punitive damages equalto the plaintiff's attorney's fees.

3. Implications of King v. Acker for Probateand Trust Litigation. The court's rationale in Kingprovides no reason to believe that its holding islimited solely to actions for interference withinheritance rights. In reaching its holding, thecourt recognized:

a. that "equity will not suffer a right to bewithout a remedy" [citing Chandler v. Wellborn,156 Tex. 312, 294 S.W.2d 801, 807 (1956)];

b. that an intentional and injurious invasionor interference with property or personal rights isan actionable tort [citing Cooper v. Steen, 318S.W.2d 750, 757 (Tex. Civ. App.--Dallas 1958, nowrit)]; and

c. that "Texas seems to recognize a cause ofaction for tortious interference" [citing Tippet v.Hart, 497 S.W.2d 606 (Tex. Civ. App.--Amarillo1973, writ ref'd n.r.e.)].

The court's reliance on these generalprinciples was seemingly applied to the particularallegation made in this case, interference withinheritance rights. However, it seems verypossible that such principles could be applied tosupport the existence of a cause of action foralmost any act, whether by an executor, trustee,beneficiary, or third party, which constitutes anintentional interference with or disruption of theproper administration or distribution of a trust orestate.

4. Possible Cause of Action for Interference

with Inheritance Expectancy. In Neill v. Yett, 746S.W.2d 32 (Tex. App.--Austin 1988, writ denied),the decedent left a will in which his granddaughterwas not remembered. The granddaughterattempted to extend the principles of King bypleading that, based on fraud and undue influencecommitted by the decedent's wife, a cause ofaction existed for tortious interference by thedecedent's wife with the granddaughter'sinheritance expectancy. The trial court grantedsummary judgment against the granddaughter.The court of appeals held that the judgment of theprobate court admitting the will to probate barredthe granddaughter's claim for tortious interferencewith her inheritance expectancy; as long as suchjudgment remained valid, the granddaughter hadno inheritance expectancy. The court then notedthat the granddaughter failed to either set out theelements of her claimed cause of action fortortious interference with her inheritanceexpectancy or to describe the basis for such causeof action. Apparently, the granddaughter citedKing for the first time in her appellate brief insupport of her claim. The court recognized thegeneral conclusion in King that the cause of actionfor tortious interference with inheritance rightsexists in Texas, but observed that the elements ofsuch cause of action were not delineated in theKing opinion. However, while never stating thata cause of action for tortious interference with aninheritance expectancy exists, the court stated that"if, indeed, a cause of action for tortiousinterference with inheritance expectancy exists,"the granddaughter's assertion of such cause ofaction was barred by limitations.

5. King and Neill Distinguished. It shouldbe observed that the facts of Neill are clearlydistinguishable from King. In King, the partieswho brought the action for tortious interferencewere named as beneficiaries in a will that wasultimately admitted to probate. Thegranddaughter in Neill could make no such claim.Additionally, the defendant in King was found tohave engaged in fraudulent activity in connectionwith the decedent's disposition of the property inquestion. In Neill, no evidence was discussedwhich could be viewed as demonstrating that therewas anything unusual about the disposition of the

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estate in question. These clearly distinguishablefacts make the decision in Neill noteworthyprimarily because the court refused to precludethe possible existence of a cause of action fortortious interference with an expectancy ofinheritance even though the facts supporting thegranddaughter's case were relatively weak. To thecontrary, the court in Neill gave every indicationthat with its elements properly pled and its basisproperly described, such a cause of action wouldindeed exist.

6. Evaluation of Contemplated Litigation.The decisions in King and Neill should promptattorneys to be cautious when contemplatingprobate or trust litigation. If a case involving anestate or trust is without merit and the partybringing the case is found to have filed themeritless action without just cause or simply outof spite, the pursuit of such an action may beactionable tortious interference with another'srights in such estate or trust under the rationale ofthese decisions. Until the scope of this cause ofaction has been determined, extreme cautionshould be employed when considering courtaction or other legally significant events affectinga will or trust. For example, the unacknowledged,but common, practice of filing a will contestalleging every available ground for a contestbased on sketchy facts delivered to the attorneyshortly before the hearing on an application forprobate could lead to disaster for both client andattorney. It should be noted that in King theattorney involved in applying to probate theforged will was sued by the beneficiary fortortious interference with inheritance rights.

7. Possible Elements of TortiousInterference in Texas.

a. Texas cases discussing interference withinheritance.

(i) Pope v. Garrett, 204 S.W.2d 867 (Tex.Civ. App.--Galveston 1947), rev'd on othergrounds, 211 S.W.2d 559 (Tex. 1948). Theappellee in Pope v. Garret, sought to recoverdamages caused by the acts of two of theappellants in physically preventing the decedent

from executing a will under which property wouldhave passed to appellee. As a result of suchaction, the decedent died intestate, and hisproperty passed to eight appellants who wouldtake decedent's property under the laws of descentand distribution. The trial court imposed a truston the property received by the eight appellantswhich would have passed to appellee under thewill. On rehearing of the appeal, the courtobserved that the appellee might have obtained ajudgment against the two appellants who by theirwrongful act prevented the execution of the willand stated that "[t]he measure of damages wouldhave been the value of the property which wouldhave passed by the will except for the wrongfulact." However, the court of appeals held that theinterests of the six appellants who did notparticipate in preventing the execution of the willwere not subject to the trust imposed by the trialcourt. Such ruling as to the six non-participatingappellants was reversed by the Texas SupremeCourt, and the trial court's judgment was affirmed.

(ii) Teague v. Stephens, 564 S.W.2d 437(Tex. Civ. App.--Tyler 1978, no writ). In Teaguev. Stephens, the plaintiff sued the defendant fornegligently or intentionally causing thedisappearance or destruction of a will under whichthe plaintiff was a beneficiary. The defendant'smotion for summary judgment was granted basedon his affidavit stating that he had never seen norhad knowledge of a will executed by the decedentunder which the plaintiff would receive propertyand that he had never destroyed or lost a will ofthe decedent. The plaintiff presented summaryjudgment evidence which suggested that thedecedent may have executed a will under whichthe plaintiff was a beneficiary. Stating that thefocused issue of the case was whether thedefendant had destroyed or lost the decedent'swill, the court of appeals upheld the summaryjudgment on the ground that the plaintiff'ssummary judgment evidence failed to create agenuine issue of material fact.

(iii) Summary. The language in Pope can beinterpreted to break the cause of action fortortious interference with inheritance rights intothe following elements:

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(a) participation in or receipt of benefitsfrom,

(b) a wrongful act,

(c) proximately causing an event,

(d) which prevents or interferes with aninheritance,

(e) and results in damages or loss to theplaintiff.

Such interpretation is supported by thelanguage in Teague which stated that thekey issue in that case was whether thedefendant had negligently lost orintentionally destroyed the alleged will,preventing the plaintiff from receiving hisbequests thereunder.

(iv) Tortious interference not addressed.Several Texas cases have been brought assertingtortious interference, but for a variety of reasons,the appellate courts have not addressed the meritsof the tort action:

(a) A remainderman brought suit against thelife tenant's executor for conversion and tortiousinterference with inheritance rights. The juryfound both conversion and tortious interferencewith inheritance rights. The plaintiff elected torecover damages on the finding of conversion.Rice v. Gregory, 780 S.W.2d 384 (Tex. App.--Texarkana 1989, writ denied).

(b) Plaintiff, who was the beneficiary of aspecific bequest under a will, sued the executorfor tortious interference, breach of fiduciary duty,fraud, bad faith, and conversion. The trial courtdirected a verdict for the plaintiff on theconversion action. On appeal, the courtdetermined that the plaintiff had elected theconversion remedy. The opinion can be read toindicate that other remedies may have beenavailable if the plaintiff had preserved his rights.Matter of Estate of Crawford, 795 S.W.2d 835(Tex. App.--Amarillo 1990, no writ).

(c) Remaindermen brought suit against thelife tenant's executor arising from a sale by the lifetenant of certain real property. The actionincluded a cause of action for tortious interferencewith inheritance rights. The defendants respondedthat the life tenant's right to sell the propertyextinguished any inheritance rights of theplaintiff. The jury failed to find that anyonetortiously interfered with plaintiff's inheritancerights. Hext v. Price, 847 S.W.2d 408 (Tex. App.--Amarillo 1993, no writ).

b. Texas cases discussing tortiousinterference with contract rights. When definingthe limits of tortious interference with inheritancerights, the Texas appellate courts will likely beguided by cases discussing tortious interferencewith contract rights. The following is a survey ofTexas decisions:

(i) American Petrofina, Inc. v. PPGIndustries, Inc., 679 S.W.2d 740 (Tex. App.--FortWorth 1984, writ dism'd by agr.). The court heldthat "[i]n maintaining a cause of action fortortious interference with contract, it must beestablished that (1) there was a contract subject tointerference; (2) the act of interference wasintentional and willful; (3) such intentional actwas a proximate cause of plaintiff's damage; and(4) actual damage or loss occurred." AmericanPetrofina, Inc. v. PPG Industries, Inc., 679S.W.2d 740 (Tex. App.--Fort Worth 1984, writdism'd by agr.).

(ii) Tippet v. Hart, 497 S.W.2d 606, 610-11(Tex. Civ. App.--Amarillo 1973, writ ref'd n.r.e.).To be actionable, the interference need notprocure a breach of the contract. Any invasionwhich injures or destroys property and interfereswith or makes more difficult the performance ofthe contract can give rise to the cause of action.Tippet v. Hart, 497 S.W.2d 606, 610-11 (Tex. Civ.App.--Amarillo 1973, writ ref'd n.r.e.).

(iii) Summary. If the Texas courts look to theelements of tortious interference with contractualrelations to determine the elements of tortiousinterference with inheritance rights, the holding inAmerican Petrofina seems most applicable. By

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analogy to that holding, the elements of tortiousinterference with inheritance rights would be:

(a) existence of a will or potentialtestator/beneficiary relationship subject tointerference,

(b) intentional and willful interference withsuch will or relationship,

(c) which proximately causes,

(d) actual damage or loss.

Under the language of Tippet, it seemslikely that actionable interference would notrequire complete elimination of a potentialinheritance. Instead, any interference whichcauses the testator's intent, as set forth in hisstatements or will, to be more difficult to carry outwould be sufficient to give rise to the cause ofaction.

G. Safe Harbor for Estate PlanningLawyers

1. A Safe Harbor Has Not Been Defined inTexas. At this time, the cases in Texas have notprovided sufficient guidance to know with anycertainty what would be a safe harbor for an estateplanning attorney relating to a claim of tortiousinterference with inheritance or gift. All that isknown right now is that assisting a client inoffering a forged will for probate is tortiousinterference with inheritance rights. In theory, anestate planning lawyer could not accidentallytortiously interfere with inheritance rights becausethe cause of action requires deliberate wrongfulconduct. However, tort concepts such as civilconspiracy and joint and several liability make itconceivable that an attorney could stumble into atortious interference case.

2. Clear Outside Parameters.

a. Knowingly participating in the offering ofa forged will for probate is tortious interference.

b. Changing a client's estate plan in good

faith is not tortious interference.

3. Defining a Likely Safe Harbor forAttorneys.

a. Simply creating or changing a client'sestate plan in good faith is safe.

b. Offering a will to probate in good faith issafe. However, it would be wise to conduct atleast a limited inquiry before proceeding to makesure that the will at least on the surface appears tobe valid.

c. Contesting a will or an intervivos transferin good faith should be permissible. If timeallows, an investigation of the facts should beconducted so that the attorney can show that theaction was taken in good faith. Simply losing acase should not be tortious interference with theprevailing parties' inheritance rights but filing acompletely frivolous action for an improperpurpose might be. The author is of the view thatadditional intentional wrongful conduct by theperson filing a weak case will be required beforea court would impose liability for tortiousinterference. For example, tortious interferencemay be appropriate when a contestant convertsproperty of the testator and files a frivolous willcontest to prevent the true beneficiaries frompursing the contestant for his wrongful conduct.

d. Basically, this is an uncertain period oftime for the cause of action for tortiousinterference, and care should be taken to avoidsituations in which the attorney could be pulleddown with an unethical client.

VIII. CONFLICTS OF INTEREST

A. General Rules - Rule 1.06 of the TexasDisciplinary Rules of Professional Conduct.

Rule 1.06. Conflict of Interest: General Rule

(a) A lawyer shall not represent opposingparties to the same litigation.

(b) In other situations and except to the extent

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permitted by paragraph (c), a lawyer shall notrepresent a person if the representation of thatperson:

(1) involves a substantially related matter inwhich that person's interests are materially anddirectly adverse to the interests of another clientof the lawyer or the lawyer's firm; or

(2) reasonably appears to be or becomeadversely limited by the lawyer's or law firm'sresponsibilities to another client or to a thirdperson or by the lawyer's or law firm's owninterests.

(c) A lawyer may represent a client in thecircumstances described in (b) if:

(1) the lawyer reasonably believes therepresentation of each client will not be materiallyaffected; and

(2) each affected or potentially affected clientconsents to such representation after fulldisclosure of the existence, nature, implications,and possible adverse consequences of thecommon representation and the advantagesinvolved, if any.

(d) A lawyer who has represented multipleparties in a matter shall not thereafter representany of such parties in a dispute among the partiesarising out of the matter, unless prior consent isobtained from all such parties to the dispute.

(e) If a lawyer has accepted representation inviolation of this Rule, or if multiple representationproperly accepted becomes improper under thisRule, the lawyer shall promptly withdraw fromone or more representations to the extentnecessary for any remaining representation not tobe in violation of these Rules.

(f) If a lawyer would be prohibited by thisRule from engaging in particular conduct, noother lawyer while a member or associated withthat lawyer's firm may engage in that conduct.TEXAS RULES OF PROFESSIONAL CONDUCT Rule

1.06.

B. Prohibited Transactions - Rule 1.08 ofthe Texas Disciplinary Rules of ProfessionalConduct.

The Rule provides:

(a) A lawyer shall not enter into a businesstransaction with a client unless:

(1) the transaction and terms on which thelawyer acquires the interest are fair andreasonable to the client and are fully disclosed ina manner which can be reasonably understood bythe client;

(2) the client is given a reasonableopportunity to seek the advice of independentcounsel in the transaction; and

(3) the client consents in writing thereto.

(b) A lawyer shall not prepare an instrumentgiving the lawyer or a person related to the lawyeras a parent, child, sibling, or spouse anysubstantial gift from a client, including atestamentary gift, except where the client isrelated to the donee.

(c) Prior to the conclusion of all aspects ofthe matter giving rise to the lawyer's employment,a lawyer shall not make or negotiate an agreementwith a client, prospective client, or former clientgiving the lawyer literary or media rights to aportrayal or account based in substantial part oninformation relating to the representation.

(d) A lawyer shall not provide financialassistance to a client in connection with pendingor contemplated litigation or administrativeproceedings, except that:

(1) a lawyer may advance or guarantee courtcosts, expenses of litigation or administrativeproceedings, and reasonably necessary medicaland living expenses, the repayment of which maybe contingent on the outcome of the matter; and

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(2) a lawyer representing an indigent clientmay pay court costs and expenses of ligation onbehalf of the client.

(e) A lawyer shall not accept compensationfor representing a client from one other than theclient unless:

(1) the client consents;

(2) there is no interference with the lawyer'sindependence of professional judgment or withthe client-lawyer relationship; and

(3) information relating to representation ofa client is protected as required by Rule 1.05.

(f) A lawyer who represents two or moreclients shall not participate in making anaggregate settlement of the claims of or againstthe clients, or in a criminal case an aggregatedagreement to guilty or nolo contendere pleas,unless each client has consented afterconsultation, including disclosure of the existenceand nature of all the claims or pleas involved andof the nature and extent of the participation ofeach person in the settlement.

(g) A lawyer shall not make an agreementprospectively limiting the lawyer's liability to aclient for malpractice unless permitted by law andthe client is independently represented in makingthe agreement, or settle a claim for such liabilitywith an unrepresented client or former clientwithout first advising that person in writing thatindependent representation is appropriate inconnection therewith.

(h) A lawyer shall not acquire a proprietaryinterest in the cause of action or subject matter oflitigation the lawyer is conducting for a client,except that the lawyer may:

(1) acquire a lien granted by law to secure thelawyer's fee or expenses; and

(2) contract in a civil case with a client for acontingent fee that is permissible under Rule 1.04.

(i) If a lawyer would be prohibited by thisRule from engaging in particular conduct, noother lawyer while a member of or associated withthat lawyer's firm may engage in that conduct.

(j) As used in this Rule, "businesstransactions" does not include standardcommercial transactions between the lawyer andthe client for products or services that the clientgenerally markets to others. TEXAS RULES OF


C. Former Client - Rule 1.09 of the TexasDisciplinary Rules of Professional Conduct.

The Rule provides:

(a) Without prior consent, a lawyer whopersonally has formerly represented a client in amatter shall not thereafter represent anotherperson in a matter adverse to the former client:

(1) in which such other person questions thevalidity of the lawyer's services or work productfor the former client;

(2) if the representation in reasonableprobability will involve a violation of Rule 1.05;or

(3) if it is the same or a substantially relatedmatter.

(b) Except to the extent authorized by Rule1.10, when lawyers are or have become membersof or associated with a firm, none of them shallknowingly represent a client if any one of thempracticing alone would be prohibited from doingso by paragraph (a).

(c) When the association of a lawyer with afirm has terminated, the lawyers who were thenassociated with that lawyer shall not knowinglyrepresent a client if the lawyer whose associationwith that firm has terminated would be prohibitedfrom doing so by paragraph (a)(1) or if therepresentation in reasonable probability willinvolve a violation of Rule 1.05. TEXAS RULES OF


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D. Recommendations Regarding Conflictsof Interest.

1. The estate planning practice presentsmore difficult conflict of interest questions thanany other area of practice. The nature of thepractice makes it very difficult to avoid giving theappearance of representing more than one person.Also, the desire to be helpful to the client willoften lead to meetings and consultations withother family members. This problem is mademore difficult because clients will often not wantto involve separate counsel for their familymembers for cost reasons.

2. A well-drafted engagement letter willsolve many problems. A well drafted engagementletter will accomplish the following at aminimum:

a. identify the client,

b. define the scope of the engagement,

c. define the fee arrangement, and

d. define future duties of the attorney.

3. The engagement letter will not solveproblems if the attorney ignores the letter andengages in a course of conduct which would leadothers to believe that the attorney represents theirinterests.

4. The estate planning lawyer shouldrecognize that people often have misconceptionsabout the duties of an estate planning lawyer. Themost common misconceptions are the following:

a. That the lawyer representing a testatorowes duties to the natural objects of the testator'sbounty. For example, many people would assumethat the attorney for the father owes duties to befair to the children.

b. That the lawyer for the executor owesduties to the beneficiaries of the estate.

5. Because we know that these

misconceptions exist, steps should be taken toinform family members that the attorney does notrepresent them. In some situations a letter may beappropriate outlining the attorney's duties andloyalties. Failure to clarify the relationships mayresult in liability to parties who have a reasonablebelief that the attorney represents them.

a. Querner v. Rindfuss, 966 S.W.2d 661(Tex.App.—San Antonio 1998, pet. filed). InQuerner, beneficiaries of an estate brought anaction against the attorney for executrix for fraud,breach of fiduciary duty and other assorted acts ofwrongdoing. The trial court granted summaryjudgment for the attorney, which included afinding that the beneficiaries lacked standing tosue. The beneficiaries appealed the granting ofthe summary judgment to the court of appeals.Rindfuss, the attorney, argued that he was neverthe attorney for the beneficiaries and he did notowe the beneficiaries any fiduciary duties. Thecourt of appeals noted that at least one courtappears to have recognized the beneficiaries' rightto sue for actions taken by an attorney hired toadvise the executors in administering an estate,citing to Vinson & Elkins v. Moran, 946 S.W.2d381 (Tex.App.—Houston [14th Dist.] 1997, writdism'd by agr.). One of beneficiaries stated in anaffidavit that Rindfuss continually representedhimself to be the attorney for the estate. Thesummary judgment evidence also contained aletter drafted by Rindfuss to a beneficiaries'attorney stating that although he was employed bythe executrix, "I am the attorney for the Estate asopposed to the attorney for the IndependentExecutrix..." The letter further stated thatRindfuss will keep the beneficiaries fully apprisedof both the executrix's position and the otherbeneficiary's position on the interpretation of thewill. The court stated that whether the evidence issufficient to sustain a finding of privity orfiduciary relationship is not the issue before us onappeal. However, the Court stated that in light ofRindfuss's own representations regarding thenature of his relationship to the estate and hisexecution of accountings in keeping with thatrepresentation, we believe there is some evidencethat requires us to permit this issue to besubmitted to a jury for factual solution.

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b. Vinson & Elkins v. Moran, 946 S.W.2d381 (Tex.App.—Houston [14th Dist.] 1997, writdism'd by agreement). Beneficiaries of an estatesued the lawyers for the estate allegingprofessional negligence (legal malpractice) breachof fiduciary duty, conspiracy, and violations of theTexas Deceptive Trace Practices Act (DTPA).The claims arose out of Vinson & Elkins' allegedmisconduct and mishandling of legal matters inconnection with the administration of the Estate ofW.T. Moran. The trial court entered a judgmentagainst Vinson & Elkins in excess of $35 million.The Fourteenth Court of Appeals reversed andrendered in part and reversed and remanded inpart. In Moran, the jury found an attorney-clientrelationship between Vinson & Elkins, theattorneys hired by the executors, and thebeneficiaries. The beneficiaries testified thatVinson & Elkins took the position early in theadministration of the Estate that it represented the"Moran interests." Beneficiaries receivedmailings directly from Vinson & Elkins and hadcontact with them at formal beneficiary meetings.Even though the beneficiaries testified that theynever hired Vinson & Elkins, and somebeneficiaries had their own personal attorneys, thejury still found an attorney-client relationship.The Fourteenth Court of Appeals found there wassufficient evidence to support the existence of anattorney client relationship between Vinson &Elkins and the beneficiaries. The court howeverdid hold that the beneficiaries were not consumersand therefore were not entitled to bring an actionunder the DTPA.

c. Barcelo v. Elliott, 923 S.W.2d 575(Tex.1996). In Barcelo, Decedent's grandchildren,who were intended beneficiaries under a trust thatwas declared invalid, brought a legal malpracticesuit against the attorney who drafted the trust.The grandchildren alleged that the lawyer'snegligence caused the trust to be invalid, resultingin foreseeable injury to them. The attorney movedfor summary judgment on the sole ground that heowed no professional duty to the grandchildrenbecause he had never represented them. The trialcourt granted summary judgment and the TexasSupreme Court affirmed the holding that anattorney retained by a testator or settlor to draft a

will or trust owes no professional duty of care topersons named as beneficiaries under the will ortrust. But see the dissent of Justices Cornyn,Abbott and Spector. The dissent states that Texasembraces a rule recognized in only four states.The dissent would allow a cause of action by abeneficiary if the beneficiary was able to showthat the attorney breached a duty to the decedent.The dissent notes that lawyers wishing to protectthemselves from liability may document thetestator's intentions.

d. Thompson v. Vinson & Elkins, 859S.W.2d 617 (Tex. App.--Houston [1st Dist.] 1993,writ denied) in which the residual beneficiaries ofa testamentary trust filed suit against the attorneyswho represented the executor and trustee. Thesame attorneys also represented the corporationwhose stock made up a substantial part of theassets of the trust. The attorneys did not check onwhether representation of the trustee would be aconflict of interest with other clientrepresentations by the attorneys.

The trustee and attorneys discussedseveral alternative ideas to redeem the corporationstock held by the trust. In correspondence, theattorneys discussed the redemption in terms ofkeeping stock from passing into the hands of theremainder beneficiaries. The plaintiffs found outabout this plan, and sued the attorneys for anumber of causes of action. The trial courtentered summary judgment in favor of theattorneys who represented the executor andtrustee. The trust beneficiaries appealed assertingseveral claims. The court of appeals found thatwith respect to a breach of contract claim, privitybetween the remainder beneficiaries and theattorneys was lacking, since the attorneysrepresented only the trustee, and did not ever takeon representation of the remainder beneficiaries.The court continued to follow the Texas rule thata lawyer is not liable for malpractice to one whois not a client. With respect to a claim of fraud,the court held that the plaintiffs failed to showeither that the attorneys had made a fraudulentrepresentation to the plaintiffs, or that if such arepresentation had been made, that the plaintiffsrelied on it. The plaintiffs also claimed a breach

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of a fiduciary duty owed to the remainderbeneficiaries. However, the court did not considerthe representation of a fiduciary to cause afiduciary relationship to exist between theattorney and a beneficiary. The plaintiffs alsomade a claim based on the Texas Deceptive TradePractices Act. The court held that this claimfailed primarily because no "goods or services"were provided by the attorneys to the plaintiffs.But, the court did make the point that underdifferent facts, a DTPA action might besustainable, since privity is not a requirement in aDTPA action.

IX. ESTATE PLANNER AS WITNESS

A. Practical Tips.

1. The estate planning attorney who is calledas a witness should have two goals:

a. assisting the judicial process; and

b. avoiding becoming a defendant.

2. Although the natural inclination of estate-planning attorney-witness is to team up with theattorneys who are representing the proponent ofthe instrument drafted by the estate planningattorney or the attorneys who are representing theformer client of the attorney-witness, the bestcourse of action is to keep some distance. If theattorney's actions show that he or she is activelyparticipating in the trial, the testimony will be lesspersuasive. Also, the parties on the other side ofthe case will be more likely to blame the attorneyfor their problems if the attorney is doing morethan serving as a witness. Finally, in the absenceof a privilege, the discussions with trial counselare discoverable and fair game for cross-examination.

3. Protect privileged documents in the files.

4. Do not reveal privileged information toanyone without appropriate waivers or consent bythe person who holds the privilege.

5. Most trial lawyers will cooperate on the

scheduling of a deposition and production ofdocuments. Simply call the trial lawyer and askfor additional time if you need it. Also, if thereare privilege questions, a motion for protectiveorder needs to be filed before the date of thedeposition or document production. Allagreements among counsel must be in writing,signed by the attorneys and filed with the court tobe enforceable.

B. Rule 501. Rule 501 of the Texas Rules ofCivil Evidence provides as follows:

Rule 501. Privileges Recognized Only asProvided

Except as otherwise provided byConstitution, by statute, by these rules or by otherrules prescribed pursuant to statutory authority, noperson has a privilege to:

(1) refuse to be a witness;

(2) refuse to disclose any matter;

(3) refuse to produce any object or writing; or

(4) prevent another from being a witness ordisclosing any matter or producing any object orwriting. TEX. R. CIV. EVID. 501.

C. Rule 3.08. Rule 3.08 of the TexasDisciplinary Rules of Professional Conductprovides as follows:

(a) A lawyer shall not accept or continueemployment in a contemplated or pendingadjudicatory proceeding if the lawyer knows orbelieves that the lawyer is or may be a witnessnecessary to establish an essential fact on behalfof the lawyer's client, unless:

(1) the testimony relates to an uncontestedissue;

(2) the testimony will relate solely to a matterof formality and there is no reason to believe thatsubstantial evidence will be offered in oppositionto the testimony;

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(3) the testimony relates to the nature andvalue of legal services rendered in the case;

(4) the lawyer is a party to the action and isappearing pro se; or

(5) the lawyer has promptly notified opposingcounsel that the lawyer expects to testify in thematter and disqualification of the lawyer wouldwork substantial hardship on the client.

(b) A lawyer shall not continue as anadvocate in a pending adjudicatory proceeding ifthe lawyer believes that the lawyer will becompelled to furnish testimony that will besubstantially adverse to the lawyer's client, unlessthe client consents after full disclosure.

(c) Without the client's informed consent, alawyer may not act as advocate in an adjudicatoryproceeding in which another lawyer in thelawyer's firm is prohibited by paragraphs (a) or (b)from serving as advocate. If the lawyer to becalled as a witness could not also serve as anadvocate under this Rule, that lawyer shall nottake an active role before the tribunal in thepresentation of the matter. TEXAS RULES OF


D. Case Law. Disqualification of attorneyswho are witnesses. Rule 3.08 provides that anattorney may be counsel for a client as well as awitness at trial if the attorney has promptlynotified opposing counsel of his dual role anddisqualification would work substantial hardshipon the client. TEXAS RULES OF PROFESSIONAL

CONDUCT Rule 3.08(a)(5). Comment seven toRule 3.08 explains that this subsection of the ruleis based upon a balancing of the interest of theclient in being represented by the counsel of his orher choice with the interests of the opposing party.See McElroy v. Gaffney, 529 A.2d 889, 893 (N.H.1987). For example, the opposing party may beunfairly prejudiced in some situations where anattorney for a party testifies as to a contestedmatter. Comment ten to Rule 3.08, however,states that the rule should not be used as a tacticalweapon to deprive the opposing party of the rightto be represented by the lawyer of his or her

choice because reducing the rule to such a usewould subvert its purpose. See also TEXAS RULES

OF PROFESSIONAL CONDUCT Preamble paragraph15 (1995).

Although the Rules of ProfessionalConduct may be relevant when determining anattorney's disqualification to serve in a case, theprimary function of the rules is to define properconduct for purposes of professional discipline.TEXAS RULES OF PROFESSIONAL CONDUCT

Preamble paragraph 10 (1995); See Ayres v.Canales, 790 S.W.2d 554, 556 n. 2 (Tex. 1990).The advocate-witness rule is concerned withproper conduct when an attorney representing aparty also serves as a witness who testifies as to acontroversial or contested matter. In such asituation, there exists a potential danger that thejury will confuse the roles of counsel. A witnessis required to testify on the basis of personalknowledge, while an advocate is expected toexplain and comment on evidence given by others.It may not be clear whether a statement by anadvocate-witness should be taken as proof or asanalysis of the proof. Id. at 557 n. 1. In order toprevent misuse of the rule, the trial court shouldrequire the party seeking disqualification todemonstrate actual prejudice to itself resultingfrom the opposing lawyer's service in dual roles.Id. at 558; TEXAS RULES OF PROFESSIONAL

CONDUCT Comment 1a (1995).

1. May v. Crofts, 868 S.W.2d 397 (Tex.App.--Texarkana 1993, no writ). Actual prejudiceto the party seeking disqualification was notestablished in May. Here, a will opponent madean insufficient showing that she would beprejudiced by the opposing lawyer serving in dualroles of witness and counsel so as to be entitled todisqualification of the opposing lawyer. The willopponent challenged the will prepared by theattorney shortly before the testator's death ongrounds that the testator lacked testamentarycapacity, that the will was not executed withrequired formalities, and that the will was theresult of undue influence by the beneficiaries andattorney. The will opponent argued the opposingattorney drafted and supervised the execution ofthe will; that he knew or should have known that

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his testimony would be material in proving thewill; and that he did not come within anyexceptions set out in Rule 3.08. The willopponent planned to call the opposing attorney asa witness and argued as such opposing attorneywould be automatically disqualified from actingas an attorney in the will contest. The court heldthat the will opponent did not establish that theopposing attorney's continued representation ofthe estate was prohibited by Rule 3.08. There wasno evidence showing that the opposing attorneywould testify or that he was a witness who wasnecessary to establish an essential fact on behalfof his client. At oral argument, the opposingattorney indicated that he did not intend to callhimself as a witness. Rather, the will opponent'sattorney was the one claiming he wanted to callthe opposing attorney as a witness. Id. at 399.The mere announcement by an adversary of hisintention to call the opposing counsel as a witnessis insufficient to orchestrate the counsel'sdisqualification. United Pacific Ins. Co. v.Zardenetta, 661 S.W.2d 244, 248 (Tex. App.--SanAntonio 1983, no writ).

2. Anderson Producing Inc. v. Koch OilCompany, 929 S.W.2d 416 (Tex. 1996). InAnderson a lawyer who had represented a partyduring pretrial proceedings testified as an expertand fact witness for that party during the trial.The Beaumont court of appeals found that thelawyer violated attorney disciplinary rulegoverning lawyer as witness and should have beendisqualified from representing the party. TheTexas Supreme Court held that the testifyingattorney appeared at trial solely as a witness, andthus did not violate Rule 3.08 of the Texas Rulesof Professional Conduct. The Court held thatRule 3.08 only prohibits a testifying attorney fromacting as an advocate before a tribunal, not fromengaging in pretrial, out-of-court matters such aspreparing and signing pleading, planning trialstrategy and pursuing settlement negotiations.The Court did not decide whether Rule 3.08 wasviolated due to the fact that the testifying attorneysat at counsel table during the trial because it waswaived because there was no objection maderegarding this matter during trial. The Courtfurther ruled that the testifying attorney’s law firm

was not disqualified from being the lead trialcounsel. The Court cited to comment 8 of Rule3.08 which states that “[e]ven in those situations[in which a testifying lawyer is disqualified],however, another lawyer in the testifying lawyer’sfirm may act as an advocate, provided the client’sinformed consent is obtained.” The Court notedthat the testifying lawyer’s law firm had acontingency fee in the case and that it could beargued that the testifying lawyer and his firmviolated Texas Disciplinary Rule of ProfessionalConduct 3.04(b) which forbids a lawyer from“pay[ing], offer[ing] to pay, or acquiesc[ing] inthe offer or payment of compensation to a witnessor other entity contingent upon the content of thetestimony of the witness or the outcome of thecase.” However, the court declined to express anopinion regarding whether Rule 3.04(b) had beenviolated because that issue had not been raised atthe trial court or the appellate court.

X. REPRESENTING A FIDUCIARY

If litigation is likely, representing afiduciary can be challenging and difficult. Thefollowing are some common problem areas:

A. Duty of Disclosure. One of the mostdifficult tasks for a fiduciary is to give fulldisclosure to a person who is currently bringing oris threatening to bring a lawsuit. The fiduciaryhas a duty to provide full disclosure to thebeneficiaries. Of course, the cost of providinginformation should also be taken into account.However, failure to provide full information aboutsignificant events or transactions almost alwaysmakes matters worse and can give rise toallegations of intentionally wrongful conduct.Although insisting on full disclosure may notmake you popular with your client from time totime, it is the best way to protect the client.

B. Allocation of Fees. No client wants topay attorney fees. However, when a transactionor a lawsuit clearly involves the client's individualinterests rather than the client's fiduciary interests,fees and expenses should be allocated in theabsence of a contractual right or some other typeof authority.

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C. Counsel the Fiduciary to ExerciseRestraint When Expending Funds Held inTrust. When emotions are running high during adispute, people will have a desire to takeaggressive actions. This is often expensive.When representing the fiduciary, the attorneyshould make an effort to make sure the actionstaken and the costs incurred are appropriate in thecircumstances. A good test is whether the clientwould take this action if the client had to pay thebill for it personally.

D. Sometimes it is a Fiduciary's Job toMake a Decision. Many fiduciaries are paralyzedby fear when litigation is threatened.Consequently, they will want to do nothing unlesstheir lawyers can guarantee that the transaction orother action is safe. Of course, nothing isabsolutely safe, so these fiduciaries will incurlarge fees seeking legal opinions or declaratoryjudgments on matters that should be decided bythe fiduciary after careful consideration. Thisdoes not mean that the fiduciary always has to goalong with whatever a beneficiary wants or shouldnever file for a declaratory judgment, but careshould be taken to be sure that the issue involvedjustifies the expense and delay.

E. Resignation is an Option. Oftenresignation by a fiduciary is the best option. If thefiduciary has no personal or family interest in theestate or trust, resignation to avoid litigation isalways an option that should be considered.

F. Be Careful What You Write. Theattorney-client privilege when representing afiduciary is fragile. A successor fiduciary mayattempt to waive the privilege. If an attorney getscaught up in the fight and writes a letter or memoabout how to win in a dispute with a beneficiary,such letter or memo may end up in the hands ofthe beneficiary some day (or the beneficiary's trialcounsel). This could harm both the client and thelawyer. Always keep fiduciary duties in mindwhen writing any memo or letter.

G. Be Careful What You Say. Rememberthat you represent a fiduciary. Comments like"we will spend every last dime fighting this", "we

will spend you into oblivion" or "we are big andrich and you are small and poor, so we will wipeyou out" will all come back to haunt you at a trial.

H. Settlement Negotiations. Keep fiduciaryduties in mind when negotiating settlements.Although offers of compromise are normallyinadmissible to prove liability, such offers areadmissible for other purposes. There are no Texascases on this point, but the author is concernedthat evidence could be admitted for other purposesparticularly when one of the parties is a fiduciary.Care should be taken to be sure that settlementoffers are stated in a way that will show that thefiduciary is still concerned about his or her dutiesand that the settlement transaction will not requirea breach of these duties. If part of a settlement isarguably a breach of fiduciary duty, allbeneficiaries should waive or release the duty inthe settlement documents.

I. Correct Mistakes. If a beneficiary iscomplaining about an action by a fiduciary, takea hard look at the action and try to decide if theaction was proper. If not, promptly correct theproblem. People are often afraid to correctproblems for fear that it will be an admission ofliability. However, if a problem is quicklycorrected, it takes all of the punch out of thebeneficiary's argument at trial and shows goodfaith.

J. Use Common Sense. Often whenrepresenting a fiduciary the attorney will havemany decisions to make. Sometimes thetechnically correct decision will not make mucheconomic sense in the circumstances. If that is thecase, try to get the fiduciary and beneficiaries toagree upon the more reasonable course of action.

K. Transactions By A Fiduciary with theBeneficiary. From time to time, a fiduciary willwant to enter into a transaction with the personwho is owed a fiduciary duty. The best advice tothe fiduciary is to avoid such transactions. Insome instances, the transactions will be strictlyprohibited by the trust instrument or applicablelaw. In all other instances, the transaction will besubject to strict scrutiny making it difficult for the

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fiduciary to meet the burden of proof imposed onthe fiduciary to support the transaction. Thefollowing are some cases to illustrate the burdenimposed on a fiduciary who benefits from atransaction with a person who is owed fiduciaryduties:

1. Sorrell v. Elsey, 748 S.W.2d 584 (Tex.App. - San Antonio 1988, writ denied). In Sorrell,a deed transferring real property to the nephewswas signed by the elderly aunt. The aunt was paid$10.00. The court found a fiduciary relationshipexisted between the aunt and her nephews. Theaunt sued to set aside the deed. The nephewsclaimed that a gift was made by the aunt. Theaunt contended she was taken advantage of andwas unaware she had signed a deed conveying toher nephews all her interest in the real propertyand she sought to set aside the deed based on lackof consideration and inadequate consideration. Atake nothing judgment was entered by the trialcourt and a finding of fact was made by the trialcourt that, “Plaintiff made the gift freely,voluntarily and with a full understanding of thefacts, and Defendants acted in good faith.” Thecourt of appeals reversed the trial court and heldthat the nephews had failed to meet their burdento show that the transaction was fair and equitableto the aunt, that the nephews made reasonable useof the confidence placed in them and that thenephews made a good faith effort to fully informthe aunt of the nature and effect of the signing ofthe deed.

The court of appeals in describing the“much higher standard for measuring conduct” ofa fiduciary quoted the famous words of JusticeCardoza cited with approval by the TexasSupreme Court as follows:

As forcefully and tersely put byMr. Justice Cardoza in Meinhardv. Salmon, 249 N.Y. 458, 164N.E. 545, 546, 62 A.L.R. 1, ‘* ** Not honesty alone, but thepunctilio of an honor the mostsensitive, is then the standard ofbehavior. As to this there hasdeveloped a tradition that is

unbending and inveterate.Uncompromising rigidity hasbeen the attitude of courts ofequity when petitioned toundermine the rule of undividedloyalty by the “disintegratingerosion” of particular exceptions.* * *’

When persons enter intofiduciary relations each consents,as a matter of law, to have hisconduct towards the othermeasured by the standards of thefiner loyalties exacted by courtsof equity. That is a sound ruleand should not be whittled downby exceptions. ...[M]ischiefwould result more often fromengrafting exceptions upon thegeneral rule than from a strictadherence thereto. (Emphasisadded).

Johnson v. Peckham, 120 S.W.2d 786, 788 (Tex.1938).

The court of appeals in Sorrell stated thatthe court’s “review of the law pertaining tofiduciary transactions does not justify liberalinterpretations in favor of the validity claimingparty.” Texas law requires that the burden ofproof shift to the fiduciary to prove that thefiduciary made reasonable use of the confidenceplaced in him and that the transaction is fair andreasonable. The court of appeals in Sorrell statedas follows:

Even in the case of a gift, intransactions involving partieswith a fiduciary relationship,[ E ] q u i t y i n d u l g e s t h epresumption of unfairness andinvalidity, and requires proof atthe hand of the party claimingvalidity and benefits of thetransaction that it is fair andreasonable. Pomeroy, EquityJurisprudence § 956 (5 ed.th

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1941); Archer v. Griffith, 390S.W.2d 735 (Tex. 1965); Cooperv. Lee, 75 Tex. 114, 12 S.W. 483(1889); see also Tippett v.Brooks, 28 Tex. Civ. App. 107,67 S.W. 512, writ ref’d, 95 Tex.335, 67 S.W. 495, 512 (1902).Stephens County Museum, Inc. v.Swenson, 517 S.W.2d 257, 260(Tex. 1974). Under thesecircumstances, the burden castupon the party claiming validityof the transaction not onlyincludes presenting evidence butsecuring findings of the “materialissues--those being whether [thevalidity claiming party] had madereasonable use of the confidenceplaced in him and whether thetransactions were ultimately fairand equitable to [the complainingparty].” Stephen CountyMuseum, Inc. v. Swenson, 517S.W.2d at 261; Cole v. Plummer,559 S.W.2d 87, 90 (Tex. Civ.App.--Eastland 1977, writ ref’dn.r.e.).

The Sorrell case also answers questionsabout what type of conduct is required of afiduciary. As mentioned above, the nephewsproved they acted in good faith and that the aunthad a full understanding of the facts. However,the court of appeals stated that acting in good faith“does not necessarily mean that they made a goodfaith effort to fully inform Sorrell [the aunt] of theconsequences, that is the nature and effect of thedeed she signed.”

The Sorrell case is an excellent exampleof the rigid requirements imposed on fiduciariesby Texas law. The case was reversed despite afactual finding that the aunt had a fullunderstanding of the facts and the nephews actedin good faith. The court required the nephews tomeet their burden of proving that the transactionwas fair and equitable to the aunt, that thenephews made reasonable use of the confidenceplaced in them and that the nephews made a good

faith effort to fully inform the aunt of the natureand effect of the transaction.

2. Miller v. Miller, 700 S.W.2d 941 (Tex.App. - Dallas 1985, writ ref’d n.r.e.). The Millercase involved a corporate buy-sell agreementsigned by a wife while a divorce petition waspending. The husband was a founder, officer anddirector of a company. The company was about toreceive a large investment by Exxon. Exxoninsisted that the founders of the company remaininvolved and sign a buy-sell agreement. The buy-sell was to be binding on the spouses of thefounders. In the event of a divorce, the buy-sellrequired the spouse of a founder to sell the sharesto the founder or the other owners of thecompany. Husband presented the agreement tohis wife after they were separated, but before theywere divorced. The wife read the agreement,signed it and never asked any questions about it.The wife later learned that the stock was muchmore valuable than she thought and sued for fraudand breach of fiduciary duty. The jury found thatvarious representations made by the husband werefalse and material, but found that the husband didnot make them with the intention that the wife relyon them in deciding whether to sign theagreement. In addition, the jury found that thehusband’s failure to disclose material facts wasnot made with the intention of inducing the wifeto sign the agreement. The jury also found that aconfidential relationship existed between thehusband and wife at the time the agreement wassigned, that the husband acted in good faith at thetime he presented the agreement to his wife andthat the agreement imposed restrictions on thewife’s ownership. However, the jury found thatthe agreement was not fair to the wife. Trial courtfound in favor of the husband and ruled that theshareholder’s agreement was valid and in fullforce and effect.The court of appeals reversed the trial court andfound that the agreement was subject to recissionbecause of the husband’s breach of fiduciary duty. A fiduciary relationship was found based on thepersonal relationship between the husband andwife and also on the husband’s position as afounder, officer and director of the company. Thecourt held that the fiduciary relationship required

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the husband as a fiduciary to deal fairly with thewife in acquiring any rights in the stock. Thecourt stated that proof of good faith is necessaryto sustain the transaction, but good faith does notin itself establish fairness. The fiduciary mustalso show that the transactions was “fair, honestand equitable.” The court stated that the ultimateissues were held to be whether the fiduciary hadmade reasonable use of the confidence placed inhim and whether the transactions were ultimatelyfair and equitable.

Some of the important factors consideredby the court in reaching its conclusion of a breachof fiduciary duty included whether the fiduciarymade a full disclosure, whether the considerationwas adequate and whether the beneficiary had thebenefit of independent advice. The court notedthat another crucial inquiry bearing on the issue offairness is whether the fiduciary has benefitted orprofited at the expense of the beneficiary.

The court noted that the jury findings thatthe husband did not act in bad faith, that hisfailure to disclose was not done with intent toinduce the wife to sign the agreement and that therestrictions imposed on the wife’s ownership werereasonably related to the corporate interests of thecompany are not controlling. It is interesting tonote that the wife admitted many facts on cross-examination that would appear to harm her case.These included statements indicating she wouldhave signed the agreement even if all of the factshad been disclosed. She also admitted that sheread the shareholder’s agreement. However, thecourt stated that “the rule that a party is presumedto know what he signs is not applied strictly in aconfidential relationship.”

The court in Miller rescinded theshareholder agreement as it applied between thehusband and wife due to the breach of fiduciaryduty on the part of the husband.

3. Texas Pattern Jury Charge Questions.

The following jury charge questions havebeen proposed for transactions in which thefiduciary benefitted from a transaction with the

beneficiary:

PJC 104.1 Question and Instruction -Existence of Relationship of Trust andConfidence

QUESTION Did a relationship of trust andconfidence exist between Don Davis and PaulPayne?

A relationship of trust and confidence existed ifPaul Payne justifiably placed trust and confidencein Don Davis to act in Paul Payne’s best interest.Paul Payne’s subjective trust and feelings alonedo not justify transforming arm’s-length dealingsinto a relationship of trust and confidence.

ANSWER: _____________________________

PJC 104.2 Question and Instruction -Breach of Fiduciary Duty

QUESTION Did Don Davis comply with hisfiduciary duty to Paul Payne?

[Because a relationship of trust and confidenceexisted between them,] [As Paul Payne’sattorney,] [Because they were partners,] [As PaulPayne’s agent,] Don Davis owed Paul Payne afiduciary duty. To prove he complied with hisduty, Don Davis must show:

a. The transaction[s] in question [was/were] fairand equitable to Paul Payne.;

b. Don Davis made reasonable use of theconfidence that Paul Payne placed in him;

c. Don Davis acted in the utmost good faith andexercised the most scrupulous honesty towardPaul Payne;

d. Don Davis placed the interests of Paul Paynebefore his own, did not use the advantage of hisposition to gain any benefit for himself in anyposition where his self-interest might conflictwith his obligations as a fiduciary; and

e. Don Davis fully and fairly disclosed all

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important information to Paul Payne concerningthe transaction[s].

ANSWER: _____________________________

PJC 110.16 Q u e s t i o n o n P r o f i tDisgorgement - Amount of Profit

QUESTION What was the amount of DonDavis’s profit in [describe the transaction inquestion, e.g., Don Davis’s leasing of mineralrights to himself]?

Answer in dollars and cents, if any.

ANSWER: _____________________________

PJC 110.17 Question on Fee Forfeiture -Amount of Fee

QUESTION What was the amount of DonDavis’s fees in [describe the transaction inquestion, e.g., Don Davis’s brokerage of the realestate transaction]?

Answer in dollars and cent, if any.

ANSWER: _____________________________

PJC 110.8 Question on Actual Damagesfor Breach of Fiduciary Duty

[Insert predicate, PJC 110.1.]

QUESTION What sum of money, if any, ifpaid now in cash, would fairly and reasonablycompensate Paul Payne for his damages, if any,that were proximately caused by such conduct?

[Insert appropriate instructions. See examples inPJCs 110.3 and .9.]

Answer in dollars and cents, if any.

ANSWER: _____________________________

4. Third Parties Can Be Held Liable for aBreach of Trust. Kinzbach Tool Co. v. Corbett -Wallace Corp., 160 S.W.2d 509 (Tex. 1942).

Corbett - Wallace Corp. (“Corbett”) contactedTurner, an employee of Kinzbach Tool Co.(“Kinzbach”) about a whipstock contract hewanted to sell Kinzbach. Turner met with Corbettand Corbett informed him that he wanted $20,000for the whipstock contract and that he would payTurner a commission if the whipstock contractwas sold to Kinzbach.

Corbett instructed Turner to not mentionto Kinzbach what the whipstock contract could bebought for. Turner was told to see what hisemployer, Kinzbach, would pay. Turner met withKinzbach about buying the whipstock contract.Kinzbach instructed Turner to find out whatCorbett would sell for. Kinzbach informed Turnerthat it would probably be willing to pay $25,000.Turner never told Kinzbach that he was going toget a commission from Corbett and never toldKinzbach that Corbett might take $20,000.Kinzbach and Corbett closed a deal by whichKinzbach agreed to pay Corbett $25,000 for thewhipstock contract. After the deal wasconsummated Kinzbach for the first timediscovered that Turner was to receive acommission of $5,000. Kinzbach filed suitagainst Corbett and Turner seeking to establish atrust against the $5,000 to be paid Turner. Corbettsued Kinzbach to recover under the contract andfor attorneys fees.

The Texas Supreme Court held thatTurner breached his fiduciary duty to Kinzbachand that Corbett knowingly participated in thebreach and became a joint tort-feasor and is liableas such. The Court held that good conscience andfair dealing called on Turner, as a trustedemployee of Kinzbach, when he was told to get aprice from Corbett, to disclose his adverse interestin the deal. Turner’s position as a trustedemployee of Kinzbach, called on him to make fulldisclosure to his employer of all the facts andcircumstances concerning his dealings withCorbett.

The Court held that it is irrelevantwhether or not Kinzbach suffered any damages.A fiduciary cannot say to the one whom he bearssuch relationship: You have sustained no loss by

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my misconduct and therefore you are withoutremedy. It would be a dangerous precedent to saythat unless some affirmative loss can be shown,the person who has violated his fiduciaryrelationships with another may hold on to anysecret gain or benefit he may have acquired. It isthe law that in such instances if the fiduciary takesany gift, gratuity, or benefit in violation of hisduty, or acquires any interest adverse to hisprincipal, without a full disclosure, it is a betrayalof his trust and a breach of confidence, and hemust account to his principal for all he hasreceived.

The Texas Supreme Court went on to saythat it is well settled as the law of this State thatwhere a third party knowingly participates in thebreach of duty of a fiduciary, such third partybecomes a joint tort-feasor with the fiduciary andis liable as such. Therefore, Corbett became aparty to the breach of duty committed by Turner,and therefore became a joint tort-feasor withTurner with regard to the rights of Kinzbach.

XI. RECOVERY OF ATTORNEY'S FEES

A. Texas Probate Code Section 243:Allowance for Defending Will. EffectiveSeptember 1, 1987, Section 243 of the TexasProbate Code was amended to allow a persondesignated as a devisee, legatee, or beneficiary ina will who defends such will or prosecutes aproceeding in good faith and with just cause forthe purpose of having such will admitted toprobate to recover from the estate his necessaryexpenses and disbursements, including reasonableattorney's fees, incurred in such proceedings. Thisamendment of Section 243 was a significantexpansion of the previous statute which allowedonly a named executor or appointed administratorto recover such expenses and disbursements fromthe estate. TEX. PROB. CODE ANN. § 243 (VernonSupp. 1995).

1. The proponent of a will was not entitledto an award of attorney fees incurred in anunsuccessful defense, in the absence of a juryfinding of her good faith offering of the will forprobate. Alldridge v. Spell, 774 S.W.2d 707 (Tex.

App.--Texarkana 1989, no writ).

2. Pleadings which alleged that the will wasfiled for probate in good faith and with just causeand that expenses and attorney fees were incurredin the amount of at least $12,000 were sufficientto permit the award of $11,932.36 to the willproponent, after probate of the purported will wassuccessfully contested. Candelier v. Ringstaff,786 S.W.2d 41 (Tex. App.--Beaumont 1990, writdenied).

3. An independent co-executrix defending anaction involving benefits to the estate was entitledto have her costs paid by the estate. Lesikar v.Rappeport, 809 S.W.2d 246 (Tex. App.--Texarkana 1991, no writ).

B. Texas Probate Code Section 245:When Costs are Adjudged AgainstRepresentative. Effective August 29, 1983,Section 245 of the Texas Probate Code wasamended to allow recovery from an estate ofreasonable attorney's fees incurred in removing apersonal representative of an estate and inobtaining compliance with any statutory duties hehad neglected as a personal representative.Previously, the statute did not allow recovery ofattorney's fees for obtaining the removal of apersonal representative. TEX. PROB. CODE ANN.§ 245 (Vernon Supp. 1995); Lawyers Sur. Corp.v. Larson, 869 S.W.2d 649 (Tex. App.--Austin1994, writ denied).

1. A successor administrator is entitled torecover attorney fees incurred in removing a priorrepresentative and in obtaining statutorycompliance of the prior representative if, ratherthan undertaking to compel the priorrepresentative to perform duties he has neglected,the successor administrator takes steps to correctthe problem; however, the successoradministrator need not pursue both courses ofaction before becoming eligible to collect attorneyfees. Lawyers Sur. Corp. v. Larson, 869 S.W.2d649 (Tex. App.--Austin 1994, writ denied).

In Lawyers Sur. Corp., the successor

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administrator of two estates filed suit against thesurety for the prior administrator, seeking attorneyfees and costs incurred in bringing the estates ofthe deceased husband and wife into statutorycompliance following the removal of the prioradministrator. The probate court awarded feesand costs of each estate. The surety appealed. Inone of its points of error, the surety challenged theprobate court's application of Section 245 of theTexas Probate Code. The surety interpretedSection 245 to mean that a personal representativeand his or her surety could only be held liable forfees that had been incurred by a person who bothremoved the administrator and attempted to obtainthat administrator's compliance with neglectedstatutory duties. The surety contended thatbecause the successor administrator was notinvolved in the removal of the originaladministrator and did not incur any feesassociated with such removal, the successoradministrator could not recover under Section245. In the alternative, the surety asserted that theTexas Probate Code limited recovery to attorney'sfees incurred in compelling the formeradministrator to perform the neglected duties, asdistinguished from attorney's fees associated witha successor administrator performing thoseneglected duties himself.

The court of appeals declined to adopteither reading of the statute offered by the surety.The court held that Section 245 allowed asuccessor administrator to recover attorney's feesincurred in removing a prior representative andallowed recovery of any attorney's fees incurredby the successor administrator if, rather thanundertaking to compel the prior administrator toperform the duties he had neglected, the successoradministrator took steps to correct the problem.The court therefore rejected a construction ofSection 245 that would require the successoradministrator to pursue both courses of actionbefore becoming eligible to collect attorney's feesfrom the prior administrator and the surety.

Furthermore, the court held that thepurpose of Section 245 was not to encouragesuccessors to force an unwilling or incompetentadministrator to carry out administrative acts

required by the Texas Probate Code after judicialremoval. Rather, Section 245 was designed toensure that expenses associated with, and causedby, the administrator's neglect of statutory dutieswere charged not against the estate, but againstthe culpable administrator and the surety. Thecourt held that it would be an unwise andimpractical construction of the Code to readSection 245 to allow the successor administratorto recover only those expenses incurred incompelling the administrator to perform the veryduties he had already been found incapable ofperforming adequately.

C. Texas Probate Code Section 149C:Removal of Independent Executor. Section149C of the Texas Probate Code was alsoamended effective August 31, 1987, by theaddition of Subsection (d), under the terms ofwhich a party seeking removal of an independentexecutor appointed without bond can recover fromthe estate his costs and expenses, includingreasonable attorney's fees, incident to the removal.TEX. PROB. CODE ANN. § 149C(d) (Vernon Supp.1995).

1. A former executor may not be chargedpersonally for a challenger's attorney's feesincurred in his removal, when a former executorfights the removal action in good faith. However,the estate is required to pay the former executor'sattorney fees. Garcia v. Garcia, 878 S.W.2d 678(Tex. App.--Corpus Christi 1994, no writ).

In Garcia, the appellee served assuccessor executor of his father's estate after thedeath of his brother. The appellee served asexecutor for approximately ten years before anapplication was filed for his removal. Theappellee was removed by the court for his failureto timely file accurate estate tax and fiduciaryincome tax returns, to timely pay ad valorem taxesor estate taxes, and to make a final settlement.The court also found the executor guilty of grossmisconduct and gross mismanagement in theperformance of his duties. After the executor'sremoval, a successor administrator was appointed.Then, the court heard applications to pay theformer executor for his work as executor and to

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pay his attorney for fees incurred in defending andprobating the will as well as in defending his postas executor. An application was also filed to paythe appellant's attorney for fees incurred duringthe removal action. The court found that theexecutor had defended the action for his removalin good faith and granted his application to payfees from the estate as well as the appellant'sapplication. The appellant then filed anapplication to surcharge certain expenses, fees,and costs of the estate against the former executor.The county court rejected the application, and theappellant appealed to the appellate court. Theappellant contended, among other things, that thecourt failed to surcharge the former executor forattorney's fees unnecessarily incurred by theexecutor's failure to properly manage and timelyclose the estate and for attorney's fees awarded theappellant's attorneys accrued in the application toremove the executor.

The court of appeals held that under theTexas Probate Code, the estate had to pay theformer executor's attorney's fees. TEX. PROB.CODE ANN. § 149C(c) (Vernon 1980). The courtdid not remand any issues relating to attorney'sfees incurred in the removal proceeding.However, the court did remand as to all otherattorney's fees unnecessarily incurred by theexecutor's failure to properly manage and timelyclose the estate. The court also denied to remandany issues pertaining to attorney's fees awarded tothe appellant's attorney which accrued in theapplication to remove the executor. The court ofappeals held that the Code allowed the estate topay the attorney's fees of the challenger. TEX.PROB. CODE ANN. § 149C(d) (Vernon Supp.1995). The court's ruling that the executor foughtthe removal action in good faith defeated anyattempt to charge the executor personally withfees incurred to unseat him. The court stated thatthe legislature determined that an estate could beliable for the attorney's fees of both sides of anaction to remove an executor that was defended ingood faith. Surcharging the removed executorwith the challenger's attorney's fees would subvertthe legislature's clear support of executors whodefended challenges in good faith. Because thefinding of good faith was not challenged, the court

overruled the objection.

D. Texas Trust Code Section 114.064:Costs. The Trust Code provides that in anyproceeding under this code the court may makesuch award of costs and reasonable and necessaryattorney's fees as may seem equitable and just.TEX. PROP. CODE ANN. § 114.064 (Vernon 1995).

1. Lyco Acquisition 1984 Ltd. Partnership v.First Nat. Bank of Amarillo, 860 S.W.2d 117(Tex. App.--Amarillo 1993, writ denied). In Lyco,the court held that a bank was entitled to attorneyfees for defending a cause of action broughtagainst it under the Trust Code, even though theplaintiff dropped the cause of action under theTrust Code before the trial court ordered summaryjudgment in favor of the bank on the remainingcause of action. In the remaining cause of action,the court found that defending the case involvedsubstantial time and labor, and the bank derivedgreat benefits from the attorney's services.

2. Lyco Acquisition 1984 Ltd. Partnership v.First Nat. Bank of Amarillo, 860 S.W.2d 117(Tex. App.--Amarillo 1993, writ denied). Thegrant or denial of attorney fees is within the sounddiscretion of the trial court, and the reviewingcourt will not reverse the trial court's judgmentunless there is a clear showing that the trial courtabused its discretion by acting without referenceto any guiding rules and principles.

E. Texas Trust Code Section 113.018:Employment of Agents. The Trust Codeprovides that a trustee may employ attorneys,accountants, agents, and brokers reasonablynecessary in the administration of the trust estate.TEX. PROP. CODE ANN. § 113.018 (Vernon 1995).

F. Texas Civil Practice and RemediesCode Section 37.009: Costs. The Civil Practiceand Remedies Code provides that in anyproceeding seeking declaratory judgment the courtmay award costs and reasonable and necessaryattorney's fees as are equitable and just. TEX. CIV.PRAC. & REM. CODE ANN. § 37.009 (Vernon1986).

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1. Canales v. Zapatero, 773 S.W.2d 659(Tex. App.--San Antonio 1989, writ denied). In asuit filed under this chapter, the trial court mayaward reasonable and necessary attorney fees thatare equitable and just.

2. Fuqua v. Fuqua, 750 S.W.2d 238 (Tex.App.--Dallas 1988, writ denied). In Fuqua, thecourt of appeals held that the trial court did notabuse its discretion in refusing to award attorneysfees to a son, who prevailed in fewer than one halfof his declaratory judgment claims in litigationarising out of the distribution of the son's mother'sestate.

3. West Texas Rehabilitation Ctr. v. Allen,810 S.W.2d 870 (Tex. App.--Austin 1991, nowrit). Here, the court of appeals held that theprobate court acted within its discretion inrequiring a specific beneficiary to pay the residualbeneficiaries' successful challenge to the estatedistribution which resulted in the determinationthat the independent executor improperlydistributed $120,871 in stocks, bonds, and mutualfunds to the specific beneficiary under theparagraphs of the will disposing of cash.

G. Texas Civil Practice and RemediesCode Section 37.005: Declarations Relating toTrust or Estate. The Civil Practice andRemedies Code provides that:

A Person interested as or through anexecutor or administrator, including anindependent executor or administrator, a trustee,guardian, other fiduciary, creditor, devisee,legatee, heir, next of kin, or cestui que trust in theadministration of a trust or of the estate of adecedent, an infant, mentally incapacitated person,or insolvent may have a declaration of rights orlegal relations in respect to the trust or estate:

(1) to ascertain any class of creditors,devisees, legatees, heirs, next of kin, or others;

(2) to direct the executors, administrators, ortrustees to do or abstain from doing any particularact in their fiduciary capacity;

(3) to determine any question arising in theadministration of the trust or estate, includingquestions of construction of wills and otherwritings; or

(4) to determine rights or legal relations of anindependent executor or independentadministrator regarding fiduciary fees and thesettling of accounts. TEX. CIV. PRAC. & REM.CODE ANN. § 37.005 (Vernon Supp. 1999).