in Re Tom Thomas, Dan Sheehan and Marc Culp, Individually and as Successor to the Interest of Thomas, Sheehan & Culp, L.L.P

• Court: Court of Appeals of Texas
• Decided: July 8, 2016
• Docket: 14-16-00495-CV
• Status: Published

Opinion

ACCEPTED 14-16-00495-CV FOURTEENTH COURT OF APPEALS HOUSTON, TEXAS 7/8/2016 11:51:01 AM CHRISTOPHER PRINE CLERK

No. 14-16-00495-CV

FILED IN 14th COURT OF APPEALS In the Court of Appeals HOUSTON, TEXAS For the Fourteenth District of Texas 7/8/2016 11:51:01 AM CHRISTOPHER A. PRINE Clerk

In Re Tom Thomas, Dan Sheehan, and Marc Culp, Individually and as Successors to the Interest of Thomas, Sheehan & Culp, LLP, Relators

From the Probate Court Number Two (2) of Harris County, Texas Honorable Mike Wood, Presiding

Real Party in Interest Legacy's Motion to Reconsider Order Granting Motion for Emergency Stay of Proceedings

M A C I N T Y R E , M C C U L L O C H , STANFIELD & YOUNG, L L P

By.- /s/ W. Cameron McCulloch W. Cameron McCulloch State Bar No. 00788930 cameron.mcculloch@mmlawtexas.com Christopher C . Burt State Bar No. 24068339 christopher.burt@mmlawtexas.com 2900 Weslayan, Suite 150 Houston, Texas 11021 (713)572-2900

Counsel for Real Party in Interest Legacy Trust Company, in its capacity as the court-appointed Receiver for the Article I V Trust created by the Last Will and Testament of Katherine Pillot Barnhart

5631319v2 Identity of Parties and Counsel

Relators and Movants for Counsel in Trial Courts and for Emergency Stay Mandamus Petition and Motion for Emergency Stay Tom Thomas, Dan Sheehan, and Marc S. Culp Marc Culp, as successors to Thomas, State Bar No. 05212700 Sheehan & Culp L L C ("Relators" or mculp(S)cdhllp .com CULP & DYER, L.L.P. TSC"), plaintiffs and counterclaim 222 East McKinney Street, Suite 210 defendants Denton, Texas 76201 (940) 484-2236 - Telephone (940) 484-4436 - Facsimile

Real Party in Interest, Defendant, Counsel in Trial Courts and for and Counterclaim Plaintiff Mandamus Petition and Motion for Emergency Stay

Legacy Trust Company, N.A., in its W. Cameron McCulloch capacity as court-appointed Receiver State Bar No. 00788930 of the Article I V Trust under the Last cameron.mcculloch@mmlawtexas .com W i l l and Testament ofKatherine Christopher C. Burt Pillot Lee Bamhart ("Legacy" or State Bar No. 24068339 "Receiver") christopher.burt@mmlawtexas.com M A C I N T Y R E , M C C U L L O C H , STANFIELD & YOUNG, L L P 2900 Weslayan, Suite 150 Houston, Texas 77027 (713)572-2900

Respondent

The Honorable Mike Wood Presiding Judge, Harris County Probate Court No. 2 Harris County Civil Courthouse 201 Caroline 6^^^ Floor Houston, T X 77002 713-368-6710

5631319v2 Procedural History

Relators Tom Thomas, Dan Sheehan, and Marc Culp, individually, and as

successors to the interest o f the law firm o f Thomas Sheehan & Culp, LLP ("TSC"

or "Relators") sued Legacy Trust Company, in its capacity as the court-appointed

Receiver for the Article I V Trust created by the Last W i l l and Testament o f

Katherine Pillot Bamhart ("Legacy"), to coUect a contingent fee they claim is due

them under a 1995 attorney fee agreement with their clients Susan Camille Lee and

Susan Campbell Gibson for representation in Lee v. Lee in Harris County Probate

Court Number Two (2) (the "Probate Court"). TSC however filed their Original

Petition in the 162'^'* Judicial District o f Dallas County on April 20, 2016 (the

"Dallas L a w s u i f ) . Legacy was appointed Receiver over the Trust by the Probate

Court. Legacy filed, in the Dallas Lawsuit, a Plea in Abatement and Motion to

Transfer that challenged the venue o f the Dallas court, and subject to those

motions, an Answer and Counterclaim that asserted among other things that TSC

had only a fee agreement with their clients Susan Camille Lee and Susan Campbell

Gibson, and not any trustee o f the Trust, and in any event were barred by the Final

Judgment awarding attorneys' fees entered by the Harris County Probate Court i n

Lee V. Lee. See Tab 1.

On May 13, 2016, Legacy filed a motion asking the Probate Court to transfer

the Dallas County Lawsuit to the Probate Court under Texas Estates Code § 34.001

5631319v2 1 as it was a matter related to a probate proceeding pending i n the Probate Court.

The Probate Court granted Legacy's Motion. Legacy served discovery requests on

TSC regarding their breach o f contract action.^ Relators subsequently filed their

Petition for Writ o f Mandamus pending in the above numbered and styled case. A t

its most basic level, Relators have asserted that the Probate Court does not have

jurisdiction such that it could transfer the litigation to itself from 16T^^ Judicial

District Court i n Dallas County under Texas Estates Code § 34.001. Relators now

have filed a Motion for Emergency Stay o f Proceedings seeking to avoid having to

produce discovery in this matter and the Court subsequently granted the request for

Emergency Stay on July 8, 2016.

Save for TSC's upcoming deadline to respond to discovery requests from

Legacy, Legacy represents to the Court that there are no other pending deadlines in

place for this case at the present time.

No matter whether TSC's claims move forward in the Probate Court or

Dallas County District Court, TSC w i l l have to respond to discovery properly

requested by Legacy. TSC is simply seeking to avoid making discovery available

on its own claims for reasons unknown.

See Tab 1 to Relator's Motion for Emergency Stay of Proceedings.

5631319v2 0 Argument and Authorities

1. The Emergency Stay Serves Only to Delay Necessary Proceedings, Prejudicing Legacy. A. Absent compelling circumstances, a stay is improper.

The request for an emergency stay is an extraordinary measure provided for

in the Texas Rules o f Appellate Procedure. See T E X . R . A P P . P. 52.10. The

Supreme Court o f Texas has provided that "[f]or a court o f appeals to stay

proceedings i n the trial court while it considers an interlocutory appeal increases

delay and expense and should not be done absent compelling circumstances."

Coal, of Cities for Affordable Util. Rates v. Third Court of Appeals, 1^1 S.W.2d

946, 947 (Tex. 1990) (per curiam). No such compelling circumstances exist here.

B. No compelling circumstances exist for a stay.

Relators' sole basis for requesting a "stay o f the trial court's proceedings" is

to avoid having to respond to Legacy's discovery about their claims against

Legacy. Relators have shown no "compelling circumstances" for avoiding

discovery. Regardless o f whether TSC's Petition for Writ o f Mandamus is ruled on

by this Court prior to August 15, or i f that petition is granted or denied, it w i l l not

change i n any way the need for TSC to respond to discovery requests from Legacy

about TSC's own claims. The discovery w i l l remain necessary and probative for

the resolution o f this matter either by settlement or trial, regardless o f whether the

lawsuit proceeds in the Probate Court or District Court i n Dallas County. The

5631319v2 3 Court's stay o f the proceedings does nothing more than further protract this

litigation and require the further delay and expense that the Texas Supreme Court

warned against in Coal, of Cities. See Coal, of Cities, 1^1 S.W.2d at 947.

Relators have conceded that Legacy has already agreed to an extension o f

the time period for which TSC may respond to Legacy's discovery requests until

August 15, 2016. A true and correct copy o f the proposed discovery response

extension agreement that counsel for Legacy has sent to counsel for Relators is

attached to this pleading within Tab 2. Relators admitted i n their own Motion for

Emergency Stay that they have tentatively agreed to such relief.^

Contrary to Relators' bald assertion, they have shown no prejudice by

ongoing discovery in the trial court. They argue, without citing any authority, that

they carmot send discovery to Legacy without "risk o f waiver o f arguments made

in TSC's plea in abatement." Even i f that were true, that is easily avoided by a

Rule 11 agreement as Legacy has offered not to assert such a waiver. A true and

correct copy o f counsel for Legacy's offer to stipulate that responding to discovery

would not waive Relators' plea in abatement is attached to this pleading within

Tab 3.

On the other hand. Legacy and the beneficiaries o f the Trust over which

Legacy is the Receiver are prejudiced by this stay. Legacy is charged by the order

^ Motion for Emergency Stay at 6.

5631319v2 4 of the Probate Court appointing Legacy as Receiver for the Article I V Trust under

the Last W i l l and Testament o f Katherine Pillot Lee Bamhart with performing the

functions o f the trustee o f that Trust, which includes the mandatory distribution o f

income o f the Trust. Relators claim they are owed over $ 1 million to be paid from

the Trust based on events that occurred twenty years ago, a disputed liability that

nevertheless affects Legacy's ability to make distributions from the Trust to its

beneficiaries.

Prayer

For the foregoing reasons, Legacy Trust Company, i n its capacity as the

Receiver for the Article I V Trust created by the Last W i l l and Testament o f

Katherine Pillot Bamhart, respectftilly requests that this Court (1) reconsider the

Realtors' Motion for Emergency Stay o f Proceedings and the Order granting the

same; (2) upon reconsideration, deny Relators' Motion for Emergency Stay o f

Proceedings, and (3) grant such other and further relief as Legacy may show itself

justly entitled to receive.

5631319v2 5 Respectfully submitted,

M A C I N T Y R E , M C C U L L O C H , STANFIELD i& Y O U N G , L L P

By; /s/ W. Cameron McCulloch W. Cameron McCulloch State Bar No. 00788930 cameron.mcculloch@mmlawtexas.com Christopher C. Burt State Bar No. 24068339 christopher.burt@mmlawtexas.com 2900 Weslayan, Suite 150 Houston, Texas 77027 (713)572-2900 (713) 572-2902 (FAX)

Counsel for Real Party in Interest Legacy Trust Company, in its capacity as the court-appointed Receiver for the Article I V Trust created by the Last Will and Testament of Katherine Pillot Barnhart

5631319v2 6 Certificate of Service

I do hereby certify that a copy o f Real Party i n Interest Legacy's Motion to

Reconsider Order Granting Motion for Emergency Stay of Proceedings was served

on the following counsel on this the 8th day o f July, 2016 by U.S. Postal Mail,

facsimile, and electronically.

M r . Marc S. Culp The Honorable Mike Wood Culp & Dyer, L L P Presiding Judge, Harris County 222 E. McKinney Street, Suite 210 Probate Court No. 2 Denton, Texas 76201 Harris County Civil Courthouse (940) 484-4436 201 Caroline Houston, Texas 77002 mculp@cdhllp.com 713-368-6710 (the "Probate Court")

Neil Kenton Alexander John Porter kalexander@porterhedges .com j ohn.porter@bakerbotts .com Eric M . English Keri D . Brown eenglish@porterhedges.com keri .bro wn@bakerbotts .com Jorma Summers Baker Botts, L L P j summer@porterhedges.com One Shell Plaza Porter Hedges, L L P 910 Louisiana Street 1000 Main St., 36^^ Floor Houston, Texas 77002 Houston, Texas 77002 (713)229-1522 (713)226-6614

Daniel J. Sheehan Thomas Zabel dsheehan@dsa-law.com Zabel Freeman John M . Phalen, Jr. tzabel@zflawfirm.com jphalen@dsa-law.com 1135 Heights Blvd. Daniel Sheehan PLLC Houston, Texas 77008 Campbell Center I I , Suite 100 (713)802-9114 8150 N . Central Expressway Dallas, Texas 75206 (214)468-8803

5631319v2 7 By; /s/ W. Cameron McCulloch W. Cameron McCulloch State Bar No. 00788930 cameron.mcculloch@mmlawtexas.com Christopher C. Burt State Bar No. 24068339 christopher.burt@mmlawtexas.com 2900 Weslayan, Suite 150 Houston, Texas 77027 (713)572-2900 (713) 572-2902 (FAX)

Counsel for Real Party in Interest Legacy Trust Company, in its capacity as the court-appointed Receiver for the Article I V Trust created by the Last Will and Testament of Katherine Pillot Barnhart

5631319v2 8 Appendix

5631319v2 9 T A B L E OF C O N T E N T S

T A B 1 - Legacy's Motion to Transfer Venue, and Subject to Motion to Transfer Venue & Motion to Transfer Lawsuit to Statutory Probate Court, Defendant's Original Answer, Plea in Abatement, and Counter Claim filed in the 162"^^ Dallas County, Texas 1

T A B 2 - July 5, 2016 Proposed Rule 11 Agreement. 184

T A B 3 - July 1, 2016 CoiTcspondence regarding plea i n abatement stipulation.. 186

5631319v2 10 TAB 1 DALLAS COUNT 5/26/2016 3:28:02 PI FELICIA PITR DISTRICT CLER

CAUSE NUMBER DC-16-04570

TOM THOMAS, DAN SHEEHAN § IN THE 162nd DISTRICT and MARC CULP, individually and § as successors to the interests of § Thomas, Sheehan & Culp, L.L.P., § Plaintiffs, § § V. § COURT OF § LEGACY TRUST COMPANY, § N.A., in the capacity as RECEIVER § FOR THE ARTICLE IV TRUST § created by the Last Will and § Testament ofKatherine Pillot Lee § • Barnhart, Deceased, § Defendant. § DALLAS COUNTY, TEXAS

Defendant Legacy's Motion to Transfer Venue Defendant Legacy Trust Company, N.A., in its capacity as the court-appointed Receiver for

the Article TV Trust created by the Last Will and Testament of Katherine Pillot Lee Bamhart,

Deceased (hereinafter referred to as "Legacy"), respectfully moves the Court to transfer this lawsuit

to Probate Coxort No. 2 of Harris County, Texas because it is the only proper venue to hear this

dispute.

Background Plaintiffs Tom Thomas, Dan Sheehan, and Marc Culp (hereinafter sometimes collectively

referred to as the "Plaintiff Lawyers"), who allege they are successors to the law firm of Thomas,

Sheehan & Culp, L.L.P., claim they are owed contingent legal fees from the Article IV Trust created

by the Last Will and Testament ofKatherine Pillot Lee Bamhart, Deceased (hereinafter referred to as

the "Article IV Trust"), for which Legacy is the Receiver appointed by Probate Court No. 2 of Harris

County, Texas. Legacy has its principal place of business in Harris County. The Plaintiff Lawyers

base their claim on the March 30, 1995 written fee agreement signed by Dan Sheehan, on behalf of

Thomas, Sheehan & Culp, LLP, and clients Susan Camille Lee (hereinafter referred to as "Ms. Lee"),

. 1 0050733 individually, and Ms. Lee's daughter Susan Campbell Gibson (hereinafter referred to as "Ms.

Gibson"), individually, under which the law firm agreed to represent these clients for a mixture of

hourly fees and contingent fees in a lawsuit Ms. Lee filed in 1988 in Probate Court No. 2 of Harris

County, In the Estate of Katherine Pillot Lee Barnhart, Deceased — Susan Lee et al v. Ronald E. Lee,

Jr., individually, as Independent Executor of the Estate and as Trustee of the Article IV Trust under

the Last Will and Testament of Katherine Pillot Lee Barnhart, No. 137,506 (hereinafter referred to as

the "Probate Court Lawsuit").' The Probate Court Lawsuit was tried and a judgment entered in

1996, the judgment was modified on appeal in 2002, and Ms. Lee and Ms. Gibson were awarded

specific attorneys' fees paid from the Article I V Trust. The judgment also ordered defendant Ronald

E. Lee, Jr., a resident of Harris County, to reimburse the Article IV Trust for certain expenses. Per

Plaintiffs' Original Petition which is attached hereto as Exhibit " 1 " , the Plaintiff Lawyers claim they

are entitled to collect a contingent fee based on amounts collected in Harris County 1) in 1997 by the

Trustee of the Article IV Trust on the judgment entered in the Probate Court Lawsuit in 1996, 2) in

2015 by Legacy as court-appointed Receiver for the Article IV Trust in 2015, and 3) in 2016

pursuant to a settlement agreement approved in 2016 by Harris County Probate Court No. 2. The

Plaintiff Lawyers do not seek contingent fees awarded to their clients Ms. Lee and Ms. Gibson, but

rather from the Article IV Trust despite the fact that the Trustee of the Article IV Trust was not a

party to the fee agreement. See Exhibit "A" to Plaintiffs' Original Petition. There is ongoing

litigation in Harris County Probate Court No. 2 conceming the Article IV Trust to which Legacy, Ms.

Lee, and Ms. Gibson are parties. Plaintiff Sheehan in fact is counsel for Ms. Lee and Ms. Gibson in

that litigation.

' A copy of the alleged fee agreement between the Plaintiff Lawyers, Ms. Lee and Ms. Gibson is attached to Plaintiffs' Original Petition at page 22 as Exhibit "A".

2 0050733 Summary of Argument A motion to transfer venue is the proper vehicle for a defendant to raise a challenge to the

plaintiffs venue choice. TEX. R. CiV. P. 86; Wichita Cty. v. Hart, 917 S.W.2d 779, 781 (Tex. 1996).

Legacy moves the Court to transfer venue of this lawsuit to Probate Court No. 2 of Harris County for

3 reasons:

1. Plaintffs'allegations ofvenue in Dallas County are incorrect.

2. Venue is proper in Harris County, and particularly in Probate Court No. 2 of Harris

County, because the claims asserted in this lawsuit directly involve prior judgments and

rulings of Probate Court No. 2 of Harris County, and ongoing litigation on related matters

in that court.

3. Dallas County is an inappropriate and inconvenient forum for the adjudication of this

Legacy has previously filed a motion in Probate Court No. 2 of Harris County requesting

that court to exercise its power conferred under Texas Estates Code §34.001 to order this case

transferred from this Court to Probate Court No. 2 of Harris County. A hearing on that motion is set

for June 7, 2016. If that motion is granted, this motion will be moot.

Argument 1. Venue for this Lawsuit is Only Proper in Probate Court No. 2 of Harris County.

Section 15.002(a) of the Texas Civil Practice and Remedies Code provides in relevant part

that, except where otherwise provided by statute, "all lawsuits shall be brought "(1) in the county in

which all or a substantial part of the events or omissions giving rise to the claim occurred; ... or (3)

in the county ofthe defendant's principal office in this state, if the defendant is not a natural person."

3 0050733 Only if these provisions do not apply may the plaintiff sue in the county of his or her residence under

Section 15.002(a)(4).

Harris County is the only county where all or a substantial part of the events or omissions

giving rise to the claim occurred. The Article IV Trust (and the underlying probate of the will that

created the trust), the Receiver, the lawsuit through which the Plaintiff Lawyers claim their

contingency fee was earned, the payments to the Article IV Trust arising out of that lawsuit, Susan

Lee, and Susan Gibson - all ofthe people, acts or omissions giving rise to the cause of action - were

situated or occurred in Harris County.

1. A plain reading of the fee agreement shows that the Susan Lee was a resident of Harris

County at the time that she signed the agreement, and that the agreement pertained to a

lawsuit she had already filed in Harris County in 1988.

2. Ms. Gibson, Ms. Lee's daughter, was a resident of Harris County with her mother when

the agreement was signed in 1995, although she was attending Pine Manor College in

Massachusetts during the school year.

3. The sole basis on which the Plaintiff Lawyers claim they are entitled to collect the

additional contingency fee is that the Trustee and the Receiver for the Article IV Trust

collected money in Harris County pursuant to a Harris County judgment.

4. The situs of that Article IV Trust was maintained in Harris County since the Trust was

created by the Last Will and Testament of Katherine Pillot Lee Bamhart, Deceased,

probated in Harris County, and under the supervision of Probate Court No. 2 in Harris

County.

5. Legacy, as court-appointed Receiver of the Article IV Trust with all the powers of a

trustee, resides in Harris County, and thus the funds from which the Plaintiff Lawyers

seek to recover are located in Harris County.

4 0050733 Therefore, venue of this lawsuit is proper only in Harris County, Texas. See TEX. CIV. PRAC.

& REM. CODE §15.002(a)(1).

Plaintiffs allege, correctly, that defendant Legacy is a nationally chartered non-depository

trust company with its principal place of business in Houston, Harris County, Texas. Movant is

not a natural person. Given the fact that Legacy's principal office is located in Harris County,

venue of the lawsuit is proper in Harris County, Texas. See TEX. Civ. PRAC. & R E M . CODE

§ 15.002(a)(3).

The Plaintiff Lawyers claim venue is proper in Dallas County under TEX. C I V . PRAC. &

R E M . CODE §64.052(b) which provides that "a suit against a receiver may be brought where the

person whose property is in receivership resides." However, §64.052(b) is a basis for proper

venue in Harris County, not Dallas County. Legacy is the Receiver for the Article I V Trust, and

as such, holds title to the assets of the Article IV Trust. Venue is proper in Harris County as

Legacy's principal place of business is in Houston, Harris County, Texas.

Texas Property Code §115.002(c-l) also provides that " . . . i f the settlor is deceased and an

administration of the settlor's estate is pending in this state, an action involving the interpretation

and administration of ... a testamentary tmst created by the settlor's will may be brought... (2)

in the county in which the administration of the settlor's estate is pending."^ In this case, the

Plaintiff Lawyers seek to have a contingent fee awarded to them from the Article IV Trust, a

testamentary trust created by Settlor Katherine Pillot Lee Bamhart (now deceased). The

administration of the Estate of Katherine Lee Pillot Lee Barnhart, Deceased is presently pending

^ Likewise, ESTATES CODE §33.002 provides that venue for a cause of action related to a probate proceeding pending in a statutory probate court (other than a cause of action against a personal representative for personal injury, death, or property damage) is proper in the statutory probate court in which the decedent's estate is pending.

5 0050733 in Harris County Probate Court Number 2. Venue of the lawsuit is therefore proper in Probate

Court No. 2 of Harris County.

Even i f venue were proper in Dallas County, there are compelling reasons for this Court

to transfer this case to Probate Court No. 2 in Harris County under TEX. CIV. PRAC. & REM. CODE

§ 15.002(b). Not only is venue unquestionably proper in that court, the following reasons make

transfer to that Court the only reasonable choice in the exercise of this court's power to transfer under

TEX. CIV. PRAC. REM. CODE §15.002(b:

1. Parties to this lawsuit are already parties to pending litigation involving

overlapping issues in Probate Court No. 2 of Harris County.

2. Plaintiffs' claims involve the interpretation of orders and judgments entered by

Probate Court No. 2 of Harris County. The Honorable Mike Wood, Judge of Probate

Court No. 2, presided over the trial and entered the very judgment that addressed both

attorneys' fees and the obligations of the trustee of the Article IV Trust at issue in the

Plaintiff Lawyers' claims for a contingent fee. Judge Wood is likewise supervising

Legacy as Receiver for the Article IV Trust.

3. Any judgment entered against Legacy as Receiver for the Article IV Trust in this

court must be referred to Probate Court No. 2, the court that appointed it Receiver, for

enforcement first under Texas Civil Practice & Remedies Code §64.055. Campbell v.

Wood, 811 S.W.2d 753, 756 (Tex. App.—Houston [1st Dist] 1991, no writ).

Under these circumstances, maintenance of the action in Dallas County, rather than in the

court that was and is directly involved in all matters pertinent to this dispute, would work an

injustice to Legacy and the beneficiaries of the Article I V Trust. The balance of interests o f a l l

parties clearly favors proceedings in Probate Court No. 2, and a transfer to that court will not

work any injustice as to any party.

6 0050733 A, Probate Court No, 2 is already adjudicating related issues involving the same parties.

The Plaintiff Lawyers' claims are but one part of an ongoing dispute entirely presided

over by Probate Court No. 2 since 1988 concerning the management ofthe Article I V Trust. The

most recent chapter of that dispute led to that court removing the Plaintiff Lawyers' client Ms.

Lee as a substitute trustee ofthe Trust, and the appointment of defendant Legacy as Receiver for

the trust. See Exhibit B to Plaintiffs' Original Petition, "Order Removing Trustee and

Appointing Receiver," dated June 18, 2015. Also actively in dispute before Probate Court No. 2

is Ms. Lee's claim that the terms ofthe settlement agreed to by Legacy and Mr. Ronald E. Lee,

Jr., under which Legacy has collected the judgment in favor ofthe Article IV Trust on which the

Plaintiff Lawyers seek to collect contingent fees, should not be approved by that court. See

Exhibit "2" to this Motion, "Defendant Susan Lee's Objections, Opposition, and Response to

Application to Approve Settlement Agreement." Dan Sheehan, a plaintiff here, is counsel for

both Ms. Lee and Ms. Gibson in the ongoing disputes in Probate Court No. 2. He served as lead

counsel for Ms. Lee in Probate Court No. 2 in a previous chapter, which is the basis for the

claims asserted in this lawsuit. It serves no legitimate purpose to involve a different court in a

different venue in the adjudication of this lawsuit.-^

B. Plaintiffs' claims require the interpretation and enforcement of the orders and judgments of Probate Court No. 2.

Why did Sheehan and his former partners sue in Dallas, rather than in Probate Court No.

2? The answer probably lies in the fact that their claims are foreclosed by that court's Final

Judgment, dated October 25, 1996 in the very lawsuit to which the contingent fee agreement

^ The Local Rules of the Dallas District Courts recognize the desirability of transferring cases "related to another case previously filed in or disposed of by another Court" in Rules 1.06 and 1.07. While these rules are not directly applicable here, the principle is the same.

fl 0050733 pertains, Susan Lee et al v. Ronald E. Lee, Jr., No 137,506. It is payments toward this same

judgment on which the Plaintiff Lawyers base their attorneys' fee claims. These same lawyers,

Ms. Lee, and Ms. Gibson were parties to a stipulation that was incorporated into that Final

Judgment dated October 25, 1996, which states in relevant part:

Based upon the stipulation of the counsel for the parties and the undisputed or admitted facts, the Court finds that i) Susan C. Lee's attomeys were paid reasonable and necessary fees of $1,000,000.00 for the prosecution of this action; ii) attomeys representing Susan C. Gibson, individually, and Susan C. Lee as Trustee of the Article V Trust for Susan C. Gibson, were paid reasonable and necessary fees of $500,000.00 for the prosecution of this action . . . . The Court further finds that Plaintiffs are entitled to judgment directing and authorizing the Executor of the Estate and Tmstee of the Article IV Trust to reimburse Susan C. Lee, individually and Susan C. Lee as Trustee of the Article Y Tmst for Susan C. Gibson for the aforesaid attomeys' fees from the assets ofthe Estate and/or the Article I V Trast, and after such payment or reimbursement, Plaintiffs are not entitled to any additional attorneys'fees for the trial of this action.

Final Judgment, October 25, 1996, Lee v. Lee, No. 137,506, p. 3 (emphasis added), attached as

Exhibit C to Plaintiffs' Original Petition at p. 037. Notwithstanding this order, under which the

Plaintiff Lawyers received their fees, they now claim they are entitled to additional contingent

fees. The proper court for interpreting and applying this order in this lawsuit is the one that

issued it - Probate Court No. 2. Moreover, it is Probate Court No. 2 that appointed and

supervises Legacy as Receiver for the Article I V Trust, and has power over the administration of

the Article IV Trust created by the Will of Katherine Pillot Lee Barnhart, whose estate was

probated in that court.

The same fee agreement on which plaintiffs base their claim was also the subject of a

previous jury trial before Judge Wood in Harris County Probate Court No.2, where another

lawyer claiming under it sued Ms. Lee to collect fees. Donna Kline v. Susan Camille Lee, No.

8 0050733 137,506-403. See Exhibit J to Plaintiffs' Original Petition at p. 143. Plaintiff Sheehan defended

Ms. Lee in that lawsuit. (Neither the then-trustee of the Article IV Trust nor Legacy was a party

to that lawsuit.) The Plaintiff Lawyers now seek to have fees awarded to themselves under the

very same fee agreement that was previously litigated in Harris County Probate Court No. 2.

C. Allowing this lawsuit to proceed in Dallas needlessly duplicates proceedings, wasting judicial resources.

Even i f a judgment were entered against Legacy here, Texas law would require the

Plaintiff Lawyers to go to Harris County Probate Court No. 2 to enforce it. When ajudgment has

been entered by a court against a receiver in its official capacity, the enforcement action must be

referred to the court that appointed the receiver. Campbell, 811 S.W.2d at 756; Tex. Civ. Prac. &

Rem. Code §64.055.

Conclusion This Court should transfer venue of the lawsuit to Harris County. Probate Court No. 2.

Defendant Legacy Trust Company, N.A., respectfully requests that this Court (1) grant the Motion to

Transfer Venue in all respects; (2) transfer the above numbered and styled cause to Harris County

Probate Court No. 2, and (3) grant Legacy such other and further relief as it may show itself justly

entitled to receive.

[This space intentionally left blank.]

9 0050733 R e s p e c t f u l l y submitted,

MACINTYRE MCCULLOCH^TANFIELD & YOUNG, L L P

W. Cameron McCuUocI State Bar No. 00788930 Adri Graves State Bar No. 24049999 2900 Weslayan, Suite 150 Houston, TX 77027 (713) 572-2900 (713) 572-2902 (FAX) Cameron.McCulloch@mmlawtexas.com Adri.Graves@mmlawtexas.com

Attomeys For Defendant Legacy Trust Company, as Court-Appointed Receiver of the Article IV Trust under the Last Will and Testament of Katherine Pillot Lee Bamhart

10 0050733 CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing instrument was sent to the following via United States Certified Mail, return receipt requested, via e-serve, and/or via facsimile on this the '^{(fX^y

Mr. Marc S. Culp Culp & Dyer, LLP 222 E. McKinney Street, Suite 210 Denton, Texas 76201 (940) 484-4436

Mr. Thomas A. Zabel Zabel Freeman 1135 Heights Blvd. Houston, Texas 77008 (713) 802-9114 (Fax)

Mr. Daniel J. Sheehan Mr. John M. Phalan, Jr. Mr. M . Patrick McShan Daniel Sheehan & Associates, LLP 2501 North Harwood, Suite 1280 Dallas, Texas 75201 (214) 468-8803 (Fax)

Mr. John W. Porter Ms. Keri Brown Baker Botts, LLP One Shell Plaza 910 Louisiana Street Houston, Texas 77002-4995 (713) 229-1522 (Fax)

W. Cameron McCulloch Adri A. Graves

11 0050733 EXHIBIT "1 UALUAa c u u CiT-ESERVE 4/20/2016 1;25:3- FELICIA PI DISTRICT CL f7 David Hernande DC-16-04570 CAUSE NO.

TOM THOMAS, DAN SHEEHAN and IN THE DISTRICT MARC CULP, individually, and as successors to the interests of Thomas, Sheehan & Culp, L.L.P., Plaintiffs,

v. COURT OF LEGACY TRUST COMPANY, N.A., in its capacity as RECEIVER FOR THE ARTICLE IV TRUST created by the Last Will and Testament ofKatherine Pillot Lee Barnhart, Deceased, Defendant. DALLAS COUNTY, TEXAS

P L A I N T I F F S ' ORIGINAL PETITION

TO THE HONORABLE COURT:

Plaintiffs, Tom Thomas, Dan Sheehan, and Marc Culp, individually, and as successors to the

interests of Thomas, Sheehan & Culp, L.L.P. ("TSC") (collectively, "Plaintiffs"), through its

undersigned counsel, brings this action primarily for the recovery of Plaintiffs' property in the

possession of Defendant, Legacy Trust Company, N. A., in its capacity as Receiver for the Article IV

Trust created by the Last Will and Testament ofKatherine Pillot Lee Bamhart, deceased (hereinafter

the "Receiver," "Legacy," or "Defendant"), and in addition or in the alternative, for a money

judgment against Defendant, and in support alleges:

D I S C O V E R Y C O N T R O L PLAN

1. The amount in controversy exceeds the minimum jurisdictional limits of this Court!

Plaintiffs intend to conduct discovery under Level 3 of T.R.C.P. 190.

PLAINTIFFS' ORIGINAL PETITION - Page 1 PARTIES AND SERVICE

2. Plaintiff, Tom Tliomas, is an individual residing in Dallas, Dallas Count}', Texas.

3. Plaintiff, Dan Sheehan, is an individual residing in Dallas, Dallas County, Texas.

4. Plaintiff, Marc Culp, is an individual residing at Lake Kiowa, Cooke County, Texas.

5. A t all times relevant to the matters placed at issue by this suit, Thomas, Sheehan and

Culp each have been duly Ucensed attorneys authorized to practice law in the State o f Texas.

6. At all times during the trial of the Lee v. Lee Litigation (defined below), Thomas,

Sheehan, and Culp were the only three partners in TSC.

7. Defendant, Receiver is a National Trust Bank, which is a non-depository trust

company operating under and subject to the control of the Office of the Comptroller of the Currency.

8. Receiver has its principal place of business in Houston, Harris County, Texas, and it

may be served with process by serving its registered agent for service of process, CT Corporation

System at 811 Dallas Avenue, Houston, Texas 77002.

J U R I S D I C T I O N AND V E N U E

Summary of Claim

9. By this action, Plaintiffs bring claims and request various relief against the Article IV

Trust created by the Last Will and Testament ofKatherine Pillot Lee Barnhart, deceased ("Article

I V Trust") for failing to deliver money and other property in its possession collected from the

judgment entered in the case styled Susan C. Lee, et al. v. Ronald E. Lee, et a l , which was finally

adjudicated in the Probate Court No. 2 of Harris County, Texas (the "Probate Court"), cause no.

137506-402. ("Lee v. Lee Litigation").

10. As specified more particularly below, this suit is brought against Defendant in the

capacity noted, because it now serves as the Receiver for the Article IV Trust.

PLAINTIFFS' O R I G I N A L PETITION - Page 2 11. Pursuant to the terms of that certain letter agreement dated March 30, 1995 (the

"Contingent Fee Agreement" or "CFA"), six percent (6%) of the money and other property

collected from the judgment entered in the Lee v. Lee Litigation was assigned to TSC and is now

owned by Plaintiffs.

12. Defendant has failed and refused to turn over that property to its true owners.

13. Attached as Exhibit " A " is a true and correct copy of the Contingent Fee Agreement.

Control of Article I V Trust

14. From inception of the Article IV Trust through approximately February, 2002, Ronald

Lee was. trustee of the Article IV Trust.

15. From and after approximately February, 2002 tlirough June 18, 2015, Susan Lee

served as trustee of the Article IV Trust.

16. On June 16, 2015, Ronald Lee filed a motion with the Probate Court seeking to

remove Susan Lee as trustee and to appoint a receiver for the Article IV Trust.

17. On June 18,2015, the judge ofthe Probate Court signed an order removing Susan Lee

as trustee of the Article IV Trust and appointing Legacy as receiver for the Article I V Trust ("June

18, 2015 Order"). 18. Attached as Exhibit "B" is a true and correct copy ofthe June 18, 2015 Order.

19. Pursuant to paragraph 3 of the June 18,2015 Order, the Receiver was authorized and

directed to conduct a variety of business on behalf of the Article IV Trust, including, but not limited

to: (i) exercising all rights, powers and duties of the Trustee as authorized under the terms ofthe

Article IV Trust or the Texas Trust Code; (ii) marshalling and taking custody of all trust assets; (iii)

managing and directing all business and financial affairs; (iv) paying, compromising and settling all

trust debts; and (v) prosecuting, defending or settling all legal proceedings.

PLAINTIFFS' ORIGINAL PETITION - Page 3 Summary of Article IV Trust Judgment

20. On October 25, 1996, the Probate Court entered a multi million dollar monetary

judgment against Ronald Lee in favor of the Article IV Trust.

21. Pursuant to the terms of the CFA, TSC served as lead counsel for Plaintiffs through

entry of a final judgment in the Probate Court.

22. But for TSC's efforts, expertise and hard work the favorable Trial Court Judgment

would not have been obtained.

23. Attached as Exhibit " C " is a true and correct copy of the final judgment entered by

the Probate Court. ("Trial Court Judgment").

24. TSC was the only law firm representing Plaintiffs during the trial of the Lee v. Lee

Litigation and through entry of the Trial Court Judgment. ^

25. Thomas, Sheehan and Culp also each served in various roles when providing legal

representation through the lengthy appellate process that followed.

26. Following completion of an appellate process that began in the Houston Court of

Appeals, an appellate opinion and mandate was issued increasing the amount of the Trial Court

Judgment. ("Article IV Trust Judgment").

27. Attached as Exhibit "D" is a true and correct copy of the Houston Court of Appeals

opinion. ("Appellate Opinion in Lee v. Lee").

28. Attached as Exhibit " E " is a true and correct copy of the mandate issued in relation

to that appellate opinion. ("Appellate Mandate").

29. At the time Legacy was appointed to serve as receiver for the Article IV Trust in

2015, the Article IV Trust Judgment was still outstanding.

PLAIMTIFFS'ORIGINAL PETITION - Page 4 . . Overview of Assets Recovered on Article I V Trust Judgment

30. On January 25, 2016, Legacy filed an application seeking approval of the Probate

Court to settle the Article IV Trust Judgment by Ronald Lee.

31. Attached as Exhibit "F" is a true and correct copy of Legacy's "Application to

Approve Settiement Agreement" filed with the Probate Court. ("Legacy's Application to Approve

Settlement Agreement").

32. Following an evidentiary hearing, the Probate Court entered an order granting

Legacy's Application to Approve Settlement Agreement.

33. Attached as Exhibit "G" is a true and correct copy of the order. ("Order Granting

Application to Approve Settlement Agreement").

34. Attached as Exhibit "A" to Legacy's Application to Approve Settlement Agreement is

a copy of the settiement agreement approved by that order. ("Legacy Settlement Agreement").

35. At pages 2,3, paragraph 7, the Legacy Settlement Agreement recites that the Article

IV Trust Judgment, "constitutes a debt owed to the Trust and an asset of the Article IV Trust."

36. At page 3, paragraph 8, the Legacy Settlement Agreement further recites that, "Mr.

Lee has made payment for the benefit ofthe Article IV Trust on the Judgment, including a payment

of $8 million in 2015." ("$8 Million Cash Payment").

37. Additionally, under the terms ofthe Legacy Settlement Agreement, paragraphs 15,16,

and 19, Ronald Lee was obligated to deliver, among other things, a $4 miUion promissory note ("S4

Million Promissory Note").

38. On information and belief, Ronald Lee has delivered and the Article IV Trust has

accepted the $8 Million Cash Payment, the $4 Million Promissory Note, and other consideration

recited in the Legacy Settiement Agreement in partial satisfaction of the Article IV Trust Judgment.

PLAINTIFFS' ORIGINAL PETITION - Page 5 39.. Despite Plaintiffs' assigned ownership interest in and to 6% of the recoveries under

the Article IV Trust Judgment, the Article IV Trust has failed and refused to deliver to Plaintiffs their

assigned portion of the consideration so received and accepted in payment of the Article IV Trust

Judgment.

Appeal from Probate Court Order Approving Legacy Settlement Agreement

40. Following entry of the Order Granting Application to Approve Settlement Agreement,

Legacy, on or about March 28,2016, filed a document in the Probate Court entitled, "Satisfaction of

.Tudgment."

41. In that document. Legacy represents that the Article IV Judgment "has been fully

paid, satisfied and discharged" based upon the terms of the Legacy Settlement Agreement.

42. Prior to Legacy's filing of the Satisfaction of Judgment, Susan Lee, on March 22,

2016, filed a notice of appeal seeking appellate review of the Probate Court's Order approving the

Legacy Settiement Agreement ("Susan Lee Appeal")

43. As ofthe filing of this suit, the Susan Lee Appeal remains pending.

44. On information and belief, Plaintiffs anticipate that Susan Lee w i l l contend in her

appeal, among other things, that the Legacy Settiement Agreement did not fully pay and satisfy the

Article IV Trust Judgment.

45. This lawsuit only seeks relief as to recoveries received by the Article IV Trust through

the time of the trial of this case, expressly reserving the right to seek further enforcement ofthe CFA

i f subsequent recoveries upon the Article IV Trust Judgment are received including, but not limited

to, any recoveries subsequently obtained as a result of the Susan Lee Appeal.

PLAINTIFFS' ORIGINAL PETITION - Page 6 Jurisdictional Basis for Suit

46. This Court has subject matter jurisdiction over this case, because the amount in

controversy exceeds the minimum jurisdictional limits of this Court.

Basis for Venue in Dallas Comity

47. Pursuant-to section 64.052(b) ofthe Civil Practices & Remedies Code ("CPRC"),

venue over this case is properly vested in Dallas County, Texas, because Thomas and Sheehan reside

in Dallas County, Texas and this is a suit against a receiver holding property belonging to Thomas

and Sheehan.

48. Pursuant to CPRC section 15.002(a)(1), venue over this case also is properly vested in

Dallas County, Texas, because the contractual relationship placed at issue by this suit was formed

and performed in material respects in Dallas County, Texas, and more generally, a substantial part of

the events giving rise to the claims raised by this suit occurred in Dallas County, Texas. More

specifically, the Contingent Fee Agreement was negotiated by means of telephone discussions,

telefax transmittals and mailings to and from Dallas, Texas, the CFA was signed by TSC in Dallas,

Texas, all billings for work performed under the CFA originated from Dallas, Texas, all payments

for such invoiced work were received in Dallas, Texas, much of the communication related to the

performance of the CFA emanated from Dallas, Texas, and a substantial amount of the worked

performed under the terms of the CFA was performed in Dallas, Texas.

49. Pursuant to CPRC section 15.003(a), venue over this case also is properly vested in

Dallas County, Texas, because joinder of one or more of the Plaintiffs is proper under the Texas

Rules of Civil Procedure ("TRCP"), venue as to each Plaintiff in Dallas County does not unfairly

prejudice another party to the suit, there is an essential need to have each Plaintiffs claim tried in

PLAINTIFFS'ORIGINAL PETITION-Page 7 : Dallas County, and Dallas County is a fair and convenient venue for each Plaintiff and all persons

against whom this suit is brought.

FACTUAL A L L E G A T I O N S SUPPORTING C L A I M S

The Contingent Fee Agreement

50. In the spring of 1995, TSC took over lead counsel responsibility for handling

litigation brought by a sister, Susan Lee, against her brother, Ronald Lee.

51. The dispute arose over Ronald Lee's administration of an estate of their grandmother,

Katherine Pillot Lee Barnhart ("Katherine Barnhart"), and certain related trusts, including the

Article IV Trust.

52. At the time of suit filing, Ronald Lee was the executor ofthe estate and the trustee of

the Article IV Trust.

53. Ronald Lee and Susan Lee were the only beneficiaries under the terms of the Article

IVTrust.

54.. Before TSC accepted the engagement, the Contingent Fee Agreement was entered

into by and between TSC, Susan Lee, her daughter, Susan Gibson, and Donna Kline.

55. Susan Gibson was a beneficiary of another trust established under the terms of

Katherine Bamhart's will.

56. Donna Kline was a duly licensed attomey authorized to practice law in the State of

Texas, who had been involved in the representation of Susan Lee and Susan Gibson in the Lee v. Lee

Litigation before TSC was retained. . '

57. Sheehan, Kline, Susan Lee, and Susan Gibson each signed the Contingent Fee

Agreement on or about March 30, 1995.

PLAINTIFFS' ORIGINAL PETITION - Page 8 58. Pursuant to the terms of the CFA, TSC was to be compensated for handling the Lee v.

Lee Litigation through payment of fees based upon reduced regular hourly rates plus 6% of all

recoveries obtained.

59. TSC was fully paid all hourly fees charged under the terms of the CFA.

60. The contingent fee agreed to be paid expressly included any recovery obtained on

behalf of the Article IV Trust; however, neither Susan Lee nor Susan Gibson would be personally

liable for any such fee related to any such recovery obtained for such trust.

61. Instead, both Susan Lee and Susan Gibson agreed to support TSC's right to its

contingent fee interest in any recovery obtained on behalf of the Article IV Trust.

62. Susan Lee and Susan Gibson support the claims brought by this suit.

Outcome of the Lee v. Lee Litigation

63. Beginning in March 1995 through the end of that year, TSC expended hundreds of

hours in preparation diligently prosecuting the case and preparing it for trial, including the conduct of

a juiy trial for several days in the fall of 1995 before a mistrial was granted.

64. On January 3, 1996, a second jury trial was started in the Lee V. Lee Litigation. .

65. Following an aggressive prosecution of the case in a trial lasting well over a week, a

favorable jury verdict was obtained on behalf of Susan Lee, Susan Gibson and the Article IV Trust.

66. Following nine more months ofbriefing and argument addressing various post trial

motions, the Trial Court Judgment was entered.

67. Under the terms of the Trial Court Judgment, the Article IV Trust was granted a

monetaiy judgment against Ronald Lee for:

a. $840,002.00 for Ronald Lee's breach of fiduciary duty related to the Knollwood

Development, the River Bend Farm, and the Cap Rock Ranch;

• PLArNTiFFS'ORIGINAL PETITION - Page 9 b. $659,506.50 for payment to Ronald Lee of an unreasonable executor fee;

c. $919,702.12 for prejudgment interest related to the payment of the unreasonable

executor fee, plus accruing per diem interest at the rate of $180.69;

d. $163,550.00 for unreasonable office expenses; and

e. $157,969.90 for prejudgment interest related to the unreasonable office expenses,

plus accruing per diem interest at the rate of 44.81.

68. In total, the Article IV Trust was granted a principal monetary judgment recovery

against Ronnie Lee in the amount of $1,663,058.50;plus prejudgment interest atlO% per annum,

bringing the total judgment amount against Ronald Lee to $2,758,770.52. ("Principal Trial Court

Judgment Amount").

69. The Trial Court Judgment also provided for postjudgment interest on the Principal

Trial Court Judgment Amount at the rate of 10% per annum, compounded annually.

70. The Trial Court Judgment also expressly denied requested relief to remove Ronald

Lee as Trustee of the Article IV Trust.

71. But for TS C' s diligent and expert handling of the Lee v. Lee Litigation, the Article IV

Trust would not have obtained the large monetary sum awarded in the Trial Court Judgment.

72. A l l parties appealed from the Trial Court Judgment.

73. OnMay 17, 2001, the Appellate Opinion in Lee V.Lee was issued and reported at 47

S.W.3d767.

74. After the Texas Supreme Court refused petitions for review, the Houston Court of

Appeals issued the Appellate Mandate.

75. The appellate process lasted from October, 1996 through issuance ofthe Appellate

Mandate in February, 2002, a total of approximately 5 years and 4 months.

PLAINTIFFS'ORlGrNAL PETITION - Page 1 0 76. Thomas, Sheehan and Culp provided legal representation in this case throughout the

appellate process.

77. Pursuant to the Appellate Mandate, the Article IV Trust's judgment against Ronald

Lee was increased materially. ,

78. Under the terms ofthe Article IV Tmst's judgment against Ronald Lee as modified by

the Appellate Mandate, the Article IV Trust was granted an additional principal monetary judgment

against Ronald Lee in the amount of $ 1,53 8,843,50 for claims related to the payment of an excessive

executor's fee.

79. The Appellate Mandate also modified the Trial Court Judgment by: (i) rendering an

additional principal monetary judgment against Ronald Lee in the amount of $1,500,000.00 based

upon the conclusion that the Article IV Trust should not have been directed to reimburse Ronald Lee

for attorney's fees incurred when defending the Lee v. Lee Litigation; (ii) removing Ronald Lee as

trustee of the Article IV Trust; (iii) revising the calculation of prejudgment interest awards; and (iv)

directing Ronald Lee to pay all costs of the appeal.

80. In sum and as most material to this case, the Appellate Mandate reformed the Trial

Court Judgment to increase the principal amount of the monetary judgment awarded to the Article IV

Trust against Ronald Lee from $1,663,058.50 to $4,701,902.00, it revised calculations of

prejudgment interest, and it confirmed the award of postjudgment interest on all of the foregoing

sums at 10% per annum, compounded annually. ("Final Monetary Sum Awarded the Article IV

Trust").

81. But for the diligent and expert handling of the appeal by Thomas, Sheehan and Culp,

the Article IV Trust would not have obtained such a favorable outcome in the appeal.

PLAINTIFFS' ORIGINAL PETITION - Page 1 1 The Donna Kline Litigation

82. Before the Lee v. Lee Litigation proceeded to trial, Susan Gibson sent a letter to

Donna Kline demanding that Kline withdraw from her representation in the Lee v. Lee Litigation.

83. Kline honored the demand and withdrew from the representation in the fall of 1995.

84. Kline subsequently intervened in the Lee v. Lee Litigation to recover unpaid legal fees

arising in connection with work performed on two separate lawsuits, including the Lee v. Lee

Litigation. ("Kline Litigation").

85. The bulk of Kline's claim pertained to representation provided in the Lee v. Lee

Litigation under the terms of the Contingent Fee Agreement.

86. On June 27, 1996, the Probate Court signed an order severing the Kline Litigation

from the Lee v. Lee Litigation.

87. In the Severance Order, the Probate Court directed the Kline Litigation to proceed

forward under Cause No. 137,506-403.

88. . The Kline Litigation proceeded to ajury tirial beginning on July 15, 1997.

89. That trial produced ajury verdict favoring Kline.

90. Attached as Exhibit " H " is a true and correct copy ofthejury verdict rendered in the

Kline Litigation. ("Kline Jury Verdicf).

91. Following receipt of the Kline Jury Verdict, the Probate Court entered judgment in

favor of Donna Kline.

92. Attached as Exhibit " I " is a true and correct copy of the judgment rendered by the

Probate Court in favor of Donna Kline and against Susan Lee, individually and as trustee for Susan

Gibson, and Susan Gibson, individually. ("Kline Judgment").

PLAINTIFFS' ORIGINAL PETITION - Page 1 2 93. Among other things, the Kline Judgment awarded Donna Kline a monetaiy recovery

of $114,207.21 for unpaid hourly fees plus an additional $132,500.00 for attorney's fees incurred in

prosecuting the case.

94. The Kline Judgment also granted Donna Kline declaratory relief, as follows: "Based

upon the Jury's answer to Question 2, the Court makes declaratoryjudgment that Donna C. Kline has

a good, valid and subsisting interest in any recovery by Susan Camille Lee, individually and as

trustee for Susan C. Gibson, and Susan C. Gibson individually, pursuant to her contingent fee

contract of March 30, 1995."

95. The reference to the contingent fee contract of March 30,1995 is the same Contingent

Fee Agreement placed at issue in this case.

96. Susan Lee and Susan Gibson appealed the Kline Judgment to the Houston Court of

Appeals.

97. On January 13, 2000, the Houston Court of Appeals issued its final decision on

rehearing.

98. Attached as Exhibit" J " is a true and correct copy of the Houston Court of Appeals

Decision in the Kline Litigation. ("Appellate Opinion in Kline Litigation").

99. As material to this case, the Appellate Opinion in the Kline Litigation made the

following rulings related to the Contingent Fee Agreement:

a. In addition to agreements to pay both Kline and TSC at hourly rates specified,

"Defendants also expressly agreed to pay . a 10% contingency fee on any

'recovery.'" (Appellate Opinion in Kline Litigation, at *1);

PLAINTIFFS' ORIGINAL PETITION - Page 1 3 b. "It was further agreed that 40% of the 10% contingency fee would be paid to

Kline and that the remaining 60% would be paid to Thomas, Sheehan & Culp."

(M);

c. Based upon the jury verdict, the Probate Court in its judgment, "found that Kline

possesses 'a good, valid and subsisting interest in any recovery by [Defendants]

pursuant to her contingent fee contract. . . .'" {Id. at *2);

d. In response to contentions that the Contingent Fee Agreement was unfair and

invalid as to Kline, the Houston Court of Appeals reached the following factual

conclusions - (i) the CFA provided for the payment of hourly fees plus '"ten

. percent (10%) of all Recovery, i/a«7'(emphasis added)."; (ii) the CFA, "further

provided that' [cjontingency fees will be divided between us, sixty percent (60%)

to Thomas, Sheehan & Culp, L.L.P., andforty percent (40%) to Donna C. Kline.'

(emphasis added)."; and (iii) "The record shows that the agreement [CFA] was

executed by both Defendants." (Id.);

e. "The record in this case is replete with competent evidence to rebut the

presumption of unfairness concerning the contingent fee agreement [CFA]." (Id.

at*3);

f. "Indeed, the evidence in the record supports the inference that the agreement was

entered into freely and voluntarily by Defendants based upon their full

understanding of the affect of the contingent fee agreement [CFA]." (Id.);

g. "Defendants assert that the trial court erred in entering its declaratory judgment

which decreed that Kline possesses a 'valid and subsisting' contingent interest in

PLAINTIFFS' ORIGINAL PETITION - Page 1 4 any recovery obtained by Defendants in the underlying estate case, pursuant to

the contingent fee agreement of March 30, 1995 [CFA]." ( M at 7);

h. "The trial court's declaratory judgment merely decrees that the parties' contingent

fee contract is valid." ( M ) ;

i. " ' A trial court may construe a contract in a declaratory judgment suit either

before or after a breach occurs.'" ( M ) ;

j. "As to the effect of any potential dispute between the parties in this case, a

'declaratory judgment may be entered if it serves a useful purpose in resolving a

controversy between the parties, even if actual or potential disputes remain.' ...

. [citations omitted](emphasis added)." {Id. at 8);

k. "We note that the trial court did not enter a monetary award to Kline based upon

the contingent fee contract because the amount of Defendants' recovery in the

underlying estate has not been finally adjudicated [footnote omitted noting

that Lee v. Lee Litigation is currently on appeal]." (/J.); and

1. "We hold, therefore, that the trial court did not err in granting a declaratory

judgment, which decreed that Kline's contingent fee interest in Defendants'

monetary recovery is valid." {Id.).

100. Following issuance of the Appellate Opinion in the Kline Litigation, the Kline

Judgment became final.

101. On information and belief, the monetaiyjudgment awarded to Kline was paid in full.

PLAINTIFFS' ORtcrNAL PETrriON - Page 15 Monetary Recoveries Received and Accepted by the Article I V Trust

• 102. On information and belief based upon evidence currently available to Plaintiffs,

Ronald Lee has made or is making three separate sets of monetary payments toward satisfaction of

the Final Monetary Sum Awarded the Article IV Trust.

103. Plaintiffs only learned of the first and second payments during the course of

proceedings related to Legacy's Apphcation to Approve Settlement Agreement in 2016.

104. As to the first monetary payment. Legacy presented evidence during hearings on

Legacy's application that Ronald Lee paid the Article IV Trust the sum of $2,816,213.60 on January

9, 1997. .("January, 1997 Payment"),

105. Sheehan first learned of this payment in February, 2016, and Thomas and Culp only

learned of that payment about six weeks later.

106. The January, 1997 Payment was made roughly 2 1/2 months after entry of the Trial

Court Judgment in October of 1996.

107. At the time of the January, 1997 Payment, Ronald Lee was the trustee of the Article

IVTrust. •

108. Susan Lee did not become the trustee of the Article IV Trust until roughly 5 years

later when the Appellate Mandate was issued.

109. As to the second monetary payment. Legacy attached to its Application to Approve

Settlement Agreement a copy of the proposed settlement agreement between Receiver and Ronald

Lee.

110. At page 3, paragraph 8 of the recitals, the Legacy Settlement Agreement states, "Mr.

Lee has made payment for the benefit of the Article IV Trust on the Judgment [Final Monetary Sum

PLAINTIFFS'ORIGINAL PETITION - Page .16 Awarded the Articie IV Trust], including a payment of $8,000,000.00 in 2015." ("S8 Million

Payment").

111. This is the first occasion that Sheehan learned of this payment, and Thomas and Culp

only learned of that payment roughly one month before filing this litigation.

112. On information and belief, the third and final series of monetary payments are those

currently being made by Ronald Lee to the Article IV Trust pursuant to the terms ofthe $4 Million

Promissory Note.

113. Pursuant to the assignment in the CFA, Plaintiffs now own 6% of all such monies

currently in the hands of the Receiver.

Non Monetary Recoveries Received and Accepted by the Article I V Trust

114. Above and beyond the additional payments still to be made to the Article IV Tmst by

Ronald Lee pursuant to the terms of the $4 Million Note, the Legacy Settlement Agreement reflects

two other valuable, non monetary considerations received by the Article IV Trust.

115. First, at pages 5 and 6, paragraph 19 of the Legacy Settlement Agreement, Ronald Lee

releases specified alleged claims that Ronald Lee has against the Article IV Trust.

116. Six percent of the value of these releases constitutes part of the recovery assigned to

and now owned by Plaintiffs under the terms of the CFA. ("Release Value").-

117. Second, at page 4, paragraph 15, Lee is obligated to execute a deed conveying his

• interest in the River Bend Farm to the Article IV Trust. ("River Bend Property").

118. Six percent of the River Bend Property constitutes part of the recovery assigned to

and now owned by Plaintiffs under the terms of the CFA.

PLAINTIFFS' ORIGINAL PETITION - Page 1 7 CLAIMS

Breach of Contract

119. Plaintiffs incorporate Paragraphs 1 - 118, as if set forth fully here.

120. There is avaUd, enforceable contract by and between TSC, SusanLee, Susan Gibson

and the Article IV Trust to provide legal services under the terms of the Contingent Fee Agreement.

121. In addition or in the alternative to the above allegations, the Article IV Trust later

adopted and accepted the CFA when Susan Lee was acting as the trustee for the Article IV Trust.

122. In addition or in the alternative to the above allegations, the Article IV Trust ratified

the CFA before and/or after the time that Susan Lee was acting as the trustee for the Article IV Tmst.

123. More specifically, Susan Lee entered into the CFA on behalf of the Article IV Trust,

with and/or without authority to do so, and the Article IV Trust approved the CFA after acquiring

full knowledge of the terms and provisions of the CFA with the intention of giving validity to Susan

Lee's agreement to bind the Article IV Trust to the terms of the CFA.

124. In addition or in the alternative, the Article IV Trust ratified and is now bound to

honor the CFA, because it received and accepted benefits generated from the performance of the

CFA with full knowledge of TSC's assigned interest and contingent fee rights to monetary and other

recoveries obtained as a result of work performed by TSC under the terms ofthe CFA.

125. Under the terms of the CFA, TSC is the owner of 6% of every form of consideration

received and accepted in full, or alternatively, partial satisfaction of the Article IV Trust Judgment.

126. Plaintiffs are the successors in interest of TSC and they are the proper parties now

entitled to enforce the terms of the CFA.

127. TSC fully and/or substantially performed, tendered performance or was excused from

continued performance under the terms of the CFA.

PLAINTIFFS'ORIGINAL PETITION - Page 1 8 128. In accepting recoveries under the terms ofthe CFA without paying Plaintiffs their 6%

assigned, cbntingent fee interest, the Article IV Trust has dishonored the terms ofthe CFA and is

now wrongfully withholding Plaintiffs' right to full use and enjoyment of property Plaintiffs own.

129. More specifically, Plaintiffs seek an order directing the Receiver to turn over 6% of

all cash sums accepted in payment of the Article IV Trust Judgment, including, but not necessarily

limited to, 6%ofthe January, 1997 Payment and the $8 Million Payment, totaling $648,972.81 plus

interest at the highest rate allowed by law from date of receipt of each such payment until delivery of

the wi'ongfuUy possessed funds.

130. Additionally, Plaintiffs seek an order directing the Receiver to turn over 6% of all

cash sums accepted in payment of the $4 Million Promissory Note plus interest at the highest rate

allowed by law from date of receipt of each payment until delivery of the wrongfully possessed

funds.

131. In the alternative, Plaintiffs seek the recovery of a monetary judgment against the

Article IV Trust for the damage suffered by reason of its breach of the CFA equal to 6% of the

January, 1997 Payment, the $8 Million Payment and the payments received on the $4 Million

Promissory Note plus interest at the highest rate allowed by law from date of receipt of each payment

until delivery of the wrongfully possessed funds..

132. Additionally, Plaintiffs seek an order directing the Receiver to turn over 6%

ownership of the $4 Million Note, or alternatively, a monetary judgment against the Article IV Trast

for damages suffered by reason of the Article IV Tmst's breach of the CFA equal to 6% of the value

ofthe$4MillionNote.

133. Additionally, Plaintiffs seek an order directing the Receiver to tum over a 6% interest

in the River Bend Farm, or alternatively, a monetary judgment against the Article I V Trust for

PLAINTIFFS'ORIGINAL PETITION - Page ! 9 damages suffered by reason of the Article IV Trust's breach ofthe CFA equal to 6% of the value of

the River Bend Farm.

134. Additionally, Plaintiffs seek a monetai-y judgment against the Article IV Trust for

damages suffered by reason of the Article IV Trust's breach of the CFA equal to 6% of the Release

Value.

135. Plaintiffs also seek and are entitled to recover all reasonable and necessary attomey's

fees arising from work performed to prosecute this suit, including any and all appeals, in an amount

to be determined at trial.

136. Plaintiffs further seek and are entitled to the recovery of pre-judgment interest at the

highest rate authorized by law.

137. Plaintiffs further seek and are entitled to the recovery of post-judgment interest on all

of the monetary awards obtained from and after entry of this Court's final judgment until paid in full

at the highest rates authorized by law.

138. A l l conditions precedent to recovering the relief sought herein have occurred, will

occur or have been waived, including, but not limited to, the giving of all proper notices and

demands.

139. Based upon the doctrines of claim and issue preclusion. Defendant is barred from

denying any ofthe facts and/or claims established in the Kline Litigation, including, but not limited

to, those expressly recited in paragraph 99 above. •

140. WHEREFORE, Plaintiffs request that, on final trial, they have and recover the relief

sought in Claim 1, whether alleged primary or in the alternative, pre-judgment and post-judgment

interest on all monetary awards to the extent legally permitted at the highest rate allowed by law, and

PLAINTIFFS' ORIGINAL PETITION - Page 2 0 all other and fuilher relief, legal or equitable, general or special, to which Plaintiffs may show

themselves to be justly entitled, including, but not limited to, recovery of all court costs and any

other recoverable costs of this suit.

141. Plaintiffs demand trial by jury. Plaintiffs will remit the necessary fees and notices

accordingly.

Respectfully submitted,

CULP & DYER, L.L.P. 222 E. McKinney Street, Suite 210 Denton, Texas 76201 Telephone: (940) 484-2236 Telecopier: (940) 484-4436

By: I si Marc S. Culp Marc S. Culp State BarNo. 05212700 mculp@cdhllp.com

ATTORNEY FOR PLAINTIFFS

PLArNTiFFS' ORIGINAL PETITION - Page 2 1 EXHIBIT " A

PLAINTIFFS' ORIGINAL PETITION - Page 0 2 2 o THOMAS, SaKtoui & CULP, LX.F. ATTCWHSSfS A«0 COtlMSaOftS 1891 EiMsraeCT (n«) i a i - o o »

. !•»«!».out*- n u x BOAMO o r U O J K . t i a H O U U Z A K M

Maidi 30, 1955

Ms. Soaa C Lcc

Houston, TX 77019 "

MI; Stmn C Oibsoa qfo Pine Minor Oallipte P.O. Box 131 CSwitBnt Hlil, M A 02167

Re: No. 137;SDfr482 Sasan C. Lee, ti uL v. Ronald E. Lee, et at. l» (be ProbaU Court No. 2 Harrit Conatjr, Teui

Dear Ml. Loe end Ml. aiiMon:

This ieUcr is to set foctli the team \spxL whldi we utd Dooo* C Kline iuve agieed lo repnsenc Sunu C Lee and Susan C Oltlaon's ttttecestt in Utipdiqn agaliut Rooald E. Lee, Jr., Steven Oqduin and TMIOUS other lelaicd entities and penons.

We wil{ invexticate your dafaos, file mA oa your .betiBlf, {sepore the cme. tcy IIIB case, appeal as necoaaty, and take such otiier aalon as is necessair to (xoteet and pursue your uMerests. It is ow h«eitt to inppart the Wm of KatheriM

' OPT fee will be tbe sua ofc (a)rauoaabfehotrfyratesincluding Doiuu Kline at the rate of S225 pK hour ai^i liiasnbe^ L.L.P. w i n work on tbe case with Tom Tli6iMH('jMte at $300 per hour and D«ii Sbeefaan's lale at $250 per hoar, pha (b) ten {letceiit (10%} ;pf dl Iteo^^ If any. Tix tena "Recoveiy" means all valuereceivedon your beimlf. nlirectly or ioiibe^ wfcethetfayseOloneia, trial, or otherwise. It is posibte that you could lecover iitaeti. a t ^ ittan auAi and in fllat event, oor ten peioent (lOX) fee shall be payable in Uiid.X We wllf ii^^ cash only lo the extmt that our petcenlafe ^iplies to caah which you recover. By exectitioa below, yoa l>en*y sell, transfer and astipi tea peicent (lOS) of aB of neh jclaina io Thnnu, Sbedm & Ciilp, LLP. and Doom C Kline as part ofihis agrecinenL

EXHIBIT

Conndential information may have been redacted from the document in compliance with the Public Information Act.

A Certified Copy Attest: 4/5/2016 c<> Stan Stanart, County Clerk ?o / |\ \^^% Harris County, Texas | ^ •

Depot,. . ^^'••••-•-''P PLAINTIFFS'DiirG IN A L PETITION - Page 023 M I , Sos«a C Gibjoo Mtrch 30, 1995

The Recovery aay include the fcdlowing:

1 («) DMn»^e«foclI^^IriesioffecedpcraoosalybyeEtIK^of yo^ iJtoiiM kave been distributed andet OK Wffl of KJtiuMine PiM -WiB-) oc lelalBd tmtx ocestmles (the "Tinsts") (Iho 'Clients' Recovecy") and lost income therefroni-, (b) DraijBSfor ii\}oiicss«freted by the &rtiUe of Katherine 1 ^ "Estate') or the Ttwts, such as damages for mismanagement of tlie Estate's assets oc foe excess fees (the "Estjm^Tmst's Recovery^; and

(c) Interest on the above a^nounts. The Becovay afaaU «iot U»:lud6 aiBounts which arc mrady reaUocalcd bctvretm and'Dvsts or between the Thists thesnselves.

tliB ccodngeat part of the fee shall be computed teptnitcty foe the aienli" Recovery and the Estati^T5rosfs Reeorery, and youriiallonly be pcnooally liaMe foe contingent fees comptrted on tbo OSmbf Raeov«ty. W« will look to lbs Estate oc Trurt, tet^ecUvely, for payment of any ooocinient fet irKint oa the Estate ot Trust's Recovery, and sudi continient fee Intciest shall not be dedtKtedfromC31eat^ Recovety. You ajree to support our request for peyment thereof In all respects.

If •Uomeyx' fees ate awaided by ibe court, vj/hether nndsr Section H9C of the Texas Protxu Obde, Section J i«.064 of the Tern Property C!ode, or other cooniiott law or statutoty entltlenxoC, sucli Gees AtS. not be included in tlie cotnpuiatioa of Recovery.

Oontingeocy fees wiU be divided between us. sixty percent (60%) to 'HKXiias, Sheobsa & Cujp. LJL.P., and foity percent (<0*) to Donna C KUne. We bfllmooday for hputiy charges and expenses. In order tofcciliuteour prompt WUhij and yoar psompt jjayment, we ie<|aiie tliat you deposit and liieQ maintain a balance In oor trust ascouat of iCtSiPPO; atainst «Ueh we wiU bm htaddiflon,^ yon wfll Wasgcwi^SAi fix ihs paytnent of all oU-of-ppdcst cxpetises and wiE, as leqtKsted by us. pay so^ dauvK ditect so that we will have no Kspotistbility or obligatian lo advance ootof- pocist txpamt;. bi ooimectioa with the Iiti|;atioa, altiii3U|li we niay do so from time to time and bOl you &x thoiM eqmscs.

Confidential information may have befen redacted from the document in compliance with the Public Information Act.

A Certified Copy Attest; 4/5/2016 -v-M-.-.- Stan Stanart, Couuty Clerk J Harris Count)', Texas 5 • '

Deputy

PLAINTIFFS' ORIGINAL PETITION - Page 024 Mt. Sursn O Lec Mt, Suisn C Gibson Utick 30. 1995

Dcnld Siicehwi' or Tooi Thonus, ml pur election, dall be lead counsel for Susan Lec at Irfal and E5oo»ut Kline slull be lead counsel for Susan Gibson, In terms of day^txJiy nmnaj«nent of tlie case, counsel sliall be co-counsel in the litigation. The finn of Tlionias, Shsclon Sc. Culp, L.LJP., sl«U have pcimsiy responsibilityfiarprcparatio:i of llie case for trial, but the attoroeys shall advise and consult wllli each odisr. We «riU not agree to a settlerocnt of Ihe case without your consent. Addilbnally, we will not malcc any material agreements without your conseni. (

Yoa tnay lenninate this agreement at any time, and in the event you, choose lo do so, you shall be rcspcaistbte fbr houriy charges and expenses only through the lime of sudi lerminalicBi; Itowever, tht assigmnent to us often percent (10*) of the claims shaU survive such tettninalion to ihc extent aBowcd by law. Wettwyvoluntarily teoninate drfs agreement at any lime but If we do so and withdtaw from your lepttaentMiao ptioc lo obtahiing a Recovery, we shall not be entUIcrf Iq 10* of any Recxrvecy later lecelyed We will be entitled lo payment for aU lusirly fees and expsnscs incuired as of Ihe dale of terminatiott.

If this letter accurately sets forth our agreement, please sign the original and return it lo us. Sincerely,

Donna C Kline Donna C Kluie, Auotney at Law

Conndential information may have been redatted from the document in compliance with the Public Information Act.

A Certified Copy .v^"* Attest: 4/5/2016 . t ''• Stan Stanart, County Clerk I'cS'/ J\ Harris County, Texas = : ^'i^^.^Z^' :-js

PLAINTIFFS: ORIGINAL PETITION - Page 025 Wb. Suum C Lec 641^7-2003 M I , Susaa C. Gibson Msidi 30. 1995 P»Ee 4

XXX-XX-XXXX AGREED:

Swan Csmlile Lec

Susan C Olbsoti

Confidential information m a y have been redacted from the document in compliance with the Public Information Act. v^ . ^ „_ • —— — '

A Certified Copy O^' ^^mf%. Attest: 4/S/2016 4'.^.••''""{"'•: O^c- Stan Stanart, County Clerk j o / |\ '"•-!?=% Harris County, Texas = • • H

— ^ — - ~ — . " C * : : : ^ • PLArNTiFFS' OR-IGINAL PETITION - Page 026 . EXHIBIT " B "

PLAINTIFFS' ORIGINAL PETITION - Page 027 Cause No. 137506-403

Estate of Katherine PiUot Lcc § 0 Barnhait, Deceased o a m Ronald E, Ixo, Jr., m Plaintilf,

o N CD Susan Camille Lcc, individually, and § r- ID as TYustcc of the Article IV TYust § O created by the last will and testament § of Katherine Pillot Lee Bamhart, § EJcccascd, and as Executor of the Estate of Katherine PiUot Lcc Barnhart, Deceased, § 4r' Defendant.

Order Appointing Recdyer -

On this date, ctl*fi|^pi Rooald B. Lcc, JTr.'s ("Mr. Lcc") Motion to Remove

Tnwtec Putsoant toT^. iSfctode J113.082, and to Appoint Receiver Pursuant to Tex. Tiust

Code }114.008 (the "Motion"). The Ctowt, having reviewed the evidence presented, finds as

The Court has jurisdiction over this case and venue is proper in this

2. All necessary parties interested in this matter have aRwared.

3. The Ttust was created und« Article IV of the Last Win and Testament of

Katherine Pillot Lee Bamhart, which was admitted to probate in this C^ourt under Cause Number

137.506 ("the WUr).

PLAINTIFFS' ORIGINAL PETITION - Page 028 4, Since 2001, Susaa Camille Lee ("Ms. Leo") BiWtttfttSI the solo trustee o N of the Trust, ^P"*^ O o 5, Section 113.082 of the Texas Trust Cq^^K^djs that "a court may 0. remove a trustee" if tbc trustee "violateei or attempted to^^oIateC% terms of the trust," the in trustee "failled] to malcc an accounting roqwrcd by law^•Oie^^^^the trust," or in mstanccs

where tbe courtfinds"other cause forremoval."Tex. Tflfet^^ffll 13.082. o 6. Section 114.008 of the Texas Trast Code provides that "[a] court may N CO r- appoint a receiver to take possession of trust property and administer the trost to icmcdy a breach m o of trust that has occurred oc might occur." ThaCtoort is authorized to appoint a receiver "in

any case in which a receiver may be appointed uSMCUje rules of equity." Tex. Civ. Ptac. &

Rem. Code ^,001 (tt)(6),

7. Mr. Leo, as lufenent inoRne beneficiary of the Trust, Is an hitcrcstcd

person. •^-»

8. Mr. tee r&c a pn»>r demand on Ms. Lee for an accountuig under Tex.

Trust Code §113,151 on 3aly*y^33flm Despite this demand, Ms. Leo has provided no

accountmg. in breach of tljjlTi9i|^B4y e Texas Trust Code.

9, is tbe-tmc of Imnuneat lurther harm to tho Trust by reason of the

failure of Ms, Leo t o * ^ ^ j | ^ ^ assets and liabilities of the Trust or provide an accounltag for

them, Bxemplifle^y ]hp faihae of Ms, Lec as Trustee timely to pay tbe real estate taxes on

Trust property;jMTii^i»jto protect the hitcrests of the Tnist In property that has been the

subject of c ^ e m n ^ ^ proceedings, the absence of any distributions of a portion of the "Rust's

income taSfj^JXIttmi Katherine hoc Stacy over a period of approximately 14 years despite the

manda^EBjlMAUion provisions of the Will creating tbe Trost, and the failure to provide tbe

PLAINTIFFS' ORIGINAL PETITION - Page 029 requested aixwrnting fofm Tixist imder Tex, Trust Code 5113.151. Such actions lod inactions

N by Ms, Lcc constitute a t ^ S ^ f fidociary duty, violate tbe terms of the Trust, and violate tbc 0 0 CL Texas Tnist Code, wj..

10. The i^^^s^^val of Ms, Lec as Trustee is necessary fcx-the continued tn administration and managcttBnt of thefiTrust and to avoid the threat of imnunentftirtbcrharm to

the Trost. T^^ffP 0 11. Ms, Lee's breaches offiduciaryduty, her violation of the terms of the 03 r- Trust, and her violation of the Texas Trost Code justifrremovalunder Texas Trust Code U3 0 S113.082(a}(l, 3, and 4), and dictate that IHi fair,reasonable,and equitable for a Receiver to be

appointed to act on behalf of the TWI.'

12. Legacy Trusiadl^Sny, N.A. ("Legacy") is qualified to serve as and

should be appointed as Receiver of the Tnist. ^.

13. Mr. Lcc is cn over hisreasonableattorneys' fees incurred in

conncc^n with the Motion under Tcxsj Trost Ofdo § 114.064 fkxim the Tnist,

It is therefore ordered ''H^ifff^

1. Ms, Lee is 1 las T r a ^ ponuant to Tex, Trust Code 5113.082.

2, Legacy U hereby ^pointed, pursuant to Tex, TVust Code 5 U 4,008, as

Receiver of the Trost, effective kmnetfiate^aw^ontinumg untilfiirtherOrder of this Court,

3. TheRecciveris and dhected to: 4 a. Exercise all ri and duties of tbe Trustee of the TVust created under Arti at the Will, and all powen granted to

tiustces under tbeltacas 3]f|it Code;

PLAINTIFFS' ORIGINAL PETITION - Page 030 b. Marshal and take custody, control, and possession of all assets of N U the Trust, wherever situated, inchjding tbe income and profit 0 0 theiefrora, to insure such assets against hazards andrisks,and to CL attend to theraahjtcnanceof such assets; io In c. Manage and direct the btainess and fmiweial affairs of tho Trust r-

iri and any asset or enrity owned or controlled by the Trust; c 0 d. Retain otremove,as the Receiver deems necessary or advisable, N CD any officer, director, independent contractor, employee, or agent of to o tbe TVust (Including retained professionals);

e. Obtain, by pteseotation of this Order, all records pertaining lo the

assets, liabiUties, inoMtje, and expenses pertaining to the Trust

- ' . r %^ uJ . i ^ ' - t * . i J ^4 1 s m i t Collect a i n n c o n » f i ^ M l ^ u s t i 5 ^ ^ h c S # ^ . ! l * « T r ^ a ^ F? IE" 1

or otherwise;

g. Make sudi ordinary and necessary transfers, payments,

distributions, and disbursements as tlic Receiver deems advisable

or proper for the maintenance and preservation of Trust assets or

con^liance with the obligations of the Trostce for the Trust;

h. Pay, compromise, or settle all debts of the Trustee pertaining lo

TVust property, mcluding but not limited to taxes, penalties, and

intctest owed by the Trustee with respect to Trust property,

i. Collect, comproralso, or settle all debts owed to the Trust;

-4- «»«1S3V1

PLAINTIFFS' ORIGINAL PETITION - Page 031 Pay thereasonableattorneys' fees incurred by Mr. Lee ia n connection with the Motion and tbc proceedings thereon; N 0 0 Employ attorneys, accountants, investigators or other appropriate X agents to assist in the ideotificaJion of Trust assets and the

in collectioo of debts owed to the Trust;

in Prosecute, defend, and/or settle all legal proceedings (including o lawsuits and arbitrations) brought by or against tbe Trustee of the N r- Trust, including but not limited to lawsuits for the condemnation of UD O real property in which the Tmst has an interest, HISD v. Susan

CamiUe Lee, Executor/Tntsiee of the Estate cf Katherine Pillot Lee

Bamhart, et al. No. 1038351, Harris County Court at Law No. 3,

n*»t5y OH priate fw tbe

iement of Bch 1 ^ {KtjbMh^^,

empJoyment*of anmslf&pert ^^^bs, £ 0 ^ s u .

Institute such legal pioceedings as the Receiver deems necessary

w advisable to obtain constructive ot acwal possession of assets of

tho Trust or lo recover damages suffered by the Trust; provided

however, that the Receiver shall have discretion not to pursue

litigation against Ms. Lee that is undertaken by beneficiaries of the

Trust for the benefit of tbe TnJSt;

Employ ai^iraisas to appraise the value of real property of the

Trust; and

• 5- 4WS133Y1

PLAINTIFFS' ORIGINAL PETITION - Page 032 o. Take any and all actionsreasonablynecessary and appropriate to

- exercise tbe powers, duties, and responsibilities set forth herein. O

2 4. It is further ordered that the Receiver:

ID a. Shall, within sixty days of this Order, provide an inventory of all in Trust property that tbc Receiver has identified to the beneficiaries

of the Trust. If the Receiver subsequently identifies or comes Into ^ possession of additional property, then il shall provide a CO r- supplemental Inventory as soon as practical; and to

^ b. Shall have the generalrighttoreimbursementfrom tbe property of

the Trost that a trusloc has under Article IV of the Will and under

§114.063 of the Texas Trost Code;^|Bd shall^ com]

sp#«|n

H(«.^ ^ v^^^Tna^Bts,bU^p»niji^usi5^3SErlySr^

$25tto0 (dqpending on personnel invdved) for work conducted in the idcntificatlMi and tracing of assets, and the detcrminanon of

amounts due to or due from bcncfldaiies.

5. It isfinthcrordered;

a. Receiver, its oBicen, directors and employees shall have the same

rights to exoneration andreimbursementprovided to a Troslee of

the Trust created under Artide fV of the Will and i j l 14.062-63 of

tbe Texas Trast Code.

b. Roceiver shall have no liability for any breach of trost consmittcd

by Ms. Lee unless Receiver becomes aware of tho breach of trust

PLAINTIFFS' ORIGINAL PETITION - Page 033 p* and (a) imptoperly penniu it to cootinuc thereafter, or (b) fails to in Ir^^^l^e a reasonable effort to compel Ms. Lee to deliver property of

0.

^ ^ ^ ^ ^ shall have no liability for tbo loss or devaluing of

,propetl9l?f the Trust that occurs (1) prior to the date this Order is

the Court, or (2) prior to the Receiver having actual

o notice of tbe existence of the property as Trust property and tbe N CD ahiJity to exercise control over that property, whichever ia later. r- CD 0 6. Itis totherordere^^atMs.Leesbail:

a. WfBIm scve^^ys of the date of this Onlcr, provide copies of

ssion, custody, or control sufficient to identily

an real and persc|^al property owned by the Trust or by Ms, Lec as

T r u s t e ^ a ? ^ at any time while she served as Trustee of the

Trust to Rcceitfc;

b. Within s«|jiyj|y'of the date of this Order, provido records

sufficient l ^ ^ ^ | | j ^ l distributions and expcnditares of Trust

funds and BSlets during the time she served as Trustee of the Trust

tothBRoceivifc %

c. Wifljln seven OJ^^ of the date of this Order, jaovidc all financial

mstitutions a m f ^ J ^ ^ j l parties in the possession of assets or

records of tbe TrugJfJBL Lee as Trastee v(4th a copy of this

Order and p(OVid^rattW;|"fW><»' to cooperate with

4»SS1J5VI 5^

PLAINTIFFS' ORIGINAL PETITION - Page 034 tbc Receiver and provide noo-privilegcd inforroatioQ requested by

ibc Receiver directly to tbe Receiver, O O d. Within seven days of the date of this Order, provide written a.

instnjctioos to all attocncys and accountants employed by her in

in her capacity as Trustee of the Trast to provide non-privileged

1^ Information requested by tbc Receiver rcgartiing these roattcis;

|y O c. Provide copies of tbc mstructioos described In subparagraph (c) •

accountants; and

CTfCqteeratc with the Receiver's requests for additional informatioa

M rt^r^|lhe~^te^jmd its assets, liabiUtics, income, expenses, and

tMtions/-

SIGNED this / ? day of 'QvMtt

Judge Presiding

PLAINTIFFS' ORIGINAL PETITION - Page 035 Agreed u to form and mb«t«ace: N M PoKTKH HEDGES I X P 0 0 0. /s/BricM.Pnglah Neil Kenton Alexander to Texas Bar No. 00996600 in kalexandet(^poTterticd|re?.pom William B. Rasnmssco Texas Bar No. 24027765 WfaamujWQtwrtgitacdgM.ggai Eric M. English o Texas Bar No, 24062714 N CD pcnfJisbe'potterfaedyes.cpm 1000 Main Street, 36* Hoor to Houston, Texas 77002 o Tciephoao:(713)226-6612 Focsimile: (713) 228-1331

plaintiff Conoid B, Ut, Jr.

/5/fctoiW,P9mr John W, Porter Texas Bar No. 16149990 Keri D, Brown Texas Bar No. 24055223 910 Louisiana Street riouston, Texas 77002 Telephone: a 13) 229-1597 Facsimile: (713) 229-2797 John,poftcr@bdccrhott5.9oni

Altomty3 for Inttrytnor Kathtrint Ltt Stacy

•9-

PLAINTIFFS' ORIGINAL PETITION - Page 036 EXHIBIT " C "

PLAINTIFFS' ORIGINAL PETITION - Page 037 •1' as XXX-XX-XXXX

N O . 137,506

FN THE ESTATE OF § I N PROBATE COURTKO. 2 5 KATHERIKE PILLOT LEE BARNHART, §

DECEASED § NO, 137.506-40^ S U S A N C A M H I V E L E E , ct »l. Plainttffis »nd Counttr-IDcfcndwts § OF O

VS. § cn § RONALD B. LEE, JR., ct«!. § Dcfenduits *rtd Counter-Plaintiffs § VS.

KATHERINE LEE, § Intetvtnor. § HARRIS COUKnr, TEXAS

On&e3jxldayof Jtmwy, 19%,(:«n3eootobebwidfl»?bovc^lcd wdratobo^

The Plaintiff, Susan Los individually, ("Susaa C, Lcc") anti derivatively oa behalf of the Esfate.of

Kaaicrine P. Bamtert (the IBstatc") and the Article TV Trust contained in tbc Last WiH and

Testament of Kathtsrinc P. Banhart (the •*Artide IV TrusfX Susan Lee as Trustee fbr ^ Article V

Trust wntaincd in tjKJ Last WD and Testament of Katherine

of Susan C. Gibson (tbe"ArticJt V Tmst") and derivatively oa b<*alfcf fte Estate and the Article IV

Trust, and Susan C. Gibson, indBvidually and derivatively on bciialf of tbc Estate and tbe Article IV

Trust, (hereinafter collectively tefwted to astiteTlaintifiBi'') and &e Defcodtot, Ronald E . Lee, Jr.,

individudly ("Rodald B. Lec, Jr."), as the InAqptajdent Executwr of ^ Estate, as Tiustco for the

Article rv Trust, atkd as Tnistec for ftw Aitidc V Tnist contained in the WiU fbc flw bcotfit of

ICatbcrine Lec, aiKl Katherine Lcc, iaUvidually, as intervcQOT,a^ Ajuiy

"BWIBIT

"ft*

PLAINTIFFS' ORIGINAL PETITION - Page 038 645-r3-oru having been demanded, a jury o f 12 quaJifi^td jurors was duly a^jm^ltdr asid ibc Cisc pTQcccdcd

to trial. At the cooclusioo of ihc cvidctK^ the Court subtisitted qucstiotis offe

jury. A verdict was returned by the jiiry and accepted by tbc Court Tbe jury "was txcused.

On the 8th and 9th days of April, 199$, came to be heard the Motion by the PIa3ntifi& for

Judgment on tbc Verdict and tbc Motion by tbe Defendant for Judgatcnt Non Obstmie Yiredictc

and to Disregan} Jury Fundings; and came tbe parties personally and by and thtotigh their attorneys

of record; and the Court, having considered tbe arguments, fouad that each of said Motions sltould

be granted in part and denied in part

Based upon the jury's answers to question numbers 1(c) and 4, this Courtfindsthat the

Article IV Trust isfentillcdto judgment against Ronald E. Lcc, Jr, in the total amotmt(^$S40,055~^

arisingfinocnhis breach of fiduciary duty related to the Knollwood Devclopnicnt

Based upon the jury's answers to question numbers 1(c) and 4, this Courtfindstbrt the

Article IV Trust is entitled to judgment against Ronald E, Lee, Ir, in the total amoun^^^sT^ing

- 6x)m his breach offiduciaryduty related to the River Bend Fann,

Based upon the jury's answers to qvicstiotts iiumbcrs 1(d) aiid 4, this Cotnt

Article IV Tnid is entidcd to judgment against Ronald E. Lee, Jr, in the total aiawmt ^f^^isbng

fi»m Hs breach of SSdudaiy duty related to the Cap Rock Ranch.

Based upon the jury's answers to question nmnbm 2(a) and 5(a), this Courtfindsthai the

Article IV Trust is entitled to jtidgmcnt against Ronald E Lee, Jr, inftic total antoqat olj£9,506,50

(whieh WMisists of the $2,198,355 of unreaswiable cwxuiorfeesfoundby the jury lessfljetax

savings rcaliaed by the Estatefionathe deduction of swAfeeson the Estate's estate tax return) phis

im^ndgmentininnestat^n^of lO%peraimiun,cti^^ AsofAogu^fi,

-2-

PLAINTIFFS' ORIGINAL PETITION - Page 039 ® 1996, lf«: amovnt of prcjydgincat, interest tiat has &wrucd on thcS« daidigcS ii $919,702,12 and ii

accruing thereafter at the per ciicm rtitc of $180.69 as sbown m Exhibit "A" attached hctcto.

Based upon the jury's anyiVcrs to question numbers 2(b) and 5(b), the Courtfindsthat the

Article IV Trust is entitled to judgment against Rooald Jr. for unreasonable ofBcc expenses

in the amoi m 5 l63^55D-i»ras prejudgment interest at the rate of 10% i per annum, Computed as

sTJfXiplc intcrcsL As of August &, 199<5, the ainount of pngudgmcnt interest that has accrued on these

damages is $157,969.90 and is accruing thereafter at the per diem late of $44.81 as shown in

Exhibit-B*'attached hereto.

Based upon the stipulation of fhc counsel for the paities and the undisputed Or admitted fects.

the Court finds that i) Susan C. Lee's attomeys were p«d reasonable at>d necessary fees of

$1,000,000.00 for the prosecution of this action; ii) attorneys n^resenthig Susan C. Gibson,

individually, aiid Susan C. Lcc as Trustee of the Artidc V Trust for Susan C. Gibson, were paid

reasonable and necessaryftcsof $500,000.00 fortiaeprosecution of this action; Ronald E. Lec,

• Jr.'s attomeys were paid reasonable and necessary fees of $1,500,000,00forthe defense of this

action; and iv) Ronald E. Lee, Jt.'s attorneys' fees of $1,500,000,00 have ahrcady been paid by or

reimbursedfromthe Estate and/or Artide IV Ttust, as previously emthoiiajcd by the Court, and he

is therefore not entitled to any additional )!«orncy's fees fo^ The Court fiirftcr

fmds that Plaintiffi an? entitled to judgment directing and authori

Trustee of the Article IV Trost to rcunbwsc Susan C Lee, individually and Stjsan C. Lee as Tmstee

ofthe Article V Trust for Susan C. Gibson for the aforesaid attwneys"ftcsfromthe a m * of the

Estate and/or the Article FV Trust, and after such payment OT leimbwcscineirt, PIahiti£& are not

entitled to any additional attomeys? feesfiwtihetrial of diisartion.

PLAINTIFFS' ORIGINAL PETITION - Page 040 B ascd upon the stipiil ation of th* fsatics aod ihc undispanai or admittodfects,tbc Court .ficdj

that rcasortablc and necessary attorneys' fcej for an ^>pc$i by either P]ain{i& or D

Cotnt of Ai>pcais are $300,000.00 and that r«ssOii^l<: and r«iiicssary attoni!^ fees for an apjical by

cither t^lajntjffs or Defendant to the Texas Suptetnc Court are $ 100,000.00. The Court fimbcr finds

that both Plaintiffs and I>efehdant are entidcd to payment of such additional aBomcy s" feesfiomdie

A r t j c l c l V Trust in the event that appeals arc takenfix)mthis judgment

B^scd upon tbcfindingsand cooclusioBs set forth abovCj the Courtfindsthat tbe Article IV

Trust is entitled to judgment against Ronald E. Lcc, Jr., in the total sum of $1,663,058.50, plus

prejudgment interest at the rate of 10% per anntnn, computed as simple interest, on each payment

set forth on Exhibit ''A" attached hereto and incorporated herein for »il purposes, rclatmg to the

executor's fee,firomthe date of each such payment until the thitc of judgment, pius prejudgment

interest at tbe rate of 10% per aimtmi, computed as simple interest, on c*«::h paytnent set fortii on

Exhibit "B" attached hereto and incotpctated herein for all purposes, relating to tbe office expenses,

•firomthe date of each sxKh payroent mtil the date of judgment Based upon thefiadmgsand

conclusiotis set forth above, tbe terms offtwLast Will and Testament ofKatherine P. Banahart, the

Court concluded that the office expenses in the amount of $163,550 arid all jw^udgmeat htterest we

allocable to income and that die other damages awarded agjuastRgpaldR Lee, Jr. in the amouat of

$U499,508,50 are allocable to principal. • I tt-v. .

A Final Judgment was previously signed b^ Ihis Court on August 21,1996. However,

becausetihatFinal lodgment contained an error wifii respect to piejud^nent interest, this Court has

vacated and set aside tho Final Judgnwajtclatcd August 21» 1996.

IT IS, THEREFORE:

-4-

PLAINTIFFS' ORIGINAL PETITION - Page 041 XXX-XX-XXXX ORDERED^ ADJUDGED and DECREED lhat Plaindffi' Motion for. JwigoKat on tlie

Verdict Is GRANTED as to the foUovmig Jury Questions: Ic, td, K 2*. 2h, 4, 5d, 5btod9; that

PlaintiSs' Motion for Judgment on tbc Verdict is DENIED as to tbc foUowitig Jury Qvjestions: la,

lb, 3a, 3b, and 8; that Defendant's Motion for Judgment Nort Obstante Veredicto is DKflCED; that

Defendant's Motion to Disregard Jury Findings is GRANTED as to the following Jury Questions;

la, lb, 3a, 3b, and 8; and that Defendant's Motion to Disregard Jury Ficdings is DENIED as to the

following Jury Questions: 1 c, 1 d, le, 2a, 2b, 4, 5a, 5b and 9; it is fiirther

ORDERED, ADJUDGED and DECREED that the Trustee, on behalf of tfac Article fV Ttwt,

have and recover judgment against Ronald E Lee, Jr,, individually, in the amount of $1,663,058.50

together with i) prejudgment interest at therateof 10% per annum, computed as shni^e interest, on

each payment set forth on Exhibit "A" attached hereto and Ltx^rporsted herein fbr all purposes,

relating to tbc executor's fee, from the dale of each such payment until tbe date ofjudgnxait, plus

ii) prcjndginent interest at the rate of 10% per annuin, coinputcd as simple interest, on cad^

set forth on Bthibit "B" attached hereto and incorporated herein fot all purposes, relating to the

office expenses,fiomthe date of each such payment until the date of jtidgment, phis iii) post-

judgment interest on such total amount of $2,758,770.52 at d» rate of 10% per amuan, compounded

annxmQy,acaruingfiomwd after the date of diisjudgmeiitui^paM^ itisfintixr

OimERED^, ADJI^DGED aod DECREED that die Executor

Article rv Tmst are authoriaxd and directed to hamedi^^y pay Susan C, Lee, individually, the

amount of $1.000,000 in tehnburswnent of attorneys'fees; it is fbtdie*

ORDERED, ADJIJDGED nod DECREED that the Executor of the Estate and T m ^

Article rv Trust are au&orized and directed to pay S & n C. Lee as Trustee ofthe Article V Tmst

for Susan C. Gibson, ^ ainount of $500,000, in leinaburscmcnt of attoincya!'fees;it b fiirflier

PLAINTIFFS' ORIGINAL PETITION - Page 042 XXX-XX-XXXX

ORDERED. ADJUDGED and DECREED iix^{ the- p^pnctxts hy Ronald E. Lcc, Jr.,

Executor ofthe Estaic and/or as^ Trustee of the Article lY Tnist, &0m the assets of such Estate and

Trust of his actomcys' fees in the amount of SI,500,000 for his dcfcoae of this sctiou arc hereby

authorized; it is further

ORDERED, ADJUDGED and DECREED that the Trustee of the Article IV Trust is

authorized and directed to pay $200,000.00 to Susan C. Lcc, individually, and $100,000.00 to

Susan C, Lec, as Trustee of tbc Article V Trust for Susan C. Gibson, mtivjevent that there is an

appeal to the Court of Appeals; it is further

ORDERED, ADJUDGED and DECREED that the Trustee ofthe Article W Trust is

authorized and directed to pay $300,000,00 to Ronald E. Lec, Jr., individually, m the event that there

is an appeal to the Court of Appeals; it is fisrthct

ORDERED. ADJUDGED and DECREED that the Trustee ofthe Article W Tmst is

authorized and directed to pay $67,000.00 to Susan C, Lec. mdividually, and $33,000.00 to Susan C.

- Lcc as Trustee of the Article V Tmst fw Sxjsan C. Gibson, in tho event of an ^jpealtothe Texas

Supreme Cotjrt; it is further

I ORDERED, ADJUDGED and DECREED that the Trustee of the Article IV Trost is

authori2ed attid directed to pay $100,000.00 tn Ronald E. Lec, Jr., hidividually, in the event thwe is

an appeal to dw Texas Supreme Court; it is fiatha

ORDERED, ADJUDGED and DECREED that the Plaintiffs' request to remove Ronald E

I ^ , Jr. as the Ind^jendcnt Executor of dw Estate is D^^IED; it U farther

ORDERED, ADJUDGED and DECREED that the Plaioti£&' request to Ktmvtt Ronald R

Lec, Jr., as the Tmstee of the Article rv Ttnst is DE^aED.

PLAINTIFFS' ORIGINAL PETITION - Page 043 S45-r3~ori6 A!! v.Til5 shall issue- ihc appropriate umc 85 provided, by law. Costa sit taxed, against

Rortald E. Lcc, Jr., individually.

ALL OTHER RELIEF NOT EXPRESSLY GRA>nrED HEREIN IS DENIED.

SIGNED this ^ S " day of Q . 1996.

-7-

PLAINTIFFS' ORIGINAL PETITION - Page 044 EXHIBITED"

PLAINTIFFS' ORIGINAL PETITION - Page 045 Lee V, Lee, 47 S.W.3d 767 (2001)

Evidence was sufficient to support finding that executor earned approximately $600,000 in fees, 47S.W.3d767 . but not $2,8 million in fees that executor Court of Appeals of Texas, charged estate, for administering estate valued Houston (14th Dist). at $12.8 million; although one expert testified Susan Camille LEE, Individually, and as Trustee that executor was not entitled to any fee because he did not give beneficiaries an accounting for of the Article V Trust for the Benefit of Susan C. 13 years, did not keep proper records, and spent Gibson, and Derivatively on Behalf of the Article $750,000 on experts to develop tract of land but IV Trust and the Estate of Katherine Pillot Lee did not develop it, and another expert testified Barnhart, and Susan C. Gibson, Individually, and that a $2.8 million fee was reasonable due to the Derivatively on Behalf of the Article IV Trust and the , size and difficulty of administering estate. Estate of Katherine Pillot Lee Barnhart, Appellants, V, Cases that cite this headnote Ronald E. LEE, Jr., Individually, as Trustee ofthe Article IV Trust, and the Article V Tmst for the [2] Executors and Administrators Benefit of Katherine Lee, and as Executor ofthe Proceedings and order for allowance Estate of Katherine Pillot Lee Bamhart, Appellee. Applicability of personal representative compensation statute to determine executor's No. 14-97-00162-CV. compensation could not be considered on I • May 17, 2001. i appeal in beneficiaries' suit against executor for excessive executor fees, where executor had not I raised issue of applicability of statute as ground Rehearing Overruled May 17, 2001. for his motion for judgment notwithstanding the Beneficiaries brought action against executor of estate who verdict at trial level. V.A.T.S. Probate Code, § also served as trustee of trust for breach of fiduciary 241. duty and for charging excessive executor fees. The Probate Cases that cite this headnote Court, Harris County, Mike Wood, J., granted judgment for executor. Beneficiaries appealed. The Court of Appeals, Hudson, J., held that: (1) evidence was sufficient to support [3] Executors and Administrators finding that executor earned approximately $600,000 in fees; #= Amount and Computation of Compensation (2) evidence was insufficient to support finding that executor Estate tax deduction of $1.5 million for failed to diversify the assets of the estate; (3) executor's executor fees could not be used to offset jury alleged misconduct in administering estate was material, finding that executor charged estate $2.2 million warranting his removal; (4) no evidence existed that trustee's more than he should have, although Internal defense of beneficiaries' suit against him was in bad faith; and Revenue Service (IRS) could no longer assess (5) executor was entitled to reimbursement of attomey fees additional taxes to estate following executor's in defense of suit. reimbursement of excess fees; it was more appropriate for estate to obtain benefit of Affirmed in part, reversed and rendered in part. windfall than to let executor keep $1.5 million in fees the jury found were excessive and unreasonable.

West Headnotes (49) 1 Cases that cite this headnote

[Ij Executors and Administrators [4] Executors and Administrators Evidence Forfeiture or deprivation of compensation

V'i'E'SlLAW •© 2016 rhornson pNeuters No claim to original U.S, Government Works,

PLAINTIFFS'ORIGINAL PETITION- Page 0 4 6 . Lee V. Lee, 47 S.Vv'.Sd 767 (2001)

Executor fees couid not be forfeited as An appellate court may not second-guess the jury equitable remedy for executor's alleged breach unless only one inference may be drawn from the of fiduciary duty in administration of estate, evidence. where beneficiaries had not requested forfeiture of executor's fee in any pleading. Cases that cite this headnote

5 Cases that cite this headnote [TO] Appeal and Error Extent of Review [5] Appeal and Error When deciding factual sufficiency questions, an Sufficiency of Evidence in Support Cases that cite this headnote A court may set aside a factual finding only if the evidence is so weak as to be clearly wrong and [6] Evidence manifestly unjust. Sufficiency to support verdict or finding If there is more than a scintilla of evidence to Cases that cite this headnote support the finding, a no evidence challenge must fail. [121 Executors and Administrators Evidence Cases that cite this headnote Evidence was insufficient to support finding that executor failed to diversify the assets of [7] Evidence estate by rejecting offers to purchase property Sufficiency to support verdict or finding in beneficiaries' suit against him for breach of A "scintilla of evidence" exists when the fiduciary duty, although executor received two evidence offered to prove a vital fact is so weak offers to purchase the property, but rejected as to do no more than create a mere surmise or them; unaccepted offers to purchase property suspicion of its existence. were too uncertain to serve as proof and no testimony was offered to determine if Cases that cite this headnote prospective purchasers were' willing to meet executor's terms of sale. [8] Appeal and Error 6 Cases that cite this headnote Total failure of proof An appellate court should find there is no evidence i f reasonable minds cannot differ [13] Executors and Administrators from the conclusion that the evidence offered ^ Appeal and error to support the existence of a vital fact laclcs Executor did not invite or waive error on probative force. issue of whether measure of damages for alleged wrongful failxu-e to sell property was Cases that cite this headnote sale proceeds plus interest in beneficiaries' suit against him for breach of fiduciary duty, [9] Appeal and Error although executor offered expert testimony that 1 ^ ^ Conclusiveness in General proper measure of damages for alleged wrongful failure to sell property was sale proceeds plus interest, where offer was made to counter

VVtSTLA'/'/

PLAINTIFFS' ORIGINAL PETITION - Pase 047 Lee V, Lee, 47 S.W.Sd 767 (2001)

beneficiaries' proposal for damages to include reviewing court must review all testimony in a potential profits. light most favorable to the finding, considering only the evidence and inferences that support the Cases that cite this headnote finding and rejecting the evidence and inferences contrary to the finding. [14] Executors and Administrators Cases that cite this headnote Appeal and error Executor's counsel's response to jury question did not invite error in jury's determination [18] Appeal and Error of damages for executor's alleged breach of Extent of Review Dependent on Nature of fiduciary duty for failure to optimize profit on Decision Appealed from estate property by failure to sell it when he had If there is more than a scintilla of competent the opportunity to do so, although executor's evidence to support the jury's finding, then the counsel's position was that jury had to determine judgment notwithstanding the verdict will be the day, month, and year of when property should reversed. have been sold, where judge told jury that they had to make the less specific determination of Cases that cite this headnote month and year when property should have been sold. [19] Evidence Amount for which property will sell; offers Cases that cite this headnote Unaccepted offers to purchase property are no evidence of market value of property, [15] Executors and Administrators 'v= Appeal and error 8 Cases that cite this headnote Executor did not waive error by failing to object to question put to jury on ground of [20] Executors and Administrators insufficient evidence in suit against executor #=» Grounds in general for alleged breach of fiduciary duty for failure Executor's alleged misconduct was material to optimize profit on estate property, where in his administration of estate, warranting his executor's motion for judgment notwithstanding removal, although damages to estate were only the verdict alleged that evidence supporting the $ 1,00 for failure to sell and diversify assets jury's findings was legally insufficient. Vernon's and jury did not find that executor's actions Ann,Texas Rules Civ.Proc, Rule 279, constituted gross negligence, where executor Cases that cite this headnote was found to have breached his fiduciary duty in numerous respects and damages associated with executor's breach of duty totaled $3 million, [16[ Judgment V,A.T.S. Probate Code, § 149C. Where there is no evidence to sustain verdict Cases that cite this headnote A trial court may disregard a jury's finding i f there is no evidence to support the jury's finding. [21] Appeal and Error Abuse of discretion Cases that cite this headnote A trial court abuses its discretion if its decision is arbitrary, unreasonable, and without reference [17] Appeal and Error to any guiding rules and principles, #= Judgment When reviewing the grant of a motion for 6 Cases that cite this headnote judgment notwithstanding the verdict, the

WESTLAW •'•2016 I hotnssr'r, Reutors Mo dairn tn oricj-nal U y Goi/crnment Woi.^s

PT A m r i F F S ' nRTnrMAT. PKTTTinN - Pao-P n4R Lee V. Lee, 47 S.W.3d 767 (2001)

Trial [22j Executors and Administrators #=• Pleadings and Issues ^ Grounds in general Trial Although a trial judge is given discretion by Facts and Evidence executor removal statute to determine whether An instruction is proper if it assists the jury, an executor's actions rise to the level of gross is supported by the pleadings or evidence, and misconduct, this discretion is not unlimited; an acciuately states the law, abuse of discretion occurs when the trial court makes a legally unreasonable determination Cases that cite this headnote given the factual-legal context in which it was made. V.A.T.S, Probate Code, § 149C. [271 Appeal and Error 2 Cases that cite this headnote 'VP' Cases Triable in Appellate Court Whether terms are properly defined or the [231 Appeal and Error instruction is property worded in a definition or #•» Abuse of discretion instruction submitted to the jury is a question of law reviewable de novo, A trial court's determination is legally unreasonable if the court failed to consider a fact 3 Cases that cite this headnote shown in the evidence that was legally relevant.

Cases that cite this headnote [281 Appeal and Error Failure or refusal to submit issues [24| Appeal and Error Appeal and Error Conduct of trial or hearing in general #=• Failure or refiisal to charge The trial court's decision whether to submit a Error is reversible only if, when viewed in light particular instruction or definition to the jury is of the totality of the circumstances, the refusal reviewed for an abuse of discretion. to submit a question or instruction to the jury probably caused the rendition of an improper 4 Cases that cite this headnote judgment.

Cases that cite this headnote [251 Trial #=» Definition or explanation of temis [291 Trusts Trial #=* Proceedings #«» Constmction and Effect of Charge as a Whole Issue of removal of trustee under trustee removal statute was valid theory raised by pleadings and To determine whether an alleged error in the evidence in beneficiaries' suit to remove trustee charge is reversible, the reviewing court must for breach offiduciaryduty, where beneficiaries consider the pleadings, the evidence, and the pled removal of trustee under trustee removal charge in its entirety; as to instructions and statute, and presented evidence of conduct that definitions, the essential question is whether jury found to be breaches of fiduciary duty. the instruction aids the jury in answering the V.T.CA,, Property Code § 113,082, questions, 1 Cases that cite this headnote 2 Cases that cite this headnote

[301 Trusts [261 Trial •v=' Matters of law • = Mismanagement or misconduct in execution of trust

PLAINTIFFS' ORIGINAL PETITION - Page 049 Lee V. Lee, 47 S.W.3d 767 (2001)

Trustee's breach of fiduciary duty and j u r y ' s beneficiaries an accounting for 13 years, he did award of damages for breach of fiduciary duty not keep proper records, and he spent 5750,000 each constituted a basis for removal of trustee on experts to develop a tract of land in the estate in beneficiaries' suit against trustee for breach but he did not develop it, V.T,C,A., Property of fiduciary duty. V.T.CA., Property Code § Code § 114.064; V,A,T,S, Probate Code, § 149C 113,082. Cases that cite this headnote 3 Cases that cite this headnote

[35| Executors and Administrators {31] Trusts Application and proceedings thereon Mismanagement or misconduct in Executor could recover attomey fees firom estate execution of trust in defense of beneficiaries' attempt to remove A breach of a fiduciary duty can constitute a him, despite evidence regarding executor's material violations of a trust for the purpose of breach of duty, where there was no evidence establishing a basis for removal of a trustee. showing that executor's defense against removal V.T.CA., Property Code § 113,082. was made in bad faith,

Cases that cite this headnote 1 Cases that cite this headnote

[32] Trusts [36] Executors and Administrators •i=» Mismanagement or misconduct in Custody and Management of Estate execution of trust An executor acts in good faith when he or she A jury award of damages for breach of a subjectively believes his or her defense is viable, fiduciary duty can constitute a material financial if that belief is reasonable in light of existing law, loss to the trast for the purpose of establishing a basis for the removal of a trastee, V,T,C,A,, 4 Cases that cite this headnote Property Code § 113,082. [371 Trusts 1 Cases that cite this headnote Proceedings Trusts [33] Trusts Costs Grounds Trastee was required to reimburse trast for Alleged conflict arising from trustee's opposition attomey fees and costs incurred by beneficiaries to beneficiaries' motion for judgment and his at trial and on appeal in beneficiaries' suit attempt to reduce trast's judgment in action for against trustee for breach of fiduciary duty and breach of fiduciary duty did not require his removal, although attomey fees and costs could removal; such a conflict could arise any time a not be recovered against him under probate beneficiary brought suit for damages against a code's attomey fee statute for his removal in his trastee. role as trastee, where prosecution of claim to remove trastee was inextricably intertwined with Cases that cite this headnote prosecution of beneficiaries' claims against him for breach of fiduciary duty and removal in his [34] Trusts role as executor. V.A.T.S, Probate Code, § 245. f ~ Evidence No evidence existed to support jury's finding that Cases that cite this headnote trastee's defense of beneficiaries' suit against him for breach of fiduciary duty was in bad faith, [38] Stipulations despite evidence that trastee did not give the

PLAINTIFFS' ORIGINAL PETITION - Page 050 Lee V. Lee, 47 S.W.Sd 767 (2001)

•if^ Construction and Operation in General 1 Cases that cite this headnote Stipulation between parties as to reasonable and necessary attomey's fees incurred by beneficiaries' in their suit and appeal in action [42] Interest against executor for breach of fiduciary duty Compound interest and removal negated .requirement in attomey Prejudgment interest was properly computed as fee statute in probate code that party seeking simple interest, not interest compounded daily, recovery present evidence to enablejury or court in beneficiaries' suit against executor for breach to determine what fees are recoverable by estate. of fiduciary duty; claim for prejudgment interest V.A.T.S. Probate Code, § 245, was based upon common law since suit did not fall within any of the prejudgment interest 3 Cases that cite this headnote statutes.

2 Cases that cite this headnote [39] Costs >sf» Form and requisites of application in general [43] Executors and Administrators A party is not required to segregate attomey fees '4^ Appeal and error unless the party asserts multiple claims, some of Neither award of prejudgment interest, nor which entitle the party to recovery of attomey accmal date of that interest, required executor fees and some of which do not. to make point of error to preserve those issues for appellate review in beneficiaries' suit against Cases that cite this headnote executor for breach of fiduciary duty, although executor had not raised those issues either at trial [401 Costs level nor in his brief on appeal, where Court 'S= Form and requisites of application in of Appeals' award of prejudgment interest was general new award of damages and was of automatic There is an exception to the duty to segregate legal consequence since appellants pled for attomey fees when the attomey's fees are prejudgment interest, rendered in connection with claims arising out 2 Cases that cite this headnote of the same transaction and when the claims are so interrelated that their prosecution or defense entails proof or denial of essentially the same [441 Appeal and Error facts, ^ Effect of Failure to Assign Particular Errors A point of error not preserved is not before the 1 Cases that cite this headnote appellate court for review.

Cases that cite this headnote (411 Trusts Judgment and relief Damages award was required to be paid to [451 Appeal and Error the trust, and not to beneficiary directly, in #» Contentions other than those made on the beneficiaries' suit against tmstee for breach hearing of fiduciary duty, where beneficiary was not An assignment of error raised for the first time in entitled to gross income, and was instead entitled an appellate motion for rehearing is too late to be to "current net income" under will, which meant considered by an appellate court. any tmst income, minus expenses. V,T,C.A,, Property Code § 113,111, 6 Cases that cite this headnote

w£STLAW €> 201 r. I nornson Reuters No claim to or-qinal U S 'Government Worki.

PLAINTIFFS' ORIGINAL PETITION - Page 051 Lee V. Lee, 47 S.W.3d 767 (2001)

146] Interest Panel consists of Justices ANDERSON, HUDSON, and Prejudgment Interest in General Senior Chief Justice MURPHY. * "Prejudgment interest" is compensation allowed by law as additional damages for lost use ofthe money due as damages during the lapse of time *773 CORRECTED OPINION between the accrual of the claim and the date of judgment HUDSON, Justice.

1 Cases that cite this headnote This is an appeal from a judgment in a probate case in which appellants sought removal of the executor/trustee and sought damages for breaches of fiduciary duty and for [47] Interest excessive executor fees. After granting appellee's motion ^ Prejudgment Interest in General for judgment notwithstanding the verdict and disregarding The two legal sources for an award of several jury findings, the trial court rendered judgment: prejudgment interest are general principles of (1) refusing to remove appellee as executor and trustee, equity, and an enabling statute. and (2)awarding $2.8 million in damages and prejudgment interest to the Article IV trust. Appellants raise eight issues 2 Cases that cite this headnote and appellee brings three cross-points. In our corrected opinion of February 8, 2001, this court affirmed in part and [481 Interest reversed and rendered in part. Particular cases and issues Beneficiaries were entitled to prejudgment Appellants have filed a third motion for rehearing. We now interest from date they filed their petition against withdraw our corrected opinion of Febmary 8,2001, and issue executor for breach of fiduciary duty to date this corrected opinion, affirming in part and reversing and preceding entry of judgment on $1.5 million rendering in part. judgment, not from date of executor's alleged breach, where first date executor received notice of beneficiaries' claim that executor fees paid to Background him were excessive and unreasonable was date suit was filed. When Katherine Bamhart died in 1975, her will provided that the bulk of her estate was to pass to a tmst (the "Article I Cases that cite this headnote IV Tmst"). Bamhart's two children, appellant Susan Lee, and her brother, appellee Ronald Lee, were each entitled [49| Executors and Administrators to one-sixth of the income from the Article IV Tmst, and Representation of creditors and distributees so much of the remaining two-thirds as necessary for their health, support and maintenance, considering the "availability An executor owes a duty to disclose all material of funds from other sources." The remaining income was facts affecting the beneficiaries' rights. to go into separate tmsts for each of the grandchildren (the Cases that cite this headnote "Article V Tmsts"). The Article V Tmsts were to distribute income to the grandchildren to the extent necessary to provide for their health, support and maintenance, also considering the "availability offimdsfrom other sources." Attorneys and Law Firms As provided in the will, appellee was appointed executor of *772 Thomas A. Zabel, Houston, Daniel J. Sheehan, Marc the will (and tmstee of the tmsts) and began administration S. Culp, Dallas, for appellants. in 1976. Appellee filed the estate's inventory reflecting a date of death value of $12.8 million. After negotiations that Adam P.Schiffer, Thomas B. Greene, D. Gibson Walton, continued until 1992, appellee and the IRS agreed upon a Marie R. Yates, R. Glen Rigby, Houston, for appellants.

WESTLAW 20IB f horrisr-r; Reuters No clatrn to ovyt.nl U S Government Wc^ks.

PLAINTIFFS' ORIGINAL PETITION - Page 052 Lee V. Lee, 47 S.W.3d 767 (2001)

taxable value of the estate assets of SI2 million. By this time, appellee did not respond to this offer because he found it to federal and state inheritance taxes totaled approximately S7 be a bad proposal in that the offeror required high-density million. Because the majority of the estate's assets were raw sewer capacity and would not pay for the portion of the land, the estate was unable to pay the taxes it owed and the property within the flood plain. In 1984, appellee had received trusts could not be funded. another unsolicited offer to buy the Pasadena property for $2,3 million, which he did not accept because it was not a In February 1980, appellee reached an agreement with the cash deal. Appellee did not make counteroffers to either of IRS regarding the estate taxes due. The total amount due was these offerors. In 1984, appellee had also received a contract $2,8 million, and the interest on that amount as of February offering $ 12,500 per acre for the Pasadena property. This was 1980 was approximately $475,000 (for a total debt to the not a cash offer and appellee did not make a cormteroffer. IRS of approximately $3.5 million). The estate also owed the State of Texas approximately $800,000 in inheritance Two family ranches were also in the estate: Cap Rock Ranch taxes. Because the estate had little available cash, appellee and River Bend Ranch, Theseranchesincreased the estate's continued to request extensions on these debts. Other debts debts because they incurred taxes and were unprofitable. continued to amass, including ad valorem taxes on the various In 1990, River Bend Farm was leased for $20,000 per parcels of real estate. year, Appellee did not believe he could sell the family ranch because he and Susan Lee owned it jointly. Appellee In December 1980, appellee accepted an unsolicited offer discussed the possibility of partitioning with Susan Lee's to purchase 61 acres of a large tract on Westheimer Road attomey, but this never occurred. for $ 19,5 million. The contract provided for payment in four annual installments. Appellee funded the Article IV Tmst During 1990-91, appellee considered developing the in 1982 with a deposit of $4 million. Appellant, Susan Lee, remaining Westheimer property into a residential subdivision received her first distribution from the Article IV Tmst in to be called "Knollwood Trails," The development never January 1983 in the amount of $ 15,784. received a loan and was ultimately abandoned. By 1991, appellee had spent more than $700,000 on Knollwood. Appellee testified that, by the time he ftinded the Article IV Tmst, he had taken more than $ 1 million in executor fees. By In April 1994, K-Mart bought a 21 acre parcel of the December of 1983, appellee had taken a total of $2,836,000 Westheimer tract for $8 million. The trial court ordered in fees. Although the IRS initially disputed the amount of this that these sale proceeds along with other estate assets be fee, they ultimately allowed the deduction of $1.5 million of transferred to the Article IV tmst. A year later, appellee appellee's fee. fiinded the Article V tmst.

*774 In December 1985, appellee received a letter from Susan Lee brought suit individually and as tmstee of the Susan Lee's attomey stating that she had never received an Article V Trust for the benefit of her daughter, Susan accounting and demanding one at the eariiest possible date. Gibson, and derivatively on behalf of the Article IV Trast This letter also asked about appellee's plans and expected and the Estate. Her daughter, Susan Gibson, was also a distributions. Appellee did not produce an accounting in named plaintiff Although the original suit was for an response to this request. In 1988, Susan Lee's attomey sent accounting and for removal o f appellee as executor and appellee a certified letter requesting an accounting from tmstee, additional claims included breaches offiduciaryduty, November 1975 to the present under section 149A of the conversion, fraudulent concealment, constractive fraud and/ Probate Code, This letter demanded receipt of the accounting or fraud, negligence, and gross negligence. by December 17, 1988, and requested copies of all income tax returns filed for the estate and any tmsts. Appellee did not The case was tried to ajury and the jury found that appellee produce the accounting on the deadline and appellants filed had breached fiduciary duties, that he charged imreasonable suit several days later. fees and expenses to the estate, that his fees and expenses were unreasonable by approximately $2.2 million, that the Appellee did not list the remaining Westheimer property breaches of fiduciary duty resulted in damages, and that or the Pasadena property for sale. Although he received appellee defended against removal in bad faith. The jury also an unsolicited offer to sell the remaining Westheimer tract, found that the breaches of fiduciary duty were not committed

WESTLAW 'V 3 ; i ' ; f ) - l l - f M n v j i , Keut<;K Nn ciaim to rui-jingf US, Govoinment Woiks

PI A r N T X T P P Q ' n w r r j r M A T PCTTTTHM _ P c m a n';'^ Lee V. Lee, 47 S.W.Sd 767 (2001)

with gross negligence. Appellee filed a motion for judgment Appellants contend the impact of the court's deduction is to notwithstanding the verdict and to disregard jury findings. allow appellee to reap $1.5 million for his wrongful conduct The trial court granted this motion in part, disregarding the as long as the fee results in a tax deduction. C\ting Anderson v. jury's findings of breach of duty and damages for the *77S Armstrong, 132 Tex. 122, 120 S.W,2d 444 (1938), appellants failure to sell the Westheimer and Pasadena property, the bad contend the remedy for excessive fees is return of the entire faith defense finding, and found the following: amount with interest at the highest legal amount.

(1) the Article IV tmst was entitled to judgment against Appellee responds with three arguments: (1) the Probate Code appellee in the amount of $840,000 (amount found by jury) supports the trial court's exercise of discretion to determine for breach of fiduciary duty relating to the Knollwood the amount of the fee; (2) Burrow v. Arce. 997 S.W.2d development; 229 (Tex. 1999)' supports a trial court determination of fee (2) the Article IV Tmst was entitled to judgment against forfeiture; and (3) the "tax benefits rule" authorizes the trial appellee in the amount of $1,00 (amount found byjury) for court to deduct the amount of tax savings realized. the breach of fiduciary duty relating to River Bend Farm; [2] We tum first to appellee's claim that section 241 of (3) the Article IV Tmst was entitled to judgment against the Probate Code supports the trial court's decision to reduce appellee in the amount of $1.00 (amount found by jury) for the jury's award. Section 241 concems compensation for the breach of fiduciary duty relating to Cap Rock Ranch; personal representatives. This section provides that executors and other representatives are entitled to receive a commission (4) the Article IV tmst was entitled to judgment against of five percent of the gross fair market value of the estate. appellee in the amount of $659,506.50 (consisting of the See TEX. PROB.CODE ANN. § 241 (Vemon Supp.2000). $2.2 million of unreasonable executor fees less the tax This statutory amount has been held to represent a fair and savings realized by the Estate from the deduction of such reasonable compensation, fee *776 In re Roots'Estate, 596 fees on the Estate's estate tax return) plus prejudgment S.W.2d 240, 243 (Tex.App.—Amarillo 1980, no writ). The interest of 10% per annum, computed as simple interest; last sentence of section 241 provides that the "court may, on and application of an interested person or on its own motion, deny a commission allowed by this subsection in whole or in part (5) the Article IV tmst was entitled to judgment against i f (1) the court finds that the executor or administrator has appellee in the amount of $163,550 for unreasonable office not taken care of and managed estate property pmdently,,.," expenses. M at § 241(a)(1).

The judge also awarded appellants' attomeys reasonable Because the will provides for a reasonable fee for the and necessary attomey's fees of $ 1.5 million and awarded executor, both parties agree that section 241 is inapplicable appellee's attomeys fees of $1.5 million, all reimbursable, as it concems the amount of compensation appellee may be from the Estate (plus additional amounts for appeal). paid for his role as executor. This interpretation is supported by case law. See, e.g., Stanley v. Henderson, 139 Tex. 160, 162 S.W.2d 95 (1942). Despite the inapplicability of the Excessive Executor Fee subsection setting executor compensation, appellee argues another subsection of this same statute applies, and gives the [1] Appellants first challenge the trial court's reduction of trial court discretion, to reduce an executor's fee where there is the excessive executor fee finding. The jury found that the a finding of impmdent management. Appellants, on the other $2.8 million executor fee taken by appellee was unreasonable hand, claim that where, as here, the will sets compensation, and excessive by approximately $2.2 million. The trial court no part of the staUite applies. In support of this argument, reduced the jury's finding by $1.5 million, stating in the appellants cite Stanley. judgment that he was awarding appellee $659,506.50, which represented the jury finding of $2.2 million "less the tax We do not find Stanley dispositive on the question whether savings realized by the Estatefi-omthe deduction of such fees the last sentence of section 241(a) applies to this issue. First, on the Estate's estate tax return...." when the Stanley opinion issued, the last sentence of the present version of section 241(8) was not yet part of the

VVESTLA'yV 1 {r«:r,son Routers. No claim to onynai U -.^ Govcrncierjt Wori-s

PT AT-MTTPF<;' ORTpTrKIAT, PFTTTTnN - Paae 054 Lee V. Lee, 47 S.W.3d 767 (2001)

statute. Second, Stanley does not address the issue presented [3] The trial court also did not reduce the jury's finding here, whether the last sentence of section 241(a) applies on because there was no evidence supporting it. Instead, the trial appeal to support a trial judge's decision to reduce a jury court specifically stated he was reducing the fees by deducting finding of damages for charging an excessive fee. the amount of tax savings real ized by the estate. Therefore, we must determine whether the trial court properly applied the Because it provides for a standard fee, section 241 applies "benefits rule" to reduce the jury's finding. Appellee claims in situations where the will does not set compensation, and the trial court properly applied the "benefits rule" under the executor seeks compensation in the statutory amount Nelson v. Krusen, 678 S.W.2d 918 (Tex, 1984), or for a greater amount. See, e.g., Weatherly v. Martin, 754 S.W.2d 790, 793-94 (Tex.App.—Amarillo 1988, writ Nelson addressed the question whether Texas should denied). Therefore, this section is available for an executor to recognize a cause of action for wrongful life, 678 S,W,2d at seek the statutory five percent or may be used by an opponent, 924, In reaching their decision to follow the majority of courts or the trial court on its own motion, to deny the executor a fee, reftjsing to adopt such a cause of action, the Texas Supreme in whole or in part. These applications of the statute, however, Court observed that one rationale for not allowing a cause of are not relevant to this case because the will set compensation. action for wrongful life is that, in awarding damages, the court must offset any special benefits to the plaintiff resulting from First, appellee did not raise a section 241 objection to the negligence, See id. (with citation to RESTATEMENT the fee questions on the ground that the questions were (SECOND) OF TORTS § 920 (1979)). Section 920 ofthe within the trial court's discretion. Appellee also did not base Restatement of Torts allows considerafion of the value of his objection to the jury's finding on section 241. Instead, benefits to the interest of the plaintiff that was harmed, to the appellee argued in his motion for judgment notwithstanding extent this is equitable. See RESTATEMENT (SECOND) OF the verdict that there was no evidence to support the TORTS § 920 (1979). jury's finding. Appellee cited to the testimony of his expert accountant, Greg Bardnell, who testified that, when tax Section 920A, however, augments section 920, providing benefits and interest savings to the estate are considered, that "[p]ayments made to or benefits conferred on the the $2.8 million in fees actually cost the estate only injured party from other sources are not credited against $850,000. Citing In re Garvin's Will, 256 N.Y. 518, 177 the tortfeasor's liability, although they cover all or a part N.E. 24 (1931), appellee claimed the amount of tax savings of the harm for which the tortfeasor is liable." Id. at 920A must be considered. Appellee further argued that, even i f (emphasis added). This section of the Restatement is the legally sufficient evidence supported the jury's finding of basis for the long-recognized "collateral source rule," which unreasonableness, appellants could only recover the actual precludes a tortfeasor from obtaining the benefit of payment cost to the estate of the excessive fees. ^ conferred upon the injured party from sources other than the tortfeasor. See Castillo v. American Garment Finishers In addition to the absence of an objecfion under section 241, Corp.. 965 S.W.2d 646, 650 n. 2 (Tex,App,—El Paso 1998, the trial court did not, on its own motion, apply section no writ), In Texas, the collateral source rule has been held 241 to deny all or part of appellee's fee.. Instead, the issue to apply in cases where the injured party received insurance of unreasonableness of the fee was submitted to the jury. benefits, see Brown v. American Transfer & Storage Co., Furthermore, the trial court did not apply section 241 in 601 S.W.2d 931,934 (Tex. 1980), generalfiringebenefits, see granting the motion for judgment notwithstanding the verdict. McLemore v. Broussard, 670 S.W.2d 301, 303 (Tex.App. In its final judgment, *777 the court specifically found that —Houston [1st Dist.] 1983, no writ), gratuitous services, "the Article IV Trust is entitled to judgment against Ronald see Oil Country Haulers. Inc. v. Griffin. 668 S,W.2d 903, E. Lee, Jr, in the total amount of $659,506,50 (which consists 904 (Tex.App.-Houston [14th Dist.] 1984, no writ), and of the $2,198,355 of unreasonable executor fees found by worker's compensation benefits. See Lee-Wright, Inc. v. Hall, the jury less the tax savings realized by the Estate from the 840 S.W,2d 572, 582 (Tex.App.-Houston [1st Dist.] 1992, deduction of such fees on the Estate's estate tax returns)...." no writ). Because section 241 was not raised as a ground for appellee's motion for judgment notwithstanding the verdict, we may not Because the estate received a tax deduction from the IRS, consider it on appeal. a source other than the tortfeasor in this case, it would initially appear that the collateral source rule should prevent

PLAINTIFFS' ORIGINAL PETITION - Page 055 Lee V. Lee, 47 S.W.Sd 767 (2001)

appellee from obtaining the benefit of this deduction. More at 655, 106 S.Ct. 3143 (citing 15 U,S,C, § 77/ (2)), The out- on point, however, are the cases regarding tax benefits. *778 of-pocket damages included the difference between the fair Appellants cite LSR Joint Venture No. 2 v. Callewart, 837 value received and the fair value of what the defrauded party S,W.2d 693, 697 (TeX.App.—Dallas 1992, writ denied), in would have received had there been no fraudulent conduct. which the court, in dicta, notes its agreement with a Supreme Id at 661-62, 106 S.CL 3143 (citing 15 U.S.C. § 78bb(a)), Court case, Randall v. Loflsgaarden, 478 U.S. 647, 106 Although the court held that rescission adds an additional S.Ct. 3143, 92 L.Ed.2d 525 (1986). In Randall, the Court measure of deterrence as compared to a purely compensatory held that tax benefits may not offset a party's recovery. measure of damages, much of the reasoning supporting their Appellee attempts to distinguish Randall on the grounds that ultimate conclusion is applicable to non-securities cases. it "(1) dealt with income (not estate) taxes; (2) turned on construction of securities fraud statutes; and (3) disallowed Although it involves a breach of contract claim. Powers v. consideration of income tax benefits because ofthe statutory Powers. 714 S.W.2d 384 (Tex,App,—Corpus Christi 1986, intent to punish and deter and because the tax benefit was no writ), addresses an argument analogous to the one made speculative." Appellee claims the jury in this case found no by appellee in this case. In Powers, a woman sued her ex- culpable mental state calling for punishment or deterrence, husband for breach of an agreement to pay monthly alimony. the savings by the estate tax deduction is not speculative, See id. at 386. The trial court rendered judgment for the ex- and the IRS can no longer assess additional estate taxes or wife for payment of the arrearage, costs, attomey's fees, and disallow the deduction because the time for doing so has post-judgment interest. See id. On appeal, the ex-husband passed. claimed the trial court erred in entering judgment against him because his ex-wife failed to offer any evidence by which to Randall involved allegations of securities fraud. See 478 U.S. calculate her alleged damages. See id. at 388, '*779 More at 650, 106 S.Ct. 3143. Petitioners asserted claims under § particularly, the ex-husband claimed the measure of damages 10(b) of the Securities Exchange Act of 1934 and § 12(2) "should have been the amount of unpaid alimony less the tax of the Securities Act of 1933. See 478 U.S. at 651, 106 savings she realized on her non-alimony income as a result S.Ct. 3143. Respondents argued petitioners' damages should of his failure to pay the entire amount of alimony due under be reduced by the amount of tax benefits received from the contract." See id. In other words, the ex-husband argued the security, comparing tax benefits to the section 12(2) that his ex-wife's tax burden increased proportionately by deduction for income received. See id. at 652, 106 S.Ct. 3143. the amount of alimony she received in a year, and the less The court found that tax deductions or credits are not taxable alimony he paid, the more of a tax savings she realized. See id. events and cannot be classified as income. See id. at 657, 106 S.Ct. 3143. The court fiirther observed that, although The court presumed the ex-husband's complaint went to one purpose of the section 12(2) rescission remedy is to mitigation of damages, in that he sought an offset for any tax restore plaintiff to his position prior to the fraud, another savings realized by appellee. See id. at 389, First observing purpose is to deter fraud and encourage full disclosure. See that the burden of proving the amount of damages that id. at 659, 106 S.Ct, 3143, The court obsen'ed it was more would have been mitigated was on the breaching party, the appropriate to allow the defrauded party to have the benefit court concluded that they were "unaware of any principle or of a windfall than to let the fraudulent party benefit. See id. at authority which would allow an offset to the party who has 663, 106 S.Ct, 3143 (citing Tawgow v, Taylor, 344 F,2d 781 breached a contract for a 'tax savings' the non-breaching party (1st Circuit)), cert, denied 382 U.S. 879, 86 S.Ct. 163, 15 'realized' as a result of the breach." Id. L.Bd.2d 120 (1965). Because any recovery would be taxable as ordinary income, the court believed arguments about a Only two other state courts have addressed deductibility of windfall were greatly overstated. 478 U.S. at 663-64, 106 tax benefits from damages. In DePalma v. Westland Software S.Ct. 3143. House. 225 Cal.App.3d 1534, 276 Cal.Rptr. 214 (1990), the appellant challenged the trial court's refusal to admit evidence Although Randall did involve construction of securities of tax benefits. Appellant asserted that, by not admitting this fraud statutes, the damages allowed by the statutes included evidence, the trial court applied the collateral source mle rescission and out-of-pocket damages. The rescission and may have given the respondent a compensatory award damages encompassed the consideration paid (with interest) exceeding statutory limitations. See 225 Cal.App,3d at 1538, less the amount of income received on the security. 478 U.S. 276 Cal.Rptr, 214. The court first held that the collateral

WESTLAW rOlG i hnfT.'jrn I touter;, No claim to crigmaS U S. Government Wo'-ks

PLAINTIFFS'ORIGINAL PETITION - Page 056 Lee V. Lee, 47 S.W.3d 767 (2001)

source rule has never been extended to breach of contract and that higher cost by the tax benefits to which the clinic was it was within the trial court's discretion to deny the appellant otherwise by law entitled. See id. collateral source credit Sae id. at 1539, 276 Cal.Rptr. 21.4. In addition to denying application of the collateral source rule, In response to these cases, appellee cites to Geeslin v, the court asserted three reasons for refusing to consider tax McElhenney, m S,W,2d 683 (Tex.App,—Austin 1990, no consequences as a mitigating factor in compensatory damage writ), for the proposition that, in determining the amount calculations in breach of contract cases. See id. at 1540, of fee to which the executor is entitled, the trial court 276 Cal.Rptr. 214. First, the court found that the federal tax should balance the value of the executor's services against benefits rule would cancel out most windfalls to plaintiffs in the harm done to the beneficiaries' interests. In Geeslin, the that the government may recapture past tax benefits awarded court found the trial court acted within its authority under to a taxpayer if in a later year an event occurs which changes section 241 of the Probate Code in reducing Geeslin's fee to the basis of the premise upon which the deduction was 2.5% ofthe gross estate. See id. at 687.. Although the court originally based. See id at 1540^1, 276 Cal.Rptr. 214. stated the reduced amount could reasonably be viewed as Second, the court observed that estimating tax consequences commensurate with the value of Geeslin's services balanced is speculative, time consuming, and conflising. See id. at against the harm done to the interests of the beneficiaries, 1541-42, 276 Cal.Rptr. 214. Finally, the court determined Geeslin did not involve a tax benefit offset Accordingly, we that public policy was better served if the breaching party was find Geeslin distinguishable. responsible for the full amount of compensatory damages. See id. at 1545, 276 Cal.Rptr. 214, The court felt so strongly In the instant case, there was evidence of the deduction the about public policy that it stated it would reject appellant's estate took for the fee, the interest accrued from the delay argument even i f there were no tax benefit rule. See id. The in filing the return, the reduction in interest based on the court cited to the Supreme Court's holding in Randall, in fee deduction, and the accounting fees incurred during the which the court had held it more appropriate to give the years preceding final settlement of the estate tax debt. The defrauded party the benefit of a windfall, and stated that the jury obviously considered this evidence and decided that, court likewise "favors parties who honor their promises, not regardless of the deduction afforded the estate, $2,2 million those who breach them," See id at 1546, 276 CalRptr, 214. of the total fee taken was excessive and unreasonable.

The Supreme Court of Montana reached a similar result Based on our review of case law and the record, we find in a suit by a partnership of doctors against an accounting the trial court erred in deducting $1,5 million from the jury's firm for failing to note the adverse impact the recommended finding. First, no authority supports an offset for tax benefits. reorganization and liquidation of a corporation would have We are unpersuaded by appellee's argument that the trial on the partnership's industrial revenue bond financing. See court's offset should be upheld because the IRS can no longer Billings Clinic v. Peat Marwick Main & Co., 244 Mont, 324, assess additional estate taxes. Our concern is with the parties 797 P,2d 899 (1990), On appeal, the accounting firm claimed before this court. Furthermore, we agree with the policy it was entitled to an offset for the tax benefits the individual discussed in Randall and DePalma. As the Supreme Court doctors received by proceeding with reorganization. See 797 stated ".., it is more appropriate to give the defrauded party P,2d at 912, The district court refused to allow evidence of the benefit even of windfalls than to let the fraudulent party tax benefits. See id. at 913, The supreme court found no keep them." 478 U.S, at 663, 106 S,Ct, 3143, Under the facts entitlement *780 to an offset for tax benefits because the of this case, it is more appropriate for the estate to obtain the objective of compensatory damages is to restore the damaged benefit of a windfall than to let appellee keep $1,5 million in party to the position the party would have attained had the fees the jury found was unreasonable, tort or breach not occurred. See id. The court added that, had the accounting firm done its job, the clinic would have [4] We next tum to appellee's argument that the Arce case had the benefit both of the tax benefits arising from the supports the trial court's mling. The Texas Supreme Court reorganization, and the lower cost of the favorable tax-exempt has recently affirmed, in part, this court's opinion in the u4rce status of industrial revenue bonds. See id. The failure of this case, recognizing fee forfeiture as a remedy for breach of bond financing resulted in a higher interest cost for the loans fiduciary duty in the lawyer-client relationship. See Burrow required for construction of an addition to the clinic. See id. V, Arce, 997 S.W.2d 229 (Tex. 1999). Appellants argue that Thus, the court reasoned there would be no equity in reducing Arce is inapplicable because it concems a remedy for breach

WESTLAW . 2'.M;. iiu... • • Keni::,: N :l

PLAINTIFFS'ORIGINAL PETITION-Page 057 . Lee V, Lee, 47 S.W.Sd 767 (2001)

of fiduciary duties other than the duty not to take an excessive challenge must fail. See General Motors v. Sanchez, 997 fee, but we do not read such a limitation in Arce. Instead, S,W.2d 584, 588 (Tex, 1999), A scintilla of evidence exists we find that Arce applies to any breach of fiduciary duty when the evidence offered to prove a vital fact is so weak case where the plaintiff pleads the equitable remedy of fee as to do no more than create a mere surmise or suspicion forfeiture. See id. at 246. A review of the petition in this case, of its existence. See Kindred v. Con/Chem, Inc., 650 S,W,2d however, reveals no specific pleading of the remedy of fee 61, 63 (Tex, 1983), In application, we should find there is forfeiture. Instead, appellants sought actual damages in the no evidence " i f reasonable minds cannot differ from the form of excessive fees *781 taken by the executor. Neither conclusion that the evidence offered to support the existence side mentioned forfeiture in the Uial court. Appellee did not of a vital fact lacks probative force," Id. An appellate court argue that the claim of excessive fees was one within the may not second-guess the jury unless only one inference may trial court's discretion and did not cite any case law regarding be drawn from the evidence. See Ross v. Green, 135 Tex, 103, the equitable remedy of forfeiture either during the charge 118, 139 S,W,2d 565, 572(1940), conference or in his motion for judgment notwithstanding the verdict. During the charge conference, appellee did not object Appellants offered expert testimony from James P, Bevans, a to the questions conceming the excessive fee arid damages. In certified property manager for 25 years and former regional his motion for judgment notwithstanding the verdict, appellee manager of the Tmst Department at NationsBank, Bevans argued the evidence was legally insufficient to support the testified that, to properly evaluate fees, he considered the finding or, alternatively, the estate did not suffer damages in size of the estate, the diversity of assets, and the complexity the amount found by the jury. of administration, including tax considerations, Bevans observed that, based on his experience with comparable Even a liberal reading of the petition does not reveal a request estates, an approximate fee of $300,000 would have been for a partial or total forfeiture of the executor's fee. Appellants reasonable. Afler reviewing the estate and appellee's actions, clearly claimed that the taking of an uiueasonable fee was Bevans concluded appellee was not entitled to any fee. In in itself a breach of fiduciary duty. Because there was no support of his opinion, Bevans offered the following: (1) pleading for the equitable remedy of forfeiture, we hold that appellee did not give the beneficiaries an accounting for 13 Arce does not apply to this case. years; (2) appellee did not keep proper records; (3) 80-90% of the estate's assets were non-productive real estate and *782 Having found in favor of appellants on their first issue, we the farms and ranches were operated at a loss for 20 years; (4) turn to appellee's first cross-point, claiming that the evidence appellee did not fransfer property to a tmst for 18-20 years; is legally and factually insufficient to support the jury's (5) appellee took his fee while there was a huge IRS debt with finding of $2.2 million in unreasonable executor fees. In interest continuing to accme; and (6) appellee spent $750,000 his argument, appellee considers the evidence relating to the on experts regarding development of a Westheimer tract when factors articulated in Arce for use by the judge in determining he had no experience in development. The record shows that, the amount of fee to be disgorged. Because we have found although his 'mother died in 1975, appellee did not fully fund Arce inapplicable to the facts of this case, we will not utilize the Article IV tmst until 1984 and did not fund the Article V these factors, but will instead review the record for evidence tmst until 1995. Bevans stated that the $2,8 million fee was supporting the jury's finding that $2.2 million of the fee taken unbelievable and outrageous. by appellee was unreasonable, This testimony is some evidence supporting the jury's finding [5] (61 [71 [81 [91 Because the burden of pro

WESTLAW 1 horns.'sr. >-'Dulei« N o c l a i m to o n

PLAINTIFFS'-ORIGINAL PETITION - Page 058 Lee V. Lee, 47 S.W.3d 767 (2001)

the evidence is so weak as to be clearly wrong and manifestly evidence of improper and unacceptable actions by appellee as unjusL See Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986). executor. We overrule cross-point one.

In addition to considering the testimony of Bevans, we must also consider the evidence presented by appellee. Failure to Sell Westheimer and Pasadena Properties Appellee testified that, in taking his fee, he considered the will language, , which allows him to take a just and [12] Appellants next challenge the trial court's decision reasonable fee, and he considered an unidentified insurance to disregard the jury findings that appellee breached his publication showing fees for similar estates in Texas and other fiduciary duties by failing to sell the Westheimer and jurisdictions. Appellee testified it was his decision to take a Pasadena properties. By cross-point, appellee claims the range of fees, rather than a percentage of the value of the evidence is legally and factually insufficient to support the estate. Appellee took his fee in a series of payments from jury's findings in questions l(a)-(b) and 3. 1981-83 ranging in amounts from $5,000-375,000. Appellee conceded he did not prepare a written analysis of how he Question 1 (a) asked the jury whether appellee breached his determined his fee and he kept no time records of his efforts. fiduciary duty by failing to sell the Westheimer property. Appellee also agreed thai he did not consult an attomey or Question 1 (b) asked whether appellee breached his fiduciary conduct legal research about customary fees. Although he duty by failing to sell the Pasadena property. Question 3 asked took the fee in the early 1980s, appellee testified that he knew the jury the date appellee reasonably should have sold the the estate administration would continue for a long time. properties, the dollar amount of proceeds that would have been received from such a sale, and the dollar amount of Appellee also produced several witnesses that testified about proceeds that would be received if the property were sold the tax and interest savings the estate realized as a result today. In response to questions 1(a) and (b), the jury found of appellee's taking the $2.8 million fee. Gregory Edward that appellee breached his fiduciary duty' by failing to sell the Bardnell, a CPA, testified that approximately $2 million of the two properties. In response to quesfion 3, the jury found the fee was deductible, meaning that the estate effectively paid Westheimer property should have been sold in May 1981, the only $850,000 of appellee's fee. Bardnell also testified that, proceeds from such a sale would have been $42 million, and had appellee merely paid the estate taxes and not paid himself the proceeds if sold today would be $24.5 million. As to the a fee, the estate would have saved only $85,000 in interest on Pasadena property, the jury found the property should have the IRS debt. Bardnell had no opinion of the reasonableness sold in July 1978, the proceeds from such a sale would have of appellee's fee. been $1.6 million, and the proceeds, if sold today, would be $2,485,500. Milton L. Schultz, an accountant who performed work for the estate, testified that deducting the executor fee and other In his motion for judgment notwithstanding the verdict, administration expenses was his idea, Schultz added that he appellee argued that there was no evidence to support the believed the fee was reasonable in light of the size of the estate jury's findings in response to questions 1(a), 1(b), and 3. The and the difficulties of administration, including the lack of trial court agreed with appellee's legal insufficiency argument liquidity. Schultz characterized appellee's administration and and disregarded the answers to jury question l(a)-(b) and 3. ability to pay the taxes and preserve the bulk of the estate as "nothing short of genius." [13] Appellants first assert that appellee invited or waived error because appellee requested question 3, but we find We find that the evidence supporting the jury's finding is nothing in the record indicafing that appellee requested this not so weak that the finding is clearly wrong and manifestly question. Appellants next argue waiver because appellee's unjust Based on the evidence presented by Bevans, thejiiry attomeys objected to the damages measure sought by could have determined that appellee was entitled to no fee. appellants. Appellants sought a measure of damages that Instead, the jury determined that appellee was entitled to included potential profits had Appellee timely sold the approximately $600,000, which is approximately 5% of the properties and invested the sale proceeds in a diversified estate value at the time of Katherine Bamhart's *783 death. portfolio of stocks and bonds. Appellee disagreed with this We refiise to second-guess the jury when there is ample measure, and argued the proper measure was sales proceeds plus interest.

WeSTLAVV

PLAINTIFFS' ORIGINAL PETITION - Page 059 Lee V. Lee, 47 S.W.3d 757 (2001)

593(Tex.l986). In reviewing the grant of a motion for Appellee's disagreement with appellants' measure of damages judgment notwithstanding the verdict, the reviewing court did not invite or waive the error complained of here. Appellee must review all testimony in a light most favorable to the offered the testimony of Professor Johanson, who rejected finding, considering only the evidence and inferences that appellants' proposed measure as improper and testified that support the finding and rejecting the evidence and inferences the proper measure was sale proceeds plus interest. Appellee contrary to the finding. See Navarette v. Temple Indep. Sch. was not advocating sale proceeds as the proper measure Dist. 706 S.W.2d 308, 309 (Tex.1986). I f there is more of damages, but was countering appellants' proposal for than a scintilla of competent evidence to support the jury's damages to include lost profits. We do not find appellee's finding, then the judgment notwithstanding the verdict will be objection and offer of testimony to constitute invited error. reversed. See Mancorp v. Culpepper, 802 S.W.2d 226, 228 (Tex. 1990). [14] Appellants also argue that appellee invited or waived error by statements made during jury deliberations. The jury Appellee claims questions 1 and 3 did not, as appellants sent a question to the trial judge regarding thepart of question suggest, ask whether he breached a duty to diversify assets, 3 asking the date appellee should have sold the Westheimer transform nonproductive assets into productive assets, and and the Pasadena properties. The jury asked whether "date" generate income, but instead, asked the jury whether appellee referred to year, or month and year. The trial judge told the breached a duty to accept two specific offers. Appellee asserts parties he replied "month and year," and asked the attomeys there is no evidence supporting a finding that he had a duty to if they had any objections to this reply. Appellee's attomeys acceptaMay 1981 offer to purchase the Westheimer property objected and asked that the reply inform *784 the jury or a July 1978 offer to purchase the Pasadena property. that they must give the day, month, and year. Rather than Appellee fiuther argues there is no evidence that any sales objecting to "month and year," appellants' attomeys stated: pursuant to these two offers would have yielded the proceeds "We can take it from the end of the month if that's going to found by the jury. be their problem. 1 think that's narrowing in too specifically." The court decided to let the jury answer month and year. Although the evidence reveals a number of unaccepted offers for the Pasadena and Westheimer properties, the jury's finding The statement of appellants' counsel during this discussion of breach in May 1981 for the Westheimer property relates indicates they acquiesced in the "month and year" reply. to a May 1981 offer by a Mr. Carothers. The date found by Furthermore, this discussion does not show that appellee's the jury of July 1978 for the Pasadena property relates to counsel requested "month and year." Rather, this was the the July 1978 offer for the Pasadena property made by U.S. suggestion of the trial judge. We do not find that appellee's Homes. By failing to object to the jury question requesting the counsel invited error by asking for more specificity than the month and year appellee should have sold the two properties, •judge. appellants acquiesced in the jury finding a date that related to specific offers. [15] Likewise, appellee did not waive error by failing to object to question 3 on the ground of insufficient evidence. The evidence showed the Westheimer property did not have A party may challenge legal sufficiency for the first time high-density sewer capacity and appellee testified that he after the verdict regardless of whether the submission of delayed the sale of this property because he knew it would the question was requested by the complainant. See TEX.R. be worth more i f it had sewer capacity In May 1981, Mr. CIV. P. 279. By asserting in its motion for judgment Carothers offered to purchase part of the Westheimerproperty notwithstanding the verdict that the evidence supporting the for more than $40 million. *785 Appellee did not respond jury's findings was legally insufficient, appellee preserved to this offer because he believed it was a poor proposal in this complaint for appellate review. See id. that it required high-density sewer capacity and it included no payment for the portion of the property that was in the flood J16] (17] [18] Having found no waiver or invited plain. Appellee conceded that he did not attempt to negotiate error, we tum to appellants' challenge to the disregarding eitheroffer. Neither Carothers nor his principal, Loh, testified of the jury answers. A trial court may disregard a jury's whether they would have accepted a modified arrangement finding if there is no evidence to support the jury's finding. regarding the Westheimer property. See Aim v. Aluminum Co. of America. Ill S.W.2d 588,

weSTlA'KV © 2016 1 norrison Routers. No claim to ongmal U.S. Government Works.

PLAINTIFFS' ORIGINAL PETITION - Page 060 Lee V. Lee, 4-7 S.W.3d 767 (2001)

The evidence further showed that, in Juiy 1978, U.S. Homes Probate Code as mandatory because the language in these two offered $1.5 million for the Pasadena property, and later statutes is similar. Section 149C of the Probate Code states raised that offer to $1.64 million. Appellee testified he that a trial court may remove an independent executor on the rejected this offer because it was not a cash offer. No following grounds: representative from U.S. Homes testified. Therefore, there is no evidence that, had appellee negotiated, U.S. Homes (1) the independent executor fails to return within ninety would have accepted a modified arrangement regarding the days afler qualification, unless such time is extended by Pasadena property. Appellants' expert, Lucian Morrison, order of the court, an inventory of the property of the . testified that appellee should have responded to the offers and estate and list of claims that have come to his knowledge; negotiated for different terms than those in the original offers. (2) sufficient grounds appear to support belief that he Morrison did not state that appellee should have accepted the has misapplied or embezzled, or that he is about to original offers from U.S. Homes or Carothers. misapply *786 or embezzle, all or any part of the property committed to his care; [19] Texas courts have long held that unaccepted offers to purchase property are no evidence of market value of (3) he fails to make an accounting which is required by property. See Hanks v. Gvlf, Colorado & Santa Fe Ry. Co., law to be made; 159 Tex. 311, 320 S.W.2d 333, 336-37 (1959); Southwestern Bell Tel. Co. v. Wilson, 768 S.W.2d 755, 762 (Tex.App.- (4) he fails to timely file the notice required by Section Corpus Christi 1988, writ denied). The courts have found this 128 A of this code; evidence uncertain and speculative. See Hanks, 320 S.W.2d at 337. Evidence of an unaccepted offer does not establish the (5) he is proved to have been guilty of gross misconduct good faith of the person making the offer. See id: or gross mismanagement in the performance of his duties; or If unaccepted offers are too uncertain to serve as proof of the (6) he becomes an incapacitated person, or is sentenced market value of a parcel of property, they are likewise too to the penitentiary, or from any other cause becomes uncertain to serve as proof of the dollar amount of proceeds legally incapacitated from property performing his appellee would have obtained if hehad sold the two properties fiduciary duties. on the dates found by the jury. Because the jury was advised to find a month and year when the properties should have TEX. PROB.CODE ANN. § 149C (Vemon Supp2000). been sold, the jury necessarily focused on the dates of specific offers and unaccepted offers are no evidence of the dollar Section 113.082 of the Property Code govems removal of a amount of proceeds appellee would have received hadhe sold tmstee. This section states a court may remove a tmstee and the properties, Accordingly, we find no error by the trial court deny part or all of the tmstee's compensation if; in disregarding thejury's answers to questions 1(a), 1 (b), 3(a), and 3(b). Having found no error in the trial court's actions, we (1) the tmstee materially violated or attempted to violate need not reach appellee's cross-poinL the terms of the tmst and the violation or attempted violation results in a material financial loss to the tmst;

(2) the tmstee becomes incompetent or insolvent; or Removal of Appellee as Executor and Trustee (3) in the discretion ofthe court, for other cause. [20] Appellants next challenge the trial court's refusal to remove appellee as executor and trustee. Appellants also TEX. PROP.CODE ANN. § 113.082(a) (Vemon 1995). complain of the trial court's refusal to submit requested questions relating to removal. In reviewing a trial court's removal of a tmstee under a prior version of section 113.082, the supreme court held that Appellants initially raise an issue of statutory construction. removal was not discretionary with the trial court, despite the Appellants contend that, because the supreme court has use ofthe word"may."5'eey4fe«v. Da/)/, 661 S.W.2d9l 1,913 construed section 113.082 of the Trust Code as mandatory (Tex. 1983). Because the supreme court has found removal in nature, we should likewise construe section 149C of the mandatory under section 113.082, ^ appellants argue removal

WESTLAW © 201G ! hoo'i&.-in Houtors- No ciuirn lo onn:na! U S Govcrninent Works.

PLAINTIFFS' ORIGINAL PETITION - Page 061 Lee V. Lee, 47 S.W.Sd 767 (2001)

should also be mandatory under section 149C. Absent any higher and additional duties, some of which might not even clear directive from the supreme court, however, we decline exist absent the fiduciary relationship. appellants' invitation to construe the clear language of section 149C to find that removal of an executor is mandatory. Id. at 684-85, The court concluded that gross misconduct or mismanagement, at a minimum, includes: "(1) any willful omission to perform a legal duty; (2) any intentional 1. Removal as Executor commission of a wrongfiil act; and (3) any breach of a [21] Appellants contend the trial court's decision not fiduciary duty that results in actual harm to a beneficiary's to remove appellee as executor constituted an abuse of interest." Id. at 685 (emphasis omitted). discretion because the evidence shows appellee did not timely file an inventory, misapplied property committed to his care, In determining whether the trial coirrt abused its discretion, failed to timely file a proper accounting, and was found to the Geeslin court held there were seven legally relevant have breached his fiduciary duty in numerous-respects. A factors to cons ider: trial court abuses its discretion if its decision is arbitrary, unreasonable, and without reference to any guiding rules and (1) the higher quality of ethical and moral conduct principles. See Goode v. Shoukfeh. 943 S.W.2d 441, 446 implicit in Geeslin's fiduciary status; (Tex. 1997). (2) the degree of harm sustained by the beneficiaries' interest, owing to Geeslin's conduct; Gross misconduct or gross mismanagement is a ground for removal of an executor. See TEX. PROB.CODE ANN. § (3) the public policy in favor of independent 149C (Vemon Supp.2000). In Geeslin v. McElhenney. 788 administration, due to the salutary purposes served by S.W.2d 683 (Tex.App,—Austin 1990, no writ), the court that method of administration; reasoned that the statutory terms "gross mismanagemenf and "gross misconduct" do not encompass ordinary negligence. (4) the sufficiency of a bond to protect the beneficiaries' Nonetheless, the court recognized that an executor owes the interest i f a bond is given under section 149 of the duties of a trustee: Probate Code;

He holds property interests, not his own, for the benefit (5) the complexity of the estate; of others. He manages those interests under an equitable obligation to act for the others' benefit and not his (6) whether Geeslin's acts and omissions resulted from own. He is a "fiduciary" of whom the law requires professional advice, or whether they occurred in the face an unusually high standard of ethical or moral conduct of such advice; and in reference to the beneficiaries and their interests. (7) the distinction between willful conduct and His "duties" are more than the ordinary "duties" of inadvertent acts and omissions generally. the marketplace. They connote fair dealing, good faith, fidelity, and integrity. He may have additional *787 Id. In applying these factors, the Geeslin court upheld the duties that he would not have in an ordinary business trial court's removal ofthe executor because (1) Geeslin knew relation—a duty of full disclosure, for example, and a about an additional estate tax liability, and did not act to duty not to use the fiduciary relationship for personal limit the interest and penalty, but paid himself commissions benefit except with the full knowledge and consent of and paid other estate obligations; and (2) Geeslin used estate the beneficiaries, "It is against public policy to allow fiinds to pay pension-plan liabilities and used estate fiinds to persons occupying fiduciary relations to be placed in make terminating distributions to pension-plan participants. positions in which there will be constant danger of a Id. at 686-87. The court noted that Geeslin commingled betrayal of tmst by the vigorous operation of selfish funds despite warnings from his attomey and accountant that motives," commingling might be prohibited. See id. at 687,

Thus, the statutory criteria ("gross misrhanagement" and Appellee claims appellants misread Geeslin and that it does "gross misconduct") are necessarily elastic. They must be not hold the trial court may remove an executor for breach sufficiently narrow to exclude ordinary negligence, yet of a fiduciary duty that results in actual harm. Indeed, sufficiently broad to include a fiduciary's breach of his appellee argues that, because Geeslin does not so hold, the

WESTLAW (tV 2016.niofnsur. Routers No olaim tn otiginnl U S Govornment Woiks.

PLAFNTIFFS'ORIGINAL PETITION - Page 062 Lee V. Lee, 47 S,W-3d 767 (2001)

trial court properly denied appellants' requested questions. as appellee strongly argues, preclude removal, but we may Appellee reasons that if a breach of duty resulting in harm consider it in reviewing the trial court's mling. were sufficient to support removal, any minor breach could constitute gross misconduct. We disagree with appellee's The evidence showed, and appellee admits, he did not file reasoning. Although Geeslin does state that a breach of an accounting in a timely manner. The jury found breaches fiduciary duty resulting in actual harm to a beneficiary's of fiduciary duty by appellee in the failure to sell the interest may be sufficient to constitute gross misconduct, this Westheimerproperty, failure to sell the Pasadena property, in holding is tempered by the application of seven factors for the the mismanagement of the River Bend Farm and Cap Rock court to consider in determining whether a breach of fiduciary Ranch, and in the expenditure of estate fimds on the attempted duty resulting in harm should result in removal. See id. at 685. Knollwood development. Because we have upheld the trial We believe appellee's fears *788 about removal for minor court's decision to disregard the jury's findings relating to infractions are unfounded. Consideration of the seven factors the Westheimer and Pasadena properties, the court could not would, in our opinion, allow a trial court to determine whether consider these breaches of duty in considering whether to the breach of fiduciary duty is of sufficient magnitude to merit remove appellee as executor. As to the findings regarding removal of the executor. River Bend Farm and Cap Rock Ranch, the jury only found damages to the estate of SI ,00 for each. As to the expenditure We also disagree with appellee's statement that the trial of estate fiinds with respect to Knollwood, the jury found court denied appellants' requested question 11 because damages of $840,000. The jury also found unreasonable fees he disagreed with appellants' interpretation of Geeslin. of $2.2 million. Appellants submitted the following question; "Did Ronald Lee grossly mismanage any part of the property committed to Because there were findings of breaches of fiduciary duty his care as executor?" In refusing to submit these questions, and substantial actual damages, we must determine whether, the trial judge stated; in light of the seven Geeslin factors, the trial court abused its discretion in refusing to remove appellee as executor. We THE COURT: The instructions and begin with the overall consideration that appellee's position questions submitted as Plaintiffs A as executor, being fiduciary in nature, requires that we through F are denied. I will say hold appellee to a higher ethical and moral standard. This on the record what I have said off consideration must be tempered, however, by consideration the record, and that is that there's of the public policy in favor of independent administration a finding of either gross negligence and the undisputed complexity of this estate. Of equal or a breach of fiduciary duty and importance, are the substantial damages to the beneficiaries' damage. I would find that under interest. The damages for excessive fees and for the failed the Probate Code to be grounds for Knollwood development total more than $3 million. Appellee removing the tmstee, anyway. And , did not consult professionals with respect to the amount so I don't think those questions, of fees he took, but he did consult some professionals those particular ones, are necessary. conceming the Knollwood development Indeed, many of the expenses involved with Knollwood are those *789 of When denying appellants' requested question, the trial judge professionals appellee consulted. Finally, we must consider stated the question was unnecessary because the removal whether appellee's actions were willful or inadvertent. The question could be answered from the jury's responses jury did not find that appellee's actions constituted gross to questions regarding breach of fiduciary duty or gross negligence. Nonetheless, the evidence does not indicate negligence. The trial judge's statement is consistent with our that appellee's taking of an excessive fee or his excessive interpretation of Geeslin. expenditures on the Knollwood development were merely inadvertent acts, Based on Geeslin, the trial court could have considered the jury's findings regarding breaches of fiduciary duty in making [22] [23) Although the trial judge is given discretion by his decision regarding removal, either as executor or as statute to determine whether an executor's actions rise to the tmstee. The jury's failure to find gross negligence does not. level of gross misconduct, this discretion is not unlimited. An abuse of discretion occurs when the trial court makes

WESTLA'^iV 201G fhojTison Routers. No claim to oriqinal U.S. GSovornmenl Works,

PLAINTIFFS' ORIGINAL PETITION - Paee 063 Lee V. Lee, 47 S.W,3cj 767 (2001)

a legally unreasonable determination given the facUial-legal denied). *790 An instmction is proper if it assists the jirry, context in which it was made. See London v. Jean-Paul is supported by the pleadings or evidence, and accurately Budinger, Inc., 724 S.W.2d 931, 939 (Tex.App.—Austin states the law. See Perez v. Weingarten Realty, Investors, 1987, no writ). In other words, the trial court's determination 88! S.W,2d 490, 496 (Tex,App,—San Antonio 1994, writ is legally unreasonable if the court failed to consider a fact denied). Whether terms are properly defined or the instmction shown in the evidence that was legally relevant. See id. at property worded is a question of law reviewable de novo. See 939--10. M.N. Dannenbaum, Inc. v, Brummerhop, 840 S,W,2d 624, 631 (Tex,App.—Houston [14th Dist] 1992, writ denied). In this case, we cannot say that the trial court necessarily Error is reversible only if, when viewed in light of the totality failed to consider any of the Geeslin factors. While we may of the circumstances, the refusal to submit a question or not have reached the conclusion the trial court made in light instmction probably caused the rendition of an improper of the factors, this is not the standard. Having considered judgment See St. James Transp. Co. v. Porter, 840 S,W.2d the statute, the Geeslin factors, and the evidence, we cannot 658, 664 (Tex.App.-Houston [1st Dist,] 1992, writ denied); say the trial court abused its discretion in rellising to remove TEX,R.APP. P. 44.1(a)(1), appellee as executor. [29] [301 Because appellants pled for removal of appellee as tmstee under section 113,082, and presented evidence 2. Removal as Trustee of actions the jury found to be breaches of fiduciary duty, Grounds for removal of a trustee under section 113.082 we hold that the issue of removal under the statute was a include a material violation or an attempt to violate the valid theory raised by the pleadings and evidence. Although terms of the trust that results in a material financial loss appellants requested a question regarding a statutory ground to the trust 5ee TEX. PROP.CODE ANN. § 113,082(a)(l) for removal, appellee claims appellants "are not tme to the (Vemon 1995). Appellants requested a question (question record when they tell this Court that they asked the trial court 13) very similar to the language of the statute: "Did Ronald to submit a question to the jury in language substantially Lee grossly mismanage or materially violate the terms of identical to the specific statutory ground for removal of the Article IV Tmst resulting in a material financial loss tmstee under § 113,082,,,." Appellee argues that requested to that tmst?" The trial judge refiised to submit appellants' question 13 would have negated the statutory requirement of requested quesfion because the judge believed he could make a material violation giving rise to a material financial loss the determination of mismanagement or material violations by permitting the jury to answer "yes" if it found any breach from the submitted questions regarding breaches of fiduciary of fiduciary duty resulting in harm or a material violation duty and gross negligence. ^ Appellants claim the refirsal to resulting in material harm. We disagree. submit requested question 13 was reversible error. Requested question 13 asked the jury to determine whether [24] [25] [261 [271 PSl Rule 278 provides that thq)pellee grossly mismanaged or materially violated the terms court must submit questions raised by the written pleadings of the Article IV Tmst resulting in a material financial loss and evidence. See TEX.R. CIV. P. 278. See also Elbaor to that tmst The instmction to that question stated: "You are V. Smith, 845 S.W.2d 240, 243 (Tex.1992) (interprefing instmcted that 'gross mismanagement' means any breach of Rule 278 as a nondiscretionary directive). The decision a fiduciary duty that results in actual harm to a beneficiary's whether to submit a particular instmction or definition is interest." Rather than appellee's more tortured constmction of reviewed for an abuse of discretion. See State Farm Lloyds this question, we read this question to allow the jury to answer V. Nicolau, 951 S,W.2d 444, 451 (Tex.1997). To deteranine "yes" i f the jury found a material financial loss suffered by whether an alleged error in the charge is reversible, the the trast as a result of either; (1) a breach of fiduciary duty reviewing court must consider the pleadings, the evidence, that resulted in actual harm; or (2) a material violation of and the charge in its entirety. See Island Recreational the Article IV Trast, In other words, we believe the question Dev. Corp. v. Republic of Tex. Sav. Ass'n, 710 S.W.2d presents "gross mismanagemenf and "material violation of 551, 555 (Tex.1986). As to instmctions and definitions, the Article IV Trasf as the two types of actions by a trastee the essential question is whether the instmction aids the that could result in a material financial loss to the trast. jury in answering the questions, See Harris v. Harris, 765 Therefore, this question substantially tracks the language of S.W.2d798, 801 (Tex.App.—Houston [14th Dist] 1989, writ section 1 13,082.

YvfS-lLAVV r ' - i u i ; : rb!%n.;-.n Hci.ile"> ciaun l o Oitj-^'oi U Govoi'on'icnt Wo;K:;i

PLAINTIFFS' ORIGINAL PETITION - Page 064 Lee V. Lee, 47 S.W.3d 767 (2001)

In Akin, the trial court had removed the trastee piusuant to In reviewing appellee's brief, we note that some of appellee's jury findings that the trastee had developed such hostility defensive arguments tend to support appellants' claim that the toward certain beneficiaries that his decisions as trastee in trial court should have submitted the requested question 13. administering the tmst funds would probably be influenced Appellee argues in his brief that "whether a breach of duty is a adversely to those beneficiaries' interests, 661 S.W,2d at 'material violation' and whether afinancialloss is 'material' 912, There was also a finding that the tmstee had acted are necessarily fact questions,,.." Appellee continues, "the improperly with b^st fimds. See id. at 913. The court of finding that expenditures on BCnollwood were $840,000 too appeals reversed, holding that removal was not warranted. much cannot substitute for the missing fact finding that those See id. at 912. In the supreme court, a beneficiary argued expenditures constituted a material violation resulting in a that former section 39 of the Texas Tmst Act (now section material loss," As to the executor's fee, appellee observed that 113.082)^ allowed removal of a tmstee to be discretionary fact issues as to materiality of the breach and the loss are not and that the appropriate standard of review was the "arbitrary conclusively established. As to the late filing ofthe inventory and unreasonable" standard. See id. or the delay in providing an accounting, appellee reasons that, even if these items were undisputed, they "cannot substitute Although the former statute provided (and the current statute for the missing fact finding that any such breaches constituted continues to provide) that a tmstee may be removed for a material violation causing any material loss," a ground _ specified in the statute (material violation of tmst resulting in material financial loss, incompetence, or *791 [31) [32] Nonetheless, we believe the trial judge's insolvency) or "for other cause, in the discretion of the reasoning was correct when he stated he could determine court having jurisdiction," the Akin court found that this removal from jury answers regarding breach of fiduciary statute "does not make removal of a trustee a discretionary duty or gross negligence. We agree with the trial court that act on the part of the trial court and hence subject upon breaches of fiduciary duty can constitute material violations review to the 'arbitrary and unreasonable* standard," See id. of the trust. Furthermore, we believe that jury awards of The court observed that the portion of the statute allowing damages for breaches of fiduciary duty can constitute a removal for other causes "in the discretion ofthe court having material financial loss to the trust. Accordingly, we find no jurisdiction," was meant to insure that the grounds of removal error by the trial court in refusing to submit requested question were not expressly limited to those enumerated, but may 13, include others that the trial court, in its discretion, deems proper. See id. Even without submission of requested question 13, there are jury findings of breach of duty that the trial court should have Because no issue was submitted to the jury regarding found to be material violations of the trast. These include the improper conduct or mismanagement by the tmstee, and such jury's finding of breach of fiduciary duty with respect to the conduct was not established as a matter of law, the Akin court expenditures on the Knollwood development and the taking found that removal for mismanagement of tmst funds was not of an excessive fee. There are also juryfindingsof substantial *792 warranted. See id. As for the jiuy findings regarding damages, including $840,000 for Knollwood expenditures, trastee hostility, the court first noted that ill will or hostility, and $2,2 million in excessive fees, that constitute, as a matter standing alone, was an insufficient ground for removal. See of law, material financial losses to the trast. id. The court then stated:

Appellants argue that removal is mandatory if there is a Article 7425b-39 [now section material violation resulting in a material financial loss to 113.082] of the Texas Tmst the trast. Indeed, the supreme court appears to hold that Act sets out circumstances which removal is not discretionary. See Akin v, Dahl, 661 S,W,2d warrant the removal of a trastee 911, 913 (Tex,1983). Appellee rejects this interpretation of from office. Should the trier of Akin and claims XhsXAkin merely notes, in dicta, that removal fact affirmatively find that one is mandatory for an enumerated statutory ground. We are of the enumerated circumstances unpersuaded that we may ignore the court's holding as merely has occurred, the tmstee will be dicta. removed. Additionally, should the trier o f fact find that hostility, ill

VVgSTLA'W vQverru^ nt WO;-

PLAINTIFFS' ORIGFNAL PETITION - Page 065 Lee V. Lee, 47 S,W.3d 767 (2001)

w i l l , or other factors have affected the trustee so that he cannot properly Bad Faith Defense serve in his capacity, the trustee w/// be removed. [34] Appellants next claim the trial court erred in not requiring appellee to bear his own attomey's fees and costs See id. at 914 (emphasis added). We understand this passage because the jury found appellee defended the lawsuit in to mean that a trustee will be removed if the trier of fact bad faith. Section 149C permits an independent executor to finds the evidence shows the trustee has committed one of the recover necessary expenses, including attomey's fees, if he enumerated acts or one of the acts, not enumerated, but which or she defends an action for removal in good faith. TEX. the trial court, in its discretion, deemed a proper ground for PROB.CODE ANN. § 149C (Vemon 1980). In granting removal. appellee's motion for judgment notwithstanding the verdict, the trial court disregarded the answer to question 8, finding Although the jury in Akin had found the tmstee's hostility that appellee defended the suit in bad faith. In a cross-point, "probably" would affect his performance, the supreme court appellee claims there was legally and factually insufficient held this finding was insufficient to support removal. See *793 evidence to support thejury's finding that he defended id. Instead, the court held that there had to be a finding this lawsuit in bad faith. that the tmstee's hosdlity does or will affect his performance as a tmstee. See id. Accordingly, the court's discussion of Appellee argues that even i f there is a finding of bad faith removal for an enumerated ground could be constmed to be defense, an executor is entitled to attomey's fees where dicta. Nonetheless, the court also states that a tmstee "will be he prevails against attempted removal. In support of this removed" for hostility, a ground not enumerated, but found argument appellee cites Miller v. Anderson, 651 S.W,2d by the trial court in its discretion to be a proper ground for 726 (Tex, 1983), In Miller, the court was constming secdon removal. See id. 243 of the Probate Code, which allows an executor to recover firom the estate his necessary expenses, including By saying "will be removed," rather than "may be reasonable attomey's fees, when the executor defends the removed," the court constmes the statute to be mandatory will in good faith, and "with just cause, for the purpose and not discretionary. Although the court's statement was of having the will or alleged will admitted to probate, unnecessary to the holding, we constme this statement to be whether successfiil or not,..," TEX, PROB,CODE ANN, § judicial dictum deliberately made for guidance of the bench 243 (Vemon Supp,2000), The supreme court upheld the and bar and, therefore, binding on lower courts. See Ex parte trial court's award of attomey's fees to the executor even Harrison, 741 S,W,2d 607, 609 (Tex,App,—Austin 1987, though there was no affirmative finding of good faith. See orig, proceeding). Although we disagree with t h e c o u r t ' s 651 S.W.2d at 728, The court observed that in prior cases, constmction because the plain language of the statute is where the wills were denied probate, a showing of good discretionary in nature, we are constrained to follow supreme faith and just cause was necessary to show a benefit to the court precedent. estate compensable under section 243, See id. (citing Russell V, Moeling, 526 S.W.,2d 533 (Tex. 1975) and Huff v. Huff, [33] Appellants also argue appellee has a conflict of interest 132 Tex. 540,124 S.W.2d327 (Tex. 1939)). The Miller comt that requires his removal. The alleged conflict arises from found that a benefit to the estate was proven when the will appellee's opposition to appellants' motion for judgment and his attempt to reduce the tmst's judgment. Such a conflict was admitted to probate. ^ 651 S.W.2d at 728. could arise anytime a beneficiary brought suit for damages against a tmstee. Therefore, we decline to find a conflict of Secfion 243 is phrased similarly to secfion 149C, which interest under these circumstances. Because we find that the provides that an executor "who defends an action for his breaches of duty found by the jury and the total of $3 million removal in good faith, whether successful or not, shall in damages consfitute a material violation of the tmst resulting be allowed out of the estate his necessary expenses and in a material financial loss, we hold the trial court had a disbursements, including reasonable attomey's fees,..." TEX. mandatory duty to remove appellee as trastee. Accordingly, PROB.CODE ANN, § 149C(c) (Vemon 1980), Although the the trial court erred in reflising to remove appellee as tmstee. language of the two statutes is somewhat similar, we are unconvinced that the holding in Miller applies to the facts of this case. In Miller, there was no finding of good faith and the

iTimcnl Works Lee V, Lee, 47 S.W.Sd 767 (2001)

supreme court held that the lack of this finding did not prevent of the executor fee taken, the estate's need for cash at recovery of attomey's fees. 651 S.W.2d at 728. ffolding the time appellee took the fee, the failure to provide a that a finding of good faith is unnecessary under certain proper accounting, the use of estate fiinds to pay personal circumstances does not inescapably lead to the conclusion expenses, and the failure to transfer the estate's assets to its that an affirmative finding of bad faith should be ignored. We beneficiary until 19 years after his mother's death. Although cannot say that, based on its holding in Miller, the supreme this testimony supports liability as to breach of fiduciary court would disregard an affirmative jury finding of bad faith. duty, it does not necessarily support a finding that appellee Although appellee was successfial in avoiding removal as an defended this lawsuit in bad faith. Rather, to support thejury's executor, removal was a discretionary determination made finding, there must be some evidence that appellee's defense by the trial judge. In addition to finding many breaches of against removal was in bad faith. fiduciary duty by appellee, the jury found that appellee had defended the lawsuit in bad faith. Although the jury charge phrased the "good faith" requirement negatively, we construe the jury's affirmative [35] Although a trustee may also be removed under section finding to be a finding that appellee did not defend against 113.082 of the Property Code, there is no "good faith" removal in good faith. The jury charge did not define requirement in the statute allowing recovery of fees. Section "bad faith." The statute, which includes the "good faith" 114.064 provides that the court "may make such award requirement, also contains no definition of "good faith." of costs and reasonable and necessary attomey's fees as Furthermore, we have discovered no case law addressing the may seem equitable and just." TEX. PROP.CODE ANN. § meaning of "good faith" under this statutory provision. 114.064 (Vemon 1995). Thus, the grant or denial of attomey's fees to a trustee is within the sound discretion of the trial In different contexts, "good faith" can be a subjective or an court, and a reviewing court will not reverse the trial court's objective standard. For example, under the Texas Business judgment absent a clear showing that the trial court abused its and Commerce Code, "good faith" is defined as honesty discretion by acting *794 without reference to any guiding in facL See TEX. BUS. & COM.CODE ANN. § 1.20(19) rules and principles. See Lyco Acquisition 1984 Ltd. v. First (Vemon Supp.2000). The Texas Supreme Court has held Nat'lBank. 860 S.W.2d 117,121 (Tex.App.—Amarillo 1993, that the test for good faith is the actual belief of the party writ denied). Because removal of a trustee does not require a and not the reasonableness of that belief See La Sara good faith finding, the jury question in the instant case only Grain v. First Nat'l Bank, 673 S.W.2d 558, 563 (Tex.1984); concems appellee's entitlement to recover attomey's fees as Holeman v. Landmark Chevrolet Corp., 989 S.W.2d 395, 399 an executor. (Tex.App.-Houston [14th Dist,] 1999, writ denied). Unlike this subjective standard, the courts have adopted an objective As stated previously, a trial court may disregard a jury's standard where official immunity is asserted. See City of finding if there is no evidence to support thejury's finding. Lancaster v. Chambers, 883 S.W.2d 650, 656 (Tex. 1994), See Aim v, Aluminum Co. of America, 111 S,W,2d 588, The supreme court observed that this test, like the test under 593 (Tex, 1986), In reviewing the grant of a motion for federal immunity law, is one of objective reasonableness, judgment notwithstanding the verdict, the reviewing court without regard to whether the official acted with subjective must review all testimony in a light most favorable to the good faith. See id. This objective standard provides that an finding, considering only the evidence and inferences that officer acts in good faith in a pursuit case i f "a reasonably support the finding and rejecting the evidence and inferences pmdent officer, under the same or similar circumstances, contrary to the finding. See Navarette v. Temple Indep. Sch. could have believed that the need to immediately apprehend Dist., 706 S,W,2d 308, 309 (Tex, 1986). If there is more the suspect outweighed a clear risk of harm to the public in than a scintilla of competent evidence to support the jury's continuing the pursuit." Id. finding, then the judgment notwithstanding the verdict will be reversed. See Mancorp v. Culpepper, 802 S.W.2d 226, 228 Under other circumstances, a combination of subjective (Tex. 1990). and objective standards has been found appropriate. In the context *795 of a whistle blower action, the supreme In support of the jury finding of bad faith defense against court considered the public and private concerns involved removal, appellants cite generally to the five weeks of and the subjective and objective standards of "good faith," testimony regarding appellee's conduct, including the amount and decided on a combination of the two standards. See

WESTLAW 2016 rhomsoti Routers, No claim lo original U.S. Goverriment '>/Vorks.

PLAINTIFFS'ORIGINAL PETITION-Page 067 • Lee V. Lee, 47 S.W.3d 767 (2001)

Wichita County v. Hart, 917 S.W.2d 779, 784 (Tex,1996), must protect the beneficiaries' interest in the estate proceeds. The court held that "good faith" in the whistle blower context At the same time, we must preserve an executor's ability to means that; "(1) the employee believed that the conduct fulfill the obligations of the position, exercising judgment reported was a violation of law and (2) the employee's in handling the often complicated decisions involved in belief was reasonable in light of the employee's training and administration of an estate. Accordingly, we believe a fair experience," Id In reaching this holding the court considered balancing of these interests is achieved by adopting a standard the United States Supreme Court's discussion of objective and of good faith that combines the subjective and objective tests. subjective standards for "good faith" in Wood v. Strickland, We hold that an executor acts in good faith when he or she 420 U,S, 308, 95 S.CL 992, 43 L,Ed.2d 214 (1975), subjectively believes his or her defense is viable, if that belief is reasonable in light of existing law. This standard should In Wood, the Court addressed whether an objective or protect all but the plainly incompetent executors or those who subjective standard should apply in a section 1983 action willfully breach their fiduciary duties, ^ where the school official claimed immunity. See id. at 314- 15, 95 S.Ct 992. The court held; The record contains much evidence regarding appellee's breaches of duty, but appellants do not point to, and we The disagreement between the have not located, any evidence showing that appellee's *796 Court of Appeals and the District defense against removal was made in bad faith. We have Court over the immunity standard in located no evidence that appellee subjectively believed his this case has been put in terms of defense was in bad faith and no evidence that his defense an "objective" versus a "subjective" had no reasonable or arguable basis. Accordingly, the trial test of good faith. As we see it, court properly disregarded thejury's finding of bad faith and the appropriate standard necessarily allowed appellee to recover his attorney's fees. contains elements of both. The official himself must be acting sincerely and with a belief that he is doing right, but an act ... can Refusal to Require Reimbursement be no more justified by ignorance for Appellants' Attorney's Fees or disregard of settled, indisputable law,.. than by the presence of actual [37] In a separate issue, appellants claim the trial court malice. should have required appellee to reimburse the Article IV Tmst for appellants' attomey's fees and costs incurred in the M a t 321, 95 S.Ct 992. prosecution of this case. Section 245 of the Probate Code provides; The standards referenced in Rule 13 are particularly illuminating. Rule 13 provides that an attomey or party's When the personal representative signature on a pleading constitutes a certificate by them of an estate or person neglects the that "to the best of their knowledge, informadon, and performance of any duty required belief formed after reasonable inquiry the instmment is not of him, and any costs are incurred groundless and brought in bad faith or groundless and brought thereby, or if he is removed for for the purpose of harassment" TEX.R. CIV. P. 13. Under cause, he and the sureties on his this mle, courts presume pleadings are filed in good faith and bond shall be liable for costs of will not impose sanctions absent good cause, the particulars removal and other additional costs of which must be set out in the order. See id. "Groundless," incurred that are not authorized in the context of Rule 13, means "no basis in law or fact expenditures, as defined by this and not warranted by good faith argument for the extension, code, and for reasonable attomey's modification, or reversal of existing law." Id. fees incurred in removing him and in obtaining his compliance [36] In the context of an action to remove an executor, we regarding any statutory duty he has believe we must balance the interests of the beneficiaries with neglected. the public policy in favor of independent administration. We

weSTLAW >aiC 1 non-iftor, Hcutds. No claim to otia.Ml U S. Govcriimetit WoiKs.

PLAINTIFFS' ORIGINAL PETITION - Page 068 Lee V. Lee, 47 S.W.3d 767 (2001)

were claims of violations of appellee's statutory duty of care. TEX, PROB.CODE ANN. § 245 (Vemon Supp.2000), The Appellants also sought appellee's removal as executor and as courts have held that this statute allows the beneficiaries tmstee. Although fees may not be recovered under section to recover the attomey's fees they incurred in removing 245 for seeking removal of appellee as tmstee, our review of an executor in recovering the effects of an executor's the record shows that this effort and the facts supporting this neglect of his statutory duties. See Barnett v. Barnett, 985 claim were inextricably intertwined with the facts regarding S,W,2d 520, 535 (Tex,App.—Houston [1st Dist] 1998, writ removal as executor and for breaches of duty. There is an granted); Lawyers Sur. Corp. v. Larson, 869 S,W.2d 649,653 exception to the duty to segregate when the attomey's fees are (Tex, App,—Austin 1994, writ denied). rendered in connection with claims arising out of the same transaction and when the claims are so interrelated that their [38] Appellee argues that appellants are not entitled to prosecution or defense entails proof or denial of essentially recovery of fees under section 245 because they requested the same facts. See Stewart Title Guar Co. v. Sterling, 822 no finding by the jury or the trial court as to what amount S,W,2d 1, 11 (Tex. 1991). Because we find the prosecufion of attomey's fees were incurred in obtaining appellee's of the claim to remove appellee as tmstee was inextricably compliance with any statutory duty he neglected or in intertwined with the prosecution of appellants' other claims, removing him as executor. Case law has held that a party we find this case falls within the recognized exception to seeking recovery under section 245 must present evidence to segregation. Therefore, the trial court erred in refusing to enable the court to determine what fees are recoverable by the apply section 245 to require appellee to reimburse the estate estate. See Larson, 869 S,W,2d at 652; Fillion v. Osborne, 585 for the fees incurred by appellants. S.W,2d 842, 845 (Tex.Civ.App.—Houston [1st Dist] 1979, no writ). The parties stipulated to reasonable and necessary On rehearing, both parties ask that we also mle with respect attomey's fees and thus, no request for a finding by the jury to appellate attomey's fees. In the judgment the trial court or trial court was required, awarded both parties $300,000 in fees for appeal to the court of appeals and $100,000 for seeking review in the Texas [39[ Appellants respond that neither evidence nor Supreme Court. These fees were to be paid by the Tmstee for segregation of fees was required. A party is not required to the Article IV tmst Appellants ask that we hold that appellee segregate fees unless the party asserts multiple claims, some must also reimburse the Article IV trast for the awards of of which entitle the party to recovery o f fees and some of appellate attomey's fees to appellants. which do not See Green Int'l, Inc. v. Solis, 951 S.W.2d 384, 389 (Tex, 1997), Appellants argue that because all of their As discussed above, section 245 of the Probate Code provides claims concerned alleged mismanagement of the estate and that an estate may recover reasonable attomey's fees incurred sought removal of appellee as executor and tmstee, there were in removing the executor and in obtaining the executor's no claims for which appellants were not entitled to recovery compliance regarding any statutory duty he neglected. TEX. of fees. PROB.CODE ANN. § 245 (Vemon Supp.2000), Regarding appellate attomey's fees, appellee raises the same complaint The statute allows the estate to recover attomey's fees he raised regarding trial court fees; Appellee claims that expended for the following two actions: (1) removing the appellants did not segregate their fees between claims for executor, and (2) compelling compliance with statutory which reimbiusement is available under section 245 and duties. See TEX, PROP,CODE ANN, § 245 (Vemon claims for which reimbursement is not available. We have Supp,2000), Statutory duties include: (1) giving notices already held that segregation was not required because the required by statute; (2) approving, classifying, paying, or claims were intertwined. This holding extends to appellate rejecting claims against the estate; and (3) delivering to those attomey's fees. Accordingly, we hold that under section entitled exempt property and allowances for support. See id. 245, appellee must reimburse the Article IV tmst, and not at § 146. An executor is also charged with the duty to use appellants individually, for appellants' stipulated appellate reasonable care in that he must care for the property of the attomey's fees. estate as a pmdent man would take of his own property. See id at § 230. Both parties agree that any award of attomey's fees should bear postjudgment interest at 10% per annum, compounded *797 [40] All of appellants claims for damages involved annually (a) from the date of judgment as to the stipulated allegations of breach of fiduciary duty and, therefore, these

WESTU^W €, 2016 Thomson Routers. No claim to • Government Work

PLAINTIFFS' ORIGFNAL PETITION - Page 069 Lee V. Lee, 47 S.W.Sd 767 (2001)

$ 1.5 million in trial court attomey's fees, (b) from the date of one-third (#) of the current net income of the tmst, and this courts' judgment as to fees for appeal to this court, and to the extent such income is insufficient for the following (c) from the date of the supreme court's ruling on petition for purpose shall distribute currently such amounts from the review as to the award for fees on appeal to the supreme court. remaining two-thirds l-i) of such current net income as may be necessary and required to provide for the health, maintenance and support of [her children, or the survivor], Exclusion of Evidence of Appellants' Damages Model taking into consideration the availability offimdsfirom other sources." Thus, Susan Lee was entitled to one-half of the one- Appellants next challenge the trial court's exclusion of third (one-sixth), of current net income. evidence of appellants' damage model that was designed to illustrate what a pmdent executor would have done The statutory definition of income is the return derived with the sale proceeds from the U.S. Home and Carothers fiom the use of principal. See TEX. PROP.CODE ANN. § contracts. Because we have held that the evidence regarding 113.102(a) (Vemon 1995). Examples of income are rent on the unaccepted offers by U.S. Homes and Carothers was real property and interest on money lent. See id, Section speculative and constituted no evidence of damages for 113.102 instracts the trastee to charge expenses against breach of fiduciary duty to sell the properties, we need not income in accordance with section 113.111. See TEX. address this issue. PRORCODE ANN. § 113.102(c) (Vemon 1995). Section 113.111 requires the tmstee to charge against income all ordinary expenses incurred in administration, management, or preservation of tmst property, reasonable allowances *798 Refusal to Award Damages Directly to Susan Lee for depreciation on improvements, and, unless the court [41) Appellants contend that, because Susan Lee has a directs otherwise, court costs and fees on periodic judicial accountings and other judicial proceedings conceming the ' l(y beneficiary interest in the Article IV trast income, income interest. See TEX. PROP.CODE ANN. § 113.111 she was entitled to a recovery of ' I f , of the judgment (Vemon Supp.2000). damages representing tmst income. In support of this argument, appellants cite Comment H to section 282 ' ofthe The will gives appellant, Susan Lee, an interest in "current Restatement of Tmsts; net income," not gross income. Therefore, she was entitled to any Article IV tmst income, minus expenses as described in section 113.111. She was not entitled to tmst income before Disposition of the Proceeds Recovered. Where the trast deduction of expenses. Accordingly, the trial court properly is of such a character that i f the trastee had brought an awarded the damages to the Article IV tmst and not to Susan action against the third person, the proceeds would be Lee directly. immediately payable to the beneficiary, the beneficiary is entitled to keep whatever he recovers from the third person under the mles stated in Subsection (2) and (3). RESTATEMENT (SECOND) OF TRUSTS § 282 cmt. Prejudgment Interest H (1959). Secfion 282, however, addresses when a 1. Simple or Compound Interest beneficiary may maintain a suit against a third person. It does not concern suits by beneficiaries against the [42] Appellants next complain that the trial court awarded tmstee. Accordingly, we do not find Comment H prejudgment interest *799 at the rate of 10% per annum, applicable. computed as simple interest, when the award should be 10% per annum, compounded daily. Appellants contend that, Unless a trastee is under a duty to pay money immediately and because the claims in this case do not fall within any of the unconditionally to the beneficiary, the beneficiary may only prejudgment interest statutes, the case is controlled by Cavnar sue to compel the tmstee to restore money to the trust. See RESTATEMENT (SECOND) OF TRUSTS § 198 & omts. V. Quality Control Parking. Inc., 696S.W.2d549 (Tex.1985), B-D (1959). Katherine Bamhart's will provided in Article which provides for interest compounded daily. IV that the tmstee was to distribute equally to her children, Although we agree with appellants that prejudgment interest and to the survivor between her children^ "at least quarterly, in this case is not controlled by statute, the case on which

WESTLAW 5^2016 l i'iomson !?t-i;fe:s No cteirn to onpinai U S. Goyeioncn! Worh-r

PLAINTIFFS' ORIGINAL PETITION - Page 070 Lee V, Lee, 47 S.W.3d 767 (2001)

appellants rely was overruled after appellants filed their brief. [461 [47j "Prejudgment interest is 'compensation allowed In Johnson & Higgins of Texas, Inc. v. Kenneco Energy, by law as additional damages for lost use of the money Inc., 962 S.W.2d 507, 532 (Tex. 1998), the supreme court due as damages during the lapse of time between the held that prejudgment interest in cases conhoUed by common accraal of the claim and the date of judgment'." Id. at 528 law is to accrue at the rate for postjudgment interest and it (quoting Cavnar v. Quality Control Parking, Inc., 696 S.W.2d is computed as simple interest Accordingly, the trial court 549 (Tex.1985)). The two legal sources for an award of properly computed the prejudgment interest in this case as prejudgment interest are general principles of equity, and an simple interest enabling statute. See Kenneco, 962 S.W.2d at 528. Statutory provisions for prejudgment interest apply only to cases involving claims *800 of wrongfiil death, personal injury, 2. Accrual Date for Calculation of Prejudgment interest property damage, and condemnation. See TEX. FIN.CODE [431 In his first motion for rehearing, appellee claimed that ANN. §§304.102,304.201 (Vemon Supp.2000). Because the prejudgment and postjudgment interest should be awarded on claims in this case do not fall within the statutory provisions, the $1.5 million in executor fees required to be reimbursed an award of prejudgment interest in this case is governed by by appellee. Although appellee did not contest the imposition the common law. See Kenneco, 962 S.W.2d at 530. of prejudgment interest he claimed that it should be awarded pursuant to Johnson & Higgins of Texas, Inc. v. Kenneco [481 Appellants argue that prejudgment interest accraed Energy, Inc., 962 S.W.2d 507 (Tex. 1998). The parties from the dates Ronald Lee paid himself executor fees. disagreed on the date from which prejudgment interest should Because Lee paid himself fees in a number of payments over accrae. Appellants also complained that appellee had not a two-year period, appellants have provided a chart depicting preserved this issue for review because he did not raise this the various payments and the amount of interest on each, with complaint either in the trial court or in his brief in this court. a total amount due of $2,051,311.79. Appellee disagrees with appellants' calculation and contends that appellants' argument [44] [45| We tum first to the preservation issue. A point is based on the approach described in the Cavnar case, in of error not preserved is not before the appellate court for contravention to the more recent Kenneco case. review. Allright, Inc. v. Pearson, 735 S.W.2d 240, 240 (Tex. 1987). An assignment of error raised for the first time In Kenneco, the court held that "under the common law, in an appellant's motion for rehearing is too late to be prejudgment interest begins to accrae on the earlier of (1) 180 considered. Washington v. Walker County, 708 S.W.2d 493, days after the date a defendant receives written notice of a 497 (Tex.App.—Houston.[ 1st Dist.] 1986, writ refd n.r.e.). claim or (2) the date suit is filed." See id. at 531. A " 'claim' is 'a demand for compensation or an assertion of a right to The trial court awarded prejudgment interest, according to the be paid'." See id. Appellee contends the first date he received law in existence at that time, which held that prejudgment notice of a claim with regard to executor fees paid, was the interest began to accrae six months fi-om the date of the date suit was filed. We have not located in the record an eariier occurrence giving rise to the cause of action. Cavnar, 696 date of notice of a claim with respect to the executor fees. S,W.2d at 555. The prejudgment interest at issue here, however, does not concern the prejudgment interest on the [49] Appellants next argue that accraal of prejudgment trial court awards we have upheld. Instead, the prejudgment interest under Kenneco would nullify appellee's duty of interest at issue here concems interest on the $1.5 million disclosure as a fiduciary. Appellants base this argument on this court is rendering in favor of appellants. An award the following premisses: (1) an executor owes a duty to of prejudgment interest on this new award of damages is disclose all material facts affecting the beneficiaries' rights, an automatic legal consequence since appellants pled for see Huie v. DeShazo, 922 S.W.2d 920, 923 (Tex.1996); and prejudgment interest. Neither the award of prejudgment (2) courts have historically required breachingfiduciariesto interest, nor the accraal date of this interest required a point pay prejudgment interest from the date the breaches occurred. of error for preservation. Because the date of this new award See, e.g., Ward v. Maryland Cas. Co., 140 Tex. 124, 166 implicates case law that succeeds Cavnar, we must consider S.W.2d 117, 119(1942). whether the Cavnar rale regarding accraal of prejudgment interest applies.. Despite the previous holdings that breachingfiduciariesmust pay prejudgment interestfi-omthe date of breach, the Kenneco

ivesfLAw Kciue; •oi.ivci

PLAINTIFFS' ORIGINAL PETITION - Page 071 Lee V, Lee, 47 S.W.3d 757 (2001)

in excessive executor fees, in addition to the $659,506,50 court held that the rule it announced applied to all cases that previously awarded by the trial court, for a total award of do not fall within the statutory guidelines for prejudgment $2,198,355.00 in excessive executor fees; (2) reverse the interest. See 962 S.W.2d at 531. By making no exception portion of the judgment denying plaintiffs' request to remove for breach of fiduciary claims, the supreme court impliedly Ronald Lee as the Tmstee of the Article IV tmst and we render overruled all cases contrary to Kenneco. Therefore, we are not judgment removing Ronald Lee as Tmstee ofthe Article IV persuaded to create an exception to the Kenneco rule in cases tmst; and (3) we order the following: (a) that Ronald Lee involving breaching fiduciaries. reimburse the Article IV tmst for appellants' stipulated $1.5 million in trial court attorney's fees; (b) that Ronald Lee We hold that the date of accmal of prejudgment interest on reimburse the Article IV tmst for the appellants' stipulated the SI.5 million award rendered by this court is July 28, $300,000 in appellate attomey's fees; (c) that, in the event 1993, the date of filing of Plaintiffs' First Amended Petition. either party appeals to the Texas Supreme Court, Ronald Lee The prejudgment interest on those trial' court damage awards shall reimburse the Article IV tmst for appellants' stipulated upheld by this court accmes as the trial court mled, according $100,000 attomey's fees; (d) that the Article IV tmst, on to Cavnar. behalf of appellants, recover from appellee prejudgment interest on the $1,538,848.50 in excessive executor's fee The Kenneco court further held that prejudgment interest awarded by this judgment at the rate of 10% per annum, accmes at the rate for postjudgment interest and it is to be computed as simple interest, from the date of notice ofthe computed as simple interest. See id. at 532. The rate of interest claim, July 28, 1993, through the date preceding the day of is 10%. See TEX. FIN.CODE ANN. § 304.003 (Vemon entry of judgment, October 24, 1996; (e) that the Article IV Supp.2000). tmst, on behalf of appellants, recover postjudgment interest at the rate of 10% per annum, compounded annually, on the Accordingly, we hold that appellants are entitled to total of (i) the excessive executor fees awarded by this court prejudgment interest on the $ 1.5 million in excessive executor ($1,538,848,50), (ii) the excessive executor fees awarded fees required to be reimbursed, at the rate of 10% per annum, by the trial court ($659,506,50), and (iii) the prejudgment computed as simple interest from the date of notice of the interest awarded on those amounts, from the date of the trial claim, July 28, 1993, to the day preceding entry of judgment, court's judgment, October 25,1996; and (f) that appellee shall October 24, 1996. Appellants are entitied to postjudgment reimburse the Article IV tmst for postjudgment interest at interest on this award calculated from the date of judgment, 10% per annum, compounded annually (i) from the date of October 25, 1996. the trial court's judgment as to appellants' $1,5 million in trial court attomey's fees, (ii) from the date of this court's judgment as to fees for appeal to this court, and (iii) from the date of *801 Conclusion the supreme court's mling on petition for review as to the award for fees on appeal to the supreme court. We affirm the We find the trial court erred: (1) in deducting $1.5 million , remainder of the judgment from the jury's finding of excessive fees; (2) in refiising to remove appellee as tmstee; and (3) in refiising to require appellee to reimburse the estate for appellants' attorney's fees. All Citations Accordingly, we (1) reverse the portion of the judgment awarding the Article IV tmst $659,505.50 and render 47 S.W,3d 767 judgment that the Article IV tmst recover $1,538,848.50

Footnotes * Senior Chief Justice Paul C. Murphy sitting by assignment 1 In his brief, appellee cited to Arce v. Burrow, 958 S,W,2d 239 (Tex.App.-Houston [14th Dist] 1997, writ granted). Since submission of this case, the Texas Supreme Court has Issued its opinion affinning in part, and reversing and remanding in part. See Burrow V. Arce, 997 S,W.2d 229 (Tex.1999). 2 This amount represents the estate tax cost of $660,000, less $144,087 the estate would have owed in interest if appellee had not paid himself $2.2 million of the total fee.

PLAINTIFFS'ORIGINAL PETITION - Page 072 L e e V. L e e , 47 S.W.3d 767 (2001)

3 Appellee also cites Deloitte. & Touche v. Weller, 1997 WL 572530 (Tex.App.—Amarillo 1997), op/n/of7 withdrawn and superseded on rehearing, 976 S.W.2d 212 (Tex.App.—Amarillo 1998, writ denied) The We//eropinion to which appellee cites was withdrawn on rehearing and the substitute opinion does not address the "benefits rule." See Deloitte & Touche V. Weller, 976 S.W.2d 212 (Tex.App.—Amarillo 1998, writ denied). Accordingly, we do not discuss this case. 4 We address the AWn holding in further detail later in this opinion. 5 In his response brief, appellee claims that the trial court "determined that'cause' would exist to remove if the jury had found gross negligence." Appellee then states that appellants did not complain below and do not complain on appeal that gross negligence is not a legally valid basis for removal. Because the jury refused to find gross negligence, appellee reasons the trial court properly declined to remove appellee as trustee. Appellee misrepresents the trial court's determination. The trial court actually said he could find grounds for removal if there was a finding of e/Y/rer gross negligence or breach of fiduciary duty and damages. 6 The former statute has been rewritten upon codification to set out the grounds in an enumerated fashion; however, the language of the statute remains the same. Compare Act of April 14,1993, 48th Leg., R.S., ch. 148, § 39, 1943 Tex. Gen. Laws 232, 246 (repealed) wrth TEX. PROP.CODE ANN. § 113.082 (Vernon 1995). 7 This holding seems to fly in the face of the plain language of the statute. The statute allows recovery of attomey's fees if the executor defends the will in good faith and with just cause, whether or not he or she is successful in admitting the will to probate. See TEX. PROB.CODE ANN. § 243 (Vernon Supp.2000). Although the recovery of fees is expressly not tied to success in admitting the will to probate, It is tied to good faith defense. By holding that a finding of good faith was inapplicable where the executor was successful in admitting the will to probate, the court ignored the statutory language and tied recovery of fees to success in admitting the will. 8 This is somewhat similar to the standard for official Immunity, which has been held to protect "all but the plainly incompetent or those who knowingly violate the law." Courson v. McMillian, 939 F.2d 1479,1487 (11th Cir.1991) (quoting Ma//ey V. Br/ggs, 475 U.S. 335, 341, 106 S.CL 1092, 89 L.Ed.2d 271 (1986)). 9 Appellants incorrectly cite to section 294, but 294 has no Comment H. Appellants apparently intended Comment H under section 282, which concems suits in equity by beneficiaries.

End of D o c u m e n t © 2016 T h o m s o n R e u t e r s . N o claim to original U.S. G o v e r n m e n t Worlds.

Vv'ESTLAW (•'.• 2016 1 hom$or> Routers- :^JQ csaim to onginai v.i^ Gcvor^imtni Works.

PLAINTIFFS'ORIGINAL PETITION - Page 073 PLAINTIFFS' ORIGINAL PETITION - Page 074 0%e jrssi«te«®S% Oasisr* srf NO. 14-97-<»l*2-CV

SUSAN CAMD4JBUES, nSSOTVIDUAl-i-Y, AND AS TitUaTKB OF THE ARTJO-B V TRUST TOR Cwwvty. (Tr. C l . No. I T H B USNVfTT or SVSAN C . OQISON. AND DHRJTVATrVWLV ON »«MAJLF Of THW Mtlndly cod Kwtlw A K T K X B I V T W J S T AND T H E ESTATH Of X A T H S I U N S F l U X r r u a » A l t N H A » T , AND S U S A N C . OtSkSON. IWOrVIOXJAU-Y. A N U O W U V A T l V m . Y ON BHHAJW O f THE A K T K X « I V TKU*T ANO TVCM HSTATB OF K A T H S K m e HUU3T CE«t BAJWHAJtT, Aw-<1-«. V. M7NALD B . UOI, JK., INCTYIOUAX-LV, Aa TRuannws or T H H A R T I C L E rv T R U S T , A N D ITiB A K T I C U B V T R U S T F c m THH ftENKJOT O F K A T H E W N E UPS, A N D A3 H X E C U T O R or T H » J O T A T E or K A T K B U N E PIXXOT tHE IBAJIJWART. T O T H K r R O A A T X C O t W T NO. 1 O r HAMU8 COUNTV,

PLAINTIFFS' ORIGINAL PETITION - Page 075 M O W * WlHl I ! , ) } « , » « « » tn »wa»>T«W»W* (WT^-WJO^I W <»«jMi%r».ii.i>

nvn of 10% )»r OWMM. iMNUany, on tlw wul «<: (a) tlw nowivn iWMvMr Im owanlMl hy IhMKUrf t*l >)>M^ M); (b) Uw n a m m M »d Murt

I HawH •ttimratn^wMi>w Ar1i«l« rv in^ («) IVwa Mw dakr nfi^ Imt « w n ' H «> Mfrvl Cb)ftMVM unfurfvawni u ut «M (br («) &

W» wfT*w nff^wllM, K«rH4 .Ir.. in^vi*m1\y, to y y fcit itrgum^ by pwiii wn i Ww ordwr Aiim JiiaiMiit MrafWcS b«l9w for obwv^wpg, WinrautlWta; M « COMMATO YOU to ofc«rv« Oi^iii^ |Mn(« l

WrmiPB*, «M HCNN, SCOTT MMSTIX, CMwfJy Coxrt A{>fMad«, «ritl« Ow SwI

PLAINTIFFS' ORIGINAL PETITION - Page 076 t4TH C*mrt •••A|pr««* l-t^yr-^Kl^rv

V,

MIX o r c o * r » AMOWKT 1 |'Vtu«l>mln A||i|i«aMi<« S MMW rAJtJ CtiMt*» »Uwr< y«» AM gM|»llit»n«»nit»il CtarH KlHWini E ,a

T W A i . coarm

1, » \%1UXS, CUUUC wTtM COUXT or A T T V A U »Qlt THX l>OU1RTU

m T K M T i M o m ' w t n u w o r , irMwM Bv iHHMi cotmror CWy »CW III I m, b»»»»«7

IU» WVXUy CLMKX

RECCWOER'S UEMORANOUW: A ) » w l i r r w (H rK3X(Mion, M > k w t r u n w n t M i n d tob* i n « ( l « q u « t i for l h « b M t p h o k i a m ^ rtprodiKthxi bocMM g| MagMMy, cwbon or pholo c o p y , dtooolorvd papar, ate. A l l b i o c t n u t i , •ddKlgiw WKl c h M t Q M w a n p r a M n I a( ( h « tkrw t w IrwIrwMnt WW M M m d raognM.

*«** MX h*r« k««a ridwti* H-MI fk* dMamwM In cMFpRmct wfib Ifc* IWic InlfnmMin Act.

St«0art, Coanty Clerk

PLAINTIFFS' ORIGINAL PETITION - Page 077 EXHIBIT "

PLAINTIFFS' ORIGINAL PETITION - Page 078 25, 2 0 1 6 9;33AM M V LLP flo, 6 3 1 2 P. - 5 / 4 5

Cause No. 137506-403 Estate ofKatherine Pillot Lee Bamhart, § In the Probate Court Deceased § No. 2 of § Susan Carnille Lee, et al,. § § Plaintiffs, § § V. § Harris County, Texas § Ronald E, Lee, Jr„ et al, § Defendants, §

APPLICATION TOAPPROVE SETTLEMENT AGREEMENT

TO THE HONORABLE JUDGE OF SAID COURT;

COMES NOW Applicant LEGACY TRUST COMPANY, in its capacity as the Court

appomted Receiver of the Testamentary Trust created under Article IV of the Last Will and

Testament of Katherine Pillot Lee Barnhart (hereinafter referred to as "Applicant"), and in

yuppurl Ihtjrcof would respectfully show unto the Court the following;

BACKGROUND

1, The Last Will and Testament of Katherine Pillot Lee Bamhart (hereinafter

referred to as the "Will") created a Trust under Article IV ofthe Will (hereinafter referred to as

the "Article IV Trust") for the benefit of Katherine Pillot Lee Bamliart's two children, Ronald

Ellsworth Lee, Jr. (hereinafter referred to as "Mr. Lcc") and Susan Camille Lee (hereinafter

referred to as "Ms. Lee"), and Katherine Pillot Lee Bamhart's grandchildren.

2. ByordcrofthisCoiutinleev. lee, Case No, 137,506403 dated June 18,2015,

(hereinafter referred to as the "June 18, 2015 Order"), the Court removed Susan Camille Lee as

PLAINTIFFS'ORIGINAL PETITION - Page 079 n, 25, 2 0 1 6 9;33AM M Y LLP Wo, 6 3 1 2 ' P. 6 / 4 5

Trustee of the Article N Trust and appointed Applicant to serve as a Receiver for the Article TV

Truiit pursuant to Section 114.038 of the Texas Property Code.

3, The June 18, 2015 Order, among other things, ordered the following with regard

to the Article IV Trust:

"3- The Receiver ia authorized and directed to: a. Exercise all rights, powers and duties of the Trustee ofthe Trust created Under Article IV of the Will, and all powers granted to trustees Under the Texas Tmst Code;

i. Collect, compromise, or settle all debts owed to the Trust;

m. Institute such legal proceedings as the Receiver deems necessary or advisable to obtain constructive or actual possession of assets of the Trust or to recover dawages suffered by the Trust; provided however, that the Receiver shall have discretion not to pursue litigation against Ms, Lee that'is undertaken by beneficiaries of the Trast for the benefit of the Trust;

0. Take any and all actions reasonably necessary and appropriate to exercise the powers, duties, and responsibilities set forth herein.

4. Ajudgment was entered against Ronald E. Lee in Lee v. Lee (Case No. 137,506,

Harris County Probate Ct. No. 2), as modified by the decision in Lee v. Lee, No, 14-97-00162-

CV, 47 S.W,3d 767 (Tex. App. ~ Houston, 2001), and reflected in the Mandate issued by the

Fourteenth Court of Appeals dated February 8, 2002 and the subsequent Order Granting

Application for Writ of Scire Faciaa and to Revive Dormant Judgment from this Court under

Cause No. 137,506-402 which was filed on December 7, 2012 (hereinafter collectively referred

to as the "Judgmenf), The Judgment included an award to the Article IV Trust of 31,538,848.50

representing excess executor fees Which were previously collected by Mr. Lee, in his capacity as

the Independent Executorftorathe Estate of Kathcruie Pillot Lee Bamhart, Deceased (which

21 P a g e

PLAINTIFFS'ORIGINAL PETITION - Page 080 n, 2 5 . 2016 9 : 3 3 A M M Y LLP ^'o, 6 3 1 2 P. 7 / 4 5

reduced the amoimt that passed under the Bamhart Will to the Article IV Trust); legal fees of

$1,900,000, and prejudgment interest of $499,177.16, totaling $3,938,025,66, plus post- .

judgment interest. The Judgment, together with all rights associated therewith - including but not

limited TO principal, attorneys' fees, interest, and court, costs, constitutes a debt owed to the

Article rv Trust, and is therefore an asset of the Article IV Trust.

5. A controversy exists between Mr. Lcc and the Article IV Trust regarding the

amotmt, if any, that remains outstanding on the Judgment after all credits due Mr. Lcc and

payments made by Mr, Lee are applied. ,

6. The Article IV Trust and Mr, Lee have each held undivided interests in property

known as the River Bend Farm, consisting of approximately 640 acres in Wharton County,

Texas. Mr. Lee acquired a twenty-five percent undivided interest in this propertyfromthe estate

of his father, Ronald Ellsworth Lcc (Sr.). The Article IV Trust acquired afiftypercent interest

under the Barnhart Will.

7. The Article IV Trust and Mr. Lee have each held undivided interests in property

known as the Cap Rock Ranch, consisting of approximately 6,431 acres, in Real County, Texas.

Mr, Lee acquired a twenty-five percent imdlvided interest in this propertyfromthe estate of his

father, Ronald Ellsworth Leo (Sr.). The Article IV Trust acquired afiftypercent interest under

the Bamhart Will.

8. A controversy exists regarding the ownership, management,. and accounting for

revenues and expenses of River Bend Farm and Cap Rock Ranch between the Article IV Trust

and Mr. Lee,

9. Mr, Lee and Applicant, as Receiver of the Article IV Trust, desire to settle and

compromise disputes between them so as to (1) facilitate cooperation between Applicant, as

Receiver ofthe Article IV Trust, and Mr. Lee with respect to the continued administration ofthe

PLAINTIFFS'ORlGrNAL PETITION - Page 081 n, 2 5 , 2 0 1 6 9:34AM M I. Y LLP No. 6 3 1 2 P. 8 / 4 5

Axticle IV Trast; (2) reduce expenses otherwise Hkely to be incuited by both Applicant and Mr,

Lee in conjunction with the claims and disputes which presently exist between them; (3) provide

certainty in the management of the affairs of the Article IV Trust and Mr, Lec; (4) preserve and

enhance the value of River Bend Farm and Cap Rock Ranch and provide for efficient and

effective management of these valuable properties; and avoid partition of one or both properties

which likely would impair the value of the properties to the dehiment of the Article IV Trust and

Mr, Lee; and (5) resolve any and all issues related to the Judgment.

10. The proposed terms of settlement between Applicant and Mr. Lee arc set forth in

tiie Settlement Agreement and related settlement documents, all of which are collectively

attached hereto as Exhibit "A," For reference purposes, the Settlement Agreement and related

settlement documents (see attached Exhibit "A") will hereinafter be referred to as the

"Settlement Agreement",

REQUEST FOR AUTHORITY TO ENTER INTO SETTLEMENT AGREEMENT

11. As set forth throughout Texas case law (and more specifically Section 64.004 of

the Texas Civil Practice &, Remedies Code), the rules of equity generally govern all matters

regarding receiverships. See Harrington v. Schuble, 608.S,'W.2d 253 (Tex. Civ, App,—^Houston

[I4th Dist,] 1980, no writ) (expressing that the mles of equity govern receiverships and to

conform witli the rules of equity, the receiver should have applied to the court for authority to

take action on the sale of real property); see also TEX. CFV. PRAC. &. REM. CODE §64,004.

12. Furthermore, Texas case law supports that a receiver obtain court approval prior

to compromising or scttlmg claims. See Knox v. Damascus Corp., 200 S.W,2d 656, 659-60

(Tex. Civ. App.—Galveston, 1947, no writ) (although judgment appointing the receiver granted

the power to "institute such suits as might be necessary to enforce his order, judgment and

PLAINTIFFS'ORIGINAL PETITION - Page 082. ' n, 2 5 , 2016 9;34AM M IA Y LLP No, 6 3 1 2 P, 9 / 4 5

decree," the court maintained that the receiver obtain express authority from die court prior to

•settling claims),

13. As detailed above, the June 18, 2015 Order expressly grants to Applicant, as

Receiver of the Article IV Trust, the power to "Collect, compromise^ or settle all debts owed to

the Trust" and - . . "institute such legal proceedings as the Receiver deems necessary or advisable

to obtain constructive or actual possession of assets of the Trust or to recover damages suffered

by the Trust; provided however, that the Receiver shall have discretion not to pursue litigation

against Ms, Lcc that is undertaken by beneficiaries of the Trust for the benefit of the Tmst," .

14. In an attempt to comply with the rules of equity, and in an abundance of caution,

Applicant is filing this Application for Authority to Enter into Settlement Agreement for the

purpose of obtaining the Court's approval ofthe Settlement Agreement. By and through the

filing of this Applicatioti and a corresponding Notice of Hearing, Applicant hereby represents to

the Court that it has provided appropriate notice regarding the Application to all parties in this

matter.

15. For all of the reasons which are Stated above. Applicant respectfiilly requests that

the Court approve the terms of the Settlement Agreement, and authorize Applicant to enter into

the Settlement Agreement on behalf of the Article IV Tmst. In support of Applicant's request in

this regard, Applicant alleges and thereon believes that the Settlement Agreement is in the best

interests of the Article TV Tmst,

WHEREFORE, PREMISES CONSIDERED, Applicant respectfully requests (i) that that

the Court approve the terms of the Settlement Agreement; (ii) that the Court find that the

Settlement Agreement is in the best interests of the Article IV Trust; (iii) that the Court grant

AppUcant, in its capacity as the Receiver ofthe Article IV Trust, the authority to enter imo the

Settlement Agreement on behalf of the Article IV Trust; and (iv) that Applicant have and recover

5|Page • '

PLAtNTIFFS'ORIGINAL PETITION - Page 083 n. 25, 20 1 6 9:34AM M [/,. i UP No, 6 3 1 2 P, ! 0 . / 4 5

such other and farther rehef as it may show itself justly entitled to receive.

MACINTYRE MCCyLL0CH S; & YOUNG,

W. CAMERON McCULLOCH State Bar Number 00788930 ABRJ A. GRAVES State Bar Number 24049999 2900 Weslayan, Suite 150 Houston, Texas 77027 (713)572-2900 (713) 572-2902 (FAX) Cameron • McCulloch(@,mml awtexas .com Adri. Gray cs@mmlawtexas .com

ATTORNEYS FOR APPLICANT LEGACY TRUST COMPANY, IN ITS CAPACITY AS THE RECEIVER FOR THE ARTICLE IV TRUST

6I Pag e

PLAINTIFFS' ORIGINAL PETITION - Page 084 n, 25. 2 0 1 6 9;35AM M M V IIP Ilo,. 6 3 1 2 P. 1 1 / 4 5

CERTIFICATE OF SERVICE

ify' that a true and correct copy of the foregoing inshument was sent to the /ia"United States Certified Mail, return receipt requested, and/or via facsunile on this day of January, 2016:

Mr. Eric M, EngUsh Mr. Neil Kenton Anderson Ms. Amy TcUcgcn Porter Hedges LLP 1000 Mam Street, 36* Floor Houston, Texas 77002 (713)228-1331 (Fax)

Mr. Thomas A. Zabel Zabel Freeman 1135 Heights Blvd. Houston, Texas 77008 (713) 802-9114 (Fax)

Mr. Daniel J. Sheehan Mr. John M, Phelan, Jr, Mr. M, Patrick McShan Daniel Sheehan & Associates, LLP 2501 North Hanvood, Suite 1280 Dallas, Texas 75201 (214) 468-8803 (Fax)

Mr. John W. Porter Ms, Keri Brown Baker Botts, LLP One Shell Plaza 910 Louisiana Street Houston, Texas 77002-4995 (713)229-1522 (Fax)

W. Cameron McCulloch Adri A, Graves

7| P a g e

PLAINTIFFS' ORIGINAL PETITION - Page 085 «, 25, 2016 9:35Ali( M Ur ! H P

E X H I B I T " A

PLAINTIFFS' ORIGINAL PETITION - Page 086 25, • 2016 9;35AM ' M k Y LLP ' ' . • . • ' • '• „ . • • No. 6 3 1 2 P. 1 3 / 4

Settlement Agreement Between'Ronald Ellsworth Lee, Jr. and Legacy Trust . Company as Receiver for the Trust Created under Article IV of the Will of . ... , ; ' . Katherine Pillot Lee Barnhart

Recitals: ' •

•1. ' Under the Last Will and Testament of Katherinfi Pillot lee. Bamhart admitted to

probate inftarrisCounty, Texas under Cause Number 137,506 (the "Barnhart WilP'), trusts were

created for the benefit of her childiren and grandchildren.', One. of the trusts created was under

Axticlb.IV of the Bamhart Will (the/*Articlc IV Trust"). :••

•2- . kpnald Ellsworth Lee, Jr.- ("Mr. Lee'') is'the son of Katherine PiUot Lcc Bamhart,

and a bcneficiary .under the Article TV Trust- As suchj he is entitled to inandatory distributions of

ashareof the income of the'Article .IVTrust • '

.,3. • No distributions, of iucome-of the Axticle IV Trnst have been made'to

more than, ten years,.notwitbstanding the fact that the Trust had net income and.in many years '

reported to the Internal.Revenue Service that .^Ir. Lee had tait^ble income, attribntable to the

Artide IV'Tnast. „•;' ...... ''•:;'' . '• .'••.••.

'• 4- ' Mr. Ixe- filed suit against Susan Camille Lee ("Ms, Lee"), Trustee of. the Artide •

iV. xrust, m Lee v. i.ee,': uasc No.' l37,iU6-403, Hariis.Cbxmty" Probafc Court NoV 2,'.seeking

removal of Ms. Lee as.Trustce, and damages suffered by Mr.'.Lce and'the Artidc IV Trust,for •

• which Ms-' Lec was'responsible as Trustee, among 'other thirty. ("Mr.. lie's L^wsuilf'),' ' • '. ;

,5. By order of the- Harris Couiity. Probate Court No. 2 in Lee v. Lee,. Case No.

.137,506-403 dated'juuc. 18,-2015/0*Jmic'.X8, 2Gl5.0rdeO^^^^^ remoybd Ms: Lee as'

Trustee of the Article.IV .Trast and appointed Legacy Tirast Company'.asi Receiver for the Article

IV Trust ("Lcga:cy" or the.."Rcceivcr"). The jiine, 18, ioiS Order, among other things, ordered; ,

"3. The. RcccivM is authorized'and directed to:" ,.

'5168145 • ' -'^ • ' •' •.-•;•• •••• ; •'•

PLAINTIFFS' ORIGINAL PETITION - Page 087 25. 2016 9:35AM . M M' , LLP No, 6 3 1 2 P. 14/45-

" ' - a. Exercise all rights, powers and dutiesof the-Trustee of the Trust created under Article IV of the 'Wih, and all powers granted to. trustees under theTexa,? , Trust Code; . ' ' ,- , ; • \ • .• ' • '

- c. • ' Manage and direct the- business and financial affairs of the Trust • and any asset or entity owned or controlled by the .Trust; • •

h • • '' Collect^ coihpromise, or settle all debts owed to the. Trust; -

' ' . - . m- , • Institute such legal proceedings 35 the Receiver deems necessary • or advisable to obtain constmctive.or actual possession of assets of the Tmst or to . recover damages suffered by the Trust; provided however, that the Receiver shall - , have discretion not to pursue litigation against Ms. -Lec that; is undertalcen by ' ., beneficiaries of the Trust for the benefit of the Trust; • •'

' • . 0- - Take any and iaU actioifs reasonably necessary aEd..ippropriate to 'fcxercisethe powers, duties, arid resporisibilities set forth herein,- , '• ' • „

. . , 6. : Mr. Lee, on hi& own behalf and that of hi^i successors and assigns, and Legacy as

•• Receiver ofthe Axticle IV Tfustaiid on behalf of the Article IV Trust, andLegacy's Successors as '

Receiver and/or Trustee, -are the parties to thia Agreemeaat • •• '

7. A judgment Vi^as entered ag^iiast Mr. L.e6 in Xee.v.Xee (Case No.. 1-37^^^

County Probate Ct. No. 2), as modified-by tho decision hi Lee v'-Lec, .;No.- 14-97-00162-CV, 47

S.W.3d 767 (Ic-x.: App. - Houston^ -2001), and refl.ected in the Mandate issued by the Equrteeiith.

. Court .df Appeals dated February. 8, 2002 andthe. Order .Granting Application .for Writ of Scire

Facias.and.to Revive Bormant Judgment of £b Harris Cpmity-Pjbobatc Court.No.-'2-m Cause No;.

. 137,506-402, filed Decemi7er'7,2J6l2 {th0 "Judgment'-)- thfe. Judgment included an award to the

•Article IV Trust of $1,33.8,845^0 reprosentiiig excess.'executor' fees collected by Mr,- Lec as

P L A I N T I F F S ' O R l d l N A L PETITION - Page 088 I a n . 25, 2016 9;36Aiv1 - M L . Y LLP No. 6 3 1 2 P. 1 5 / 4 5

• Independent Executor from. the Estate of ICatherme Pi)lot I-ee Barnhart (which reduced the ,

amount that passed under the Barnhart Will [o the Article IV'Trust); legal fees of $1,900,000,

and prejudgment interest of $499,177,16, totaling $3,938,025,66, plus postjudgment .interest. The

• • Judgment .'and all rights associated therewith, including-hiit'not limited to principal, attorneys''

fees, interest, and court costs, constitutes a debt owed- to the'Trust and an asset of the Article IV.' ,

•Trust. • •• . •• . '• . , - •- .- ' ' ' .'

8. Mr. Lee lias made-payment-for the benefit of the Article IV Trust on tlic .

Judgment, incluclmga'payraent of $8,000,000 ia2015.' ' ' • ...

9. ' Mr. Ixe disputes-whether any amount remdna outstanding on the Judgment aft^^

crediting amounts that were due hhn.from the Article IV Trust and his payments to the Article

.IVTrust. . ' - •• ••. -''•/•• •'' ••-' .. . •

10. A controversy exists between Mr. Lee- and the Article IV Tnist regarding the

amount,' if .any, that rem'aiijS 'outstanding on the Judgment after all credits due "Mr. Lec and

payments.made by. Mr. Lee are applied. ' •

'• ,' 11. The Article,rv Trost and Mr.-Lee have each held undivided interests in property'.

known as the River Bend Farm,:consistingof.apprdxima'tely, 640. acres .in Wharton County,

Texas. Mr. Lee acqaued-a twenty-five percent-undivi'ded interest-in .this propertyfromthe estate

of his father, flonaM Ellsworth Lcc (Sr.); The Article IV Tnist acqukcd a fifty percent interest'

under the Barnhart Will.,'.,•'-•'•••;-.-.' ••'••-..';.•.••••,-,/ ]•.••• •• • .-.-

- 12. - . The-Artick IV Trust and.Mr. tec have each- held undivided' interests in property.

•known as tbe Cap Rock Ranch, consisting of approximatdly 6,431'aaes, in Real County, Texas.

Mr. Lee acquired a twenty-fiye percent undivided- interest ia this' property from the estate of his

51B514.5 , '.' . '• ,' • . ' , ' • - • ; "~ • •• ••• ,-'. -•' •• .'. ' ' •"• •" . •• .'.• • .. . •• .'.'

PLAINTIFFS'ORIGINAL PETITION - Page 089 an, 2 5 , 2 0 1 6 9:36AM. Mi, Y UP Wo, 6 3 1 2 - P, 1 6 / 4 5

father, Ronald EUsworUvLee (Sr!).. The Artide IV Trust acquired a fifty percent interest under • • ,

the Barnhart Will- • / .' '"

• • 13V A controversy exists regarding the ownership, marragcmcut, and accounting for • ,

revenues and'expenses of River Bend ^arro! and Cap, Rock Ranch between the. Axticle IV Tmst • • .

and Mr. Lee. • • • • ' , •• • •, \ •, • ' ••' . •' . • , ' .

14. Mr. Lee and Legacy as Receiver of the Axticle IV Trust- desire to settle and -'

compromise disputes between them so as . to (1) facilitate cooperation- between-Legacy as •

Receiver of the Article IV Trust and as a ifidudary. to,Mr. Lee with respect to the Article XV

Trust, (2) reduce expenses otlicrwise likely to' be iucurrcd by each of thcnri associated with the

• • clakns and disputes betweeu them, (3) provide certainty iu the management of the affairs of Mr.

Lee and of the Article IV Trust, (4) preserve and enhance the value of River Bend Farm and Cap ,

- Rock Ranch and provide for efficient and effective management of these valuable properties, and ,'

• avoid partition of them which hkely would impah the value; of them to both Mr. Lee and the -

Article IVTrust;.and (5) resolve any and all issuesrelatedto the Judgment,'. • . - '.^ . ^ •

' Aixordmgly, Mr, Lee and Legacy as Receiver agree as fdUowsr ''^ •;• • • '

Agreements: - - . .. 15.-. • On the Qosing -Date (defined belov/), Mr.'.Lee will' execute a. deed" to. Legacy-

Trust Company as Receiver of the Article TV Tnisfto the River Pend Farm m. Wharton 'County;

. -Texas Substantially in the form attached as.Extobifl.- '. ••-

• 16. .. .- On the Closing .Date, MrL'Lee will exetnte' a Rrorcdssory Note to Legacy Trust;'

. Company as Receivcir of the Artidc IV Trust substantially.-m the form attached as Exhibit 2 in-,.

tlie amount of $4,000,000.; - . - ' • ' ' • ' . .- - .' • • ' . .. ' • - • • ' •'; . • - ' ,-

, •' 6166.145' ,' • . "• '• ' .' •..;.•'_. •. ''• ' ',••,..-, ' - .' " ' / • - ' , ' ,--.•!•

PLAINTIFFS'ORIGINAL PETITION - Page 090 25. 2 0 1 6 9 ; 3 6 A M •••• M W f LLP\ i\'o. 6 3 1 2 -.P, 17/45

17. On the Closing Date, Mr. .Lee will execute tlie AgrccmcQt. Respecting Certain .''

Rrospective Real Estate Acquisitions by, Legacy;'Trust Company/subatantiaily in'ih'e' form

attached as Exhibits. •• , / ../,••••.•..'.'..•••••• .••.'•.••.••'.;••,;•

18. ' Effective, upon the Closing Date'.and.in cohsidcratibn of the- transactions and

releases described in Paragraphs 15,16,19, and 20, Legacy as Rcceiver of the Article W. Trust

and on behalf of the Article IV Trust and Legacy's successors as Receiver and/or Trustee shall.

• a. • scU and convey the Judgment, including but not Emited to all principal, attorneys' • fees, interest and court costs thereon and associated with the Judgment to Mr.' Lee, and agrees to file a Satisfa.ction of Judgment iriXee vi iee (Cas6.No- . '• 137,506, Harris County Probate Q. No. 2) substantially in. the form of Exhibit .4, • .: acloiDwledging that the Judgment has been fuUy satisfied; . • '

. ' . . b. . ' record in the deed records ofajl jurisdictions in which the Judgment has been •. '. abstracted a Bill of Sale substantially in the fomx attached.as Exhibit 5; . . ..•

c. agrees to ijiderrmify and hold.harmless.Mx: Ixefiromall claims based upon the : • '. •' • Judgment; and • •"'••'••. • ; .• y - \

d; • ' releasesMr. Lee, his successors, and assignsTrom all liability under or related to •, claims for amounts due from Mr, Lee oh account of his owfiership of an . • • undivided 25 per cent interest iti River Bend Farm and an undivided 25 per c^^^ interest in Cap Rock Raack .

19. . Effective upon the Closing.Date and'in consideration of the transactions and

, releases, dcscri'bed in Paragraph 18, Mr. Lee op Ms own behalf and' that of his successors and

assigns releases Legacy as Receiver of'the Article tV Trhst and. its successors, as Receiver, and/or,

. Trustee of the Article IVTrust from the foUowiag claims: . ' , .

• a.- Claims of Mr. Lee fox his daiuages, inten^st, or other expenses because amounts due . to himfromthe Article WTrust for his share of . income of the Artide IV Trust with . • respect to the mandatory distribution of one^third of the Axticle TV Trust's net income for all periods prior to December 31,2013, produced from revenue actually collected on a cash basis by the Trust prior, to December 31,2013 were oir. will be paid or • credited to him untimely,

b. Claims of Mr. Leo for payments of income pro duced fcomi revenue actually collected . on a cash basis by the trust prior tp, December 31,2014 fbir bis health, maintenance,

5168145 • • ,• • ' ., " . • ;..' . ] • '• ••'•'••.'••'.''' • '

PLAINTIFFS'ORIGINAL PETITION - Page 091 25, 2016 9:37AM MM, i LLP LJo. 6 3 1 2 . P, 1 8 , / 4 5

., •. ; • and support in excess of the mandatory distribution of one-third of the Axticle;IV Trust's'n.etincome ,' •• ' • .. •' •• .' , . •

. -. ,' c. Clauns against the Article IV Trost for attorneys'fees kcuired.by Mr. Lee prior to . • June 30,2015 not prtviously reimbursed by Legacy as,Receiver.'

d. Qaims for tmstee's fees and trustee's expenses due Mr. I^e prior to'Jmie 3 0 , ^ .

e. Claims against the Article IV Trost for attorney^'' fees mcurrcd by Mr. Lee in • cormection with die Judgment or this Settlement Agre'ement. • •. • •

,t Claims for expenses'of the Trust incmred tod p'aid by Mr^ . for which he has not been previously reimbursed.' •

g. Claha5 against the Artidc IV Tmst related to the accountmg treatmcn^^ . • and the allocation of trust receipts and expenses' between principal and mcora6 prior ; . . to December 31,2013; provided that Mir. Lee reserves his right to assert any claim or , argument regarding'allocation of any proceeds from the sale or disposition otreal •,. . ..• property occurring after such. date. .; .'

h. • Claims that the Judgment is dormant, lapsed, invalid, or unenforceable, •, ' ' .

i. • ClaimS to equitably reform or inodify the Judgment based on the ineq'uitable and'. • improper acoual of interest/. • • •

j. Claims regarding calculation of th:e Judgment and interest thereon, including clainis . that interest should have been suspended and. not charged following Mr, L«6's • attempts to sctde the .Judjgment and ids request fOr a trust accounting in J^y 2014. .

k. ''Qalms for damages suffered ph account of his twenty-five p.er cent iiitcresti^^ •• ' . . ' Bend Farm, ' ' ' , . , ' ' • •'. •'•

.• ; 20^ . . For the • avoidance .of • doubt,' the parties agree'"that:- Mr. Lee by the releases •

dcscri'bed in Paragraph 19 docs wot release aad expressly-retains: ' . '. ''

a»- Any and all claims of Mr. Lee, indivi^aUy, as trustee.df aiiy trust created under the ' BarnhartWiU, asabencfidary of the Article iV • Trust, agamst Susan CaroiUe Lee, individua^^^^^ . . under the Barnhart 'Will, including but not limited to' Mr. Lee's right to pursue such.. . (^ainis and to obtain'his share of the benefits thereftom,

b. Any and all clainis of Mt. .Lee, individually, as trastese of any trust created under the Bamhart Will, and as a beneficiary of the Article IV Trust to a share of any . . • • distribution for any reasonfromthe Axticle IV Trust made oxi or after January 1, . •2014. • • ' . • „'•'..• . •

5159145 . .'•...,• ,..'.-..' . • '.•••

PLAINTIFFS' ORIGINAL PETITION - Page 092 2 5, 20 1 6 9; 3 7 A M • M l\ Y LLP •No, 6 3 1 2 ,P, 19/45

c' Any an.d all claims for )ns share of momss or cdmpeasation received by the Article • IV Trust after December 3 1 , 2 0 1 3 jn any manner even if it relates to events or obligations prior to Deceinbcr 3 1 , 2 0 1 3 , including but not limited to ( 1 ) any recovery obtained by or oh behalf of the Article W Trust after December 31,, 2013 from any , person or entity by reason of events occurring .or, injuries suffered by the Articie IV • Trust at any time, and (2) any. claim rcgardmg allocation of any proceeds from the sale of real property of the Article IV Tmst occurring after December 3 1 , 2 0 l 3 v .'

21. Either party to this Agreement may require,approval of Harris County Probate ''

Court No. 2 to the terms hereof as a condiEo|i precedent to the obligations of Paragraphs 15-2p

hereof. Legacy will file a motion seeking' that approval to the terms hereof within fourteen days

of the Effective Date, of this Agreement, .Mr. Lee'.agrees to support a motion to approve this •

Agreement

Ronald E . L

Legacy trust Cornpany as Re

Presideiit & Chief Executive Officer

616814S-.

PLAINTIFFS' ORIGINAL PETITION - Page 093 25, 2016 9;38AM Mk Y LLP No, 6 3 1 2 P, 20/45

Index of Exhibits ,, .

1. , Deed to River Bend Farm in Wliaxton County, Texas, to Legacy Trust • Company as Receiver of,the Article I V Trust • ...••../.' •. .

2.'. Promissory l^ole from Lec to Legacy Trust Company as. Receiver of ' the, Article IV Ttust/. • ' • "

3. Agreerneittt Respecting Certain Prospectiye Keal Estate Acquisitions by Legacy Trust Company on Behalf of the Article JV •Trust' . .. •' .' • • .• , / . •; •

4. ... .Satisfaction, of Judgnient entered inXee v. Xee, (Case No. 137,506/. Harris County Probate C t No. 2), as modified by the decision in Lee v. Lee, :. 47 S,W3d'767 (Tex. App. - Houston, 2001)

. 5.. / Bill of Sale of Judgnient fronr Legacy Tmst Company as Receiver of. • the'Article I V Tmst under the tast Will' and Testameiit of Katherine. Piliot . Lee 3amhart to Roiiald E. Lee, Jx. .'

•.' • • • \ \ •..:: •:.,•.' . ;• • •••••'/. \ . '/••-•g^-•..' • 6185145..; • •

PLAINTIFFS' ORIGINAL PETITION - Page 094 n, 25. 2016 . 9 ; 3 8 A M . M iVZ- V U P No. 6 3 1 2 P: 2 1 , / 4 5

Exhibii. 1 • ' , • .• • •. •

• ' . ' • • • 'M m .. ' ' ;

NOTICE OF CONFIDENTIAIiTY RIGHTS: I F YOU A R E A NATORAL PERSON,, Y O U MAY REMOVE OR STRHCE ANY OF THE FOTLOWING INFORMATION F R O M ANY INSTRUMENT THAT TRANSFERS AN INTEREST IN REAL PROPERTY B E F O R E I T IS FILED FOR RECOBD IN; THR PUBLIC RECORDS; YOUR SOCL^L S E C U R I T Y NUMBER OR YOUR DRIVlER'S LICENSE NUMBER. ;•

STATE OF TEXAS • '§ ' ' ' • ' •.• • • . § . , KNOW ALL MEN, BY THESE PBESENTS: ' . "•: COUNTy,0FWBART0N § ' • ••• , ' ' •. •

. ' THAT' RONALD ELLSWORTH LEE,' JR:, an individual ("Grantor'') for and -in considcratiOn.,of tho sum of Ten arid No/100 Doil.ars ($10.00) cash in haud paid by LEGACY ' TRUST' COMPANY, as Receiver of the Article IV .Trust .under the Last Will and Testament of • KATHERINE PILLOT LEE BARNHART ('Vrantee"), whose address is 600 Jefferson, Suite 300, Houston, TX'770O2, and other good and valuable consideration,'.the. receipt and sufficieacy ' of which are hereby acknowledged by Grantor, ElAS QUITCLAIMEb unto Grantee all of Grantor's right, title, .interest, claim; and demand iii' and to, arid by tbcse presents, does QUITCLAIM that 'certain! tract of real property situated iii Whartou County,. Texas, and . described as follows: • .' ' - ' ' ..

See Exhibit "A" attached .hereto.-.and incorporated herein by . rcjfercncc , . •, '

- together with all and.singular Grantor'srigh't,title, interest, claim', and demand 'iu and to the . rights, privileges,, hereditaments, and appmtenanceg pertaining to sudi rcal property, including any aud all improvements andfltstmcscurrently attached to and located thereon (collectively, the "Property'), • • ... . .. '..,,. , •

TO. HAVE AND' TO HQLD the above-releascdi Tights,- .titles,, interests, claims,, and;, demands to said Property, to Grantee and'Grantee's heirs, executors, administrators, legal repre- sentatives and assigns forever/ Neither Giranto'r nor Grantor's lieirs, executors, administrators, leg;al representatives,.or assigns shall have, claim, or deraaud' any right or tide to the Property or any part of it. ,'. • • • ' : . . • , . . ' ''' .• '•

[SlGNATUrtE ONFOXjLOyflWO PAGEi .

,,. 5157376- • , : ' . , : - .. • ' ' .' '.'',••-.

PLAINTIFFS' ORIGWAL PETITION - Page 095- J a n , 25. 2 0 1 6 9;38AM -MM f ^ o , 6 3 1 2 • P, 2 2 / 4 5

. EXECUTBDthe day o f " ' . • • 12016. ' .

:•• , , •••. GRANTOR •, .

RQNAl5 ELLSWORTH ISE,, JR.

THE STATE OF TEXAS ' • ••.•§ •.' ' ' , ' • • • • • • • . • • • • ^ § . • • , •

COUNTY OF HARRIS ' •, § , ' . '' ' ' . •,

•This inshuincnt was acknowledged before me on, the day of ^, 2.016, by Ronald Ellsworth Lee, Jr;, an individual, •'• . •..

:|;SEAL].. .-•:• . ':. '• ..' . ••• .•. ;y'-.

• ..' •• • Notary Public m and for the State of Texas

After recording please retxim to: .:

Porter HedgesLlC^? •. . ioOOMainStrcfeti36*^Hoor.. Houston, Texas 77002 Attn: Neil Kenton Alexander '

•5157376 ". , • • '•: .;.'„• ; •• •' . '. '

PLAINTIFFS'ORIGINAL PETITION - Page 096" • ' J a n . 25, 20 1 6 . 9 : 3 9 A M / M i , - - Y LLP 1^0,6312 -P, 23/45

. •• ., • EXHIBIT " A " ' ; . ' . • •"

633,46 aqres of land more or less, v/ith inxprovements located tliereon, with 633.460' acres being ia. Abstract 62, and 6:'542 acres being'in Abstract 348, for a total land area.of 64O.002 acres, 'Wharton . County, Texas, being more particularly described by meteg and bounds; also known locally as River Bend Farmi. • ' ': •.••,••'. • •'; ' ••.

3157375 ... •. . •' • '• •• . ,-.

PLAINTIFFS' ORIGINAL PETITION - Page 097 n , 2 5 , 20 1 6 9;39AM Vik. /LLP ' •. .• . , •!\io.6312 P, 2 4 / 4 5

• . • '. . /'PromtssoryNote,

$4,000,000.00 , :• ' , • Houston,Texas, • ' ' ., A s o f f . ..• ' •• _],20l6

•'.,1. DefmitioDs • ' • " ., • ' ' .' •.•' , •• •, • .' ' ' • '•

. a. . Waiter" means Rouald Ellsworth Lee, Jr. ' ' •

' '• ' . b, "Article IV Trust" raeans the katherine lee Bamhart Trust • Created • . ' under Artide IV of the Last Will and Testament ofKatherine Pillot l^e • , Barnhart. • ,

• • • c, Tayee" means Legacy Trust Company, , as Receiver for tire Article IV •Trust and any successor receiver or trustee of the Article IV Trust,

• 2.- In consideration ofthe agreements executed in writing contemporaneously with • this Promissory Note, Maker promises to pay ,to the order of Payee at its offices • •• at 600 Jefferson, Suite 300, Houston, TX 77002, in lawful pro.ney of ,the United . States of America, the principal amount of Four .IvIlUion and No/100 Dollars^ $4,000,000.00,,plus, such additional amounts as may be added , to principal pursuant to the tenns of this Promissory Note (this W o f O or any. df the ^ Bocumcnts (as defined, bclcrw), together witii interest,on the principal balauco firom time to time remaining mipaid at the rate and iipon the terns provided in this Note. • • .•

3. ' Intare^ Rate> The mipaid principal balance of this Note ,from time to time • Qutstandiug shall accrue, interestfromthe- date of this Note until maturity at an. • annual feed rate .of fourperceot (4.0%) per armum. ,

4. FaVnij^rit' Td^tlttL^!i.', Payments of principal and accmed interest shall be made . quarterly in the amount of $500,000 principal, plus accrued interest, begiojiiug • 91 .days from the date hereof, with.a.final payment of remaining principal and mterest due two years from the date hereof, .. • ' •

, S. • Calcolatiott of' Interest. Interest will'be calculated on the basis of achial number • ,of days elapsed (deluding the first day but excluding the last day) during a ,• , calejjdar year consisting of 3.65 or 366 days, as the case niay be,' . .

, 6, .yrepayhlgnt. Maker may prepay this Note in whole or. in part at any tune . vrithout being requhed to pay any peiialty or prendum for such privilege. All prepayments under this Note,, whether designated as payments of principal or interest, shall be applied to the principal or interest of this Note or to .expenses provided herein, or any combmation of the foregoing, as'dnccted by the Payee or the holder of this Note at its option and .in its sole disaetion. , •

,' 5I55684y7^ '•. V. • ' .' '

PLAINTIFFS' ORIGINAL PETITION - Page 098 n, 2 5 . 201 6 9;39Ali M ^ Y UP No, 6 3 1 2 - P, 2 5 , / 4 5

7. Msmnm Rat&. • Regardless of any provision in this Note,, all other agreements; . documents, and instruments iii favor of Payee ever delivered in-connection with or under this Note; and all renewals, extensions, amBudmenLs, modifications, ••' • supplements, restatements, and replacements of, or substitutions for, any of the . , foregoing (collectively, the "Loan Docummts"), it is the intention of 'Maker and '. Payee that Payee not (a) contract for, charge, take, reserve, receive, or apply, as. -• • interest on all or any part ofthe principal bf this Note any amount in excess of the Maximum Rate or^ an amount calculated based on the Maximum Rate (the "Maximum Amomf), or (b) receive any unearned interest, in violation of any .• • applicable law. If any acceleration of the matoiity of this Note or any paym,ent •. under this- Note or. any other Loan Document produces a rate in excess of ttie 'Maximum Rate or if Payee' shall for .any reason .receive any' such unearned interest or if. any. transacdoh contemplated hereby or, by any other ,Loan •• Document would otherwise be usurious, under applicable law, theA '(i) the. ,, aggregate of,,ail iaterest under applicable,-usury-laws'that is'cohhacted for,, charged, taken,.reserved, received or applied under this Note, .the other Loan • - Dodumente, Or-otherwise shall , under-no circumstances exceed the Maximum Amount, (ii) neither Maker, nor .any .other-mdividual, .partnership, limited .partnership, 'corporation, limited-liability company, business trust, joint stock, company, trust, •'-linincoiporated ' assoeiation, joint ' venture, syndicate, ' • governmental authority or other , entity or organization.-Of whatever nature shaU . be obligated to pa.y the amount of'such interest to the extent that il is m excess of the Maximum Anaount, (iii) any excess or unearned interest shall, be deemed to be and shall.be treated as a partial prepayment or repayment of principal and any remaining excess or unearned interest will'be refunded to Maker, and (iv) the • provisions of this Note'and the tain. Documents shall irxunedlately be deemed . reformed,, -without the necessity of the. execution, of any'new document' or . instrument, so as to comply., with .all applicable usury laws: In. determining whether interest .paid-or payable exceeds the Maximum Rate or the Maxiuium Amount, Payee shall,'to the maximum extent pennitted under applicable law (w) • treat aU advances' uiidsr this Note and the other Loan Documents' as' a single extension of credit, (x) chaiacteiiJEe any non-principal payment as an expense, fee or premiuih rather than as interest, (y) , exclude voluiitary prepayments or repayments and their effects, and (z) amortize, prorate, allocate and spread the total amount, of inter^t throughout the entire contemplated term of thijs Note. However, if the Note is paid In fiiil before the end of its full contemplated term, and if the interest received -for its acttial 'period of existence exceeds the Maximum Rate or the Maximum'Amount, Payee shall refund ,any excess (and , Payee may not, to the extent permitted by law, be subject to any penalties provided by .any laws for contraciing', for,'charging, taking, reserving or receiving interest in excess of the Maximum Amount). If the laws of the State ; of Texas are applicable for purposes of detennining the "Maximum Rate" or the ."Maximum Amount," the, "Maximmn Rate" may not exceed the "weekly ceiling" from time to time ia effect nnder Chapter 303 of the Texas Finance Cpde, as amended and In effect from time to.time.

2 '. - ' 5155684V7. . ~• ".'.• •, .- , '••.. .

PLAINTIFFS' ORIGINAL PETITION - Page 099 25, 2 0 1 6 9:40AM M M Y UP No, 6 3 1 2 ' P. 2 6 / 4 5

8. fi^fiuUs: The term "Default' means, the occnrrehcc of any one of more of the • , following.events:- , " ' ' .' •. '•' . '

.a. The failure of Maker to pay any .part'of the principal or interest under this Note when and as requited to he paid. . . • ' •• •' • .

• b,-' Maker (i) voluntarily scela;' consents to, or acquiesces in.the.beneJat. of • Tide 11 of the United States Code or any other applicable liquidation, conservatorship, bahkmptcy, fraiudulent transfer, assignment for the .• , . benefit of. . creditors,. .'inoratprium, ' rearrangement,-. receivership, insolvency, reorganization, suspension of payments, ,or similar debtor -,- , rehef laws of the United-States or other applicable jurisdictions from , -'tinre to .time in e:5ect and affectihg the rights.of-creditors .generally . • . ' ' (^'X>ebtor Relief Lixw^'), (ii) becomes a party to or is made the subject of - • any -proceeding provided for by any Debtor Relief Law (other than as a ' creditor or claimant), and (A) the petition is not contoovcrted within 10 days and is not.diismissed within 60- days, or (B) an order for relief is . • entered under Title 11 of the United.States Code, (iii) makes an- . assignment for. the benefit pf Creditors, ot (iv) fails, (of admits in writing it§ inability) to pay its debts generally as they become due. -•

If a Default occurs,, after the expiration of any .applicable grace or notice and opportunity to cure.periods, the holder p,f this Note shall be entitled to (i) declare the entire unpaid principal, of, and all' accmed and unpaid interest on, this Note immediately due and payable, without notice of intent to accelerate,, notice of • . acceleration, any other notice, dcinandi or presentment, all of which are hereby waived, (ii) exercise its offset rights under Section 11, or (iii) proceed to protect,. enforce, and exercise any other right or remedy to which the holder may be' : entitled by agreement, at law, or in equity. ,' .'

9/ -NO-WaiVgr. No delay on 'the part of 'tire holder of this Note'm' the exercise of . any right or remedy available'.to the holder shall operate as a waiver of such' . right or remedy.' No single or 'pardal exercise 'of a particular right or'remedy • shall operate, as a w:aiver of that particular right or remedy, or any other right or' remedy.'•'..'.'''- , '•. ' • •.' :.'.- -. ..'.,''

10. Waiver. Except as provided in this Note, Maker and any party which may be of ' . become habl'c fof the payment of any. amounts'due under this' Note (including any surety, endorser, or guarantor) jointly and severally waive (to the extent pennitted by law) all • applicable exemption rights (whether arising by . . constitution, , law, or otherwise), all 'valuatiQn and . appraisement rights, .presentment- and demand for payment, protest^ notice of- protest , and noppayment, notice of the intention, to accelerate, and'notice of acceleration and • agree that their liability on this Note shall not be affected by any renewal; or extension in the time of payroent hereof, by any indulgences, or by any release or change in any security for the payment of fhis Note, and hereby consent to

-• '5j5S(584v7 - , ' - ..' '•• ; ;-• : '. .'• •. ••' •. . -'..' •' '. •• . "

PLAINTIFFS'ORIGINAL PETITION-Page 100 . ' ' Jan, 25, 2 0 1 6 - 9:40AM. - M ••--4 Y LLP. No. 6 3 1 2 • P, 2 7 / 4 5

:•• any and all renewals, extensions,indulgences, releases,-or changes, regardless of • the number of such renewals, extensions, indulgences, releases; or, changes. •. •

• 11' ^kr'Q,tt EigllM. While a Defauh exists, Payee.is hereby authorized at any time, ; • and from titftt to tunc, to the fullest extent permitted hy law, to set off and apply any other debt or income attoy-time owingfayPayee or the Micle'IV.'IV^^ or for the .credit or the account of Maker, against the oiitatandmg'principal ,. • amount of this- Note, interest, • and. other amounts due under this ,,Note (the ''Obligation")/tv&n if Payee has not made demand under, this Note and the . Obligation .is unmatured. Payee agrees to promptly notify Maker after any such • setoff and application is m,ade;j?rov/ifedr/^a/the faflure to give such notia shall , not affect the validity of such set off and application;' Therightsof Payee and •the Article IV Trtist under this Section 11 arc in addition to other/rights and • remedies (mcluding other rights of set off) that Payee and the Article .IV Trust may have! ... ' .•• . •• ,•.,•.• . .. •. -.

• • .. -12. WmMs4 Mi^m^^ This Note, and Maker's performance of this Note, is an' , unsecured obligation of Maker, • • • • •

• 1.3- AaKlii&MsTSS;- This Note shall be construed, and its pcrforxhance enforced, in . accordance with the laws of . the State of Texas and, as. applicable, tho laws of the United States of America.,'. .. ' . ' " . ' \ ,'. , .

.' 14- fetSifeMlg:^. • Payee shall have aU rights, remedies, and recourses granted •.. in this Note and the Loan Documents and those available at law or equity and, the satne (a) shall be cumulative'and concurrent, (b) may be pursued sepatately, ,. ., siicccssively, or concurreiitly-against Maker or any other liable party .or against'' '- any. one or more of them .in such order as Payee, in its sole discretion, shall determme, (c) may be exercised as often as occasion therefor shaU arise, it being • ..agreed by Maker.-and any other' liable party that the exercise or failure to ' . . exercise, any .of the same shall .in no event be construed as a waiver or release , . thereof or ofany ptherright,remedy, or recomse, and (d) are intm^ . shall be, nonexclusive,: ' ''-, ' -• ' •;

15. W A i v m m. ! i m y : TRIAL, VACR VXUTY mmxo mmm WAIVES, t o r m FULLEST EXTENT PERMTTTED B Y A F F U C A B L E LAW, ANY BIGHT I T MAY HAVE TO A T R I A L BY JURY IN ANY L E G A L PROCEEDING D I R E C T L Y OR INDIRECTLY ARISING OUT OF OR RELATING TO THUS NOTE, T H E OTHER L<)AN DOCUMENTS OR T H E TRANiSACIIONS CONTEMPLATED H E R E B Y (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER ..' •• THEORY).. .

16, ENTIRE AGREEMENT. THIS NOTE (AS AMENDED OR R E P L A C E D FROM TIME TO TIME) AND T H E OTHER W R I T I E N LOAN DOCUMENTS EXECUTED BY MAKiaa AND P A Y E E {OR B Y M A E ^ FOR T H E BENEFIT O F PAYEE) REPRESENT TBDE FINAL

•• ' 5155(S94v7 .- , .. ; . . ; ' . ' . .• . • . •' ''• ' • •[ '•' •• . . . '' ,

PLAINTIFFS'ORIGINAL PETITION-Page 101 ' • . .. . J a n , 25, 2 0 1 6. 9 ; 4 1 A M M I Y LLP No. 6 3 1 2 " . P, 2 3 , / 4 5

AGREEMENT- BETWEEN MAKER AJSDO' PAYEE AND MAY NOT BE CONTRADICTED BY EVIDENCE OF TRIOR, CONTEMPOItANEOXJS, OR SUBSEQUENT ORAL AGREEMENTS BY MAiOER AND PAYEE.. I H E R E A R E NO UNWRITTEN ORAL AGREEMENTS BETWEEN MAKER AND PAYEE. THIS PARAGRAPH IS INCLUDED HEREIN PURSUANT TO SECHON 26.02 OF. THE . TEXAS BUSINESS AND COMMERCE CODE, AS AMENDED FROM TIME TO TIME. :

• 51556S4Y7 .• ••. . •-. y •- •

PLAINTIFFS' ORIGINAL PETITION - Page 102 Jan. 2 5 , 2015' 9;41AM-, VU P Jo, 6 3 1 2 - P. 2 9 / 4 5

Exhibii 2

MAKER::

Ronald Ellsworth Ixe, Jr,

:. ; • . . . Signature. Page to Unsecured Pxontissory Note

PLAINTIFFS'ORIGINAL PETITION - Page 103 25, 2 0 1 6 9 ; 4 1 A M ,M M o - ( L L P • ' . No,'6312 P, 3 0 / 4 5

.Exhibit:3 . • . . •• '' .' '•• , ' ' , , . , ;'

Agreement Respecting Certain Prospective Real Estate Acquisitions by Legacy Trust Company on BehaJI of the Article IV trust Recitab ' ' • '

1. Under tHc Last Will and Testament of Katliorine PiUot Lec Bamiiart admitted to probate in • . . Harris, County, Texas nnder Cause Number 137,506 (tbfe "Bamliart WilV"), trusts were • . created for tbe benefit of her children and grandchildreri. One of the trusts created was under Article IV of the Barnhart Will (the "Article IV Trust^O-' . • • ' .', '''' ' •' 2, Ronald EHsworth Lee,'Jr. ("Mr. Lee") is the.son of Katherine Pillot Lee Bamhart, and'a • benefioiary uEider the Article IV Tmst. • ;• . •. , • .'

3- Snsan Camille Lee is die daughter of Kathcriiic Pillot Lee Barnhart, and a beneficiary under • the Article IV, Trust;, .,v .• , ,' ' ' - . • . ' • • • .

4. By order of the Harris Gounty Probate'Court No, Z ini^e v. Lee, Case No. 137^506-403 dated June 18,2015, ("June 18,2015 Order"),'the court appomted Legacy Trust Company as . Receiver fbr the Article.W. Trust ("Legacy" or the "iE^i^^^^ • ; '

5. .The Article IV Tmst and Mr. Lee haye each held, undivided interests' in property, known as the River Bend Farm, consisting of approximately 640 acres in Wharton County, Texas. Mi, . Lee acquired a twenty-jSve percent undiyided interest in this propertyfromthe estate of his . &tbcr, Ronald Ellsworth Lee (Sr,); Susan Camille Lee also acquired a twenty-five percent ' undivided interest in this property fi»m the estate of Ron'ald BUsworth Lee (Sr.), The Article • : ,1V Trust acquired a'fifty percent hiterest under the Barnhart Will.

, 6.. The-Article IV Tmst and Mr. Lee hav^ each held undivided interests in property known as the Cap Rock Ranch, consisting of approximately 6j431 acres, in Real Comity, Texas. Mr. ' . - Lec acquired a twenty-five percent undivided interest in this property from the estate of his ' father, Ronald Ellsworth.Lcc. (Sr.):'Susan Camille Lee.also' acquired a twenty-five percent . undivided Interest m this propertyfipbm.thc'estateof RonahJ Ellsworth Lee (Sr.).Thc Article. ' IV Trust acquired afiftypercent uiterest under the Bainh^

7. The Article IV Trust owns propetty'known as Rim Rock Ranch, coosisticig of approximately ,. . 1,200 aaes ro Real County,.Texasadjoinmg Cap Rock Rarich^ '•

' 8. • The First Codicil to the Last Will and Testament of Katherine PiJlot Lee Bamhart provides in 'part: • ' ; ' . • . . • . , • ' . '. /••. /• . .• ' ..'•'•; • ' •• • : ' • • • '

. "3. Notwithstanding any provision of my WiU and this First • Codicil.to the contrary, or seemingly to the contrary, during the . . lifetune ofraydaughter Susan Ixe Gibson,-no Executor, TriK . Co-Trustee serving hereunder shall have thcrightor authoril;y to , sell, dispose or in any manner, partition or rnortgage any of the.

' 5217039'•.''•: ' ...-',•'••:'• ••,••.,'.••• ..^ . ' • ' ' • ' • , . - " ^ / . . •-' .-' . •'/•'•.! . -

PLAINTIFFS'ORIGINAL PETITION- Page'l04 25. 2016 9;42AM . M ^, . Y LLP No, 6312.- -P, 31/45

Exhibits • • , ' ' • .

5-foUowixjg properties wiihout the; prior written consent , • • daughter: [ ' • '. . .' . • . •

... My .interest irrdre'iUvcr Bend Farm, Whartori Courity. • Texas,'same bemg 640 acres of land, more ore less, situated in the • ' • . A, Somerviile Survey, Block 4, Abstract,62, Wharton County,. . " • • -. • Texas,'and .the'Caprock Ranch''and the'RitnrockRatich,'said ' ' • . Ranchesbemg situatcdmRcalCounty, Texas, about twelve miles • north of the town of Reagan.'Wells, Texas, containing 7,680 acres, ; '. more or less, and bemg situated in T.W.N.G.R.R,Co., Block,No. • '• • .'• • ' • •'• 13, Real County Texas.".-.' •"..• ' . ., . ' . • , ' / . . ' •• •

9. Mr. Lcc' and Legacy as Receiver of the Article FV Trast desire to'preserve and enhance the, value of River Bend Farm .and Cap Rock Ranch and provide for efficient and effective • . . . pianagement of these valuable properties, and WOid partition of them which likdy would impair the value of them.

10. Mr, Lee has agreed to convey and Legacy as Receiver of the Article W Tmst and on behalf of the Article IV Trust has .agreed, to acquhe Mr- Lee's Interest in' River.Bend Farfn, more pardcularly described.in a Deed dated" ';, 2016, as part of a Settlement Agreement . between'Mr. Lec and Legacy as Receiver. • •,

.. . I L Accordingly, Mr. Ixe and Legacy as the Receiver agree-as follows: , , • • .

Agreements ' ;• .. .-.,'',' . ' • ' , . . ••

12. For andincoBsideradon of the sum ofTBN AND NO/lbo DOLLARS ($10.00) cash and other good and valuable consideration Mr. Lefe hereby consents to the pmchasc by Legacy . Trust Company as Receiver of the Article IV. Trust and on behalf of the Article IV Tnist of

a. Susan Camille Lee's tw-enty-fiV6;percent (25%) itt'Cap Rpck Ranch • . conditioiis and for a gross purchase price not to exceed .$3,400,000-00, provided however,- that Susan Camille Lec also provides irrevocable written consent that any . ' Receiver or. Trustee of the Articie IV Trust may sell, dispose of in any manner, . ,, partition or mortgage the properties known as Cap Rock Ranch and Run Rock Ranch,

b, Susan Camille Lee's tweuty-jS-ve percent (25^) in. River JBehd Farm under cirstomary conditions and at a price riot greater than the appraised value of Susan CamiUe Lee's • twenty-five percent kitcrest as 'determined by a third party qualified appraiser, provide ... hqwevef, that Susan'CamiUe Lce'also provides, irmv-ocable written .consent that ^ y • ' .. . • Receiver or Trustee of the Article IV Trust may sell, dispose of in any manner, partition or'mortgage the property knO'Wn as River Bend Farm;

13. The Effective Date of thi^ Agreement is. . ' \ ,.2016.. . .

52J7039

PLAINTIFFS' ORIGINAL PETITION - Page 105 n, 25, 2 0 1 6 9;42AM • M M y LLP No, 6 3 1 2 • P, 3 2 / 4 5

Exhibits

•Ronald E. Lee, Jr.

THE STATE OF TEXAS •;. / §•• . • •••••, .

COUNTY OP HARRIS •„ I • ' . " ' , . •'' ; " ' • Theforegoinginstrument.-Was actoiowledged before me on this_ •' ; day of 2015,byRonaIdBl]sworthLee,;r.. .." ..•.••• . . ' . • • . .;

• •:• .NOTARY f UBLIC, m and for • •;.. THE STATE OF TEX^S •

Legacy Trust Company as Receiver of the Article I V Trust under tie Last WiU and Testament of Katherine PiUot Lee Bamhart

By-.; 1:. •. : "• Edward R. Naumes •

THE STATE OF TEXAS ' - • ' .r'V"': . •-. " ' • '.

.. COUNTY OF.HARRIS . §'' •• •• • • ,• ' • • ' .

The foregoing instrument was acknowledged before inc on this day of ^ '2016, by Edward R Naumes as President of Legacy' Trust Company:' •'. • ' ••

NOTARY PUBUC, in and for THE STATE O F TEXAS

5217039 • , ' .

PLAINTIFFS' ORIGINfAL PETITION - Page 106 1, 25, 2 0 1 6 9; 42AM Uk '/LLP io, 6 3 1 2 • P, 3 3 / ^

Exhibit 4

Cause No,. 137506;402'

Estate of Katherine Pillot L e e - § - l i t the P r o b a t e C o u r t - Barnhart, Deceased '• •'§ • '^^ • • • ..• ••• . ^ • • • § - •. No.2.of., • • • • • §

Snsan Camille Lee, et al, § Plaintiffs, § •

V, Harris County, Texas

P-Onald E. . 1 , ^ , Jr., et al, § § Defendants. §

Legacy Trust Conipany, Receiver of, the Aiticle I V Trust under the Last W i l l ' •

and Testament of Katherine Pillot Lee Bamhart probated iii this Court, notifies the

Court that fire, original judgment in Lee v.' Xee (Case No. -137,506,. Harris County

Probate ,Ct. No. 2),.as modified by the-decision in Lee v. l e e , ' No. 14-97-00162^

CV, 47 S'.W.3d 767 (Tex. App. - Houston, 2001), .and reflected in, the Mandate

issued by the f^ourteenth Court of Appeals, dated February 8,, 2002 and the Order

(Granting Application for Writ of Scire Fadas and to Reyiye Dormant Judgment of

tire Harris County Probate Coiirt No. 2 in Cause No,'137^06-402, filed December

•7, 2Cil2, a copy of which is attached hereto as Exhibit. A' (the "Judgment"), has

been M l y paid, satisfied, and is discharged. '.

'•Dated:; • - , ' ' • ; " ,' '•• ^ '• . ' ' -

1 , 5151537 ,- :. • ' . • :.•

PLAINTIFFS' ORIGINAL PETITION - Page 107 J a n , 2 5 , . 20 1 6 - 9:43AM M k .. Y LLP Mo, 6 3 1 2 P, 3 4 , / 4 5

. Exhibit 4

Respectfully sub'mitted,-

Attorneys for Legacy Trast Company as Receiver of the Artide IV Trust lUBder the Last Will and Testament ofKatherine Pillot Lee Bamhart

••• 515X537- •• ,. •: •. . , ;- •: ..; •

PLAINTIFFS'ORIGINAL PETITION - Page 108 an, 2 5 . 2 0 1 6 - 9:43AM M M -cr V LLP t^o, 6 3 1 2 - P. 3 5 , / 4 5

BxhibU 4

' •. This-is to certify that.a troc and correct copy of the,foregomg document was served via • email upon the following counsel pf record for Defendant on ^ 2016;,

baniel J. Sheehan • ...... ^shcehSn^d^^ • .. . • • '• .-. .'• John M. Phalen, Jr. ' ,, ' jpix^dcu'OdBa-)aw..com. ' ',• . •'. ' • ' . • .\ • M. Patrick fvlcShan . , ',• . pffl(Lshaii@dsa-hiw,<»m ' •' ' '. • • . .'. . Daniel, Sheehan & Associates, LLP ' • .• • . .. ' . • 2501N. Harwood Street,. Suite 1280. •. ' • • ' .. ' •DaUas,XX75201 , " '

.Thomas Zabel ' ' .'• •' ' • .ZabelFreeman ' •, . ... 1135 Heights Boulevard • ,. .. . ' • ' Houston,TX7700? ' ' V tz^tfaelt^thiwrtrm^com • • . •; ' • • • •• • '•.

Eric M. English, • ' ' ' •."

Neil Kenton Alexander . Fcrtter Hedges LLP ' .1000 Main St., 36* Floor Houston, TX 77002 " .fcalexanderi^porterheds^^eo

. John W; Porter • . ' - . Texas Bar No. 16149990 ' jc^tf.portKtiio^bidcsrbdttsxom ICeri D. Brown • ikKr}-br0wn(^ak6.Tb<^tt8:ebiti, 910 Louisiana Street ' . Houston^ Texas 77002 . •

.•••;3 5151537

PLAINTIFFS' ORIGINAL PETITION - Page 109 an, 25, 2 0 1 6 ' 9 : 4 3 A M •; M . T LLP: Wo. 6 3 1 2 - P, 3 6 , / 4 5

Exhibii 5

'•• • '. ' , . . ., '..Bill of Sab;.. ••• ; .. ' •

' THE STATE OF TEXAS §;. •. •. • • • • • • • § ••. KNOW ALL MEN BY THESE PRESENTS'• . COUNTY OF HARRIS ' ' • •, , ' •

That Legacy Trust Company as ReceiVet and on behalf of the .Article IV

TiTist createa under, the Last Will and Testament of Kjatherine Pillot Lee Barnhart

admitted to pirobate in Harris County Probate Court No. 2, Cause No. 137,506,

herein called "Seller", for and i n cojisideration .of the sum of Ten and .No/100 Dollars /

. (.$10.00) and other valuable consideration to the undersigned pajd by the• Buyer hereta

nanied, the receipt of whicH is hereby acknowledged, has GRANTED, BARGAINED,

SOLD .ANP CONVEYED, and by these presents does GRANT, BARGAIN, S E I i : AND

CONVEY, unto Ronald EUsworth .Lee, Jr.,'of HARRIS County, Texas,, herein called '

., "Buycif', all ofthe followmg described property;^ ' • • . •

The Jnctgmeiit in faior of the Article IV Trust entered in tee v, lee, (Case No. 137,506, HaA-ris County Probate C t No. 2)^ . as modified by the decision in Lee v. Lee^ No. 14-^97-00162-0?, 47 S.W.3d 767 (Tex, App- Houston, 2001), as reflected in the Mandate Issued by the Fourteenth Court of Appeals dated Fcbni^ry S^ 2002 and the Order Granting Application for Writ of Scire Fadas and to Reyive Dormajut ,. Jadgment of the Harris County Probate Court No, 2, jn Cause No. . , 137,506-402,. filed December, 7, 2012, together with ail principal^. attorneys' fees, interest, and court costs on or associated with such ; • Judgment. '.•

, .. TO HAVE AND t o HOLD the above described Jwigmeht, .together w i ^

• singular the- rights and appurtenances thereto in' anywise belonging unto'the said Seller,

• and unto Setter's,successors and:assigns foreveirj.and'ScIlcr does hereby bind itself, its

successors and assigns; to WARRANT AND FOREVER' DiEFEND all and singular the

.. said preroiscs imto the said Buyer, .Buyer's heirs, eiecutors, administrators and assigns

PLAINTIFFS' ORIGINAL PETITION - Page 110 J a n , 25, 2 0 1 6 ' 9 : 4 4 A M , .M . Y LLP. , .. - Mo, 6 3 1 2 'P, 31/45

Exhibits •• • •.•

' agaifl-vSt every person whomsoever ,lawfully claimLag or to daitn the same or any part

thereof, by throagli or nnder Seller, but not .otherwise. , ' . : '

EXECUTEDtMs; \ day of . ' „,2016. . • \' '

•• / SELLER: / .• • /; . '

Legacy .Trust Company as Receiver and on. , Behalf of the Article IV Trust created mxder • /• the . Last .Will and Testament of Katherine • Tillot Lee Bamhart admitted to probate in ' • .• . Harris Gounty Probate Court No. 2, Cause • • No. 137,506 , . • ,' '

B y : . • . ' : ' '•• ' • " • Name: Edward R. Naumes Title: President . and. Chief Executive Officer'.

PLAINTIFFS' ORIGINAL PETITION - Page 1 1 1 11,25, 20 1 6 9; f y i - ^ Y LLP lo, 5 3 1 2 P, 3 8 / 4

THE S T A m OF TEXAS §

COUNTY OF HARRIS . . , §

. . Before iDC^ . , ' on thia day of ^2016,

personally appeared Edward R. Naumes,'President and Chief.Executive Officer of

Legacy Trust Cornpany as Receiver and on Behalf of the , Article IV Trast created under

.die Last Wiir and Testament of Katherine, PUlot Lee Barnhart admitted' tq- probate , in

Harris Comity Probate Court No. 2, Cause No. .137,506, known to nie to be the person

. whose-name is subscribed to the foregoing instromc'nt and acknowledged to me that he,

executed the same for the purposes and consideration therein expressed. . '

Notary Publicin and for the State of Texas [SEAL] • ' Printed Name of Notary: , . My Commission Expires:

BUYER'S ADDRESS;

Ronald Ellsworth Lee, Jr.' 3114 Mid Lane , - ; Houston, TK'77027 .

5174445

PLAINTIFFS' ORIGINAL PETITION - Page 1 1 2 n, 25, 20 1 6 • 9 ; 4 4 A M M M Y LLP No, 6 3 1 2 - P, 3

Draft -1/11/2016 , . ' •

Agreement Respecting Conduct of the Litigation in Lee v. Lee, Case No. 137,506-403 Recitab ' ,. ' •. ,'• ... ..

1. • Under the Last Will and Testament of KathcrineTillot Lee Bamhart admitted to probate in . . Harris County, Texas under Cause Nuinber 137,506 (the ^'Bamhart .Will"), trusts were.'. • createdforthe benefit of her children and gi-andchildrea One of the trusts- created was under Article IV of the Bamhart WiU (the ".Article IV Trust"). ' ', '. . • " '

2'. ...Ronald Ellsworth Lec, Jr. ("Mr. Lee") is the.son of Katherine Pillot Lee Barrihartj and a' ' beneficiary under the Article IV Trust.-. •• . ' -, • •

3.- 'Katherine Lee Stacy ("Ms, Stacy') isttiedaughter'of Mr. Lee and a beneficiary under a Trust estabhshed under the Barnhart Will that is a beneficiary of the Article lY Trust, • .

.4., Mr. Lee.filedsuit against Susan Camille l'cc ("Ms. Lee"), Tros'tee ofthe Article IV Trust; in Lee y, Lee, Case No. 137,506-403, Harris County Probate.Court No, 2, seeking removal of • Ms. Lee as Trustee, and damages suffered by MrJ Lee and the Article IV Trust during the trusteeship of Ms. Lec ("Mr. Lee's Lawsuit").- , . ' ' • . • .••

5.' By order of the Harris County.Probate Court No. 2 in Lee v, Lee. Case No. 137,506-403 ; • • dated June 18,.20l5,:("June 18', 2015 Order"), the court rcnlovcd Ms; Lcc as Trustee ofthe • Article I'Y Trust and'appointed Legacy Trust Company as Receiverfor the'Article IV Trust ('Tegacy'or the''Rece.iVefO-The June 18, 2015: OrdCT, among'other things, or

'"3. The Receiver is authorized and directed to: • . . • '• , . •• a. Exercise all rights, powers and duties of the Trustee of the Tmst created under Article IV .of the WiU, and all pow;ers granted to. trustees under the. Texas Trust.Code; •- . ' ' •' • . ': •.' ' , '• • :.' •

. 0. .. Manage and dncct the business andfinanciala-f&irs'of the Trust' and any asset or entity owned or controlled by the Trust; • ,

m . 'Institute such legal proceedings as the Receiver deems necessary . , or advisable to obtain constructive or actual possession of assets ofthe Trust or to recover damages suffered by the Trust; provided however, that the Receiver shall • have discretion not to pursue htigation against Ms. Lee that, is undertalcen by • ' ' beneficiaries. oftheTrust for the benefit of .the Trust;'

7. Mr.' Lee intends to pursue the claimsfiledin Mr. Lee's,Lawsuit, Ms.' Stacy has intervened as . ah additional plaiiitiff iti'Mr. Lee's Lawsuit.. •

52383eOy2 • ' • . .' ' .'.'•• •.• •''.•'", ..' —'. ,' ' '. •

PLAINTIFFS'ORIGINAL PETITION- Page 113 n, 2 5 . 20 1 6 . 9 ; 4 5 A M • M M & t LLP h. 6 3 1 2 --P. 4 0 / 4 5

Draft-1/11/2016, '/ , ' , ' ' ' '. '. ' • • ''r • ' ' . /

Agreements • . •' . •• ' /••"•., ' .' 8. So as to avoid the duplication of expense and effort in connection with the claims asserted' in. '. MF, Lee's Lawsuit, at least a portion of which may benefit the Article W Trust, Mr/Lee- and •Ms. Stacy consent that Legacy shall have no obhgation to them to file pr proseciite a lawsuit •. asserting claims against Ms. Lee for breaches- bf her obUgations while serving as Trustee of • , the Article rv Trust •. • - , •', ' • •• .-• ' ' .••/ ,•,'•'/' / / • • ' ,

9. Legacy as- Receiver agrees £o reimburse Mr. Leo frorh the assets ofthe Article IV Trust for his. reasonable and necessary attorneys' fees and htigation expenses (inclnduig but not , limited to expert witness fees, expenses of attorneys, and court, costs) incurred in connection ' with claims agamst Ms. Lee for breaches of her obligations to the Article IV Trust while she • • served as Trastee ofthe Article IV Trtist man aggregate amount np to $500,000. In the event Mr. Lee bclicvcfii that additional reasonable and.ncccssary attorneys' fees and htigation' • , expen$esshouldheincuiredinexccssof$500,000, ho may request Legacy to approve in advance such additional expenditures, which approval Legacy will not unreasonably ;. ' . withhold.' • • • • •. . '' . .. . • . '•''•. 10. So as to avoid the duplication of expense and effort La connection with the claims asserted in Mr,; Lee's Lawsuit, the parties agree that counsel for Mr. Lee shall take the lead work . responsibility m pursuing the clainis in Mr, Lee's Lawsuit for which the Article IV Trust. •. would be the principal beneficiary. Counsel for Ms, Stacy, while representing her interests • professionally, will tdc.c secondary work rcsponsibiUty fbr pursuing these clain^ ' • duphcating work of Mr. Lee's counsel, '••

U , Legacy ieis Reoeiver agrees to reimburse Ms'. Stacy -from'the assets of the Article IV Trust for • her reasonable and necessary.attorneys.' fees and htigation expenses (includmg.but not limited to expert witness fees, expenses'of attorneys, and court costs) incuixed iu accordance '. with the terms of paragraph 10 hereof m, an aggregate amount up to $100,000. In the event . Ms, Stacy believes that additional reasonable and nebessary attorneys' fees and litigation ecxpcnses should be incurccd m excess of SIOO.OOO, she may request Legacy to approve in' advance such additional expenditures, which approval Legacy will not unreasonably • withhold, '• '. " . ^ '/;, • / . . . ,' • ' . , . •

.12. Nothuig in this Agreement relieves Legacyfroriiwhatever'obligafions it may have to provide iafqimation or otherwise cooperate with the beneficiaries of the Article IV Trust in pursuing. . clahns agahist Ms, Lee for the benefit- of the Article IV Trust, to -adjust distributions to Ms; : Lee. by.reason of monies Ms, Lee owes to the Article FV Trust, or to. defend claims asserted by Ms,'Lee agaiiist Legacy as Receiver, ofthe Article r v Trust.

• , 523B360v2 ' .' .• . ' . , •.•' .'". .. ;

PLAINTIFFS' ORIGINAL PETITION - Page 114 J s n , 25. 2 0 1 6 • 9 ; 4 5 A M • M M ULP No, 6 3 1 2 • -P, 4 1 / 4 5

••. Draft~I/lI/20I6 • ' . ' . '

13, The Effective D ate of this Agreement is

Ronald E. Lee, Jr.

Katherine Lee Stacy . „

Legacy Trust Cotopauy as Recetver of the Article IV Trust nnder the Last, WiU and Te$taiiicnt of Katherine Pillot Lee Bamhart , .

By - ' • • •/'.,./• .•' ••'"'./ Edward R. Naumes

.•3 J238360v2.

PLAINTIFFS' ORIGINAL PETITION - Page 115 EXHIBIT " G "

PLAINTIFFS' ORIGINAL PETITION - Page 116 PROBATE C0URT#2 m Cause No, 137506-403 ill Estate ofKatherine Pillot Lee Bamhart, In the Probate Court o Deceased o a, No. 2 of ii\ Susan Camille Lee, ct al.,

Plaintiffs,

Ronald E. Lcc, Jr., et al.

Defendants.

ORPER GRANTING APPLICATTONTOAPPROVE SETTLEMENT AGREEMENT . . 4 • '» V k

(hereinafter referred to aj,the ;*«s ^ in t ! » » ( » | c e e 3 n ^ ^IpUsi't I''.

ACY TRUST ^ capoci^;^ thffrOsakt inted Receiver of tho

Teiinientaty Trust cr^ed iSfe ArtSe IV of the Last Win and Testament of Katherine Pillot Bamhart (bereinafter refened to as "Legacy" or "Receiver"), After considering tbe

Application, the Court finds that the Applicafion is well taken and should be granted, It is

therefore,

ORDERED, ADJUDGED, and DECREED, that tbe Settlen«nt Agreement and related

settlement doctunents, all of which arc attached to the Application collectively as Exhibit "A",

are hereby APPROVED, U»«irit)er,

QlVOCT,liP| I'lDJUPqCPviriil TroffPnTm, tint till giiUlwumit i'lftHHwunat i» in tha twt

interests of tbe Testainentaiy Trust created uixlcr At^i of

Katherine Pillot L«B3BlJM»HBBcwa5w^e^ to as the "Article IV Trust"), and lhat the

HSWiveris h c r ^ granted authority to enter into the Settlement Agreement, and to sign all

PLAINTIFFS' ORIGINAL PETITION - Page 117 01 U! O a a. SIGNED on this _ day of io

JGEPI^IDIKG 0 APPROVED: w n MACINTYRE MCCULLOCH .g?>\NFIELD o & YOUNG, LLP n o

-••=>!» State Bar Number 0075S930 m ^ r t v . ' ADRI A. GRAVES State Bar Number 24049999 '^^iT mi 2900 Weslayan, Suite 150*; '1*. r- Houston, Texas 77027 sfn, „ (713)572-2900 ^ 3 (713) 572-2902 (FAJQi ..J-' Can;eroaMcCulloc>|^mlawtexa3,coro 4? AdriTGrivCT@iBml|t^^?HW.'?W| ATTORNEYS FOR APftlCAOTtTBOACY TRUST COMPANY, IN rrS CAPACITY AiaiW|J?ECEIVER FOR THE ARTICLE IV

PLAINTIFFS' ORIGINAL PETITION - Page 118 EXHIBIT " H "

PLAINTIFFS' ORIGINAL PETITION - Page 119 652-^6-201 i. NO. 137,506-403 ^-€83482 ESTATE OF KATHERINE PILLOT § IN THE PROBATE COURT NO. 2 BARNHART, DECEASED § i DONNA C.KLINE § § V. § § OF SUSAN CAMILLE LEE, Individually § and as Trustee for SUSAN C. GIBSON § § and § § SUSAN C. GIBSON § HARRIS COUNTY, TEXAS

LADIES AND GENTLEMEN OF THE JURY:

This case is submitted to you by asking questions about the facts, which you mxist decide from the evidence you have heard in this hial. You are the sole judges of the credibility of the witnesses and the weight to be given then testimony, but in matters of law you must be govemed by the insnuctions in this charge. In discharging yom responsibility on this jury, you will observe all the inshuctions which have been previously given you. I shall now give you additional instructions which you should carefully and snictly follow dming your deliberations.

1. Do not let bias, prejudice, or sympathy play any part in your deliberations.

2. In anivmg at your answers consider only the evidence uitroduced here under oath and such exhibits, if any, as have been inteoduced for your consideration under the rulings ofthe court, that is what you have seen and heard m this courtroom, together with the law as given you by the court. In your deliberations you will not consider or discuss anything that is not represented by the evidence in this case.

3. Since every answer that is required by the charge is important, no juror should state or consider that any required answer is not important.

4. You must not decide who you think should win, and then hy to answer the questions accordmgly. Simply answer the questions, and do not discuss or concem yourselves with the effect of your answers.

5. You will not decide the answer to a question by lot or by drawing straws, or by any other method of chance. Do not rehim a quotient verdict. A quotient verdict means that the jurors agree to abide by the itssult to be reached by adding together each juror'sfiguresand dividing by the

-1-

PLAINTIFFS' ORIGINAL PETITION - Page 120 number of jurors to get an average. Do not do any trading on your answers; that is, one juror should not agree to answer a certain question one way if others will agree to answer another question another way.

6. You may render your verdict upon the vote of ten or more members of the jury. The same ten or more of you must agree upon all the answers made and to the entire verdict. You will not, therefore, enter into an agreement to be bound by a majority or any other vote of less than 10 jurors. I f the verdict and all the answers therein are reached by unanimous agreement, the Presiding Juror shall sign the verdict for the entire jury. If any jmor disagrees as to any answer made by the verdict, those jmors who agree to allfindingsshall each sign the verdict.

These instructions are given you because your conduct is subject to review the same as that of the witnesses, parties, attomeys, and the judge. If it should be found that you have disregarded any of these instructions, it will be jury misconduct and it may require another trial by another jury; then all of oirr time will have been wasted.

The presiding juror or any other who observes a violation ofthe court's instructions shall immediately warn the one who is violating the same and caution the juror not to do so again.

When words are used in this charge in a sense which variesfromthe meaning commonly understood, you are given a proper legal definition, which you are bound to accept m place of any other definition or any other meaning.

Answer "Yes" or "No" to all questions unless otherwise mstructed,

A "Yes" answer must be based on a preponderance ofthe evidence, xmless that question states specifically that a different standard should be used. In answering a question based on a preponderance ofthe evidence, if you do notfindthat a preponderance ofthe evidence supports a "Yes" answer, then answer "No."

The term "preponderance of the evidence" means the greater weight and degree of credible testimony or evidence introduced before you and admitted in this case.

In answering a question based on a preponderance ofthe evidence, a fact may be established by direct evidence or by circumstantial evidence or both. Afiictis established by direct evidence when proved by documentary evidence or by witaesses who saw the act done or heard the words spokert A fact is established by circumstantial evidence \^en it may be fairly and reasonably inferred fiom other facts proven.

U3 c cz I —

no CO •2-

PLAINTIFFS' ORIGINAL PETITION - Page 121 652-r5-20l3 In determining the amount ofreasonableand necessary attorney's fees, the following factors should be considered:

1. the time and labor involved, the novelty and difficulty of the questions involved, and the skill required to perform the legal services properly; 2. the liklihood that the acceptance of the particular employment will preclude other employment by the lawyer; 3. the fee customarily charged in the locality for similar legal services; 4. the amount involved and the results obtained; 5. the time limitations imposed by the client or the ckcumstanccs; 6. the nature and length of the professional relationship with the client; 7. the experience, reputation, and ability of the lawyer or lawyers performing the services; and 8. whether the fee isfixedor contingent on results obtained or uncertainty of collection before the legal services have been rendered.

-3-

PLAINTIFFS' ORIGINAL PETITION - Page 122 652-f6-ZOI4

QUESTION ONE

What reasonable amount, if any, is owed to Donna Kline for the necessary legal services she performed for Susan Lee and Susan Gibson on an hourly basis under the contracts?

Answer in dollars and cents, if any.

Answer: ll^,lO?.U

r

PLAINTIFFS' ORIGINAL PETITION - Page 123 65H6-20I5 QUESTION TWO

Did Susan Lee and Susan Gibson discharge Donna Kline for good cause?

Answer "Yes" or "No".

Answer, /J Q •

You are instructed that a cUent has "good cause" to discharge an attomey if the attomey fails to perform her duties in the manner that an attomey of ordinary skill and ability would have performed her duties under the same or similar circumstances.

-5-

PLAINTIFFS' ORIGINAL PETITION - Page 124 QUESTION THREE

What is a reasonable fee for the necessary services of Donna Kline's attomeys in this case?

Answer with an amount for each of the following;

a. For preparation and trial.

Answer: ^7S"^ooQ.oO .

b. For an appeal to the Court of Appeals.

Answer: ^ ^O,QO0-0O . —

c For making or responding to a petition for review to the Supreme Court of Texas.

Answer: ^7,^OO^oo .

d. If a petition for review is granted by the Supreme Court of Texas.

Answer: 4 , 0<^ »<0'0 •

-6-

PLAINTIFFS' ORIGINAL PETITION - Page 125 QUESTION FOUR B52~r6~Z0 I J

What is a reasonable fee for the necessary services of Susan Lee's and Susan Gibson's attomeys in this case?

Answer with an amount for each of the following:

Answer: -^^^

b. For an appeal to the Coxut of Appeals.

Answer;

c. For making or responding to a petition for review to the Supreme Court of Texas.

Answer: JS^"^^

d. If a petition for review is granted by the Supreme Court of Texas.

Answer:

PLAINTIFFS' ORIGINAL PETITION - Page 126 After you retire to tbe jury room, you will select your own presiding juror. Thefirstthing the presiding jmor will do is to have this complete charge read aloud and then you will deliberate upon yom answers to the questions asked.

It is the duty of the presiding juror:

1. to preside during your deliberations,

2. to sec that your deliberations are conducted in an orderly manner and in accordance with the instructions in this charge,

3. to write out and hand to the bailiff any communications conceming the case that you deshe to have deUvcrcd to the judge,

.4. to vote on the questions,

5, to write your answers to the questions in the spaces provided, and

6. to certify to your verdict in the space provided for the presiding jmor's signatme or to obtain the signatmes of all the jmors who agree with the verdict if your verdict is less than imanimbus.

You should not discuss the case with anyone, not even with other members of the jury, unless all of you are present and assembled in the jury room. Should anyone attempt to talk to you about the case before the verdict is retimied, whedier at the courthouse, at yom: home, or elsewhere, please inform the judge of this fact

When you have answered all the questions you arc required to answer undertiieinstructions of the judge, and your presiding juror has placed you answers in the spaces provided and signed the verdict as presiding juror or obtamed the signatures, you will mform the bailiff at the door of the jury room that you have readhed a verdict, andtiienyou will return into court with your verdict

-8-

PLAINTIFFS' ORIGINAL PETITION - Pasie 127 652-^6-2019 CERTIFICATE

We, the jury, have answered the above and foregoing questions as herein indicated, and herewith return same into court as our verdict.

(To be signed by the presiding juror if unanimous.)

Presiding Juror

(To be signed by all jurors in agreement if not unanimous)

-9

PLAINTIFFS' ORIGINAL PETITION - Page 128 (1 653-r4-3255

)2-

m. 137,506^

__ ESTATE OP KATHERINE flUm § IN THE PROBATE COURT NO. 2 BARNHART, DECEASED j ±. DONNACIOINE

V. I OF SUSAN CAMILLE LEE, Individually isad M TnisSw fbr SUSAN C GIBSON

SUSAN COtDSON { HARRIS COUNTY, TEXAS

This esse is submittedtoyoo by addag questkms sbout tbefocts,wfaidi you must decide fitna^svidetiM jroabm heard in This tML Yott antfissdejudges of &e credibility of Oe witnesses aad the iveigtAtobe gim tbdr test^^ the itUOuctiooi in this dUB|^ In discbargisgycvie^MXt^bflityoQ this Jury, you wiUobserwaU thetnrtnictioiiswhldibvvebempnwioudyg^myoti. I dbsOiKrw give you additional imtructiou >^ch you shmiJd carefully Old itrictiyfoOowd o ^

L DoiwtletbUs,pR;}udioe,orsyiitp«thyplByai)9p8rtiiiyourdelibe

2, baniviiif atyouraarweisooatsldKoafythsevt^^ eshibtts, If aay, m hav* \mn kctroducwd fbr yow ocH»id««tica ocdcr the rulingi of the cowt, that is «ribat you haYC seen md heerd ia this oourtnxni, together lhyoffli»

3, Since eveiy asswer that is required by tt» charge is important, no juror should state or consider that any required answer is not importsflt

4, You onist not decide who yoa ttiiidc should wis, aod thcsi tiy to answer tbe questioss feccorcBngly. Sfanply answer the queitioaa^ aod do not

Sy Yo« will not dec{

PLAINTIFFS' ORIGINAL PETITION - Page 129 Qumbef ofjurors to pt^ftverai^ DoiMdoeajrtrasSagOityiweasvvm', thstU,oneJum8houkj oot Kgr^ to aasvm & esrtalii quostkn oi» wqr if o^bers wUl

i* YouittiriwJwyot»va(dtot«q»ath«volsoft®tJOf TheMane tett or tmn of yott nntst agrea upoa aU tbe aaswers awk and to tha entire verdict You will no4, dtere&fe,et)^tt)toaQfignem(Mtobefx)u«i!^ 10 jurors. If tfa« verdid atui all tha answm dterein are reac^ Iq^ shaUrigntevBnMotfbrtheeQtiniJuiy. If as^junvdlssgnss^toany answer tnada by the verdict, tfaoia Jurors wim agre«to

Thesg itiMructfcjm ant givea you bec

Ihe presiding Juror or any other who observes a vMatioa of the couxfs instmctions dull immediately want tbe one w l » is violating dw same and caution the juror nottodo so again.

When words are u«ad ia this charge in a sense witich v^ieafix>mthe meamng common! understood, you «» given a fxoper legal deflnitioa, which you ere boundtoaccept in place of any other deflnitioa or toy other meaniiig.

Answer "Yea" or "No"toall quesdoQs wlesa otherwise instructed.

A "Yea" answer most be based oo a prepoodentnoe of ih« evidence, unless that question statea ipecifloally that a diffiHteM statkbud should ba us^ In oaswering a question based on a prqpotKkritMof the flvideo««;ifyoadoiW(fitdti»taprep evidence supports a "Yes" answer, then answer

n* teem "pcepoodctaooe ofthe tvldedca" icMaas the greater weight and degree of credible teatimooQf or avtdenoe introduced befbn you and admittedfaitUs caae.

In answering • questkw based OQ a pr^xstdanm of dM evidence, a SK^ may be estab direct «vidmc« or t^eircusstandalevideoc* or both. Aftctisesti^iishedbydiroctevidetxe wt>co pnvod by documentary evidence or by ^witntag^ who saw tha set done or beerd the words ipolcea AfltcttaeatsibUshed by circumstantial svideaos whea It may befitiriyand reasonably {nfixTcdfiomotherfitctsproven.

PLAINTIFFS' ORIGINAL PETITION - Page 130 653-i'4-3Z5r

I,

3. (he flM CQSUomily d a ^ i ^ k Ih9 {ocaliiy fb^ 4. thefeoiouotfaivoiyed80(1 tba tBSih> olxaioedi 5. tfie ilaiB HflBtoltaMiBJjwwed l y ibs cSect of the dscotostsoccsi 6. tbe s a t m aod kogth cf i » ptolbeaic^ 7. die expaflaoce, rsjpotstloo, aad AOky o£fb» bmyw or bnvyers petfixiohif the aerrtcea;aod I. wh^faer l b fte iafixedor ooedh^^ oQ results obtahied 0^ befiws tbs legtd exrioes have beta rendered. 653-74-3Z58

QUESTION CWE .

Aasvm ia doQns saai omts, i f say.

PLAINTIFFS'ORIGINAL PETITION - Page 132 653-f4-3259

QUESHWTWO

0 y Sum Lee md Sima Oibsoai AKtegs Dmim Klkis

Amw«r"Yes"ocW,

to petfbem hes dodea ia tba nwmer fb«t an attimtejr of ordim^ dd^' a»i aUiity would have

PLAINTIFFS' ORIGINAL PETITION - Page 133 XXX-XX-XXXX

-r&-20ii

Wii^ k a re^isca^ &r ti» oecmvy MviMis of DossM 1^

AE@WW ia dotlas sod cmts, if any.

Aoswvr « ^ «a sntountforeadi of d» folkmifig:

a. For prt^wratloo and triaL Answer. 1^ 7$"^ o o < ? , o O .

h. Foraos|>pealtotbeCoartofA{^peaIs.

c. Fornuddngormqyondingtoapeddoa&rreviewtodiBSi)^^ Answer: ^7,^0O ,

d. If a petitionfiwreviewiigtantod by tin StqiremeCotat of Texas.

Answer: 4 %0^O

PLAINTIFFS' ORIGINAL PETITION - Page 134 QUESnoNFOUR

What is a te&sombk fo- tin K m w y mvioM of Smm Lee's «id Smu Oibscm's »ttoniQ« la this cese?

Aiamer in doQan sod oeots, if tay.

Answer with sa imKxnt fbr e@ch of die fbllowiiif:

m. For prqmssioa tad trial.

Answer. .

Ik Fbr an aptteal to tha CoQrt (^Appeals.

Answer: .

c Forn)ddngorn»^}ondlngto«petitioofi»-reviewtod}eSupren}eCouitofTe:t^

Answen

Ifa pctkioo fbr revkw is granted by the Siqjrems <^owt of

Answer: -^""''^

PLAINTIFFS' ORIGINAL PETITION - Page 135 Alkr yoa ndie to tfasjutyroom,you wfll sdei(!t yaw owe TbefdttAing the preddlog juror will do istoh$V9 this compkto <^m^ tmd skmi sad dtea yoa will deliboste f^CKm yctirfioswerstoIbe ({oesiioas s^ced.

It ia the duty tbe presiding juror.

L to preside dudng your deliberstioni,

2. to see that your deiibeiaiiom sre coiKiacted in en orderly aia^^ accordance witb the instntctians in this cbsrge,

3. to write out end bandtothe bailiff any con»inn4c«dom concerning the esse that yoa desiretohave deliveredtothe judge,

4. to vote 09 d» questions,

5. to write your answerstothe questioasia the q»oes provided, and

6. to certiiy to your verdict in the i^Mtce provided for the presiding jmoi's signature or to obtsin the signatoBes of all the juron who agree with dK venfict If your verdict is lea than unsnimoui.

Yoa should no* (fiscuss tbe case with anyone, not even with odierroonbersof the jury, all ofyou are present aad asseaoUed in the jury room. Should aaorons attempttotallctoyou about dsc case bcfoio tho venfict is retiatncd, whether at tla coortboasa, st your home, or elsewhere, plasss infbtm Ae j w ^ of this fittt.

When you han« answered aB queadom yoo are reqdxadtoanswer untfer the i ^ ^ of the jixlgek and yotr pRakSogjinr has placed yoa answers b the spaces pro^ venfict as prodding juror or obb^oed tbe sigBstuiea, you win h i f l ^ room that yoo have reached a vercfict, «od then you will return into court with your verdict

PLAINTIFFS' ORIGINAL PETITION - Page 136 m XXX-XX-XXXX

CERTTFICATB

We, tbe Juq', Ime mmwmd <^ sborve sodfiKegofaf;qtieftkws ss fwda iadkatoi, and besei^HUi retnm saiBs b^ ocmt w onr vc»&t

CTs b« sifoed br tlse i>m{dtag Jersr if B]i8BlnioB».)

Pret^isif Jam*

CTs b« s%Bed by an Jntrers ia agmmeat if aat Baaaittotts}

A t

PLAINTIFFS' ORIGINAL PETITION - Page 137 EXHIBIT

PLAINTIFFS' ORIGINAL PETITION - Page 138 80-2973

NO. 137506-403

E S T A T E OF KATHERINE P I L O T S IN THE PRbBATE/fcOURT EARNHARDT, DECEASED s s DONNA -C. K L I N E s

VS. ss NO. 2 s SUSAN CAMILLE L ' E E , s I n d i v i d u a l l y and a s TRUSTEE s FOR SUSAN C. GIBSON s s AND s B56-63-2795 s SUSAN C. GIBSON s s VS. s s GARY GROTE s OF HARRIS COUNTY, TEXAS

JTJgGHENT

BE I T REMEMBERED t h a t on t h e 1 5 t h day o f J u l y , 1997, came on

to be heard t h e a b o v e - s t y l e d and numbered c a u s e i n w h i c h Donna C.

Kline was Intervener and Plaintiff, and Susan Camille Lee,

individually and a s t r u s t e e f o r Susan C. G i b s o n , and Susan C.

G i b s o n were defendemts. A jury consisting o f P e t e r Hugo a n d 11

o t h e r good and l a w f u l men a n d women were s e l e c t e d t o h e a r t h e c a s e

and returned a verdict on J u l y 23, 1997, s i g n e d b y 11 members o f

the jury.

The Court having considered the verdict of the jury, the

testimony of the p a r t i e s , and having considered t h e argument o f

counsel, was of the opinion that Judgment should be for the

P l a i n t i f f / I n t e r v e n e r Donna C. K l i n e .

It i s t h e r e f o r e , ORDERED, ADJUDGED a n d DECREED t h a t Donna C.

Kline shall r e c o v e r of a n d from t h e D e f e n d a n t s S u s a n C a m i l l e L e e ,

individually and a s t r u s t e e f o r Susan C. G i b s o n , and Susan C.

PLAINTIFFS' ORIGINAL PETITION - Page 139 Gibson, Jointly and severally, the sura of $114, CT interest thereon a t t h e r a t e of s i x p e r c e n t ( 6 % ) p e r annum from W I October 26, 1995. I t i s f u r t h e r o r d e r e d t h a t Donna C. K l i n e shall ~4 r e c o v e r a t t o r n e y ' s f e e s i n t h e ainount o f $13 2,500.00, w i t h i n t e r e s t \ Jh

thereon f r o m d a t e o f Judgment a t t e n p e r c e n t ( 1 0 % ) p e r annum from

both L e e and Gibson j o i n t l y and s e v e r a l l y . I n t h e event t h e r e i s

no a p p e a l t o one o f t h e C o u r t s o f A p p e a l s o f T e x a s f o l l o w i n g e n t r y

of this Judgment, t h e amount of t h e Judgment w i l l be r e d u c e d by

remittitur i n t h e amount o f $30,000.00. I n t h e e v e n t t h e r e i s no

a p p l i c a t i o n f o r varit aff avrov f i l e d w i t h t h e Supreme C o u r t o f T e x a s

by a n y p a r t y f o l l o w i n g e n t r y o f t h i s Judgment, t h e amount o f t h e

J u d g m e n t s h a l l be r e d u c e d by r e m i t t i t u r by $7,500.00. I n t h e e v e n t

no p e t i t i o n f o r review i s g r a n t e d by t h e Supreme C o u r t of Texas

following e n t r y o f t h i s Judgment, t h e amount o f t h e Judgment w i l l

be reduced by r e m i t t i t u r i n t h e amount o f $ 2 0 , 0 0 0 . 0 0 . 656-63-Z796 Based o n t h e J u r y ' s answer t o Q u e s t i o n 2, t h e C o u r t makes

declaratory judgment t h a t Donna C. K l i n e h a s a good, valid and

subsisting interest in any recovery by Susan Camille Lee,

individually and a s t r u s t e e f o r Susan C. Gibson, and Susan C

Gibson individually, pursuant to her contingent f e e c o n t r a c t of

M a r c h 3 0, 1995.

I n t e r v e n o r / P l a i n t i f f Donna C. K l i n e s h a l l r e c o v e r a l l c o s t s o f

court and i n t e r e s t on a l l amounts awarded h e r e i n f r o m t h e d a t e o f

Judgment u n t i l p a i d a t t h e r a t e o f t e n p e r c e n t ( 1 0 % ) p e r annum.

It i s further ORDERED, ADJUDGED AND DECREED that the

d e f e n d a n t s c o u n t e r - c l a i m a n t s S u s a n C a m i l l e L e e , I n d i v i d u a l l y and a s

PLAINTIFFS' ORIGINAL PETITION - Page 140 T r u s t e e f o r Susan C. G i b s o n ("Lee") and S u s a n C. Glb^gp^^("Gi^gon^)

t a l c e n o t h i n g on t h e i r c o u n t e r c l a i m s a g a i n s t Donna C. Kline.

On J u l y 11, 1997, came on for consideration the Motion f o r

Summary Judgment of T h i r d Party Defendant and Counter-Plaintiff

G a r y G r o t e . The c o u r t c o n s i d e r e d t h e Motion, t h e R e p l y , t h e summary

j u d g m e n t e v i d e n c e and t h e arguments o f c o x i n s e l and found t h a t t h e

M o t i o n s h o u l d be g r a n t e d , a s s e t f o r t h i n t h e c o u r t ' s O r d e r o f J u l y

11, 1997.

I t i s t h e r e f o r e ORDERED, ADJUDGED AND DECREED t h a > - ^

P l a i n t i f f s S u s a n C a m i l l e L e e , I n d i v i d u a l l y and a s T r u s t e e f o r S u s a n

C. Gibson ("Lee") and S u s a n C. G i b s o n ("Gibson") take nothing of

a n d f r o m T h i r d P a r t y D e f e n d a n t Gary G r o t e i n t h i s lawsuit.f356""63""2r9r It is f u r t h e r ORDERED, ADJUDGED AND DECREED t h a t T h i r d Party

P l a i n t i f f G a r y G r o t e h a v e and r e c o v e r o f and from S u s a n C a m i l l e L e e

the amount o f T h r e e Thousand F i v e Hundred D o l l a r s ($3,500.00), i n

a d d i t i o n t o a t t o r n e y ' s f e e s o f $2,500.00 t h r o u g h t h e d a t e o f t h i s

J u d g m e n t ; a n d a d d i t i o n a l a t t o r n e y s f e e s o f $15,000.00 i f t h e c a s e

is a p p e a l e d t o t h e Covurt o f A p p e a l s , $15,000.00 i f a P e t i t i o n f o r

R e v i e w i s f i l e d w i t h t h e T e x a s Supreme Coxirt, a n d $15,000.00 i f t h e

T e x a s Supreme C o u r t g r a n t s a p e t i t i o n f o r r e v i e w .

All other r e l i e f r e q u e s t e d by any p a r t y that i s not granted

herein i s s p e c i f i c a l l y denied. z

RENDERED and SIGNED on this 1997. u CT, H o n o r a b l e Mike Wood P r e s i d i n g Judge

CD -3-

PLAINTIFFS' ORIGINAL PETITION - Page 141 A p p r o v e d a a t o form o n l y :

9 09 F a n n i n H o u s t o n , TX 77010-1063 Telephone: ( 7 1 3 ) 652-2419 Fax: ( 7 1 3 ) 652-2419 ATTORNEYS FOR DONNA C. K L I N E

WILSON, C R I B B S , GOREN & FLAUM, P.C.

S t a t 6 B a r No. 2 0446750 2200 L y r i c C e n t r e 440 L o u i s i a n a H o u s t o n , T e x a s 77002 T e l e p h o n e : 713/222-9000 f a x : 713/229-8824

Examined p r i o r t o e n t r y but not approved a s t o form o r s u b s t a n c e ^ and without waiver of any objection or request for post-judgment r e l i e f .

BURNS, WOOLEY & MARSEGLIA, L . L . P .

M. S u s a n H a r d i e S t a t e B a r No. 08957600 1111 B a g b y , S u i t e 4 900 H o u s t o n , TX 77002 T e l e p h o n e : 713/651-0422 f a x : 713/651-0817

PLAINTIFFS' ORIGINAL PETITION - Page 142 EXHIBIT " J "

PLAINTIFFS' ORIGINAL PETITION - Page 143 Lee V. KUne, Not Reported in S.W,3d (2000)

that, based upon thejury's findings, Kline possesses a good, valid and subsisting interest in any recovery obtained by 2000 WL 19227 Defendants in the underlying estate case pursuant to Kline's Only the Westlaw citation is currently available. contingent fee contract.' NOTICE: NOT DESIGNATED FOR PUBUCATION. UNDER TX R RAP RULE 47.7, UNPUBUSHED Defendants assign twelve issues on appeal, alleging that OPINIONS HAVE NO PRECEDENTIAL Kline failed to obtain necessary jury findings, challenging VALUE BUT MAY BE CITED W I T H THE the sufficiency of the evidence to support the judgment, and NOTATION "(not designated for publication)." that Grote's motion for summary judgment should have been denied because it was unsupported by competent evidence Court of Appeals of Texas, Houston (14th Dist.). and did not dispose of all issues in the case. Defendants also contend that "the trial judge should have been recused firom Susan C. Lee, Individually, and Susan the trial of this case." Lastly, Defendants assert that "the C. LEE, Trustee for Susan C. Gibson, trial court erred in not conditioning the award of appellate and Susan C. Gibson, Appellants, attomey's fees on a successful appeal." We affirm. v. Donna KLINE and Gary Grote, Appellees. I. BACKGROUND No. 14-98-00268-CV. Defendants retained Kline in July 1994. Kline was retained I to represent Gibson in an action against Gibson's uncle, who Jan. 13, 2000. was the executor of the estate of his and Lee's mother (Estate

On Appeal from the Probate Court No. 2, Harris County, ofKatherine Pillot Bamhart, Deceased). ^ Defendants agreed Texas, Trial Court Cause No. 137,506-403. to pay Kline $225 per hour. Defendants were not satisfied with the executor's management of a trust created pursuant to Panel consists of Chief Justice MURPHY, Justices HUDSON the deceased's will, Defendants believed that disbursements and FOWLER. into the trust accounts were not being made by the executor pursuant to the terms of the trust.

OPINION ON REHEARING The law firm of Butler & Binion was lead counsel in the action brought by Defendants. Kline was retained by Defendants to FOWLER. "help and advise [Defendants] in regard to the handling of the case" and to act as lead counsel on behalf of Gibson. The *1 Defendants filed a motion for rehearing in this case. executor was represented by the law firm of Vinson & Elkins. See TEX.R.APP.P, 49.1. It is denied. However, our original Butler & Binion withdrew from the case sometime in early opinion is withdrawn and this substituted opinion is issued in 1995. Through Kline's efforts; the Dallas law firm of Thomas, its stead. Sheehan & Culp was retained to become Defendants' lead counsel in March 1995. When this firm became lead counsel, Donna Kline ("Kline") brought this action against Susan the fee agreement was modified. Defendants expressly agreed C. Lee, Individually, and Susan C. Lee, Trustee for Susan to continue to pay Kline $225 per hour, $250 per hour for Don C. Gibson, and Susan C. Gibson (individually as "Lee" Sheehan, and $300 per hour for Tom Thomas. Defendants and "Gibson" or collectively as "Defendants") to recover also expressly agreed to pay a 10% contingency fee on any attomey fees. Defendants filed a counterclaim against Kline "recovery ." It was fiirther agreed that 40% of the 10% aiid Gary Grote ("Grote"), alleging legal malpractice. The contingency fee would be paid to Kline and that the remaining trial court granted Grote's motion for summary judgment. 60% would be paid to Thomas, Sheehan & Culp. The remaining claims proceeded to a jury trial. The trial court instructed a verdict in Kline's favor on Defendants' *2 The relationship between Defendants and Kline was malpractice action. On Kline's action to recover attorney fees, the jury found in favor of Kline and awarded her genuinely affable^ until September 1995, when Kline $114,207.21. In its final judgment, the trial court found received correspondence from Gibson wherein the demand was made to Kline to "withdraw from the case immediately."

WtSTLAW . fh.vr->.;-ri Routes No daim toonqsnai U.S tiOvar'-imcn* Wo-k>

PLAINTIFFS'ORIGINAL PETITION - Page 144 Lee V. Kline, Not Reported in S.W.3d (2000)

Kline obeyed Gibson's demand and withdrew from the case. Defendants assert that because the contingent fee agreement I^rior to withdrawing, fCline received approximately 578,000 between Kline and Defendants was made during the existence in attomey fees from Defendants, These attorney fees were of their attorney-client relationship, there was a "presumption incurred between July 1994 and December 1994. Afler Kline of unfairness" of the agreement. They contend that the withdrew, she billed Defendants for her time invested in their only way Kline could defeat that presumption was by case between December 1994 and July 1995. Kline's attomey obtaining a jury finding that the agreement was fair and fees for that period of time totaled $110,388.77. Defendants reasonable. In making this claim, defendants rely on Archer refused to pay the bill and Kline intervened in the underlying V. Griffith, 390 S.W,2d 735 (Tex. 1964).. There, the supreme estate case to recover her attomey fees. court held that where an attomey contracts with his or her client for compensation during the existence of an attorney- client relationship, there "is a presumption of unfairness or Following a trial, the jury awarded Kline $114,207.21 for invalidity attaching to the contract, and the burden of showing "legal services she performed for [Defendants] on an hourly its fairness and reasonableness is on the attomey," Id. at 739 basis under the contract." The jury also found that Defendants (citations omitted); see also Robinson v. Garcia, 804 S.W,2d did not discharge Kline for "good cause." Consequently, in its 238, 248 (Tex.App.-Corpus Christi 1991, writ denied). judgment, the trial court found that Kline possesses "a good, valid and subsisting interest in any recovery by [Defendants] pursuant to her contingent fee contract,..." *3 Although Defendants did not request a jury instruction conceming the fairness and reasonableness ofthe contingent fee agreement, they did request that the trial court submit II. DISCUSSION the following question to the jury: "Do you find from a preponderance of the evidence that the making of the March 30, 1995 retainer agreement constituted an unconscionable Jury Findings on Fairness of Contingent Fee Agreement action or course of action with respect to the attorney's fees to In Defendants' first issue, they aver that "Kline failed to be paid to Donna Kline?" ^ The trial court refused to submit prove and to secure findings that she dealt fairly with Gibson Defendants' tendered question to the jury because there was and Lee...." They contend that the contingent fee agreement "no evidence to support the elements in the definition of was unfair and invalid because it was made after Kline was unconscionable conduct or course of action." The trial court initially retained by Defendants. ^ also found no "evidence of taking advantage or lack of knowledge or ability or experience or capacity or grossly Kline's original fee agreement provided that Defendants unfair [because] there is [no] evidence on any of those points." would pay Kline $225 per hour, plus expenses, for legal services she performed in the underlying estate case. The Jury instructions and questions are proper only i f they fee agreement between Defendants and Kline was modified are raised by the written pleadings and are supported when Thomas, Sheehan & Culp was retained to join Kline in by the evidence.'^- ^/^obr v. Smith. 845 S.W.2d 240, representing Defendants, On March 30,1995, Daniel Sheehan 243 (Tex.1992); Knoll v. Neblett, 966 S.W.2d 622, 633 drafted an agreement which outlined the terms of his firm's (Tex.App.-Houston [14th Dist.] 1998, no pet.); Bean v. Baxter representation of Defendants in the underlying estate case. Healthcare Corp., 965 S.W.2d 656, 661 (Tex.App.-Houston The agreement provided that "[o]ur fee will be the sum of: [ 14th Dist.] 1998, no pet.); see also TEX.R.CIV.P. 278 (West (a) reasonable hourly rates including Donna Kline at the 1999), A trial court may properly refuse to submit an issue to rate of $225 per hour and members of Thomas, Sheehan & the jury where no evidence exists to warrant its submission. Culp, L.L.P. who work on the case with Tom Thomas' rate Elbaor, 845 S.W.2d at 243. at $300 per hour and Dan Sheehan's rate at $250 per hour, plus (b) ten percent (10%) of all Recovery, if any," (emphasis Further, presumptions that are imposed by law must be added). The agreement fiarther provided that "[cjontingency supported by the evidence presented during trial in order to fees will be divided between us, sixty percent (60%) to be considered by the trier of facts. We note the following: Thomas, Sheehan & Culp, L.L.P., andforty percent (40%) to Donna C. Kline." (emphasis added). The record shows that Courts have frequently remarked that the agreement was executed by both Defendants. presumptions are only intended to take the place of facts and cannot

PLAINTIFFS' ORIGINAL PETITION - Page 145 Lee V. Kiine, Not Reported in S.W.Sd (2000)

be relied upon where the facts are In issues two, three, four, five and six, Defendants contend shown; or that no presumption can that the trial court erred by entering its judgment against each stand in the face of facts. According Defendant under "all three contracts." Defendants maintain to such authorities a presumption is that they were not jointly and severally liable on each an artificial thing, a mere house of contract. Defendants also assert that Defendant Susan C. Lee, cards, which one moment stands with Tmstee for Susan C. Gibson was not a proper party to the suit sufficient force to determine an issue, brought by Kline. but at the next, by reason of the slightest rebutting evidence, topples Defendants' allegations of trial court error in issues two utterly out of consideration of the trier through six, inclusive, are waived. "Where a defendant does of facts. not file a sworn pleading complaining of a defect of parties before the case is called to trial, such defect is waived." Combined American Ins. Co. v. Blanton, 353 S.W.2d847, 849 Sunbelt Const, Corp., Inc. v. S & D Mechanical Contractors, (Tex.1962). Inc., 668 S.W.2d 415, 418 (Tex.App.-Corpus Christi 1983, writ refd n.r.e.); Allright, Inc. v. Burgard, 666 S.W.2d 515, The record in this case is replete with competent evidence to 517 (Tex.App.-Houston [14th Dist.] 1983, writ refd n.r.e.); rebut the presumption of unfairness conceming the contingent Butler V. Joseph's Wine Shop, Inc., 633 S.W,2d 926, 929-30 fee agreement. For example, Kline testified that "from the (Tex.App.-Houston [14th Dist.]' 1982, writ refd n:r.e.); see time we started talking about contingency arrangements with also TEX.R.CIV.P. 93(4) (West 1999); Shawell v. Pend [another law firm], [Defendants] said if someone is going to Oreille Oil & Gas Co., 823 S.W.2d 336, 338 (Tex.App.- get a contingency fee, we want you to get part of it, because Texarkana 1991, writ denied) (a defendant must complain you have done so much for us...."- Conversely, there was about a defect in the parties before the case is called to trial). no evidence presented by Defendants to suggest that Kline's Thus, nothing is presented for appellate review. forty percent contingent fee was unfair or unreasonable. Indeed, the evidence in the record supports the inference On rehearing, Susan C. Lee, Trustee, chastises this court that the agreement was entered into freely and voluntarily by for summarily disposing of five points of error; she claims Defendants based upon their full understanding of the affect that she was never a party to the suit in her capacity as of the contingent fee agreement. See Archer, 390 S.W.2d at tmstee. We beg to differ. By her Second Amended petition. 739. Donna Kline sued-and served-Susan C. Lee in her capacity as Trustee; Kline also sued Lee in that capacity in a supplemental The presumption upon which Defendants rely "disappeared petition. Moreover, Susan C. Lee, Tmstee, appeared in the like chaff in the wind" upon the introduction of Kline's suit of her own volition in a counterclaim and a third evidence contradicting the applicable legal presumption. party petition. That pleading began as follows: "NOW INTO See Praetorian Mutual Life Ins. Co. v. Humphreys, 484 COURT, Susan Camille Lee, individually and as Tmstee S.W.2d 413, 417 (Tex.App.-Fort Worth 1972, writ refd for Susan C. Gibson, and Susan C. Gibson, and files this n.r.e.). Thereafter, the presumption, previously existent, no their Third Amended Original Counterclaim combined with longer constituted evidence. See id.; see also Sudduth v. Third Amended Original Third Party Petition complaining Commonwealth County Mutual Ins. Co., 454S.W.2d 196,198 of Donna Kline and Gary Grote.,.." Unquestionably, Susan (Tex. 1970). C. Lee, Trustee, was a party to the lawsuit, appeared in the lawsuit, and requested affirmative relief from the trial court. *4 Accordingly, there being no evidence of imfaimess or We overrule issues two through six. unreasonableness in the record, a specific finding by the jury that Kline's contingent fee agreement with Defendants was fair and reasonable was not necessary. See Elbaor, 845 S.W.2d at 243. Defendants' first issue is overmled. Separate Jury Findings on "Each Contract"

Defendants contend in their seventh issue that Kline "invited reversible error" by failing to obtain jury findings upon which Parties an accurate judgment can be entered against them. They contend that the trial court committed reversible error by

WESTLAW © 2015 Thomson Heutecs. No claim io ongmal U.S. Government Works.

PLAINTIFFS' ORIGINAL PETITION - Page 146 Lee V. Kline, Not Reported in S.W.3d (2000)

submitting one, broad question to the jury conceming the reverse ajudgment based upon error in the charge, Defendants amount of attomey fees owed under the contracts, rather than must establish that the error complained of amounted to submitting separate jury questions conceming the amount of such a denial of the rights of the Defendants that it was attomey fees "owed under each contracL" reasonably calculated to cause, and probably did cause, rendition of an improper judgment. See Insurance Co. of *5 In interpreting Rule 277, our Supreme Court held that North America v. Morris, 928 S.W.2d 133, 143 (Tex .App.- broad-form submissions "shall" be used "whenever feasible" Houston [14th DisL] 1996, no writ). Defendants must also and that trial courts do not possess any discretion to submit establish that they "distinctly" and "specifically" objected separate questions with respect to each element of a case. to the complained of question so as to have preserved the Texas Dep't of Human Serv. v. E.B., 802 S.W.2d 647, issue for appellate review./(T/rfcv. Stale of Texas, 651 S.W,2d 649 (Tex. 1990). Broad-form submissions must be used "in 840, 844 (Tex.App.-El Paso 1983, no writ). Conceming any and every instance in which it is capable of being the former. Defendants do not develop in their argument accomplished," Id. The court also stated that broad-form how the trial court's complained of jury question caused the questions reduce conflicting jury answers, thus reducing rendition of an improper judgment. See Insurance Co. of appeals and avoiding retrials. Id. "Rule 277 expedites trials North America. 928 S.W.2d at 143, As to the latter, contrary by simplifying the charge conference and making questions to Defendants' assertion in their brief, the record shows that easier for the jury to comprehend and answer." Id. Defendants failed to distinctly and specifically object to the complained of question submitted by the trial court to the jury. Here, the trial court submitted the following, broad-form See Kirk, 651 S.W,2d at 844. Issue seven is overruled. question to the jury: "What reasonable amount, if any, is owed to Donna Kline for the necessary legal services she performed for [Defendants] on an hourly basis under the Good Cause contracts?" The jury answered this question by awarding Kline $114,207.21. The record shows that this amount was *6 In their eighth issue. Defendants contend that the jury's entirely consistent with Kline's evidence. Kline testified that finding that Kline was not discharged by Defendants for Defendants agreed to pay her $225 per hour, plus expenses, "good cause" was against the great weight and preponderance for legal services. Kline testified that the amount of her unpaid of the evidence. reasonable and necessary attomey fees and expenses related to her time spent preparing the underlying estate case totaled The same standard of review applies in reviewing factual $110,388.27. Kline also testified that she billed Defendants sufficiency challenges, regardless of whether the court of an additional $3,818.94 for reasonableandnecessary attomey appeals is reviewing a negative or affmnative jury finding and fees for representing Defendants in a suit involving one of regardless of which party had the burden of proof. Blonstein Defendants' neighbors. Kline testified that the total amount V. Blonstein, 831 S.W.2d468, 473 (Tex.App.-Houston [I4th owed to her on an hourly basis for legal services she Dist] 1992, writ denied). Afler consideration of all ofthe performed for Defendants totaled $114,207.21. evidence, a verdict will be set aside only i f the evidence is so weak or the finding is so against the great weight and At trial, the only disputed fact related to Kline's hourly preponderance of the evidence that it is cleariy wrong and attomey fees under the contracts was the amount owed by unjust. Id.; see also Lofton v. Texas Brine Corp., 720 S.W.2d Defendants. The question submitted by the trial coxjrt was 804, 805 (Tex.1986). The trier of fact is the sole judge ofthe framed to resolve that disputed fact. Triaf courts possess credibility of the witnesses and the weight to be accorded their "broad discretion in framing questions to be submitted, testimony. Id. Therefore, in determining the sufficiency ofthe 'subject only to the requirement that the questions submitted evidence, appellate courts must recognize from the verdict must fairiy submit the disputed issues for the jury's of the jury what the jury, in its discretion, chose to believe. determination,' " Libhart v. Copeland 949 S,W.2d 783, 799 Shafer Plumbing & Heating, Inc. v. Controlled Air, Inc., 742 (Tex.App.-Waco 1997, no writ). We discern no abuse of trial S.W,2d 717, 720 (Tex.App.-San Antonio 1987, no writ). In court discretion in submitting the complained of question. doing so, we must accept thejury's resolution of any conflicts or inconsistencies in the evidence and testimony. Id. The jury Further, assuming arguendo that the trial court should have is free to believe or disbelieve any witness' testimony in whole submitted separate questions to the jury in this case, to or in part. Murphy v. Texas Farmers Ins. Co., 982 S.W.2d 79,

WESTLAW • © 2016 Thomson Reuters. No claim to onginai U.S. Government Works 4

PLAINTIFFS'ORIGINAL PETITION - Page 147 Lee V. Kline, Not Reported in S.W.3d (2000)

85 (Tex.App.-Houston [1st Dist.] 1998, no pet. h,). The jury was instmmental in, inter alia, developing the portion of the is entitled to disbelieve a witness even though that witness is estate case that resulted in Defendants receiving a verdict neither impeached nor contradicted. Id. for S840,000 on the sale of property located on Westheimer, Further, one of the key expert witnesses in the estate was Dr. In Question Two, the jury in this case was asked, "Did Harold Stephen Grace. Dr. Grace is an expert "in litigation [Defendants] discharge Donna Kline for good cause?" The consulting on complex business andfinancialmatters ." Kline jury was instructed that "a client has 'good cause' to discharge brought Dr. Grace into the estate case in May 1995. Dr. an attomey i f the attomey fails to perform her duties in Grace testified that Kline supplied him with all the necessary the manner that an attomey of ordinary skill and ability documents he needed to develop a strategy and his testimony would have performed her duties under the same or similar for the estate case. Dr. Grace testified that Kline possessed a circumstances." The jury responded to Question Two in the cogent grasp of the issues involved in estate case. In preparing negative. his testimony in the underlying estate case. Dr. Grace testified that "my time sheets would reflect that the overwhelming In their brief. Defendants contend that Kline's performance majority of my time, over 90 percent would be spent with deteriorated "dramatically" afler the contingent fee Donna Kline." Dr. Grace testified that he and Kline developed agreement was executed on March 30, 1995. No criticisms the strategy that he used to testify in the estate case. Defendant were made of Kline's performance between the time she Susan Lee told Dr. Grace after he testified in the underiying was retained in July 1994 and March 1995. To show that estate case that his testimony "was the high point ofthe trial." Kline was discharged for "good cause" in September 1995, Defendants rely .solely on criticisms of Kline's performance Reviewing all the evidence in the light of what the verdict made at trial by Daniel Sheehan. First, Sheehan did not reveals the jury obviously believed, we cannot conclude that testify in this case as an expert witness conceming whether the verdict "is contrary to the overwhelming weight of the Kline met the appropriate standard of care. See Greathouse evidence as to be clearly wrong and unjust," See Shafer V. McConnell, 982 S.W.2d 165, 174 (Tex.App.-Houston Plumbing & Heating, Inc., 742 S.W.2d at 721; see also [1st Dist.] 1998, no pet.). Indeed, neither Sheehan nor any Blonstein, 831 S,W.2d at 473-74. Issue eight is overmled. other witness in this case was designated as an expert witness on legal malpractice,' Second, Sheehan was Kline's co-counsel, not her employer, Kline was employed by Declaratory Judgment Defendants. Sheehan's criticisms of Kline's performance, In their ninth issue, Defendants assert that the trial court ened testifying as only a fact witness,"^ are immaterial as to in entering its declaratory judgment which decreed that Kline whether Defendants discharged Kline for "good cause." possesses a "valid and subsisting" contingent interest in any Defendants direct this Court to no testimony in the record by recovery obtained by Defendants in the underlying estate Defendants to support a finding that Kline was discharged by Defendants for good cause, Finally, conceming whether case, pursuant to the contingent fee agreement of March 30, any of Sheehan's criticisms of Kline's performance were ever 1995. communicated to Defendants, in their brief, Defendants rely The purpose of the Uniform Declaratory Judgment Act is to on Sheehan's testimony wherein he testified that he told settle and afford relief from uncertainty and insecurity about Defendants that "Kline was not of any real use to me in getting rights, status, and other legal relations. Hasty, Inc. v. Inwood the case ready." Buckhorn Joint Venture, 908 S.W.2d 494, 499 (Tex.App.- Dallas 1995, writ denied); see also TEX,CIV.FRAC, *7 On the other hand, the record is replete with testimony & REM.CODE ANN. §§ 37.001-.011 (Vemon 1997). and evidence that shows Kline performed in a diligent manner Defendants maintain that the trial court's declaratory in preparing the underlying estate case. Kline testified that she judgment in this case "does not terminate the uncertainty prepared pleadings and motions, attended hearings, prepared or controversy giving rise to [the] lawsuit." However, intenogatories on behalf of Defendants, deposed several Defendants do not identify in their brief what "uncertainty or witnesses, secured expert witnesses, assisted in getting controversy" remains. The trial court's declaratory judgment Defendants' accounting and tax affairs in order, and prepared merely decrees that the parties' contingent fee contract is a portion of the jury charge that was ultimately utilized in the trial of the underlying estate case. Kline testified that she

WESTLAW ® 2016 rhornson Routers. No claim to original U.S. Government Works

PLAINTIFFS'ORIGINAL PETITION - Page 148 Lee V, Kline, Not Reported in S,W.3d (2000)

valid. "A trial court may construe a contract in a declaratory issue of material fact exists on one or more of the essentia! judgment suit either before or afler a breach occurs." Id. elements of the plaintiffs cause of action, or when the defendant establishes each element of an affirmative defense *8 As to the effect of any potential disputes between the as a matter of law. Id.; see also Black v. Victoria Lloyds Ins. parties in this case, a "declaratory judgment may be entered if Co., 797 S.W. 2d 20, 27 (Tex, 1990). A defendant who moves it serves a useful purpose in resolving a controversy between for summary judgment has the burden of showing as a matter the parties, even if actual or potential disputes remain. " Town of law that no material issue of fact exists on the plaintiffs of Griffing Park v. City of Port Arthur, 628 S.W.2d 101, cause of action. Id.; see also Arnold v. National County Mut. 102 (Tex.App.-Beaumont 1981, writ refd n.r.e.) (emphasis Fire Ins. Co.. 725 S.W.2d 165, 166-67 (Tex.1987). added). Indeed, "[t]he fact that other issues in the general controversy remain uiu-esolved by a declaratory judgment *9 The function of a summary judgment is not to deprive a does not deprive the court of the power and discretion to lifigant of its right to a full hearing on the merits of any real render such a judgment." Id . (citation omitted); see also issue of fact but to eliminate patently unmeritorious claims Hawkins v. Texas Oil & Gas Corp.. 724 S.W.2d 878, 891 and untenable defenses. Id.; Dallas Cent. Appraisal Dist. v, (Tex.App.-Waco 1987, writ refd n.re.). G.T.E. Directories Corp. 905 S,W.2d 318, 319 (Tex.App,- Dallas 1995, writ denied). The purpose of the summary We note that the trial court did not enter a monetary award judgment mle is not to provide either a trial by deposition to Kline based upon the contingent fee contract because or a trial by affidavit, but to provide a method of summarily the amount of Defendants' recovery in the underlying estate terminating a case when it clearly appears that only a question has not been finally adjudicated. See note 1, supra. All that of law is involved and that no genuine issue of material fact remains is the calculation of Kline's contingent interest in remains. Id. Defendants' recovery, if any. We hold, therefore, that the trial court did not err in granting a declaratory judgment, which In a legal malpracdce case, as here, the plaintiff must prove decreed that Kline's contingent fee interest in Defendants' a duty owed to him or her by the defendant, a breach of that monetary recovery is valid. Issue nine is overruled. duty, injury proximately caused by the breach, and damages, Schlager, 939 S.W.2d at 186; see also Peeler v. Hughes & Luce, 909 S.W.2d 494, 496 (Tex.1995). A lawyer in Texas is held to the standard of care which would be exercised by Gary Grote's Motion for Summary Judgment a reasonably pmdent attomey, based on the information the In their tenth issue. Defendants assert that the trial court attomey has at the time of the alleged act of negligence. Id. To erred in granting Gary Grote's mofion for summary judgment prevail in a legal malpractice action, a plaintiff must prove "a on ( I ) Defendants' action for malpractice against Grote, and suit within a suit" by demonstrating that he or she would have (2) Grote's action to recover attomey fees from Defendants prevailed in the underlying action but for his or her attomey's which were incurred when Grote represented Defendants in a negligence. Id. at 186-87. Although proximate cause in a lawsuit involving one of Defendants' neighbors. legal malpractice action is usually a question of fact, it may be determined as a matter of law if the circumstances are The standard of review to be followed in a summary judgment such that reasonable minds could not arrive at a different is well-established. The movant has the burden of showing conclusion. Id. I f the attomey demonstrates that his failure to that there is no genuine issue of material fact and that he act was not the cause of any damages to the client, a summary or she is entitled to judgment as a matter of law. Schlager judgment may be proper. Id. V. Clements. 939 S.W.2d 183, 186 (Tex.App.-Houston [14th Dist.] 1996, writ denied). In deciding whether or not there is Defendants filed legal malpractice actions against Gary Grote a disputed material fact issue precluding summary judgment, and Donna Kline. Their action was filed as a counterclaim proof favorable to the non-movant will be taken as tme. Id. to Kline's action to recover attomey fees. As to Grote, Every reasonable inference must be indulged in favor of the Defendants alleged that he represented Defendants on matters non-movant and any doubts are resolved in his or her favor. unrelated to the underlying estate case during 1994-95. Id.; see also Nixon v. Mr. Property Management Co., 690 Defendants alleged that Grote committed legal malpractice S.W.2d 546, 548-49 (Tex.1985). Summary judgment for the because he breached his employment contract, was negligent defendant is proper when the proof shows that no genuine in representing Defendants, breached fiduciary duties by

WESTLAW

PLAINTIFFS' ORlGrNAL PETITION - Page 149 Lee V. Kline, Not Reported in S.W.Sd (2000)

charging excessive attomey fees and by communicating action. See Mackie v. McKenzie, 900 S.W.2d 445, 451-52 with a juror in the underlying estate case, was negUgent (Tex.App.-Texarkana 1995, writ denied); see also Klein v. and grossly negligent in communicating with a juror in the Reynolds, Cunningham, Peterson & Cordell. 921, S.W,2d45, underlying estate case, knowingly violated the Deceptive 49 (Tex.App.-Houston [1st Dist.] 1995, no writ). Further, the Trade Practices Act (DTPA), relative to his representation of record shows that Defendants' causes of action against Grote Defendants, and conspired with Kline to interfere with the were "patently unmeritorious." See Schlager, 939 S.W.2d at underlying estate case by obtaining juror information sheets 186. The trial court did not en in granting Grote's motion for and communicating with a juror in that case for the purpose summary judgment. Issue ten is overmled. of causing a mistrial. "

Grote moved for summary judgment, contending that Recusal he was entitled to a judgment as a matter of law on Defendants' malpractice action and on his claim for In their eleventh issue. Defendants aver that the trial court attomey fees. Defendants contend that Grote's motion for erred in refusing to recuse Judge Wood from the trial of this summary judgment should have been denied because it was case. unsupported by competent summary judgment proof and did not dispose of all of the issues in the case. We disagree. Citing Rule of Civil Procedure 18b(2), Defendants contend that Judge Wood possessed "personal knowledge of the * 1 0 Grote asserted in his motion that he was entitied to evidentiary facts conceming the proceeding" and was a summary judgment on Defendants' malpractice action and "material witness to the Kline and Grote matter in the his attomey fees action because the attomey fees he charged [underlying estate] litigation." See TEX.R.CIV.P. 18b(2) were reasonable and customary and that he was competent (West 1999). Defendant's eleventh issue is without merit. The in performing the kind of legal services he performed for gist of Defendants' complaint is that Judge Wood acquired Defendants. In support of his motion, Grote attached copies "personal knowledge" and was a "material witness" to the of Defendants' responses to requests for admissions and a instant case because during the underlying estate case he detailed affidavit which outiined his qualifications and which (1) heard , testimony conceming to Grote's communication showed that his performance in representing Defendants with Juror Thomas, (2) made certain in-courtralings,and (3) was consistent with the standard care of what a reasonable presided over the underiying estate case. and pmdent attomey would have exercised based on the information the attomey had at the time of the alleged act *11 Judicial mlings alone almost never constitute a valid of malpractice. ''^ Grote also attached a copy of his billing basis for a recusal motion because they cannot possibly show invoice which reflected the amount of attomey fees owed reliance by a judge upon extrajudicial sources. Ludlow v. by Defendants. Further, as to Defendants' allegations that DeBerry. 959 S.W.2d 265, 271 (Tex.App.-Houston [14th Grote violated the DTPA by failing "to exercise due care and Dist.] 1997, no writ). None of Judge Wood's knowledge of diligence in representing Susan C. Gibson and Susan C. Lee the facts of the instant case, if any, resulted from extrajudicial in the Estate case," the record clearly refutes this allegation. sources nor his "personal knowledge." See id. Further, there Grote's summary judgment unequivocally establishes that is no provision contained within Rule 18b(2) that would Grote never represented either Defendant in the underiying support Defendants' contention that Judge Wood was a estate case. Finally, as to Defendants' allegations that Grote's "material witness" in the underlying estate litigation. See communication with a juror in the underlying estate case TEX.R,CIV,P. 18b(2) (West 1999), showed that he was involved in a conspiracy with Kline "to interfere with or compromise" the underlying estate case, the There yvas no abuse of trial court discretion in denying siimmary judgment proof and record shows that this claim Defendants' motion to recuse. See Hector v. Thaler, 927 S.W.2d 95, 99 (Tex.App.-Houston [1st Dist.] 1996, writ is at best, meritless, and at worst, frivolous, ^ee note 13, denied); see also TEX.R.CIV.P. 18a(f) (West 1999). Issue supra. eleven is overmled.

In sum, we hold, contrary to Defendants' contentions, that Grote's summary judgment proof was not conclusory and that it responded to all of Defendants' pled causes of

WESTLAW t- 20 iB i r-.(;rnson Keuterf;. No clairn to ortotnsi L' S. Government Works

PLAFNTIFFS'ORIGINAL PETITION - Page 150 Lee V. Kline, Not Reported in S.W.Sd (2000)

is proper. See Internationa! Security Life Ins. Co. v. Spray, Ailorney's Fees 468 S.W.2d 347, 349-50 (Tex.l97I). Finally, Defendants' In their twelfth issue, Defendants contend that the trial court argument that Kline's appellate attomey's fee award should erred in not conditioning the award of appellate attomey's have been conditioned upon Defendants' unsuccessful appeal fees to Kline upon a successful appeal. In response to ajury is rendered moot by our decision to affirm the trial court's question, the jury awarded Kline attomey's fees for the trial, judgment. See Siegler v. Williams, 658 S.W.2d 236, 241 for an appeal to the court of appeals, and for an appeal to (Tex.App.-Houston [1st DisL] 1983, no writ). Issue twelve is the Texas Supreme Court. In the trial court's judgment, the overmled. respective awards of attomey's fees to Kline were subject to remittitur if no appeal was taken. In other words, no The judgment is affirmed. attomey's fees would be awarded to Kline for appeals if Defendants chose not to appeal the trial court's judgment. The trial court's judgment conceming the award of attomey's fees All Citations Not Reported in S.W.3d, 2000 WL 19227

Footnotes 1 See Lee, et al. v. Lee, et a/., No. 14-97-00162-CV {In re Estate of Katherine Pillot Lee Barnhart, Deceased ). The underlying estate case is presently on appeal in this Court, assigned to another panel. 2 The underlying estate action was filed by Defendants in 1988. 3 The record shows that Defendants and Kline vacationed together in the Virgin Islands and exchanged gifts between July 1994 and July 1995. 4 The law firm of Thomas, Sheehan & Culp remained in the case as lead trial counsel. After the trial of the underlying estate case In January 1996, the lawfirm was awarded $1,500,000 for attorney fees. 5 As we understand Defendants' first issue, they are not challenging the award of $114,207.21. This amount was awarded to Kline based on her hourly billing rate of $225, 6 "Failure to submit a question shall not be deemed a ground for reversal of the judgment, unless Its submission,.m substantially correct wording, has been requested in writing and tendered by the party complaining of the judgment." TEX.R.CIV.P. 278 (West 1999) (emphasis added); Mason v. Southern Pacific Transp. Co., 892 S.W.2d 115, 117-18 (Tex.App.-Houston [1st Dist.] 1994, writ denied) (where party complaining of the judgment on appeal failed to tender a written question to the trial court concerning the defendant's duty of care, point of error was waived on appeal); see also note 8, infra. Defendants' tendered jury instmction appears to be consistent with their contention that Kline violated the Texas Deceptive Trade Practices Act. See TEX.BUS. & COM.CODE ANN. § 17.50(a)(3) (Vemon Supp.1998). However, the trial court instructed a verdict in Kline's favor on that issue. 7 We note that the issue regarding the fairness and reasonableness ofthe contingent fee agreement was not raised in any of Defendants' pleadings or tendered jury questions in this case. See TEX.R.CIV.P. 278 (West 1999). Further, our review of the record, including Defendants' motion for new trial, discloses that the fairness and reasonableness ofthe contingent fee agreement was not an issue in this case at the trial level. See A. V.A. Ser/ices, Inc. v. Parts Indus. Corp., 949 S.W.2d 852, 854 (Tex.App .-Beaumont 1997, no writ); see a/so Steel v. Rhone Poulenc, Inc., 962 S.W.2d 613, 618 (Tex.App.- Houston [1 st Dist] 1997, no pet.); Hughes v. Thrash, 832 S.W.2d 779, 788 (Tex.App.-Houston [1 st Dist.] 1992, no writ). 8 "Itiselementarythatundisputed factual issues need notbesubmittedtothejury"Kora//ndt/s., Inc. v. Security Connecticut Life Ins. Co., 788 S.W.2d 138, 149 (Tex.App.-Dallas 1990, writ denied). As noted, Defendants' specific complaint on appeal does not appear to have been a disputed factual issue at trial. 9 To establish compliance with the appropriate standard of care in a legal malpractice case, expert testimony is required. Jatoi V. Decker, Jones, McMackIn, Hall & Bates, 955 S.W.2d 430, 434 (Tex.App.-Fort Worth 1997, pet. denied). 10 Lay or fact witnesses are subject to the general rule that a witness' testimony must be limited to facts which the witness has personal knowledge, and a witness must not give a personal opinion or legal conclusion unless he or she is designated as an expert witness. United Way of San Antonio, Inc. v. Helping Hands Lifeline Found., Inc., 949 S.W.2d 707, 713 (Tex.App.-San Antonio 1997, no writ). 11 Defendants' allegations stem from the following event: After a jury had been selected in the underiying estate case, Grote, an attorney, was playing soccer with a team-mate and friend. Earl Thomas. Thomas mentioned that he was serving Jury duty that day in a case involving a will dispute. Grote responded to Thomas by saying, "Oh, it's not the Lee case?" Thomas

WESTLAW 2016 rhornson HeulCif;. No (Jam to onginai U.S. Governmerii: Works

PLAINTIFFS' ORIGINAL PETITION - Page 151 Lee V, Kline, Not Reported In S.W.3d (2000)

responded that indeed it was the Lee case. Grote informed Thomas, Inter alia, that because he was involved in litigation to recover attorney fees from Lee that Thomas should report their conversation to the Judge the following moming. Thomas followed Grote's instmctions and reported it to the Judge the following moming. The Judge declared a mistrial because of Thomas' conversation with Grote, in addition to problems with at least four other Jurors. The judge noted that if Thomas was theonly problem he would allow the trial to proceed but he could not allow it to proceed because another Juror stated that she was suffering from intolerable pain and could not afford to sen/e, another juror stated that he was schizophrenic, and another stated he had to be with his wife who was taken to an emergency room. The Judge concluded, "I have reached the conclusion I am very uncomfortable with the Jury. I have never had a Jury that has been more creative with excuses. It seems to be pandemic among them, and it's well, if you don't buy this excuse, I've got this excuse." 12 Notably, nowhere in Defendants' pleadings nor in Defendants' responses to Grote's motion for summary judgment, is an attempt made to show that Defendants possessed any evidence to show that Defendants could prove the "suit within a suit" by demonstrating that they would have prevailed in the action complained of but for Grote's alleged malpractice. See Schlager, 939 S.W.2d at 186. Indeed, this Court is left in the dari( as to what it was that Grote did In the complained of action that showed he committed legal malpractice or violated the DTPA. See Greathouse, 982 S.W.2d at 174 (summary Judgment appropriate where plaintiff fails to raise a fact issue conceming the "suit within a suit" element of a legal malpractice cause of action). 13 Attached to Grote's motion for summary Judgment are copies ofthe transcripts from Grote's and Juror Thomas' testimony before the trial court concerning their communication.

© 2016 Thomson Reuters. No claim to original U.S. Government Works.

weSTtAW © 2016 f hornsoii Reuters. No clairn to original U.S Government Works.

PLAINTIFFS'ORIGINAL PETITION - Page 152 EXHIBIT "2 CAUSE NO. 13-7506;.-403 ESTATE OF KATHERINE PILLOT LEE IN THE PROBATE COURT BARNHART, § § RONALD E. LEE JR., § § Plaintiff, § V, HARRIS COUNTY, TEXAS

SUSAN CAMILLE LEE, Individually and as Trustee of the Article IV Trust created by the Last Will and Testament of Katherine Pillot Lee Barnhart, Deceased, and as Executor ofthe Estate ofKatherine Pillot Lee Bamhart, Deceased,

Defendant. PROBATE COURT NO. 2

DEFENDANT'S OBJECTIONS, OPPOSITION, AND RESPONSE TO APPLICATION TO APPROVE SETTLEMENT AGREEMENT

Susan Camille Lee, Individually and formerly Trastee of the Article IV Trust (the

"Trusf) created by the Last Will and Testament ofKatherine Pillot Lee Bamhart, Deceased (the

"Bamhart Will"), and as Executor of the Estate of Katherine Pillot Lee Bamhart, Deceased,

("Defendant") files her Objections, Opposition, and Response to the Application to Approve

Settlement Agreement filed by Applicant Legacy Trust Company ("Legacy") in its capacity as

the court-appointed Receiver ofthe Testamentary Article IV Trust created by the Last Will and

Testament ofKatherine Pillot Lee Bamhart, Deceased, and in support thereof would respectfully

show as follows:

The Bamhart Will created the Trust for the benefit of Ronald Ellsworth Lee Jr. ("Ronald

Lee"), Susan Camille Lee ("Susan Lee"), and Katherine Pillot Lee Bamhart's grandchildren. On

June 18, 2015, the Court removed Susan Lee as Tmstee of the Trust and appointed Legacy to serve as receiver for the Trust pursuant to TEX. PROP. CODE § 114.038. The Order provided that

Legacy was authorized to collect, compromise, or settle all debts owed to the Trust.

On January 25, 2016, Legacy fded its Application to Approve Settlement Agreement

("Application"), attaching an executed Settlement Agreement between Ronald Lee and Legacy,

dated as effective January 13, 2016. Among other things, the Settlement Agreement calls for a

settlement of the judgment against Ronald Lee in favor ofthe Trust, entered in 1996, arising out

of Lee V. Lee, Cause No. 137,506, Harris County Probate No. 2. The judgment was modified by

the Fourteenth Court of Appeals in Lee v. Lee, 47 S.W.3d 767 (Tex. App.-Houston [14th Dist.]

2001, pet. denied). The court of appeals rendered its opinion on May 17, 2001, the Texas Supreme

Court denied Ronald Lee's petition in December 2001, and the Fourteenth Court of Appeals issued

its mandate on February 8, 2002. On December 6, 2012, this Court entered an Order Granting

Application for Writ of Scire Facias and to Revive Dormant Judgment in Cause No. 137,506-402

("Judgmenf).

L The proposed Settlement Agreement is not in the best interest of the Trust and should not be approved.

SUMMARY O F OBJECTION AND RESPONSE

The Court should not approve Legacy's Settlement Agreement with Ronald Lee because:

1. Settlement ofthe Trust's $26 million Judgment against him for less than one-half of its value is not in the best interest of the Trust and violates Legacy's fiduciary duties.

2. The proposed transfer of Ronald Lee's interest in the River Bend Fami Property is of no benefit to the Trust because it already owns his interest.

DEFENDANT'S OBJECTIONS, OPPOSITION, AND RESPONSE TO APPLICATION TO APPROVE SETTLEMENT AGREEMENT PAGE 2 A. The proposed settlement of the Judgment is grossly inadequate.

The proposed Settlement Agreement between Ronald Lee and Legacy allows Ronald Lee

to satisfy the Judgment in full, apparently for consideration that includes an alleged payment of

$8 million in 2015, and a promissory note in the amount of $4 million payable quarterly over a

period of two years at a 4% interest rate. This amount is woefully inadequate, less than one-half

of what is due under the Judgment.

Legacy's Application understates the amount of the Judgment against Ronald Lee by a

significant amount. The Application simply references a judgment totaling approximately $3.9

million "plus prejudgment interest." The actual amount of the Judgment is in excess of $4.3

million, and significant portions ofthe Judgment carry post-judgment interest at the rate of 10%

compounded annually back to October 1996, almost 20 years. When post-judgment interest is

calculated in accordance with the Fourteenth Court of Appeals' opinion, the total amount ofthe

Judgment as of February 2016 exceeds $26 million.^ Yet, the proposed Settlement Agreement

discharges the Judgment and sells the Trust's $26 million asset in retum for only $8 million, plus

a $4 million promissory note payable over two years. And, the promissory note carries only 4%

interest, compared to the Judgmenf s rate of 10%.

Ronald Lee and Legacy have colluded to relieve him of his obligations to the Trust. Legacy

asks the Court to find that the Settlement Agreement is in the best interest of the Trast. Yet, it

allows Ronald Lee to discharge this judgment (unpaid for 20 years) for less than 50 cents on the

dollar. It is not in the best interest of the Trust or its beneficiaries. Rather, it is only in Ronald

An approximate calculation ofthe Trust's Judgment against Ronald Lee with prejudgment and post- judgment interest in accordance with the Fourteenth Court of Appeals' opinion is attached hereto as Exhibit A.

DEFENDANT'S OBJEcnoNs, QpposraoN, AND RESPONSE TO APPLICATION TO APPROVE SETTLEMENT AGREEMENT PAGES Lee's interest, providing a windfall to him in violation of Legacy's duties as Receiver. While

Legacy has the authority to compromise and settle all debts owed to the Trust, it is also charged

with all duties of a trustee under the Trust.'- Legacy owes fiduciary duties to all beneficiaries of

the Trust to exercise good faith in protecting the assets of the Trust and discharging its duties as a

prudent person would ordinarily exercise in the management of his or her own affairs. The

agreement to allow Ronald Lee to satisfy the Judgment is in violation of Legacy's duties.

Based on the foregoing, Susan Lee requests that the Court deny Legacy's Applicafion to

Approve the Settlement Agreement and deny Legacy authority to enter into the agreement as

presented.

B. Ronald Lee's transfer of the River Bend Farm Property is of no benefit to the Trust.

Legacy's Settlement Agreement also calls for the settlement of issues related to Ronald

Lee's interest in property known as the River Bend Farm Property, consisting of approximately

640 acres in Wharton County, Texas. Legacy's Application states that Ronald Lee acquired a 25%

interest in this property from the estate of his father and the Trust acquired a 50% interest under

the Bamhart Will. The agreement calls for Ronald Lee to deed his interest in the River Bend Farm

Property to Legacy. The problem here is that Ronald Lee has no interest in the River Bend Farm

Property. Legacy's Application fails to infonn the Court that Ronald Lee's interest in the River

Bend Farm Property was foreclosed upon for failure to pay taxes. Susan Lee as Trustee of the

Tmst later redeemed that interest. Therefore, the conveyance of Ronald Lee's interest in the River

Bend Farm Property is worthless to the Trust, because it already ovms his interest. Whatever

consideration is given to Ronald Lee for the value of his interest in the property for the transfer

^ Order Removing Trusting and Appointing Receiver f 3.a, June 18,2015.

DEFENDANT'S OBJECTIONS, OPPOSITION, AND RESPONSE TO APPLICATION TO APPROVE SETTLEMENT AGREEMENT PAGE 4 should be nullilied. hi this regard, the purported Settlement Agreement is not in the best ofthe

Trust and Legacy's Application to Approve the Settlement Agreement in this regard should also

be denied.

WHEREFORE, PREMISES CONSIDERED, Susan Lee respectfully request that the

Court: (1) decline to approve the terms ofthe Proposed Settlement Agreement; (2) find that the

proposed settlement agreement is not in the best interest of the Trust; and (3) deny Legacy in its

capacity as receiver the authority to enter into the proposed settlement agreement on behalf of the

Trust. Susan Lee also request such other and further relief as which she may show herself justly

entitled.

DANIEL SHEEHAN P L L C

/s/Daniel J. Sheehan DANIEL J. SHEEHAN StateBarNo. 18174500 dsheehan@dsa-law. com JOHN M . PHALEN JR. StateBarNo. 15895300 jphalen@dsa-law.com Campbell Centre II, Suite 100 8150 N. Central Expressway Dallas, Texas 75206 (214)468-8899 (214)468-8803 Fax

ATTORNEYSFOR DEFENDANT SUSAN C A M I L L E L E E

C E R T I F I C A T E OF S E R V I C E

The undersigned hereby certifies that a true and correct copy of the foregoing document was served on all counsel of record on February 10, 2016, in accordance with TEX. R. CIV. P. 21a.

/s/Daniel J. Sheehan

DEFENDANT'S OBJECTIONS, OPPOSITION, AND RESPONSE TO APPLICATION TO APPROVE SETTLEMENT AGREEMENT PAGES EXHIBIT A Lee y. Lee, 47 S.W.Sd 767, 801 (Tex. App.-Houston [14th Dist.] 2001, pet. denied)

EXCESSIVE EXECUTORS' FEES ATTORNEYS' FEES & COURT COSTS

TRIAL: :.:$^:500,pp|-^ Pius Post-Judgment lnterest • "^^'•-.^iy.^'-''-'--'• •••• • •• : •• '•':':i.-"-'f -..• $659,506 TOTAL: i$9,173,8635 ^^•$B!\/!@:10%Comp6uncieclAnnlial^ + $1,538,848 ;^ 40/25/1996 to;2/26/2016:(19,3:years)

APPELLATE: $2,198,355 10% SIMPLE TOTAL: + $333,417 — :;;::^?2/2|20p2:fe& 7/28/1993iTO,10/24/1996: SUPREME : JM.00(3'^ •- " Plus Post-JudgmentintereBt'/ $2,531,772- PLUS POST-JODGMENT IhmRESX COURT:

^ TOTAL:: •'•$379,749^:^^ ^$ldO,aQO@lD%OompoutTded;An^ EXCESSIVE FEES TOTAL: TRIAL COURT |:Sf®|Q/2||||i&to::;f/|l/2^ J i >$2,531^772:AT10% •|i|ip§p-S::|||

i • COivIPOUNDED AHNIIALLY-: $15,535,701 ||B-GC|iRf^ 10/26/1996TO 2/26/2016

ATTORNEYS' FEES TOTAL $10,589,293

EXECUTOR'S FEES TOTAL $15,535,701

TOTAL $26,124,994 COSTS TOTAL $384,445 GRAND JUDGMENT TOTAL $26,509,439 DALLAS COUNT^ 5/26/2016 4:02:53 PIV FELICIA PITRE DISTRICT CLERH David Hernandez

TOM THOMAS, DAN SHEEHAN IN THE 162nd DISTRICT and MARC CULP, individually and as successors to the interests of Thomas, Sheehan & Culp, L.L.P., Plaintiffs,

V. COURT OF

LEGACY TRUST COMPANY, N.A., in the capacity as RECEIVER FOR THE ARTICLE IV TRUST created by the Last Will and Testament of Katherine Pillot Lee Bamhart, Deceased, Defendant. DALLAS COUNTY, TEXAS

Subject to Motion to Transfer Venue & Motion to Transfer Lawsuit to Statutory Probate Court, Defendant's Original Answer, Plea In Abatement, and Counterclaim Defendant Legacy Tmst Company, N.A., in its capacity as Receiver for the Article IV

Trust created by the Last Will and Testament of Katherine Pillot Lee Bamhart, Deceased

appointed by the Probate Court No. 2 of Harris County (hereinafter referred to as "Defendant or

"Legacy"), and, subject to its (1) Motion to Transfer Venue and (2) Motion to Transfer Lawsuit

to Statutory Probate Court, files this its Original Answer and Plea in Abatement, and in support

thereof would respectfully show the Court the following:

1. As stated above, Defendant is filing this pleading subject to the following two

pleadings:

a. Defendant's Motion to Transfer Venue which is being contemporaneously

filed with this Court under the above entitled and nrmibered cause; and

0050812 CAUSE NUMBER DC-16-04570

TOM THOMAS, DAN SHEEHAN § IN THE 162nd DISTRICT and MARC CULP, individually and § as successors to the interests of § Thomas, Sheehan & Culp, L.L.P., § Plaintiffs, § § v. § COURT OF § LEGACY TRUST COMPANY, § N.A., in the capacity as RECEIVER § FOR THE ARTICLE IV TRUST § created by the Last Will and Testament ofKatherine Pillot Lee § Barnhart, Deceased, § Defendant. § DALLAS COUNTY, TEXAS

Subject to Motion to Transfer Venue & Motion to Transfer Lawsuit to Statutory Probate Court, Defendant's Original Answer, Plea In Abatement, and Counterclaim Defendant Legacy Trust Company, N.A., in its capacity as Receiver for the Article I V

Trust created by the Last Will and Testament of Katherine Pillot Lee Bamhart, Deceased

appointed by the Probate Court No. 2 of Harris County (hereinafter referred to as "Defendant or

"Legacy"), and, subject to its (1) Motion to Transfer Venue and (2) Motion to Transfer Lawsuit

to Statutory Probate Court, files this its Original Answer and Plea in Abatement, and in support

1. As stated above, Defendant is filing this pleading subject to the following two

a. Defendant's Motion to Transfer Venue which is being contemporaneously

filed with this Court under the above entitled and numbered cause; and

1IP ag e 0050812 b. Defendant's Motion to Transfer Lawsuit to Statutory Probate Court which was

filed in Harris County Probate Court Number Two (2) under Cause Number

137,506-403 on May 13, 2016.

Original Answer

General Denial

2. Defendant hereby asserts a general denial as to each and every allegation

contained in Tom Thomas, Dan Sheehan, and Marc Culp's (hereinafter sometimes referred to

collectively as the "Plaintiffs") Original Petition as authorized by Rule 92 of the Texas Rules of

Civil Procedure. Defendant requests that the Court require Plaintiffs to prove their claims,

charges, and allegations as required by the Constitution and the laws of the State of Texas.

3. Defendant respectfully reserves the right tq file an amended answer in response to

Plaintiffs Original Petition in the manner which is authorized by the Texas Rules of Civil

Procedure.

Verified Denial

4. Without waiving the foregoing general denial, Defendant hereby asserts the

following verified denial:

a. Defendant denies the existence of a valid contract (a.k.a. - a written fee

agreement) between the Plaintiffs and the Trustee of the Article I V Trust that was

created by the Last Will and Testament of Katherine Pillot Lee Bamhart,

Deceased (hereinafter referred to as the "Article IV Trusf).

2|P .i g e 0050812 Additional Defenses

5. Without waiving the foregoing general denial or verified denial, Defendant

hereby assets the following defenses:

a. Defendant asserts that a duly-authorized Trustee for the Article IV Trust did not

sign the written fee agreement, and, as a result, no Trustee ofthe Article I V Trust

(nor the assets of the Article IV Trust) are bound by the terms and provisions of

the agreement.

b. Defendant asserts the defense of res judicata;

c. Defendant asserts the defense of claim preclusion;

d. Defendant asserts the defense of issue preclusion;

e. To the extent that Plaintiffs seek to recover a contingent fee from Susan Lee's or

Susan Gibson's beneficial interest in the Article I V Trust by virtue of the fee

agreement. Defendant asserts that such a recovery is barred by the spendthrift

clause which is a part of the Article IV Trust;

f. Defendant asserts the defense of estoppel;

g. Defendant asserts the defense of quasi-estoppel;

h. Defendant asserts the defense of acceptance of benefits;

i. Defendant asserts the defense of laches; and

j. Defendant asserts the defense of limitations.

3I P aa c 0050812 k. Defendant asserts that plaintiffs' claims to entitlement to attorneys' fees are

barred by Texas Government Code §82.065(a).

Plea I n Abatement

6. Without waiving the foregoing general denial, verified denial, or defenses,

Defendant moves to abate these proceedings pending a ruling from Harris Coimty Probate Court

Number Two (2) on Defendant's Motion to Transfer Lawsuit to Statutory Probate Court which

Defendant previously filed with Harris County Probate Court Number Two (2) on May 13, 2016

under Cause Number 137,506-403.

Counterclaim

7. Subject to the foregoing Motion to Transfer Venue, Defendant Legacy Trust

Company, N.A., in its capacity as Receiver for the Article IV Trust created by the Last Will and

Testament of Katherine Pillot Lee Bamhart, Deceased appointed by the Probate Court No. 2 of

Harris County asserts the following counterclaims against Plaintiffs Tom Thomas, Dan Sheehan,

and Marc Culp.

8. Defendants Tom Thomas, Dan Sheehan, and Marc Culp have asserted claims

against Legacy for legal fees they claim are owed by the trustee of the Article IV Trust. Legacy

is the court-appointed Receiver for the Article IV Trust, invested with all the power of the tmstee

ofthe Article IV Trast.

9. The original trastee of the Article I V Trust was Ronald E. Lee, Jr. (hereinafter

referred to as "Mr. Lee"). Under the Last Will and Testament ofKatherine Pillot Lee Bamhart

(hereinafter referred to as the "Bamhart Will"), in the event Mr. Lee failed to serve as trustee, the

Article IV Trast was to be managed by co-trustees (1) Susan Camille Lee and (2) Texas

Commerce Bank, N.A. or any successor to that bank. In the event that Texas Commerce Bank,

' 4IPag e 0050812 N.A. or its successors failed to serve, another financial institution with trust powers was required

by the Barnhart Will to be appointed.

10. Mr. Lee was removed as trustee of the Article IV Trust on February 8, 2002. The

successor to Texas Commerce Bank, N.A. at that time was JP Morgan Chase Bank. JP Morgan

Chase Bank declined to serve as co-trustee after Susan Camille Lee specifically requested that it

not serve with her as co-trustee. Susan Camille Lee never sought or obtained the appointment of

a substitute co-trustee as required by the Barnhart Will and Texas law.

11. No agreement was ever signed by any trustee of the Article I V Trust with Tom

Thomas, Dan Sheehan or Marc Culp, or with the law firm of Thomas, Sheehan & Culp, L.L.P.,

for (1) the provision of legal services to the trustee of the Article I V Trust, (2) the payment of a

contingent fee for legal services to the trustee of the Article IV Trust or on behalf of the Article

IV Trust, or (3) the payment of a debt for legal services of another person. Notwithstanding the

lack of any such agreement, Messrs. Thomas, Sheehan and Culp have asserted claims against

Legacy in its capacity as court-appointed Receiver of the Article IV Trust for a contingent fee

based on collections by Mr. Lee as a former trustee of the Article IV Trust, collections by

Legacy as Receiver of the Article IV Trust, and asserted entitlement to collect a contingent fee

based on future collections by Legacy as Receiver of the Article I V Trust.

12. Susan Camille Lee was not a co-tmstee of the Article IV Trust when she signed

the contingency fee agreement in her individual capacity in 1995. In fact, she would not become

even a co-trustee for another seven years. When Susan Camille Lee eventually became a co-

trustee, she never sought or obtained appointment of a co-trustee as required under the Article IV

Trust, a clear violation of the terms of the Trust and the intent of Katherine Pillot Lee Barnhart

5IP a a e' 0050812 when she executed the Barnhart Will. Susan Camille Lee never had the power to bind the Article

IV Trust to the contingency fee agreement.

13. Legacy is placed at jeopardy based on these claims, and pursuant to T E X . CiV.

PRAC. & R E M . CODE §37.005 asks this Court to declare that, under the terms of the Barnhart

Will, the Article IV Trust, and Texas law, the purported March 30, 1995 contingency fee

agreement among Thomas, Sheehan & Culp, LLP, Susan Lee, and Susan Gibson does not today

bind a lawfully appointed Trustee or Receiver of the Article I V Trust. Legacy seeks this relief to

foreclose current and future claims by Plaintiffs against Legacy under the contingency fee

agreement.

14. Legacy further requests that this Court award reasonable and necessary attorney's

fees to Legacy as would be equitable and just and therefore authorized by T E X . CiV. PRAC. &

R E M . CODE §37.009.

15. Legacy further requests that pursuant to T E X A S PROPERTY CODE §114.064, this

Court make such award of costs and attomey's fees to Legacy as may seem equitable and just.

WHEREFORE, PREMISES CONSIDERED, Defendant and Counterclaim Plaintiff

Legacy Trast Company, N.A., in its capacity as court-appointed Receiver of the Article I V Trust

under the Last Will and Testament of Katherine Pillot Lee Bamhart, respectfully requests that on

final hearing, the Court grant the following relief:

• A judgment from the Court that Plaintiffs take nothing by way of their lawsuit;

• A judgment from the Court that costs be adjudged against Plaintiffs;

• A n order that this matter is to be abated until such time as Harris County Statutory Probate Court Number Two (2) has ruled on Defendant's Motion to Transfer Proceeding to Statutory Probate Court;

6IPag e 0050812 A declaration that Legacy and any future Receiver or trustees of the Article IV Trust have no obligation to pay additional fees to Tom Thomas, Dan Sheehan, Marc Culp, or Thomas, Sheehan & Culp, LLP.;

An award from Tom Thomas, Dan Sheehan, and Marc Culp, jointly and severally of Legacy's reasonable attorneys' fees incurred in connection with this matter; And

Such other and further relief as Legacy may show itself justly entitled to receive.

M A C I N T Y R E M C C U L L O ^ ^TANFIELJ & Y0DNG, LLP

W. Cameron McCulloch StateBarNo. 00788930 A d r i Graves State Bar No. 24049999 2900 Weslayan, Suite 150 Houston, T X 77027 (713)572-2900 (713) 572-2902 (FAX) Cameron.McCulloch(^mmlawtexas. com Adri. Graves(a)mmlawtexas. com

Attorneys for Legacy Trust Company, N.A. in its capacity as Court-appointed Receiver of the Article I V Tmst under the Last Will and Testament of Katherine Pillot Lee Barnhart Certificate of Service

I hereby certify that a t r u e ^ d correct copy of the foregoing instrument was sent to the following via United Stam'^'Cmified Mail, retum receipt requested, via e-serve, and/or via facsimile on this the ^day of May, 2016:

Mr. Marc S. Culp Culp & Dyer, LLP 222 E. McKinney Street, Suite 210 Denton, Texas 76201 (940)484-4436

Mr. Thomas A. Zabel Zabel Freeman 1135 Heights Blvd. Houston, Texas 77008 (713) 802-9114 (Fax)

Mr. Daniel J. Sheehan Mr. John M . Phalan, Jr. Mr. M . Patrick McShan Daniel Sheehan & Associates, LLP 2501 North Harwood, Suite 1280 Dallas, Texas 75201 (214) 468-8803 (Fax)

Mr. John W. Porter Ms. Keri Brown Baker Botts, LLP One Shell Plaza 910 Louisiana Street Houston, Texas 77002-4995 (713) 229-1522 (Fax)

"feron McCulloch Adri A. Graves

I P ag e 0050812 VERIFICATION

STATE OF TEXAS § COUNTY OF HARRIS . §

Before me, the undersigned authority, on this day personally appeared Sarah Snook, in

her capacity as a Vice President and Tmst Officer for Legacy Trast Company, N.A,, in its

capacity as the Receiver for the Article IV Trast created by the Last Will and Testament of

Katherine Pillot Lee Bamhart, Deceased, Sarah Snook (hereinafter referred to as the "Affianf')

is a person whose identity is known to me. After I administered an oath to Affiant, Affiant

testified as follows:

"My name is Sarah Snook. I am a Vice President and Trust Officer for Legacy Trast

Company, N.A,. Legacy Trast Company is the Receiver for the Axticle IV Trast created by the

Last Will and Testament ofKatherine Pillot Lee Bamhart, Deceased appointed by Harris County

Probate Court Number Two (2). I am capable of malcing this verification. I , have read the

foregoing pleading, which is entitled "Subject to Motion to Transfer Venue & Motion to

Transfer Lawsuit to Statutory Probate Court, Defendant's Original Answer, Plea In Abatement

and Counterclaim". With regard to paragraphs 4, 5 and 6 of the pleading, the facts stated in

these paragraphs are within my personal knowledge and are true and correct."

Sarah Snook, Vice President and Trast Officer for Legacy Trost Company, N,A., ui its capacity as the Receiver for the Article IV Trast created by the Last Will and Testament of Katherine Pillot Lee Bamhart, Deceased

0050812 9|P9g. .^Swoin-10 .and.subscribe.d.befQre^mei th© md6i:sigfi6d-authority,/em--this-the 24 -dtty-of -

May, 2016. A

lAJi Notary Public, State of Texas

0050812 101P a g e TAB 2 w. CAMERON MCCULLOCH, JR. MMS&Y MACINTYRE • McCULLOCH • STANFIELD YOUNG ROBERTS. MACINTYRE, JR. PARTNER W. CAMERON MCCULLOCH, JR. Cameron.mcculloch@mmlawtexas,com ROBERTB. STANFIELD JILL WILLARD YOUNG ADRIANNE ARCHER GRAVES CHRISTOPHER BURT THUY THAI GOTTLIEB WILLIAM C. MCCULLOCH*

* OF COUNSEL

July 5,2016

Via E-Mail: amontgomery@cdhllp.com Ms. Amanda Montgomery Culp & Dyer, L.L.P, 222 E. McKinney Street, Suite 210 Denton, Texas 76201

Re: Cause Number 137,506-404; Tom Thomas. Dan Sheehan and Marc Culp, Individually and as Successors to the Interests of Thomas, Sheehan & Culp, L.L.P. vs. Legacy Trust Company, N.A., in its capacity as the Receiverfor the Article IV Trust created by the Last Will and Testament of Katherine Pillot Lee Barhnhart, Deceased; In Hanis County Probate Court Number Two (2)'

Dear Amanda:

This letter confirms our recent e-mail communications wherein we have agreed, on behalf of our respective clients, to extend discovery response deadlines for the lawsuit which is referenced above.

For purposes of this agreement, the term "Plaintiffs" shall collectively refer to your clients, meaning Plaintiffs Tom Thomas, Dan Sheehan and Marc Culp, Individually and as Successors to the Interest of Thomas, Sheehan & Culp, L.L.P. In addition, the term "Plaintiff, for purpose of this agreement, shall refer to each of the Plaintiffs individually.

For purposes of this agreement, the term "Defendant" shall refer to my client, meaning Legacy Trust Company, N.A., in its capacity as the Court appointed Receiver for the Article IV Trust created under the Will of Katherine Pillot Lee Bamhart, Deceased.

Per our agreement, the deadline for the Plaintiffs to respond to Defendant's pending First Requests for Disclosure, First Requests for Admission, Interrogatories and Requests for Production to TSC shall be extended until August 15, 2016. The purpose ofthe aforementioned extension is to provide Plaintiffs with sixty days within which to respond to Defendant's pending discovery requests, as identified above.

' Prior to the entry of an Order Granting Motion to Transfer Lawsuit to This Statutory Probate Court by Harris County Probate Court Number Two (2) on June 7, 2016, this lawsuit was pending in the 162"'^ Judicial District Court of Dallas County, Texas under Cause Number DC-16-04570. lOlli/ 001762 0051436

MACINTYRE • M c C U L L O C H - STANFIELD. Y O U N G , LLP 2900 W e s l a y a n , Ste ISO H o u s t o n , Texas 7 7 0 2 7 7 1 3 5 7 2 2V00 Fax 713 572 2902 Ms. Amanda Montgomery Page 2 7/5/2016

Per our agreement, Defendant shall have sixty days within which to respond to the first set of any written discovery requests which are propounded to Defendant by Plaintiffs, or by any Plaintiff, for the lawsuit which is referenced above. Defendant's sixty day discovery response period will begin to accrue on the date upon which Defendant, by and through my office, is served with written discovery requests by Plaintiffs, or by any Plaintiff, for the lawsuit which is referenced above.

If this letter accurately reflects your understanding of our agreement, please acknowledge by signing below and returning it to us. Your cooperation in this regard is greatly appreciated.

Should you have any questions, please call or e-mail me. My telephone number>a; work is (713) 572-2900, and my e-mail address is Cameron.McCuUochfglmmlawtexas.com. | j

AGREED ON JULY , 2016:

CULP & DYER, L.L.P.

By: ^ Amanda Montgomery

ATTORNEY FOR PLAINTIFFS TOM THOMAS, DAN SHEEHAN AND MARC CULP, INDIVIDUALLY AND AS SUCCESSORS TO THE INTEREST OF THOMAS, SHEEHAN & CULP, LLP. TAB 3 Virginia Martinez

From: Cameron McCulloch Sent: Friday, July 0 1 , 2016 11:54 A M To: Amanda Montgomery Cc: Marc Culp Subject: RE: Cause N u m b e r 1 3 7 5 0 6 - 4 0 3 ; Susan Camille Lee, et al., vs. Ronald E, Lee, Jr., el al,; In Harris C o u n t y Probate C o u r t N u m b e r T w o (2)

Amanda:

l e g a c y w i l l a g r e e t o r e s p o n d t o d i s c o v e r y requests f r o m TSC o n t h e same t i m e f r a m e t h a t TSC r e s p o n d s t o Legacy's p e n d i n g d i s c o v e r y r e q u e s t s . For e x a m p l e , if w e agree t h a t TSC w i l l have 6 0 days t o r e s p o n d t o Legacy's p e n d i n g d i s c o v e r y r e q u e s t s , Legacy w o u l d likewise have 60 days t o r e s p o n d t o d i s c o v e r y r e q u e s t s f r o m TSC Legacy w o u l d also a g r e e t o a s t i p u l a t i o n t h a t TSC's p r o p o u n d i n g o t discovery r e q u e s t s t o Legacy d o e s n o t in any w a y c o n s t i t u t e a w a i v e r of TSC's p e n d i n g piea in a b a t e m e n t a r g u m e n t . Let me k n o w if this p r o p o s e d s o l u t i o n is a c c e p t a b l e t o y o u .

You are c o r r e c t t h a t m y l e t t e r f r o m e a r l i e r t o d a y s h o u l d be c o n s t r u e d as Legacy being o p p o s e d t o y o u r M o t i o n f o r E m e r g e n c y Stay. Thanks, Cameron

W Cameron McCuiioch MaclNTYRE • McCULLOCH • STANFIELD • YOUNG, L L P Please note our new a d d r e s s : 2 9 0 0 W e s l a y a n , S u i t e 150 H o u s t o n , Texas 77027 713-572-2900 (Telephone) 713-572-2902 fFax) Cameron.iVlcCuiioch@mmlawtexas.com

From: Amanda M o n t g o m e r y [mailto:amontgomery@cdhllp.com] S e n t : Friday, July 0 1 , 2 0 1 6 11:22 A M To: Cameron McCulloch Cc: M a r c Culp < M C u l p ( 5 ) c d h l l p . c o m > Subject: FW: Cause N u m b e r 1 3 7 5 0 6 - 4 0 3 ; Susan Camille Lee, et al,, vs, Ronald E. Lee, Jr., ei al,; In Harris C o u n t y P r o b a t e C o u r t N u m b e r T w o (2)

Cameron, M a r c and I have r e v i e w e d t h e a t t a c h e d l e t t e r y o u sent t o d a y r e g a r d i n g a p o t e n t i a l BO^day e x t e n s i o n o n d i s c o v e r y responses u n d e r a Rule 1 1 A g r e e m e n t . W h i l e w e a p p r e c i a t e t h e o f f e r o f a 3 0 - d a y e x t e n s i o n , t h e p r e m i s e o f t h a t a l l o w s y o u t o receive d i s c o v e r y ( w i t h m o t i o n s still p e n d i n g ) , b u t w e w o u l d risk w a i v i n g o u r plea in a b a t e m e n t a r g u m e n t if w e w e r e t o serve any d i s c o v e r y o n Legacy T r u s t d u r i n g this i n t e r i m p e r i o d . T h a t places TSC in an unfair p o s i t i o n , w h i c h is w h y w e are p u r s u i n g a stay o f t h e p r o c e e d i n g s in the 14*'^ CoA, as I discussed t h i s m o r n i n g w i t h y o u r assistant. My hope is t h a t y o u p r o m p t l y r e c e i v e d t h e message I p r o v i d e d t o h e r this m o r n i n g at a r o u n d 8:45 a.m., please n o t i f y m e if y o u did n o t receive this message,

W e w i l l be filing this M o t i o n w i t h t h e CoA t o d a y , y o u r l e t t e r indicates t o us t h a t y o u a r e o p p o s e d to t h e IVIotion f o r E m e r g e n c y Stay u n d e r TRAP 5 2 , 1 0 ,

Best Regards,

1 A m a n d a M o n tg o m e ry

F r o m : Marc Culp S e n t : Friday, July 0 1 , 2 0 1 6 1 0 : 4 6 AM T o : Amanda Montgomery S u b j e c t : FW: Cause N u m b e r 1 3 7 5 0 6 - 4 0 3 ; Susan Camille Lee, e t a l . , vs. Ronald E. Lee, Jr., el a!,; I n Harris County Probate Court N u m b e r T w o ( 2 )

F r o m : Virginia Martinez [rruailto:virgitiiaTnartinez(5)mmlawtexas.cofri] S e n t : Friday, July 0 1 , 2 0 1 6 1 0 : 2 7 A'M T o : Marc Culp C c : ' s s n o o k @ l e g a c y t r u s t . c o m ' ; Legacy T r u s t C o m p a n y , N.A. (jcrow(a}|eqacytrust.corn); ' k a l e x a n d e r @ p o r t e r h e d g e s . c o m ' ; C a m e r o n McCulloch S u b j e c t : Re: Cause N u m b e r 1 3 7 5 0 6 - 4 0 3 ; Susan Camille Lee, e t a l . , vs. Ronald E. Lee, Jr., el a l , ; I n Harris County Probate Court N u m b e r T w o ( 2 )

Re: Cause N u m b e r 1 3 7 5 0 6 - 4 0 3 ; Susan Camille Lee, e t a l . , vs. Ronald E. Lee, Jr., el al,; In Harris C o u n t y P r o b a t e C o u r t N u m b e r T w o (2)

M r . Culp:

Please see t h e a t t a c h e d t r a n s m i t t a l l e t t e r in c o n n e c t i o n w i t h t h e above e n t i t l e d m a t t e r . If y o u are u n a b l e t o access t h e a t t a c h m e n t , please c o n t a c t m e . T h a n k y o u f o r y o u r t i m e .

l!l£SlLH:MLl!ME.,M£ll:,.iiiM -

Virginia Martinez MaclNTYRE • M c C U L L O C H • STANFIELD • YOUNG, L L P 2900 Weslayan, Suite 150 Houston, Texas 77027 (713) 572-2900 Telephone (713) 572-2902 Fax