Opinion
09-20-00005-CV
01-31-2022
MARK E. JOHNSTON, Appellant v. STEPHEN D. JACKSON, Appellee
Submitted on December 21, 2021
On Appeal from the 359th District Court Montgomery County, Texas Trial Cause No. 19-08-10701-CV
Before Go lemon, C. J., Kreger and Horton, JJ.
MEMORANDUM OPINION
W. SCOTT GOLEMON, Chief Justice.
The trial court sustained a plea to the jurisdiction and dismissed Mark E. Johnston's lawsuit against his former criminal defense lawyer, Stephen D. Jackson. In his appeal, Johnston argues the trial court erred by making factual findings because Jackson challenged Johnston's standing to sue based solely on the pleadings. Johnston claims that as the equitable owner and intended beneficiary he had standing to assert claims arising from Jackson's handling of a $ 100, 000 cashier's check. Johnston complains that by dismissing some of his claims without notice the trial court denied Johnston due process. Finally, Johnston asserts he amended his pleadings to add properly stated claims for fraud and breach of fiduciary duty based up on misrepresentations by Jackson in an affidavit submitted in a post-conviction habeas corpus proceeding. We affirm the trial court's judgment.
In an Original Petition filed on August 6, 2019, Johnston alleged that in 2008 he retained Jackson to represent him in several criminal matters, which the Original Petition described as "first degree felony theft and six other charges [.]" Johnston alleged that during the course of the legal representation Jackson received an $8,000 check and a $100,000 check. Johnston alleged that Jackson received the $8,000 check from Johnston's stepfather for purposes of paying one of the complainants "a debt that was related to the foregoing criminal case." Johnston alleged that after the $8,000 check was deposited Johnston learned that Jackson "never paid [the complainant], but instead put $5,000 of the money in his own pocket." However, it should be noted that Johnston never made a claim as to the $8,000 check in his Original Petition or in his subsequent amended pleadings. Johnston alleged that on March 20, 2009, his stepfather gave Jackson a $ 100, 000 personal check "for display only" to show prosecutors Johnston could pay restitution, that Jackson tried to deposit the check notwithstanding clear directions to the contrary, and the check was returned for insufficient funds. The Original Petition alleged that "[o]n March 23, 2009, the date Mr. Johnston's trial was to begin," Johnston's "business associate" arrived at the courthouse with a $100,000 cashier's check. Johnston alleged Jackson was to deposit the check in his IOLTA account, but Jackson "violated the express directive to hold the funds until an acceptable agreement was reached." Instead, before the plea agreement was reached Jackson "unlawfully converted the $ 100, 000 check and gave the proceeds to the district attorney's office[, ]" which "in turn gave the money to one of Mr. Johnston's creditors without any judgment or finding of liability." Johnston further alleged that a plea agreement was subsequently reached wherein Johnston "received deferred adjudication in exchange for restitution of $222,000, but none of the $100,000 was credited toward the restitution balance." Johnston alleged he discovered the "discrepancy" when his new attorneys were preparing to seek post-conviction relief in the fall of 2015.
A docket sheet from the criminal case was admitted into evidence in the hearing on the plea to the jurisdiction. The-docket sheet indicates Johnston received a 15-year sentence after pleading guilty on March 23, 2009, a motion for new trial was granted on March 25, 2009, and Johnston pleaded guilty and was placed on deferred adjudication community supervision for ten years on March 25, 2009. Jackson attached to his plea to the jurisdiction the memorandum in support of post-conviction relief filed by Johnston on August 18, 2015, in his habeas proceeding before the Texas Court of Criminal Appeals. The facts recited in the memorandum state:
Applicant was indicted for two counts of the felony offence of theft pursuant to Texas Penal Code section 31.03(b) on August 8, 2008. On March 23, 2009, Applicant entered a plea of guilty pursuant to a plea bargain with the State whereby one count was abandoned and the Applicant was sentenced to fifteen (15) years confinement. On March 25, Applicant's Motion for New Trial was granted, and a new judgment was entered placing Applicant on Deferred Adjudication Community Supervision for a period of ten (10) years. Under the terms of the probated sentence, Applicant was required to pay restitution to the complainants alleged in this indictment as well as several others merged from other cause numbers pursuant to section 12.45(a) of the Texas Penal Code.
The docket sheet placed in evidence in the hearing on the plea to the jurisdiction indicates the deferred adjudication order was signed on March 25, 2009.
Johnston alleged his deferred adjudication was revoked on August 1, 2014, and he was sentenced to forty years of confinement. He pursued post-conviction relief "based on ineffective assistance of counsel, mishandling of fiduciary property, material misrepresentations, and other professional misconduct" by Jackson. In the habeas proceeding Jackson provided a court-ordered affidavit that Johnston alleged contained "numerous false statements" about what he did with the checks and "whether he read certain matters into the record." In the lawsuit against Jackson, Johnston alleged Jackson "read nothing into the record, and that's because he inexcusably and inexplicably waived the record." Johnston alleged that in the habeas proceeding Jackson "gave false testimony about the disposition of the $8,000 and $100,000 checks[, ]" and as a result of Jackson's "dishonesty and fraud on the court[, ]" Johnston "has endured years of additional confinement[, ]" It should be noted that the only claim asserted in the Original Petition was that Johnston sued Jackson for ". . . breach of fiduciary duty and fraud, specifically for the misappropriated $ 100, 000 check."
Johnston attached Jackson's 2015 affidavit to the Original Petition in his lawsuit against Jackson but omitted the documents attached to Jackson's affidavit.
Jackson filed a plea to the jurisdiction, original answer, and an affirmative defense. Jackson alleged the trial court lacked subject-matter jurisdiction because Johnston lacked standing to pursue the single claim alleged and further failed to allege any damages from that single claim. Jackson asserted that Johnston failed to allege any facts that would support either a breach of fiduciary duty or a fraud claim for the allegedly misappropriated cashier's check. Jackson pleaded the affirmative defense of limitations based on Johnston's July 31, 2015, supporting declaration for his habeas filing, which showed that by that date Johnston was aware of the claim alleged in his lawsuit against Jackson.
On September 4, 2019, Jackson filed a notice of submission by oral hearing on September 20, 2019. On September 16, 2019, Johnston filed a motion for continuance due to counsel's scheduling conflict. The following day Johnston filed his First Amended Petition. The First Amended Petition added a paragraph in which Johnston alleged that a business associate purchased the cashier's check with funds provided by another business associate but Johnston "was the equitable owner and intended beneficiary of the funds[.]" Johnston alleged that the March 20, 2019, correspondence from Jackson to the second business associate stated:
This is the letter that you requested addressing the $100k for Mark's case as well as the negotiations surrounding the plea. Any funds
received for restitution in Mark's case will be placed into my IOLTA account. These funds will only be used in negotiations with the District Attorney's office. If an agreement cannot be reached then the funds will be returned in full to you on or before March 25th 2009.
Johnston's First Amended Petition addressed Jackson's limitations defense. Johnston alleged, "As of July 31, 2019, the Plaintiff was only aware that Mr. Jackson had misappropriated the $8,000 check referenced above, and that is why he did not seek damages with respect to the $8,000 check in his Original Petition (nor does he seek damages for the $8,000 check now)." Johnston alleged that he did not learn about Jackson's alleged breach of fiduciary duty with respect to the $100,000 cashier's check until October 2015 when Jackson "produced records showing that he could not have deposited the $ 100, 000 into his IOLTA account as he claimed[, ]" and Johnston "learned that the $ 100, 000 had not been applied toward his restitution balance." In the First Amended Petition, Johnston for the first time added:
Plaintiff further brings a claim for breach of fiduciary duty and fraud with respect to Defendant's October 9, 2015 affidavit. Even though the Defendant was no longer the Plaintiff s attorney as of that date, he had an ongoing duty to be truthful about the nature of his previous representation of the Plaintiff. The October 9, 2015 affidavit was a fraud on the court as well as the Plaintiff.
On September 20, 2019, Jackson filed a notice of oral hearing on the plea to the jurisdiction for October 4, 2019. On October 1, 2019, Johnston filed a Second Amended Petition. The Second Amended Petition added an allegation that Jackson did not have an IOLTA account at Wood forest Bank on March 23, 2009 and therefore his October 9, 2015 affidavit falsely stated that he used a $ 100, 000 Regions Bank cashier's check to purchase a $100,000 cashier's check from Wood forest Bank but none of the money entered any personal or business account. Johnston also alleged Jackson leaves the State for approximately two weeks each year. Johnston asserted:
. . . claims against the Defendant for breach of fiduciary duty and fraud, specifically for the misappropriated $100,000 check, because the Plaintiff did not receive the intended benefit of the check insofar as it was not applied to his restitution balance. The Plaintiff further brings a claim for breach of fiduciary duty and fraud with respect to the Defendant's October 9, 2015 affidavit.
The trial court heard the plea to the jurisdiction on October 4, 2019. Michael Hess testified for Johnston. The trial court took judicial notice of Hess's affidavit attached to Johnston's pleading but admonished that Hess would provide live testimony subject to cross-examination. Hess testified that he purchased a $ 100, 000 cashier's check payable to Jackson. The memo line stated, "purchased for IOLTA account." Hess claimed he told Johnston that the $100,000 cashier's check was for Johnston's benefit. Hess stated the money was a loan from Hess to Jim Winkler, but he "ultimately" understood that the money was a loan to Johnston. Hess gave the check to Winkler because Winkler provided a Lake Conroe condominium as collateral. Hess understood that the money was going to Johnston's lawyer to help Johnston secure his attorney. The trial court asked Hess, "Who was going to repay this money?" Hess replied, "My loan was to Jim Winkler." Johnston offered Winkler's affidavit, but the trial court sustained Jackson's hearsay objection.
Johnston's counsel noted that Jackson's plea to the jurisdiction did not address the claim alleged by Johnston in his amended pleading for breach of fiduciary duty relating to the affidavit Jackson provided in the habeas proceeding. Jackson argued at the time Jackson provided the affidavit in the habeas proceeding no fiduciary relationship existed and they were adversarial in proceedings in which Johnston claimed Jackson provided ineffective assistance. As to the fraud claim added in the amended pleadings, Jackson argued Johnston failed to allege specific facts that Johnston relied upon that were material and either to Jackson's detriment or benefit.
The trial court's October 7, 2019 order dismissing the case stated:
On October 4, 2019, came on for hearing Defendant's Plea to the Jurisdiction and after reviewing the pleadings and evidence offered by both Plaintiff and Defendant it is the opinion of the Court that Defendant's Plea to the Jurisdiction should be sustained. The Court finds the following facts:
1. Plaintiffs claims all relate to an alleged misappropriation of a $100,000 cashier's check.
2. The $100,000 cashier's check at issue in this case was never the property of Mark Johnston nor did Mr. Johnston have an individual claim to the $ 100, 000 cashier's check.
3. The $100,000 cashier's check, based on the testimony of Mr. Hess who secured the check, was never intended to be the property of Mark Johnston.
4. The 100, 000 cashier's check was a loan from Mr. Hess to Mr. Winkler and not Mark Johnston.
IT IS THEREFORE ORDERED that this case is dismissed.
In his first issue, Johnston contends the trial court erred by making findings of fact and conclusions of law contrary to the pleadings because Jackson only challenged the sufficiency of the pleadings. He argues no evidence was presented contrary to his allegation that he is the equitable owner and intended beneficiary of the funds. However, it should be noted that Johnston was allowed to put on evidence at the hearing, which formed the basis of the trial court's October 7, 2019 order. Jackson argues the jurisdictional facts in Johnston's pleadings negate his assertion of standing as the equitable owner and intended beneficiary of the $100,000 cashier's check or that Jackson breached a fiduciary duty to Johnston and committed fraud by filing an affidavit in Johnston's habeas proceeding.
Whether a court has subject-matter jurisdiction, whether the plaintiff has alleged facts that affirmatively demonstrate atrial court's subject-matter jurisdiction, and whether undisputed evidence of jurisdictional facts establishes a trial court's jurisdiction are all questions of law that we review de novo. Tex. Dep't of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004). A defendant may challenge the court's jurisdiction either on the pleadings or by evidence negating jurisdictional facts. Id. at 226-27. "If the pleadings affirmatively negate the existence of jurisdiction, then a plea to the jurisdiction may be granted without allowing the plaintiffs an opportunity to amend." Id. at 227. "However, if a plea to the jurisdiction challenges the existence of jurisdictional facts, we consider relevant evidence submitted by the parties when necessary to resolve the jurisdictional issues raised, as the trial court is required to do "Id. "[I]f the relevant evidence is undisputed or fails to raise a fact question on the jurisdictional issue, the trial court rules on the plea to the jurisdiction as a matter of law." Id. at 228.
In this case, the trial court received evidence of jurisdictional facts. Johnston presented Hess as a witness and the trial court admitted a copy of the cashier's check in evidence. The trial court admitted a docket sheet for the criminal case without an objection from Johnston. The trial court could consider the relevant evidence when necessary to resolve the jurisdictional issues. See Miranda, 133 S.W.3d at 227; see also Phillips v. McNeill, 635 S.W.3d 620, 626-27 (Tex. 2021) (stating that findings of fact are appropriate when the trial court received evidence it could consider in deciding a plea to the jurisdiction).
Johnston also argues the evidence contradicts the trial court's findings. He refers this Court to Winkler's and Hess's affidavits, but the trial court admitted neither affidavit in the hearing. Johnston argues the trial court erred by refusing to consider Winkler's affidavit. A trial court may consider evidence in the form of affidavits in deciding a plea to the jurisdiction. FKMP 'ship, Ltd. v. Bd. of Regents of Univ. of Hous. Sys., 255 S.W.3d 619, 628 (Tex. 2008). But an affidavit submitted in support or opposition to a plea to the jurisdiction is subject to evidentiary objections. See CHW-Lattas Creek, L.P. v. City of Alice, 565 S.W.3d 779, 792 (Tex. App.-San Antonio 2018, pet. denied). We review the trial court's rulings on evidentiary objections to evidence submitted on a plea to the jurisdiction for abuse of discretion. Univ. of Tex. M.D. Anderson Cancer Ctr. v. King, 417 S.W.3d 1, 5 (Tex. App.-Houston [14thDist] 2013, no pet.). Johnston does not challenge the trial court's ruling on Jackson's hearsay objection on appeal. He neither argues Winkler's affidavit was not hearsay nor that he articulated an exception to the hearsay rule in the oral hearing. See Tex.R.App.P. 38. l(i) ("The brief must contain a clear and concise argument for the contentions made, with appropriate citations to authorities and to the record."). We overrule issue one.
In issue two, Johnston argues that as equitable owner and intended beneficiary of the $ 100, 000 cashier's check he had standing to assert claims arising from the misuse of the check. Equitable ownership is the present right to compel legal title. AHF-Arbors at Huntsville I, LLC v. Walker Cty. Appraisal Dist, 410 S.W.3d 831, 837 (Tex. 2012). The facts recited in Johnston's petition affirmatively negate his equitable ownership of the cashier's check. The funds were acquired by Winkler from Hess. The funds were not Johnston's and he did not allege any facts to support his right to obtainlegal title to the cashier's check.
Nor was Johnston the third-party beneficiary of the transaction between Hess and Winkler. To create a third-party beneficiary, the contracting parties must have intended to grant the third party the right to be a "claimant" in the event of a breach. First Bank v. Brumitt, 519 S.W.3d 95, 102 (Tex. 2017). Johnston pleaded that the purpose of the cashier's check was to secure a plea bargain agreement for Johnston by using the funds to negotiate restitution to a creditor connected to the criminal prosecution against Johnston. According to Johnston's pleading, if Jackson failed to secure a plea bargain agreement the $ 100, 000 would have been returned to Winkler, not to Johnston. Neither Johnston's pleadings nor Hess's testimony supports an argument that Hess and Winkler intended Johnston to have the right to claim the funds in the event of a breach of their agreement. We overrule issue two.
In issue three Johnston argues the trial court denied Johnston due process by dismissing without notice Johnston's claim for breach of fiduciary duty and fraud with respect to Jackson's October 9, 2015 affidavit. He argues the notice of an oral hearing on Jackson's plea to the jurisdiction did not inform Johnston that the trial court intended to hear and decide matters first raised in Johnston's amended pleadings.
The cases cited by Johnston are inapposite. In Cruz v. Ghani, the trial court erred by treating a JNOV hearing as a trial on the merits of a counterclaim and entering judgment on the claim. See No. 05-17-00566-CV, 2018 WL 6566642, at * 24 (Tex. App.-Dallas Dec. 13, 2018, pet. denied) (mem. op.). In Seckers v. Ocean Chemicals, Inc., the appellate court held the appellant failed to receive notice of a June 14 hearing because the date written on the fiat setting could and was read as June 17. See 845 S.W.2d 317, 318 (Tex. App.-Houston[1st Dist.] 1992, no pet.).
A plea to the jurisdiction is determined based upon the plaintiffs live pleading. See Heckman v. Williamson Cty., 369 S.W.3d 137, 149 (Tex. 2012). Jackson challenged Johnston's standing to bring the lawsuit by filing a plea to the jurisdiction. Faced with a jurisdictional challenge to his standing to sue, Johnston could establish his standing by amending his pleadings to allege jurisdictional facts. Johnston attempted to overcome Jackson's plea to the jurisdiction by amending his pleadings to allege additional claims. However, Johnston had notice that the trial court would consider Jackson's plea to the jurisdiction at the oral hearing and Johnston had notice of his own live pleading. Due process is satisfied because Johnston had notice of the plea to the jurisdiction, an opportunity to amend his pleadings, and an oral hearing. We overrule issue three.
In issue four, Johnston argues he properly stated claims for fraud and breach of fiduciary duty based on alleged misrepresentations made by Jackson in the 2015 habeas proceeding affidavit. He argues Jackson's fiduciary duty survived the termination of the attorney-client relationship because a lawyer has a duty to deliver funds belonging to a former client. See Burnett v. Sharp, 328 S.W.3d 594, 600-01 (Tex. App.-Houston [14th Dist.] 2010, no pet.).
The allegation of fraud and breach of fiduciary duty asserted in the amended pleadings does not concern delivery of funds belonging to the client. Johnston's allegations specifically relate to an affidavit provided in a habeas proceeding in which Johnston accused Jackson of providing ineffective assistance of counsel in the criminal case. Johnston's pleadings conclusively establish that the lawyer-client relationship had ended and that the parties were in an adversarial posture when Jackson provided a court-ordered affidavit. Johnston's pleadings also conclusively establish that the alleged misrepresentations were made in a judicial proceeding and that he has not been exonerated, as required to establish causation. See Peeler v. Hughes & Luce, 909 S.W.2d 494, 498 (Tex. 1995). We conclude that the amended pleadings affirmatively negate the alleged basis for the trial court's jurisdiction; therefore, the trial court did not err by granting the plea to the jurisdiction. See Miranda, 133 S.W.3d at 227. We overrule issue four and affirm the trial court's judgment.
AFFIRMED.