Robert C. Vilt v. Midland Central Appraisal District ( 2023 )

Opinion filed February 16, 2023
In The
Eleventh Court of Appeals
__________
No. 11-21-00112-CV
__________
ROBERT C. VILT, Appellant
V.
MIDLAND CENTRAL APPRAISAL DISTRICT, Appellee
On Appeal from the 441st District Court
Midland County, Texas
Trial Court Cause No. TX15936
MEMORANDUM OPINION
This appeal arises out of an order for sanctions that was entered against
Appellant, Robert C. Vilt. Vilt is an attorney that entered an appearance on behalf
of “William F. Shum [sic], individually and on behalf of James Wesley Schrum [sic],
Deceased.” The trial court found that Vilt filed a groundless pleading that led to the
entry of an order distributing excess proceeds from a tax sale. As a result of his
conduct, the trial court sanctioned Vilt by ordering him to pay $21,097.21 into the
registry of the court.1 Because we conclude that there was no abuse of discretion,
we affirm.
Background Facts
The Texas Tax Code includes provisions that relate to the distribution of
proceeds that are recovered at a tax sale which are in excess of the delinquent taxes
and other fees and costs relating to the sale. See TEX. TAX CODE ANN. § 34.03 (West
Supp. 2022), § 34.04 (West 2015). Pursuant to these provisions, persons with an
interest in the proceeds may file a petition to claim the excess proceeds. Id.
§ 34.04(a). The petition must be served on all parties to the foreclosure action not
later than the twentieth day before the date is set for a hearing on the petition. Id.
§ 34.04(b). Following the hearing, the excess proceeds are awarded to one or more
parties according to a list of priorities as set out in Section 34.04(c). That list
includes those who “acquired by will or intestate succession the interest in the
property.” Id. § 34.04(c)(5)(C).
In February 2020, the trial court signed a judgment of foreclosure in order to
secure payment of delinquent property taxes that had been assessed against a tract
of real property owned by James Wesley Shrum. The trial court also entered an
order of sale for delinquent property taxes. A subsequent sale resulted in excess
proceeds totaling $21,097.21.
On April 6, 2021, Vilt filed a notice of appearance and a motion to release
excess proceeds pursuant to Section 34.04. The notice of appearance indicated that
Vilt represented “William F. Shum [sic], individually and on behalf of James Wesley
Schrum [sic], Deceased.” The motion to release excess proceeds states that William
1
As indicated in the caption of this opinion, the Midland Central Appraisal District is listed as the
appellee in this case. However, its status as the appellee is nominal because the sanctions which Vilt
challenges are payable to the trial court’s registry.
2
“is entitled to excess proceeds because he represents the Estate of James Wesley
Shrum Deceased who was the owner of the subject property when it was sold.”
The trial court signed an order granting the motion to release excess proceeds
on the following day. Thereafter, on April 9, 2021, the Midland Central Appraisal
District (the Appraisal District) filed an objection to the motion to withdraw the
excess proceeds, along with a motion to set aside the order. Following a
videoconference hearing on the same day, the trial court set aside the order to release
the excess proceeds, and the funds were never released. Several days later, the
Appraisal District filed the motion for sanctions that is the subject of this appeal.
The motion for sanctions was set for a hearing on May 17, 2021, alongside
the motion to release the excess proceeds. Vilt did not appear at the sanctions
hearing, nor did he attempt to contact the court to explain the reason for his absence.
Present at the hearing was Gina Shrum McKinney, one of the defendants in the
foreclosure action. McKinney is the daughter of James Wesley Shrum. McKinney
testified that William is the brother of James. She stated that, in addition to herself,
James had four other children: Wesley H. Shrum (deceased), Debra Gressett, Brenda
Bright, and Pamela Fisher (deceased).
McKinney indicated that she had never heard of Vilt, that Vilt had never been
hired to represent James, and that neither she nor any of her siblings or their children
had been contacted by Vilt. Likewise, she knew nothing about the request for the
excess proceeds to be paid to Vilt and stated that Vilt did not have authority from
her or any of James’s children to make a request for such proceeds.
Harvey Allen, counsel for the Appraisal District, also testified at the hearing.
He stated that, based on research conducted by his firm, William did not have any
interest in the property. He also indicated that no affidavit of heirship or probate had
been filed in Midland County concerning James’s estate. Allen also testified that
the Appraisal District had incurred attorney’s fees of $900 for his services in
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connection with the work required to set aside the order to release excess proceeds.
Following the hearing, the trial court entered an order denying the motion to release
excess proceeds. The trial court also entered an order for sanctions, requiring Vilt
to pay $21,097.21 into the registry of the trial court. By separate order, the trial court
ordered Vilt to pay attorney’s fees of $900. 2 This appeal followed.
Analysis
In his sole issue on appeal, Vilt asserts that the trial court erred in entering an
order of sanctions. He contends that the trial court abused its discretion by entering
the sanctions order. Vilt primarily bases his claim on appeal on the details
surrounding the certificate of conference that accompanied his motion to release
excess proceeds. He also asserts that a sanction of $21,097.21 is excessive when
the maximum fee he could have received for his services was $1,000 under
Section 34.04(i). See id. § 34.04(i). For the reasons stated below, Vilt is incorrect.
The trial court’s order did not explicitly cite the authority for its sanction.
Nevertheless, because this sanction concerns pleadings, we look to Chapter 10 of the
Texas Civil Practice and Remedies Code and Rule 13 of the Texas Rules of Civil
Procedure in determining whether it is proper. See Nath v. Tex. Children’s Hosp.,
446 S.W.3d 355, 362–63 (Tex. 2014). Thus, we review the trial court’s sanctions
order for an abuse of discretion. Id. at 361. “A trial court abuses its discretion if it
acts in an arbitrary or unreasonable manner without reference to any guiding rules
or principles.” Walker v. Gutierrez, 111 S.W.3d 56, 62 (Tex. 2003); see also Foote
v. Texcel Expl., Inc., 640 S.W.3d 574, 581 (Tex. App.—Eastland 2022, no pet.). A
trial court does not abuse its discretion in levying sanctions if some evidence
supports its decision. Nath, 446 S.W.3d at 361.
2
Vilt does not challenge the award of attorney’s fees.
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The decision to impose sanctions involves two distinct determinations:
(1) whether conduct is sanctionable and (2) what sanction to impose. Brewer v.
Lennox Hearth Prods., LLC, 601 S.W.3d 704, 716 (Tex. 2020). We begin with the
trial court’s determination of whether Vilt’s conduct is sanctionable. Rule 13
provides, in relevant part, that the signature of an attorney on a motion constitutes a
certificate that he has read the motion and that, “to the best of [his] knowledge,
information, and belief formed after reasonable inquiry the instrument is not
groundless and brought in bad faith.” TEX. R. CIV. P. 13. A pleading is groundless
if it has no basis in law or fact and is not warranted by good faith argument for the
extension, modification, or reversal of existing law. Id. “Bad faith” is not simply
bad judgment or negligence but is, rather, the conscious doing of a wrong for a
dishonest, discriminatory, or malicious purpose. Great W. Drilling, Ltd. v.
Alexander, 305 S.W.3d 688, 698 (Tex. App.—Eastland 2009, no pet.). Courts are
permitted to impose sanctions against an attorney or party for violations of Rule 13
under the terms of Rule 215. TEX. R. CIV. P. 13, 215.
Chapter 10 of the Texas Civil Practice and Remedies Code provides in
relevant part that the signing of a motion constitutes a certificate that “to the
signatory’s best knowledge, information, and belief, formed after reasonable inquiry
. . . each claim . . . in the . . . motion is warranted by existing law or by a nonfrivolous
argument for the extension, modification, or reversal of existing law or the
establishment of new law.” TEX. CIV. PRAC. & REM. CODE ANN. § 10.001(2) (West
2017).
“Generally, groundless pleadings are sanctionable under either Rule 13 or
Chapter 10.” Nath, 446 S.W.3d at 369. Chapter 10 and Rule 13 each require an
attorney to make a reasonable inquiry into the basis for the pleading before it is
submitted. Additionally, Rule 13 requires a showing of bad faith, an intention to
harass, or a knowingly false allegation to justify sanctions. Id.
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The evidence before the trial court demonstrates that the motion to withdraw
excess proceeds, which alleged that William represented the estate, was
“groundless” (Rule 13) and was not warranted by existing law (Chapter 10). No will
had been probated naming William as an heir, nor an estate proceeding filed naming
William as administrator. Thus, because James had multiple children, his brother
William had no interest in the property at issue under the laws of intestate succession.
See TEX. EST. CODE ANN. § 201.001(a), (b) (West 2020). Furthermore, the
testimony at the hearing demonstrated that the family had never given William the
authority to act on their behalf. Vilt has not addressed, either at the trial court level
or on appeal, William’s lack of authority to obtain a recovery of the excess proceeds
payable to James’s children.
The trial court could have reasonably concluded that Vilt failed to make a
reasonable inquiry regarding William’s status as a representative of the estate.
Specifically, the trial court could have determined that a reasonable inquiry would
have included, at a minimum, an investigation into whether James had executed a
will and, if so, whether William was named as an administrator or beneficiary
therein. Such an investigation would have immediately led a reasonable attorney to
conclude that (a) William had no interest in the estate and (b) any authority for
seeking the excess proceeds would necessarily need to come from James’s children,
not from William.
The trial court also found that Vilt, acting in bad faith, made false statements
for the purpose of inducing the court to sign an order releasing the excess proceeds.
This finding is supported by the record. When a party with special knowledge of a
disputed issue fails, without explanation, to testify about it, a judge may infer that
the testimony would not support its claim. Thompson v. Deloitte & Touche, L.L.P.,
902 S.W.2d 13, 18 (Tex. App.—Houston [1st Dist.] 1995, no writ). Vilt possessed
unique knowledge regarding his understanding of William’s purported status as
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representative of the estate and Williams’s rights to the excess proceeds. Because
Vilt did not testify or even appear at the hearing to explain his basis for making these
representations, the trial court could have reasonably inferred that Vilt filed the
motion with knowledge that it had no basis in fact or law.
The trial court also pointed to Vilt’s absence from the May 17 hearing, along
with his failure to contact the court prior to or during the hearing, as a basis for the
imposition of sanctions. Vilt did not provide the trial court with any explanation for
his absence because he did not appear for the hearing, and he did not file a
subsequent motion for new trial. Nor did he provide an explanation in his briefing
on appeal. A party’s lack of any explanation for failing to appear at a hearing is a
factor that may be considered when imposing sanctions. See, e.g., Luxenberg v.
Marshall, 835 S.W.2d 136, 141 (Tex. App.—Dallas 1992, no writ) (holding that
sanctions were appropriate when the attorney therein had not “advanced any
explanation for failing to appear at the depositions, show cause hearings, and court-
ordered mediation”). Accordingly, we hold that the trial court did not abuse its
discretion in sanctioning Vilt for his failure to appear at the hearing. Moreover, and
based on the foregoing, we also conclude that the trial court did not abuse its
discretion by finding that Vilt engaged in conduct that was subject to sanctions under
Chapter 10 and Rule 13.
We now turn to the question of whether the amount of the sanctions was
appropriate. “The amount of the sanction is limited by the trial court’s duty to
exercise sound discretion.” Low v. Henry, 221 S.W.3d 609, 619 (Tex. 2007) (citing
TransAm. Nat. Gas Corp. v. Powell, 811 S.W.2d 913, 917 (Tex.1991)). To be just,
a sanction must be based on a direct relationship between the particular offensive
conduct and the sanction imposed, and the sanction must not be excessive in relation
to that conduct. CHRISTUS Health Gulf Coast v. Carswell, 505 S.W.3d 528, 540
(Tex. 2016); Jurgens v. Martin, 631 S.W.3d 385, 404 (Tex. App.—Eastland 2021,
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no pet.). The court should ensure that the punishment “fits the crime” and that the
sanction is no more severe than necessary to satisfy its legitimate purposes. Nath,
446 S.W.3d at 363. Legitimate purposes include securing compliance with the
relevant rules of procedure, punishing violators, and deterring other litigants from
similar misconduct. Id.
Section 10.004(c)(2) provides that a sanction may include “an order to pay a
penalty into court.” CIV. PRAC. & REM. § 10.004(c)(2). Because the trial court
ordered Vilt to pay the sanction into the court’s registry, we will review it under
Section 10.004(c)(2). As noted in Low, the only limitation in the statute is that the
“sanction must be limited to what is sufficient to deter repetition of the conduct or
comparable conduct by others similarly situated.” 221 S.W.3d at 620 (quoting CIV.
PRAC. & REM. § 10.004(b)). As a result of the lack of statutory guidance, the Texas
Supreme Court in Low adopted a list of factors that were created by the American
Bar Association (ABA) for courts to consider when imposing sanctions under
Federal Rule of Civil Procedure 11. Id. at 620–21 n.5. The Texas Supreme Court
held that the same factors should be considered in connection with sanctions under
Chapter 10 of the Texas Civil Practice and Remedies Code and Rule 13 of the Texas
Rules of Civil Procedure. Id. at 621; see also State Office of Risk Mgmt. v. Foutz,
279 S.W.3d 826, 838 (Tex. App.—Eastland 2009, no pet.). The factors include the
following:
a. the good faith or bad faith of the offender;
b. the degree of willfulness, vindictiveness, negligence, or
frivolousness involved in the offense;
c. the knowledge, experience, and expertise of the offender;
d. any prior history of sanctionable conduct on the part of the offender;
e. the reasonableness and necessity of the out-of-pocket expenses
incurred by the offended person as a result of the misconduct;
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f. the nature and extent of prejudice, apart from out-of-pocket
expenses, suffered by the offended person as a result of the
misconduct;
g. the relative culpability of client and counsel, and the impact on their
privileged relationship of an inquiry into that area;
h. the risk of chilling the specific type of litigation involved;
i. the impact of the sanction on the offender, including the offender’s
ability to pay a monetary sanction;
j. the impact of the sanction on the offended party, including the
offended person’s need for compensation;
k. the relative magnitude of sanction necessary to achieve the goal or
goals of the sanction;
l. burdens on the court system attributable to the misconduct,
including consumption of judicial time and incurrence of juror fees
and other court costs;
....
n. the degree to which the offended person’s own behavior caused the
expenses for which recovery is sought. . . .
Low, 221 S.W.3d at 620–21 n.5. While the list is nonexclusive, it is helpful in
guiding the often intangible process of determining a penalty for sanctionable
behavior. Nath, 446 S.W.3d at 372. A trial court does not have to consider all of
the factors to explain the basis for a monetary sanction, but it should consider all
factors that are relevant. Low, 221 S.W.3d at 620–21. “In practice, this means that
when a factor is relevant to a party being sanctioned, that factor must inform the
issuance of the award.” Nath, 446 S.W.3d at 372.
Relevant factors for consideration in this case include the good faith or bad
faith of the offender, the degree of willfulness, vindictiveness, negligence, or
frivolousness involved in the offense, the knowledge, experience, and expertise of
the offender, and the relative magnitude of sanction necessary to achieve the goal or
goals of the sanction. We have reviewed the trial court’s order, and we are satisfied
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that the order takes these factors into consideration. In particular, the trial court’s
sanctions amount was equal to the amount of the excess proceeds that Vilt had
sought in the motion, which is appropriate for purposes of determining the
magnitude of the sanction. We note in this regard that Vilt sought for the payment
to made to him—not to his trust account for the benefit of William or to William
directly. We further note that but for the prompt action of the Appraisal District’s
attorney, the excess proceeds in the amount of $21,097.21 would have been paid out
of the registry of the court to Vilt. Had that occurred, James’s children, who were
pro se at the time, would have been left with the difficult task of trying to retrieve
their money from Vilt and William.
The Appraisal District’s motion for sanctions requested “monetary and
nonmonetary sanctions” against Vilt “as the Court deems appropriate.” In his
briefing, Vilt argues that, because the maximum fee that he can recover in this matter
is $1,000, the award of sanctions is excessive. See TAX § 34.04(i) (limiting
attorneys’ fees for obtaining excess proceeds to 25% of the amount obtained or
$1,000, whichever is less). However, Vilt did not present this legal argument to the
trial court. Vilt filed a written response to the motion for sanctions that only
addressed the complaints and discussion regarding timing of submission of the
proposed order and the certificate of conference. Vilt’s response did not present an
argument or legal basis for limiting the amount of sanctions. As recently noted by
the Texarkana Court of Appeals, the failure to raise a complaint in the trial court that
it should have considered a lesser sanction will result in the contention not being
preserved for appellate review. Manning v. Johnson, 642 S.W.3d 871, 883 (Tex.
App.—Texarkana 2021, no pet.) (collecting cases).
Even if the trial court had considered Vilt’s written response, he did not
address a basis for seeking excess proceeds on behalf of William. Neither did he
seek to offer an explanation to this court concerning why he was seeking funds for
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a client that was not, as a matter of law, entitled to any excess proceeds. Because
the trial court did not abuse its discretion by entering the sanctions order against Vilt
based on the facts that are described above, we do not reach the additional facts that
were considered by the trial court concerning the matters set out in Vilt’s certificate
of conference that accompanied his motion to release excess proceeds.
This Court’s Ruling
We affirm the trial court’s order of sanctions.
JOHN M. BAILEY
CHIEF JUSTICE
February 16, 2023
Panel consists of: Bailey, C.J.,
Trotter, J., and Williams, J.
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