Patrick Hlavaty & Jeff Strnadel v. Commercial State Bank of El Campo, Texas, Inc. ( 2015 )

ACCEPTED
13-14-00516-CV
THIRTEENTH COURT OF APPEALS
CORPUS CHRISTI, TEXAS
3/4/2015 5:56:21 PM
DORIAN RAMIREZ
CLERK
NO. 13-14-00516-CV
FILED IN
IN THE COURT OF APPEALS FOR THEOF APPEALS
13th COURT
CORPUS CHRISTI/EDINBURG, TEXAS
THIRTEENTH DISTRICT OF TEXAS 3/4/2015 5:56:21 PM
__________________________________________________________________
DORIAN E. RAMIREZ
Clerk
PATRICK HLAVATY AND JEFF STRNADEL,
Appellants and Cross-Appellees,
v.
COMMERCIAL STATE BANK OF EL CAMPO, TEXAS, INC.,
Appellee and Cross-Appellant.
__________________________________________________________________
CROSS-APPELLANT COMMERCIAL STATE BANK
OF EL CAMPO, TEXAS, INC.’S APPELLANT’S BRIEF
__________________________________________________________________
From the District Court of Wharton County, Texas,
329th Judicial District; Trial Court Case No. 44081
__________________________________________________________________
DAWN S. HOLIDAY
TBA No. 24046090
MIA B. LORICK
TBA No. 24091415
Roberts Markel Weinberg Butler Hailey PC
2800 Post Oak Blvd, 57th Floor
Houston, TX 77056
Tel: (713) 840-1666
Fax: (713) 840-9404
dholiday@rmwbhlaw.com
mlorick@rmwbhlaw.com
ATTORNEYS FOR APPELLEE / CROSS-APPELLANT,
COMMERCIAL STATE BANK OF EL CAMPO, TEXAS, INC.
ORAL ARGUMENT REQUESTED
IDENTITY OF PARTIES AND COUNSEL
Appellants Trial Court Counsel Appellate Counsel
/ Cross-
Appellees
Patrick Howard H. Singleton Walter James Kronzer, III
Hlavaty Singleton Law Firm Walter James Kronzer, III,
and 109 East Milam Street P.C.
Jeff Strnadel Wharton, TX 77488 3000 Weslayan, Suite 247
Tel: (979) 532-9800 Houston, TX 77027
Fax: (979) 532-9805 Tel: (713) 622-5756
singletonlaw@sbcglobal.net Fax: (713) 622-5445
wkronzer@kronzer.com
Howard H. Singleton
Singleton Law Firm
109 East Milam Street
Wharton, TX 77488
Tel: (979) 532-9800
Fax: (979) 532-9805
singletonlaw@sbcglobal.net
Cross- Trial Court Counsel Appellate Counsel
Appellant /
Appellee
Commercial Gregg S. Weinberg Dawn S. Holiday
State Bank Dawn S. Holiday Mia B. Lorick
of El Campo, Chase A. Evans Roberts Markel Weinberg
Texas, Inc. Roberts Markel Weinberg Butler Hailey PC
Butler Hailey PC 2800 Post Oak Blvd, 57th Fl
2800 Post Oak Blvd., 57th Fl. Houston, TX 77056
Houston, TX 77056 Tel: (713) 840-1666
Tel: (713) 840-1666 Fax: (713) 840-9404
Fax: (713) 840-9404 dholiday@rmwbhlaw.com
gweingerg@rmwbhlaw.com mlorick@rmwbhlaw.com
dholiday@rmwbhlaw.com
cevans@rmwbhlaw.com
ii
TABLE OF CONTENTS
IDENTITY OF PARTIES & COUNSEL . ……………………………………ii
TABLE OF CONTENTS ... ……………………………………………………iii
TABLE OF AUTHORITIES ... …………………………………………………v
RECORD REFERENCES ………………………………………………..…vii
STATEMENT OF THE CASE ………………………………………………viii
ISSUES PRESENTED .......... …………………………………………………ix
STATEMENT REGARDING ORAL ARGUMENT ... ………………………x
STATEMENT OF FACTS .. ……………………………………………………1
PROCEDURAL HISTORY ..... …………………………………………………7
SUMMARY OF THE ARGUMENT…………………………………………..9
ARGUMENTS AND AUTHORITIES ………………………………………10
I. The trial court was without jurisdiction to issue an order of
sanctions six months after it lost plenary power……………10
A. Standard of Review ………………………………………10
B. CSB’s nonsuit allowed the trial court a reasonable
amount of time to rule on collateral matters, nothing
more. ………………………………………………………11
C. Three and a half years is in no way a reasonable
amount of time. ……………………………………………13
iii
D. The trial court lost plenary power on December 16,
2013, and therefore, was without jurisdiction to enter
an order of sanctions on June 11, 2014. ………………15
II. If the trial court did have jurisdiction—which it did not—it
abused its discretion in entering the order of sanctions …..18
A. Standard of review……………………………………………18
B. The trial court abused its discretion by failing to provide a
basis for its order of sanctions. ……………………………18
C. The trial court abused its discretion by failing to verify
the attorney’s fees. …………………………………………20
D. The trial court abused its discretion by entering an order
of sanctions based on alleged non-compliance with
vacated orders. ………………………………………………21
CONCLUSION ......................................................................................... 23
PRAYER ............................ ……………………………………………………23
CERTIFICATE OF COMPLIANCE .. ………………………………………25
CERTIFICATE OF SERVICE. ………………………………………………25
APPENDIX .............................. ………………………………………………26
iv
TABLE OF AUTHORITIES
Cases
Cook v. Cameron,
733 S.W.2d 137, 140 (Tex. 1987)... ...................................................... 15
Frost Nat’l Bank v. Fernandez,
315 S.W.3d 494, 502 (Tex. 2010)... ...................................................... 10
Hawkins v. Estate of Volkmann,
898 S.W.2d 334, 346 (Tex. App.—San Antonio 1994, writ denied).. . 18
In re Bates,
429 S.W.3d 47 (Tex. App.—Houston [1st Dist.] 2014, no pet. h.). ..... 15
In re Bennett,
960 S.W.2d 35, 38 (Tex. 1997). ............................................................ 12
In re Ford Motor Co.,
988 S.W.2d 714, 718 (Tex. 1998). ........................................................ 18
In re Fuentes,
960 S.W.2d 261, 262 (Tex. App.—Corpus Christi 1997, no writ).. .... 15
In re Metro. Lloyds Ins. Co.,
No. 05-08-01712-CV, 2009 Tex. App. LEXIS 1764 at *7 (Tex. App.—
Dallas, March 13, 2009). ...................................................................... 13
Scott & White Mem’l Hosp. v. Schexnider,
940 S.W.2d 594, 596 (Tex. 1996)... ...................................................... 16
Smalley v. Smalley,
436 S.W.3d 801, 806 (Tex. App.—Houston [14th Dist.] 2014, no
pet.)... .................................................................................................... 15
Spohn Hosp. v. Mayer,
104 S.W.3d 878, 882 (Tex. 2003)... ...................................................... 18
v
Tex. Comm’n on Envtl. Quality v. Bonser-Lain,
438 S.W.3d 887, 891 (Tex. App.—Austin 2014, no pet.)... ................. 10
Texas Ass’n of Bus. v. Texas Air Control Bd.,
852 S.W.2d 440, 443 (Tex. 1993)... ...................................................... 11
Tourneau Houston, Inc. v. Harris County Appraisal Dist.,
24 S.W.3d 907, 910 (Tex. App.—Houston [1st Dist.] 2000, no pet.). . 11
TransAmerican Natural Gas Corp. v. Powell,
811 S.W.2d 913, 917 (Tex. 1991). .................................................. 18, 19
Univ. of Texas Med. Branch at Galveston v. Estate of Blackmon,
195 S.W.3d 98, 101 (Tex. 2006). .................................................... 11, 12
Statutes
Tex. R. Civ. P. 13... ................................................................................... 19
Tex. R. Civ. P. 162. ............................................................................. 11, 12
vi
RECORD REFERENCES
Citations in this Cross-Appellant’s Brief to the Parties are as follows:
Cross-Appellant Commercial State Bank of El Campo, Texas, Inc. will
be referred to as “CSB.”
Cross-Appellee Patrick Hlavaty will be referred to as “Hlavaty.”
Cross-Appellee Jeff Strnadel will be referred to as “Strnadel.”
Citations in this Cross-Appellant’s Brief to the record are as follows:
CR – Clerk’s Record designated by Commercial State Bank of El
Campo, Texas, Inc. and filed in this Court on 10/27/2014 (i.e. CR [page];
e.g. CR 1)
vii
STATEMENT OF THE CASE
Nature of the case: This appeal arises from an order of
sanctions entered against CSB by the trial
court after the trial court determined it lost
plenary jurisdiction as to all parties in this
case.
Trial Court Disposition: Hlavaty and Strnadel filed a Motion to
Compel and Sanctions against CSB. (CR
308). On June 3, 2014, the trial court
entered an order stating that it had plenary
lost jurisdiction as to all parties in this case
as of December 15, 2013 and that it had no
further authority to act. (CR 784). But, on
June 11, 2014, the trial court granted
Hlavaty and Strnadel’s motion for
sanctions. (CR 788). CSB filed a Motion to
Vacate the Order for Sanctions for lack of
jurisdiction. (CR 791). However, on August
29, 2014, the trial court denied CSB’s
Motion to Vacate the Order for Sanctions.
(CR 853).
Trial Court: 329th Judicial District of Wharton County,
Texas.
viii
ISSUES PRESENTED
1. Whether the trial court had jurisdiction to enter an order of
sanctions on June 11, 2014, which is six months after the trial
court declared that it lost plenary jurisdiction as to all parties as
of December 15, 2013.
2. If the trial court did have jurisdiction to enter the June 11, 2014
order of sanctions—which it did not—whether the trial court
abused its discretion in entering the order of sanctions without
sufficient basis.
ix
STATEMENT REGARDING ORAL ARGUMENT
Pursuant to Appellate Procedure Rule 52.8(b)(4), Cross-Appellant
respectfully requests oral argument on belief it will materially aid the
Court in determination of the legal and procedural issues presented for
review.
x
STATEMENT OF FACTS
This case was brought by CSB against nine defendants following
internal investigations that revealed fraudulent conduct on behalf of
the defendants.1 CSB nonsuited its claims against all defendants;
however, the trial court entered an order of sanctions six months after it
lost plenary jurisdiction.2 The entry of the order of sanctions post
expiration of the trial court’s plenary jurisdiction is the subject of this
appeal. CSB will timely respond to all issues raised by Appellant in
challenging the trial court’s loss of plenary jurisdiction in CSB’s
Appellee’s Brief on issues presented by Appellant.
1. CSB Generally.
This is a case brought by CSB for damages arising from fraud and
dishonesty committed by former bank employees.3 CSB has been in the
business of banking since February 7, 1921.4 One of the services it
makes available to its customers is that of interim construction lending,
both residential and commercial.5 CSB relies on mortgage lenders,
1 CR 23.
2 CR 559; CR 788.
3 CR 23-43.
4 CR 25.
5 Id.
1
mortgage bankers, mortgage companies, realtors, builders, and
developers as potential sources of its interim loan business.6
Often times the process of obtaining an interim loan begins
through a mortgage broker.7 The mortgage broker obtains permanent
financing for individuals who seek to either acquire raw land to build
their own new structure, or acquire an existing structure and make
improvements on it.8 Whether the transaction goes forward, depends
upon the buyer obtaining permanent financing.9 At this point, the
mortgage broker will request a “financial package” from the buyer,
consisting of things such as tax returns, bank statements, financial
statements, and any appraisals that the buyer may have in his
possession.10 A credit inquiry will also be made by the loan processor to
determine credit scores.11
After assembling the financial package, the mortgage broker then
shops the permanent loan to a permanent lender, by submitting the
6 Id.
7 Id.
8 CR 25.
9 Id.
10 CR 26.
11 Id.
2
financial package to the permanent lender for examination.12 Once a
permanent lender has committed to make a permanent loan, the
mortgage broker then contacts a lender that specializes in interim
financing.13 A loan committee then decides whether to make the loan to
the buyer.14
2. The fraudulent acts of CSB’s employees give rise to this
suit.
A. Hlavaty
On or about February 17, 1987, Patrick Hlavaty (“Hlavaty”) began
employment with CSB as vice president in the mortgage lending
department.15 He was responsible for marketing the bank’s services as
well as evaluating and recommending mortgage lending and real estate
loans to the loan committee.16 On October 31, 2007, Hlavaty was asked
to resign from his position because internal investigations revealed
dishonesty, fraud, self-dealing, and numerous breaches of fiduciary
duties owed to CSB.17 The acts that led to Hlavaty’s requested
resignation were falsifying information, failing to disclose his interest in
12 Id.
13 Id.
14 Id.
15 CR 27.
16 Id.
17 Id.
3
certain corporations, and accepting kickbacks on loans made to various
customers.18
Hlavaty’s bad acts gave rise to this lawsuit.19 Specifically, a pre-
suit internal investigation into the fraudulent activities of Hlavaty was
conducted at the request for CSB’s counsel.20 The investigation was
conducted by Moritz & Associates, Inc. and a report of the findings of
the investigations was provided to CSB’s counsel and dated November
2, 2007, known and referred to in this litigation as the “Moritz
Report”.21 The Moritz Report noted that Hlavaty signed a yearly Code
of Ethics and Annual Declaration of Personal Circumstances document
with CSB that, among other things, neither he nor any family member
(1) had any business connections with CSB or conducted any personal
business activities that could conflict with CSB; (2) had received income
for services performed from sources other than CSB; (3) or was licensed
to sell real estate and had received money from such transaction within
the last 12 months.22
18 CR 32-37.
19 CR 354.
20 Id.
21 Id.
22 CR 355.
4
Hlavaty admitted to the investigator that he lied about him and
his wife’s (Helen Hlavaty) involvement in a home building business
relationship between Helen Hlavaty Homes and Waldron Development
(a long-time customer of CSB).23 The Moritz Report stated:
. . . At this point, Mr. Hlavaty admitted he had lied
about involvement with Waldron Development and stated “I
am the front man for Waldron. I am the front man through
Helen Hlavaty Homes for Waldron Development. Helen
knows Waldron but that’s all, she doesn’t do anything. I am
the one who does it. I get a commission from Waldron on the
transactions.” Investigator Moritz showed Mr. Hlavaty an
email from Mr. Waldron telling Mr. Hlavaty he was getting
him into Westbound Bank as no other bank would take
Helen Hlavaty Homes checks. Mr. Hlavaty read it and then
repeated he did get a commission. Mr. Hlavaty stated “If
you got it off of my computer, I can’t deny it. I thought you
did but I didn’t know and I can’t deny anything you get off
my computer.” Mr. Hlavaty was shown the bank draws
discovered in the computer forensic examination and after
examining them, he stated he had signed the draws. He
stated “Now I know I shouldn’t have done this. I didn’t
think it was wrong before but I do now.” . . .24
***
Mr. Hlavaty stated that Mr. Waldron was sent to CSB by 1st
Bank Mortgage a “long time ago.” He stated he was the
“front for loans for Waldron Development’ and would get
loans for Waldron Development. Mr. Hlavaty stated he ran
Helen Hlavaty Homes out of the CSB office and used their
computers and phones.25
23 CR 359.
24 Id.
25 CR 360.
5
B. Strnadel
Jeff Strnadel (“Strnadel”) was also an employee of CSB.26 Part of
Strnadel’s duties and responsibilities was to make physical site
inspections of construction sites to determine whether improvements
had been made, whether construction had been made in a good and
workmanlike manner, and whether payment on requested draws should
be authorized.27 Strnadel failed to inspect job sites and accurately
report his findings to his superiors.28 CSB incurred damages because of
Strnadel’s inability to complete his job duties.29
As early as 2007, Strnadel’s bad acts were being investigated by
the Secret Service.30 In a fidelity claim submitted by CSB regarding
“forgery and alteration of documents used for loan approval and
presentation” committed by Hlavaty and Strnadel, it was noted:
. . . Mr. Strnadel performed certain onsite inspections of one
property in which the work had not been completed, but the
draws approved based upon inspections. Mr. Strnadle did
not have an explanation nor could he justify this actions.
26 CR 39.
27 CR 39.
28 Id.
29 Id.
30 CR 777-778.
6
Losses have also been occurred due to the presentation of
fraudulent earnest money contracts, by certain builders
under investigation.
As indicated above the Secret Service has an ongoing
investigation that has been able to develop the case with
subpoenas into other Banks and entities. The Bank is in
contact with Agent Jonathan Breedlove 713-868-2299 who
has advised that there is indication that there were
monetary gains received by the officers involved. Mr.
Breedlove is unable to give us specifics at this time; however,
he has advised that as soon as he is at liberty to provide
information, he will do so. Mr. Breedlove has also advised
that if the Insurance Company would need to speak to him
regarding this information, he is available at the phone
number above. . . .31
CSB brought suit in 2009 against Hlavaty, Strnadel, and seven
other defendants alleging fraud, fraud by nondisclosure, negligent
failure to disclose, breach of fiduciary duty, breach of the duty of loyalty,
unjust enrichment, and negligence.32
PROCEDURAL HISTORY
On October 23, 2009, CSB filed its Original Petition against nine
defendants, including Patrick Hlavaty and Jeff Strnadel.33 The
Defendants filed an Original Answer on November 20, 2009, and
31 Id.
32 CR 23-43.
33 CR 23.
7
subsequently filed an Amended Answer on December 2, 2009.34
Defendants Hlavaty and Strnadel filed a Motion for Rule 13 Sanctions
on March 17, 2010.35 On June 23, 2010, CSB filed a notice of nonsuit as
to defendants Hlavaty and Strnadel.36 The trial court signed the
dismissal order as to Hlavaty and Strnadel on June 24, 2010.37
Thereafter, on September 1, 2010, CSB nonsuited the remainder of the
defendants in the lawsuit.38 However, because an objection was made by
Hlavaty and Strnadel, as to the form of the dismissal order relating to
other defendants, the proposed order of non-suit was not signed by the
trial court at that time.
On November 15, 2013, the trial court signed the final order of
nonsuit as to the last two remaining defendants.39 On April 8, 2014,
CSB filed its Motion to Dismiss and Vacate Orders.40 The trial court
granted CSB’s motion and dismissed the case, specifically stating that
the trial court’s “plenary jurisdiction as to all parties in this case ended
34 CR 47-49.
35 CR 56-59.
36 CR 100.
37 CR 100.
38 CR 126.
39 CR 559.
40 CR 561.
8
on December 15, 2013.”41 Seven months after all defendants had been
nonsuited and six months after the trial court declared that it lost
plenary jurisdiction, on June 11, 2014, the trial court issued an order of
sanctions against CSB.42 CSB filed a Motion to Vacate the Order of
Sanctions, which the trial court denied.43 This appeal followed.
SUMMARY OF THE ARGUMENT
The trial court did not have jurisdiction to enter an order of
sanctions against CSB on June 11, 2014 after the trial court determined
that it lost plenary jurisdiction as of December 15, 2013 and that no
further proceedings in this case would be heard.
The trial court should have ruled on Hlavaty and Strnadel’s
pending motions for sanctions within a reasonable amount of time after
CSB’s final nonsuit was filed on September 1, 2010. Instead, the trial
court waited three years and entered a ruling after it lost jurisdiction.
Specifically, the trial court entered a final order of nonsuit in November
of 2013; therefore, the trial court lost its plenary power in December of
2013—30 days after the final order, which the trial court itself
determined. However, six months after the court lost jurisdiction, it
41 CR 785-86.
42 CR 788.
43 CR 791-94.
9
entered the order of sanctions. As such, the trial court was without
subject matter jurisdiction to enter such order as a matter of law. The
trial court erred in refusing to vacate the order of sanctions entered
after it lost plenary jurisdiction to enter such order.
Even if the trial court had jurisdiction—which it did not—the
court abused its discretion in entering the order of sanctions because it
did not provide sufficient facts to show a direct relationship between the
alleged conduct and the sanctions imposed.
As a result, the order of sanctions should be set aside for want of
jurisdiction; or, in the alternative, the order of sanctions should be
vacated for an abuse of discretion.
ARGUMENTS & AUTHORITIES
I. The trial court was without jurisdiction to issue an order
of sanctions six months after it lost plenary power.
A. Standard of Review
Whether a trial court had subject matter jurisdiction is a question
of law that the appellate court reviews de novo.44 Subject matter
44Frost Nat’l Bank v. Fernandez, 315 S.W.3d 494, 502 (Tex. 2010); Tex. Comm’n on
Envtl. Quality v. Bonser-Lain, 438 S.W.3d 887, 891 (Tex. App.—Austin 2014, no
pet.).
10
jurisdiction is essential for a court to have authority to decide a case.45
It is never presumed.46 It cannot be waived.47 Therefore, a lack of
subject matter jurisdiction is a fundamental error; and, it can be raised
by the appellate court or by a party for the first time on appeal.48
B. CSB’s nonsuit allowed the trial court a reasonable
amount of time to rule on collateral matters, nothing
more.
Pursuant to Texas Rule of Civil Procedure 162, “at any time before
the plaintiff has introduced all of his evidence, other than rebuttal
evidence, the plaintiff may dismiss a case, or take a non-suit.”49 If there
are no pending affirmative claims before the court at the time a nonsuit
is filed, the nonsuit extinguishes the case or controversy from the
moment the motion is filed.50 While the date the trial court signs the
nonsuit is relevant to determine when the court’s plenary power
expires, the nonsuit is effective when filed.51
45 Texas Ass’n of Bus. v. Texas Air Control Bd., 852 S.W.2d 440, 443 (Tex. 1993).
46 Id.
47 Id.
48 Tourneau Houston, Inc. v. Harris County Appraisal Dist., 24 S.W.3d 907, 910
(Tex. App.—Houston [1st Dist.] 2000, no pet.) (citing Fed. Underwriters Exch. v.
Pugh, 174 S.W.2d 598, 600 (Tex. 1943)).
49 Tex. R. Civ. P. 162.
50 Univ. of Texas Med. Branch at Galveston v. Estate of Blackmon, 195 S.W.3d 98,
101 (Tex. 2006) (citing Shadowbrook Apts. v. Abu-Ahmad, 783 S.W.2d 210, 211
(Tex. 1990); see also Greenberg v. Brookshire, 640 S.W.2d 870, 872 (Tex. 1982)).
51 In re Bennett, 960 S.W.2d 35, 38 (Tex. 1997).
11
Rule 162 provides that a plaintiff’s nonsuit shall not prejudice the
right of an adverse party to be heard on a pending claim for affirmative
relief and shall have no effect on a motion for sanctions or attorney’s
fees pending at the time of the nonsuit.52 The trial court has discretion
to defer signing an order of dismissal so that it can “allow a reasonable
amount of time” for holding hearings on the matters which are
“collateral to the merits of the underlying case.”53 However, even though
Rule 162 permits motions for sanctions and attorney’s fees to be heard,
it must be done within a reasonable amount of time and does not
preclude the nonsuit’s effect of rendering the merits of the case moot.54
Here, CSB filed a nonsuit dismissing Hlavaty and Strnadel from
the underlying matter on June 23, 2010; and, the court entered an order
of nonsuit.55 On September 1, 2010, CSB filed its final nonsuit as to the
remaining defendants.56 At the time of the final nonsuit on September
1, 2010, Hlavaty and Strnadel did not have pending affirmative claims
before the court. Hlavaty and Strnadel did however have pending
motions for sanctions and attorney’s fees—collateral matters. While
52 Tex. R. Civ. P. 162.
53 In re Bennett, 960 S.W.2d at 38-39.
54 Univ. of Texas, 195 S.W.3d at 101.
55 CR 96-101.
56 CR 126-129.
12
Hlavaty and Strnadel will undoubtedly attempt to assert that they did
in fact have affirmative claims based on their filing of motions entitled
“counterclaims,”57 their motions are nothing more than a request for
attorney’s fees—making them collateral matters, rather than
affirmative claims.58
Because collateral matters were the only motions pending at the
time of CSB’s final nonsuit, the trial court, pursuant to Rule 162, only
had a reasonable amount of time to resolve the pending motions—not
three and half years to twiddle its thumbs and make a ruling when it
got around to it. The trial court clearly failed to resolve the collateral
matters within a reasonable amount of time and therefore, was without
jurisdiction when it entered an order of sanctions over three years later.
C. Three and a half years is in no way a reasonable
amount of time.
The trial court entered an order on Hlavaty and Strnadel’s
pending motions for sanctions over three years after the final notice of
57CR 61-66.
58 In re Metro. Lloyds Ins. Co., No. 05-08-01712-CV, 2009 Tex. App. LEXIS 1764 at
*7 (Tex. App.—Dallas, March 13, 2009) (holding that when pleading an affirmative
claim the pleader must give every element of a cause of action so that the opposing
party may prepare a defense, and in determining whether a cause of action is pled,
you look to the substance of the pleading and not merely its title.)
13
nonsuit was filed by CSB.59 This is certainly not what the Texas
Supreme Court meant when it allowed trial courts a reasonable amount
of time to hold hearings and resolve collateral matters. The trial court’s
blatant disregard for timely resolving this case should not be affirmed
or tolerated, as it is not in the best interest of an efficient judicial
system. To hold otherwise would set the precedent that upon the filing
of a nonsuit and dismissal of a case, a judge’s power to rule on collateral
matters continues for eternity—allowing for cases and controversies to
continue forever. Such result is absurd.
In addition to the trial court’s unreasonable delay in ruling on
pending motions, Hlavaty and Strnadel also failed to take any action
with regard to their motion for sanctions. Hlavaty and Strnadel failed
to do anything that could be reasonably construed as them pursuing
sanctions within a reasonable amount of time after the nonsuit as to all
defendants was filed. As such, the trial court was without jurisdiction
when it entered the order of sanctions, sua sponte, over three years
after the final notice of nonsuit. And, this Court should decline to
reward such inaction and unreasonable delay.
59 CR 788.
14
D. The trial court lost plenary power on December 16,
2013, and therefore, was without jurisdiction to enter
an order of sanctions on June 11, 2014.
Even if there is an argument to be made that three years is a
reasonable amount of time—which no such argument exists—the trial
court lost its plenary power on December 16, 2013.
Once a trial court’s plenary power ends, it loses subject matter
jurisdiction.60 A judgment is void when it is apparent that the court
rendering judgment had no jurisdiction of the parties, no jurisdiction of
the subject matter, no jurisdiction to enter judgment, or no capacity to
act as a court.61 Therefore, orders issued outside of a trial court’s
plenary power are void because a court cannot act once it has no
jurisdiction to enter judgment.62 A void order is null within itself and its
nullity cannot be waived.63 Although a trial court is free to “impose
sanctions while it retains plenary jurisdiction,” after plenary
60 In re Bates, 429 S.W.3d 47 (Tex. App.—Houston [1st Dist.] 2014, no pet. h.);
Smalley v. Smalley, 436 S.W.3d 801, 806 (Tex. App.—Houston [14th Dist.] 2014, no
pet.).
61 Cook v. Cameron, 733 S.W.2d 137, 140 (Tex. 1987) (quoting Browning v. Placke,
698 S.W.2d 362, 363 (Tex. 1985).
62 In re Fuentes, 960 S.W.2d 261, 262 (Tex. App.—Corpus Christi 1997, no writ).
63 Id.
15
jurisdiction has expired a trial court may not sanction counsel for pre-
judgment conduct.64
In this case, the trial court signed a final order of nonsuit on
November 15, 2013—even though it should have entered an order
within a reasonable amount of time after the September 1, 2010
nonsuit. However, the entering of the final order triggered the
expiration of the trial court’s plenary power. Because the final order of
nonsuit was entered on November 15, 2013, the trial court’s plenary
power expired 30 days later, on December 16, 2013.
What is extremely interesting is that the trial court entered a
final order dismissing all claims on June 3, 2014, and in the order, the
trial court admitted to having lost its jurisdiction on December 15,
2013. The trial court stated:
This court signed its final order of nonsuit as to defendants
The Lending Center and Larry Tew on November 15, 2013,
even though it had a ministerial duty to do so within a
reasonable time after September 1, 2010. This court is aware
of no reason which would justify the three year delay. This
event finally triggered the expiration of this court’s
plenary jurisdiction in this case on December 15, 2013,
thirty days later. No pleading has been filed which would
operate to extend this court’s plenary jurisdiction.65
64 Scott & White Mem’l Hosp. v. Schexnider, 940 S.W.2d 594, 596 (Tex. 1996).
65 CR 784-86 (emphasis added).
16
The trial court further stated “because this court’s plenary jurisdiction
as to all parties in this case ended on December 15, 2013, no further
proceedings in this court will be heard.”66
However, on June 11, 2014, the same trial court that admitted it
lost jurisdiction in December of 2013, entered an order of sanctions for
conduct that allegedly occurred pre-judgment.67 The trial court was
without a doubt lacking subject matter jurisdiction to enter such order
and not only violated the rules of civil procedure, but also violated its
own order. As a result, the trial court erred by taking action after its
plenary jurisdiction expired.
Because the trial court was without subject matter jurisdiction to
enter an order of sanctions, this Court should set aside the trial court’s
order as null and void as a matter of law.
66 CR 786.
67 CR 788-90.
17
II. If the trial court did have jurisdiction—which it did not—it
abused its discretion in entering the order of sanctions.
A. Standard of review
If the trial court did in fact have subject matter jurisdiction, then
the standard of review when analyzing the sufficiency of an order of
sanctions is whether the trial court abused its discretion.68
B. The trial court abused its discretion by failing to
provide a basis for its order of sanctions.
When a trial court awards a party sanctions the sanctions
imposed must be just under the circumstances.69 When determining
whether the sanctions imposed are just, the court considers two factors:
(1) whether there is a direct relationship between the offensive conduct
and the sanctions; and (2) whether the sanctions are excessive.70 A just
sanction must be directed against the abuse and towards remedying the
prejudice caused to the innocent party.71 And, the trial court must at
68 Hawkins v. Estate of Volkmann, 898 S.W.2d 334, 346 (Tex. App.—San Antonio
1994, writ denied).
69 TransAmerican Natural Gas Corp. v. Powell, 811 S.W.2d 913, 917 (Tex. 1991); In
re Ford Motor Co., 988 S.W.2d 714, 718 (Tex. 1998).
70 Id.
71 Spohn Hosp. v. Mayer, 104 S.W.3d 878, 882 (Tex. 2003).
18
least attempt to determine whether the offensive conduct is attributable
to counsel only, or to the party only, or to both.72
Furthermore, sanctions awarded under Texas Rule of Civil
Procedure 13 must be based on good cause and must describe the
conduct giving rise to good cause.73
In this case, the sanctions order the court entered was void of facts
justifying the sanction.74 While the trial court stated that it entered
sanctions due to alleged disrespect and non-compliance with prior
orders, the order fails to articulate any specific facts or details to show
that the court was within its discretion to enter such order. Because
sufficient facts showing good cause were not stated in the order, there is
no way to determine whether a direct relationship exists between the
conduct and the sanctions. However, even without sufficient facts, the
record contains evidence that the trial court abused its discretion and
entered an order of sanctions for an amount equal to Hlavaty and
Strnadel’s attorney’s fees without any justification.
Specifically, at a hearing on a Motion to Dismiss, the trial judge
asked Hlavaty and Strnadel how much their attorney’s fees were
72 TransAmerican, 811 S.W.2d at 917.
73 Tex. R. Civ. P. 13.
74 CR 788-90.
19
through September 1, 2010—the same date the judge stated he thought
the case should have been over. And, in correspondence sent to the
court by Hlavaty and Strnadel, the attorney’s fees equaled $12,113.50
for Hlavaty and $6,151.00 for Strnadel.75 The trial court judge signed
the order for sanctions 5 days later for the exact amount of the
attorney’s fees sent to the court 5 days prior. However, the trial court
was extremely broad and failed to state how this amount was related to
the alleged sanctionable conduct.76 Because the trial court failed to
state a basis or provide sufficient facts as to why it entered an order of
sanctions, the trial court abused its discretion.
C. The trial court abused its discretion by failing to verify
the attorney’s fees.
The above-referenced correspondence, sent by Hlavaty and
Strnadel, is the only document presented in support of the sanctions
award.77 The document Hlavaty and Strnadel’s counsel provided to the
court providing a total of attorney’s fees allegedly incurred without any
supporting documentation, is just that – a document and does not
constitute evidence. There was no evidentiary hearing to justify how the
75 CR 787.
76 CR 788-90.
77 CR 787.
20
awarded attorney’s fees relate to the alleged sanctionable conduct, and
therefore, there is no sworn testimony in the record to support the trial
court’s award.
Additionally, due to the trial court’s failure to hold an evidentiary
hearing, CSB had no opportunity to rebut the nature and amount of
attorney’s fees; so, there is no evidence in the record to support the
actual fees incurred and awarded. Specifically, no fee bills or invoices
were produced by Hlavaty and Strnadel, and the trial court failed to
determine whether the attorney’s fees claimed were reasonable and
necessary. The trial court further failed to determine whether the fees
were actually incurred and related to this matter. Therefore, there is
insufficient evidence to support the claimed attorney’s fees and the
entering of an order based on unverified fees is an abuse of discretion. It
is an abuse of discretion for the trial court to award attorney’s fees
based on numbers pulled out of thin air without any evidence to support
it.
D. The trial court abused its discretion by entering an
order of sanctions based on alleged non-compliance
with prior vacated orders.
Even if the trial court stated the purpose of the order of sanctions
was to remedy any prejudice—which it did not—such assertion would
21
be false. Specifically, in the order of sanctions, the trial court states that
“the [c]ourt has considered that prior orders designed to require
[c]ounterdefendant to participate in the litigation process in good faith
and in compliance with court orders were ineffective.”78 Because the
only prior orders in the record are discovery orders, it would appear
that the trial court is claiming the alleged prejudice was CSB’s non-
compliance with prior discovery orders. But, what the trial court seems
to forget is that a mere eight days prior, it entered a final order that,
inter alia, stated “[t]his court concludes that all orders entered in
this cause after September 1, 2010, other than the order of nonsuit
on November 15, 2013, are a nullity, and to the extent this court has
the authority to do so, they are hereby VACATED.”79
The prior orders in the record—referenced in the order of
sanctions—are an order on a motion to compel, entered on July 22,
2013, and an order nunc pro tunc, entered on August 21, 2013.80 These
discovery orders were clearly entered after September 1, 2010.
Meaning, per the trial court’s final order, cited supra, the discovery
orders were vacated. Therefore, the trial court abused its discretion by
78 CR 788 (emphasis added).
79 CR 786 (emphasis added).
80 CR 504; CR 541.
22
entering an order of sanctions based upon discovery orders that it
vacated.
As a result, the trial court, without a doubt, abused its discretion
by entering an order of sanctions without good cause, without stating
facts sufficient to determine whether the sanctions were directly related
to alleged wrongful conduct, without sworn verification of the amount
awarded, and based upon non-compliance with prior orders that it
vacated. Because the trial court abused its discretion, the order of
sanctions should be vacated.
CONCLUSION
The trial court was without subject matter jurisdiction to enter an
order of sanctions on June 11, 2014; therefore, the order should be set
aside because it is void. However, if this Court determines the trial
court did in fact have subject matter jurisdiction—which it did not—the
trial court abused its discretion in entering such order and the order of
sanctions should be vacated.
PRAYER
For these reasons, Cross-Appellant Commercial State Bank of El
Campo, Texas, Inc. respectfully requests this Court to reverse the trial
23
court’s Order Denying Commercial State Bank’s Motion to Vacate Order
of Sanctions and set aside Hlavaty and Strnadel’s June 11, 2014 Order
for Sanctions against Cross-Appellant Commercial State Bank of El
Campo, Texas, Inc. and grant Cross-Appellant Commercial State Bank
of El Campo, Texas, Inc. any such other and further relief to which it is
entitled.
Respectfully submitted,
ROBERTS MARKEL WEINBERG BUTLER HAILEY PC
/s/ Dawn S. Holiday
____________________________________
DAWN S. HOLIDAY
TBA No. 24046090
MIA B. LORICK
TBA No. 24091415
2800 Post Oak Blvd, 57th Floor
Houston, TX 77056
Tel: (713) 840-1666;
Fax: (713) 840-9404
dholiday@rmwbhlaw.com
mlorick@rmwbhlaw.com
ATTORNEYS FOR APPELLEE / CROSS-
APPELLANT, COMMERCIAL STATE BANK
OF EL CAMPO, TEXAS, INC.
24
CERTIFICATE OF COMPLIANCE
Pursuant to Rule 9.4 i(3) of the Texas Rules of Appellate
Procedure, I certify that the word count in this Cross-Appellant’s Brief
is 4,388 words.
/s/ Dawn S. Holiday
_________________________________
DAWN S. HOLIDAY
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing
instrument was served upon the parties listed below by facsimile,
messenger, regular U.S. Mail, certified mail, return receipt requested
and/or electronic service in accordance with the Texas Rules of
Appellate Procedure on this the 4th day of March, 2015.
Via Email: Via Email:
wkronzer@kronzer.com singletonlaw@sbcglobal.net
Walter James Kronzer, III Howard H. Singleton
Walter James Kronzer, III, P.C. Singleton Law Firm
3000 Weslayan, Suite 247 109 East Milam Street
Houston, TX 77027 Wharton, TX 77488
/s/ Dawn S. Holiday
_____________________________________
DAWN S. HOLIDAY
25
APPENDIX
TAB 1: Trial Court Order Denying Commercial State Bank’s Motion
to Vacate Order for Sanctions, signed August 29, 2014.
TAB 2: Trial Court Order of Sanctions signed June 11, 2014.
26
APPENDIX
TAB 1
Cause No. 44,081
COMMERCIAL STATE BANK § IN THE DISTRICT COURT
OF EL CAMPO, TEXAS, INC., §
Counterdefendant §
§
v. ·§ OF WHARTON COUNTY, TEXAS
§
PATRICK HLAVATY, et al., §
Counterplaintiffs § 329th JUDICIAL DIS'IRICT
ORDER DENYING COMMERCIAL STATE BANK'S MOTION TO VACATE ORDER
FOR SANCTIONS
On this day came on-for consideration Counterdefend~;IDts Commercial State Bank
of El Campo, Texas' Motion to Vacate Order and for Sanctions and the Court, after
having considered the Motion and thereto, believes that said Motion should in all things
be denied.
ORDERED, ADJUDGED and DECREED that Bank' s Motion to Vacate Order
and for Sanctions is denied.
Signed this2fJ__ day of &/.2014.
D
APPROVED & ENTRY REQUESTED:
By:
l!~fio~o:QM.
AUG 2 9 20\4
SBN: 18436200
109 East Milam ., TEXAS
Wharton, Texas 77488 ------``--``~y
(979) 532-9800
(979) 532-9805 FAX
ATTORNEY FOR COUNTERPLAINTIFFS
PATRICK HLAVATY AND JEFF STRNADEL
APPENDIX
TAB 2
b\IDo~2f'r.
JUN 11 2.0'4
CsllSeNo. 44,081 ``~·=
COMMERCIAL STATE BANK § ``OURT ·
OF EL CAMPO, TEXAS, INC., §
. Plaintiff, §
§
v. § OF WHARTON COUNTY, TEXAS
§
PATRICK HLAVATY~ et al., §
Defendants. § 329th JUDICIAL DISTRICT
QJWER OF SANCTIONS
BE IT R£MEllvffiERED that on previous occasions this Court has carried with this
case various prayers for sanctions of Defendant!Counterplaln.tiff Patrick Inavaty and
Defendant/Counterplaintiff Jeff S1madel. It has become clear to the Couxt that
Plaintifii'Counterdefendao.t Commercial State Bank of El Campo, Texas, Inc.
("Counterdefendanf') has rep~tedly conducted itself in the course of this case without
due regard for the authority of this Court as a coUrt:. Such persistent disrespect has been
an affront to the dignity of this and all courts. This Court accordingly recognizes a need
for it to exercise its inherent authority pursuant to Willy v. Coastal Corp:, 503 U.S . 13 L
( 1992), to sanction this litigan-t for deliberate mi~behavior in the course of these
proceedings.
In so doing, the Coun has considered that prior orders designed to require
counterdefendant to participate in the litigation process in good faith and :in compliance
with court orders were ineffective. The Court has determined that there is no lesser or
other type of o,;-der or sanction which would serve the purpose of the sanctions o~dered
below. The Court has also considered that the recalcitrant behavior has ocCWTed while
Counterdefendant bas been represented by a succession of different attorneys of recor~
indicating that the disrespect for the judicial process is not a product of poor
representation by counsel but of an underlyjng attitude on the part of the
Counterdefendant itself.
Counterdefendant Commercial State Bank ofEl Campo~ Texas, Inc. accordingly is
hco:eby ORDERED to pay as a ""cti011 by ¢(! 'f , 20l4, to
Cotmterplaintiff Patrick J'avaty and his attorney of record jointly the sum of
12-.l/'3.£()
and to Counterplaintiff Jr. I
Stmadel and his attorney of record jointly the sum of
k 1 l S I , oo .
It is further ORDERED, AJVDGED~ and DECREED that if Coun.terdefendant
unsuccessfully seeks appellate review of any part of this Order, Counterdef'endant is
ordered to pay reasonable and necessary attorneys' fees of $15,000.00 for
Coll.Ilte:tplaintiffs to respond to such appellate action. If appellate relief is uus.uccessfully
sought from the Supreme Court, Counterdefendant is ordered to pay an additional award
of$10~000.00 in reasonable and necessary attorneys' fees to CounterplaiD.tiffs' and their
attorney ofrecord jointly.
•
ORDERED, AD.nJDGED, and DECREED that execution will issue on any part of
this Order that is not timely pai.d.
SIGNED this /L day of _ _ _d~t.-~
'---..-4. .=. ;: : . ._·~·, 2014.
.. ......
I ~· I " • I • " 1 o 0 t 1 '