Relative lacks standing to bring derivative legal malpractice claim on behalf of ward after temporary guardian fails to bring action.
Categories: Who can sue,Standing to Sue,Capacity to Sue
In In re The Guardianship of Archer, an Incapacitated Person, No. 04-02-00547-CV, 2006 Tex. App. Lexis 3682 (Tex. App.–San Antonio 2006), Sherri Archer Loveday brought a derivative legal malpractice action in the probate court against the defendant lawyers on behalf of her uncle’s temporary guardian, alleging that the temporary guardian had failed or refused to prosecute the lawsuit. The trial court dismissed her claims because she did not have standing or capacity to bring suit on behalf of her uncle’s temporary guardian. Loveday appealed. The Court of Appeals affirmed the judgment of the trial court.
Background
Loveday’s uncle, John R. "Jack" Archer, is an incapacitated individual. This case arises from Loveday’s belief that her uncle’s attorneys had been careless with his money and her concern that her uncle’s temporary guardian had not brought suit against the attorneys.
Several years ago, Archer suffered a stroke that affected his mental abilities. Thereafter, Archer made changes to his estate plan, including the creation of a trust containing most of his assets, with the help of his girlfriend, Pamela Rucker, and several attorneys, including Douglass Hearne, Richard Leshin of the Kleberg Law Firm, J.G. Adami, Jr. of Warburton, Adami, McNeill, Paisley & Appell, P.C., and Ted Anderson.
On May 9, 2000, Loveday’s siblings, David B. Archer and Carol Anne Archer-Bugg, instituted guardianship proceedings in Bexar County. The trial court entered a number of orders appointing representatives. First, on August 8, 2000, the trial court appointed A. Chris Heinrichs as attorney ad litem. Next, on October 23, 2000, the trial court appointed Douglas C. Young as guardian ad litem. Then, on February 1, 2001, the trial court appointed Rucker as temporary guardian of the person. Also, on February 5, 2001, the trial court appointed J.R. Hamilton as temporary guardian of the estate. The order appointing Hamilton gave him the authority, among other things, to "marshal and gather the assets of John R. ‘Jack’ Archer and to report to the Court as to the assets which comprise the Estate and property of John R. ‘Jack’ Archer" and "subject to further court approval, to take such further actions with respect to the Estate, assets and property of John R. ‘Jack’ Archer as may be warranted or required to properly manage and administer such assets and property."
After the appointment of these representatives, on November 8, 2001, Loveday filed three separate lawsuits: (1) a legal malpractice and breach of fiduciary duty action against the attorneys who had helped Archer alter his estate plan and set up the trust (Hearne, Leshin and his firm, Adami and his firm, and Anderson) as well as Archer’s attorney ad litem (Heinrichs) (collectively, "the lawyer defendants"); (2) an action against Hamilton pursuant to section 772 of the Probate Code, alleging that Hamilton had breached his fiduciary duty to Archer while he was temporary guardian of the estate; and (3) an emotional distress action against Anderson and Rucker, alleging that they had caused Archer emotional distress. This appeal involves the first case, the malpractice case against the lawyer defendants.
The trial court disposition
In her petition alleging malpractice and breach of fiduciary duty, Loveday alleges that she has standing to bring suit on behalf of Archer’s temporary guardian:
The Plaintiff, who is Jack Archer’s niece, is a person interested in Jack Archer’s estate and therefore has standing to bring this lawsuit. The Plaintiff has standing to bring a derivative action on behalf of Hamilton, the Temporary Guardian of Jack Archer’s estate, because Hamilton has failed and/or refused to prosecute this lawsuit.
The lawyer defendants responded by arguing that Loveday lacked standing and capacity to bring the action and moving for the trial court to dismiss Loveday’s claims. While the lawyer defendants’ motions were pending, on April 16, 2002, the trial court removed Hamilton as temporary guardian of the estate and appointed Richard Tinsman as successor temporary guardian of the estate. The order appointing Tinsman gave him the power to "marshal and gather the assets of John R. ‘Jack’ Archer, and to report to the Court as to the assets which comprise the Estate and property of John R. ‘Jack’ Archer" and "subject to further Court approval, to manage and administer such assets and property and to take all such further actions with respect to the Estate, as may be warranted or necessary." Tinsman entered a one-year limitation tolling agreement with the lawyer defendants, effective April 24, 2002. In an order signed May 31, 2002, the trial court gave Tinsman permission to sign and file the limitation tolling agreement with the court.
On May 2, 2002, the trial court held a hearing on the lawyer defendants’ pleas in abatement. The lawyer defendants argued that Loveday lacked standing and capacity to bring a derivative suit against them as long as there was a guardian of the estate who could bring suit. At the lawyer defendants’ request, the trial court took judicial notice of the pleadings, motions, and orders in the "A" case and the guardianship case. Leshin’s attorney also offered the Archer trust indenture as an exhibit and Hearne’s testimony to authenticate it. Loveday’s attorney offered the trust indenture, the petition against the lawyer defendants, and the petition against Rucker and Anderson. At the hearing, the trial court asked Loveday’s attorney, "As long as there’s a guardian of the estate who has the potential to bring the action . . . would that still allow you to bring a derivative suit?"
Later, the trial court ruled that the lawyer defendants should be dismissed from the case and asked for a proposed order. In an order dated July 3, 2002, the trial court granted the lawyer defendants’ motions and dismissed Loveday’s claims. That same day, the trial court also discharged Tinsman as temporary guardian and appointed Mark Murray as temporary guardian of the estate. The order appointing Murray gave him the power to "marshal and gather the assets of John R. ‘Jack’ Archer and to report to the Court as to the assets which comprise the Estate and property of John R. ‘Jack’ Archer, the location of each of such assets and the value of such assets" and "subject to further Court approval, to manage and administer such assets and property and to take all such further actions with respect to the Estate as may be warranted or necessary."
The standing and capacity requirements
A plaintiff must have both standing and capacity to bring a lawsuit. Coastal Liquids Transp., L.P. v. Harris County Appraisal Dist., 46 S.W.3d 880, 884 (Tex. 2001). "Standing" is a party’s justiciable interest in the suit and is a component of subject matter jurisdiction. Nootsie, Ltd. v. Williamson County Appraisal Dist., 925 S.W.2d 659, 661-62 (Tex. 1996). In Texas, the standing doctrine requires that there be (1) "a real controversy between the parties" that (2) "will be actually determined by the judicial declaration sought." Austin Nursing Ctr., Inc. v. Lovato, 171 S.W.3d 845, 849 (Tex. 2005). Standing focuses on who may bring an action, M.D. Anderson Cancer Ctr. v. Novak, 52 S.W.3d 704, 708 (Tex. 2001), and is determined at the time suit is filed in the trial court. Tex. Ass’n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440, 446 n.9 (Tex. 1993). Without standing, a court lacks subject matter jurisdiction to hear the case. Waco I.S.D. v. Gibson, 22 S.W.3d 849, 850 (Tex. 2000); Tex. Ass’n of Bus., 852 S.W.2d at 445. As such, it cannot be waived and can be raised the first time on appeal. Waco I.S.D., 22 S.W.3d at 850; Tex. Ass’n of Bus., 852 S.W.2d at 443-44.
A plaintiff must also have the capacity to pursue a claim. Lovato, 171 S.W.3d at 849. "Capacity" is a party’s legal authority to act. Nootsie, 925 S.W.2d at 661. Unlike standing, which may be raised at any time, the burden is on the defendant to challenge capacity by a verified pleading in the trial court or it is waived. Lovato, 171 S.W.3d at 849, 853 n.7.
Loveday’s lack of standing
The Court of Appeals found that Loveday lacked standing to bring her claims:
Generally speaking, only the guardian of the ward’s estate may bring a lawsuit on behalf of a ward. See Tex. Prob. Code Ann. § 773 (Vernon 2003) ("A guardian of a ward’s estate appointed in this state may institute suits for the recovery of personal property, debts, or damages and suits for title to or possession of land or for any right attached to or growing out of the same or for injury or damage done."); id. § 768 (Vernon Supp. 2005) ("The guardian of the estate of a ward is entitled . . . to bring and defend suits by or against the ward . . ."). Despite not being Archer’s guardian, Loveday argues that she has "derivative" standing to bring suit on behalf of the guardian because the temporary guardian failed or refused to prosecute the lawsuit.
In support of her argument, Loveday cites to the following cases: Chandler v. Welborn, 156 Tex. 312, 294 S.W.2d 801, 806 (1956); Burns v. Burns, 2 S.W.3d 339, 342 (Tex. App.–San Antonio 1999, no pet.); In re Estate of York, 951 S.W.2d 122, 127 (Tex. App.–Corpus Christi 1997, no writ); Interfirst Bank-Houston, N.A. v. Quintana Petroleum Corp., 699 S.W.2d 864, 874 (Tex. App.–Houston [1st Dist.] 1985, writ ref’d n.r.e.); Quada v. Quada, 396 S.W.2d 232, 234 (Tex. Civ. App.–Texarkana 1965, no writ); Uehlinger v. State, 387 S.W.2d 427, 430 (Tex. Civ. App.–Corpus Christi 1965, writ ref’d n.r.e.).
In response, Appellee Heinrichs points out that four of the six cases cited by Loveday involve decedents’ estates, not guardianships. See Chandler, 294 S.W.2d at 806; Burns, 2 S.W.3d at 342; In re Estate of York, 951 S.W.2d at 127; Interfirst Bank-Houston, 699 S.W.2d at 874. Further, Heinrichs notes that the two guardianship cases cited by Loveday involved a guardian having a conflict of interest with the ward. See Quada, 396 S.W.2d at 234; Uehlinger, 387 S.W.2d at 430. Indeed, the two guardianship cases cited by Loveday do not apply Loveday’s proposed "representative failing to act" standard.
Additionally, Heinrichs emphasizes that there is an important distinction between cases involving decedent estates and guardianship proceedings, and "it would be a mistake to simply overlay Texas guardianships with the law of decedents’ estates." We agree. In the context of a decedent’s estate, while an administration is pending, generally the heirs are not entitled to maintain a suit for the recovery of property belonging to the estate. However, in Chandler v. Welborn, 156 Tex. 312, 294 S.W.2d 801, 806 (1956), the Texas Supreme Court recognized an exception to the general rule: when it appears that the administrator will not or cannot act, or that his interest is antagonistic to that of the heirs desiring to sue, the heir may maintain a suit. Id. The court reasoned that it had already recognized an exception for creditors of a decedent, holding that under certain circumstances, creditors of a decedent must be permitted to bring suit for the protection of their interest in the estate. Id. It concluded that such an exception should also apply to heirs to protect their property interest in the estate. Id.
Unlike heirs who have a present property interest in the estate, in the context of guardianships, a relative (like Loveday) has no property interest in the guardianship. Under section 601(15) of the Probate Code, Loveday may be an "interested person," and as an interested person, she could seek removal of the temporary guardian and bring an action against the guardian for damages. See Tex. Prob. Code Ann. § 601(15) (Vernon Supp. 2005) ("‘Interested persons’ or ‘persons interested’ means an heir, devisee, spouse, creditor, or any other person having a property right in, or claim against, the estate being administered or a person interested in the welfare of an incapacitated person, including a minor."); id. § 761(a) (providing that under certain conditions, the court may remove a guardian on motion of any interested person); id. § 772 (Vernon 2003) ("If the guardian willfully neglects to use ordinary diligence, the guardian and the sureties on the guardian’s bond shall be liable, at the suit of any person interested in the estate, for the use of the estate, for the amount of the claims or for the value of the property that has been lost due to the guardian’s neglect.") (emphasis added). However, a relative like Loveday should not (absent showing that the guardian has a conflict of interest with the ward) be able to bring a lawsuit on the guardian’s behalf, thereby circumventing the bonded guardian who owes a fiduciary duty to the ward. Because Loveday had no legal right to bring the claim on behalf of the temporary guardian, the trial court did not err in dismissing Loveday’s claims against the lawyer defendants.
Loveday’s lack of capacity
The Court of Appeals also found that Loveday lacked capacity to bring her claims:
Here, Loveday lacks both standing and capacity. Loveday, however, argues that any defect is merely one of capacity and as such, she should have an opportunity to amend her petition. In support of her argument, Loveday relies on Austin Nursing Center, Inc. v. Lovato, 171 S.W.3d 845 (Tex. 2005). Lovato, however, is distinguishable from the facts presented here. In Lovato, the plaintiff filed a survival action on behalf of her mother’s estate, alleging that she was the "Personal Representative" of the estate, but also that "no administrator [of the estate] had been appointed." Id. at 847 (alterations in original). The supreme court held that even though the plaintiff had not been appointed administrator at the time suit was filed, because she was later appointed "Independent Administratrix" of the estate, the defect in capacity was cured. Id. at 853. Here, however, at the time she filed suit, Loveday was not the temporary guardian, and she has not since "cured" the defect by being appointed guardian. Instead, Loveday is attempting to stand in the shoes of the guardian because he has failed or refused to act. If Loveday were correct in her assertion that any defect was merely one of capacity and not one of both standing and capacity, then any person could file suit on behalf of a guardian and that guardian would have the burden of showing that the person lacked capacity to bring suit. Or, if the guardian was not a party to the litigation, he would have to intervene or rely on the defendants to show lack of capacity. Such reasoning conflicts with the Probate Code, which allows only a guardian to bring suit on behalf of a ward and which creates a fiduciary relationship between the guardian and the ward. We, therefore, hold that because Loveday lacked both standing and capacity to bring the claims against the lawyer defendants, the trial court did not err in dismissing Loveday’s claims.
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