In Re: ELAMEX, S.A. De C v. Elamex USA, Corp., and Mount Franklin Foods, L.L.C. , 2012 Tex. App. LEXIS 3458 ( 2012 )

COURT OF APPEALS
EIGHTH DISTRICT OF TEXAS
EL PASO, TEXAS
§
§ No. 08-11-00110-CV
IN RE: ELAMEX, S.A. DE C.V.,
ELAMEX USA, CORP., AND § AN ORIGINAL PROCEEDING IN
MOUNT FRANKLIN FOODS, L.L.C.,
§ MANDAMUS
§
OPINION
In this original proceeding, Relators seek to compel Respondent to vacate an order denying
their motion to dismiss for lack of jurisdiction. For the reasons stated below, we deny Relators’
petition for writ of mandamus.
FACTUAL AND PROCEDURAL BACKGROUND
This case centers on a dispute among entities and individuals involved in the candy
business.
The Parties
The two Plaintiffs in the underlying suit are Real-Parties-in-Interest in this mandamus
action. One of the Plaintiffs is Dulces Arbor, S. de R.L. de C.V. (“Dulces Arbor”), a Mexican
corporation. The other is Blueberry Sales, LLP (“Blueberry Sales”), a Delaware limited liability
partnership that has its principal place of business in El Paso.1 Blueberry Sales is the American
counterpart to Dulces Arbor.2
There are seven Defendants in the underlying lawsuit, but only three of them are Relators
1
Dulces Arbor and Blueberry Sales are also Third-Party Defendants in the underlying suit.
2
In the underlying suit, Raymond Ducorskyand Brad Ducorsky are Third-Party Defendants, as well as Third-Party
Plaintiffs and Cross-Claimants, whereas Mark Ducorsky is only a Third-Party Defendant. None of the Ducorskys are
a party in this mandamus action.
in this mandamus action. Relators are Elamex, S.A. de C.V. (“Elamex Mexico”), Elamex USA,
Corp. (“Elamex USA”), and Mount Franklin Foods, LLC (“MFF”). Elamex Mexico is a Mexican
corporation doing business in Texas. Elamex USA is a Delaware corporation doing business in
Texas. MFF is a Texas limited liability company. These three entities are interrelated – Elamex
Mexico owns Elamex USA, which in turn owns MFF – and all operate from or have offices in El
Paso, Texas.
The other Defendants in the underlying suit are Sunrise Candy, LLC (“Sunrise Candy”),
Casas Grandes Confections, LLC (“Casas Grandes”), Robert J. Whetten (“Whetten”), and David
Stewart (“Stewart”). Sunrise Candy is a Nevada limited liability company doing business in
Texas. Casas Grandes is also a Nevada limited liability company doing business in Texas. Like
Relators, these entities have offices in El Paso. Whetten is a resident of El Paso, who at various
times was an executive or board member for Casas Grandes, Elamex USA, Elamex Mexico, and
MFF as well as some other entities. Like Whetten, Stewart is a resident of El Paso, who at various
times was also an executive for Elamex Mexico, Sunrise Candy, and MFF.
The Mexican Real Property
At the heart of the dispute between Plaintiffs and Defendants is a building located in
Cuidad Juarez, Mexico (the Mexican real property) used to manufacture candy. Throughout the
litigation, Dulces Arbor has maintained that it owns the Mexican real property, which it expanded
with financing provided by several lenders, including Bank of the West.3 Dulces Arbor attempted
to sell the Mexican real property to several entities affiliated with the Defendants, but negotiations
broke down between Dulces Arbor and Whetten and Stewart and the sale was never
3
Bank of the West is now WestStar Bank.
2
consummated.4 The parties disagree about who is to blame for the failure to reach an agreement.
In any event, Dulces Arbor’s assertion that it owned the Mexican real property remained
unchallenged until early last year when Relators claimed in their motion to dismiss for lack of
subject matter jurisdiction that Dulces Arbor had transferred ownership of the Mexican real
property into a trust for the benefit of the lenders, including Bank of the West.
The Personal Property
Another dispute between Plaintiffs and Defendants concerns machinery and computers
(the personal property) originally leased by Blueberry Sales from C Leasing Company, a
subsidiary of Bank of the West. Except for one computer that remained in El Paso but was
nonetheless part of the manufacturing process, the personal property was installed on the Mexican
real property. Blueberry Sales eventually purchased the personal property.
The Leases
Several leases concerning the occupancy and use of the Mexican real property play a large
role in this dispute as well. Originally, Dulces Arbor leased the Mexican real property to
Blueberry Sales. However, that changed when Blueberry Sales and another entity named Dulces
Blueberry, S.A. de C.V. (“Dulces Blueberry”) combined assets with another entity to create
Simply Goodies, LLP (“Simply Goodies”).5 Following this combination, Dulces Arbor leased
the Mexican real property to Dulces Blueberry. Simply Goodies acted as guarantor of this lease.
Although the mandamus record is unclear as to what exactly occurred, MFF’s maquiladora
4
Whetten referred the Ducorskys to an attorney in El Paso named Hector Delgado to represent Dulces Arbor in the
negotiations. The Ducorskys were apparently unaware that Delgado was representing the other entities involved in
the transaction.
5
Bridge Healthcare Finance, LLC, and Bridge Opportunity Finance, LLC (collectively “Bridge”) provided financing
for this transaction.
3
counterpart, Confecciones de Juarez, S.A. de C.V. (“Confecciones de Juarez”), currently has a
submaquila agreement with Dulces Blueberry to use the Mexican real property.
The Lawsuit
At the time of this mandamus action, Plaintiffs’ live pleading was their sixth amended
petition. Plaintiffs sued Defendants for fraud, tortious interference, breach of contract, breach of
contract under an alter ego theory, unjust enrichment, and conspiracy.
Plaintiffs allege that Defendants committed several types of fraud. First, Plaintiffs claim
that Whetten and Relators indicated that they wanted to purchase the Mexican real property when
they actually had no intention of doing so. Thus, Plaintiffs assert that by inducing them to
undertake negotiations for the sale of the Mexican real property, Whetten and Relators caused
them to forebear from taking actions to protect the Mexican real property and the personal
property. Second, Plaintiffs claim that Relators used Delgado to acquire information from them
and then used that information against them, and that Relators referred Delgado to Plaintiffs
without disclosing that he would act adversely to Plaintiffs’ interests. Third, Plaintiffs claim that
Defendants fraudulently “cheated” them out of “the rent payments, other Lease obligations, and
other rights that Dulces Arbor is entitled to under the contract with Dulces Blueberry and Simply
Goodies.”
As for their conversion claim, Plaintiffs assert that Relators, both on their own and through
other entities, exercised “unlawful dominion and control” over the personal property and thus
deprived them of the use, enjoyment, dominion, and control over the personal property. Plaintiffs
have two tortious interference claims. First, Plaintiffs allege that Defendants caused Bridge not to
consummate the letter of credit. Second, Plaintiffs assert that Relators and others prevented
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Dulces Blueberry from performing its obligations under its lease with Dulces Arbor.
Plaintiffs contend that Relators breached a contract with Dulces Arbor in which they
agreed to reimburse Dulces Arbor for $25,000 in attorney’s fees that Dulces Arbor incurred in
pursuing the sale of the Mexican real property.
As for their breach of contract claim under the theory of alter ego, Plaintiffs assert that
Simply Goodies breached its guaranty agreement with Dulces Arbor, and the corporate veil of
Elamex Mexico should be pierced to render it liable for the breach.
As to their claim for unjust enrichment, Plaintiffs allege that Defendants did not
compensate Dulces Arbor for the use of the Mexican real property to produce candy, which was
sold without further compensation to Dulces Arbor.
Finally, Plaintiffs claim that Defendants, along with others, conspired to commit the torts
described above.
MANDAMUS
To obtain mandamus relief from the order denying its motion to dismiss for lack of subject
matter jurisdiction, Relators must meet two requirements. They must show that the trial court
clearly abused its discretion and that they have no adequate remedy by appeal. In re Prudential
Ins. Co. of Am., 148 S.W.3d 124, 135-36 (Tex. 2004)(orig. proceeding).
A trial court abuses its discretion if it reaches a decision so arbitrary and unreasonable as to
constitute a clear and prejudicial error of law. In re Cerberus Capital Mgmt., L.P., 164 S.W.3d
379, 382 (Tex. 2005)(orig. proceeding). When reviewing the trial court’s decision for an abuse of
discretion, we may not substitute our judgment for that of the trial court with respect to resolution
of factual issues or matters committed to the trial court’s discretion. See Walker v. Packer, 827
5
S.W.2d 833, 839 (Tex. 1992); see also Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238,
242 (Tex. 1985). However, we are much less deferential when reviewing the trial court’s
determination of the legal principles controlling its ruling. See Walker, 827 S.W.2d at 840. A
trial court has no discretion in determining what the law is or applying the law to the facts, even
when the law is unsettled. Prudential, 148 S.W.3d at 135. A clear failure by the trial court to
analyze or apply the law correctly will constitute an abuse of discretion. Walker, 827 S.W.2d at
840.
Absent extraordinary circumstances, mandamus will not issue unless the relator lacks an
adequate remedy by appeal. In re Van Waters & Rogers, Inc., 145 S.W.3d 203, 210-11 (Tex.
2004)(orig. proceeding). Whether a clear abuse of discretion can be adequately remedied by
appeal depends on a careful analysis of costs and benefits of interlocutory review. In re McAllen
Med. Ctr., Inc., 275 S.W.3d 458, 464 (Tex. 2008)(orig. proceeding). Because it depends heavily
on circumstances, such a cost-benefit analysis must be guided by principles rather than by simple
rules that treat cases as categories. See id. In addition, we must consider whether mandamus
will spare the litigants and the public “the time and money utterly wasted enduring eventual
reversal of improperly conducted proceedings.” In re Team Rocket, L.P., 256 S.W.3d 257, 262
(Tex. 2008)(orig. proceeding), quoting Prudential, 148 S.W.3d at 136.
MOTION TO DISMISS FOR LACK OF SUBJECT MATTER JURISDICTION
Relators argue that the trial court abused its discretion in denying their motion to dismiss
for lack of subject matter jurisdiction because Dulces Arbor’s right to recover money damages
against them for the failed sale of, and unlawful use and occupancy of, the Mexican real property
at issue depends on Dulces Arbor’s disputed interest in that land. Relators further contend that
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their remedy by appeal is inadequate because proceeding to trial on causes of action over which the
trial court does not have jurisdiction would deprive them of their right to dismissal and constitute
an irreversible waste of judicial and public resources since the relief afforded by an appeal at the
conclusion of trial would be the same as the relief afforded by mandamus: dismissal. Because we
conclude that Relators have not shown that the trial court abused its discretion in denying their
motion to dismiss for lack of subject matter jurisdiction, we do not reach the issue of whether
Relators have an adequate remedy by appeal.
Standard of Review
Whether a trial court has subject-matter jurisdiction is a question of law subject to de novo
review. Texas Natural Res. Conservation Comm’n v. IT-Davy, 74 S.W.3d 849, 855 (Tex. 2002).
If the trial court lacks subject matter jurisdiction, the trial court’s judgment must be reversed and
the case dismissed. City of Garland v. Louton, 691 S.W.2d 603, 605 (Tex. 1985). A motion to
dismiss based on a lack of subject matter jurisdiction is the functional equivalent of a plea to the
jurisdiction. Trutec Oil & Gas, Inc. v. W. Atlas Intern, Inc., 194 S.W.3d 580, 584
(Tex.App.--Houston [14th Dist.] 2006, no pet.); Anderson v. City of San Antonio, 120 S.W.3d 5, 7
(Tex.App.--San Antonio 2003, pet. denied). A plea to the jurisdiction challenges the trial court’s
authority to determine the subject matter of a cause of action. Tex. Dep’t of Parks & Wildlife v.
Miranda, 133 S.W.3d 217, 226 (Tex. 2004). In deciding a plea to the jurisdiction, the trial court
must determine if the plaintiff has alleged facts that affirmatively demonstrate its jurisdiction to
hear the case. Miranda, 133 S.W.3d at 226. The trial court construes the pleadings liberally in
favor of the plaintiff and looks to the pleader’s intent. Id. If the pleadings do not affirmatively
demonstrate jurisdiction, but do not negate it outright, then the plaintiff ought to be afforded the
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opportunity to amend since the issue is one of pleading sufficiency. Id. at 227. If, however, the
pleadings affirmatively negate jurisdiction, the trial court may grant the plea to the jurisdiction or
the motion to dismiss without allowing the plaintiff an opportunity to amend. Id. The trial court
may also consider evidence in determining a plea to the jurisdiction or a motion to dismiss, and
must do so when necessary to resolve the question of subject-matter jurisdiction. Id.
Applicable Law
It is well-settled that Texas courts have no subject matter jurisdiction to adjudicate title to
interests in real property outside of Texas. Holt v. Guerguin, 106 Tex. 185, 189, 163 S.W. 10, 12
(1914); Trutec Oil & Gas, 194 S.W.3d at 583; Kelly Oil Co. v. Svetlik, 975 S.W.2d 762, 764
(Tex.App.--Corpus Christi 1998, pet. denied); Hartman v. Sirgo Operating, Inc., 863 S.W.2d 764,
766 (Tex.App.--El Paso 1993, pet. denied). However, it is also well-settled that Texas courts
have subject matter jurisdiction over lawsuits relating to real property outside of Texas if the
nature of the suit and the remedy sought directly affect and operate upon the defendant, and not
upon the out-of-state property. Tex. & Pacific Railway Co. v. Gay, 86 Tex. 571, 589, 26 S.W.
599, 605 (1894); Banco Minero v. Ross, 106 Tex. 522, 533-35, 172 S.W. 711, 713 (1915). The
determining issue is whether the nature of the lawsuit in question involves a naked question of
title; if it does, the suit is in rem, if it does not, the suit is in personam. Hartman, 863 S.W.2d at
766; Estabrook v. Wise, 506 S.W.2d 248, 249, 253 (Tex.Civ.App.--Tyler 1974, writ ref’d n.r.e.),
vacated as moot, 519 S.W.2d 632 (Tex. 1974). A lawsuit involves the adjudication of title to real
property if title is not involved in a merely incidental or collateral way, but is actually involved as
the basis, as well as the measure of right of any recovery. Merit Mgmt. Partners I, L.P. v. Noelke,
266 S.W.3d 637, 646-47 (Tex.App.--Austin 2008, no pet.), citing Kegans v. White, 131 S.W.2d
8
990, 995 (Tex.Civ.App.--Eastland 1939, writ ref’d).
Discussion
Relators believe this case requires the trial court to decide a question of title before it can
render judgment, and make two arguments in support of that contention: the first factual, the
second legal.
As support for their argument that a question of title has been raised, Relators direct our
attention to two pieces of evidence in the mandamus record. The first is a copy of a petition filed
in Mexico by the wife of one of the Third-Party Plaintiffs and Cross-Claimants in the underlying
lawsuit. Citing this petition, Relators contend that Dulces Arbor’s own documents establish that
it transferred title to the Mexican real property to a Trustee for the benefit of Bank of the West.
However, Dulces Arbor did not file the Mexican lawsuit. Rather, they are one of the named
defendants. While it is accurate that the Plaintiff in the Mexican lawsuit asserted that Dulces
Arbor conveyed the Mexican real property in trust, allegations contained in pleadings are not
evidence, even if sworn or verified, and therefore cannot support the conclusion that Dulces Arbor
transferred ownership of the Mexican real property to the trust. See Laidlaw Waste Sys. (Dallas),
Inc. v. City of Wilmer, 904 S.W.2d 656, 660 (Tex. 1995); Americana Motel, Inc. v. Johnson, 610
S.W.2d 143, 143 (Tex. 1980).
In addition, the allegation in the petition cannot be characterized as a judicial admission
made by Dulces Arbor because Dulces Arbor is not the pleader, and there is no evidence in the
mandamus record that Dulces Arbor adopted the pleading as its own. See Grimes v. Jalco, Inc.,
630 S.W.2d 282, 284 (Tex.App.--Houston [1st Dist.] 1981, writ ref’d n.r.e.)(holding that judicial
admissions in pleadings are binding only on the pleader); see also Wise v. Haynes, 103 S.W.2d
9
477, 482-83 (Tex.Civ.App.--Texarkana 1937, no writ) and Irwin v. Par-Oil Well Servicing Co.,
349 S.W.2d 277, 278 (Tex.Civ.App.--Texarkana 1961, writ ref’d n.r.e.)(together standing for the
proposition that pleadings in other actions which contain statements inconsistent with a party’s
present position are inadmissible unless otherwise adopted by the party).
Moreover, the Plaintiff in the Mexican lawsuit alleged that the Mexican real property was
placed into trust for the purpose of guaranteeing punctual, timely payments on the loan Dulces
Arbor had secured from Bank of the West. This assertion alone does not address, much less
negate, Dulces Arbor’s legal right to sell or lease the Mexican real property. Given that the trust
document is not in the record, neither the trial court nor this Court is able to ascertain the validity of
the allegations in the Mexican lawsuit as related to the trust.
The second piece of evidence upon which Relators rely is an affidavit executed by
Relators’ expert on Mexican law, David Lopez (“Lopez”). Lopez is an American attorney
practicing law in San Antonio who has written several treatises and scholarly articles on Mexican
law. Relators contend that Lopez’s affidavit establishes that only the trustee has the power to
pursue lawsuits and collections with the written consent of Bank of the West, and that only the
courts in Juarez have exclusive jurisdiction over suits construing the Mexican real property.
Because these assertions, if true, have no bearing on determining the issue of ownership of title to
the Mexican real property, Lopez’s affidavit is irrelevant to determining title to the Mexican real
property. See E.I. du Pont de Nemours & Co., Inc. v. Robinson, 923 S.W.2d 549, 556 (Tex.
1995)(holding that evidence is irrelevant if it has no relationship to any of the issues in the case).
It is also unclear whether Relators rely upon Lopez’s affidavit as evidence that title to the
Mexican real property has been transferred to the trust. In one section of their brief, Relators do
10
not cite the affidavit as support for this contention, but elsewhere in the affidavit, they do.
(Keeping in mind that our review is de novo, we will consider Lopez’s affidavit for the proposition
that ownership of the Mexican real property was transferred to a trust.
Lopez states that he was asked to opine on “the exclusive jurisdiction of Mexican courts
over real property matters and the claims and remedies, if any, available to Plaintiffs under
Mexican law for the conduct by Defendants alleged in Plaintiffs’ petition.” Lopez does not state
he was asked to provide his opinion on the ownership of the Mexican real property. Rather, he
makes an assumption regarding ownership of the property. Specifically, Lopez states that he
reviewed case-specific materials, including an undated “Contract for Real Property Transfer and
Related Transactions” and a Spanish document dated March 10, 2000, which appears to be the
modification of the aforementioned contract. However, this is unclear because there is no English
translation of the document’s title. Based on his review of these documents Lopez “assume[s]”
that under an irrevocable Mexican collateral trust, which is not specifically identified as one of the
materials he reviewed, Dulces Arbor transferred its ownership interest in the Mexican real
property to the trustee and that ownership would not revert back to Dulces Arbor until it fulfilled
its loan obligation to Bank of the West.
We conclude that Lopez’s affidavit is insufficient to establish that title to the Mexican real
property was held in a trust as Relators contend or that ownership of the property was transferred
to anyone, such that title to the property may be legitimately questioned. First, as mentioned
above, Lopez did not conclude that the trust, rather than Dulces Arbor, owns the Mexican real
property. Instead, Mr. Lopez assumes that fact. Mere speculation in an affidavit is insufficient
to establish a conclusion. See Ingram v. Deere, 288 S.W.3d 886, 903 (Tex. 2009)(holding that the
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testimony of a defense expert, who admitted that his statements were unsupported and mere
assumptions, constituted speculation insufficient to establish that the plaintiff contributed valuable
property to the clinic). Second, Lopez apparently bases his assumption that Dulces Arbor does
not own the property on a document he labels as an irrevocable Mexican collateral trust, but, this
was not one of the documents identified by Lopez that he reviewed. However, since Lopez never
states that he actually reviewed the irrevocable Mexican collateral trust document and relied on it
as a basis for his assumption, there is no way to corroborate his assertions, particularly since the
document is not included in the record. As a result, the underlying basis of Lopez’s conclusion is
unreliable. If the basis underlying an expert’s opinion testimony is unreliable, the expert’s
testimony is unreliable and legally constitutes no evidence and may not be considered. See
Merrell Dow Pharm., Inc. v. Havner, 953 S.W.2d 706, 714 (Tex. 1997).
No competent evidence supports the allegation that Dulces Arbor transferred ownership of
the Mexican real property to a trust. Even were these documents referred to above competent
evidence, they serve only to raise a fact issue. We may not consider disputed issues of fact in an
original mandamus proceeding, see West v. Solito, 563 S.W.2d 240, 245 (Tex. 1978)(holding that
an appellate court may not deal with disputed areas of fact in an original mandamus proceeding).
We are also mindful that when reviewing a trial court’s determination for an abuse of discretion,
we may not substitute our judgment for that of the trial court with respect to resolution of factual
issues or matters committed to the trial court’s sound discretion. See Walker, 827 S.W.2d at 839.
Faced with a mandamus record devoid of the necessary proof to establish that Dulces
Arbor does not own the Mexican real property, we cannot conclude that the trial court clearly
abused its discretion in denying the motion to dismiss for lack of subject matter jurisdiction.
12
Relators also contend that, as a matter of law, the trial court cannot address Dulces Arbor’s
claims without first adjudicating issues related to the Mexican real property. Again, we are
mindful that when reviewing the trial court’s determination of the legal principles controlling its
ruling, a trial court has no discretion in determining what the law is or in applying the law to the
facts, even when the law is unsettled, and a clear failure by the trial court to analyze or apply the
law correctly will constitute an abuse of discretion. Prudential, 148 S.W.3d at 135; Walker, 827
S.W.2d at 840. On the other hand, Relators cite no authority for their proposition that the trial
court, as a matter of law, had a duty to adjudicate title as a prerequisite to address Dulces Arbor’s
claims. Given the lack of competent evidence offered in support of Relators’ arguments, we
cannot conclude that the trial court clearly abused its discretion in denying the motion to dismiss
for lack of subject matter jurisdiction.
Having disposed of Relators’ arguments, we hold that the trial court did not abuse its
discretion in denying their motion to dismiss based on lack of subject matter jurisdiction.
CONCLUSION
Relators’ petition for a writ of mandamus is denied.
May 2, 2012
CHRISTOPHER ANTCLIFF, Justice
Before McClure, C.J., Antcliff, J., and Chew, C.J. (Senior)
Chew, C.J. (Senior)(Sitting by Assignment)
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