Susana C. Nichols and Four Nichols Inc. v. Kenneth L. Nichols, Kyle Nichols, Fossil Creek Realty, Inc. and QC Carwash, Inc. ( 2010 )

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-09-00319-CV
SUSANA C. NICHOLS AND APPELLANTS
FOUR NICHOLS, INC.
V.
KENNETH L. NICHOLS, KYLE APPELLEES
NICHOLS, FOSSIL CREEK REALTY,
INC., AND QC CARWASH, INC.
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FROM THE 231ST DISTRICT COURT OF TARRANT COUNTY
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OPINION
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Introduction
Appellants Susana C. Nichols and Four Nichols, Inc. appeal the trial
court’s order dismissing their suit against appellees, which had been originally
filed in a divorce suit, but which was later severed. In one issue, appellants
argue that the trial court erred by dismissing the severed lawsuit. We reverse
and remand.
Background Facts
This case began as a divorce between Kyle Nichols and Susana Nichols.
On August 9, 2004, Susana filed a Second Amended Original Counter-Petition
for Divorce which joined Kenneth L. Nichols (―Kenneth‖), Kyle’s father, and First
State Bank of Keene, Texas (―the bank‖) as third party defendants. Susana
claimed Kenneth and the bank had engaged in conspiracy, fraud, and breach of
fiduciary duty relating to a car wash business operated by Susana and Kyle.
Both Kenneth and the bank filed answers. On August 23, 2004, Kenneth filed a
motion to dismiss and motion for sanctions.
On August 31, 2004, the divorce court1 sua sponte ordered that the third
party claims relating to Kenneth and the bank be ―severed into a separate cause
of action.‖ The divorce court did not render a written order granting the
severance at that time nor enter a final judgment in the divorce.
On December 15, 2004, the divorce court signed a final divorce decree.
Only Kyle, Susana, and James A. Stephenson, P.C.—which had intervened over
unpaid attorney’s fees—are named as parties in the decree.2 Kenneth and the
bank are not listed as parties, nor does the divorce decree dispose of the claims
1
Another judge was assigned to hear the divorce because of the sitting
judge’s recusal. Because there are two courts involved in this case, we will refer
to the court that heard the divorce proceedings as the ―divorce court‖ and the
court that heard the third party claims as the ―trial court.‖
2
James A. Stephenson, P.C. had previously represented Susana in the
divorce proceedings.
2
against them or Kenneth’s motion to dismiss and for sanctions. In the ―Division
of Marital Estate‖ section of the divorce decree, the divorce court awarded
Susana the following relevant items:
11. All interest in and to the stock in the corporation known as Four
Nichols, Inc., as well as any claims or causes of action relating
thereto.
12. Any claims or causes of action that were previously filed in this
case and which were severed from this cause.
13. Any cause of action with regard to the parties’ certificate of
deposit in the approximate sum of $100,000.00 which were taken in
connection with the First State Bank of Keene foreclosure.
On January 13, 2005, Susana filed a Motion to Reopen Case and for Nunc
Pro Tunc, or in the Alternative, to Modify, Correct or Reform Judgment in the
divorce court. In her motion, Susana argued that the decree ―omitted reference
to the prior ruling of [the divorce court] which severed certain claims and causes
of action relating to the foreclosure by the First State Bank of Keene, Texas.‖
On January 24, 2005, the divorce court signed an order to sever the third
party claims based upon its August 31, 2004 oral severance. In the severance
order, the divorce court assigned a new cause number and style for the third
party claims. The order states that the third party claims ―are hereby severed
from this cause of action into a separate cause of action.‖
Susana and Four Nichols, Inc. filed a first amended petition in the severed
suit against Kenneth, the bank, Kyle, Fossil Creek Realty, Inc., and QC Carwash,
Inc. All five filed answers to the amended petition and Kenneth, QC Carwash,
3
and Fossil Creek moved to dismiss the claims against them. The trial court
signed an agreed order of partial dismissal with prejudice as to Susana and Four
Nichols, Inc.’s claims against the bank, based upon a settlement.
The trial court then dismissed the remaining parties because the divorce
court did not sign the order of severance until after the divorce had been
submitted. The trial court stated that even though the divorce court made an oral
pronouncement that the case should be severed, the trial court was ―of the
opinion that the granting of a severance of the claims in this matter requires a
written order and is effective only when such an order is signed.‖ 3 This appeal
followed.
Discussion
In one issue, appellants contend that the trial court erred by dismissing the
severed lawsuit because the trial court had subject matter jurisdiction to hear the
severed cause of action. Conversely, appellees argue that the trial court did not
have jurisdiction over appellants’ claims and, alternatively, that there was no
cause of action that survived the divorce decree and that Susana waived her
claims by not having the divorce court rule on them.
We review a trial court’s order of dismissal for an abuse of discretion.
Johnson-Snodgrass v. KTAO, Inc., 75 S.W.3d 84, 87 (Tex. App.––Fort Worth
3
We note, however, that the divorce decree specifically acknowledges that
the related third party claims had been previously severed and were awarded to
Susana in the divorce decree.
4
2002, pet. dism’d); see also MacGregor v. Rich, 941 S.W.2d 74, 75 (Tex. 1997).
A trial court abuses its discretion when it acts arbitrarily, unreasonably, or without
reference to guiding rules and principles. Johnson-Snodgrass, 75 S.W.3d at 87;
see also Morrow v. H.E.B., Inc., 714 S.W.2d 297, 298 (Tex. 1986) (op. on reh’g).
However, whether a trial court had subject matter jurisdiction is a question of law
that we review de novo. City of Fort Worth v. Crockett, 142 S.W.3d 550, 552
(Tex. App.––Fort Worth 2004, pet. denied); see also Tex. Natural Res.
Conservation Comm’n v. IT-Davy, 74 S.W.3d 849, 855 (Tex. 2002); Mogayzel v.
Tex. Dep’t of Transp., 66 S.W.3d 459, 463 (Tex. App.––Fort Worth 2001, pet.
denied).
Here, the ―Final Decree of Divorce‖ was interlocutory because it did not
dispose of all parties and issues. See Lehmann v. Har-Con Corp., 39 S.W.3d
191, 192–93 (Tex. 2001); Rotella v. Nelson Architectural Eng’rs, Inc., 251 S.W.3d
216, 218 (Tex. App.––Dallas 2008, no pet.); Allmond v. Loe, Warren, Rosenfield,
Kaitcer, Hibbs & Windsor, P.C., No. 02-07-00282-CV, 2008 WL 4601910, at *1
(Tex. App.––Fort Worth Oct. 16, 2008, no pet.) (mem. op.). Because the divorce
decree did not dispose of Susana’s claims against Kenneth and the bank—or
Kenneth’s motion to dismiss and for sanctions—and the divorce court had not yet
signed a written severance order, the divorce decree was not a final order, but
rather an interlocutory order. See Lehmann, 39 S.W.3d at 192. Thus, the
divorce court still had plenary power when it signed the written order to sever the
remaining causes of action. See In re Lancer Ins. Co., No. 04-07-00473-CV,
5
2007 WL 2780321, at *2 (Tex. App.––San Antonio Sept. 26, 2007, no pet.)
(holding trial court still had plenary power when severance order did not operate
as final order).
Moreover, even if the divorce decree was not interlocutory, we have found
no Texas court that requires that a written order of severance be signed before a
case is submitted to the trier of fact. In fact, many Texas courts have recognized
that severance of an interlocutory judgment into a separate action makes the
interlocutory judgment final as long as all parties and issues are disposed of.
See Diversified Fin. Sys., Inc. v. Hill, Heard, O’Neal, Gilstrap & Goetz, P.C., 63
S.W.3d 795, 795 (Tex. 2001) (holding severance of interlocutory judgment into a
separate cause of action makes interlocutory judgment final); Farmer v. Ben E.
Keith Co., 907 S.W.2d 495, 496 (Tex. 1995) (holding that ―[w]hen a judgment is
interlocutory because unadjudicated parties or claims remain before the court,
and when one moves to have such unadjudicated claims or parties removed by
severance, dismissal, or nonsuit, the appellate timetable runs from the signing of
a judgment or order disposing of those claims or parties.‖); Inliner Americas, Inc.
v. MaComb Funding Grp., L.L.C., 244 S.W.3d 427, 431 (Tex. App.––Houston
[14th Dist.] 2007, pet. dism’d) (holding that appeal following severance would be
an appeal of a final order); Thompson v. Beyer, 91 S.W.3d 902, 904 (Tex. App.—
Dallas 2002, no pet.) (stating that, as a general rule, severance of an
interlocutory judgment into a separate action makes it final if all claims in the
severed action have been disposed of).
6
In the order of dismissal, the trial court cites Rule 41 and emphasizes that
a severance must be by ―order of the court.‖ Tex. R. Civ. P. 41 (emphasis
added). The trial court’s order also states, in relevant part,
The court is of the opinion that the granting of a severance of the
claims in this matter requires a written order and is effective only
when such order is signed. Although the intent to sever the issues
in this litigation from the divorce is clear, the oral pronouncement of
the court, with or without a docket entry, was insufficient to affect the
desired severance.
The order further cites In re Lovito-Nelson, 278 S.W.3d 773 (Tex. 2009), to
support its ruling. In re Lovito-Nelson involves Rule 329b(c) of the Texas Rules
of Civil Procedure. See 278 S.W.3d at 774. In that case, after the trial court
signed a ―Final Order in Suit Affecting the Parent-Child Relationship,‖ the mother
and father/stepfather filed a timely motion for new trial. Id. The trial court then
held a hearing on the motion for new trial and on the docket sheet wrote, ―New
trial granted. DHL.‖ Id. The trial court and all parties signed a ―Pre-trial
Scheduling Order.‖ Id. However, the trial court never signed a written order
granting the new trial. Id. Lovito-Nelson then sent the trial court a letter stating
that the judgment was final and that the Pre-Trial Scheduling Order was moot
because the court never signed a written order and more than 105 days had
passed since the Final Order had been signed. Id. The trial court subsequently
signed an order stating that the pretrial scheduling order ―remain[ed] in full
effect,‖ and the court of appeals denied Lovito-Nelson’s petition for writ of
7
mandamus. Id. at 775. Lovito-Nelson then filed a petition for mandamus relief in
the Texas Supreme Court. Id.
The Texas Supreme Court, in reversing the trial court and the court of
appeals, stated that an order granting a motion for new trial must be in writing
and signed by the trial court. Id. The Court noted that Rule 329b requires a
written order before a motion for new trial is actually granted. Id. The Court
stated that an oral pronouncement and docket entry could not substitute for the
written order. Id. The Court held that this is a ―bright-line rule‖; there must be a
―signed, written order explicitly granting the motion.‖ Id. at 775–76.
We do not agree with the trial judge’s reliance on In re Lovito-Nelson to
justify the order of dismissal. In re Lovito-Nelson dealt with a motion for new trial,
whereas here, the issue is an order of severance. In contrast to Rule 329b, Rule
41 has no such requirement that a severance be determined ―by written order.‖
Tex. R. Civ. P. 41, 329b (emphasis added). Furthermore, unlike Rule 329b,
which requires a motion for new trial to be granted in writing before the relevant
time period expires, nothing in Rule 41 requires a severance order to be in
writing and signed before the remaining case is submitted to the trier of fact.
The trial court clearly believed that because the divorce had been tried,
Rule 41’s requirement to order a severance ―before the time of submission‖ to
the trier of fact applied. Tex. R. Civ. P. 41. However, courts have held that
submission of the remaining cause to the trier of fact does not prevent a
severance because a properly severable cause of action, if not tried, may still be
8
tried separately. See Tex. R. Civ. P. 174; Christopher Columbus St. Mkt. LLC v.
Zoning Bd. of Adjustments of City of Galveston, 302 S.W.3d 408, 414–15 (Tex.
App.—Houston [14th Dist.] 2009, no pet.); see generally In re Union Carbide
Corp., 273 S.W.3d 152, 155 (Tex. 2008). There is no justification for treating a
properly severable cause of action differently. Compare Christopher Columbus
St. Mkt. LLC, 302 S.W.3d at 414–15, with Collins v. Tex Mall, L.P., 297 S.W.3d
409, 419 (Tex. App.—Fort Worth 2009, no pet.). Moreover, the controlling
reason for severance is to do justice, avoid prejudice, and promote convenience,
not to prevent the trial of potentially viable claims. See Tex. R. Civ. P. 41.
Here, the divorce court made an oral ruling and docket notation on the
severance before the divorce was tried. Additionally, the divorce court did not
hear any of the severed claims against Kenneth and the bank during the divorce
proceeding, and neither Kenneth, the bank, nor their attorneys appeared before
the divorce court after the oral severance. Further, the divorce decree did not list
Kenneth or the bank as parties and did not dispose of Susana’s issues against
them. Thus, unlike the situation in a motion for new trial after a disposition of all
claims, Susana’s severed claims have not been previously addressed by a court.
Thus, because Susana’s claims against Kenneth, Kyle, Fossil Creek, and
QC Carwash were properly severed before the trial court lost plenary power, we
hold that the trial court erred by dismissing Susana and Four Nichols’s causes of
action. We sustain appellants’ sole issue.
9
Conclusion
Having sustained appellants’ sole issue, we reverse the trial court’s
judgment and remand the case for further proceedings.
TERRIE LIVINGSTON
CHIEF JUSTICE
PANEL: LIVINGSTON, C.J.; GARDNER and MEIER, JJ.
GARDNER, J. filed a concurring opinion.
DELIVERED: December 30, 2010
10
COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-09-00319-CV
SUSANA C. NICHOLS AND FOUR APPELLANTS
NICHOLS INC.
V.
KENNETH L. NICHOLS, KYLE NICHOLS, APPELLEES
FOSSIL CREEK REALTY, INC., AND QC
CARWASH, INC.
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FROM THE 231ST DISTRICT COURT OF TARRANT COUNTY
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CONCURRING OPINION
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I differ with the majority=s characterization of the final decree of divorce as
an interlocutory judgment. I believe it was a judgment rendered after a
conventional trial on the merits and was thus subject to the presumption that it
disposed of all claims and parties and is final. As stated in Lehmann v. Harcon
Corp.,
When a judgment, not intrinsically interlocutory in character, is
rendered and entered in a case regularly set for a conventional trial
on the merits, no order for a separate trial of issues having been
entered, . . . it will be presumed for appeal purposes that the court
intended to and did dispose of all parties legally before it and all
issues made by the pleadings between such parties.
39 S.W.3d 191, 198 (Tex. 2001) (quoting N.E. Indep. Sch. Dist. v. Aldridge, 400
S.W.2d 893, 897B98 (Tex. 1966) (enunciating the test for determining when, in
most instances, judgments in which parties and issues made by the pleadings
are not disposed of in express language but are nevertheless final for appeal
purposes)).1
As the trial court here noted in its order, a severance order is not effective
until signed. McRoberts v. Ryals, 863 S.W.2d 450, 452B54 (Tex. 1993). But I
agree with the majority that nothing in Rule 41 requires a written severance order
to be signed before the remaining case is submitted to the trier of fact. Absent a
written order before the final divorce judgment was signed, however, and had the
judgment here not been challenged by a timely motion to reopen or to modify, I
1
Although the issue of whether the previous judgment disposed of the
claims against Kenneth and the bank, and should therefore be dismissed,
appears to be one of res judicata effect rather than finality for purposes of
appeal, the principles for determining finality are the same. See Mower v. Boyer,
811 S.W.2d 560, 562B63 (Tex. 1991) (holding an interlocutory judgment was not
final and was non-appealable and therefore was not entitled to res judicata
effect); Restatement (Second) of Judgments ' 13 (1982).
2
believe the presumption of finality would apply and the trial court=s dismissal
would have been correct. See Aldridge, 400 S.W.2d at 896B97.2
Appellants timely filed their motion to reopen and to modify the final
divorce decree, and the record established that the parties and the court had
intended to sever the third party claims before judgment.3 Because the divorce
court was acting within its extended plenary power, it was not precluded from
signing a written order of severance within that period after the final judgment
was signed. And because the divorce court did so, I agree with the majority that
the trial court erred in dismissing the severed claims. Therefore, I concur in the
result.
ANNE GARDNER
JUSTICE
DELIVERED: December 30, 2010
2
A judgment rendered after a conventional trial on the merits need not
dispose of every party and issue in order for the Aldridge presumption of finality
to apply. Vaughn v. Drennon, 324 S.W.3d 560, 560 (Tex. 2010).
3
The presumption of finality is subject to the qualification, as stated in
Lehmann, that any doubt Aas to the judgment=s finality . . . >must be resolved by a
determination of the intention of the court as gathered from the language of the
decree and the record as a whole, aided on occasion by the conduct of the
parties.=@ Vaughn, 324 S.W.3d at 560 (quoting Lehmann, 39 S.W.3d at 203).
Here, the record, including the conduct of the parties, establishes not that the
judgment was intended to be interlocutory but that the court and the parties
intended to sever the claims against Kenneth and the bank.
3