John Kleas Co., Inc. v. Michael Prokop, David A. Carp and Herzog & Carp, P.C. ( 2015 )

NUMBER 13-13-00401-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI – EDINBURG
JOHN KLEAS CO. INC., Appellant,
v.
MICHAEL PROKOP, DAVID A. CARP
AND HERZOG & CARP, P.C., Appellees.
On appeal from the 423rd District Court
of Bastrop County, Texas.
MEMORANDUM OPINION
Before Chief Justice Valdez and Justices Rodriguez and Garza
Memorandum Opinion by Justice Garza
Appellant John Kleas Co., Inc. (“Kleas”) challenges the trial court’s summary
judgment and its award of attorney’s fees as sanctions in favor of appellees, Michael
Prokop, David A. Carp, and Herzog & Carp, P.C. By five issues, Kleas contends that: (1)
the trial court erred by denying its motion to continue a hearing on appellees’ summary
judgment motions; (2) Kleas produced an affidavit which defeated appellees’ summary
judgment motions; (3) the sanctions order contained insufficient findings of fact; (4) the
order incorrectly concluded that all of Kleas’s causes of actions were groundless and filed
in bad faith; and (5) the award of sanctions was excessive. We affirm.1
I. BACKGROUND
On July 11, 2008, Kleas purchased eight acres of property in Bastrop, Texas, from
Lena Ruth Prokop-Purcell. Prokop-Purcell provided part of the financing for the sale,
obtaining a promissory note for $303,160.17 and a second lien on the property. The
remainder of the financing was provided by a bank which obtained the primary lien on the
property. Three months later, in October of 2008, Kleas purchased additional acreage
from Prokop-Purcell; again, the sale was partly owner-financed, with Prokop-Purcell
taking a $150,000 promissory note and a second lien. Under both promissory notes,
Kleas owed four quarterly payments and a balloon payment. Later in October of 2008,
Prokop-Purcell provided an unsecured $50,000 loan to Kleas, due in one payment.
After Kleas defaulted on all eleven payments, Prokop-Purcell hired appellee Carp,
an attorney, to begin foreclosure proceedings. Carp sent Kleas a letter on January 27,
2011, stating that Kleas was in default and that, if he did not cure the default within twenty
days, Prokop-Purcell would seek to enforce her rights under the loan documents.2 Twelve
days after sending the notice letter, on February 8, 2011, Carp sent to Kleas a “Notice of
1 This appeal was transferred from the Third Court of Appeals pursuant to a docket equalization
order issued by the Texas Supreme Court. See TEX. GOV’T CODE ANN. § 73.001 (West, Westlaw through
2013 3d C.S.).
2 The letter stated that, “[i]n accordance with federal and Texas laws regarding fair debt collections,”
the “indebtedness will be assumed to be valid” if Kleas did not dispute the validity of the debt within thirty
days. The letter further explained that, if Kleas notified Carp within that thirty-day period that he was
disputing the validity of the debt, Carp would “obtain a verification of the indebtedness and will mail that
verification to you.”
2
Trustee’s Sale” stating that the properties at issue would be offered for sale at a public
auction at the Bastrop County Courthouse on March 1, 2011.
On February 24, 2011, Kleas filed suit against Prokop-Purcell alleging breach of
contract and improper foreclosure. The lawsuit alleged that foreclosure was improper
because, among other things, Prokop-Purcell did not provide him with proper notice or
opportunity to cure the default.3 Kleas contended that he was in the process of
refinancing the properties and that the refinancing, if closed, would have cured the default
and obviated the need for a foreclosure sale; but that the foreclosure notice clouded the
properties’ titles and precluded refinancing, thereby causing him to suffer irreparable
harm. The suit requested damages, temporary and permanent injunctions against the
foreclosure, and attorney’s fees.
The trial court granted a temporary restraining order enjoining the foreclosure sale,
and it set a hearing for March 10, 2011, which was later postponed to April 7, 2011. Carp
then sent another letter to Kleas notifying him of a new foreclosure sale date of April 5,
2011. The trial court held an emergency hearing on March 30, 2011 regarding this new
foreclosure sale date. At the hearing, the parties entered into a Rule 11 agreement under
which Prokop-Purcell agreed to “cease the foreclosure sale currently scheduled for April
5, 2011” and Kleas agreed to provide Prokop-Purcell with certain information regarding
encumbrances on the properties. The Rule 11 agreement also provided that “the
3 In particular, Kleas argued that, in the event of default, the deeds of trust at issue allowed him
thirty days within which to cure the default, contrary to Carp’s January 27 letter which gave him twenty days.
Kleas further alleged that, in the event the default cannot be fully cured within thirty days, the deeds of trust
allow him an additional “reasonable period of time” of up to ninety days to cure or remedy the default,
provided that he began the cure before the initial thirty-day period expired and “continue[d] to proceed with
diligence to complete the cure or remedy.” The lawsuit concluded that, “[p]ursuant to the Deeds of Trust at
issue, in regards to a default, [Kleas] would have a total of one hundred twenty (120) days from the date of
the first notice of default before any foreclosure can legally proceed.”
3
Temporary Restraining Order currently in effect will remain so until further order from this
Court.”
Carp sent another notice of default to Kleas on April 1, 2011; and eleven days later,
Carp filed and posted two notices of foreclosure with respect to the properties at issue.
On June 6, 2011, Kleas filed an amended petition that added Prokop-Purcell’s
daughter Deborah Ruth Prokop Cecil and Carp as defendants. The amended petition
added claims that the defendants (1) tortiously interfered with two contracts that Kleas
had entered into with commercial developers, (2) tortiously interfered with prospective
business relations with two other entities, and (3) tortiously disparaged his business. The
amended petition also asked the trial court to assess sanctions against Prokop-Purcell,
Cecil, and Carp for filing the notices of foreclosure, which Kleas contended were frivolous
pleadings. See TEX. CIV. PRAC. & REM. CODE ANN. ch. 10 (West, Westlaw through 2013
3d C.S.) (“Sanctions for Frivolous Pleadings and Motions”).
Subsequently, on September 2, 2011, Kleas settled his claims against Prokop-
Purcell and later non-suited his claims against her and Cecil. Carp remained as a
defendant.
Kleas then filed three additional amended petitions, the last two of which added
Prokop-Purcell’s son Michael Prokop and Carp’s law firm Herzog & Carp, P.C. (“Herzog
& Carp”) as defendants. Kleas’s live petition, his fourth amended petition dated August
29, 2012, contained additional factual assertions, including allegations that: (1) the
defendants undertook an “obvious ploy to seize control of the Properties” by offering to
purchase the note held by the properties’ first lienholder, a bank, without disclosing their
identity to the bank; (2) the defendants “called Austin Title Company to shut down the
4
sale transaction that was intended, yet again, to pay the second liens”; and (3) the
defendants “obstruct[ed] the discovery processes that would have revealed their
wrongdoing in detail.” The fourth amended petition alleged the following causes of action
against all three appellees: (1) fraud, (2) breach of the deeds of trust and promissory
notes, (3) wrongful foreclosure, (4) slander of title, (5) tortious interference with existing
contracts, (6) tortious interference with prospective business relations, (7) business
disparagement and defamation, (8) breach of a Rule 11 agreement, (9) promissory
estoppel, (10) declaratory judgment, (11) negligence and gross negligence, (12) negligent
management and supervision, and (13) negligent misrepresentation. The petition also
retained the request for sanctions for frivolous pleadings. The petition alleged that Kleas
had suffered over $4 million in damages as a result of the defendants’ actions.
On September 6, 2012, Prokop filed a “special motion to dismiss” in which he
asked the trial court to dismiss Kleas’s claims pursuant to the Texas Citizens’ Participation
Act (“TCPA”). See id. ch. 27 (West, Westlaw through 2013 3d C.S.) (providing generally
that a defendant may move to dismiss a claim that is “based on, relates to, or is in
response to a party’s exercise of the right of free speech, right to petition, or right of
association” and that the trial court shall grant such motion unless the plaintiff “establishes
by clear and specific evidence a prima facie case for each essential element of the claim
in question”). The trial court granted the motion in part after a hearing and ordered that
Kleas pay $4,000 in attorney’s fees to Prokop.
Carp filed a motion to dismiss and for traditional summary judgment on October
10, 2012, contending that Kleas’s claims fail as a matter of law in part due to the doctrine
of qualified immunity. See, e.g., James v. Easton, 368 S.W.3d 799, 802 (Tex. App.—
5
Houston [14th Dist.] 2012, no pet.) (noting that attorneys have “qualified immunity” from
civil liability with respect to non-clients for actions taken in connection with representing
a client in litigation). The motion was accompanied by evidence, including an affidavit by
Carp. Prokop filed a motion for no-evidence summary judgment on November 7, 2012,
alleging that “adequate time for discovery has passed” and asserting that Kleas’s various
claims were supported by no evidence.4 On November 27, 2012, Carp also filed a motion
for no-evidence summary judgment. A hearing on the summary judgment motions was
set for December 17, 2012.
Ten days prior to the hearing date, Kleas filed a motion for continuance, claiming
that the parties “have commenced and are in the process of completing discovery in this
cause.” The motion asserted that “[d]uring discovery, [Kleas] has uncovered several facts
that have a high potential to lead to admissible facts that will prove [Kleas]’s case.” It
further alleged that “the time is not ripe for a ruling on qualified immunity” because Kleas
has not “completed its fact discovery.” The trial court denied the motion without a hearing.
Subsequently, Kleas filed an affidavit in response to appellees’ summary judgment
motions. After the December 17, 2012 hearing, the trial court granted Carp’s and
Prokop’s summary judgment motions.
Appelees’ requests for sanctions remained pending, and an evidentiary hearing on
4 Prokop’s motion for no-evidence summary judgment argued specifically that: (1) the fraud and
negligent misrepresentation claims fail because there is no evidence that Prokop ever communicated to
Kleas; (2) the breach of contract, promissory estoppel, and declaratory judgment claims fail because there
is no evidence that Kleas and Prokop were in privity of contract; (3) the wrongful foreclosure claim fails
because there is no evidence that Prokop ever attempted foreclosure or owned an interest in the properties;
(4) there is no evidence of slander of title; (5) the tortious interference claims fail because there is no
evidence that Prokop “had any contract with any of the named companies”; (6) there is no evidence that
Prokop made any disparaging or defamatory statements about Kleas; (7) the negligence claims fail because
there is no evidence that Prokop “was ever a lender” to Kleas; and (8) the negligent management and
supervision claim fails because there was no evidence that Prokop was ever represented by Carp or had
any control over Carp.
6
that matter was held on January 8, 2013. Kleas did not appear at the hearing but was
represented by counsel. After hearing testimony, the trial court granted the sanctions
motions, finding that all of Kleas’s claims were brought in bad faith and for the purpose of
harassment.5 The trial court subsequently rendered final judgment, based on its prior
summary judgment rulings, that Kleas take nothing from his claims against Carp and
Prokop, and further stating as follows:
With respect to the claims for sanctions, after taking into account all five
volumes of the case files, all conduct, evidence and exhibits discussed at
all previous hearings, and all of the evidence and argument offered at the
evidentiary hearing on January 8, this Court finds as follows:
1. [Kleas’s counsel] has engaged in no wrongful behavior, improper
conduct, or otherwise sanctionable actions, no such allegation has
been made, and the Court finds no wrongful conduct by [Kleas’s
counsel].
2. The Court finds that the wrongful activity that has taken place is the
doing of [Kleas].
3. The Court finds that every single one of the fourteen causes of action
alleged against Defendants [Carp], [Herzog & Carp], and [Prokop]
are frivolous, baseless, [and] groundless[.]
4. The Court finds that every allegation made by [Kleas] against these
three Defendants has been demonstrated to be groundless,
baseless, worthless, and frivolous.
5. The Court finds that every allegation made by [Kleas] against the
Defendants was filed in bad faith and for purposes of harassment.
6. The Court finds that Texas Rule of Civil Procedure 13 and Chapter
10 of the Civil Practice and Remedies Code warrant the imposition
of sanctions against [Kleas] for improper behavior.
The order provided that Kleas shall pay to Carp and Herzog & Carp the amount of
$102,000 for “reasonable attorney[’]s fees necessarily expended for defense of the claims
5 Kleas filed an objection to the entry of judgment and a motion for new trial, both of which were
denied by operation of law. See TEX. R. CIV. P. 329b(c).
7
in this Court.” The order further provided that Kleas shall pay to Prokop the amount of
$25,000 “for reasonable attorney[’]s fees necessarily expended in this Court,” minus the
$4,000 in fees previously awarded. As to each of Carp and Prokop, Kleas was ordered
to additionally pay $40,000 “for responding to the already perfected appeal in the Court
of Appeals,” an additional $10,000 if a petition for review is filed in the Texas Supreme
Court by any party, and an additional $30,000 if the Texas Supreme Court grants review.6
The trial court later rendered two additional sets of findings of fact and conclusions of law,
each dated March 21, 2013; the first set contained 28 factual findings and five legal
conclusions and the second set contained 167 factual and legal findings. This appeal
followed.
II. DISCUSSION
A. Motion for Continuance
By his first issue, Kleas contends that the trial court erred in denying his motion to
continue the December 7, 2012 summary judgment hearing.
When a party contends that it has not had an adequate opportunity for discovery
before a summary judgment hearing, it must file either an affidavit explaining the need for
further discovery or a verified motion for continuance. Tenneco Inc. v. Enter. Products
Co., 925 S.W.2d 640, 647 (Tex. 1996). A trial court may continue a hearing on a motion
for summary judgment if it appears from the evidence presented that the party opposing
the motion “cannot for reasons stated present by affidavit facts essential to justify his
opposition.” TEX. R. CIV. P. 166a(g). When reviewing a trial court’s order denying a
6 The trial court rendered an amended final judgment on February 27, 2013, reflecting that Kleas
had since amended its corporate name to become “Jackson Purcell JV, Inc.”
8
motion for continuance, we consider whether the trial court committed a clear abuse of
discretion on a case-by-case basis. Joe v. Two Thirty Nine Joint Venture, 145 S.W.3d
150, 161 (Tex. 2004). A trial court abuses its discretion when it reaches a decision so
arbitrary and unreasonable as to amount to a clear and prejudicial error of law. Id. When
deciding whether a trial court abused its discretion in denying a motion for continuance
seeking additional time to conduct discovery, we consider the length of time the case has
been on file, the materiality and purpose of the discovery sought, and whether the party
seeking the continuance has exercised due diligence to obtain the discovery sought. Id.
In the summary judgment context, it is generally not an abuse of discretion to deny a
motion for continuance if the party moving for a continuance has received 21 days’ notice
of the hearing as required by Rule 166a(c). Carter v. MacFadyen, 93 S.W.3d 307, 310
(Tex. App.—Houston [14th Dist.] 2002, pet. denied); see TEX. R. CIV. P. 166a(c). A party
seeking more time to oppose a summary judgment motion must describe the evidence
sought, explain its materiality, and show the due diligence used to obtain the evidence.
Carter, 93 S.W.3d at 310 (citing TEX. R. CIV. P. 166a(g), 251, 2527). The movant must
7 Texas Rules of Civil Procedure 251 and 252 provide:
No application for a continuance shall be heard before the defendant files his defense, nor
shall any continuance be granted except for sufficient cause supported by affidavit, or by
consent of the parties, or by operation of law.
TEX. R. CIV. P. 251.
If the ground of such application be the want of testimony, the party applying therefor shall
make affidavit that such testimony is material, showing the materiality thereof, and that he
has used due diligence to procure such testimony, stating such diligence, and the cause
of failure, if known; that such testimony cannot be procured from any other source; and, if
it be for the absence of a witness, he shall state the name and residence of the witness,
and what he expects to prove by him; and also state that the continuance is not sought for
delay only, but that justice may be done; provided that, on a first application for a
continuance, it shall not be necessary to show that the absent testimony cannot be
procured from any other source.
TEX. R. CIV. P. 252.
9
show why the continuance is necessary; conclusory allegations are not sufficient. Id.
(citing Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. CBI Indus., Inc., 907 S.W.2d 517,
520–22 (Tex. 1995)); see TEX. R. CIV. P. 252.
Kleas’s motion, which was verified by counsel, argued that certain witnesses—
including Prokop, Prokop-Purcell, and Prokop Cecil—had not yet been deposed but that
the parties “have agreed to a schedule of depositions.”8 The motion argued that “certain
fact[s] can exist that can destroy” an attorney’s qualified immunity and that Kleas “has a
right to discover the nature of the actions taken with reference to foreclosure and to the
actions taken by [Carp] and Herzog & Carp with regard to the failure of the former
Defendants to perform under the terms [of] a Rule 11 [agreement] reached in this matter.”
The motion argued that Kleas “has a right to determine if facts exist[] that would cause
the doctrine of qualified immunity to not apply” and that, “[u]ntil [Kleas] has completed its
fact discovery, the Court will not be in a position to determine whether such facts exist[]
and are or are not in issue.”
We cannot conclude that the trial court abused its discretion by denying this
motion. Although this was the first motion for continuance filed by Kleas with regard to
his claims against the appellees,9 it came over four years after Kleas initially filed suit and
8 The record contains two Rule 11 agreements, one dated August 6, 2012 and one dated November
12, 2012, regarding discovery scheduling. The August agreement states, among other things, that Kleas’s
counsel and Prokop’s counsel agreed to take the depositions of Prokop and Prokop-Purcell on September
11, 2012. The November agreement states, among other things, that Kleas’s counsel and Carp’s counsel
agreed to take Prokop’s deposition on November 14, 2012. The record does not reveal why those
depositions did not take place as scheduled. Kleas asserts on appeal that “[t]he parties subsequently
agreed” to reschedule those depositions for after December 17, 2012. Prokop asserts on appeal that Kleas
“failed to abide by his own Rule 11 Agreement.” We express no opinion on the matter except to note that,
according to the record, Prokop was eventually deposed on January 7, 2013.
9Kleas asserts that the motion was the first motion for continuance that he filed in the case. In fact,
Kleas’s prior counsel filed an agreed motion for continuance on March 8, 2011, asking to continue the
hearing on the injunction proceedings against Prokop-Purcell.
10
over two years after Carp was first named as a defendant. Carp filed his summary
judgment motions more than sixteen months after he was first named as a defendant,
and Kleas does not dispute that he was given the requisite 21 days’ notice of the
hearing.10 See TEX. R. CIV. P. 166a(c); Joe, 145 S.W.3d at 161. Moreover, Kleas’s motion
did not discuss whether he had exercised due diligence in attempting to procure the
testimony of the witnesses yet to be deposed. See TEX. R. CIV. P. 252; Joe, 145 S.W.3d
at 161; Carter, 93 S.W.3d at 310.
Kleas cites Laughlin v. Bergman, in which the First Court of Appeals found that the
trial court abused its discretion, requiring a new trial, by denying the plaintiff’s motion to
continue a summary judgment hearing in a legal malpractice case. 962 S.W.2d 64, 66
(Tex. App.—Houston [1st Dist.] 1997, pet. denied). Laughlin is distinguishable. There,
the record included an affidavit by the plaintiff’s counsel stating that “he had made
numerous attempts to schedule [the defendant]’s deposition to no avail,” thereby
evidencing his due diligence. Id. Moreover, in Laughlin the plaintiff sought a continuance
in order to depose the defendant, who was “the attorney blamed for the malpractice” and
“is also in possession of the files that [the plaintiff] asserts will evidence this malpractice.”
Id. It was therefore “abundantly apparent” to the court of appeals that the ability to depose
the defendant and review the files was “absolutely critical” to the plaintiff’s case. Id. Here,
on the other hand, though Kleas’s motion asserted generally that “certain fact[s] can exist
that can destroy” appellees’ defenses, he did not specify what evidence he expected to
10 We note that the November 12, 2012 Rule 11 agreement—which was drafted by Kleas’s counsel
and signed by Kleas—states that Carp and Herzog & Carp agreed to “not proceed with their Motion for
Summary Judgment . . . until on or after December 17, 2012.” Moreover, in a letter to the trial court judge
written after the continuance was denied, Kleas’s counsel stated in part: “With some difficulty, we have
finalized, filed and served our papers in opposition to defendants’ motions for summary judgment and are
ready for argument on Monday, December 17 at 1:30.”
11
obtain from the depositions of Prokop, Prokop-Purcell, and Prokop Cecil, or how that
evidence would support his various causes of action against Carp and Prokop. See
Carter, 93 S.W.3d at 310.
We overrule Kleas’s first issue.
B. Summary Judgment
Kleas argues by his second issue that his affidavit was sufficient to defeat
appellees’ summary judgment motions.
1. Standard of Review
We review summary judgments de novo. Joe, 145 S.W.3d at 156; Nalle Plastics
Family L.P. v. Porter, Rogers, Dahlman & Gordon, P.C., 406 S.W.3d 186, 199 (Tex.
App.—Corpus Christi 2013, pet. denied). We take as true all evidence favorable to the
non-movant and indulge every reasonable inference and resolve any doubts in the non-
movant’s favor. Joe, 145 S.W.3d at 157.
In advancing a traditional motion for summary judgment, the movant has the
burden of showing there is no genuine issue of material fact and it is entitled to judgment
as a matter of law. TEX. R. CIV. P. 166a(c); Joe, 145 S.W.3d at 157. An issue of fact is
raised if more than a mere scintilla of evidence is produced. See, e.g., City of Keller v.
Wilson, 168 S.W.3d 802, 810 (Tex. 2005). Evidence is less than a scintilla is if it is “so
weak as to do no more than create a mere surmise or suspicion that the fact exists.”
Regal Fin. Co. v. Tex Star Motors, Inc., 355 S.W.3d 595, 603 (Tex. 2010). Evidence is
more than a scintilla if it “rises to a level that would enable reasonable and fair-minded
people to differ in their conclusions.” Serv. Corp. Int’l v. Guerra, 348 S.W.3d 221, 228
(Tex. 2011).
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A motion for no-evidence summary judgment must establish that there is no
evidence of at least one essential element of the plaintiff’s cause of action. Hamilton v.
Wilson, 249 S.W.3d 425, 426 (Tex. 2008) (per curiam). The burden of producing
evidence is entirely on the plaintiff; the defendant has no burden to attach any evidence
to the motion, and if the plaintiff produces evidence raising a genuine issue of material
fact, summary judgment is improper. TEX. R. CIV. P. 166a (i). All that is required of the
plaintiff is to produce more than a scintilla of probative evidence to raise a genuine issue
of material fact on the challenged element. Forbes, Inc. v. Granada Biosciences, Inc.,
124 S.W.3d 167, 172 (Tex. 2003).
2. Applicable Law
To promote zealous representation, courts have held that an attorney has
“qualified immunity” from civil liability with respect to non-clients for actions taken in
connection with representing a client in litigation. James, 368 S.W.3d at 802; Alpert v.
Grain, Caton & James, P.C., 178 S.W.3d 398, 405 (Tex. App.—Houston [1st Dist.] 2005,
pet. denied). Under this doctrine, an attorney is generally immune from personal liability
stemming from conduct that the attorney “engages in as part of the discharge of his duties
in representing a party in a lawsuit.” Bradt v. West, 892 S.W.2d 56, 72 (Tex. App.—
Houston [1st Dist.] 1994, writ denied)11; see McCamish, Martin, Brown & Loeffler v. F.E.
11 In Bradt v. West, the First Court of Appeals explained the policy rationale for this rule:
The public has an interest in loyal, faithful and aggressive representation by the legal
profession. An attorney is thus charged with the duty of zealously representing his clients
within the bounds of the law. In fulfilling this duty, an attorney has the right to interpose
any defense or supposed defense and make use of any right in behalf of such client or
clients as the attorney deems proper and necessary, without making himself subject to
liability in damages. Any other rule would act as a severe and crippling deterrent to the
ends of justice for the reason that a litigant might be denied a full development of his case
if his attorney were subject to the threat of liability for defending his client’s position to the
best and fullest extent allowed by law, and availing his client of all rights to which he is
13
Appling Interests, 991 S.W.2d 787, 792 (Tex. 1999) (“At common law, the rule of privity
limits attorney liability to third parties. . . . The general rule is that persons who are not in
privity with the attorney cannot sue the attorney for legal malpractice. . . . In practical
terms, this privity requirement means that an attorney is not liable for malpractice to
anyone other than her client.”) (citations omitted). This qualified immunity focuses on the
type of conduct in which the attorney engages rather than on whether the conduct was
meritorious. Byrd v. Vick, Carney & Smith LLP, 409 S.W.3d 772, 780 (Tex. App.—Fort
Worth 2013, pet. granted). Thus, an attorney cannot be held liable to a third party for
conduct that requires “the office, professional training, skill, and authority of an attorney.”
Id. (quoting Miller v. Stonehenge/Fasa-Tex., JDC, L.P., 993 F. Supp. 461, 464 (N.D. Tex.
1998) (order)). “Incorrect, meritless, and even frivolous conduct is not actionable if it
satisfies this standard.” Id. (quoting Miller, 993 F. Supp. at 464).
An attorney’s protection from liability is not boundless, however. Id. An attorney
can be held liable by a third party for actions that are not part of the discharge of his duties
to his client. See Alpert, 178 S.W.3d at 406; Bradt, 892 S.W.2d at 71. If a lawyer
participates independently in fraudulent activities, his action is “foreign to the duties of an
attorney.” Alpert, 178 S.W.3d at 406; see Sacks v. Zimmerman, 401 S.W.3d 336, 340
(Tex. App.—Houston [14th Dist.] 2013, pet. denied); see also Poole v. Houston & T.C.
Ry., 58 Tex. 134, 137 (1882) (holding that attorneys acting on behalf of their clients are
not shielded from liability for their fraudulent conduct because fraudulent acts are “entirely
foreign to the duties of an attorney”). In other words, the law does not provide absolute
entitled.
892 S.W.2d 56, 71 (Tex. App.—Houston [1st Dist.] 1994, writ denied) (citations omitted).
14
immunity for every tort committed by a lawyer that may be tangentially related to his
professional role or which may occur during litigation. Byrd, 409 S.W.3d at 780; see
Bradt, 892 S.W.2d at 71–72. By way of extreme example, an attorney who assaults the
opposing party or lawyer during trial could be held liable for that act. Byrd, 409 S.W.3d
at 780.
The attorney’s qualified immunity generally applies even if conduct is wrongful in
the context of the underlying lawsuit. Alpert, 178 S.W.3d at 405. For example, a third
party has no independent right of recovery against an attorney for filing motions in a
lawsuit, even if frivolous or without merit, even though such conduct may be sanctionable
or contemptible as enforced by the statutory or inherent powers of the court. Id. (citing
Bradt, 892 S.W.2d at 72); see also Sacks, 401 S.W.3d at 343 (holding that if the plaintiff
“had any evidence that opposing counsel were abusing the discovery process, discovery
sanctions would be available to her” but that opposing counsel were nonetheless entitled
to immunity). If an attorney’s conduct violates his professional responsibility, the remedy
is public, not private. Byrd, 409 S.W.3d at 780.
3. Evidence
Carp’s affidavit, which was attached to his motion for traditional summary
judgment, stated in part as follows:
I have never had any financial interest in the real property at issue or the
transaction at issue. My only financial interest was the legal fees I would
make by representing my clients in this case. I never had a contingent fee
in this case. Before I was hired I did not have any knowledge of Mr. Kleas,
his company, or any of the transactions at issue. All actions which I took
related to this case arose from my attorney-client relationship [with Prokop-
Purcell]. . . .
I have never done anything to intentionally, maliciously, or gratuitously harm
Mr. Kleas or his company. I have never done anything intended or designed
to interfere with, obstruct, or delay any financing or re-financing by Mr. Kleas
15
or his company relating to the property in issue or any other property he
owns. I have tried to get Mrs. Prokop-Purcell paid all the money she was
owed on the three promissory notes in dispute. My efforts to get Mrs.
Prokop-Purcell paid in full did not involve any intent to harm, damage, or
injure Mr. Kleas, his company, or any property they owned. I certainly
intended to compel the company to pay what they owed: beyond that I had
no intent to require them to do anything else. I did nothing beyond providing
legal services to my client. No conduct of mine related to this case was for
my own benefit or outside the scope of my legal representation of her.
Kleas’s affidavit, the only summary judgment evidence that Kleas produced in
response to the summary judgment motions, stated in its entirety as follows:
My name is John Kleas. I am over the age of eighteen years and am
competent to make this affidavit. I am also President of the John Kleas Co.,
Inc. and am authorized to make this affidavit on behalf of the John Kleas
Co., Inc. (“Plaintiff”). I have never been convicted of a felony or a crime
involving moral turpitude. I have personal knowledge of the facts stated in
this affidavit and they are true and correct.
Plaintiff has previously filed Fourth Amended Petition which is attached to
this Affidavit as Exhibit A and incorporated into this Affidavit for all purposes.
I am the President of the Plaintiff. I have personal knowledge of the facts
contained in the Plaintiff’s Fourth Amended Petition and the facts contained
therein are true and correct. The Plaintiff purchased several tracts of land
in Bastrop County which came to be known as the Purcell Tract and the
Jackson Square Tract[] (collectively called “the disputed tracts”).
In February 2011, [Prokop] and [Carp] initiated a series of actions that
prevented Plaintiff from completing the development of the disputed tracts
for sale as retail pad sites. Specifically, Defendant Carp initiated foreclosure
proceedings to foreclose on the disputed tracts which were the security for
two promissory notes owed to [Prokop-Purcell]. The procedure followed by
Defendant Carp to foreclose on the tract were not consistent with the notice
and cure provisions of the Deed of Trust.
Unknown to Plaintiff, Robert Leffingwell, a real estate broker doing business
in Bastrop, Texas, delivered to Defendant Carp a letter dated December 10,
2010 outlining a number of options for acquisition or use of the disputed
tracts in the event of foreclosure. A copy of the December 10, 2010 letter
is attached to this Affidavit as Exhibit B and incorporated into this Affidavit
for all purposes. In point of fact, this letter was delivered to Defendant Carp
two month[s] prior to the first notice of foreclosure being issued.
On January 27, 2011, Carp issued a Notice [] to Plaintiff of a proposed non-
judicial foreclosure sale of the disputed tracts on February 8, 2011. A copy
16
of the January 27,2011 letter from Defendant Carp is attached to this
Affidavit as Exhibit C and incorporated into this Affidavit for all purposes.
Prior to beginning foreclosure proceedings, Defendant Carp contacted the
first lien holder, Noble Capital, in an attempt to gain information regarding
the payoff amount for the first lien and whether that lien could be purchased
at a discount. A copy of a March 28, 2011 statement written by Rodney
Navarro is attached to this Affidavit as Exhibit D and incorporated into this
Affidavit for all purposes. Defendant Carp began foreclosure proceedings
against Plaintiff, even though Defendant was fully aware that Plaintiff was
in the process of selling several pad sites. A copy of the contracts regarding
the proposed sales are attached to this Affidavit as Exhibits E and F and
incorporated into this Affidavit for all purposes.
After several unsuccessful attempts to foreclose on the disputed tracts, and
two court hearings, the Plaintiff and the then-defendants entered into a
written Rule 11 Agreement intended to bring this litigation to an end. A copy
of the Rule 11 Agreement is attached to this Affidavit as Exhibit G and
incorporated into this Affidavit for all purposes. Despite the agreement of
all parties to the litigation, the Rule 11 Agreement was not performed
according to its terms. The Plaintiff secured financing for the purpose of
performing under the terms of the Rule 11 Agreement. Defendants Prokop
and Carp’s actions prevented the finalization of several sales transactions
which remained pending the completion of Plaintiff’s refinancing. The
actions were consistent with the purpose of taking the disputed tracts from
the Plaintiff and completing the strategy outlined in the December 10, 2010
letter from Robert Leffingwell. At the time of the breach of the Rule 11
Agreement, the Plaintiff was fully capable of carry[ing] out its terms and
capable of fully paying the notes owed to [Prokop-Purcell]. A copy of the
HUD 1 Statement scheduling a November 10, 2011 closing is attached to
this Affidavit as Exhibit H and incorporated into this Affidavit for all
purposes.[12]
The record does not contain any exhibits to Kleas’s affidavit.
12 Carp filed formal objections to Kleas’s affidavit on the grounds that it is “unauthenticated
hearsay,” contains facts “beyond the personal knowledge” of the affiant, and contains improper legal
opinions and conclusions. Carp’s formal objections asked the trial court to “rule Exhibits 7 and 8
inadmissible” and to rule “the selected portions of [Kleas’s] affidavit inadmissible.” The document did not
otherwise refer to “Exhibits 7 and 8,” however, and the parties neither explain this reference nor direct us
to any location in the record where the “exhibits” may be found. In any event, on the day of the summary
judgment hearing, the trial court rendered an order sustaining Carp’s objections as to “Exhibits 7 and 8”
and also stating that “[Kleas’s] affidavit is accepted in part, rejected in part.” The order did not state which
parts of Kleas’s affidavit were excluded, if any. For purposes of this opinion, we will assume that the entirety
of Kleas’s affidavit was admitted as summary judgment evidence.
17
4. Analysis
Kleas, in his petition and affidavit, made the following specific factual allegations
against Carp: that he initiated foreclosure proceedings while knowing that Kleas “was in
the process of selling several pad sites”; that he followed improper foreclosure procedure;
that he issued a notice of a proposed non-judicial foreclosure sale; and that he contacted
the first lienholder of the properties “in an attempt to gain information regarding the payoff
amount for the first lien and whether that lien could be purchased at a discount.” Carp’s
affidavit established that each of these activities was undertaken in furtherance of his
representation of Prokop-Purcell regarding the properties at issue. Kleas’s affidavit does
nothing to refute that. In particular, Kleas’s affidavit does not show that Carp
“participate[d] independently in fraudulent activities” which were not part of the discharge
of his duties to Prokop-Purcell. See Sacks, 401 S.W.3d at 340; Alpert, 178 S.W.3d at
406; Bradt, 892 S.W.2d at 71. Kleas’s affidavit is therefore insufficient to establish a fact
issue as to whether Carp retained qualified immunity as to all of Kleas’s causes of action.
See Bradt, 892 S.W.2d at 71. We conclude that traditional summary judgment was proper
as to Carp.13
As to Prokop, we find that no-evidence summary judgment was proper. Kleas’s
affidavit—which, again, was the only evidence produced by Kleas in response to the no-
evidence summary judgment motions—did not make any specific factual allegations
against Prokop. The affidavit summarily stated that “[Prokop] and [Carp] initiated a series
of actions that prevented [Kleas] from completing the development of the disputed tracts
13 Because traditional summary judgment in favor of Carp was proper, we need not determine
whether his motion for no-evidence summary judgment was meritorious. See TEX. R. APP. P. 47.1.
18
for sale as retail pad sites” and that “Prokop and Carp’s actions prevented the finalization
of several sales transactions which remained pending the completion of [Kleas]’s
refinancing,” but it did not explain what specific “actions” Prokop took that support the
causes of action raised by Kleas. No more than a scintilla of evidence supporting those
causes of action appears in the record; accordingly, the trial court did not err in granting
summary judgment in favor of Prokop. See Forbes, Inc., 124 S.W.3d at 172. Kleas’s
second issue is overruled.
C. Sanctions
Kleas’s remaining three issues challenge the trial court’s sanctions award. Kleas
posits by his third issue that the sanctions order contains insufficient findings; by his fourth
issue that the trial court erred in determining that all of his causes of action were
“groundless, baseless, worthless, and frivolous”; and by his fifth issue that the amount of
sanctions ordered was excessive.
1. Adequacy of Findings
By his third issue, Kleas argues that the sanctions order does not comply with the
particularity requirements of Texas Rule of Civil Procedure 13 and section 10.005 of the
Texas Civil Practice and Remedies Code.
Rule 13 provides that an attorney’s signature on an instrument filed with the court
“constitutes a certificate” by the attorney “that to the best of their knowledge, information,
and belief formed after reasonable inquiry the instrument is not groundless and brought
in bad faith” nor “groundless and brought for the purpose of harassment.” TEX. R. CIV. P.
13. The rule further states that “[n]o sanctions under this rule may be imposed except for
good cause, the particulars of which must be stated in the sanction order.” Id. Section
19
10.001 of the civil practice and remedies code similarly provides that an attorney’s
signature on a pleading or motion “constitutes a certificate” that, among other things,
“each claim, defense, or other legal contention in the pleading or 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, Westlaw through 2013 3d C.S.). Section 10.005 states that “[a] court
shall describe in an order imposing a sanction under this chapter the conduct the court
has determined violated Section 10.001 and explain the basis for the sanction imposed.”
Id. § 10.005 (West, Westlaw through 2013 3d C.S.). We have observed that the
particularity requirement imposed by chapter 10 and Rule 13 “serves several important
purposes”:
First, it ensures that the trial court is held accountable and adheres to the
standard of the rule. Second, it requires the trial court to reflect carefully on
its order before imposing sanctions. Third, it informs the offending party of
the particular conduct warranting sanction for the purpose of deterring
similar conduct in the future. And fourth, it enables the appellate court to
review the order in light of the particular findings made by the trial court.
Rudisell v. Paquette, 89 S.W.3d 233, 237 (Tex. App.—Corpus Christi 2002, no pet.)
(citations omitted).
Kleas cites Tarrant County v. Chancey, in which the Fort Worth Court of Appeals
reversed a sanctions order where the trial court merely found that the appellant’s motion
was filed “for the purposes of harassment, causing unnecessary delay, needles [sic]
increase in the cost of litigating of Plaintiffs [sic] case, and for the purpose of denying
Plaintiff access to relevant documents.” 942 S.W.2d 151, 155 (Tex. App.—Fort Worth
1997, no writ). The court found that “[s]uch general findings are insufficient to satisfy the
particularity requirements of Rule 13” because “[t]he court must specify, in its order, the
20
particular acts or omissions on which the sanctions were based.” Id. (citing Zarsky v.
Zurich Mgmt., Inc., 829 S.W.2d 398, 399 (Tex. App.—Houston [14th Dist.] 1992, no writ)).
Kleas also cites several other cases where sanctions orders have been reversed for lack
of particularity. See III Forks Real Estate, L.P. v. Cohen, 228 S.W.3d 810, 818 (Tex.
App.—Dallas 2007, no pet.) (sanctions order stated only that “Defendant’s claims and
causes of action brought against Plaintiffs and Third–Party Defendant in this cause are
groundless and/or were brought in bad faith for the purposes of harassing Plaintiffs and
Third–Party Defendant in violation of Rule 13 of the Texas Rules of Civil Procedure, as
such claims and causes of action were, or should have been, fully litigated in a prior
arbitration proceeding between the parties”); Rudisell, 89 S.W.3d at 237 (sanctions order
stated only that “it appear[s] that the Request for Sanctions in Respondent’s Response
has merit”); Jimenez v. Transw. Prop. Co., 999 S.W.2d 125, 130 (Tex. App.—Houston
[14th Dist.] 1999, no pet.) (sanctions order stated only that a pleading was filed “in
violation of Rule 13” and that a paralegal “misrepresented facts to the court”); Friedman
& Assocs., P.C. v. Beltline Rd., Ltd., 861 S.W.2d 1, 3 (Tex. App.—Dallas 1993, writ dism’d
by agr.) (sanctions order contained no findings).
Appellees do not dispute that the sanctions order rendered by the trial court in this
case lacked the particularity required by Rule 13. Instead, Carp contends that Kleas
waived the issue by failing to object to the lack of particularity in the sanctions order in
either of its post-judgment motions; and both appellees assert that the failure of the
sanctions order to comply with the particularity requirement is harmless error because the
trial court filed two extensive sets of findings of fact and conclusions of law addressing
the grounds for sanctions.
21
We agree with Carp that the issue has not been preserved for appellate review.
See Connell Chevrolet Co., Inc. v. Leak, 967 S.W.2d 888, 895 (Tex. App.—Austin 1998,
no pet.) (finding that appellant failed to preserve his appellate issue regarding the lack of
particularity in a sanctions order because he failed to object at trial to the lack of
particularity); Land v. AT & S Transp., Inc., 947 S.W.2d 665, 667 (Tex. App.—Austin 1997,
no writ) (same).14
Even if the issue were preserved, any error regarding the lack of particularity in the
sanctions order would be harmless. In 1989, this Court held that the failure of a sanctions
order to comply with the particularity requirements was harmless because “[t]he trial court
did not obscure its reasoning at the hearing, and the situation has been adequately
presented to us.” Powers v. Palacios, 771 S.W.2d 716, 719 (Tex. App.—Corpus Christi
1989, writ denied); see TEX. R. APP. P. 44.1(a) (“No judgment may be reversed on appeal
on the ground that the trial court made an error of law unless the court of appeals
concludes that the error complained of: (1) probably caused the rendition of an improper
judgment; or (2) probably prevented the appellant from properly presenting the case to
the court of appeals.”). A majority of Texas appellate courts that have considered the
14 In Rudisell, this Court held that the appellant preserved his issue regarding lack of particularity
in the sanctions order by filing a motion for new trial which argued that his motion was “legally supportable”
and which “detailed the statutory evidence in support of his claim and asserted that his claim had merit.”
Rudisell v. Paquette, 89 S.W.3d 233, 236 (Tex. App.—Corpus Christi 2002, no pet.) (citing West v. Maint.
Tool & Supply Co., 9 S.W.3d 96, 109 (Tex. App.—Corpus Christi 2002, no pet.) (finding that appellant
preserved his issue regarding lack of particularity in the sanctions order by filing a motion for new trial in
which he “denie[d] that his claims constitute groundless pleadings” and “addresse[d] the evidence
supporting his claims”)). Here, Kleas’s motion for new trial generally alleged that the trial court erred in
assessing sanctions but did not detail or address any evidence which he believed supported his claims.
In any event, because this is a transfer case, we are required to apply the precedent of the
transferor court—here, the Austin Court of Appeals—to the extent it differs from ours. TEX. R. APP. P. 41.3.
Accordingly, pursuant to the Austin court’s Connell Chevrolet and Land opinions, we conclude that the issue
has not been preserved because it was not raised at trial. See Connell Chevrolet Co., Inc. v. Leak, 967
S.W.2d 888, 895 (Tex. App.—Austin 1998, no pet.); Land v. AT & S Transp., Inc., 947 S.W.2d 665, 667
(Tex. App.—Austin 1997, no writ).
22
issue have agreed that the lack of particularity in a sanctions order may constitute
harmless error, and have found that subsequently-rendered findings of fact and
conclusions of law may be considered to satisfy the particularity requirement. See
Gaspard v. Beadle, 36 S.W.3d 229, 239 (Tex. App.—Houston [1st Dist.] 2001, pet.
denied) (finding no abuse of discretion where the sanctions order “did not list the
particulars of the good cause” supporting sanctions, because “[i]n her findings, the trial
judge specified the conduct upon which she was basing the sanctions”); Univ. of Tex. at
Arlington v. Bishop, 997 S.W.2d 350, 356 (Tex. App.—Fort Worth 1999, pet. denied)
(“While we do not condone the practice of using findings of fact and conclusions of law to
satisfy section 10.005, we conclude that the findings and conclusions supplied the
particulars lacking in the sanctions order . . . .”); Campos v. Ysleta Gen. Hosp., Inc., 879
S.W.2d 67, 70 (Tex. App.—El Paso 1994, writ denied) (abating appeal to allow trial court
to file findings of fact and conclusions of law stating particulars of good cause for sanction
order); but see Friedman & Assocs., P.C. v. Beltline Road Ltd., 861 S.W.2d 1, 3 (Tex.
App.—Dallas 1993, writ dism’d by agr.) (“[A] trial court cannot avoid the clear directive of
the rule by gratuitously making findings in separately filed findings of fact after a sanction
order is entered and in effect.”).15
The trial court in the instant case, after rendering its sanctions order, issued a total
of two hundred numbered findings of fact and conclusions of law, including the following:
142. Having reviewed the affidavits filed with respect to summary
judgment and heard oral testimony in support, and having no
evidence that contradicts those claims, this Court finds that [Carp]
never acted with intent to harm Kleas, never acted for [Carp]’s own
interest, and never acted in violation of the disciplinary rules or Texas
15The parties have directed us to no cases from the Austin Court of Appeals, and we find none,
addressing the issue of whether the lack of particularity in a sanctions order may constitute harmless error
when separate findings of fact and conclusions of law are subsequently filed. See id.
23
laws. Instead, this Court finds [Carp] acted solely and exclusively in
an effort to zealously represent and protect the interests of [Prokop-
Purcell], his client, and to obtain payment of the funds owed to
[Prokop-Purcell].
143. With respect to the claims of defamation and business
disparagement, this Court finds no evidence that either [Carp] or
[Prokop] ever said or did anything that was faIse with regard to
Kleas. . . .
146. With respect to the claims of negligence, gross negligence, negligent
management, negligent supervision, and negligent
misrepresentation, this Court finds no evidence that either [Carp] or
[Prokop] made any false representation to Kleas. . . .
147. . . . [T]his Court finds that no false or frivolous pleadings were filed
by [Carp] or [Herzog & Carp]. . . .
149. This Court finds that [Carp] never improperly spoke with the first lien
holder. . . .
150. . . . [T]he Court finds [Carp] acted in good faith and as competent
counsel for [Prokop-Purcell] without malice and without ill intent. . . .
152. This Court finds that all fourteen causes of action alleged against
[Carp], [Herzog & Carp], and [Prokop] were groundless, brought in
bad faith, and brought for the purpose of harassment. No reasonable
person could believe that the claims had any merit. In addition, the
Court finds no evidence of a reasonable inquiry conducted in
accordance with Rule 13 before the unfounded frivolous allegations
were made.
153. This Court finds that there is no basis in law and no basis in fact for
any of the causes of action alleged in this case against [Carp],
[Herzog & Carp], and [Prokop]. There were no allegations for the
creation, extension, modification, or reversal of any existing law.
154. This Court finds that thirteen of the causes of action alleged against
[Carp] and [Herzog & Carp] were precluded by attorney qualified
immunity. [Carp] never engaged in any independent fraudulent
activities, any conspiracy to defraud, or conducted any fraudulent act
outside the scope of his representation of [Prokop-Purcell]. . . .
156. . . . Since [Carp], [Herzog & Carp], and [Prokop] were not parties to
the notes or deed of trust it is impossible for a legal theory to be
properly stated against them for breach. . . .
24
157. This Court finds that the cause of action for wrongful foreclosure is
factually impossible since no foreclosure ever occurred. . . .
158. This Court finds that [Carp] never filed any document in the real
property records, wrote anything, or said anything that could possibly
constitute a cloud on title or slandering of Kleas’[s] title. . . .
159. This Court finds, with respect to the tort[i]ous interference claim,
[Carp] never acted for his own interest or the interest of his firm.
[Carp] never acted to harm Kleas. [Carp] was justified in posting the
property for foreclosure, privileged to post the property for
foreclosure, and any claim against [Carp] or his firm was precluded
by attorney qualified immunity.
160. This Court finds that the cause of action for tort[i]ous interference
against [Prokop] had no factual or legal support. The only person he
spoke with, Ms. Tracy Hendrix at the title company repeatedly
indicated in sworn testimony that the phone call had no real effect
upon her and certainly did not harm Kleas or title to the property.
There is no evidence that [Prokop] did anything to harm Kleas.
Instead, this Court finds that [Prokop] attempted to help Kleas in
hopes that Kleas’[s] success would allow him to pay [Prokop]’s
mother the money that was owed to [her].
161. This Court finds that the cause of action for defamation and business
disparagement never had any factual support. There was no
evidence presented that [Carp] or [Prokop] said anything false about
Kleas. In addition, the claims against [Carp] and the firm were
precluded by attorney qualified immunity.
162. . . . [Carp] and his firm were not parties to the Rule 11 Agreement
and therefore cannot be liable for breach. The undisputed
evidence . . . was that a third party bank destroyed the effectiveness
of the Rule 11 Agreement. . . .
164. With respect to the claims for negligence, gross negligence,
negligent management, negligent supervision and negligent
misrepresentation, the Court finds [Carp] and [Herzog & Carp],
together with [Prokop], owed no duty to Kleas; there was no false
representation; Kleas never relied on anything [Carp] or [Prokop] did;
and the claims against [Carp] and the firm were barred by attorney
qualified immunity.
165. With respect to the claim of frivolous pleadings, the Court finds that
none of the pleadings filed by [Carp] or [Herzog & Carp] were
frivolous.
25
Although these findings were not contained in the actual order awarding sanctions, we
conclude that any error in that regard is harmless because the trial court’s comprehensive
findings of fact and conclusions of law, including those listed above, fully apprised the
parties and this Court of the bases of the trial court’s decision to award sanctions.16 See
TEX. R. APP. P. 44.1(a); Powers, 771 S.W.2d at 719; see also Gaspard, 36 S.W.3d at 239;
Bishop, 997 S.W.2d at 356; Campos, 879 S.W.2d at 70. Kleas’s third issue is overruled.
2. Legal Conclusions
Kleas contends by his fourth issue that the trial court erred by concluding that all
of his causes of action were “frivolous, baseless, groundless” and brought “in bad faith”
and “for the purpose of harassment.” In particular, he contends that the record contains
evidence supporting his tortious interference and slander of title claims against Prokop.17
Kleas points to testimony by Prokop at the hearing on his “special motion to dismiss” that
Prokop called Tracey Hendrix, a representative of Austin Title Company, to ask whether
“there was a closing fixing to take place by Kleas Company.” Prokop testified that he
“may have” told Hendrix that he and Cecil “filed the paperwork to foreclose” on the
16 Kleas argues that the trial court’s decision to enter findings after the sanctions had been awarded
“runs contrary to one of the recognized purposes for including detailed findings in the sanctions order”: i.e.,
that “it requires the trial court to reflect carefully on its order before imposing sanctions.” Rudisell, 89 S.W.3d
at 237. We agree, and for that reason, we do not condone the practice of entering sanctions findings after
the sanctions award. See Univ. of Tex. at Arlington v. Bishop, 997 S.W.2d 350, 356 (Tex. App.—Fort Worth
1999, pet. denied). However, here, there is no indication that the trial court failed to reflect carefully on its
sanctions order prior to rendering it. The trial court rendered its order only after a full evidentiary hearing
at which all parties were represented. For the reasons stated herein, we do not believe that a trial court’s
failure to make sufficient findings in the sanctions order is necessarily harmful error. See TEX. R. APP. P.
44.1(a); Powers v. Palacios, 771 S.W.2d 716, 719 (Tex. App.—Corpus Christi 1989, writ denied).
17 Kleas also argues by this issue that he did not have a “‘reasonable opportunity for further
investigation or discovery’ with respect to the majority of [his] claims” against each of the appellees. See
TEX. CIV. PRAC. & REM. CODE ANN. § 10.001(3) (West, Westlaw through 2013 3d C.S.). For the reasons
cited in our discussion of Kleas’s first issue, we disagree. In any event, whether or not Kleas actually had
the opportunity to engage in full discovery is immaterial to an analysis of whether the claims raised in his
pleadings were “likely to have evidentiary support after a reasonable opportunity for further investigation or
discovery.” Id. (emphasis added).
26
properties at issue. According to Prokop, Hendrix replied by saying “Yes, we’re
suppose[d] to have [a closing]” and that “she was waiting on some pay-off figures.” Kleas
testified as follows at the same hearing: “[F]rom my standpoint, [Prokop] claimed he
represented his sister and his family to the title company, for my assumption he
represents facts and conclusions for the title company to react. Therefore, he blocked
my closing.” Kleas asserts that this testimony “support[s] a prima facie case of slander
of title and tortious interference with existing contracts.” See Prudential Ins. Co. of Am.
v. Fin. Review Servs., Inc., 29 S.W.3d 74, 77–78 (Tex. 2000) (stating that the elements
of tortious interference with an existing contract are: “(1) an existing contract subject to
interference, (2) a willful and intentional act of interference with the contract, (3) that
proximately caused the plaintiff’s injury, and (4) caused actual damages or loss”; and
noting that “as an affirmative defense, a defendant may negate liability on the ground that
its conduct was privileged or justified”).
We review the imposition of sanctions under an abuse of discretion standard. Low
v. Henry, 221 S.W.3d 609, 614 (Tex. 2007). We will reverse the trial court’s ruling only if
the trial court acted without reference to any guiding rules and principles, such that its
ruling was arbitrary or unreasonable. Id. To determine if the sanctions were appropriate
or just, we examine whether there is a direct nexus between the improper conduct and
the sanction imposed. Id.
For purposes of Rule 13, “groundless” means “no basis in law or fact and not
warranted by good faith argument for the extension, modification, or reversal of existing
law.” TEX. R. CIV. P. 13. Generally, courts presume that pleadings and other papers are
filed in good faith, and the party seeking sanctions bears the burden of overcoming that
27
presumption. Low, 221 S.W.3d at 614; see TEX. R. CIV. P. 13. Sanctionable conduct
under chapter 10 includes signing a pleading with “any improper purpose, including to
harass or to cause unnecessary delay or needless increase in the cost of litigation”; and
signing a pleading which does not have evidentiary support nor “is likely to have
evidentiary support after a reasonable opportunity for further investigation or discovery.”
TEX. CIV. PRAC. & REM. CODE ANN. § 10.001(1), (3).18 Upon finding that a person has
signed a pleading in violation of either Rule 13 or section 10, the court may impose
sanctions against the party signing the pleading, the represented party, or both. See id.
§ 10.004(a) (West, Westlaw through 2013 3d C.S.); TEX. R. CIV. P. 13.
At the sanctions hearing, Carp testified that he has been a licensed attorney since
1981. In his career, he has done “almost exclusively civil work,” and business litigation
in particular. He became a partner in the firm of Herzog & Carp around early 2000, and
he has been the president of the firm since its inception. At that time, he knew Cecil
because her children were in some school activities with his children. Cecil introduced
Carp to her mother, Prokop-Purcell, and Prokop-Purcell’s husband. Carp began
representing Prokop-Purcell and her husband in “a variety of different legal” matters.
They hired Carp to help them in the instant dispute in late 2010.
18 Conduct that is sanctionable under chapter 10 also includes signing a pleading with a legal
contention that is not “warranted by existing law or by a nonfrivolous argument for the extension,
modification, or reversal of existing law or the establishment of new law.” Id. § 10.001(2). However, “[t]he
court may not award monetary sanctions against a represented party for a violation of Section 10.001(2).”
Id. § 10.004(d) (West, Westlaw through 2013 3d C.S.). We note that Kleas does not argue on appeal that
the sanctions are improper pursuant to section 10.004(d).
28
Carp identified a five-page list of accusations drawn from Kleas’s pleadings which
he claimed to be groundless.19 When asked on cross-examination whether the list of
accusations showed malice or bad faith, Carp replied:
They definitely represent bad faith. . . . Because I am just trying to represent
my client and get what my client is entitled to under the law. Which is to
have your client pay the money that he owes. And if he could pay the note,
then he could have had the property and gone on and done whatever he
wanted to with it.
Carp later stated:
This case should have been over with when there was a settlement between
my clients and [Kleas] and his company. And, instead, what [Kleas] and his
company have done is to try and prolong the situation, try to waste judicial
resources, try to waste resources, time, and effort of the people involved.
And it’s what . . . gives the legal profession sometimes a bad name. And if
that’s not dealt with appropriately, then I think it’s only being encouraged.
Carp testified that, during the course of the dispute, Kleas was represented by no fewer
than thirteen different attorneys at various times. He stated that, when a client “goes
through . . . [thirteen] lawyers on a deal in the space of two years,” that indicates “[t]hat
there’s probably a problem . . . [w]ith the client.”
Harry Herzog, Carp’s partner, testified that he filed an answer to Kleas’s claims
against Herzog & Carp around September 2011. Herzog stated that, “within a couple of
weeks,” Kleas filed a motion for sanctions to strike the firm’s pleadings and enter default
judgment against it for discovery abuse even though “without question no discovery had
ever been sent to the law firm. None.” He “didn’t see any way” that the applicable law
19 The list of accusatory language used by Kleas in his pleadings included: “stunning plethora of
falsehoods”; “massive fraud”; “systematic annihilation of Kleas”; “distortions and contradictions”;
“unrelenting campaign of foreclosure”; “lied”; “systematic, fraudulent scheme”; “outright deception”;
“outrageous conduct”; “deceitful sham”; “malicious efforts to seize the properties”; “false pretense of debt
collection”; “dereliction of duty”; “professional irresponsibility of an unprecedented order of magnitude”; and
many others.
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“could support striking of the pleadings of a law firm for discovery abuse when the law
firm had never received any discovery to respond to.” Herzog testified that this is “an
example of bad faith and harassment.” He conceded, however, that prior to the time he
joined the case as counsel of record, there may have been a “good faith, legitimate,
honest” discovery dispute.
Herzog further stated that he got no response from Kleas’s counsel when he
“offered them in various e-mails ten to twelve dates for our deposition,” so he finally
“noticed our depositions, ourselves” but neither Kleas nor his counsel showed up at the
depositions. Herzog testified that this is “evidence of bad faith and malice” by Kleas and
his counsel. He stated that he would put “90 percent or more of the blame” on Kleas and
“approximately 10 percent of the blame” on Kleas’s former attorneys. 20
Herzog referred to the list of accusatory terms used by Kleas in his pleadings and
stated: “[T]o make slander, after slander, after slander, after slander, and all of these
horribly abusive allegations, cannot be in good faith, has to be in bad faith.” Herzog stated
that, when his law firm had been groundlessly accused in the past of committing fraud,
his malpractice insurance premiums increased “600 percent.” He stated:
We’ve already had limits placed on what we can and cannot do as a law
firm within our insurance coverage because of [Kleas’s] lawsuit. We have
a rider on our policy, we cannot take a real estate foreclosure. We can’t
post a piece of property for foreclosure anywhere in the State of Texas
without violating our policy and l[o]sing our insurance coverage because of
this lawsuit. So it’s already affecting us. . . . [T]he fact that we owed no
duty to [Kleas], and never actually foreclosed on any property, and we never
did any of the things that we’re accused of doing means nothing to the
underwriter setting the rates on malpractice policies.
20 Herzog testified that Herzog & Carp settled with one of Kleas’s prior trial attorneys.
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Prokop testified that he has never met Kleas and never had any conversations with
him prior to the time Kleas filed suit against him. He was not involved in the litigation
between Kleas and his mother; he was not a party to any deed of trust, promissory note,
or Rule 11 agreement; he never filed anything in the public records concerning the
properties at issue; and he never knew about any contracts regarding development on
the properties. Prokop stated that, when he called Austin Title Company, he did not intend
to stop any closing; rather, it was for “basically informational” purposes. When asked
whether the claims against him were “brought just in bad faith, just to harass you,” Prokop
replied: “I would assume.”
On cross-examination, Prokop conceded that, had his family carried through on
the foreclosure and reacquired the properties, the bank was willing to loan his family funds
sufficient to pay off the first lien. He disagreed, however, that the bank made this decision
because of the extent of the improvements already made by Kleas on the property;
instead, Prokop testified that the decision was “more based on the standing in the
community that my family had had through the years, versus any equity built up in the
property.” Prokop agreed that, based on his experience, a title company will not approve
a title if it cannot get a release from someone holding a prior lien; but he denied Kleas’s
accusation that he told Austin Title Company that he would not grant a release of his
mother’s lien. Prokop further denied that he even had the authority to refuse to release
his mother’s lien. He could not speak to what Kleas thought about the matter, however. 21
Prokop’s counsel testified that, at a deposition, Kleas threatened to sue “four or
five other people” in the event his claims against Carp and Prokop are dismissed, and
21 Kleas did not appear at the hearing.
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that: “The only way that I can think that the Court could stop this man from carrying
forward is to sanction him into the ground.” Prokop’s counsel stated that Kleas “knew
what was in those pleadings because he said those same things” at his deposition.
We conclude that Carp and Prokop each met their burden to overcome the
presumption that Kleas’s pleadings were filed in good faith. See TEX. R. CIV. P. 13; Low,
221 S.W.3d at 614. The trial court’s conclusion that all of Kleas’s causes of action were
groundless and brought in bad faith was supported by the evidence.22 Specifically, the
evidence supported a finding that the factual contentions in Kleas’s pleadings did not
have evidentiary support, nor were they “likely to have evidentiary support after a
reasonable opportunity for further investigation or discovery.” TEX. CIV. PRAC. & REM.
CODE ANN. § 10.001(3). The evidence also supported a finding that Kleas, rather than
his attorney, was primarily responsible for bringing the claims. Finally, the sanctions were
intended to deter Kleas from bringing further unsupported claims; therefore, there was a
direct nexus between the improper conduct and the sanctions imposed. See Low, 221
S.W.3d at 614. Accordingly, the trial court did not abuse its discretion in awarding
sanctions under Rule 13 and chapter 10. We overrule Kleas’s fourth issue.
3. Amount of Sanctions
Kleas argues by his fifth issue that the sanctions award was excessive. “[I]n order
to safeguard constitutional due process rights, a sanction must be neither unjust nor
excessive.” Nath v. Tex. Children’s Hosp., 446 S.W.3d 355, 363 (Tex. 2014). Sanctions
under chapter 10 “must be limited to what is sufficient to deter repetition of the conduct
22 Carp asserts on appeal that “[t]hese numerous pleadings set a sad new standard for the most
frivolous, groundless, and malicious claims filed and sanctioned in Texas history.” We express no opinion
on the historical status of Kleas’s pleadings, but merely hold that the trial court did not abuse its discretion
in awarding sanctions in this case.
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or comparable conduct by others similarly situated.” TEX. CIV. PRAC. & REM. CODE ANN.
§ 10.004(b). In Low, the Texas Supreme Court stated that
the determination of the amount of a penalty to be assessed under Chapter
10, which is not limited to attorney’s fees and costs, should nevertheless
begin with an acknowledgment of the costs and fees incurred because of
the sanctionable conduct. This provides a monetary guidepost of the impact
of the conduct on the party seeking sanctions and the burdens on the court
system.
221 S.W.3d at 621.23 The amount of sanctions “is limited by the trial court’s duty to
exercise sound discretion.” Id. at 619.
23The Low Court stated that, in assessing the amount of sanctions, courts "should consider relevant
factors” which may include the following factors identified by the American Bar Association:
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;
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;
m. the degree to which the offended person attempted to mitigate any prejudice
suffered by him or her;
n. the degree to which the offended person's own behavior caused the expenses for
which recovery is sought.
Low v. Henry, 221 S.W.3d 609, 620 n.5 & 621 (Tex. 2007) (citing American Bar Association, Standards &
Guidelines for Practice Under Rule 11 of the Federal Rules of Civil Procedure, reprinted in 121 F.R.D. 101
33
At the sanctions hearing, Carp identified billing records for work on the claims
against him from April 2012, after Kleas settled his claims against Prokop-Purcell, to
January 2013. The records, introduced into evidence as Carp’s Exhibit 13, showed that
a total of $120,900 was billed for services and $494 for costs. Carp stated that around
$35,000 had been billed for work defending Carp personally between the time Carp was
named a defendant and the time Prokop-Purcell’s claims settled, but those amounts were
not included in the exhibit. Carp billed at $300 per hour and Herzog billed at $500 per
hour. He agreed that the rates he and Herzog charged for their services are customary
and reasonable. Carp stated that $40,000 would be a reasonable and necessary fee to
defend against an appeal in this Court; $10,000 would be a reasonable and necessary
fee to file a petition for review with the Texas Supreme Court; and $30,000 would be a
reasonable and necessary fee if the supreme court grants review.
Herzog testified that he was first licensed to practice in 1982 and does primarily
business litigation. He has been board certified in civil trial law since 1989 and in civil
appellate law since 1992. He stated that he is a “longtime director and past officer and
president of the Texas Association of Civil Trial and Appellate Specialists” and that he
has previously “testified as an expert witness in fee disputes involving large law firms.”
Herzog stated that he has charged $500 per hour, billed in quarter-hour increments,
throughout the time this case has been pending. He testified: “I believe that fee is the
lowest fee in Harris County for any lawyer with my experience. And I believe it is below
a reasonable fee. And I purposefully have it priced below a reasonable fee to help get
work. Particularly in this disastrous economic climate.”
(1988)).
34
Herzog stated that around $35,000 included in Exhibit 13 was attributable to work
done by Carp in Carp’s defense. He agreed that, out of “fairness,” Carp would not seek
to recover those fees. He stated: “[W]hen you subtract all of [Carp]’s time out
of . . . Exhibit 13, you should come to right at $90,000. The precise number is [$]89,969.
But I round that off to [$]90,000.” Herzog testified that, since the time the exhibit was
prepared, he had spent 32.25 additional hours on the case.24
Herzog opined that $35,000 to $40,000 would be a reasonable and necessary fee
for an appeal to this Court; $10,000 to $15,000 would be a reasonable and necessary fee
if a petition for review is filed with the Texas Supreme Court; and $40,000 to $45,000
would be a reasonable and necessary fee if the supreme court grants review.
Prokop identified a bill from his attorney detailing the services provided defending
against Kleas’s suit. The bill showed 83 hours of work at a $300 hourly rate, for a total of
$24,900, as well as $444.50 in costs. Prokop said he had to borrow money from his
mother and sister so that he could pay roughly half of the bill; the rest remains unpaid.
Prokop’s counsel testified that he has been a licensed attorney since 1975 and
typically charges $300 to about $650 per hour. He stated that he charged Prokop $300
per hour and that the amount he charged is fair, reasonable, and necessary. He stated
that reasonable and necessary appellate fees would be $40,000 for an appeal to the court
of appeals, $10,000 for a petition for review in the Texas Supreme Court, and $30,000 if
the supreme court grants review.
24 At Herzog’s $500 hourly rate, those additional hours cost $16,125. Adding that amount to the
“precise number” as testified to earlier by Herzog, the total amount incurred would be $106,094.
35
Kleas argues that, because the attorneys testified that Kleas’s counsel was about
ten percent responsible, and because Carp and Prokop had already settled with Kleas’s
prior trial counsel, the award of “100 percent” of the requested fees is excessive. But
sanctions under Rule 13 and chapter 10 are not limited to attorney’s fees and costs. Id.
at 621. Here, evidence showed that Carp spent dozens of hours, which would be billed
at nearly $35,000, defending himself from Kleas’s groundless claims. Although pro se
litigants may generally not recover attorney’s fees as sanctions, see, e.g., Beasley v.
Peters, 870 S.W.2d 191, 196 (Tex. App.—Amarillo 1994, no writ) (“[A]n award of
attorney’s fees to an attorney appearing pro se as a litigant is not an appropriate
sanction.”), the trial court could have considered this evidence in determining what
amount was appropriate in order to deter future sanctionable behavior.
Kleas further argues that, though Herzog testified that $500 is a reasonable hourly
rate for an attorney with his experience in Harris County, he did not testify that $500 was
a reasonable hourly rate in Bastrop County, which is where this litigation occurred.
However, at least three courts of appeals have held that proof of the necessity or
reasonableness of attorney’s fees is not required when such fees are assessed as
sanctions. Gorman v. Gorman, 966 S.W.2d 858, 868–69 (Tex. App.—Houston [1st Dist.]
1998, pet. denied); Stites v. Gillum, 872 S.W.2d 786, 797 (Tex.App.—Fort Worth 1994,
writ denied); Glass v. Glass, 826 S.W.2d 683, 688 (Tex. App.—Texarkana 1992, writ
denied). Moreover, there was no evidence adduced that $500 is an unreasonable hourly
rate.
Considering all of the evidence, including evidence that Herzog & Carp’s
malpractice insurance has already been affected by Kleas’s suit, we conclude that the
36
trial court’s award of sanctions was not excessive or unjust. See Nath, 446 S.W.at 363.
Kleas’s fifth issue is overruled.
III. CONCLUSION
We affirm the judgment of the trial court.
DORI CONTRERAS GARZA,
Justice
Delivered and filed the
2nd day of April, 2015.
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