Gone, But Not Forgotten: Broker Entitled to Commission After Its Listing Terminated

Ebby Halliday Real Estate, Inc. v. Giambrone

Dallas Court of Appeals, No. 05-22-00386-CV (February 28, 2023)

Justices Reichek, Nowell, and Garcia (Opinion, linked here)

Brent M. Rubin

On September 2, 2020, Giambrone and Ebby Halliday Real Estate executed an exclusive listing agreement that provided Halliday a 6% commission if Giambrone’s property sold. After five months, Giambrone had not received any serious offers, so Giambrone and Halliday entered into a “Termination Agreement.” The Termination Agreement provided, in pertinent part, that 3% of the sales price would go to Halliday if Giambrone sold the property by December 31, 2021.

In June 2021, Giambrone had Compass list the property, and it promptly sold. Giambrone refused to pay Halliday the 3% fee prescribed in the Termination Agreement—$167,250. Halliday sued for breach of contract. The parties filed cross-motions for summary judgment. The trial court granted Giambrone’s motion. Halliday appealed.

The Court of Appeals reversed and rendered judgment, holding Halliday was entitled to the 3% fee. The appeal focused largely on the “producing cause” doctrine. This doctrine, which dates back to the Texas Supreme Court’s decision Goodwin v. Gunter, 185 S.W. 295, 296 (Tex. 1916), provides that a broker’s entitlement to a commission vests by procuring the sale. Here, Compass, not Halliday, found the buyer. But the producing cause doctrine is only a default rule, and parties can displace it through the terms of their agreement.

After observing that it is “not uncommon” for a broker to receive a commission by agreement after having its listing terminated, the Court of Appeals concluded the Termination Agreement overrode the producing cause doctrine. Because the termination agreement provided Halliday a 3% fee if Giambrone agreed to “sell or lease the Property” to “anyone” on or before December 31, 2021, Halliday did not need to procure the sale to receive the fee. Therefore, the Court of Appeals rendered a $167,250 judgment for Halliday and remanded for the trial court to determine Halliday’s attorneys’ fees on its breach-of-contract claim.

Clause Preserving “All Remedies” Does Not Conflict with Agreement to Arbitrate

Kirk v. Atkins

Dallas Court of Appeals, No. 05-21-00639-CV (February 1, 2023)

Justices Nowell, Smith, and Miskel (Opinion, linked here)

Ken Carroll

Atkins sued Kirk for breach of contract, fraudulent misrepresentation, and conversion in connection with her investment in his company. The parties’ “investor agreement” included a broad ADR provision that required “[a]ny disputes or controversies arising out of or relating to” that agreement to be resolved through AAA arbitration. That agreement also contained a fairly standard “Remedies” provision stating that, “The parties shall have all remedies for breach of this Agreement available to them provided by law or equity.” Kirk sought to compel arbitration of the parties’ dispute. In response, Atkins did not contest the validity or scope of the arbitration provision, but argued that the agreement’s express reservation of “all remedies” conflicted with the agreement to arbitrate and rendered that ADR provision ambiguous. The trial court agreed and denied the motion to compel arbitration. But the Dallas Court of Appeals reversed.

The appeals court held the ADR and “Remedies” provisions of the agreement could and should be reconciled. “The ADR paragraph, in which the arbitration clause is found, controls the process of resolving disputes between the parties,” the Court explained, “while the remedies paragraph describes the substantive relief that may flow from decisions on those controversies.” The two provisions therefore were not in conflict, the ADR provision was not ambiguous, and the motion to compel arbitration should have been granted.

Witness’s “Understandings” and Belief She Was “Deceived” Are Too Conclusory to Defeat Summary Judgment

Orange Cup Drive In LLC v. Mid-Continent Casualty Co.

Dallas Court of Appeals, No. 05-21-00448-CV (January 5, 2023)

Justices Nowell, Smith, and Rosenberg (opinion available here)

Kelli Hinson

Orange Cup Drive In lost summary judgment on its contractual coverage claims against Mid-Continent Casualty Company. Undeterred, Orange Cup tried to pursue extra-contractual claims, alleging that the insurance company took advantage of Orange Cup’s lack of expertise to misrepresent that Orange Cup had more insurance coverage than it did. The insurance company moved for summary judgment on these claims as well, and the motion was granted.

On appeal, Orange Cup argued the trial court erred in disregarding the affidavits of one of its principals, Shanta Barua, regarding her understandings and beliefs regarding the insurance coverage purchased by Orange Cup. Barua had conducted all of the negotiations with the insurance company, and she stated in her affidavit that she “understood” and “was under the impression” that the policy would cover third-party claims against Orange Cup. She further stated the insurance company “deceive[d] me into believing that I obtained third party liability coverage for [Orange Cup].”

The Dallas Court of Appeals affirmed the trial court’s decision to disregard these statements because, without any explanation of how Barua was allegedly misled or how she came to her alleged understanding about the policy, her statements were “conclusions unsupported by any factual detail” and were not admissible. In the absence of any other evidence to support Orange Cup’s fraud and other extra-contractual claims, summary judgment was appropriate.

Rule 165a(3) Motion to Reinstate: "Verified" Really Does Mean What It Says

In re Briseno

Dallas Court of Appeals, Nos. 05-22-01174-CV (December 14, 2022)

Before Justices Myers, Nowell (Opinion), and Goldstein 

Neil R. Burger

Rule 165a(3) states that a motion to reinstate after dismissal for want of prosecution must be “verified by the movant or his attorney.” The Dallas Court of Appeals applied that requirement literally (and some might say harshly) in In re Briseno. There, following a dismissal for want of prosecution, plaintiff’s counsel timely filed a motion to reinstate within 30 days explaining that he failed to appear for the dismissal hearing due to a “calendaring error.” And he attached a “Verification” swearing that the facts in the motion were “true and correct.” But, the “purported verification d[id] not reflect it was made in the presence of an authorized officer such as a notary public.” Nevertheless, the trial court granted the motion and reinstated the case.

The Court of Appeals ruled that the trial court’s order granting the motion to reinstate was void for lack of jurisdiction because it was not properly verified and did not extend the court’s plenary power beyond 30 days of the judgment. A verification must be sworn to before an authorized officer. In addition, the “verification” here did not meet the requirements of an unsworn declaration under CPRC § 132.001, such as containing the declarant’s birthdate and address. Accordingly, the Court granted mandamus relief and ordered the trial court to set aside the case’s reinstatement.

Morale of the story: Follow the rules, especially when dismissal is on the line.

Fifth Court: Twenty-Plus Years of Precedent on Bankruptcy Trustee’s “Exclusive Standing” Implicitly Overruled by SCOTX

Moser v. Dillon Investments, LLC 

Dallas Court of Appeals, No. 05-21-00204-CV (August 2, 2022) 

Justices Myers (Opinion, linked here), Osborne, and Nowell 

 Brent M. Rubin 

Mason claimed that, while staying at a hotel on June 30, 2017, she was taking a shower and the bathtub floor shifted, causing her to fall and hit her head. On June 13, 2019, Mason sued the hotel in state court for negligence. But in April 2018, Mason had filed for Chapter 7 bankruptcy without listing her potential claim against the hotel on her schedule of assets. By the end of 2018, Mason had received a discharge and the bankruptcy case had terminated.

The hotel initially sought summary judgment, alleging Mason lacked standing to assert the claim and that she was judicially estopped from bringing the claim. The hotel argued that because Mason had not disclosed the claim in her bankruptcy schedules, the claim remained with the bankruptcy estate and was not returned to her upon the bankruptcy’s termination. Mason then filed a motion in bankruptcy court to reopen the bankruptcy to amend her schedules to add the negligence claim, which the bankruptcy court granted. 

In January 2021, Moser, the bankruptcy trustee, filed an amended petition in the state court case on behalf of Mason’s bankruptcy estate, alleging the same negligence claim against the hotel. The hotel moved for summary judgment, arguing the amended petition was filed after the two-year statute of limitations had run. The trial court granted the motion. 

Moser’s appeal centered on the relation-back doctrine. Section 16.068 of the Texas Civil Practice and Remedies Code provides that when a party initially brings a timely claim, “a subsequent amendment or supplement to the pleading that changes the facts or grounds of liability or defense is not subject to a plea of limitation unless the amendment or supplement is wholly based on a new, distinct, or different transaction or occurrence.” But the relation-back doctrine does not apply to an amended petition when the trial court lacked subject-matter jurisdiction over the original petition. 

Mason first brought her negligence claim within the two-year statute of limitations, and Moser’s amended petition on behalf of the bankruptcy estate alleged the same facts as Mason’s original petition. So, to determine whether the relation-back doctrine applied, the court of appeals considered whether the trial court had jurisdiction when Mason first sued. 

The court of appeals explained that for the trial court to lack jurisdiction based on a lack of standing, Mason had to lack “constitutional” standing. The Court noted that courts have, at times, blurred the distinction between standing and capacity—a critical if sometimes confusing distinction, because standing is jurisdictional, while capacity is not. In 1999, the Texas Supreme Court held in Douglas v. Delp that a bankruptcy trustee had “exclusive standing” to bring claims on behalf of the estate, quoting a 1994 Fifth Circuit decision that did not expressly address the question of constitutional standing. After an extensive analysis of later Fifth Circuit cases on a bankruptcy trustee’s authority to bring claims on behalf of the estate as well as later Texas Supreme Court decisions addressing the distinction between standing and capacity, the court of appeals concluded the Texas Supreme Court had implicitly overruled Douglas and the various intermediate appellate decisions—including those of the Fifth Court—that had followed it. 

 Accordingly, the Court said, Mason had standing to bring her claim in 2019; she merely lacked capacity to assert it. Therefore, the trial court had subject-matter jurisdiction in 2019, Moser’s amended petition in 2021, in his capacity as bankruptcy trustee, related back to Mason’s timely 2019 petition, and the trial court erred in granting summary judgment based on the statute of limitations.

Mandamus: If Not Now, When?

In re Holland

Dallas Court of Appeals, Nos. 05-22-00368-CV, -00369-CV, and -00378-CV (May 27, 2022)

Before Justices Myers, Nowell (Opinion), and Goldstein

Neil R. Burger

In three identical rulings, the Dallas Court of Appeals rejected three identical petitions for writs of mandamus as having been filed prematurely. The petitions complained that the trial court had not ruled on motions to compel discovery in three criminal cases concerning the same incarcerated individual. The convicted defendant “filed his motions on January 7, 2022, reminded the trial court that they were pending by letter dated March 7, 2022, and filed his petition[s] seeking mandamus relief on April 20, 2022.” The Court denied all three petitions, saying the Relator had not “shown he is entitled to mandamus relief after such a short period of time.”

Although it is not clear that a hearing on the motions was ever requested or set, we now have guidance that 103 days from filing a motion without getting a ruling is not long enough to warrant mandamus relief compelling the trial court to rule.

Going Paperless in a Spoliating World

Power v. Power

Dallas Court of Appeals, No. 05-19-01557-CV (May 3, 2022)

Justices Molberg, Nowell (Opinion), and Goldstein

Neil R. Burger

In Power v. Power, the Fifth Court confronted a spoliation jury instruction given after a company went paperless and destroyed a decade’s worth of invoices central to the fiduciary duty claims in the lawsuit. Finding error, the Court reversed and remanded the case for a new trial.

Brothers Craig Power and Braden Power developed real estate together. Craig operated the business, and Braden designed and oversaw the business’s construction activities. In 2013, Craig decided the company would adopt a paperless recordkeeping system and authorized the destruction of ten boxes of invoices dating back to 2003. The brothers later sued each other over finances and distributions.

At trial, the court admitted evidence that Craig gave permission for a payroll employee to shred old invoices when they converted to electronic billing. Braden’s counsel also stated in opening and closing arguments that Craig ordered the destruction of the documents and that that “alone is a breach of fiduciary duty.” The trial court subsequently instructed the jury on spoliation without naming the offending party:

Invoices and documents which would demonstrate or reflect expenses relating to Craig Power and Braden Power [sic] real estate transactions have been destroyed.

You may consider that the invoices, documents, and records destroyed would have been unfavorable to the party who destroyed the invoices, documents, and records on the issues of whether the party complied with the party’s legal duties and the failure to properly account for money under the party’s care and control.

The jury returned a verdict in favor of Braden awarding damages against Craig. This appeal followed.

The Court first addressed whether the jury charge constituted a spoliation instruction when it did not name the party responsible for the destruction of documents. It did. There was no evidence or argument that Braden had destroyed evidence, while Braden’s counsel put on testimony and made arguments that Craig had. Therefore, not naming Craig as the spoliating party was “not determinative.”

Next, the Court analyzed whether the “severe spoliation sanction” of a jury instruction was an abuse of discretion that probably caused the rendition of an improper judgment. It was and it did. To sanction a party for spoliating evidence, the trial court must, outside the presence of the jury, find that (1) the spoliating party had a duty to preserve evidence, and (2) the party intentionally or negligently breached that duty. The trial court did not do that here. Because of the closely contested nature of the issues at trial, the emphasis Braden’s counsel placed on spoliation, and the harshness of a spoliation instruction, the Court of Appeals found harm, reversing and remanding for a new trial.

Splitting with Sister Courts, the Dallas Court of Appeals Holds Post-Judgment Interest Applies to Judgments Confirming Arbitration Awards

Bluestone Resources, Inc. v. First National Capital, LLC

Dallas Court of Appeals, No. 05-20-00776-CV (April 29, 2022)

Justices Reichek (Opinion, linked here), Nowell, and Carlyle

Robert Fountain

First National secured an award in arbitration against Bluestone. When First National sought confirmation of the award, it requested post-judgment interest under the Finance Code. The trial court issued a final judgment confirming the award and ordering post-judgment interest on all sums awarded in the judgment. On appeal, Bluestone argued the trial court’s award of post-judgment interest was an impermissible modification of the arbitration award.

The Dallas Court of Appeals held chapter 304 of the Finance Code requires post-judgment interest on a judgment confirming an arbitration award. The Court cited section 304.003, which states that post-judgment interest accrues on any “money judgment of a court of this state.” Because the trial court’s judgment confirming First National’s arbitration award was a “money judgment of a court of this state,” First National was entitled to post-judgment interest.

The Court acknowledged that its decision departed from a line of cases holding that a court may award post-judgment interest only if the arbitrator awards it. The Court observed that those cases failed to differentiate between post-award interest (accruing from the date of the arbitration award) and post-judgment interest (accruing from the date of final judgment). Post-award interest ordered by a trial court but not the arbitrator amounts to an impermissible modification of an arbitration award. Post-judgment interest, on the other hand, accrues automatically under the Finance Code even if a court’s judgment does not specifically reference it. Awarding post-judgment interest in this context, therefore, is completely consistent with the general rule that courts may not modify arbitration awards, because the post-judgment interest applies to the judgment and not the award.

Given the split among the courts of appeals, and absent reconsideration en banc, the availability of post-judgment interest in arbitration confirmation proceedings appears bound for the Texas Supreme Court. Until then, Bluestone clarifies it’s available (and mandatory) in the Fifth District.

Mandamus Relief for Denial of Advancement of Defense Costs

In re DeMattia

Dallas Court of Appeals, No. 05-21-00460-CV (April 12, 2022)

Justices Schenck, Nowell (Opinion, linked here), and Garcia

Brent M. Rubin

Mark DeMattia co-owned Restoration Specialists, LLC and served as its managing member. In 2018, he sold the company. But a few days before the closing, he allegedly copied or deleted certain files. Under its new owners, Restoration later sued DeMattia, alleging breach of fiduciary duty and misappropriation of trade secrets.

DeMattia, in turn, demanded that Restoration indemnify him and advance his defense costs, pursuant to Restoration’s corporate regulations. The Texas Business Organizations Code allows LLCs to indemnify and advance defense costs, through their organizing documents, to both current and former officials and governing persons. After Restoration denied his demand for advancement, DeMattia counterclaimed and moved for summary judgment. Restoration responded that the advancement provision in the company regulations, by its terms, did not apply to former managers like DeMattia. The trial court denied DeMattia’s motion.

DeMattia sought mandamus relief in the Dallas Court of Appeals. Applying contract interpretation principles, the Court held that the advancement provision in Restoration’s corporate regulations did cover former managers like DeMattia, so the trial court erred by denying DeMattia’s motion for summary judgment. The Court also rejected Restoration’s argument that DeMattia’s “unclean hands”—his alleged misappropriation and breach of fiduciary duty—barred advancement as a matter of public policy. The Court explained that every lawsuit involves allegations of wrongdoing, so denying advancement based mere allegations of unclean hands would render the right to advancement a nullity.

Finally, the Court held DeMattia did not have an adequate remedy by appeal, a requirement for mandamus relief. The right to advancement can be satisfied only during proceedings in the trial court, so proceeding to trial without advancement, when a party is entitled to advancement, would defeat the right to advancement. Therefore, the Court ordered the trial court to vacate its denial of summary judgment and issue an order granting DeMattia’s motion.

Must-Read Opinion Regarding Return-of-Service Affidavits

Mesa SW Management, LP v. BBVA USA

Dallas Court of Appeals, No. 05-20-01091-CV (February 24, 2022)

Justices Myers, Osborne, and Nowell (Opinion available here)

Kelli Hinson

Hanging on to a no-answer default judgment is hard. And it may have just gotten harder. In this restricted appeal, the appellants sought reversal of the default judgments against them, arguing BBVA failed to strictly comply with multiple requirements governing service of process. The Dallas Court of Appeals agreed. In particular, the Court took issue with the Affidavit of Service regarding each appellant. The affidavits provided in relevant part:

The Court held the affidavits failed to comply with Rule 105, which states: “The officer or authorized person to whom process is delivered shall endorse thereon the day and hour on which he received it, and shall execute and return the same without delay.” By its language, the rule requires the same person to whom process is delivered to then execute and return the process without delay. Because the affidavits indicated that Austin Process LLC received the process and Roger Bigony served it, the affidavits did not strictly comply with Rule 105. Failure to show strict compliance with Rule 105 renders attempted service invalid and of no effect. So the default judgments were reversed, and the case was remanded back to the trial court. The Court did not reach appellants’ other complaints about service, including whether an entity such as Austin Process LLC is an “authorized person” to receive the process under the rules.

Party Has No Standing to Appeal Sanctions Against Its Attorneys

On Deck Capital, Inc. v. CWO Designer Landscapes LLC

Dallas Court of Appeals, No. 05-20-00471-CV (February 10, 2022)

Justices Reichek (opinion available here), Nowell, and Carlyle

Kelli Hinson

When the day of trial arrived, the plaintiff had not timely responded to or supplemented its discovery responses. It became clear that, if trial proceeded, the court would exclude much of plaintiff’s anticipated evidence because of that failure to respond or supplement. When the trial court refused the plaintiff’s request for a continuance in order to supplement its discovery, the plaintiff filed a motion for non-suit. The parties disagreed about whether the non-suit should be with or without prejudice and whether discovery sanctions should be issued. Ultimately, the trial court dismissed the case without prejudice, but ordered discovery sanctions against the plaintiff’s law firm, “not the client.” The plaintiff appealed.

The Court of Appeals dismissed for lack of jurisdiction, holding that the plaintiff/appellant had no standing to appeal the sanctions order because the sanctions were imposed against the law firm, not the plaintiff. “An appellant is not harmed when sanctions are imposed solely against the appellant’s attorney” the Court explained, “and does not have standing to challenge an order imposing sanctions solely upon his attorney.”

Evidence Required at the Threshold for Direct Access to Opponent’s Electronic Device

In re Cooley

Dallas Court of Appeals, No. 05-21-00445-CV (February 2, 2022)

Justices Schenck (Opinion, linked here), Nowell, and Garcia

Ken Carroll

Cooley sued Methodist Richardson Medical Center, alleging she was injured while a patient there. Cooley and her housemate took photos of her injuries. Methodist sought production of the photos and the associated metadata. Cooley produced a CD with the photos and what she contended was all metadata. Methodist disagreed that all metadata had been produced, and sought direct access to the electronic devices on which the photos were taken to pursue the metadata it contended was missing. After a non-evidentiary hearing, the trial court granted Methodist’s motion to compel the requested direct access.

Applying the Supreme Court’s decision in In re Weekley Homes, L.P., 295 S.W.3d 309 (Tex. 2009), the Dallas Court of Appeals granted mandamus and ordered the trial court to vacate its order that Cooley gave Methodist direct access to her electronic devices. The Dallas Court noted the admonition in Weekley that “ordering examination of a party’s electronic storage device is particularly intrusive and should be generally discouraged.” To justify direct access to an opponent’s electronic device, the Court said, “[t]he procedural protections identified in Weekley Homes require that the requesting party show that the responding party has defaulted in its obligation to search its records and produce the requested data, that the responding party’s production has been inadequate, and that a search of the opponent’s electronic device could recover relevant materials.” What’s more, this is a “threshold” evidentiary requirement. Where, as here, the requesting party does not put forth the required evidence, its request for direct access must be denied—or, in this case, vacated on mandamus.

Hey, I Didn't Rob a Bank Today – Mugshots, Defamation, and the TCPA

CBS Stations Group of Texas, LLC v. Burns

Dallas Court of Appeals, No. 05-21-00042-CV (September 27, 2021)

Before Justices Molberg, Nowell (Opinion), and Goldstein

Neil R. Burger

        Unlike most of the appeals in the Fifth Court involving the Texas Citizens Participation Act (TCPA), CBS Stations Group of Texas, LLC v. Cedric Burns did not involve a dispute about whether the TCPA applied to the claims asserted—claims for defamation and intentional infliction of emotional distress (IIED) arising out of CBS’s mistaken use of Mr. Burns’s mugshot while airing a story on an armed bank robbery and subsequent high-speed chase. Instead, the issue before the Court was whether Mr. Burns had met his burden to “establish by clear and specific evidence a prima facie case for each essential element of [his] claim.”

        A Cedric Burns was arrested for bank robbery. But, it was not the Cedric Burns depicted in the mugshot provided to CBS by the Tarrant County Sheriff’s Office as it prepared to air a story on the crime. People who knew the Cedric Burns whose mugshot was displayed on TV notified him of the story, and he promptly contacted CBS about its mistake. CBS then removed all references to the story and the photograph from its digital platforms.

        Burns sued CBS for defamation and IIED. In response to CBS’s TCPA motion, Burns admitted that the story was a matter of public concern, thus making the TCPA applicable, but asserted that he had established all elements of his causes of action. The trial court apparently agreed, and denied the motion. The Dallas Court of Appeals reversed, rendered judgment granting the motion, and remanded for determination of fees and possible sanctions.

        A key issue decided by the Court was whether CBS acted with the “requisite degree of fault” for a defamation claim when it used the mugshot provided by the Sheriff. The applicable degree of fault is determined by whether Burns was a public figure. A public figure must prove malice, while a private individual must only prove negligence. Here, because Burns had nothing to do with the story, and was not otherwise widely known, the Court considered him a private individual, and therefore analyzed the evidence for CBS’s negligence.

        For broadcasters, defamation requires that the person knew or should have known that the statement at issue was false. The content must warn a reasonably prudent editor or broadcaster of its defamatory potential. Here, there was nothing in the record showing that CBS knew or should have known that the mugshot provided to it by the Tarrant County Sheriff’s Office was not the correct Cedric Burns arrested earlier in the day. The Court of Appeals found that lack of proof to be determinative, and rendered judgment dismissing the defamation claim under the TCPA.

        Likewise, the Court dismissed the IIED claim. IIED is a “gap filler” claim limited to rare circumstances when egregious conduct causes emotional harm, but no other cause of action applies. Burns’s allegations and evidence forming his IIED claim were the same as his defamation claim. Therefore, it also failed.

Appraisal Based on Non-Comparable Sales Fails Reliability Test

Bank of Texas v. Collin Central Appraisal District

Dallas Court of Appeals, No. 05-19-00568-CV (June 22, 2021)

Justices Myers, Nowell (Opinion linked here), and Goldstein

Lyndon Bittle

        Bank of Texas appealed a judgment denying its challenge to CCAD’s tax appraisal of two properties. The bank argued the trial court abused its discretion by striking the bank’s appraisal experts for not properly applying the “income method,” one of three appraisal methods recognized by the Tax Code. The Dallas Court of Appeals affirmed, holding the trial court could reasonably have concluded “that the comparables relied on by the [bank’s] appraisers, rents for office buildings and retail properties, were not comparable to the property being valued, branch banks.” This “analytical gap” failed the reliability test articulated by the Texas Supreme Court in Gammill v. Jack Williams Chevrolet (1998) and its progeny.

        The appeals court rejected the bank’s argument (a common refrain of proponents of expert opinions) that CCAD’s complaints went “to the weight of the evidence, not its admissibility.” The court explained that whether an “appraisal is based on non-comparable sales is an issue for the trial court in determining admissibility,” and thus within its discretion. The appeals court also rejected the notion that “real estate appraisers are unique and somehow different from other experts; that their testimony is for the jury and not subject to reliability requirements.” To the contrary, the court said, “Courts must act as gatekeepers of expert testimony; appraisers do not get a free pass.”

Abandoning Prior Acceleration Avoids Statute of Limitations on Foreclosure

Florey v. U.S. Bank, N.A.

Dallas Court of Appeals, No. 05-20-00306-CV (June 22, 2021)

Justices Osborne, Reichek (Opinion, linked here), and Nowell

Ken Carroll

        Where a borrower defaults on a loan secured by real estate and the noteholder accelerates that loan, foreclosure must occur within four years after acceleration—unless the noteholder abandons that acceleration, which resets the limitations clock.

        The Floreys defaulted on their home equity loan. Nationstar Mortgage, the holder of the note, sent the Floreys a notice of default and then a notice accelerating the debt, both in 2013. But for many months after those notices, Nationstar said nothing further about acceleration and continued to send the Floreys monthly mortgage statements seeking only the current and past due amounts rather than the full amount of the loan, and even offering them the option to pay off the loan with no “prepayment penalty.” Those monthly notices made no reference to the acceleration. In August 2017, Nationstar filed an application for expedited foreclosure under Tex. R. Civ. P. 736, expressly relying on the 2013 notice of default, but not the notice of acceleration. But the trial court denied that application, and Nationstar then sold the note to U.S. Bank, which in 2019 sent the Floreys a new notice of default and acceleration and again sought to pursue expedited foreclosure under Tex. R. Civ. P. 736. The Floreys opposed that request and sought to quiet title, arguing that “U.S.Bank’s attempt to foreclose the lien was not timely brought within the four-year limitations period” and “[b]ecause the limitations period had expired, … the lien was no longer valid.” The trial court, however, granted summary judgment to U.S. Bank and the Court of Appeals affirmed. 

        “The pivotal issue,” the appeals court said, was “whether the 2013 acceleration of the Floreys’ note [by Nationstar] was abandoned.” If it was, then “the contract [was] restored to its original condition, including restoring the loan’s original maturity date and resetting the statute of limitations.” “Once a debt has been accelerated, the note holder may unilaterally waive or abandon the acceleration so long as the borrower neither objects to the abandonment nor detrimentally relied on the acceleration. … Abandonment can occur either expressly through a clear repudiation of the right, or impliedly through conduct inconsistent with a claim to the right.” Where the facts are undisputed, whether acceleration has been abandoned is a question of law. Here, Nationstar’s repeated monthly notices, sent after its notice of acceleration, that sought only monthly payments and made no mention of acceleration—and in fact, were inconsistent with acceleration—were sufficient to establish Nationstar’s abandonment of the 2013 acceleration. The foreclosure limitations clock, therefore, was re-set and didn’t start ticking again until U.S. Bank served its own notices of default and acceleration in 2019. U.S. Bank’s foreclosure, therefore, was not time-barred.

Dallas Court Affirms 9-Figure Judgment Against Toyota Even Though Toyota Complied With All Applicable Safety Regulations

Toyota Motor Sales, U.S.A., Inc. v. Reavis

Dallas Court of Appeals, No. 05-19-00075-CV (June 3, 2021)

Justices Partida-Kipness and Nowell (opinion available here); Justice Schenck dissenting (here)

Kelli Hinson

The Reavis family was involved in a violent car accident in their Lexus, which resulted in the parents being propelled into the back seat, where they crashed into their small children, who suffered skull fractures and traumatic brain injuries as a result. The family sued Toyota, asserting design and marketing defects. Even though the vehicle complied with all applicable safety standards, the jury found against Toyota, awarding $242 million in damages, including $144 million in exemplary damages. Toyota appealed.

        Section 82.008(a) of the CPRC provides a rebuttable presumption that a product manufacturer is not liable for injury caused by a product that complied with federal mandatory safety standards. The presumption can be rebutted under § 82.008(b) if the plaintiff proves that the federal standards are “inadequate to protect the public from unreasonable risk of injury” or that the manufacturer withheld or misrepresented information relevant to the federal government’s determination of adequacy of the safety standards or regulations at issue.

        Toyota first argued that § 82.008(b) is preempted by federal law because it allows a jury to reject a federal agency’s determination of safety standards, but the Court held Toyota had waived that defense in the trial court.

        The Court upheld the jury’s determination that the federal standards are inadequate to protect the public, particularly the standard regarding seat-back strength. It noted that all automakers greatly exceed the mandatory standard—in fact, the Toyota seats at issue exceeded the standard by over 700%—so the standard must be inadequate. The Court also held there was evidence to support a finding that Toyota withheld or misrepresented information relevant to the adequacy of the safety standard. In particular, the Court noted a letter from Toyota to two senators in 2016 in which it stated that Toyota had a “long and robust safety culture.” The Court found this statement misleading in light of a deferred prosecution agreement Toyota had entered into in 2014 over misrepresentations made with regard to sudden unintended acceleration in some of its vehicles. The Court also held the jury could have rationally concluded that Toyota was misleading in claiming that the NHTSA was an “effective regulator” in light of Toyota’s extensive lobbying efforts with the agency. With the § 82.008(a) presumption rebutted, the Court held the evidence was sufficient for the jury to conclude that Toyota’s design was unreasonably dangerous.

        The Court also upheld the jury’s finding that Toyota failed to warn of the car’s dangers. Although the owner’s manual “strongly recommended” that children be placed in the rear seat, it did not warn of the danger that front seat occupants might be propelled into the back seat, injuring the children, in a rear-end collision.

        Justice Schenck filed a dissent, noting that “the record reflects no evidence of any automobile that has been marketed with both the seatback strength necessary to avoid the injuries here and the proposed seatbelt changes that would protect front seat occupants.” He expressed skepticism that “every car ever marketed and sold to this point could be ‘defective’ and that their manufacturers could all be subject to exemplary damages on this basis.” He also took issue with the Court’s affirmance of a design defect without evidence that fewer injuries and deaths would result from an alternative design taking into account all potential crash scenarios, not just the rear-end collision at issue in this case. He noted that additional protections for rear-end crashes could cause additional injuries in front-end crashes. Justice Schenck would have held the plaintiffs failed to rebut the §82.008(a) presumption of no liability. He characterized the Court’s conclusion that the federal standards were inadequate as ipse dixit and noted that Toyota’s alleged misrepresentations to regulators were unrelated to seatback strength or seatbelt function and so were not relevant to the “safety standards or regulations at issue in the action” under §82.008(b)(2).

        With the money at stake and the importance of the § 82.008(a) presumption to auto manufacturers like Toyota, expect this one to go to the Supreme Court of Texas.

THE NARROWED SCOPE OF “MATTERS OF PUBLIC CONCERN” UNDER THE TCPA, AS AMENDED

Vaughn-Riley v. Patterson

Dallas Court of Appeals, No. 05-20-00236-CV (December 2, 2020)

Justices Myers, Nowell, and Evans (Opinion, linked here)

Ken Carroll

In 2019, the Texas Legislature amended the TCPA “with the intent to narrow its scope” for actions filed on or after September 1 of that year. In Vaughn-Riley, the Dallas Court of Appeals provided an early glimpse of how it regards the amended version of the TCPA to limit the “matters of public concern” that trigger coverage under the Act. And while the plaintiff surely welcomed the result here, the appeals court’s reasoning probably stung a bit for someone, like her, in show biz.

Lawainna Patterson’s play, Sleeping with the Enemy, was set for back-to-back performances in Tyler. After the matinee, a dispute arose between the actors and crew and the producers, leading to cancellation of the evening show. Terri Vaughn-Riley, one of the actors (identified as “Vaughn” in the opinion), posted a video on Instagram voicing her frustrations with the situation. Patterson and others associated with production of the play sued Vaughn and the other actors, alleging breach of contract and “defamation, slander, and libel.” Vaughn moved to dismiss under the TCPA, arguing that “Patterson’s legal action was ‘based on or is in response to’ Vaughn’s exercise of the right of free speech or right of association” regarding the play and Patterson, its author. Specifically, Vaughn argued that “her communications and actions relate to matters of public concern because they (1) pertained to Patterson, who she claims is a limited purpose public figure, (2) involved the quality and timeliness of the public performance of a theatrical work, and (3) concerned a service in the marketplace.” The trial court denied the motion, and the Court of Appeals affirmed.

The appeals court began by noting that the Legislature had redefined “matters of public concern” before this lawsuit was filed, with the intention of narrowing the applicability of the TCPA. Drawing on legislative history, the Court reasoned that whether something qualifies as a “matter of public concern” is to be measured by the United States Supreme Court’s formulation in Snyder v. Phelps: “communications are matter[s] of public concern when they can ‘be fairly considered as relating to any matter of political, social or other concern to the community’ or when it ‘is a subject of legitimate news interest; that is, a subject of general interest and of value and concern to the public.’” 562 U.S. 443, 453 (2011). The Dallas Court concluded “there is nothing to suggest that the cancellation of the second performance of a play in Tyler, Texas, was the subject of general interest and of value and concern to the public.” Ouch. Further, the Court said, “Patterson’s status as cowriter and producer of the play,” coupled with a brief public interview about the dispute, do not “make Patterson a limited purpose public-figure.” Ouch, again. The Court then rejected Vaughn’s final argument—that the dispute related to a service in the maketplace, i.e., the play—because “the legislature’s 2019 amendments to the Act specifically removed issues related to ‘a good, product, or service in the market place’ from the definition of ‘matter of public concern.’”

CONTINUING TRESPASS IS NOT NECESSARILY AN IRREPARABLE INJURY

WBW Holdings, LLC v. Clamon

Dallas Court of Appeals, No. 05-20-00397-CV (November 12, 2020)

Justices Myers, Nowell (Opinion available here), and Evans

Kelli Hinson

Good fences make good neighbors … sometimes. Two parties owning adjoining land became involved in a dispute about whether the boundary between their properties was the center line of the county road between them or to the south of that road. Taking the latter position, the Clamons erected a fence between the WBW property and the county road (allegedly on their property), barring WBW’s access to the road, and WBW cut the fence to regain access.

Litigation ensued, and the trial court granted a temporary injunction, enjoining WBW from crossing over the boundary asserted by the Clamons. The Clamons argued they had “no adequate remedy, short of injunctive relief, to stop WBW’s representatives from trespassing on their land” and that trespassing on land “is of such a nature that the damage to the Clamon brothers is irreparable; it simply cannot be measured by any pecuniary standard.” The Dallas Court disagreed, holding that trespass alone is not an irreparable injury. The Clamons failed to demonstrate that the alleged trespass would invade the possession of their land, destroy the use and enjoyment of their land, or cause potential loss of rights in real property. With no evidence of a probable, imminent, and irreparable injury, the trial court erred in granting the injunction.

NO PERMISSIVE APPEAL WHERE CONTROLLING ISSUES WERE NOT DECIDED BY THE TRIAL COURT

Home State County Mutual Insurance Co. d/b/a Safeco v. Taiwo

Dallas Court of Appeals, No. 05-20-00596-CV (August 12, 2020)

Chief Justice Burns (Opinion, linked here), and Justices Whitehill and Nowell

Ken Carroll

In a very short opinion, the Dallas Court of appeals rejected an insurer’s petition for a permissive interlocutory appeal. The briefs explain Taiwo was injured in a traffic accident allegedly caused by another driver. He settled for the limits of that driver’s insurance policy, an amount less than his purported damages. Taiwo then sued his own insurer, Safeco, relying on his UM/UIM coverage. Safeco sought summary judgment, arguing Taiwo was required to obtain a judicial determination that he was legally entitled to recover from an uninsured or underinsured motorist before proceeding against his own insurer—something he had not done. See Brainard v. Trinity Universal Ins. Co, 216 S.W.3d 809 (Tex. 2006). Taiwo, however, moved to postpone the summary judgment hearing in order to take discovery, and the trial court granted that motion.

Safeco sought permission to pursue an interlocutory appeal of that ruling under Civil Practice and Remedies Code § 51.014(d) & (f). It argued the trial court’s decision “turned on” three “controlling questions of law”—i.e., (1) whether an insured must obtain a judicial determination that he was legally entitled to recover from an uninsured or underinsured motorist before he can proceed against his own insurer on UM/UIM issues, and (2) whether a court can defer dismissal or abatement based on that ground and (3) allow discovery to proceed, without first resolving that threshold issue. The trial court granted permission for the appeal, pursuant to § 51.014(d). But the Dallas Court of Appeals rejected Safeco’s petition and denied the appeal under § 51.014(f).

The appeals court held that “to invoke this court’s permissive appeal jurisdiction, the trial court must make a substantive ruling on the controlling legal issues presented in the petition for permissive appeal.” It found the trial court had not done that here. The record reveals that although the trial court’s order refers to “the controlling questions of law decided by this order,” it actually contains no such decisions on those questions—at least no express decisions. The proposed form of order tendered by Safeco included such rulings, but the trial court manually lined through those passages and inserted the more generic statement that its order was predicated on “the argument and authority in the motion, the response, and papers on file.” This, the appeals court apparently concluded, did not constitute the “substantive ruling on the controlling legal issues” necessary to support a permissive appeal.

UNDERESTIMATING WORK DOESN’T MAKE CONTRACT AMBIGUOUS

Bright Excavation, Inc. v. Pogue Construction Co., L.P.
Dallas Court of Appeals, No. 05-18-00820-CV (April 21, 2020)
Justices Myers, Osborne, and Nowell (Opinion linked here)

Lyndon Bittle

The Dallas Court of Appeals affirmed summary judgment for a general contractor, holding its subcontractor was bound by the contract price, even if the subcontractor underestimated the amount of work required to complete the project.
Lancaster ISD hired Pogue Construction to build two elementary schools. Pogue subcontracted the excavation work on one of the sites to Bright Excavation for $945,000. The subcontract required Bright to “excavate to the top of the tan limestone as verified by the geotechnical representative.” The bid package had instructed bidders to “assume six feet of remove and replace would be necessary.” After reviewing the initial geotechnical report of subsurface conditions, Bright estimated only between two and four feet of excavation would be required, and priced its bid accordingly. Unfortunately, this estimate proved to be inadequate, and Bright claimed it incurred over $325,000 in expenses beyond what it had projected. Pogue rejected Bright’s request for a change order increasing the contract amount, and Bright sought unsuccessfully to recover over $760,000 from Pogue’s payment bond surety, Hartford Insurance.

Bright sued Pogue and Hartford for breach of contract, payment on the bond, and assorted torts. Pogue counterclaimed to recover its attorney’s fees under the terms of the subcontract. The trial court entered summary judgment for Pogue and awarded its fees.

On appeal, Bright argued summary judgment was improper because the subcontract was ambiguous regarding the depth to which Bright was required to excavate within the $945,000 subcontract price. The Court of Appeals summarized Texas law governing the determination of contractual ambiguity, and reviewed the terms of the subcontract and related documents on which Bright relied. The Court concluded the subcontract was not ambiguous: “Bright, not Pogue or the school district, assumed the risk of the conclusions and interpretations Bright made based on the subsurface information contained in the geotechnical report.” Absent a breach of contract, Bright’s claim on the payment bond and tort claims against Pogue also failed.