Blue Window Capital, LLC, 2811 Holmes Street, in Rem, 2906 Holmes Street, in Rem, and 2712 Holmes Street, in Rem v. City of Dallas ( 2022 )

AFFIRMED and Opinion Filed October 17, 2022
S In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-22-00042-CV
BLUE WINDOW CAPITAL, LLC, 2811 HOLMES STREET, IN REM, 2906
HOLMES STREET, IN REM, AND 2712 HOLMES STREET, IN REM,
Appellants
V.
CITY OF DALLAS, Appellee
On Appeal from the 14th Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-18-12986
MEMORANDUM OPINION
Before Justices Schenck, Reichek, and Goldstein
Opinion by Justice Reichek
This is an interlocutory appeal from an order expanding the powers of a
receiver appointed over three multifamily rental properties owned by Blue Window
Capital, LLC. Blue Window contends the trial court erred in expanding the
receiver’s powers (1) based on alleged reports of crime at the properties, (2) without
holding a hearing on the motion requesting supplemental receivership authority, and
(3) without first ordering a narrower remedy. For reasons that follow, we affirm the
trial court’s order.
BACKGROUND
Blue Window owns real property located at 2712 Holmes Street, 2811 Holmes
Street, and 2906 Holmes Street in Dallas. Between May 2017 and May 2018, the
City of Dallas notified Blue Window of numerous violations of public health and
safety ordinances at each of the properties. The alleged violations include failure to
maintain building and structural materials in operating condition, failure to maintain
flooring in operating condition, failure to maintain exterior doors so they are
weather-tight and in operating condition, and failure to maintain interior walls and
ceilings in operating condition.
Because Blue Window did not make necessary repairs to the properties, in
September 2018, the City filed this lawsuit against it and the properties in rem for
enforcement of City health and safety ordinances. The City requested temporary
and permanent injunctions requiring Blue Window to bring the properties into
compliance with the Dallas City Code and also sought civil penalties. The City
asked the trial court to appoint a receiver to take control of the properties.
The trial court did not initially appoint a receiver. Although the court would
later appoint Dennis Roossien as receiver, it first appointed him to act as a “court
representative.” The court’s November 6, 2019 order appointing Roossien as court
representative was agreed to by the parties. In that role, Roossien was to oversee
and guide Blue Window in its efforts to operate and maintain the properties as
multifamily rental properties. Blue Window was ordered to make repairs to the
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properties and to fully cooperate and meet regularly with Roossien. At least every
two weeks, Roossien was to report to the trial court on the condition of the properties
and any repair and maintenance activity by Blue Window. If Roossien reported that
Blue Window was not making repairs and maintaining the properties in substantial
compliance with City ordinances, a presumption would exist that the appointment
of a receiver was necessary.
About four months later, on March 2, 2020, the trial court signed an order
appointing Roossien as receiver of the properties. The parties also agreed to this
order. The trial court appointed Roossien as receiver pursuant to Texas Civil
Practice and Remedies Code § 64.001, Texas Local Government Code § 214.003,
and Texas Rule of Civil Procedure 695. See TEX. CIV. PRAC. & REM. CODE ANN.
§ 64.001(a)(6) (permitting court to appoint receiver in any case in which receiver
may be appointed under rules of equity); TEX. LOC. GOV’T CODE ANN. § 214.003(b)
(authorizing court to appoint receiver for property if structures on property are in
violation of ordinances for public health and safety).
Roossien was granted less than full statutory authority as receiver. He was
authorized and directed to make any reasonable repairs necessary to bring the
properties into substantial compliance with City ordinances and to establish
reasonable measures to reduce criminal activity at the properties. But Blue Window
remained in possession and control of the properties with full authority to collect
rent. Within ten days of the order, Roossien and Blue Window were to coordinate
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to (1) create an estimate of the cost and time needed for repairs, and (2) establish
reasonable measures to reduce criminal activity. Roossien and Blue Window were
also to coordinate to install security cameras on the properties within a reasonable
time. At least quarterly, Roossien was to report his activities as receiver to the Court
and the City.
In addition, the trial court ordered Blue Window to deposit $200,000 into an
escrow account within ten days. The costs of repairs and materials were to be paid
out of that account upon written agreement of Roossien and Blue Window or at the
trial court’s direction. Blue Window was also required to maintain a certain balance
in the account, as specified in the order.
Although the City’s original petition did not include a claim under Chapter
125 of the Texas Civil Practice and Remedies Code, such a claim was mentioned in
the agreed order appointing Roossien as receiver with limited powers. Chapter 125
authorizes suits to enjoin and abate a common nuisance. See TEX. CIV. PRAC. &
REM. CODE ANN. § 125.002. A common nuisance exists if a person maintains a place
where people habitually go to commit certain illegal activities, knowingly tolerates
the activity, and fails to make reasonable attempts to abate the activity. Id.
§ 125.0015. The trial court’s agreed order provided that upon completion of the
repairs, the City “will be deemed to release [Blue Window] and the Properties from
any and all claims for civil penalties and any and all causes of action for nuisance
violations as provided for in Chapter 125 of the Texas Civil Practice and Remedies
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Code.” The order abated any claims for civil penalties or for nuisance violations
during the pendency of the receivership.
On November 19, 2021, about twenty months after Roossien was appointed
as receiver, the City filed a “Motion for Supplemental Receivership Authority.” The
City claimed the condition of the properties had declined, with Code violations
worsening and a “staggering increase in criminal activity.” The City alleged that the
Code violations cited in its petition still exist and that there were new violations.
The City also listed crimes that allegedly occurred at the properties, including a
murder at 2906 Holmes. The City argued that because the receiver’s power was
limited, he was unable to address the issues on the properties.
In addition, the City’s motion alleged that Blue Window had failed to comply
with court orders. For example, on May 3, 2021, the trial court ordered Blue
Window to either pay a contractor or prepare a “punch list” of Code violations for
each property and obtain a contractor to abate the violations. According to the City,
Blue Window had not paid the contractor or made substantial progress on the punch
list.
The City asked the trial court to grant Roossien the authority to take
possession and control of the properties. Attached to the City’s motion was an
affidavit from a Code Inspector for the City who stated that Code violations were
still present at the properties. In her opinion, the condition of the properties posed a
substantial danger for many reasons, including structural instability and violations
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that are adverse to the health and safety of the tenants. Blue Window did not file a
response to the motion.
The City filed a notice of a December 6, 2021 hearing on the motion, and on
that day, the trial court held a hearing. The cover page of the reporter’s record from
the hearing indicates the proceeding involved a motion to release funds and cross-
motion for show cause order and the motion for supplemental receivership authority.
At the start of the hearing, the trial court asked the City’s attorney the reasons for
the hearing. The City’s attorney indicated the receiver filed the show cause motion
and stated that “depending on how his Show Cause hearing goes, you know, we are
requesting supplemental receivership authority.” The trial court took up the show
cause motion first, reasoning that if it was going to give the receiver additional
authority, it should first establish Blue Window had not done what it should have.
Roossien identified several ways in which Blue Window failed to comply with
the trial court’s orders. For example, Blue Window had not provided him an
accounting. Blue Window had owed $30,000 to a contractor for nearly a year. It
also had an obligation to restore $70,000 to the escrow account that had been
withdrawn in August. Roossien did not know whether Blue Window had the funds
to make a $70,000 deposit. Another issue was the provision of “realtime-access
functioning security cameras” at the properties. Cameras were supposed to be
operating by April 27, but Roossien had not been given access to any cameras and
did not know if they were functioning. In addition, Blue Window had not paid
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$25,000 in sanctions the court previously ordered for Blue Window’s failure to
install the cameras. Blue Window also failed to complete work that needed to be
done at the properties. Roossien suggested an appropriate sanction would be closing
one of Blue Window’s buildings—“the one that has the most crime going on.”
Counsel for Blue Window responded that Blue Window provided “P&L
statements for 2020” to show its revenue. Further, counsel stated there had been
technical issues in installing the cameras. Additional parts and an electrician were
needed. Also, the properties needed extensive work, such as sewer line replacement
and foundation work, and the work had been delayed. Blue Window planned to
present two witnesses—a contractor to testify as to the causes for delay and Blue
Window’s principal, Stewart McCray, to testify about efforts to comply with court
orders. Counsel asked the court to continue to allow McCray to operate the
properties.
The trial court asked McCray why Blue Window was not in compliance with
court orders. McCray testified cameras were installed in February, but were not
strong enough to get the needed footage. Installation of different equipment was in
progress. The court also asked about rental income from the properties. McCray
testified that in the previous 30 days, he collected about $5400 in rent and
consistently received $5000 to $7000 a month in rent. When Roossien questioned
McCray about money received from the State under a Covid rent relief program,
McCray did not want to speculate on the amount received. The court pressed him
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for an answer, and McCray estimated Blue Window received about $40,000.
Roossien then asked if McCray had received $200,000 under the program, and
McCray testified “not that I know of.”
When McCray testified he deposited $50,000 into the escrow account since
August, Blue Window’s attorney asked the trial court for a recess because she had
“some concerns.” The judge stated it would not be appropriate to stop the
questioning so counsel could talk to her client about his answers. At that point,
counsel stated it might be best for her to withdraw from the case. The judge indicated
he would consider a written motion to withdraw, but was going to proceed with the
hearing. Counsel for Blue Window then informed the trial court that her concerns
were with the veracity of some of McCray’s testimony. The trial court noted
counsel’s concerns. Roossien decided not to ask McCray any more questions. The
judge asked Blue Window’s counsel if she had further testimony for the court and
she responded no.
The trial judge was “exceedingly troubled” by the status of the case and asked
the receiver what he wanted the court to do. Roossien suggested shutting down 2906
Holmes, the site of most of the crime. The court expressed concern for the tenants
and suggested the tenants pay rent directly to the receiver. In response, Blue Window
asked for more time to complete repairs and to maintain a consulting or cooperative
role with the receiver. Roossien expressed his desire to be able to collect rent. He
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also wanted to deal with the lack of a cash accounting. The court said it would grant
Roossien’s requests, and Roossien planned to send the court an appropriate order.
The next day, the trial court issued an order granting the City’s motion for
supplemental receivership authority. The court granted Roossien “full powers of a
receiver” pursuant to Chapter 64 of the Texas Civil Practice and Remedies Code and
§ 214.003 of the Texas Local Government Code. Roossien was to receive and take
charge of the properties and all assets, including rent, within 3 days. Among other
things, the court granted the receiver the power to conduct the daily operations of
the property, establish and maintain bank accounts for the deposit of funds collected
in connection with administration of the properties, dispense funds to pay for repairs
and maintenance of the properties, and implement crime prevention measures
necessary to address criminal activity. The court prohibited Blue Window and its
agents from interfering in any manner with the properties or the actions of the
receiver.
In its order, the trial court found it reasonable and necessary to appoint a
receiver with full power because Blue Window (1) failed to abate Dallas City Code
violations, (2) failed to implement reasonable security measures on the properties,
(3) violated the court’s orders of November 20, 2020, February 3, 2021, May 3,
2021, and June 30, 2021, and (4) lacked sufficient funds to operate the property
legally.
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Blue Window moved to set aside the order. In January 2022, the court held a
hearing on Blue Window’s motion to set aside, as well as another motion to show
cause filed by the receiver. Blue Window acknowledged the City’s motion seeking
supplemental receivership authority was set for hearing on December 6, but argued
the court did not hear or rule on the motion at the hearing. It asked the court to set
the order aside and give it the opportunity to present argument against the motion.
The City’s response was that the receiver’s show cause motion laid the foundation
the court needed to rule on the City’s motion asking for supplemental receivership
authority.
The trial court asked Blue Window if it wanted to be heard on the underlying
motion at that time, but Blue Window’s counsel was not prepared to take up the
merits of the motion. The trial court denied the motion to set aside. This appeal
followed. See TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(a)(1) (permitting
interlocutory appeal of order that appoints receiver).
APPLICABLE LAW
A home-rule municipality such as the City of Dallas may bring an action in
district court against the owner of a property that is not in substantial compliance
with certain municipal ordinances, including ordinances for preservation of public
health and safety. TEX. LOC. GOV’T CODE ANN. § 214.003(a); see id. § 54.012. The
court is authorized to appoint a receiver for the property if it finds that structures on
the property are in violation of such an ordinance. Id. § 214.003(b). A court-
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appointed receiver may exercise all authority that an owner of the property would
have except for the authority to sell the property. TEX. LOC. GOV’T CODE ANN.
§ 214.003(g). This authority includes taking control of the property, collecting rents
due, and making or having made any repairs necessary to bring the property into
compliance with minimum standards in local ordinances. Id. We review a trial
court’s order appointing a receiver for an abuse of discretion. Spiritas v. Davidoff,
459 S.W.3d 224, 231 (Tex. App.—Dallas 2015, no pet.).
Although not mentioned in the briefing by either side, the appellate record in
this case is incomplete. The clerk’s record includes the City’s original petition and
Blue Window’s answer, the agreed orders appointing Roossien as court
representative and receiver, the City’s motion to supplement receivership authority
and the trial court’s order granting that motion, and the trial court’s docket sheet.
The clerk’s record indicates there were many other filings and orders over the three
years this case was pending prior to this appeal. We do not have the four orders that
Blue Window was found to be in violation of in the order giving Roossien full power
as receiver. We are also missing multiple reports filed by Roossien as both court
representative and receiver, a motion for civil contempt sanctions, the receiver’s
motions to show cause, and several show cause orders, among other things.
An appellant bears the burden to bring forward a record that enables the
appellate court to determine whether appellant’s complaints constitute reversible
error. Palla v. Bio-One, Inc., 424 S.W.3d 722, 727 (Tex. App.—Dallas 2014, no
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pet.) (citing Christiansen v. Prezelski, 782 S.W.2d 842, 843 (Tex. 1990)). When a
record is incomplete and, as in this case, the rules on partial records do not apply,
we must presume the missing portion of the record supports the factual
determinations made by the factfinder. Id.ANALYSIS
In its first issue, Blue Window argues the trial court abused its discretion in
expanding the receiver’s powers due to alleged reports of crime at the properties.
Blue Window bases this argument on the language in the agreed order initially
appointing Roossien as receiver that abated any Chapter 125 claim for nuisance due
to alleged criminal activity.1 At the December 6 hearing, Blue Window stated that
with regard to the attempt to abate crime, there was no Chapter 125 action in this
case. Without citation to legal authority, Blue Window contends the court erred in
granting receivership with full power based on criminal activity when the court was
not asked to decide a Chapter 125 claim.
The trial court did not identify an increase in crime as a direct reason for giving
Roossien more power as receiver. Rather, it was Blue Window’s failure to
implement reasonable security measures, such as the court-ordered security cameras,
1
As stated, the City’s original petition did not include a Chapter 125 claim for common nuisance.
According to the trial court’s docket sheet, the City filed an amended petition that Blue Window
moved to strike. Before a scheduled hearing on the motion to strike, the parties reached an
agreement on the motion and the trial court issued an order on the motion. These documents are
not part of the appellate record.
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that was one of the reasons for the decision to increase Roossien’s authority. To the
extent the trial court considered an increase in crime, however, it did not abuse its
discretion. When the parties agreed for Roossien to be appointed as a receiver
instead of court representative, they agreed he could establish reasonable measures
to reduce criminal activity at the properties. The trial court’s agreed order initially
appointing Roossien as receiver, signed by the parties, required Blue Window to
work with Roossien to reduce crime at its properties. We cannot conclude it was an
abuse of discretion for the trial court to consider an increase in criminal activities at
the properties when later deciding the City’s request for expanding the receiver’s
powers.
Further, even if the trial court erred in considering increased crime, we cannot
conclude the error was reversible. Blue Window’s failure to implement security
measures was not the only reason the trial court granted Roossien full power. The
trial court also considered Blue Window’s failure to abate Code violations, violation
of multiple court orders, and lack of funds to operate the properties. Blue Window
has not challenged these other reasons supporting the trial court’s decision to
increase the receiver’s power. See TEX. R. APP. P. 44.1(a). We overrule Blue
Window’s first issue.
In its second issue, Blue Window contends the trial court abused its discretion
by failing to hold a hearing on the City’s motion to expand the receiver’s powers.
Blue Window relies on Texas Rule of Civil Procedure 695, which provides:
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[N]o receiver shall be appointed without notice to take charge of
property which is fixed and immovable. When an application for
appointment of a receiver to take possession of property of this type is
filed, the judge or court shall set the same down for hearing and notice
of such hearing shall be given to the adverse party by serving notice
thereof not less than three days prior to such hearing.
TEX. R. CIV. P. 695; see Independent Am. Sav. Ass’n v. Preston 117 Joint Venture,
753 S.W.2d 749, 750 (Tex. App.—Dallas 1988, no writ). Blue Window contends
the City’s motion was not actually heard at the December 6 hearing.
The December 6 hearing was apparently scheduled for two motions, one filed
by the receiver and one filed by the City. The City’s motion for supplemental
receivership authority was mentioned at the start of the hearing. But the trial court
first took up the receiver’s show cause motion because there was a connection
between the receiver’s arguments and whether the receiver should be given
additional authority as the City requested in its motion. Neither the court nor the
parties mentioned the City’s motion again at the hearing. The City did not expressly
argue its motion and its counsel spoke only a handful of times. The trial court signed
an order the following day granting the motion.
A major focus of the December 6 hearing was whether, due to Blue Window’s
conduct, the receiver should be given control of the properties. Blue Window
presented the idea of doing away with the receivership altogether. The City opposed
that idea, citing Blue Window’s violation of court orders and lack of progress on the
properties. Blue Window attempted to counter the receiver’s evidence that Blue
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Window was not in compliance with court orders and not making progress repairing
the properties, but cut its presentation of evidence short due to issues with the
truthfulness of McCray’s testimony. The trial court asked counsel for Blue Window
what the court should do to ensure compliance with court orders. Counsel argued
Blue Window should remain in control of the properties.
Due to the intertwined nature of the motions before the trial court on
December 6, the court at least implicitly gave Blue Window the opportunity to be
heard, and Blue Window at least implicitly presented evidence and argument, on the
issue of whether Roossien should be given full receivership authority. In addition,
to the extent Blue Window was not heard in opposition to the expansion of the
receiver’s powers on December 6, it had the express opportunity to be heard a month
later. The court gave Blue Window the chance to argue against the merits of the
City’s motion at the hearing on Blue Window’s motion to set aside, but Blue
Window was unprepared to do so. Given these circumstances, the trial court did not
abuse its discretion in how it handled having a hearing on the City’s motion. We
overrule Blue Window’s second issue.
In its third issue, Blue Window argues the trial court abused its discretion by
failing to provide a narrower remedy before granting the receiver supplemental
authority. Blue Window suggests the trial court should have limited the grant of full
receivership powers to the property with the most criminal activity, 2906 Holmes, a
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position which seems contrary to its argument in issue one that the court should not
have considered reports of crime at the properties.
This case was pending for over three years before the trial court appointed a
receiver with the full amount of power authorized by Local Government Code
§ 214.003. Prior to that, the trial court considered and implemented less drastic
measures that were ineffective. The trial court first appointed Roossien as a court
representative to work with Blue Window on completing the needed repairs. The
court next appointed Roossien as a receiver over the properties, but limited his
powers. Roossien did not have authority to take control of the properties or collect
rent. Yet under this arrangement, the appellate record shows Blue Window failed to
comply with the trial court’s orders, including failing to complete the necessary
repairs and maintenance, failing to pay for work that was done, and failing to install
security cameras. In addition, we assume the show cause orders and other
documents that are missing from the appellate record further support the trial court’s
decision to grant the receiver additional authority. The trial court was well within
its discretion in expanding the receiver’s powers when it did. We overrule Blue
Window’s third issue.
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We affirm the trial court’s order.
/Amanda L. Reichek/
AMANDA L. REICHEK
JUSTICE
220042F.P05
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S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
BLUE WINDOW CAPITAL, LLC, On Appeal from the 14th Judicial
2811 HOLMES STREET, IN REM, District Court, Dallas County, Texas
2906 HOLMES STREET, IN REM, Trial Court Cause No. DC-18-12986.
AND 2712 HOLMES STREET, IN Opinion delivered by Justice
REM, Appellants Reichek. Justices Schenck and
Goldstein participating.
No. 05-22-00042-CV V.
CITY OF DALLAS, Appellee
In accordance with this Court’s opinion of this date, the trial court’s December
7, 2021 Order Granting Motion for Supplemental Receivership Authority is
AFFIRMED.
It is ORDERED that appellee CITY OF DALLAS recover its costs of this
appeal from appellants BLUE WINDOW CAPITAL, LLC, 2811 HOLMES
STREET, IN REM, 2906 HOLMES STREET, IN REM, AND 2712 HOLMES
STREET, IN REM.
Judgment entered October 17, 2022.
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