James C. Mosser and Mosser Law PLLC v. Bob Mims ( 2015 )

ACCEPTED
03-15-00365-CV
7944990
THIRD COURT OF APPEALS
AUSTIN, TEXAS
November 23, 2015 11/23/2015 11:07:35 AM
JEFFREY D. KYLE
CLERK
No. 03-15-00365-CV
IN THE
THIRD JUDICIAL DISTRICT COURT OF APPEALS
at AUSTIN, TEXAS
JAMES C. MOSSER and MOSSER LAW PLLC,
Appellants
v.
BOB MIMS,
Appellee
APPEALED FROM THE 340th JUDICIAL DISTRICT COURT
TOM GREEN COUNTY, TEXAS
APPELLANTS’ OPENING BRIEF
MOSSER LAW PLLC
James C. Mosser
Texas Bar No. 00789784
Nicholas D. Mosser
Texas Bar No. 24075405
Paul J. Downey
Texas Bar No. 24080659
2805 Dallas Parkway, Suite 220
Plano, Texas 75093
Tel. (972) 733-3223
Fax. (469) 626-1073
courtdocuments@mosserlaw.com
LAWYERS FOR APPELLANTS, JAMES C. MOSSER AND MOSSER
LAW, PLLC
APPELLANT REQUESTS ORAL ARGUMENT
IDENTITY OF PARTIES AND COUNSEL
The following is a complete list of the parties, the attorneys, and any other
person who has an interest in the outcome of this appeal.
Appellants
James C. Mosser
MOSSER LAW, PLLC, represented by
James C. Mosser
Texas Bar No. 00789784
Nicholas D. Mosser
Texas Bar No. 24075405
Paul J. Downey
Texas Bar No. 24080659
2805 Dallas Parkway, Suite 220
Plano, Texas 75093
Tel. (972) 733-3223
Fax. (469) 626-1073
courtdocuments@mosserlaw.com
Appellee
Bob Mims, represented by
Hay, Wittenburg, Davis, Caldwell & Bale, LLP
Larry W. Bale
Texas Bar No. 01629830
P.O. Box 271
San Angelo, Texas 76092
Tel. (325) 658-2728
lwb@hwdcb.com
ii
TABLE OF CONTENTS
IDENTITY OF PARTIES AND COUNSEL. . . . . . . . . . . . . . . . . . . . . . . . . ii
TABLE OF CONTENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii
INDEX OF AUTHORITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v
RECORD CITATION KEY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix
STATEMENT OF THE CASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . x
STATEMENT REGARDING ORAL ARGUMENT. . . . . . . . . . . . . . . . . . . xii
ISSUES PRESENTED. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii
STATEMENT OF FACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SUMMARY OF THE ARGUMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARGUMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Standard of Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
THE TRIAL COURT ERRED IN IMPOSING SANCTIONS AGAINST MOSSER
LAW PLLC.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
THE TRIAL COURT ERRED IN SANCTIONING JAMES C. MOSSER FOR THE
FILING OF THE SECOND AND THIRD AMENDED PETITIONS.. . . . . . 17
THE TRIAL COURT ERRED IN FINDING THAT THE PLEADINGS AND CLAIMS
FILED IN THIS CASE WERE GROUNDLESS.. . . . . . . . . . . . . . . . . 19
MELTON’S CONSTITUTIONAL CLAIM WAS NOT GROUNDLESS AND
HAD EVIDENTIARY SUPPORT. . . . . . . . . . . . . . . . . . . . . . 21
MELTON’S FRAUD IN A REAL ESTATE TRANSACTION CLAIM WAS
NOT GROUNDLESS AND HAD EVIDENTIARY SUPPORT. . . . 29
iii
MELTON’S COMMON LAW FRAUD CLAIM WAS NOT GROUNDLESS
AND HAD EVIDENTIARY SUPPORT. . . . . . . . . . . . . . . . . . . 39
MELTON’S DECEPTIVE TRADE PRACTICES ACT CLAIM WAS NOT
GROUNDLESS AND HAD EVIDENTIARY SUPPORT. . . . . . . . 43
MELTON’S BREACH OF CONTRACT CLAIM WAS NOT GROUNDLESS
AND HAD EVIDENTIARY SUPPORT. . . . . . . . . . . . . . . . . . . 46
MELTON’S NEGLIGENCE CLAIM WAS NOT GROUNDLESS AND HAD
EVIDENTIARY SUPPORT. . . . . . . . . . . . . . . . . . . . . . . . . . 49
THE TRIAL COURT ABUSED ITS DISCRETION IN SANCTIONING
MOSSER FOR BRINGING ALLEGEDLY TIME-BARRED CLAIMS
AGAINST APPELLEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
THE TRIAL COURT ABUSED ITS DISCRETION IN FINDING THAT THE
PLEADINGS WERE BROUGHT FOR AN IMPROPER PURPOSE.. . . . 61
PRAYER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
CERTIFICATE OF COMPLIANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
CERTIFICATE OF SERVICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
APPENDIX TO APPELLANT’S BRIEF.. . . . . . . . . . . . . . . . . . . . . . . . . . 71
iv
INDEX OF AUTHORITIES
CASES
American Flood Research, Inc. v. Jones, 192 S.W.3d 581 (Tex. 2006). . 14
Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 649 (Tex. 1996).. . . . . . . 43
Bennett v. Grant, 460 S.W.3d 220 (Tex.App.–Austin 2015, pet. filed). . 14,
29, 39, 52, 61, 67
Burleson State Bank v. Plunkett, 27 S.W.3d 605, 610 (Tex.App–Waco
2000, pet. denied). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
City of Fort Worth v. Pippen, 439 S.W.2d 660 (Tex. 1969). . . . . . . . . 28, 52
City of Keller v. Wilson, 168 S.W.3d 802 (Tex.2005). . . . . . . 15, 41, 60, 67
Dike v. Peltier Chevrolet, Inc., 343 S.W.3d 179 (Tex.App.–Texarkana
2011, no pet.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62, 64, 66
Dolenz v. Boundy, 197 S.W.3d 416 (Tex.App.–Dallas 2006, pet. denied)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Dukes v. Philip Johnson/Alan Ritchie Architects, P.C., 252 S.W.3d 586
(Tex.App.–Fort Worth 2008, pet. denied). . . . . . . . . . . . . . . . . . . . . . 50, 51
Ernst & Young, L.L.P. v. Pacific Mut. Life Ins. Co., 51 S.W.3d 573 (Tex.
2001). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36, 40, 42
Great Am. Reserve Ins. Co. v. San Antonio Plumbing Supply Co., 391
S.W.2d 41 (Tex. 1965). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53, 58
Greenway Bank & Trust v. Smith, 679 S.W.2d 592 (Tex.App.–Houston [1st
Dist.] 1984, writ ref’d n.r.e). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Hannaway v. Deutsche Bank Nat’l Trust Co., A-10-CV-714-LY, 2011 WL
891669 at *5 (W.D. Tex, Mar. 11, 2011). . . . . . . . . . . . . . . . . . . . . . . . . . 57
v
Hansberger v. EMC Mortg. Corp., Docket No. 04-08-00438-CV, 2009 WL
2264996 at *4 (Tex.App.–San Antonio 2009, no pet.).. . . . . . . . . . . . . . . 30
KPMG Peat Marwick v. Harrison County Housing Finance Corp., 988
S.W.2d 746 (Tex. 1999). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54, 59
Lake Travis Indep. Sch. Dist. v. Lovelace, 243 S.W.3d 244
(Tex.App–Austin 2007, no pet). . . . . . . . . . . . . . . . . . . . . . . . . . . 13, 20, 61
Latham v. Castillo, 972 S.W.2d 66 (Tex. 1998).. . . . . . . . . . . . . . . . . . . . 45
Low v. Henry, 221 S.W.3d 609 (Tex. 2007). . . . . . . . . . . . . . . . . . . . 14, 20
Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546 (Tex. 1985). . . . . . . . . . . 53
Office of Pub. Util. Counsel v. Public Util. Com’n of Texas, 878 S.W.2d
598, 600 (Tex. 1994).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24, 26
Retherford v. Castro, 378 S.W.3d 29 (Tex.App.–Waco 2012, pet. denied)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Riverside Nat’l Bank v. Lewis, 603 S.W.2d 169 (Tex. 1983). . . . . . . . . . . 44
Robson v. Gilbreath, 267 S.W.3d 401 (Tex.App.–Austin 2013, pet. denied)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19, 20, 61
S.V. v. R.V. 933 S.W.2d 1 (Tex. 1996). . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Schanzle v. JPMC Specialty Mortg. LLC, No. 03-09-00639-CV, 2011 WL
832170 at *4 (Tex.App.–Austin Mar. 11, 2011, no pet.). . . . . . . . . . . . . . 56
Sierra Blanca Indep. Sch. Dist. v. Sierra Blanca Corp., 514 S.W.2d 782
(Tex.Civ.App.–El Paso 1974, writ ref’d.). . . . . . . . . . . . . . . . . . . . 25, 27, 33
Southwestern Bell Tel. Co. V. DeLanney, 809 S.W.2d 493 (Tex. 1991)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
State v. PR Investments and Specialty Retailers, Inc., 180 S.W.3d 654
vi
(Tex.App.–Houston [14th Dist.] 2005, pet. granted). . . . . . . . . . . . . . . . . . 61
Tarrant County v. Chancey, 942 S.W.2d 151 (Tex.App.–Fort Worth 1997,
no writ.). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12, 13
Transport Insurance Company v. Faircloth, 898 S.W.2d 269 (Tex. 1995)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34, 41
Trenholm v. Ratcliff, 646 S.W.2d 927 (Tex. 1983). . . . . . . . . . . . . . . . . . 34
Walker v. Packer, 827 S.W.2d 833 (Tex. 1992). . . . . . . . . . . . . . 27, 42, 52
Yuen v. Gerson, 342 S.W.3d 824 (Tex.App.–Houston [14th Dist.], pet.
denied.).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15, 16, 39, 46, 50
CONSTITUTIONAL PROVISIONS
TEX. CONST. ART. XVI § 50(a)(6). . . . . . . . . . . . . . . . . . . . . . . . . . . 21, 22
TEX. CONST. ART. XVI § 50(h). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22, 23
FEDERAL STATUTES
28 U.S.C. § 1332(a)(1). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64, 65
STATE STATUTES
TEX. BUS. & COM. CODE § 17.45.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
TEX. BUS. & COM. CODE § 17.49.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
TEX. BUS. & COM. CODE § 27.01.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
TEX. BUS. & COM. CODE §17.565. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
TEX. CIV. PRAC. & REM. CODE § 10.001.. . . . . . . . . . . . . . . . . 20, 32, 62
TEX. TAX. CODE § 23.01(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . 24, 33, 45
vii
TEX. TAX. CODE § 23.01(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24, 33
RULES
TEX. R. APP. 33.1(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
TEX. R. CIV. P 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16, 21, 61
TEX. R. CIV. P. 51(a). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
TEX. R. EVID. 201(d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
TEX. R. EVID. 201(f).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
OTHER AUTHORITIES
Act of May 28, 1983, 68th Leg. R.S., ch. 949, 1983 Gen. Laws. 5208. . . . 31
viii
RECORD CITATION KEY
Citations to the clerk’s record will appear as CR Vol ___, ___. For
example, [CR Vol 1:1] means “Clerk’s Record, Volume 1, Page 1.
Citations to the reporter’s record will appear as “RR Vol.___,
___:___. For example, RR Vol. 2, 1:1 means “Reporter’s Record, Volume
2, page 1, line 1.”
Citations to the Appendix in Support of Brief of Appellants will appear
as App.___. For example, [App. 1] means Page One of the appendix. For
clarity, each page in the Appendix in Support of Brief of Appellants has
been labeled on the bottom right corner of the page.
ix
STATEMENT OF THE CASE
1. This case arises from the closing of Ben Melton’s home equity loan in
violation of Section 50(a) et seq., of Article XVI of the Texas
Constitution by lending an amount in excess of 80 percent of the fair
market value of Melton’s property. [CR Vol. 1, 7-11].
2. Melton, by and through attorneys James C. Mosser and Alexis
Steinberg, brought suit in Tom Green County, the situs of the
property, to declare the lien on Melton’s property void, to cancel the
remaining debt secured by Melton’s homestead, and to recover
principal and interest paid by Melton. CU Member’s Mortgage, First
Western Title Co., and Bob Mims, who appraised Melton’s property,
were the named defendants in the case. [Id.].
3. The trial court granted summary judgment in favor of all defendants
as to all of Melton’s claims. [CR Vol. 1, 358-60; 429-30]; [CR Vol. 2,
19].
4. Additionally, the trial court awarded Bob Mims $15,366.55 in
attorney’s fees as sanctions under Rule 13 of the Texas Rules of
Civil Procedure and Chapter 10 of the Texas Civil Practices and
Remedies Code. [CR Vol. 1, 420-428].
x
5. This appeal from the sanctions order follows.
xi
STATEMENT REGARDING ORAL ARGUMENT
The Court of Appeals should conduct oral argument because this
appeal involves the resolution of complex questions of Texas Constitutional
Law regarding detailed factual issues. Oral argument will help the Court’s
understanding of the factual relationship between the parties and the
posture of the case, particularly because the trial court’s ruling conflicts will
the applicable law. It will also allow the Appellants to explain the logic
undergirding each claim and petition filed in this case, and to show how
diversity jurisdiction could not have been established by any party in this
case. Finally, it will allow Appellants to demonstrate to the Court that there
was no sanctionable conduct upon which the trial court could have based
its order. The Appellants therefore respectfully urge the Court to allow oral
argument in this case.
xii
ISSUES PRESENTED
1. Whether the trial court erred in sanctioning Mosser Law PLLC, an
entity that cannot be sanctioned.
2. Whether the trial court erred in sanctioning James C. Mosser for
filing the Second and Third Amended Petitions, when he did not sign
either of those petitions.
3. Whether the trial court erred in finding that the Petitions and Claims
filed in this case were groundless and without evidentiary support
4. Whether the trial court erred in finding that the petitions and claims
filed against Appellee were filed to defeat diversity jurisdiction in a
case with no diverse parties.
xiii
STATEMENT OF FACTS
1. On March 13, 2009, Ben Melton executed a Home Equity Note with
CU Members Mortgage for $223,648.00, a sum secured by his
homestead located in Tom Green County, Texas. [CR Vol. 1, 63-68;
70-84]. As part of the same transaction on March 13, 2009, Ben
Melton and CU Members Mortgage also executed a statement
acknowledging that the fair market value of Melton’s property on that
date was $300,000.00. [CR Vol.1, 94]. This acknowledgment states,
“The fair market value indicated herein is the value estimated in the
appraisal which was prepared in accordance with state or federal
requirements applicable to this extension of credit.” [Id.] The box next
to this statement is ticked, indicating that this statement applies to
this acknowledgment. [Id.]
2. This appraisal was performed by the Appellee on January 30, 2009
and transmitted to CU Members Mortgage on February 3, 2009. [CR
Vol. 1, 104-05; RR Vol. 3, 51].
3. On March 13, 2013, Counsel for Plaintiff, James C. Mosser, filed an
Original Petition in Cause No. C130102C, Melton v. CU Members
Mortgage, et al. [CR Vol 1, 7]. The suit named Appellee as a party.
1
[Id.]
4. As stated in his Original Petition, Ben Melton is an individual resident
of Tom Green County, Texas. [Id. at ¶2].
5. Defendant CU Member’s Mortgage, a division of Colonial Savings,
FA, (hereinafter “Colonial”) was also a resident of Texas, with its
home office located at 2600 West Freeway, Fort Worth, Texas
76102. [Id. at ¶3; CR Vol. 1, 59 at ¶ 10].
6. Defendant First Western Title Company was also a Texas resident,
with its home office located at 1500 Norwood Dr., Suite 400, Hurst,
Texas 76054. [Id. at ¶5].
7. Finally, Appellee was also a Texas resident from San Angelo, Texas.
[Id. at ¶4].
8. Plaintiff alleged that Defendant Colonial violated the Texas
Constitution by closing a home equity loan sought by Melton for
which the principal loan amount exceeded eighty percent of the fair
market value of property that secured the loan. [CR Vol. 1, 8].
9. The Plaintiff specifically alleged that Appellee “aided [co-defendant]
Colonial and Defendant Western Title in the execution of this
violation by providing a false and fraudulent real estate appraisal.”
2
[CR Vol.1, 8 at ¶11(b); 9 at ¶11(f)].
10. Based on these factual allegations, Plaintiff sought declaratory relief
invalidating the unconstitutional loan, forfeiture of all principal and
interest paid on the note up to the point of suit, and forfeiture of all
remaining principal and interest on the note. [CR Vol. 1, 9 at ¶13].
Plaintiff also sought exemplary damages for fraud in a real estate
transaction under TEX. BUS. & COM. CODE § 27.01. [CR Vol. 1, 10
at ¶21].
11. In his request for relief, Plaintiff specifically sought to recover
“judgment from and against Defendants for the forfeiture of all
principal and interest on the Loan, including but not limited to a
judgment from and against Defendants for payment of all principal
and interest paid by Plaintiffs to Defendant to date...” [CR Vol.1, 11 at
¶27].
12. Additionally, the plaintiff sought to recover “such other and further
relief, both in law and equity to which Plaintiffs may show themselves
to be justly entitled.” [CR Vol 1, 11 at ¶31].
13. The signature block for the Original Petition bears the electronic
signature of James C. Mosser. [CR Vol. 1, 11].
3
14. On May 31, 2013, Defendant Colonial, a Division of Colonial Savings
F.A. and Defendant First Western Title Co., filed their original answer
in this cause. [CR Vol. 1, 12-15]. On June 27, 2013, these
defendants filed their first amended answer. [CR Vol. 1, 16-19].
15. On July 24, 2013, Appellee filed his Original Answer and Motion for
Rule 13 Sanctions seeking sanctions “under Rule 13 against Ben
Melton and his attorney of record” for the filing of Plaintiff’s Original
Petition. [CR Vol. 1, 20-22].
16. On August 05, 2013, Plaintiff Ben Melton filed his First Amended
Petition in this case, reasserting his claims under the Texas
Constitution, its Declaratory Judgment Action, its Fraud in a Real
Estate Transaction claim, and adding a claim against Appellee under
the Deceptive Trade Practices Act. [CR Vol. 1, 23-27]. Again, Melton
stated twice, “Defendant Mims aided Colonial and Defendant
Western Title in the execution of this violation by providing a false
and fraudulent residential real estate appraisal.” [CR Vol.1, 24 at ¶
6(b), (f)].
17. James C. Mosser was the signing attorney on the Plaintiff’s First
Amended Petition. [CR Vol. 1, 27].
4
18. On September 17, 2013, Plaintiff Melton filed his Second Amended
Petition, reasserting its previous claims and more fully explicating
Appellee’s role in the loan transaction. [CR Vol. 1, 34-40].
Specifically, Plaintiff alleged that on review of the appraisal
performed in this case, Appellee failed to follow the Uniform
Standards of Professional Appraisal Practice by failing to consider
the effect of the terms and conditions of a lease on leasehold
property, and failed to refrain from valuing the property solely by
adding together the individual values of the various estates. [CR Vol.
1, 35-36 at ¶ 6(d),(e)].
19. Plaintiff Melton then alleged that Defendant Colonial violated the
Texas Constitution when it closed his home equity loan without
providing the true fair market value of Mr. Melton’s home on the date
the loan closed, and that Appellee “aided in the execution of the
violation by providing a false and fraudulent residential real estate
appraisal. [CR Vol. 1, 36 at ¶ 6(i)].
20. Alexis F. Steinberg signed Plaintiff’s Second Amended Petition. [CR
Vol. 1, 39].
21. On September 28, 2013, Defendants Colonial and First Western Title
5
Co. moved for Summary Judgment in this case. In support of their
motion, Defendants submitted Exhibit A-9, a copy of the settlement
statement generated in connection with the loan, which detailed the
transaction costs. [CR Vol. 1, 100-102]. In the section entitled
“Settlement Charges,” Line 103 bears the notation POC (B) in
reference to the cost of the appraisal, which was paid to “CU
Members Mortgage for Mims, Bob.” [CR Vol. 1, 101]. P.O.C. means
paid outside of closing. [CR Vol. 1, 100]. An affidavit proving up these
records under the business records exception to the hearsay rule
accompanied these documents. [CR Vol. 1, 56-61]. Plaintiff raised no
objection to the entry of these documents into evidence. [CR Vol. 1,
216-56].
22. Shortly thereafter, Appellee filed his First Motion for Summary
Judgment. [CR Vol. 1, 169-215].
23. On December 16, 2013, Plaintiff Melton filed his third Amended
Petition in this suit, in which he pleaded the discovery rule,
reasserted his Texas Constitutional Claim, his request for
Declaratory Relief, his request for damages under the Deceptive
Trade Practices Act, and added claims for common law fraud, breach
6
of contract, and negligence against all defendants. [CR Vol. 1, 257-
266]. Melton did not include his claim for fraud in a real estate
transaction in this pleading. Id.
24. Alexis Steinberg was the signing attorney on Melton’s Third
Amended Petition, Plaintiff’s final pleading in this case. [CR Vol. 1,
265].
25. On December 16, 2013, and January 3, 2014, Melton filed his
responses to both defendants’ Motions for Summary Judgment. [CR
Vol. 1, 216-256; 267-298]. Melton’s attorneys stated, “Melton has
amended his petition to remove the claims for statutory fraud, as
Melton has researched Defendant’s arguments and determined that
the statutory fraud claims is unsupportable.” [CR Vol. 1, 216.] In
support of denying Appellee’s Motion for Summary Judgment, Melton
submitted the Settlement Statement included by Defendant Colonial
in support of its Motion for Summary Judgment. [CR Vol. 1, 286-292].
26. Colonial substantively responded to the discovery rule as plead. CR
Vol. 3, 9]. Appellee, for his part, merely adopted Colonial’s
Argument. [CR Vol. 2, 6-7].
27. On May 21, 2014, the trial court granted Appellee’s First Motion for
7
Summary Judgment, having sustained Mims’ Objections to Melton’s
Evidence in Support of its Response to Mims’ Motion for Summary
Judgment. [CR Vol. 2, 19-20].
28. On May 20, 2014, Appellee filed his Second Motion for Summary
Judgment on Melton’s remaining claims. [CR Vol. 1, 307-318]
29. The Court issued a letter ruling granting Appellee’s Second Motion
for Summary Judgment on July 10, 2014. [RR Vol. 3, 84]. The court
did not sign the judgment until March 12, 2015. [CR Vol. 1, 429-430].
30. On December 29, 2014, Appellee filed his first Amended Motion for
Sanctions, which for the first time included a claim for sanctions
under Chapter 10 of the Texas Civil Practices and Remedies Code.
[CR Vol. 1, 404-408]. Appellee attached no exhibits in support of the
motion. [Id.]
31. The trial court held the hearing via Court Call on Appellee’s First
Motion for Sanctions on January 7, 2015. [RR Vol. 2, 1-113].
32. At the hearing, Counsel for Appellee introduced into evidence a
document signed by Melton acknowledging $300,000.00 as fair
market value of his property. [RR Vol. 2, 22:14, RR Vol. 3, 34]. The
acknowledgment states, “The fair market value indicated herein is
8
the value estimated in the appraisal which was prepared in
accordance with state or federal requirements applicable to the
extension of credit.” [RR Vol. 3, 34].
33. Appellee testified from his appraisal package, which was admitted,
that the “Intended user of the report is CU Members Mortgage and/or
its assigns.” [RR Vol. 2, 48: 18-23; RR Vol. 3:62].
34. Counsel for Appellee also introduced the Tom Green County
Appraisal District tax records for Mr. Melton’s property which the
County valued at $171,500.00. [RR Vol. 2, 34-36; RR Vol. 3, 37].
During cross-examination, Appellee testified that the Tax Appraisal
District “had a different opinion of value than [he] did” and conceded
that the Appraisal District had valued the property at $171,500.00.
[RR Vol. 2, 67:4-14].
35. Appellee further testified that he was appraising the fair market value
of the property. [RR Vol. 2, 40: 6-8].
36. Appellee also testified that he received $350.00 in compensation for
the appraisal. [RR Vol. 2, 61: 25 - 62: 1-2]. On cross-examination,
Appellee testified that the sum was “Cash on Delivery” and was to be
paid at the door. [RR Vol. 2, 65:16-25].
9
37. Over the relevance objection of Mr. Mosser, the Court then admitted
Appellee’s Exhibit 9, documents filed in Priester v. Long Beach
Mortgage Company and JP Morgan Chase & Co., et al., 4:10-cv-
00641. [RR Vol 2:84-85]. In response to Mr. Mosser’s objection,
Counsel for Appellee stated that the documents were relevant
“because it shows a pattern this attorney has used in another case
almost identical.” [RR Vol. 2, 85: 15-17]. The trial court agreed,
admitting the documents with the caveat that the court would
“disregard any testimony about diversity jurisdiction, or that purpose.”
[Id.: 18-22]. The trial court would later find that the “primary purpose
for naming Bob Mims as a defendant in this case was to defeat
diversity jurisdiction and the removal of this cause to federal court.”
[CR Vol. 1, 425].
38. During closing argument, Mr. Mosser requested that the court take
judicial notice of Texas Tax Code section 23.01, which requires that
all taxable property is appraised at its market value as of January 1
each year. [RR Vol. 2, 107:6-13, 25; 108:1-5]. Counsel for Appellee
objected on grounds that this fact had not been admitted into
evidence, a sentiment the court appeared to agree with when it
10
directed Mr. Mosser to “stay away from things that have not been
admitted.” [RR 2, 107: 14-16, 19-24].
39. The trial court granted Mims’ First Amended Motion for Sanctions on
March 12, 2015. [CR Vol 1, 420-428].
40. James Mosser and Mosser Law PLLC filed their Motion for New Trial
on April 13, 2015 and their Notice of Appeal on June 10, 2015. [CR
Vol. 1, 435-442; 495-497].
11
SUMMARY OF THE ARGUMENT
At its heart, this case represents an abuse of the trial court’s
authority to sanction a party with whom it disagrees under the Texas Rules
of Civil Procedure and the Texas Civil Practices and Remedies Code.
Sanctions are tools “that must be available to trial courts in those
egregious situations where the worst of the bar uses our honored system
for ill motive without regard to reason and the guiding principals of the law.”
Tarrant County v. Chancey, 942 S.W.2d 151, 154-55 (Tex.App.–Fort Worth
1997, no writ.). This case was not worthy of the court’s power to punish
such offenders.
Though both the appellee and the trial court claimed and stated that
the purpose of making the appellee appear in court was to defeat Federal
Diversity Jurisdiction, nothing could be further from the truth. [CR Vol. 1,
425, ¶ 37]. By filing on behalf of Ben Melton, James C. Mosser put before
the trial court a unique constitutional claim seeking the voiding of an
extension of credit due to irregularities in the Appellee’s appraisal, as well
as other claims related to the preparation of the appraisal. See [CR Vol.
1:8 at ¶11(b), (f); 24 at ¶ 6(b), (f); 34-36 at ¶6(b)-(e), (i); 258 at ¶6(b)-(e),
(I)]. Thus, the goal of the suit was not to defeat diversity jurisdiction but to
12
seek recovery from appellee for his role in the making of an
unconstitutional extension of credit.
Thus, the court had no grounds under either Chapter 10 of the Texas
Civil Practices and Remedies Code or Rule 13 of the Texas Rules of Civil
Procedure for sanctioning James C. Mosser, or the law firm Mosser Law
PLLC. Though the court ultimately disagreed with Mosser and awarded
summary judgment against his client, the court was not free to punish
Mosser for making claims on which he ultimately did not prevail. See Lake
Travis Indep. Sch. Dist. v. Lovelace, 243 S.W.3d 244, 254
(Tex.App–Austin 2007, no pet). Courts have stated of the statutory and
rule-based power to sanction: “The rule, however, cannot become a
weapon used to punish those with whose intellect or philosophic viewpoint
the trial court finds fault.” Chancey, 942 S.W.2d at 155 (citing Dyson
Descendant Corp. v. Sonat Exploration Co., 861 S.W.2d 942, 951
(Tex.App.–Houston [1st Dist.] 1993, no writ.). This court should not allow
the trial court to use these authorities as weapons, and should reverse the
award of sanctions against James C. Mosser and Mosser Law PLLC.
13
ARGUMENT
Standard of Review
41. The Court reviews the trial court’s imposition of sanctions under
Texas Rule of Civil Procedure 13 and Texas Civil Practices and
Remedies Code Chapter 10 for an abuse of discretion. Low v. Henry,
221 S.W.3d 609, 614 (Tex. 2007). In reviewing the sanctions order,
the court reviews the entire record to determine whether the trial
court abused its discretion. American Flood Research, Inc. v. Jones,
192 S.W.3d 581, 583 (Tex. 2006).
42. An appellate court may reverse the trial court’s ruling only if the trial
court acted without any guiding rules and principles, such that its
ruling was arbitrary or unreasonable. Low, 221 S.W.3d at 614. At the
very least this requires a showing that the trial court based its order
on an incorrect interpretation of the law or a clearly erroneous
assessment of the evidence. Bennett v. Grant, 460 S.W.3d 220, 255
(Tex.App.–Austin 2015, pet. filed)(citing Robson v. Gilbreath, 267
S.W.3d 401, 405 (Tex.App.–Austin 2008, pet. denied)). Because the
trial court is without discretion to decide what the law is or how to
apply it, appellate courts review legal issues de novo. Interstate
14
Northborough Prtshp. v. State, 66 S.W.3d 213, 220 (Tex. 2001);
Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992).
43. The court will sustain a legal sufficiency challenge if the evidence
shows a complete absence of a vital fact; rules of law or evidence
bar the court from giving weight to the only evidence offered to prove
a vital fact; the evidence offered to prove a vital fact is no more than
a mere scintilla; or the evidence establishes conclusively the
opposite of a vital fact. City of Keller v. Wilson, 168 S.W.3d 802, 810
(Tex.2005).
44. In a nonjury case, a complaint regarding the legal or factual
insufficiency of the evidence may be made for the first time on appeal
in the complaining party’s brief. TEX. R. APP. 33.1(d); see also Yuen
v. Gerson, 342 S.W.3d 824, 827 at n.3 (Tex.App.–Houston [14th
Dist.], pet. denied.).
THE TRIAL COURT ERRED IN IMPOSING SANCTIONS AGAINST MOSSER LAW
PLLC
45. The trial court erred in sanctioning Mosser Law PLLC under Texas
Rule of Civil Procedure 13 or Texas Civil Practice and Remedies
Code Section 10.004, as the evidence conclusively establishes that
Mosser Law PLLC did not sign any of underlying pleadings in this
15
case, and the law conclusively establishes that Mosser Law PLLC
lacked capacity to sign those pleadings.
46. Sanctions under Rule 13 are appropriate against the person who
signed the pleading, a represented party or both. TEX. R. CIV. P 13.
47. Likewise, the Civil Practices and Remedies Code restricts pleadings-
based sanctions to the person who signed the pleading, a party
represented by the person, or both. TEX. CIV. PRAC & REM CODE
§ 10.004(a).
48. Three courts of appeals have held that the express language of Rule
13 limits sanctions for groundless pleadings to the attorney who
actually signed the pleadings, the party represented by that attorney,
or both. Yuen v. Gerson, 342 S.W.3d at 828 (citing In re Hill, No. 2-
07-295-CV, 2007 WL 2891059, at *2 (Tex.App.–Fort Worth Oct. 3,
2007, orig. proceeding (mem. op.); Metzger v. Sebek, 892 S.W.2d
20, 52 (Tex.App.–Houston [1st Dist.] 1994, writ denied)(emphasis
added).
49. The record evidence establishes that James C. Mosser signed the
Original Petition and the First Amended Petition. [CR Vol. 1, 11; 27].
50. The evidence also establishes that Alexis Steinberg signed the
16
Second and Third Amended Petitions. [CR Vol. 1, 39; 265].
51. The evidence further establishes that the parties to the suit were Ben
Melton; Colonial, a Division of Colonial; First American Title; and Bob
Mims. [CR Vol. 1, 7].
52. Thus, the record conclusively establishes that Mosser Law PLLC was
neither a party nor a signatory to any of the pleadings filed in this
case, such that the trial court abused its discretion in sanctioning
Mosser Law PLLC. [CR Vol. 1, 11; 27; 39; 265].
53. Additionally, whether Mosser or Steinberg signed on behalf of the
firm is irrelevant. Entities, such as law firms, may not be licensed to
practice law and therefore cannot sign pleadings as only individuals
duly licensed to practice law may sign a pleading. Yuen v. Gerson,
342 S.W.3d at 828-29 (citing TEX. GOVT. CODE §§ 1.051(a);
81.101(a)).
54. Thus, the evidence is legally insufficient to support the trial court’s
order of sanctions against Mosser Law PLLC such that the judgment
against Mosser Law PLLC should be reversed.
THE TRIAL COURT ERRED IN SANCTIONING JAMES C. MOSSER FOR THE FILING
OF THE SECOND AND THIRD AMENDED PETITIONS
55. The trial court further abused its discretion in sanctioning James C.
17
Mosser under Rule 13 and Chapter 10 with respect to the Second
and Third Amended Petitions as he was not the signatory attorney to
either of those petitions.
56. Under the analysis previously stated, supra at ¶ 45-54, Rule 13 and
Chapter 10 provide for sanctions against the attorney who actually
signed the pleadings and a represented party. Yuen v. Gerson, 342
S.W.3d at 828 (citing In re Hill, No. 2-07-295-CV, 2007 WL 2891059,
at *2 (Tex.App.–Fort Worth Oct. 3, 2007, orig. proceeding (mem.
op.); Metzger v. Sebek, 892 S.W.2d 20, 52 (Tex.App.–Houston [1st
Dist.] 1994, writ denied)(emphasis added)
57. The record evidence establishes that James C. Mosser signed the
Original Petition and the First Amended Petition but did not sign the
Second and Third Amended Petitions. [CR Vol. 1:11; 27].
58. The evidence establishes that Alexis Steinberg signed the Second
and Third Amended Petitions. [CR Vol. 1, 39; 265].
59. Thus, the evidence is legally insufficient to support an award of
sanctions against James C. Mosser for the filing of the Second and
Third Amended Petitions in this case, such that the trial court’s award
of sanctions against James C. Mosser should be reversed.
18
THE TRIAL COURT ERRED IN FINDING THAT THE PLEADINGS AND CLAIMS FILED
IN THIS CASE WERE GROUNDLESS
60. The Trial Court erred in sanctioning James C. Mosser under Texas
Rule of Civil Procedure 13 as neither the evidence nor the law
supports the proposition that the pleadings filed in this case were
groundless. Furthermore, all claims in this case had some evidentiary
support and were warranted by existing law or nonfrivolous argument
for the extension, modification, or reversal of existing law or the
establishment of new law, such that sanctions under Chapter 10 of
the Texas Civil Practice and Remedies Code were improper.
Sanctions may only be imposed under Texas Rule of Civil Procedure
13 against an attorney, a represented party, or both who file a
pleading that is either groundless and brought in bad faith; or
groundless and brought for the purpose of harassment. Robson v.
Gilbreath, 267 S.W.3d 401, 405 (Tex.App.–Austin 2013, pet.
denied)(citing TEX. R. CIV. P. 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.
61. Additionally, courts may impose sanctions under Chapter 10 of the
19
Texas Civil Practices and Remedies Code for filing pleadings with an
improper purpose, even if the suit was not frivolous. Lake Travis
Indep. Sch. Dist. v. Lovelace, 243 S.W.3d 244, 257 (Tex.App–Austin
2007, no pet); See also Low v. Henry, 221 S.W.3d 609, 614 (Tex.
2007)(“Chapters 9 and 10 of the Texas Civil Practices and Remedies
Code and rule 13 of the Texas Rules of Civil Procedure allow a trial
court to sanction an attorney or party for filing motions or pleadings
that lack a reasonable basis in fact or law.”).
62. In determining whether sanctions are appropriate, the trial court must
examine the facts available to the litigant and the circumstances
existing when the litigant filed the pleading. Robson, 267 S.W.3d at
409. Courts presume that pleadings, motions, and other papers are
filed in good faith, and the party moving for sanctions has the burden
of overcoming this presumption. Lake Travis Indep. Sch. Dist. v.
Lovelace, 243 S.W.3d 244, 256 (Tex.App–Austin 2007, no pet).
63. Because a party may join as many claims legal or equitable or both
as he may have against an opposing party in a single petition,
evaluating each claim in this case under Chapter 10 also constitutes
an evaluation of the pleadings under Rule 13. See TEX. CIV. PRAC.
20
& REM. CODE § 10.001; TEX. R. CIV. P. 13; TEX. R. CIV. P. 51(a).
MELTON’S CONSTITUTIONAL CLAIM WAS NOT GROUNDLESS AND HAD
EVIDENTIARY SUPPORT
64. The undisputed facts establish that Ben Melton contracted with
Colonial for a $223,648.00 extension of credit secured by his
homestead. [CR Vol.1, 100]. Ultimately, each claim against Appellee
in this case arose out of this loan transaction between Melton and
Colonial, which Melton alleged was made in violation of Article 16
Section 50 of the Texas Constitution. [CR Vol. 1, 8; 24; 34-36; 257-
266].
65. The Texas Constitution authorizes an extension of credit secured by
a homestead under a very strict set of conditions designed by the
drafters to make homestead alienation extremely difficult. TEX.
CONST. ART. XVI § 50(a)(6). The most critical of these conditions is
the requirement that any line of credit extended by a lender may not
exceed eighty percent of the fair market value of the homestead.
TEX. CONST. ART. XVI § 50(a)(6)(B). In furtherance of this
requirement, the Constitution requires that both the owner of the
homestead and the lender sign a written acknowledgment as to the
fair market value of the homestead on the date the extension of
21
credit is made. TEX. CONST. ART. XVI § 50(a)(6)(Q)(ix)(emphasis
added).
66. This acknowledgment is not absolute as to the homeowner. Lenders
may only conclusively rely on the acknowledgment to act as a bar to
recovery if an appraisal has been performed according to state or
federal standards, and the lender does not have actual knowledge
that the fair market value stated in the acknowledgment was
incorrect. TEX. CONST. ART. XVI § 50(h). If an appraisal is not
performed according to federal or state appraisal standards, or the
lender has actual knowledge that the fair market value of the property
stated in the written acknowledgment is incorrect, then the entire
principle amount of the loan and the lender’s right to the interest
collected is at risk. Compare id. with TEX. CONST. ART. XVI §
50(a)(6)(Q)(x).
67. The appraisal thus is the linchpin of the entire loan transaction, and
the appraiser an indispensable party to litigation that seeks to
establish that a lender assisted by an appraisal that fails to comply
with state and federal appraisal standards extended credit in excess
of Texas Constitutional requirements. See TEX. CONST. ART. XVI §
22
50(h)(1). The appraiser’s presence is of even greater importance
when the allegation is that the lender received an appraisal it knew to
be incorrect so as to mask its actual knowledge of the fair market
value of the house, thereby allowing the lender to make an extension
of credit secured by the homestead. See TEX. CONST. ART. XVI §
50(h)(2).
68. The undisputed facts known to James C. Mosser about the appraisal
as of the date of filing of Melton’s Original Petition establish that
Appellee was aware of an appraisal performed by the Tom Green
County Central Appraisal District on January 1, 2008 that valued Mr.
Melton’s property at $171,500.00. [RR Vol. 2, 67:9-11; RR Vol. 3:37].
Despite this appraisal, Appellee appraised Ben Melton’s homestead
for $300,000.00 on January 30, 2009, a increase in value of
$128,500.00 in only one year. [CR Vol. 1, 104; RR Vol. 2, 49:9-11].
Appellee further testified at the sanctions hearing that this appraised
value, $171,500.00, constituted the fair market value of the property.
[RR Vol.2, 40: 6-8]. Because an appellate court can take judicial
notice of a fact for the first time on appeal, James C. Mosser
requests that this court take judicial notice of the 2009 appraisal
23
performed by the Tom Green County Tax Assessor, valuing the
property at $189,500.00 as of January 1, 2009, a mere twenty-nine
days prior to Appellee’s appraisal of Melton’s property. [App.38];
Office of Pub. Util. Counsel v. Public Util. Com’n of Texas, 878
S.W.2d 598, 600 (Tex. 1994).
69. The Texas Tax Code requires that county tax assessors appraise all
taxable property at its market value as of January 1. TEX. TAX.
CODE § 23.01(a). Additionally, the County Tax Assessor is required
by law to determine the market value of property by the application of
mass appraisal standards that comply with the Uniform Standards of
Professional Appraisal Practice. TEX. TAX. CODE § 23.01(b). These
are the very same methods and techniques that Appellee Mims
certified using in his appraisal of Melton’s property. [RR Vol.3, 59 at
¶3] (“I performed this appraisal in accordance with the requirements
of the Uniform Standards of Professional Appraisal Practice...”).
70. The conflict between the Tom Green County Central Appraisal
District’s appraisal of Melton’s property and Appellee’s appraisal of
the same property forms the basis of each and every allegation made
by Melton against the Appellee. The Appraisal District is required by
24
law to appraise all taxable property at its market value as of January
1 and found that Melton’s property was worth $171,500.00 in 2008,
and $189,500.00 in 2009. [App. 37-38] Mims’ appraisal is between
fifty-eight and seventy-nine percent above the values reported by the
Tom Green County Central Appraisal District. Compare TEX. TAX
CODE § 23.01(a),(b) with [CR Vol.1, 104; RR Vol.2, 49:9-11]; [App.
37-38]. Property assessments that are thirty-three percent greater
than the market value have been held to be grossly excessive. Sierra
Blanca Indep. Sch. Dist. v. Sierra Blanca Corp., 514 S.W.2d at 788
(citing Pierce v. City of Jacksonville, 403 S.W.2d 512
(Tex.Civ.App.–Tyler 1966, writ ref’d n.r.e.)). When a grossly
excessive valuation has been made, this alone is sufficient to
establish such fraud or illegality sufficient to render that valuation
void. Sierra Blanca Indep. Sch. Dist. v. Sierra Blanca Corp., 514
S.W.2d 782, 788 (Tex.Civ.App.–El Paso 1974, writ ref’d.).
71. Because Texas Tax Code § 23.01 provides the basis for claims
against the Appellee, Mosser requested that the court take judicial
notice of these statutes. [RR Vol.2, 107:10-13]. This request drew an
objection from the Appellee and was sustained by the court. See [RR
25
Vol.2, 107:19-24].
72. Thus, the trial court erred in sustaining this objection, as a request for
judicial notice may be made and taken at any time during the
proceeding. TEX. R. EVID. 201(f); See also Office of Pub. Util.
Counsel v. Public Util. Com’n of Texas, 878 S.W.2d 598, 600 (Tex.
1994)(holding that appellate courts can take judicial notice for the
first time on appeal).
73. This error constitutes an abuse of discretion, as a court has no
discretion to refuse a request for judicial notice if requested by a
party and is supplied with the necessary information. See TEX. R.
EVID. 201(d); Office of Pub. Util. Counsel v. Public Util. Com’n of
Texas, 878 S.W.2d at 600 (Tex. 1994). Mosser made his request
during the sanctions proceeding, and provided the judge with a
substantial recitation of the statute for which he requested judicial
notice. [RR Vol.2, 107: 10-13; 108: 1-5].
74. This abuse of discretion is compounded by the fact that the court’s
refusal to take judicial notice of the statutes caused the court to then
fail entirely to apply these statutes to the sanctions question. When
determining legal principles, the trial court has no discretion to
26
misinterpret or misapply the law. Walker v. Packer, 827 S.W.2d 833,
840 (Tex. 1992). Thus, a clear failure to analyze or apply the law
correctly constitutes an abuse of discretion. Id.
75. The failure to take judicial notice was harmful error and grounds for
reversal, as the failure to consider the statutes prevented the
consideration of facts and the relevant cases which provide the good
faith basis for the allegations made by Appellant James Mosser and
subsequently Alexis Steinberg on behalf of Ben Melton in all petitions
filed in this case. The original petition states that Colonial, a Division
of Colonial Savings, F.A. violated the Texas Constitution by lending
in excess of eighty percent of the fair market value of the home and
that Appellee Mims “aided Colonial and Defendant Western Title in
the execution of this violation by providing a false and fraudulent
residential real estate appraisal” [CR Vol. 1, 8] (emphasis added).
This statement incorporates the Texas Tax Code and the Tom Green
County Central Appraisal District’s assessments of Melton’s property
as the good faith basis for the extension of per se appraisal fraud to
be applied to private appraisers. See TEX. TAX CODE §
23.01(a),(b); see also Sierra Blanca Indep. Sch. Dist., 514 S.W.2d at
27
 788.
76. Furthermore, by pleading that the Appellee’s actions were
instrumental to the writing of the unconstitutional extension of credit,
James C. Mosser put the Appellee on notice of the damages that
Melton sought from him: joint liability for the forfeiture of the principal
and interest and repayment of sums tendered by Melton to Colonial
on the unconstitutional note as well as attorney’s fees. Compare [CR
Vol. 1, 9] with TEX. CIV. PRAC & REM CODE § 37.009; See also
City of Fort Worth v. Pippen, 439 S.W.2d 660, 668 (Tex. 1969)
(affirming joint and several liability for aiding and abetting). All four
petitions maintained this claim against the Appellee, with each
successive claim expounding on the Appellee’s role in the
unconstitutional extension of credit. [CR Vol 1, 8 at ¶11(b), (f); 24 at ¶
6(b), (f); 34-36 at ¶6(b)-(e), (i); 258 at ¶6(b)-(e), (I)]. As if to drive the
point home, the original petition and each successive petition prayed
for forfeiture of the principal and interest under the loan, and
especially for “a judgment from and against the defendants for
payment of all principal and interest paid by the Plaintiffs to the
Defendant to date, together with prejudgment and post judgment
28
interest as allowed by law.” [CR Vol. 1, 11 at ¶ 27]. (emphasis
added).
77. Thus, the trial court abused its discretion in erroneously finding that
“the four petitions filed in this cause have not alleged any claim or
cause of action against Mims that would or could have resulted in an
award of monetary damages against Bob Mims.” [CR Vol.1, 426 at ¶
44.] The record evidence clearly and unmistakably demonstrates that
Melton sought joint and several liability for Appellee’s role in the
making of the unconstitutional extension of credit. See e.g. [CR Vol.
1, 11 at ¶ 27]. This presents a second ground for reversal of the
sanctions, as the trial court based its finding on a clearly erroneous
assessment of the evidence. See Bennett v. Grant, 460 S.W.3d at
255.
MELTON’S FRAUD IN A REAL ESTATE TRANSACTION CLAIM WAS NOT
GROUNDLESS AND HAD EVIDENTIARY SUPPORT
78. As a threshold matter, the court also abused its discretion in finding
that there was no basis in law or a good-faith argument for the
extension or modification of existing law to assert a claim of fraud in
a real estate transaction against Appellee. See [CR Vol 1, 426 at ¶
49]. Relying solely on the one case cited by Appellee in its motion
29
for summary judgment, the court found that fraud in a real estate
transaction is not an available remedy in a home equity loan
transaction. [CR Vol. 1, 175; 425] (citing Burleson State Bank v.
Plunkett, 27 S.W.3d 605, 611 (Tex.App–Waco 2000, pet. denied)).
That case is distinguishable from the instant case as it arose out of a
construction loan made in 1995, three years prior to the passing of
the constitutional amendment that permitted the extension of credit
secured by the homestead, which is at issue here. See Burleson
State Bank v. Plunkett, 27 S.W.3d 605, 610 (Tex.App–Waco 2000,
pet. denied).
79. More importantly, although one other court has found that extensions
of credit secured by a homestead are outside the scope of this
statute, that court relied on Plunkett which in turn relied on an
interpretation of Texas Business and Commerce Code Section 27.01
that had been superseded by legislative amendment. See
Hansberger v. EMC Mortg. Corp., Docket No. 04-08-00438-CV, 2009
WL 2264996 at *4 (Tex.App.–San Antonio 2009, no pet.) (citing
Burleson State Bank v. Plunkett, 27 S.W.3d 605, 611
(Tex.App–Waco 2000, pet. denied) and Greenway Bank & Trust v.
30
Smith, 679 S.W.2d 592, 596 (Tex.App.–Houston [1st Dist.] 1984, writ
ref’d n.r.e)).
80. The Greenway court ruled that the statute did not apply to loan
transactions because the measure of actual damages in the statute
was defined as “the difference between the value of the real estate or
stock as represented or promised, and its actual value in the
condition in which it is delivered at the time of contract.” Greenway
Bank & Trust v. Smith, 679 S.W.2d 592, 596 (Tex.App.–Houston [1st
Dist.] 1984, writ ref’d n.r.e). The prior version of the statute had this
language in 1972, when the events giving rise to Greenway took
place. See id. (citing (R.S. Art. 4004, sen. 1, 3, and 4) Acts 1967, 60th
Leg. vol. 2, p. 2343, ch 785, Sec. 1.).
81. The Texas Legislature struck this language and any other reference
to physical real estate from the statute, leaving only the phrase “fraud
in a transaction involving real estate or stock...consists of...” Act of
May 28, 1983, 68th Leg. R.S., ch. 949, 1983 Gen. Laws. 5208
(current version at TEX. BUS. & COM. CODE § 27.01(b)). This
legislative action makes reliance on Greenway untenable, as it was
decided based on statutory language that no longer exists. See id.
31
Thus, nothing in the plain language of the statute as it existed in
2013 barred an unconstitutional extension of credit from falling within
the ambit of a “transaction involving real estate,” such that there was
a good faith basis for arguing for the reversal of those cases whose
holdings were based on reading of the law that had been superseded
by legislative enactment. See TEX. BUS. & COM. CODE § 27.01;
See also TEX. R. CIV. P. 13; TEX. CIV. PRAC. & REM. CODE §
10.001(2). Thus, to the extent that the court granted sanctions on this
issue, the court abused its discretion in finding that this cause was
groundless when pleaded.
82. Furthermore, the evidence is insufficient to find that Melton’s Fraud in
a Real Estate Transaction Claim was “groundless” when raised in the
Original, First, and Second Amended Petitions. To prove fraud in a
real estate transaction, a plaintiff must show that there was a false
representation of a past or existing material fact when the false
representation is made to the plaintiff for the purpose of inducing the
plaintiff to enter into a contract, and the false representation was
relied on by the plaintiff in entering into that contract. TEX. BUS. &
COM. CODE § 27.01(a)(1).
32
83. As previously stated, the Appellee’s appraisal was between fifty-eight
and seventy-nine percent above the values reported by the Tom
Green County Central Appraisal District. Compare TEX. TAX CODE
§ 23.01(a),(b) with [CR Vol. 1, 104; RR Vol. 2, 49: 9-11]; [Appendix at
37-38]. Property assessments that are thirty-three percent greater
than the market value have been held to be grossly excessive, which
alone is sufficient to establish such fraud or illegality sufficient to
render that valuation void. Sierra Blanca Indep. Sch. Dist. v. Sierra
Blanca Corp., 514 S.W.2d at 788. Thus, at the time of the original
pleading, Mosser had sufficient grounds for pleading that the
appraisal was false and fraudulent and incorrectly represented a then
existing material fact.
84. Despite Appellee’s claims to the contrary and the trial court’s ultimate
ruling, actions against appraisers can be maintained in Texas as an
appraiser’s opinion that he knows to be false is actionable. Compare
[CR Vol. 1, 175] (“Ben Melton’s statutory fraud claim is based upon
Bob Mims’ opinion of market value in a real estate appraisal, which is
not an actionable representation under Texas law.”); [CR Vol. 1, 425]
(“no basis in law or fact to assert a claim or cause of action against
33
Mims for fraud in a real estate transaction.”) with Trenholm v. Ratcliff,
646 S.W.2d 927, 930 (Tex. 1983)(“An opinion may constitute fraud if
the speaker has knowledge of its falsity.”). Even the authority that
Appellee cited for this proposition acknowledges that knowledge of
an opinion’s falsity is an exception to the general rule that opinions of
value are not actionable. Transport Insurance Company v. Faircloth,
898 S.W.2d 269, 276 (Tex. 1995). Based on the wide disparity
between the value reported by Appellee and the Tom Green County
CAD, and the fact that Appellee knew about the value reported by
the Tom Green County CAD, pursuing this theory of the case was not
groundless. Thus, the Trial Court abused its discretion by failing to
properly analyze the law as to falsity of opinions in cases involving
misrepresentation, warranting reversal on this issue.
85. As to the second element of fraud in a real estate transaction, the
appraisal value removed the only impediment to Melton’s extension
of credit, such that the appraisal induced his agreement to the terms,
and he could not have entered into an extension of credit with
Colonial had the value been that reported by the Tom Green County
Central Appraisal District. See TEX. CONST. ART. XVI §§
34
50(a)(6)(Q)(ix); (h); see also [CR Vol. 1, 249 at ¶ 32].
86. The record evidence also makes it clear that Melton relied on the
appraisal in obtaining an extension of credit secured by his
homestead. The uncontradicted evidence establishes that Ben
Melton paid the Appellee $350.00 by check to perform a property
appraisal. CR 1:100-101 (“POC (B)”); [RR Vol. 2, 65:19-22; RR Vol.
3, 75 at ¶ 6-8];. The Appellee may claim to have prepared the
appraisal for Colonial alone, but Colonial made Melton its assignee of
the information contained in the appraisal when it disclosed the
appraisal value to him so that he could sign the acknowledgment of
fair market value as $300,000.00. Compare [RR Vol. 2, 47:16-17]
with [RR Vol.3, 34]. (“The fair market value indicated herein is the
value estimated in the appraisal which was prepared in accordance
with state or federal requirements applicable to this extension of
credit.”).
87. The Appellee further testified that his appraisal could be relied upon
by an assignee of Colonial, yet later testified that Melton was not
entitled to rely on the appraisal. Compare [RR Vol.2, 48:21-23] with
[RR Vol 2, 56:18-20]. Mosser properly and timely objected to this
35
testimony as misstating the facts. [RR Vol 2, 56:21-22]. In overruling
the objection, the court directed Mosser’s attention to language in the
appraisal stating, “No other use or users of this report are permitted,”
but failed entirely to realize that CU Members Mortgage had the right
to divulge the information to any of its assigns. Compare [RR Vol. 2,
57:15-16] with [RR Vol. 3, 62] (“The intended user of the report is CU
Members Mortgage and/or its assigns. No other use or users of this
report are permitted.”)(emphasis added).
88. To the extent the court adopted Appellee’s argument that Melton
could not by law rely on Appellee’s appraisal, the court erred in
finding no basis in law for Melton’s fraud in a real estate transaction
claim. Appellee cited Westcliff Co. v. Wall, 267 S.W.2d 544, 546
(Tex.1954), for the proposition that only Colonial could rely on the
appraisal. [CR Vol.1, 175]. The Supreme Court of Texas has
expressly disapproved of using Westcliff in this way, as the
jurisprudence of Texas authorizes a fraud claim “if the false
representations be made with a view of reaching the third person to
whom it is repeated, and for the purpose of influencing him.” Ernst &
Young, L.L.P. v. Pacific Mut. Life Ins. Co., 51 S.W.3d 573, 578 (Tex.
36
2001). The Supreme Court of Texas stated that Texas jurisprudence
is entirely consistent with the Restatement Second of Torts’s
“reason-to-expect” standard, which states that a person who makes a
misrepresentation is liable to the class of persons the maker intends
or has reason to expect will act in reliance upon the
misrepresentation. Id. at 578-79. Furthermore, the Court expressly
held that a defendant who acts with knowledge that a result will follow
is considered to intend the result. Id. at 579.
89. The facts establish that Ben Melton paid Appellee for the Appraisal,
[CR Vol. 1, 100-101 (“POC (B)”); RR Vol. 3, 75 at ¶ 6-8; RR Vol. 2,
65:19-22]; that Appellee submitted the completed Appraisal to
Colonial, [RR Vol. 2, 47:13-17]; and that Ben Melton relied on the
appraisal when signing the acknowledgment of fair market value, [RR
Vol. 3, 34]. It is also clear that the Appellee knew that Colonial would
not be the only party relying on the appraisal, as the specific terms of
use of the appraisal altered the boiler-plate language of the appraisal
to allow for assigns of Colonial to rely on the appraisal. Compare [RR
Vol. 3, 58] (“Modifications, additions, or deletions to the intended use,
intended user, definition of market value, or assumptions and limiting
37
conditions are not permitted”) with [RR Vol. 3, 62] (“The intended
user of the report is CU Member’s Mortgage and/or its assigns”).
Thus, the record evidence and the case law available to Mosser at
the time of the Original, First, and Second Amended Petitions shows
that Mosser had a good faith basis in law and fact for pleading under
Texas Business Code Section 27.01, such that the court clearly erred
in finding otherwise.
90. That Steinberg would ultimately nonsuit this claim in the Third
Amended Petition as “unsupportable” does not establish that the
claim was groundless and lacked merit when initially brought. [CR
Vol. 1, 216]. Her replacement of the claim with a common law fraud
claim based on the same facts, substantially the same elements, and
substantially the same means of recovery indicates a tactical
decision to remove any doubt as to claim being made, rather than an
admission that the claim had no merit when brought. Compare [CR
Vol.1, 37-38] with [CR Vol. 1, 261-62]; See also TEX. CIV. PRAC &
REM. CODE § 41.003(a)(1) (authorizing exemplary damages for
common law fraud claims).
91. Thus, this error by the trial court constitutes an abuse of discretion,
38
as the court’s reading of the evidence and the law is clearly
erroneous such that it should not have concluded that there was no
basis in law or fact to assert a claim of fraud in a real estate
transaction. See Bennett v. Grant, 460 S.W.3d at 255. This court
should sustain this point, and reverse the trial court’s award of
sanctions on this issue.
MELTON’S COMMON LAW FRAUD CLAIM WAS NOT GROUNDLESS AND HAD
EVIDENTIARY SUPPORT
92. As a threshold matter, neither James C. Mosser nor Mosser Law,
PLLC, signed a pleading that contained this cause of action and
therefore may not be sanctioned under either Chapter 10 or Rule 13,
as only the attorney that signed the offensive pleading may be
sanctioned. Yuen v. Gerson, 342 S.W.3d 824, 828
(Tex.App.–Houston [14th Dist.], pet. denied.). If this court declines to
follow Yuen v. Gerson, then Mosser argues alternatively that
sanctions awarded pursuant to Melton’s common law fraud claim,
like the sanctions awarded for Melton’s fraud in a real estate
transaction, fail because the claim was not groundless when made.
93. A plaintiff proves common law fraud by establishing that the
defendant made a material representation that was false; the
39
defendant knew the representation was false or made it recklessly as
a positive assertion without any knowledge of its truth; the defendant
intended to induce the plaintiff to act upon the representation, and
the plaintiff actually and justifiably relied upon the representation and
thereby suffered injury. Ernst & Young, L.L.P. v. Pacific Mut. Life Ins.
Co., 51 S.W.3d at 577. As stated above, the facts establish that Ben
Melton paid Appellee for the Appraisal, [CR Vol. 1, 100-101 (“POC
(B)”); RR Vol. 3, 75 at ¶ 6-8; RR Vol. 2, 65: 19-22; that Appellee
submitted the completed Appraisal which valued Melton’s property at
$300,000.00 to Colonial, [RR Vol. 2, 47:13-17]; that Appellee knew of
widely conflicting appraisal values required by law to be the fair
market value of Melton’s property, [RR Vol. 2, 67:9-11; RR Vol.3, 37];
and that Ben Melton relied on the appraisal when signing the
acknowledgment of fair market value, [RR Vol. 3, 34]. These facts,
which constitute prima facie fraud, were known by Steinberg at the
time she filed the Third Amended Petition. [CR Vol. 1, 257-266].
94. In its sanctions order, the trial court ruled that Ben Melton did not
have a viable claim or cause of action against Bob Mims for common
law fraud because Bob Mims did not make a false representation of a
40
material fact. [CR Vol. 1, 425 at ¶41]. To the extent that the trial court
heard Appellee’s testimony and made this determination, it erred
because it ruled on the merits of the fraud claim and considered
evidence that was not available to Steinberg at the time she filed the
Third Amended Petition. See Robson v. Gilbreath, 267 S.W.3d 401,
409 (Tex.App.–Austin 2008, pet. denied). This error constitutes an
abuse of discretion warranting reversal because the evidence is
legally insufficient to establish that Steinberg knew the Appellee’s
representation was not factually false when she filed the Third
Amended Petition. See City of Keller v. Wilson, 168 S.W.3d 802, 810
(Tex.2005).
95. Conversely, if the trial court ruled as a matter of law that the
appraisal could not have constituted an actionable misrepresentation
of a material fact, as Appellee argued in its Second Motion for
Summary Judgment, the trial court erroneously interpreted the law by
failing to consider that statements of opinion are actionable if the
speaker knows that they are false at the time they are made.
Transport Insurance Company v. Faircloth, 898 S.W.2d 269, 276
(Tex. 1995). This also constitutes an abuse of discretion warranting
41
reversal, as the court clearly failed to analyze or apply the law as it
failed to consider this legal theory when considering whether to
sanction Mosser. Walker v. Packer, 827 S.W.2d 833, 840 (Tex.
1992).
96. Finally, to the extent that the court granted summary judgment and
subsequently Appellee’s motion for sanctions on the basis of
Appellee’s erroneous application of Westcliff to this case, the trial
court abused its discretion by reaching an erroneous legal conclusion
as to who may properly plead fraud. Again, the Texas Supreme Court
has stated that persons who rely on misrepresentations transmitted
to them by an intermediary have a cause of action against the person
who originally made the misrepresentation if that person knew or
should have known that others would rely on the misrepresentations.
Ernst & Young, L.L.P. v. Pacific Mut. Life Ins. Co., 51 S.W.3d at 578.
Because Melton fit this definition, Steinberg had a good faith basis
for pleading common law fraud on his behalf in the Third Amended
Petition, such that the trial court’s finding that there was no basis in
law or fact to assert a common law fraud claim constitutes an abuse
of discretion warranting reversal.
42
MELTON’S DECEPTIVE TRADE PRACTICES ACT CLAIM WAS NOT GROUNDLESS
AND HAD EVIDENTIARY SUPPORT
97. The trial court further abused its discretion in awarding sanctions on
the basis that Melton’s Deceptive Trade Practices Act (DTPA) claim
was “groundless.” [CR Vol. 1, 425 at ¶ 40]. Under the DTPA, a
plaintiff may recover if the plaintiff is a consumer; if the defendant
may be sued under the DTPA; the defendant’s action or course of
action was unconscionable; and the defendant’s action was a
producing cause of the plaintiff’s damages. Amstadt v. U.S. Brass
Corp., 919 S.W.2d 644, 649 (Tex. 1996).
98. The trial court incorrectly concluded that sanctions were appropriate
against Mosser on the basis that Melton could never qualify as a
consumer. [CR Vol 1, 425]. Under the act, an individual who seeks or
acquires goods or services by purchase or lease. TEX. BUS. & COM.
CODE § 17.45(4). As previously stated, the facts establish that Ben
Melton paid Appellee for the appraisal, thereby acquiring his
services. [CR Vol. 1, 100-101 (“POC (B)”); RR Vol. 3, 75 at ¶ 6-8; RR
Vol. 2, 65:19-22].
99. Furthermore, the goods or services acquired were of a type that were
actionable. Mosser agrees that extensions of credit are too intangible
43
to constitute goods or services for the purposes of the DTPA.
Riverside Nat’l Bank v. Lewis, 603 S.W.2d 169, 174 (Tex. 1983).
However, as stated in Melton’s reply to Appellee’s Motion for
Summary Judgment, Melton did not seek an extension of credit from
Appellee; rather, Melton sought an appraisal of his homestead, for
which he paid Appellee $350.00. [CR Vol. 1, 270-271]. In fact,
Mosser never raised the DTPA claim in connection with the extension
of credit, instead focusing the claim entirely on Appellee and his
appraisal services. [CR Vol. 1, 26-27; 38; 262-63].
100. Appellee also had capacity to be sued because the claim as pleaded
places him outside the ambit of the professional services exemption
to the DTPA. The Act exempts “claims for damages based on
rendering of professional services, the essence of which is providing
advice, judgment, opinion, or similar professional skill.” TEX. BUS. &
COM. CODE § 17.49(c). This exemption however does not apply to
an express misrepresentation of a material fact that cannot be
characterized as advice, judgment or opinion; or an unconscionable
action or course of action that cannot be characterized as advice,
judgment, or opinion. TEX. BUS. & COM. CODE § 17.49(c)(1),(3).
44
101. Mosser pleaded the exceptions to the exemption, as facts known to
him at the time of the pleading establish that Appellee’s appraisal
was between fifty-eight and seventy-nine percent above the values
reported by the Tom Green County Central Appraisal District, so as
to render the opinion rendered potentially false and unconscionable.
Compare TEX. TAX CODE § 23.01(a),(b) with [CR Vol. 1, 104; RR
Vol. 2, 49:9-11]; [App. 37-38]. Appellee never addressed the
exceptions to the exemption in his motion for summary judgment,
instead arguing for an extension of the exemption to appraisers
which, even if it were available to real estate appraisers, would have
no preclusive effect on a claim raised on Appellee’s knowledge that
his opinion of the value of Melton’s homestead was severely inflated.
See Latham v. Castillo, 972 S.W.2d 66, 68 (Tex. 1998) (holding an
attorney, a professional, liable for an unconscionable act or course of
action.). Even Appellee’s case law cited in his motion for summary
judgment for an extension of the professional services exemption to
appraisers acknowledges that there are exceptions to the exemption.
See Retherford v. Castro, 378 S.W.3d 29, 37 (Tex.App.–Waco 2012,
pet. denied) (In determining whether the Castro’s misrepresentation
45
claim is barred by the professional services exemption or meets one
of the exceptions to the exemption.”)(emphasis added); [CR Vol. 1,
176-77]. Thus, the court erred in interpreting the law by failing to
analyze whether Mosser pleaded an exception to the professional
services exemption, such that the trial court abused its discretion in
finding that there was no basis in law or fact to assert a DTPA claim
against Appellee. Reversal on this point is warranted.
MELTON’S BREACH OF CONTRACT CLAIM WAS NOT GROUNDLESS AND HAD
EVIDENTIARY SUPPORT
102. As a threshold matter, neither James C. Mosser nor Mosser Law,
PLLC, signed a pleading that contained this cause of action and
therefore may not be sanctioned under either Chapter 10 or Rule 13,
as only the attorney that signed the offensive pleading may be
sanctioned. Yuen v. Gerson, 342 S.W.3d 824, 828
(Tex.App.–Houston [14th Dist.], pet. denied.). If this court declines to
follow Yuen v. Gerson, then Mosser argues alternatively that the
sanctions awarded in response to Melton’s breach of contract claim
fail as a matter of law.
103. Breach of contract may be established by showing the existence of a
valid contract, performance or tendered performance by the plaintiff,
46
breach of the contract by the defendant, and damages sustained by
the plaintiff as a result of the breach. Valero Marketing & Supply Co.
v. Kalama Intern. 51 S.W.3d 345, 351 (Tex.App.–Houston [1st Dist.]
2001, rehearing overruled). Additionally, the plaintiff must establish
that it is the proper party to commence the suit. Mandell v. Hamman
Oil & Ref. Co., 822 S.W.2d 153, 161 (Tex.App.–Houston [1st Dist.]
1991, writ denied).
104. In its second motion for summary judgment, which formed the basis
for the trial court’s award of sanctions, the Appellee conceded that
there was a valid contract, and that Colonial had tendered
performance on the contract through Ben Melton’s payment of
$350.00 to the Appellee. Compare [CR Vol. 1, 312] with [Id., 425 at
¶42]. The trial court ultimately ruled that the claim was “groundless”
when brought because Ben Melton never could have been the third
party beneficiary of the contract between Colonial and Appellee,
based on an erroneous interpretation of the evidence. [CR Vol.1,
425 at ¶ 42]. The record evidence establishes that Colonial
transmitted an appraisal order form that specifically identified Ben
Melton as the borrower in a loan transaction dependent on the
47
results of the appraisal that properly reflected the fair market value of
Melton’s property. [RR Vol. 3, 35]. The evidence also establishes that
the price paid for the appraisal was $350.00, and that Appellee
performed the appraisal knowing that the appraisal would directly
benefit Melton as the borrower in the transaction. [CR Vol. 1, 105],
[RR Vol. 3, 51]. Thus, the evidence demonstrates that Mosser has a
good faith basis for arguing that Melton was a third party beneficiary
to this contract, as both the Appellee and Colonial intended that the
appraisal benefit Ben Melton, as it would form the basis of his loan,
and that both parties entered the contract directly for the benefit of
Melton. See Basic Capital Management, Inc. v. Dynex Commercial,
Inc., 348 S.W.3d 894, 900 (Tex. 2001).
105. Thus, the court abused its discretion in ruling that the claim was
groundless and lacked evidentiary support when brought, such that
reversal is warranted on this issue.
106. Furthermore, the court appears to have accepted that there was no
breach as the Appellee fully performed his obligations under the
contract. The record evidence demonstrates that there was a
genuine issue of material fact on this point, as the contract was for
48
Appellee’s opinion of the fair market value of Melton’s property, not a
value that grossly exceeded the values determined by the Tom
Green County Central Appraisal District’s determination of fair market
value on the same property. Thus, the court abused its discretion in
determining that there was no basis in law or in fact to assert a
breach of contract on this issue, such that reversal is warranted.
107. Finally, the court also erred in determining that Melton suffered no
damages or injury as a result of a breach of contract. The record
evidence establishes that Ben Melton tendered $350.00 for the
appraisal, which was to properly reflect fair market value of the
property. [RR Vol. 3: 51; 75 at ¶ 6,7]. This is the adequate measure
of damages under breach of contract known to Steinberg at the time
she filed this pleading. Thus, the court clearly erroneously assessed
the evidence on this issue, such that reversal is warranted under an
abuse of discretion standard.
MELTON’S NEGLIGENCE CLAIM WAS NOT GROUNDLESS AND HAD EVIDENTIARY
SUPPORT
108. As a threshold matter to this claim, neither James C. Mosser nor
Mosser Law, PLLC, signed a pleading that contained this cause of
action and therefore may not be sanctioned under either Chapter 10
49
or Rule 13, as only the attorney that signed the offensive pleading
may be sanctioned. Yuen v. Gerson, 342 S.W.3d 824, 828
(Tex.App.–Houston [14th Dist.], pet. denied.). If this court declines to
follow Yuen v. Gerson, then Mosser argues alternatively that
sanctions awarded pursuant to Melton’s negligence claim fail
because the claim was not groundless when made.
109. The trial court ruled that because Appellee owed no legal duty to
Melton, the claim was groundless when brought as there was no
basis in law or fact for bringing the claim and there was no good faith
argument for the extension, modification, or reversal of existing law.
The trial court failed to analyze the law properly for it to have arrived
at this conclusion. The Supreme Court of Texas has held that with
every contract, there is a common law duty to perform it with care,
skill, reasonable expedience, and faithfulness. Southwestern Bell Tel.
Co. V. DeLanney, 809 S.W.2d 493, 494 (Tex. 1991). Furthermore, a
contract for professional services creates a duty that the professional
exercise the degree of care, skill, and competence that reasonably
competent members of the profession would exercise under similar
circumstances. Dukes v. Philip Johnson/Alan Ritchie Architects,
50
P.C., 252 S.W.3d 586, 594 (Tex.App.–Fort Worth 2008, pet. denied).
The trial court’s logic thus fails in concluding simultaneously that
Appellee could qualify for the professional services exemption under
the DTPA and that Appellee owed no duty under a contract for
professional services to Melton. Compare [CR Vol. 1, 425 at ¶ 40]
with [CR Vol. 1, 426 at ¶ 43].
110. Steinberg had a good faith basis in pleading negligence, as it is clear
that Appellee could have and did owe a duty to both Melton and
Colonial to perform appraisals with the degree of care, skill, and
competence that reasonably competent appraiser would exercise
under reasonable circumstances. Dukes, 252 S.W.3d at 594. The
facts known to Steinberg at the time tend to indicate that the
Appellee breached this duty, as the appraisers for the Tom Green
County Central Appraisal District are bound to perform appraisals in
the same manner as Appellee, yet their valuations of Melton’s
property were significantly less than that proposed by the Appellee.
[CR Vol. 1, 104]; [RR Vol. 2, 49: 9-11]; [App.37-38]. Furthermore,
Appellee’s appraisal was the proximate cause of Melton’s damages,
as it permitted the funding of an unconstitutional extension of credit
51
secured by Melton’s homestead, such that Melton suffered damages
in the form of both a lien enabling alienation of his homestead and
principal and interest paid under that loan to Colonial, which was
aided by the Appellee’s tortious acts. See City of Fort Worth v.
Pippen, 439 S.W.2d 660, 668 (Tex. 1969) (affirming joint and several
liability for aiding and abetting).
111. Thus, the trial court abused its discretion in failing to properly apply
or analyze the law as it pertains to duties arising from a contract for
professional services, such that reversal on this issue is also
warranted. Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992);
Bennett v. Grant, 460 S.W.3d 220, 255 (Tex.App.–Austin 2015, pet.
filed).
THE TRIAL COURT ABUSED ITS DISCRETION IN SANCTIONING MOSSER FOR
BRINGING ALLEGEDLY TIME-BARRED CLAIMS AGAINST APPELLEE
112. Finally, the court erred in sanctioning Mosser under both Rule 13 and
Chapter 10 for arguing for the delayed accrual of all of Melton’s
claims.
113. The trial court’s sanctions order states, “All of the claims and causes
of action asserted against Bob Mims in the petitions filed in this
cause are barred by the applicable statute of limitations.” [CR Vol. 1,
52
425]. This is based in large part on its orders granting summary
judgment in favor of Appellee on all causes, in which Appellee
argued that limitations barred recovery on all of Melton’s claims. [CR
Vol. 2, 19]; [CR Vol. 1, 428-29]. Because it is questionable whether
Summary Judgment should have been granted at all on this issue,
sanctions are inappropriate against Mosser or Mosser Law PLLC as
a matter of law.
114. When filing a motion for summary judgment, the movant bears the
burden of proof and all doubts about the existence of a genuine issue
are resolved against the movant. Nixon v. Mr. Prop. Mgmt. Co., 690
S.W.2d 546, 548-49 (Tex. 1985)(emphasis added).
115. Furthermore, all evidence and any reasonable inferences must be
viewed in the light most favorable to the nonmovant. Id. at 548-49.
116. Most importantly, all conflicts in the evidence are disregarded, and
the evidence which tends to support the position of the party
opposing the motion is accepted as true. Evidence favoring the
movant’s position will not be considered unless it is uncontradicted.
Great Am. Reserve Ins. Co. v. San Antonio Plumbing Supply Co.,
391 S.W.2d 41, 47 (Tex. 1965)(emphasis added).
53
117. A defendant moving for summary judgment on limitations must
conclusively prove when the cause of action accrued and negate the
discovery rule, if it applies and has been pleaded or otherwise raised,
by proving as a matter of law that there is no genuine issue of
material fact about when the plaintiff discovered, or in the exercise of
reasonable diligence, should have discovered the nature of its injury.
KPMG Peat Marwick v. Harrison County Housing Finance Corp., 988
S.W.2d 746, 748 (Tex. 1999).
118. Likewise, a party moving for sanctions based on limitations bears the
burden of proving that the nonmovant’s pleading of the discovery rule
was groundless and filed in bad faith and for purpose of harassment.
Dolenz v. Boundy, 197 S.W.3d 416, 421 (Tex.App.–Dallas 2006, pet.
denied).
119. Mosser plead fraud as an element of every pleading filed in this case
on which his signatures appears in the signature block. [CR Vol. 1,
10 at ¶21; 24 at ¶ 6(b), (f); 36 at ¶ 6(I)].
120. In its response to Colonial and Appellee’s first motions for summary
judgment, Steinberg amended Melton’s petition, pleaded the
discovery rule, and Mosser filed the affidavit of Ben Melton with the
54
response to both Colonial’s and Appellee’s Motions for Summary
Judgment. [CR Vol. 1, 246-250; 279-283].
121. Colonial responded, “Plaintiff does not understand that limitations
began to run when he suffered his alleged injury, not when he knew
about it...Here, Plaintiff when he closed his loan had all of the
information he needed to determine whether or not he suffered a
legal injury.” [CR Vol. 3, 9]. Appellee, for his part, simply adopted and
incorporated this argument, in addition to making several conclusory
statements that the discovery rule did not apply here. [CR Vol. 2, 6-
7].
122. Neither Colonial nor Appellee offered any documentary evidence or
statements establishing that Ben Melton knew or should have known
of any legal injury accruing on the date the loan closed. Both parties
simply asserted that case law establishes that the accrual date of all
injuries was the date that the loan closed, March 13, 2009. [CR Vol.
3, 9] (citing Schanzle v. JPMC Specialty Mortg. LLC, No. 03-09-
00639-CV, 2011, 2011 Tex. App. LEXIS 1748 *10 (Tex.App.–Austin
Mar. 11, 2011, no pet.); Hannaway v. Deutsche Bank Nat’l Trust Co.,
A-10-CV-714-LY, 2011 U.S. Dist. Lexis 24775 *8 (W.D. Tex, Mar. 11,
55
2011)). The only document that even indicates that Ben Melton might
have been aware of the value of the homestead is the Fair Market
Value Acknowledgment, and that document reinforces the notion that
Melton had “no knowledge or reason to believe that the fair market
value of the Homestead Property stated in this acknowledgment is
incorrect” at the time the loan closed. See [CR Vol. 1, 94]. Nothing in
the summary judgment evidence offered by either Appellee or
Colonial indicates that Melton received a copy of the appraisal at
closing, which would have provided him with the proper means to
discover an injury. See [CR Vol. 1, 55-168; 180-215].
123. Additionally, neither of the cases cited by Appellee and Colonial is
binding authority on the issue of fraudulently prepared appraisals.
Schanzle does not address the discovery rule, instead generally
concluding that a four-year statute of limitations applies to claims
made under Article 16 Section 50 of the Texas Constitution as the
appellant in that case failed to plead the discovery rule or fraud.
Schanzle v. JPMC Specialty Mortg. LLC, No. 03-09-00639-CV, 2011,
2011 WL 832170 at *4 (Tex.App.–Austin Mar. 11, 2011, no pet.)
Hannaway is a ruling from a United States District Court which was
56
not binding authority on the trial court, and which improperly
conflated claims sounding in fraud with the discovery rule. Compare
Hannaway v. Deutsche Bank Nat’l Trust Co., A-10-CV-714-LY, 2011
WL 891669 at *5 (W.D. Tex, Mar. 11, 2011) (citing S.V. v. R.V., 933
S.W.2d 1, 4 (Tex. 1996) with S.V. v. R.V. 933 S.W.2d 1, 6 (Tex.
1996) (“Restated, the general principle is this: accrual of a cause of
action is deferred in cases of fraud or in which the wrongdoing is
fraudulently concealed, and in discovery rule cases in which the
alleged wrongful act and resulting injury were inherently
undiscoverable at the time they occurred but may be objectively
verified.”)(emphasis added).
124. In direct contrast and in response to the two motions for summary
judgment, Mosser filed Melton’s affidavit which states that Melton
received documents at the loan’s 2009 closing that were incomplete,
that he ultimately lost employment in 2012 which led to him seeking
modification options of his extension of credit and to him investigating
the whole loan closing in July of that year, and that he sought the
final executed copies of the documents from Mortgage Electronic
Registration Systems in both July 2012, and February 2013. [CR Vol.
57
1, 330-332 at ¶ 16-23]. No evidence presented by either Appellee or
Colonial rebutted this. See generally [CR Vol. 1, 55-168; 180-215].
125. Thus, the evidence before the court certainly raised a fact question
on when Melton knew or should have known there was a serious
problem with the appraisal, such that summary judgment as a matter
of law on Melton’s Constitutional, statutory fraud, and DTPA claims
was inappropriate. See Great Am. Reserve Ins. Co. v. San Antonio
Plumbing Supply Co., 391 S.W.2d 41, 47 (Tex. 1965); See also TEX.
BUS. & COM. CODE § 17.565 (“All actions brought under this
subchapter must be commenced...within two years after the
consumer discovered or in the exercise of reasonable diligence
should have discovered the occurrence of the false, misleading, or
deceptive act or practice.”). More importantly, this fact question
demonstrates that Mosser had some basis in fact for pleading
deferral of accrual of Melton’s claims, such that the trial court clearly
abused its discretion in finding that the pleadings Mosser signed
were “groundless.” The dearth of substantive case law on this issue
also demonstrates that Mosser’s pleading of fraud and Steinberg’s
pleading of the discovery rule were warranted by good faith argument
58
for the extension of existing law, such that the trial court abused its
discretion in finding otherwise.
126. The trial court’s finding that Melton’s common law fraud, breach of
contract, and negligence claims were time-barred and warranted
sanctions is also wrong. Appellee’s arguments in his Second Motion
for Summary Judgment improperly conflate the discovery rule with
claims sounding in fraud. Compare [CR Vol. 1, 309-310] with S.V. v.
R.V. 933 S.W.2d 1, 6 (Tex. 1996) (“Fraud, we have said, in and of
itself prevents running of the statute of limitations.”). Appellee offered
no evidence to show when Melton knew or should have known of the
accrual of his cause, such that he did not conclusively negate the
deferral of the fraud claims or the discovery rule. Compare [CR Vol.
1, 309-310] with KPMG Peat Marwick v. Harrison County Housing
Finance Corp., 988 S.W.2d 746, 748 (Tex. 1999).
127. Although the court refused to consider Melton’s properly mailed
response to Appellee’s Second Motion for Summary Judgment, the
Appellee himself introduced Melton’s affidavit in support of the
response to Appellee’s Second Motion for Summary Judgment into
evidence at the sanctions hearing. [RR Vol. 2, 51:10-20]; [RR Vol. 3,
59
74-78]. Like the affidavit offered in response to Appellee’s first Motion
for Summary Judgment, this affidavit also states that Melton did not
discover the issues with the appraisal undergirding his extension of
credit until July 2012. [RR Vol. 3, 76-77 at ¶ 16-23].
128. Rather than rebutting these statements, the testimony adduced at the
hearing reinforces the notion that Melton never received a copy of
the appraisal from which he could have discovered a legal injury. See
[RR Vol. 2, 61:11-18]. No other evidence adduced at the hearing, or
presented by Appellee rebuts Melton’s pleading of fraud or the
discovery rule. See generally [RR Vol. 2, 1-113]. Thus, the only
evidence offered in support of sanctions against Mosser for pleading
fraud and the discovery rule as grounds to defer accrual of Melton’s
claims actually militates against sanctions, as the evidence shows
that Mosser and Steinberg had a basis in fact for filing such
pleadings. [RR Vol. 2, 51:8-20, 61:11-18], [RR Vol. 3, 74-78]. The
evidence was legally insufficient to provide a basis for the court to
award sanctions against Mosser for bringing claims that were
allegedly time-barred such that the trial court abused its discretion in
awarding the sanctions. See City of Keller v. Wilson, 168 S.W.3d
60
 802, 810 (Tex.2005); See also Bennett v. Grant, 460 S.W.3d 220,
255 (Tex.App.–Austin 2015, pet. filed).
THE TRIAL COURT ABUSED ITS DISCRETION IN FINDING THAT THE PLEADINGS
WERE BROUGHT FOR AN IMPROPER PURPOSE
129. In addition to demonstrating that the claims filed by Mosser on behalf
of Melton were “groundless,” the Appellee also has the burden of
proving that the claims were brought in bad faith or for the purpose of
harassment to prevail on a motion for sanctions. TEX. R. CIV. P. 13.
Sanctions under Rule 13 require a showing of bad faith, or the
conscious doing of a wrong for a dishonest, discriminatory, or
malicious purpose. Lake Travis Indep. Sch. Dist. v. Lovelace, 243
S.W.3d at 256 (citing Stites v. Gillum, 872 S.W.2d 786, 794-96
(Tex.App.–Fort Worth 1994, writ denied). Improper motive is an
essential element of bad faith. Robson v. Gilbreath, 267 S.W.3d 401,
407 (Tex.App.–Austin 2008, pet.denied). Harassment in the context
of Rule 13 means that the pleading was intended to annoy, alarm,
and abuse another person. State v. PR Investments and Specialty
Retailers, Inc., 180 S.W.3d 654, 670 (Tex.App.–Houston [14th Dist.]
2005, pet. granted). When reviewing a sanctions order under
Chapter 10.001 of the Texas Civil Practices and Remedies Code,
61
courts construe the phrase “improper purpose” as the equivalent of
“bad faith” under rule 13. Dike v. Peltier Chevrolet, Inc., 343 S.W.3d
179, 196 (Tex.App.–Texarkana 2011, no pet.). The evidence is
legally insufficient to support the trial court’s conclusion that these
proceedings were filed in bad faith or for the purpose of harassment
such that the trial court abused its discretion in making such a
finding.
130. The court erred in awarding sanctions pursuant to Texas Civil
Practice and Remedies Code Chapter 10 or Rule 13, as the Appellee
wholly failed to plead an improper purpose in its motion for sanctions.
The motion itself contains a recitation of facts and the bald assertion,
“The petitions and pleadings in this cause filed against Bob Mims
have been intended to harass or cause unnecessary delay or
needless increase in the cost of litigation.” [CR Vol. 1, 407]. Appellee
wholly failed to demonstrate how the facts contained in the motion
prove an improper purpose for filing suit against Appellee. Compare
[CR Vol. 1, 407] with TEX. CIV. PRAC. & REM. CODE § 10.001.
131. Despite the deficient motion, the trial court concluded “that the
primary purpose for naming Bob Mims as a defendant in this cause
62
was to defeat diversity jurisdiction and the removal of this cause to
federal court,” such that all pleadings filed in this case against
Appellee “were brought in bad faith or were “brought for the purpose
of harassment.” [CR Vol. 1, 425-426 at ¶ 37, 45].
132. During the sanctions hearing and over Mosser’s relevance objection,
the court received into evidence all of the pleadings filed in Priester v.
Long Beach Mortgage Company and J.P. Morgan Chase, 708 F.3d
667 (5th Cir. 2013), for the limited purpose of establishing a common
scheme allegedly utilized by Mosser. [RR Vol. 2, 82: 24-25; 85:15-
22]. Despite the court’s insistence that it would “disregard any
testimony about diversity jurisdiction or that purpose,” the court
ultimately and wrongly concluded that Mosser added Appellee to the
suit to defeat diversity jurisdiction. Compare [RR Vol. 2, 85:18-20]
with [CR Vol. 1, 425 at ¶ 37]. The evidence and the record simply do
not support this assertion.
133. Because the Appellee bore the burden of overcoming the
presumption that papers and pleadings are filed in good faith, the
Appellee was bound to put on some evidence that diversity
jurisdiction could have and would have been established in the
63
absence of the Appellee. See Dike v. Peltier Chevrolet, Inc., 343
S.W.3d 179, 191 (Tex.App.–Texarkana 2011, no pet.)(citing GTE
Commc’ns Sys. Corp. v. Tanner, 856 S.W.2d 725, 731 (Tex. 1993).
Appellee failed entirely to do this at the hearing, as the testimony
taken at the hearing establishes that Appellee and Melton were
Texas residents but does not address Colonial or First Western Title.
RR 2: 28, lines 1-4.
134. The record itself demonstrates that all parties to this litigation were
Texas residents such that diversity jurisdiction could not have been
established, even in Appellee’s absence. The Federal District Courts
have diversity jurisdiction where the matter in controversy exceeds
the sum or value of $75,000.00, exclusive of interest and costs and is
between citizens of different states. 28 U.S.C. § 1332(a)(1). There is
no question that the amount in controversy requirement is met, but
the diverse residency requirement cannot be met by either of the
other parties to this case. As stated, Ben Melton is a Texas resident
currently located in Tom Green County, Texas. [CR Vol. 1, 7 at ¶2].
By its own admission and evidence filed in support of its Motion for
Summary Judgment which the court reviewed prior to granting the
64
Motion in its favor, Defendant Colonial was a Texas resident with its
principal office located at 2600 West Freeway, Fort Worth, Texas
76102. [CR Vol. 1, 7 at ¶3; 59 at ¶ 10]. Finally, by its own admission,
First Western Title is a Texas Corporation with principal office located
at 2626 West Freeway, Fort Worth, Texas 76102. [CR Vol. 1, 164-
68]. Disregarding for the moment Appellee and his direct connection
to the case, the plaintiff and the other defendants were all Texas
residents, such that the conditions to establish diversity jurisdiction
could never have been met. See 28 U.S.C § 1332(a)(1).
135. Secondly, neither of the other defendants filed a motion to remove to
this case to Federal Court. In fact, Colonial admitted that jurisdiction
was proper in Texas and that the trial court had subject matter
jurisdiction over this case in its original counterclaim filed in this case.
[CR Vol. 1, 29-30 at ¶ 1-4]. As no diversity of residents could be
established and at least one other defendant admitted both residency
and subject matter jurisdiction before the Trial Court in Tom Green
County, inclusion of Mims in the suit would have had no bearing on
the forum of the case, such that the evidence is legally insufficient to
establish that Mosser added Mims to the suit to defeat diversity
65
jurisdiction.
136. Additionally, although Priester and this case share a violation of
Texas Constitution Article 16 Section 50, the similarities stop there.
As stated above, the central claim in this case involves an extension
of credit that exceeded eighty percent of the fair market value of the
home, as enabled by a fraudulent appraisal. [CR Vol. 1, 8 at ¶11(b),
(f); 24 at ¶ 6(b), (f); 34-36 at ¶6(b)-(e), (i); 258 at ¶6(b)-(e), (I)]. No
similar claim was ever made in Priester. [RR Vol. 3, 90-99; 156-74;
181-207; 249-59. Secondly, Appellee was a named party to the
lawsuit from the filing of the original petition as his actions would
have been directly responsible for the unconstitutional extension of
credit, whereas the title company and the attorney named as parties
in Priester were named once the case was in Federal Court.
Compare [RR. Vol. 3, 90-99] with [Id. at 156-74].
137. Finally, the trial court adduced no evidence as to the motives and
credibility of James C. Mosser, the person who signed the first three
petitions filed in this cause. Rule 13 generally requires that the trial
court hold an evidentiary hearing to make a determination about the
motives and credibility of the person signing the petition. Dike v.
66
Peltier Chevrolet, Inc., 343 S.W.3d 179, 191 (Tex.App.–Texarkana
2011, no pet.). As Appellee wholly failed to call Mosser to testify
regarding his reasons for filing the petition, there is no evidence in
the record regarding any improper motive he may have had in filing
any of the petitions that he signed. See Dike at 194. (“As the party
having the burden of proof at the sanctions hearing, Peltier could
have easily called counsel to testify regarding what inquiry, if any,
was made with respect to application of the discovery rule before
filing the petition.”).
138. Thus, it is clear that Appellee was a necessary party to the suit as his
appraisal formed the basis for the entire claim, and was not added for
the supposed improper purpose of defeating diversity jurisdiction or
to annoy, alarm or surprise him. The evidence shows a complete
absence of any facts that would permit diversity jurisdiction to be
established, such that this court should sustain a challenge to the
legal sufficiency of the evidence on which the trial court based its
finding that Mosser brought this suit for an improper purpose, such
that sanctions under Rule 13 and Chapter 10 are inappropriate. See
City of Keller v. Wilson, 168 S.W.3d 802, 810 (Tex.2005); Bennett v.
67
Grant, 460 S.W.3d 220, 255 (Tex.App.–Austin 2015, pet. filed).
PRAYER
The trial court’s order awarding sanctions against James C. Mosser
and Mosser Law PLLC weaponizes Rule 13 and Chapter 10 so as to
punish those with whom the trial court disagrees intellectually or
philosophically. See Tarrant County v. Chancey, 942 S.W.2d 151, 154-55
(Tex.App.–Fort Worth 1997, no writ.). The record evidence is insufficient to
establish that Mosser Law PLLC signed any pleadings in this case, and is
insufficient to establish that James C. Mosser signed two of the four
pleadings filed in this case. All pleadings and the claims contained therein
had some legal and factual basis for their filing, or were warranted by a
nonfrivolous argument for the extension, modification, or reversal of
existing law or the establishment of new law, such that the court could not
have concluded otherwise. Furthermore, on the basis of the record before
it, the court could not have ever concluded that any of the parties to this
suit were diverse, let alone the driving force behind the addition of Appellee
to this lawsuit. These findings constitute abuses of discretion, for which the
only adequate remedy is reversal and rendition of judgment against
Appellee on his motion of sanctions by this court, and an award of
68
attorney’s fees and costs on appeal to Mosser.
Respectfully Submitted, MOSSERLAW PLLC
/s/ James C. Mosser
James C. Mosser
Texas Bar No. 00789784
Nicholas D. Mosser
Texas Bar No. 24075405
Paul J. Downey
Texas Bar No. 24080659
2805 Dallas Parkway, Suite 220
Plano, Texas 75093
Tel. (972) 733-3223
Fax. (469) 626-1073
courtdocuments@mosserlaw.com
69
CERTIFICATE OF COMPLIANCE
I certify that there are 13520 words in this document, and that I relied on
the word count function of WordPerfect X6, which was used to prepare this
document
/s/ Paul J. Downey
Paul J. Downey
CERTIFICATE OF SERVICE
I certify that on November 23, 2015, this document was served on the
following parties or counsels of record in accordance with the Texas Rules
of Appellate Procedure 9.5
/s/ Paul J. Downey
Paul J. Downey
Appellee
Bob Mims, represented by
Hay, Wittenburg, Davis, Caldwell & Bale, LLP
Larry W. Bale
Texas Bar No. 01629830
P.O. Box 271
San Angelo, Texas 76092
Tel. (325) 658-2728
lwb@hwdcb.com
70
NO. 03-15-00365-CV
JAMES C. MOSSER and
MOSSER LAW PLLC,
Appellant,
v.
BOB MIMS,
Appellee.
APPENDIX TO APPELLANT’S BRIEF
LIST OF DOCUMENTS
Exhibit 1: Order Granting Bob Mims’ First Amended Motion for
Sanctions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . App.1
Exhibit 2: Order Granting Bob Mims’ First Motion for
Summary Judgment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . App.8
Exhibit 3: Order Granting Bob Mims’ Second Motion for Summary
Judgment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . App.10
Exhibit 4: TEX. CONST. ART. XVI § 50. . . . . . . . . . . . . . . . . . . . . . App.11
Exhibit 5: TEX. BUS. & COM. CODE § 27.01. . . . . . . . . . . . . . . . . . App.29
Exhibit 6: TEX. CIV. PRAC. & REM. CODE § 10.001. . . . . . . . . . . . App.31
Exhibit 7: TEX. CIV. PRAC. & REM. CODE § 10.004. . . . . . . . . . . . App.32
Exhibit 8: TEX. TAX CODE § 23.01. . . . . . . . . . . . . . . . . . . . . . . . . App.34
Exhibit 9: TEX. R. CIV. P. 13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . App.36
71
Exhibit 10: Tom Green County Central Appraisal District Tax Assessments
of 1969 Beaty Road, San Angelo, Texas 76904
for 2008, 2009, and 2015. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . App.37
Exhibit 11: Act of May 28, 1983, 68th Leg. R.S., ch. 949, 1983 Gen. Laws.
5208. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . App. 41
72
EXHIBIT 1 APP. 1
EXHIBIT 1 APP. 2
EXHIBIT 1 APP. 3
EXHIBIT 1 APP. 4
EXHIBIT 1 APP. 5
EXHIBIT 1 APP. 6
EXHIBIT 1 APP. 7
EXHIBIT 2 APP. 8
EXHIBIT 2 APP. 9
CAUSE NO. C130102C
BEN MELTON § IN THE DISTRICT COURT
§
V. §
§
CU MEMBER'S MORTGAGE § 340TH JUDICIAL DISTRICT
A DIVISION OF COLONIAL SAVINGS, F.A§
FIRST WESTERN TITLE CO. AND §
BOB MIMS § TOM GREEN COUNTY, TEXAS
ORDER GRANTING BOB MIMS' MOTION FOR SUMMARY JUDGMENT
On January 10, 2014, the Court heard oral argument on Bob Mims' Motion for
Summary Judgment. After considering the pleadings on file, the summary judgment
evidence admitted for consideration, and the argument of counsel, the Court finds that Bob
Mims' Motion for Summary Judgment should be in all things granted.
Prior to entering its ruling on Bob Mims' Motion for Summary Judgment, the Court
heard and considered Bob Mims' Objections to Plaintiff's Summary Judgment Evidence,
which was filed prior to the hearing on Bob Mims' Motion for Summary Judgment. The
Court has determined that the three objections in Bob Mims' Objections to Plaintiffs
Summary Judgment Evidence are sustained and that the objectionable summary judgment
evidence in Plaintiffs Response to Bob Mims' Motion for Summary Judgment should be
stricken from the record and not considered for any purpose.
It is, accordingly, ORDERED that the three objections in Bob Mims' Objections to
Plaintiffs Summary Judgment Evidence are sustained and the objectionable summary
judgment evidence in Plaintiffs Response to Bob Mims' Motion for Summary Judgment is
stricken from the record and shall not be considered for any purpose.
It is further ORDERED that Bob Mims' Motion for Summary Judgment is in all things
granted.
Signed this 21rJ day of May 2014.
QL~
DiSTRIJliDGE PRESiDG
EXHIBIT 3 19 APP. 10
§ 50. Homestead; protection from forced sale; mortgages,..., TX CONST Art. 16, § 50
KeyCite Yellow Flag - Negative Treatment
Proposed Legislation
Vernon's Texas Statutes and Codes Annotated
Constitution of the State of Texas 1876 (Refs & Annos)
Article XVI. General Provisions
Vernon's Ann.Texas Const. Art. 16, § 50
§ 50. Homestead; protection from forced sale; mortgages, trust deeds and liens
Effective: November 22, 2013
Currentness
(a) The homestead of a family, or of a single adult person, shall be, and is hereby protected from forced sale, for the payment
of all debts except for:
(1) the purchase money thereof, or a part of such purchase money;
(2) the taxes due thereon;
(3) an owelty of partition imposed against the entirety of the property by a court order or by a written agreement of the parties
to the partition, including a debt of one spouse in favor of the other spouse resulting from a division or an award of a family
homestead in a divorce proceeding;
(4) the refinance of a lien against a homestead, including a federal tax lien resulting from the tax debt of both spouses, if the
homestead is a family homestead, or from the tax debt of the owner;
(5) work and material used in constructing new improvements thereon, if contracted for in writing, or work and material used
to repair or renovate existing improvements thereon if:
(A) the work and material are contracted for in writing, with the consent of both spouses, in the case of a family homestead,
given in the same manner as is required in making a sale and conveyance of the homestead;
(B) the contract for the work and material is not executed by the owner or the owner's spouse before the fifth day after the owner
makes written application for any extension of credit for the work and material, unless the work and material are necessary to
complete immediate repairs to conditions on the homestead property that materially affect the health or safety of the owner or
person residing in the homestead and the owner of the homestead acknowledges such in writing;
(C) the contract for the work and material expressly provides that the owner may rescind the contract without penalty or charge
within three days after the execution of the contract by all parties, unless the work and material are necessary to complete
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© 2015 APP. 11 1
§ 50. Homestead; protection from forced sale; mortgages,..., TX CONST Art. 16, § 50
immediate repairs to conditions on the homestead property that materially affect the health or safety of the owner or person
residing in the homestead and the owner of the homestead acknowledges such in writing; and
(D) the contract for the work and material is executed by the owner and the owner's spouse only at the office of a third-party
lender making an extension of credit for the work and material, an attorney at law, or a title company;
(6) an extension of credit that:
(A) is secured by a voluntary lien on the homestead created under a written agreement with the consent of each owner and
each owner's spouse;
(B) is of a principal amount that when added to the aggregate total of the outstanding principal balances of all other indebtedness
secured by valid encumbrances of record against the homestead does not exceed 80 percent of the fair market value of the
homestead on the date the extension of credit is made;
(C) is without recourse for personal liability against each owner and the spouse of each owner, unless the owner or spouse
obtained the extension of credit by actual fraud;
(D) is secured by a lien that may be foreclosed upon only by a court order;
(E) does not require the owner or the owner's spouse to pay, in addition to any interest, fees to any person that are necessary
to originate, evaluate, maintain, record, insure, or service the extension of credit that exceed, in the aggregate, three percent of
the original principal amount of the extension of credit;
(F) is not a form of open-end account that may be debited from time to time or under which credit may be extended from time
to time unless the open-end account is a home equity line of credit;
(G) is payable in advance without penalty or other charge;
(H) is not secured by any additional real or personal property other than the homestead;
(I) is not secured by homestead property that on the date of closing is designated for agricultural use as provided by statutes
governing property tax, unless such homestead property is used primarily for the production of milk;
(J) may not be accelerated because of a decrease in the market value of the homestead or because of the owner's default under
other indebtedness not secured by a prior valid encumbrance against the homestead;
(K) is the only debt secured by the homestead at the time the extension of credit is made unless the other debt was made for a
purpose described by Subsections (a)(1)-(a)(5) or Subsection (a)(8) of this section;
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© 2015 APP. 12 2
§ 50. Homestead; protection from forced sale; mortgages,..., TX CONST Art. 16, § 50
(L) is scheduled to be repaid:
(i) in substantially equal successive periodic installments, not more often than every 14 days and not less often than monthly,
beginning no later than two months from the date the extension of credit is made, each of which equals or exceeds the amount
of accrued interest as of the date of the scheduled installment; or
(ii) if the extension of credit is a home equity line of credit, in periodic payments described under Subsection (t)(8) of this section;
(M) is closed not before:
(i) the 12th day after the later of the date that the owner of the homestead submits a loan application to the lender for the
extension of credit or the date that the lender provides the owner a copy of the notice prescribed by Subsection (g) of this section;
(ii) one business day after the date that the owner of the homestead receives a copy of the loan application if not previously
provided and a final itemized disclosure of the actual fees, points, interest, costs, and charges that will be charged at closing.
If a bona fide emergency or another good cause exists and the lender obtains the written consent of the owner, the lender may
provide the documentation to the owner or the lender may modify previously provided documentation on the date of closing; and
(iii) the first anniversary of the closing date of any other extension of credit described by Subsection (a)(6) of this section
secured by the same homestead property, except a refinance described by Paragraph (Q)(x)(f) of this subdivision, unless the
owner on oath requests an earlier closing due to a state of emergency that:
(a) has been declared by the president of the United States or the governor as provided by law; and
(b) applies to the area where the homestead is located;
(N) is closed only at the office of the lender, an attorney at law, or a title company;
(O) permits a lender to contract for and receive any fixed or variable rate of interest authorized under statute;
(P) is made by one of the following that has not been found by a federal regulatory agency to have engaged in the practice
of refusing to make loans because the applicants for the loans reside or the property proposed to secure the loans is located
in a certain area:
(i) a bank, savings and loan association, savings bank, or credit union doing business under the laws of this state or the United
States;
(ii) a federally chartered lending instrumentality or a person approved as a mortgagee by the United States government to make
federally insured loans;
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© 2015 APP. 13 3
§ 50. Homestead; protection from forced sale; mortgages,..., TX CONST Art. 16, § 50
(iii) a person licensed to make regulated loans, as provided by statute of this state;
(iv) a person who sold the homestead property to the current owner and who provided all or part of the financing for the purchase;
(v) a person who is related to the homestead property owner within the second degree of affinity or consanguinity; or
(vi) a person regulated by this state as a mortgage broker; and
(Q) is made on the condition that:
(i) the owner of the homestead is not required to apply the proceeds of the extension of credit to repay another debt except debt
secured by the homestead or debt to another lender;
(ii) the owner of the homestead not assign wages as security for the extension of credit;
(iii) the owner of the homestead not sign any instrument in which blanks relating to substantive terms of agreement are left
to be filled in;
(iv) the owner of the homestead not sign a confession of judgment or power of attorney to the lender or to a third person to
confess judgment or to appear for the owner in a judicial proceeding;
(v) at the time the extension of credit is made, the owner of the homestead shall receive a copy of the final loan application and
all executed documents signed by the owner at closing related to the extension of credit;
(vi) the security instruments securing the extension of credit contain a disclosure that the extension of credit is the type of credit
defined by Section 50(a)(6), Article XVI, Texas Constitution;
(vii) within a reasonable time after termination and full payment of the extension of credit, the lender cancel and return the
promissory note to the owner of the homestead and give the owner, in recordable form, a release of the lien securing the
extension of credit or a copy of an endorsement and assignment of the lien to a lender that is refinancing the extension of credit;
(viii) the owner of the homestead and any spouse of the owner may, within three days after the extension of credit is made,
rescind the extension of credit without penalty or charge;
(ix) the owner of the homestead and the lender sign a written acknowledgment as to the fair market value of the homestead
property on the date the extension of credit is made;
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© 2015 APP. 14 4
§ 50. Homestead; protection from forced sale; mortgages,..., TX CONST Art. 16, § 50
(x) except as provided by Subparagraph (xi) of this paragraph, the lender or any holder of the note for the extension of credit
shall forfeit all principal and interest of the extension of credit if the lender or holder fails to comply with the lender's or holder's
obligations under the extension of credit and fails to correct the failure to comply not later than the 60th day after the date the
lender or holder is notified by the borrower of the lender's failure to comply by:
(a) paying to the owner an amount equal to any overcharge paid by the owner under or related to the extension of credit if the
owner has paid an amount that exceeds an amount stated in the applicable Paragraph (E), (G), or (O) of this subdivision;
(b) sending the owner a written acknowledgement that the lien is valid only in the amount that the extension of credit does not
exceed the percentage described by Paragraph (B) of this subdivision, if applicable, or is not secured by property described
under Paragraph (H) or (I) of this subdivision, if applicable;
(c) sending the owner a written notice modifying any other amount, percentage, term, or other provision prohibited by this
section to a permitted amount, percentage, term, or other provision and adjusting the account of the borrower to ensure that the
borrower is not required to pay more than an amount permitted by this section and is not subject to any other term or provision
prohibited by this section;
(d) delivering the required documents to the borrower if the lender fails to comply with Subparagraph (v) of this paragraph or
obtaining the appropriate signatures if the lender fails to comply with Subparagraph (ix) of this paragraph;
(e) sending the owner a written acknowledgement, if the failure to comply is prohibited by Paragraph (K) of this subdivision, that
the accrual of interest and all of the owner's obligations under the extension of credit are abated while any prior lien prohibited
under Paragraph (K) remains secured by the homestead; or
(f) if the failure to comply cannot be cured under Subparagraphs (x)(a) -(e) of this paragraph, curing the failure to comply by a
refund or credit to the owner of $1,000 and offering the owner the right to refinance the extension of credit with the lender or
holder for the remaining term of the loan at no cost to the owner on the same terms, including interest, as the original extension
of credit with any modifications necessary to comply with this section or on terms on which the owner and the lender or holder
otherwise agree that comply with this section; and
(xi) the lender or any holder of the note for the extension of credit shall forfeit all principal and interest of the extension of
credit if the extension of credit is made by a person other than a person described under Paragraph (P) of this subdivision or if
the lien was not created under a written agreement with the consent of each owner and each owner's spouse, unless each owner
and each owner's spouse who did not initially consent subsequently consents;
(7) a reverse mortgage; or
(8) the conversion and refinance of a personal property lien secured by a manufactured home to a lien on real property, including
the refinance of the purchase price of the manufactured home, the cost of installing the manufactured home on the real property,
and the refinance of the purchase price of the real property.
EXHIBIT 4 Thomson Reuters. No claim to original U.S. Government Works.
© 2015 APP. 15 5
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(b) An owner or claimant of the property claimed as homestead may not sell or abandon the homestead without the consent of
each owner and the spouse of each owner, given in such manner as may be prescribed by law.
(c) No mortgage, trust deed, or other lien on the homestead shall ever be valid unless it secures a debt described by this section,
whether such mortgage, trust deed, or other lien, shall have been created by the owner alone, or together with his or her spouse,
in case the owner is married. All pretended sales of the homestead involving any condition of defeasance shall be void.
(d) A purchaser or lender for value without actual knowledge may conclusively rely on an affidavit that designates other property
as the homestead of the affiant and that states that the property to be conveyed or encumbered is not the homestead of the affiant.
(e) A refinance of debt secured by a homestead and described by any subsection under Subsections (a)(1)-(a)(5) that includes
the advance of additional funds may not be secured by a valid lien against the homestead unless:
(1) the refinance of the debt is an extension of credit described by Subsection (a)(6) of this section; or
(2) the advance of all the additional funds is for reasonable costs necessary to refinance such debt or for a purpose described
by Subsection (a)(2), (a)(3), or (a)(5) of this section.
(f) A refinance of debt secured by the homestead, any portion of which is an extension of credit described by Subsection (a)
(6) of this section, may not be secured by a valid lien against the homestead unless the refinance of the debt is an extension of
credit described by Subsection (a)(6) or (a)(7) of this section.
(g) An extension of credit described by Subsection (a)(6) of this section may be secured by a valid lien against homestead
property if the extension of credit is not closed before the 12th day after the lender provides the owner with the following
written notice on a separate instrument:
“NOTICE CONCERNING EXTENSIONS OF CREDIT DEFINED BY SECTION 50(a)(6), ARTICLE XVI, TEXAS
CONSTITUTION:
“SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION ALLOWS CERTAIN LOANS TO BE SECURED
AGAINST THE EQUITY IN YOUR HOME. SUCH LOANS ARE COMMONLY KNOWN AS EQUITY LOANS. IF
YOU DO NOT REPAY THE LOAN OR IF YOU FAIL TO MEET THE TERMS OF THE LOAN, THE LENDER MAY
FORECLOSE AND SELL YOUR HOME. THE CONSTITUTION PROVIDES THAT:
“(A) THE LOAN MUST BE VOLUNTARILY CREATED WITH THE CONSENT OF EACH OWNER OF YOUR HOME
AND EACH OWNER'S SPOUSE;
“(B) THE PRINCIPAL LOAN AMOUNT AT THE TIME THE LOAN IS MADE MUST NOT EXCEED AN AMOUNT
THAT, WHEN ADDED TO THE PRINCIPAL BALANCES OF ALL OTHER LIENS AGAINST YOUR HOME, IS MORE
THAN 80 PERCENT OF THE FAIR MARKET VALUE OF YOUR HOME;
“(C) THE LOAN MUST BE WITHOUT RECOURSE FOR PERSONAL LIABILITY AGAINST YOU AND YOUR SPOUSE
UNLESS YOU OR YOUR SPOUSE OBTAINED THIS EXTENSION OF CREDIT BY ACTUAL FRAUD;
EXHIBIT 4 Thomson Reuters. No claim to original U.S. Government Works.
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“(D) THE LIEN SECURING THE LOAN MAY BE FORECLOSED UPON ONLY WITH A COURT ORDER;
“(E) FEES AND CHARGES TO MAKE THE LOAN MAY NOT EXCEED 3 PERCENT OF THE LOAN AMOUNT;
“(F) THE LOAN MAY NOT BE AN OPEN-END ACCOUNT THAT MAY BE DEBITED FROM TIME TO TIME OR
UNDER WHICH CREDIT MAY BE EXTENDED FROM TIME TO TIME UNLESS IT IS A HOME EQUITY LINE OF
CREDIT;
“(G) YOU MAY PREPAY THE LOAN WITHOUT PENALTY OR CHARGE;
“(H) NO ADDITIONAL COLLATERAL MAY BE SECURITY FOR THE LOAN;
“(I) THE LOAN MAY NOT BE SECURED BY HOMESTEAD PROPERTY THAT IS DESIGNATED FOR
AGRICULTURAL USE AS OF THE DATE OF CLOSING, UNLESS THE AGRICULTURAL HOMESTEAD PROPERTY
IS USED PRIMARILY FOR THE PRODUCTION OF MILK;
“(J) YOU ARE NOT REQUIRED TO REPAY THE LOAN EARLIER THAN AGREED SOLELY BECAUSE THE FAIR
MARKET VALUE OF YOUR HOME DECREASES OR BECAUSE YOU DEFAULT ON ANOTHER LOAN THAT IS
NOT SECURED BY YOUR HOME;
“(K) ONLY ONE LOAN DESCRIBED BY SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION MAY
BE SECURED WITH YOUR HOME AT ANY GIVEN TIME;
“(L) THE LOAN MUST BE SCHEDULED TO BE REPAID IN PAYMENTS THAT EQUAL OR EXCEED THE AMOUNT
OF ACCRUED INTEREST FOR EACH PAYMENT PERIOD;
“(M) THE LOAN MAY NOT CLOSE BEFORE 12 DAYS AFTER YOU SUBMIT A LOAN APPLICATION TO THE
LENDER OR BEFORE 12 DAYS AFTER YOU RECEIVE THIS NOTICE, WHICHEVER DATE IS LATER; AND MAY
NOT WITHOUT YOUR CONSENT CLOSE BEFORE ONE BUSINESS DAY AFTER THE DATE ON WHICH YOU
RECEIVE A COPY OF YOUR LOAN APPLICATION IF NOT PREVIOUSLY PROVIDED AND A FINAL ITEMIZED
DISCLOSURE OF THE ACTUAL FEES, POINTS, INTEREST, COSTS, AND CHARGES THAT WILL BE CHARGED
AT CLOSING; AND IF YOUR HOME WAS SECURITY FOR THE SAME TYPE OF LOAN WITHIN THE PAST YEAR,
A NEW LOAN SECURED BY THE SAME PROPERTY MAY NOT CLOSE BEFORE ONE YEAR HAS PASSED FROM
THE CLOSING DATE OF THE OTHER LOAN, UNLESS ON OATH YOU REQUEST AN EARLIER CLOSING DUE TO
A DECLARED STATE OF EMERGENCY;
“(N) THE LOAN MAY CLOSE ONLY AT THE OFFICE OF THE LENDER, TITLE COMPANY, OR AN ATTORNEY
AT LAW;
“(O) THE LENDER MAY CHARGE ANY FIXED OR VARIABLE RATE OF INTEREST AUTHORIZED BY STATUTE;
“(P) ONLY A LAWFULLY AUTHORIZED LENDER MAY MAKE LOANS DESCRIBED BY SECTION 50(a)(6),
ARTICLE XVI, OF THE TEXAS CONSTITUTION;
“(Q) LOANS DESCRIBED BY SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION MUST:
“(1) NOT REQUIRE YOU TO APPLY THE PROCEEDS TO ANOTHER DEBT EXCEPT A DEBT THAT IS SECURED
BY YOUR HOME OR OWED TO ANOTHER LENDER;
EXHIBIT 4 Thomson Reuters. No claim to original U.S. Government Works.
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“(2) NOT REQUIRE THAT YOU ASSIGN WAGES AS SECURITY;
“(3) NOT REQUIRE THAT YOU EXECUTE INSTRUMENTS WHICH HAVE BLANKS FOR SUBSTANTIVE TERMS
OF AGREEMENT LEFT TO BE FILLED IN;
“(4) NOT REQUIRE THAT YOU SIGN A CONFESSION OF JUDGMENT OR POWER OF ATTORNEY TO ANOTHER
PERSON TO CONFESS JUDGMENT OR APPEAR IN A LEGAL PROCEEDING ON YOUR BEHALF;
“(5) PROVIDE THAT YOU RECEIVE A COPY OF YOUR FINAL LOAN APPLICATION AND ALL EXECUTED
DOCUMENTS YOU SIGN AT CLOSING;
“(6) PROVIDE THAT THE SECURITY INSTRUMENTS CONTAIN A DISCLOSURE THAT THIS LOAN IS A LOAN
DEFINED BY SECTION 50(a)(6), ARTICLE XVI, OF THE TEXAS CONSTITUTION;
“(7) PROVIDE THAT WHEN THE LOAN IS PAID IN FULL, THE LENDER WILL SIGN AND GIVE YOU A RELEASE
OF LIEN OR AN ASSIGNMENT OF THE LIEN, WHICHEVER IS APPROPRIATE;
“(8) PROVIDE THAT YOU MAY, WITHIN 3 DAYS AFTER CLOSING, RESCIND THE LOAN WITHOUT PENALTY
OR CHARGE;
“(9) PROVIDE THAT YOU AND THE LENDER ACKNOWLEDGE THE FAIR MARKET VALUE OF YOUR HOME ON
THE DATE THE LOAN CLOSES; AND
“(10) PROVIDE THAT THE LENDER WILL FORFEIT ALL PRINCIPAL AND INTEREST IF THE LENDER FAILS TO
COMPLY WITH THE LENDER'S OBLIGATIONS UNLESS THE LENDER CURES THE FAILURE TO COMPLY AS
PROVIDED BY SECTION 50(a)(6)(Q)(x), ARTICLE XVI, OF THE TEXAS CONSTITUTION; AND
“(R) IF THE LOAN IS A HOME EQUITY LINE OF CREDIT:
“(1) YOU MAY REQUEST ADVANCES, REPAY MONEY, AND REBORROW MONEY UNDER THE LINE OF CREDIT;
“(2) EACH ADVANCE UNDER THE LINE OF CREDIT MUST BE IN AN AMOUNT OF AT LEAST $4,000;
“(3) YOU MAY NOT USE A CREDIT CARD, DEBIT CARD, OR SIMILAR DEVICE, OR PREPRINTED CHECK THAT
YOU DID NOT SOLICIT, TO OBTAIN ADVANCES UNDER THE LINE OF CREDIT;
“(4) ANY FEES THE LENDER CHARGES MAY BE CHARGED AND COLLECTED ONLY AT THE TIME THE LINE OF
CREDIT IS ESTABLISHED AND THE LENDER MAY NOT CHARGE A FEE IN CONNECTION WITH ANY ADVANCE;
“(5) THE MAXIMUM PRINCIPAL AMOUNT THAT MAY BE EXTENDED, WHEN ADDED TO ALL OTHER DEBTS
SECURED BY YOUR HOME, MAY NOT EXCEED 80 PERCENT OF THE FAIR MARKET VALUE OF YOUR HOME
ON THE DATE THE LINE OF CREDIT IS ESTABLISHED;
“(6) IF THE PRINCIPAL BALANCE UNDER THE LINE OF CREDIT AT ANY TIME EXCEEDS 50 PERCENT OF
THE FAIR MARKET VALUE OF YOUR HOME, AS DETERMINED ON THE DATE THE LINE OF CREDIT IS
ESTABLISHED, YOU MAY NOT CONTINUE TO REQUEST ADVANCES UNDER THE LINE OF CREDIT UNTIL THE
BALANCE IS LESS THAN 50 PERCENT OF THE FAIR MARKET VALUE; AND
EXHIBIT 4 Thomson Reuters. No claim to original U.S. Government Works.
© 2015 APP. 18 8
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“(7) THE LENDER MAY NOT UNILATERALLY AMEND THE TERMS OF THE LINE OF CREDIT.
“THIS NOTICE IS ONLY A SUMMARY OF YOUR RIGHTS UNDER THE TEXAS CONSTITUTION. YOUR RIGHTS
ARE GOVERNED BY SECTION 50, ARTICLE XVI, OF THE TEXAS CONSTITUTION, AND NOT BY THIS NOTICE.”
If the discussions with the borrower are conducted primarily in a language other than English, the lender shall, before closing,
provide an additional copy of the notice translated into the written language in which the discussions were conducted.
(h) A lender or assignee for value may conclusively rely on the written acknowledgment as to the fair market value of the
homestead property made in accordance with Subsection (a)(6)(Q)(ix) of this section if:
(1) the value acknowledged to is the value estimate in an appraisal or evaluation prepared in accordance with a state or federal
requirement applicable to an extension of credit under Subsection (a)(6); and
(2) the lender or assignee does not have actual knowledge at the time of the payment of value or advance of funds by the lender
or assignee that the fair market value stated in the written acknowledgment was incorrect.
(i) This subsection shall not affect or impair any right of the borrower to recover damages from the lender or assignee under
applicable law for wrongful foreclosure. A purchaser for value without actual knowledge may conclusively presume that a lien
securing an extension of credit described by Subsection (a)(6) of this section was a valid lien securing the extension of credit
with homestead property if:
(1) the security instruments securing the extension of credit contain a disclosure that the extension of credit secured by the lien
was the type of credit defined by Section 50(a)(6), Article XVI, Texas Constitution;
(2) the purchaser acquires the title to the property pursuant to or after the foreclosure of the voluntary lien; and
(3) the purchaser is not the lender or assignee under the extension of credit.
(j) Subsection (a)(6) and Subsections (e)-(i) of this section are not severable, and none of those provisions would have been
enacted without the others. If any of those provisions are held to be preempted by the laws of the United States, all of those
provisions are invalid. This subsection shall not apply to any lien or extension of credit made after January 1, 1998, and before
the date any provision under Subsection (a)(6) or Subsections (e)-(i) is held to be preempted.
(k) “Reverse mortgage” means an extension of credit:
(1) that is secured by a voluntary lien on homestead property created by a written agreement with the consent of each owner
and each owner's spouse;
(2) that is made to a person who is or whose spouse is 62 years or older;
EXHIBIT 4 Thomson Reuters. No claim to original U.S. Government Works.
© 2015 APP. 19 9
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(3) that is made without recourse for personal liability against each owner and the spouse of each owner;
(4) under which advances are provided to a borrower:
(A) based on the equity in a borrower's homestead; or
(B) for the purchase of homestead property that the borrower will occupy as a principal residence;
(5) that does not permit the lender to reduce the amount or number of advances because of an adjustment in the interest rate
if periodic advances are to be made;
(6) that requires no payment of principal or interest until:
(A) all borrowers have died;
(B) the homestead property securing the loan is sold or otherwise transferred;
(C) all borrowers cease occupying the homestead property for a period of longer than 12 consecutive months without prior
written approval from the lender;
(C-1) if the extension of credit is used for the purchase of homestead property, the borrower fails to timely occupy the homestead
property as the borrower's principal residence within a specified period after the date the extension of credit is made that is
stipulated in the written agreement creating the lien on the property; or
(D) the borrower:
(i) defaults on an obligation specified in the loan documents to repair and maintain, pay taxes and assessments on, or insure
the homestead property;
(ii) commits actual fraud in connection with the loan; or
(iii) fails to maintain the priority of the lender's lien on the homestead property, after the lender gives notice to the borrower,
by promptly discharging any lien that has priority or may obtain priority over the lender's lien within 10 days after the date the
borrower receives the notice, unless the borrower:
(a) agrees in writing to the payment of the obligation secured by the lien in a manner acceptable to the lender;
EXHIBIT 4 Thomson Reuters. No claim to original U.S. Government Works.
© 2015 APP. 20 10
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(b) contests in good faith the lien by, or defends against enforcement of the lien in, legal proceedings so as to prevent the
enforcement of the lien or forfeiture of any part of the homestead property; or
(c) secures from the holder of the lien an agreement satisfactory to the lender subordinating the lien to all amounts secured by
the lender's lien on the homestead property;
(7) that provides that if the lender fails to make loan advances as required in the loan documents and if the lender fails to cure
the default as required in the loan documents after notice from the borrower, the lender forfeits all principal and interest of
the reverse mortgage, provided, however, that this subdivision does not apply when a governmental agency or instrumentality
takes an assignment of the loan in order to cure the default;
(8) that is not made unless the prospective borrower and the spouse of the prospective borrower attest in writing that the
prospective borrower and the prospective borrower's spouse received counseling regarding the advisability and availability of
reverse mortgages and other financial alternatives that was completed not earlier than the 180th day nor later than the 5th day
before the date the extension of credit is closed;
(9) that is not closed before the 12th day after the date the lender provides to the prospective borrower the following written
notice on a separate instrument, which the lender or originator and the borrower must sign for the notice to take effect:
“IMPORTANT NOTICE TO BORROWERS RELATED TO YOUR REVERSE MORTGAGE
“UNDER THE TEXAS TAX CODE, CERTAIN ELDERLY PERSONS MAY DEFER THE COLLECTION OF PROPERTY
TAXES ON THEIR RESIDENCE HOMESTEAD. BY RECEIVING THIS REVERSE MORTGAGE YOU MAY BE
REQUIRED TO FORGO ANY PREVIOUSLY APPROVED DEFERRAL OF PROPERTY TAX COLLECTION AND YOU
MAYBE REQUIRED TO PAY PROPERTY TAXES ON AN ANNUAL BASIS ON THIS PROPERTY.
“THE LENDER MAY FORECLOSE THE REVERSE MORTGAGE AND YOU MAY LOSE YOUR HOME IF:
“(A) YOU DO NOT PAY THE TAXES OR OTHER ASSESSMENTS ON THE HOME EVEN IF YOU ARE ELIGIBLE TO
DEFER PAYMENT OF PROPERTY TAXES;
“(B) YOU DO NOT MAINTAIN AND PAY FOR PROPERTY INSURANCE ON THE HOME AS REQUIRED BY THE
LOAN DOCUMENTS;
“(C) YOU FAIL TO MAINTAIN THE HOME IN A STATE OF GOOD CONDITION AND REPAIR;
“(D) YOU CEASE OCCUPYING THE HOME FOR A PERIOD LONGER THAN 12 CONSECUTIVE MONTHS WITHOUT
THE PRIOR WRITTEN APPROVAL FROM THE LENDER OR, IF THE EXTENSION OF CREDIT IS USED FOR THE
PURCHASE OF THE HOME, YOU FAIL TO TIMELY OCCUPY THE HOME AS YOUR PRINCIPAL RESIDENCE
WITHIN A PERIOD OF TIME AFTER THE EXTENSION OF CREDIT IS MADE THAT IS STIPULATED IN THE
WRITTEN AGREEMENT CREATING THE LIEN ON THE HOME;
“(E) YOU SELL THE HOME OR OTHERWISE TRANSFER THE HOME WITHOUT PAYING OFF THE LOAN;
“(F) ALL BORROWERS HAVE DIED AND THE LOAN IS NOT REPAID;
EXHIBIT 4 Thomson Reuters. No claim to original U.S. Government Works.
© 2015 APP. 21 11
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“(G) YOU COMMIT ACTUAL FRAUD IN CONNECTION WITH THE LOAN; OR
“(H) YOU FAIL TO MAINTAIN THE PRIORITY OF THE LENDER'S LIEN ON THE HOME, AFTER THE LENDER
GIVES NOTICE TO YOU, BY PROMPTLY DISCHARGING ANY LIEN THAT HAS PRIORITY OR MAY OBTAIN
PRIORITY OVER THE LENDER'S LIEN WITHIN 10 DAYS AFTER THE DATE YOU RECEIVE THE NOTICE, UNLESS
YOU:
“(1) AGREE IN WRITING TO THE PAYMENT OF THE OBLIGATION SECURED BY THE LIEN IN A MANNER
ACCEPTABLE TO THE LENDER;
“(2) CONTEST IN GOOD FAITH THE LIEN BY, OR DEFEND AGAINST ENFORCEMENT OF THE LIEN IN, LEGAL
PROCEEDINGS SO AS TO PREVENT THE ENFORCEMENT OF THE LIEN OR FORFEITURE OF ANY PART OF THE
HOME; OR
“(3) SECURE FROM THE HOLDER OF THE LIEN AN AGREEMENT SATISFACTORY TO THE LENDER
SUBORDINATING THE LIEN TO ALL AMOUNTS SECURED BY THE LENDER'S LIEN ON THE HOME.
“IF A GROUND FOR FORECLOSURE EXISTS, THE LENDER MAY NOT COMMENCE FORECLOSURE UNTIL THE
LENDER GIVES YOU WRITTEN NOTICE BY MAIL THAT A GROUND FOR FORECLOSURE EXISTS AND GIVES
YOU AN OPPORTUNITY TO REMEDY THE CONDITION CREATING THE GROUND FOR FORECLOSURE OR TO
PAY THE REVERSE MORTGAGE DEBT WITHIN THE TIME PERMITTED BY SECTION 50(k)(10), ARTICLE XVI,
OF THE TEXAS CONSTITUTION.THE LENDER MUST OBTAIN A COURT ORDER FOR FORECLOSURE EXCEPT
THAT A COURT ORDER IS NOT REQUIRED IF THE FORECLOSURE OCCURS BECAUSE:
“(1) ALL BORROWERS HAVE DIED; OR
“(2) THE HOMESTEAD PROPERTY SECURING THE LOAN IS SOLD OR OTHERWISE TRANSFERRED.”
“YOU SHOULD CONSULT WITH YOUR HOME COUNSELOR OR AN ATTORNEY IF YOU HAVE ANY CONCERNS
ABOUT THESE OBLIGATIONS BEFORE YOU CLOSE YOUR REVERSE MORTGAGE LOAN. TO LOCATE AN
ATTORNEY IN YOUR AREA, YOU MAY WISH TO CONTACT THE STATE BAR OF TEXAS.”
“THIS NOTICE IS ONLY A SUMMARY OF YOUR RIGHTS UNDER THE TEXAS CONSTITUTION. YOUR RIGHTS
ARE GOVERNED IN PART BY SECTION 50, ARTICLE XVI, OF THE TEXAS CONSTITUTION, AND NOT BY THIS
NOTICE.”;
(10) that does not permit the lender to commence foreclosure until the lender gives notice to the borrower, in the manner provided
for a notice by mail related to the foreclosure of liens under Subsection (a)(6) of this section, that a ground for foreclosure
exists and gives the borrower at least 30 days, or at least 20 days in the event of a default under Subdivision (6)(D)(iii) of
this subsection, to:
(A) remedy the condition creating the ground for foreclosure;
(B) pay the debt secured by the homestead property from proceeds of the sale of the homestead property by the borrower or
from any other sources; or
EXHIBIT 4 Thomson Reuters. No claim to original U.S. Government Works.
© 2015 APP. 22 12
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(C) convey the homestead property to the lender by a deed in lieu of foreclosure; and
(11) that is secured by a lien that may be foreclosed upon only by a court order, if the foreclosure is for a ground other than a
ground stated by Subdivision (6)(A) or (B) of this subsection.
(l) Advances made under a reverse mortgage and interest on those advances have priority over a lien filed for record in the
real property records in the county where the homestead property is located after the reverse mortgage is filed for record in
the real property records of that county.
(m) A reverse mortgage may provide for an interest rate that is fixed or adjustable and may also provide for interest that is
contingent on appreciation in the fair market value of the homestead property. Although payment of principal or interest shall
not be required under a reverse mortgage until the entire loan becomes due and payable, interest may accrue and be compounded
during the term of the loan as provided by the reverse mortgage loan agreement.
(n) A reverse mortgage that is secured by a valid lien against homestead property may be made or acquired without regard to
the following provisions of any other law of this state:
(1) a limitation on the purpose and use of future advances or other mortgage proceeds;
(2) a limitation on future advances to a term of years or a limitation on the term of open-end account advances;
(3) a limitation on the term during which future advances take priority over intervening advances;
(4) a requirement that a maximum loan amount be stated in the reverse mortgage loan documents;
(5) a prohibition on balloon payments;
(6) a prohibition on compound interest and interest on interest;
(7) a prohibition on contracting for, charging, or receiving any rate of interest authorized by any law of this state authorizing
a lender to contract for a rate of interest; and
(8) a requirement that a percentage of the reverse mortgage proceeds be advanced before the assignment of the reverse mortgage.
(o) For the purposes of determining eligibility under any statute relating to payments, allowances, benefits, or services provided
on a means-tested basis by this state, including supplemental security income, low-income energy assistance, property tax relief,
medical assistance, and general assistance:
EXHIBIT 4 Thomson Reuters. No claim to original U.S. Government Works.
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(1) reverse mortgage loan advances made to a borrower are considered proceeds from a loan and not income; and
(2) undisbursed funds under a reverse mortgage loan are considered equity in a borrower's home and not proceeds from a loan.
(p) The advances made on a reverse mortgage loan under which more than one advance is made must be made according to the
terms established by the loan documents by one or more of the following methods:
(1) an initial advance at any time and future advances at regular intervals;
(2) an initial advance at any time and future advances at regular intervals in which the amounts advanced may be reduced, for
one or more advances, at the request of the borrower;
(3) an initial advance at any time and future advances at times and in amounts requested by the borrower until the credit limit
established by the loan documents is reached;
(4) an initial advance at any time, future advances at times and in amounts requested by the borrower until the credit limit
established by the loan documents is reached, and subsequent advances at times and in amounts requested by the borrower
according to the terms established by the loan documents to the extent that the outstanding balance is repaid; or
(5) at any time by the lender, on behalf of the borrower, if the borrower fails to timely pay any of the following that the
borrower is obligated to pay under the loan documents to the extent necessary to protect the lender's interest in or the value
of the homestead property:
(A) taxes;
(B) insurance;
(C) costs of repairs or maintenance performed by a person or company that is not an employee of the lender or a person or
company that directly or indirectly controls, is controlled by, or is under common control with the lender;
(D) assessments levied against the homestead property; and
(E) any lien that has, or may obtain, priority over the lender's lien as it is established in the loan documents.
(q) To the extent that any statutes of this state, including without limitation, Section 41.001 of the Texas Property Code, purport
to limit encumbrances that may properly be fixed on homestead property in a manner that does not permit encumbrances for
extensions of credit described in Subsection (a)(6) or (a)(7) of this section, the same shall be superseded to the extent that such
encumbrances shall be permitted to be fixed upon homestead property in the manner provided for by this amendment.
EXHIBIT 4 Thomson Reuters. No claim to original U.S. Government Works.
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(r) The supreme court shall promulgate rules of civil procedure for expedited foreclosure proceedings related to the foreclosure
of liens under Subsection (a)(6) of this section and to foreclosure of a reverse mortgage lien that requires a court order.
(s) The Finance Commission of Texas shall appoint a director to conduct research on the availability, quality, and prices of
financial services and research the practices of business entities in the state that provide financial services under this section.
The director shall collect information and produce reports on lending activity of those making loans under this section. The
director shall report his or her findings to the legislature not later than December 1 of each year.
(t) A home equity line of credit is a form of an open-end account that may be debited from time to time, under which credit
may be extended from time to time and under which:
(1) the owner requests advances, repays money, and reborrows money;
(2) any single debit or advance is not less than $4,000;
(3) the owner does not use a credit card, debit card, or similar device, or preprinted check unsolicited by the borrower, to obtain
an advance;
(4) any fees described by Subsection (a)(6)(E) of this section are charged and collected only at the time the extension of credit
is established and no fee is charged or collected in connection with any debit or advance;
(5) the maximum principal amount that may be extended under the account, when added to the aggregate total of the outstanding
principal balances of all indebtedness secured by the homestead on the date the extension of credit is established, does not
exceed an amount described under Subsection (a)(6)(B) of this section;
(6) no additional debits or advances are made if the total principal amount outstanding exceeds an amount equal to 50 percent
of the fair market value of the homestead as determined on the date the account is established;
(7) the lender or holder may not unilaterally amend the extension of credit; and
(8) repayment is to be made in regular periodic installments, not more often than every 14 days and not less often than monthly,
beginning not later than two months from the date the extension of credit is established, and:
(A) during the period during which the owner may request advances, each installment equals or exceeds the amount of accrued
interest; and
(B) after the period during which the owner may request advances, installments are substantially equal.
EXHIBIT 4 Thomson Reuters. No claim to original U.S. Government Works.
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(u) The legislature may by statute delegate one or more state agencies the power to interpret Subsections (a)(5)-(a)(7), (e)-(p),
and (t), of this section. An act or omission does not violate a provision included in those subsections if the act or omission
conforms to an interpretation of the provision that is:
(1) in effect at the time of the act or omission; and
(2) made by a state agency to which the power of interpretation is delegated as provided by this subsection or by an appellate
court of this state or the United States.
(v) A reverse mortgage must provide that:
(1) the owner does not use a credit card, debit card, preprinted solicitation check, or similar device to obtain an advance;
(2) after the time the extension of credit is established, no transaction fee is charged or collected solely in connection with any
debit or advance; and
(3) the lender or holder may not unilaterally amend the extension of credit.
Credits
Amended Nov. 6, 1973; Nov. 7, 1995; Nov. 4, 1997, eff. Jan. 1, 1998; Nov. 2, 1999; Nov. 6, 2001, eff. Nov. 26, 2001; Sept. 13,
2003, eff. Sept. 29, 2003; Nov. 8, 2005, eff. Nov. 23, 2005; Nov. 6, 2007, eff. Dec. 4, 2007; Nov. 5, 2013, eff. Nov. 22, 2013.
Editors' Notes
INTERPRETIVE COMMENTARY
1993 Main Volume
The homestead exemption was a Texas creation. It was the logical development of the evolution of the changing
social attitude toward debtors whereby first the person, then the personal property, and finally the real estate of the
debtor were freed from the control of the creditor through the abolition of imprisonment for debt, the extension of
chattel exemptions, and the adoption of the homestead exemption.
While Texas was governed by Spanish colonial law and, subsequent thereto, the law of Mexico, it became familiarized
with chattel exemptions for such items as family clothing, the minimum of furniture for the family abode, and the
implements of the breadwinner, none of which could be used for forced application to the payment of debts. In an
agricultural community, it was no great step to extend the concept underlying these chattel exemptions to the family
home and land.
The earliest homestead exemption law was the Statute of January 26, 1839 (Laws of the Republic of Texas, First
Session of the Third Congress, 1839, pp. 125-126). Beyond statements to its intent and purpose, the idea of homestead
exemption elicited slight notice, scarcely any comment, and no discernible opposition. Its passage was hurried through
the legislature on the last day of its session with the legislators apparently unaware of the important precedent the
law would establish or of the far-reaching effect it was to have.
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© 2015 APP. 26 16
§ 50. Homestead; protection from forced sale; mortgages,..., TX CONST Art. 16, § 50
The direct cause of the law was the United States Panic of 1837 and the ensuing depression during which numerous
families lost homes and farms through foreclosures, and in the Republic of Texas business became stagnate, money
scarce, and credit unobtainable. Most Texans were in debt, and the young nation was in economic peril. The homestead
exemption was looked upon as a necessary measure to offset the economic danger to Texans and Texas. It had
a three-fold purpose: (1) to preserve the integrity of the family as the basic element of social organization, and,
incidentally, to encourage colonization for in a frontier society each pioneer family was of definite value to the
community; (2) to provide the debtor with a home for his family and some means to support them and to recoup his
economic losses so as to prevent the family from becoming a burdensome charge upon the public; (3) to retain in
pioneers the feeling of freedom and sense of independence which was deemed necessary to the continued existence
of democratic institutions.
Although the Constitution of the Republic contained no provisions with reference to homestead exemptions, Texans
quickly learned that homestead exemptions could not be left to the mercy of the legislators. The Fourth Congress of
the Republic, in an act concerning executions (Act of February 5, 1840, sections 4 and 24, Laws of Republic of Texas,
Session of Fourth Congress, pp. 93-98), annulled the law of 1839, although no explanation for this action can be
found in the journals of that congress. The next legislature, however, repealed the action of the Fourth Congress and
re-enacted the original homestead exemption law. (Act of December 22, 1840, Laws of Republic of Texas, Session
of Fifth Congress, pp. 61-62). Consequently, the convention which drew up the Constitution of 1845, designed to
provide for the government of the State of Texas after annexation by the United States, determined to safeguard the
homestead by putting it beyond the reach of legislators as well as creditors by incorporating an exemption provision
in the constitution.
Article VII, Section 22, of the Constitution of 1845 declared:
The Legislature shall have power to protect by law from forced sale, a certain portion of the property of all heads
of families. The homestead of a family not to exceed two hundred acres of land, (not included in a town or city,)
or any town or city lot or lots, in value not to exceed two thousand dollars, shall not be subject to forced sale, for
any debts hereafter contracted, nor shall the owner, if a married man, be at liberty to alienate the same, unless by
consent of the wife, in such manner as the Legislature may hereafter point out.
There was little opposition in the convention to the homestead exemption as such, although it was adopted by a vote
of only 42 to 14. The opposition specifically went on record as approving of the principle but objected to the wording
of the measure on various grounds--the limitation on the size of the homestead was felt to be too small or too large;
or objection was voiced to the provision preventing the husband from alienating the homestead without the wife's
consent.
The Constitutions of 1861 and 1866 carried forward those homestead provisions. The Constitution of 1869 provided
for the exemption of a rural homestead not exceeding 200 acres or an urban homestead not in excess of $5,000
evaluation without reference to improvements. The present constitution included the 1869 provisions with the added
provision that a place of business might be included in an urban homestead and that certain property of an unmarried
adult might be exempt as a homestead.
At the convention of 1875 opposition again arose to the provision preventing the husband from alienating the
homestead without the wife's consent. But eloquent pleas were made picturing the sad effect of drunken and worthless
husbands bringing their wives to want and poverty, and the provision was retained.
Notes of Decisions (1676)
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© 2015 APP. 27 17
§ 50. Homestead; protection from forced sale; mortgages,..., TX CONST Art. 16, § 50
Vernon's Ann. Texas Const. Art. 16, § 50, TX CONST Art. 16, § 50
Current through the end of the 2015 Regular Session of the 84th Legislature
End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.
EXHIBIT 4 Thomson Reuters. No claim to original U.S. Government Works.
© 2015 APP. 28 18
§ 27.01. Fraud in Real Estate and Stock Transactions, TX BUS & COM § 27.01
Vernon's Texas Statutes and Codes Annotated
Business and Commerce Code (Refs & Annos)
Title 3. Insolvency, Fraudulent Transfers, and Fraud
Chapter 27. Fraud
V.T.C.A., Bus. & C. § 27.01
§ 27.01. Fraud in Real Estate and Stock Transactions
Currentness
(a) Fraud in a transaction involving real estate or stock in a corporation or joint stock company consists of a
(1) false representation of a past or existing material fact, when the false representation is
(A) made to a person for the purpose of inducing that person to enter into a contract; and
(B) relied on by that person in entering into that contract; or
(2) false promise to do an act, when the false promise is
(A) material;
(B) made with the intention of not fulfilling it;
(C) made to a person for the purpose of inducing that person to enter into a contract; and
(D) relied on by that person in entering into that contract.
(b) A person who makes a false representation or false promise commits the fraud described in Subsection (a) of this section
and is liable to the person defrauded for actual damages.
(c) A person who makes a false representation or false promise with actual awareness of the falsity thereof commits the fraud
described in Subsection (a) of this section and is liable to the person defrauded for exemplary damages. Actual awareness may
be inferred where objective manifestations indicate that a person acted with actual awareness.
(d) A person who (1) has actual awareness of the falsity of a representation or promise made by another person and (2) fails
to disclose the falsity of the representation or promise to the person defrauded, and (3) benefits from the false representation
or promise commits the fraud described in Subsection (a) of this section and is liable to the person defrauded for exemplary
damages. Actual awareness may be inferred where objective manifestations indicate that a person acted with actual awareness.
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§ 27.01. Fraud in Real Estate and Stock Transactions, TX BUS & COM § 27.01
(e) Any person who violates the provisions of this section shall be liable to the person defrauded for reasonable and necessary
attorney's fees, expert witness fees, costs for copies of depositions, and costs of court.
Credits
Acts 1967, 60th Leg., vol. 2, p. 2343, ch. 785, § 1. Amended by Acts 1983, 68th Leg., p. 5208, ch. 949, §§ 1, 2, eff. Sept. 1, 1983.
Notes of Decisions (614)
V. T. C. A., Bus. & C. § 27.01, TX BUS & COM § 27.01
Current through Chapters effective immediately through Chapter 46 of the 2015 Regular Session of the 84th Legislature
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© 2015 APP. 30 2
§ 10.001. Signing of Pleadings and Motions, TX CIV PRAC & REM § 10.001
Vernon's Texas Statutes and Codes Annotated
Civil Practice and Remedies Code (Refs & Annos)
Title 2. Trial, Judgment, and Appeal
Subtitle A. General Provisions
Chapter 10. Sanctions for Frivolous Pleadings and Motions (Refs & Annos)
V.T.C.A., Civil Practice & Remedies Code § 10.001
§ 10.001. Signing of Pleadings and Motions
Currentness
The signing of a pleading or motion as required by the Texas Rules of Civil Procedure constitutes a certificate by the signatory
that to the signatory's best knowledge, information, and belief, formed after reasonable inquiry:
(1) the pleading or motion is not being presented for any improper purpose, including to harass or to cause unnecessary delay
or needless increase in the cost of litigation;
(2) 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;
(3) each allegation or other factual contention in the pleading or motion has evidentiary support or, for a specifically identified
allegation or factual contention, is likely to have evidentiary support after a reasonable opportunity for further investigation
or discovery; and
(4) each denial in the pleading or motion of a factual contention is warranted on the evidence or, for a specifically identified
denial, is reasonably based on a lack of information or belief.
Credits
Added by Acts 1995, 74th Leg., ch. 137, § 1, eff. Sept. 1, 1995.
Notes of Decisions (110)
V. T. C. A., Civil Practice & Remedies Code § 10.001, TX CIV PRAC & REM § 10.001
Current through the end of the 2015 Regular Session of the 84th Legislature
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© 2015 APP. 31 1
§ 10.004. Violation; Sanction, TX CIV PRAC & REM § 10.004
Vernon's Texas Statutes and Codes Annotated
Civil Practice and Remedies Code (Refs & Annos)
Title 2. Trial, Judgment, and Appeal
Subtitle A. General Provisions
Chapter 10. Sanctions for Frivolous Pleadings and Motions (Refs & Annos)
V.T.C.A., Civil Practice & Remedies Code § 10.004
§ 10.004. Violation; Sanction
Currentness
(a) A court that determines that a person has signed a pleading or motion in violation of Section 10.001 may impose a sanction
on the person, a party represented by the person, or both.
(b) The sanction must be limited to what is sufficient to deter repetition of the conduct or comparable conduct by others similarly
situated.
(c) A sanction may include any of the following:
(1) a directive to the violator to perform, or refrain from performing, an act;
(2) an order to pay a penalty into court; and
(3) an order to pay to the other party the amount of the reasonable expenses incurred by the other party because of the filing
of the pleading or motion, including reasonable attorney's fees.
(d) The court may not award monetary sanctions against a represented party for a violation of Section 10.001(2).
(e) The court may not award monetary sanctions on its own initiative unless the court issues its order to show cause before a
voluntary dismissal or settlement of the claims made by or against the party or the party's attorney who is to be sanctioned.
(f) The filing of a general denial under Rule 92, Texas Rules of Civil Procedure, shall not be deemed a violation of this chapter.
Credits
Added by Acts 1995, 74th Leg., ch. 137, § 1, eff. Sept. 1, 1995.
Notes of Decisions (80)
V. T. C. A., Civil Practice & Remedies Code § 10.004, TX CIV PRAC & REM § 10.004
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© 2015 APP. 32 1
§ 10.004. Violation; Sanction, TX CIV PRAC & REM § 10.004
Current through the end of the 2015 Regular Session of the 84th Legislature
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© 2015 APP. 33 2
§ 23.01. Appraisals Generally, TX TAX § 23.01
KeyCite Yellow Flag - Negative Treatment
Proposed Legislation
Vernon's Texas Statutes and Codes Annotated
Tax Code (Refs & Annos)
Title 1. Property Tax Code
Subtitle D. Appraisal and Assessment (Refs & Annos)
Chapter 23. Appraisal Methods and Procedures (Refs & Annos)
Subchapter A. Appraisals Generally
V.T.C.A., Tax Code § 23.01
§ 23.01. Appraisals Generally
Effective: September 1, 2011
Currentness
(a) Except as otherwise provided by this chapter, all taxable property is appraised at its market value as of January 1.
(b) The market value of property shall be determined by the application of generally accepted appraisal methods and techniques.
If the appraisal district determines the appraised value of a property using mass appraisal standards, the mass appraisal standards
must comply with the Uniform Standards of Professional Appraisal Practice. The same or similar appraisal methods and
techniques shall be used in appraising the same or similar kinds of property. However, each property shall be appraised based
upon the individual characteristics that affect the property's market value, and all available evidence that is specific to the value
of the property shall be taken into account in determining the property's market value.
(c) Notwithstanding Section 1.04(7)(C), in determining the market value of a residence homestead, the chief appraiser may not
exclude from consideration the value of other residential property that is in the same neighborhood as the residence homestead
being appraised and would otherwise be considered in appraising the residence homestead because the other residential property:
(1) was sold at a foreclosure sale conducted in any of the three years preceding the tax year in which the residence homestead
is being appraised and was comparable at the time of sale based on relevant characteristics with other residence homesteads
in the same neighborhood; or
(2) has a market value that has declined because of a declining economy.
(d) The market value of a residence homestead shall be determined solely on the basis of the property's value as a residence
homestead, regardless of whether the residential use of the property by the owner is considered to be the highest and best use
of the property.
(e) Notwithstanding any provision of this subchapter to the contrary, if the appraised value of property in a tax year is lowered
under Subtitle F, the appraised value of the property as finally determined under that subtitle is considered to be the appraised
value of the property for that tax year. In the following tax year, the chief appraiser may not increase the appraised value of
the property unless the increase by the chief appraiser is reasonably supported by substantial evidence when all of the reliable
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© 2015 APP. 34 1
§ 23.01. Appraisals Generally, TX TAX § 23.01
and probative evidence in the record is considered as a whole. If the appraised value is finally determined in a protest under
Section 41.41(a)(2) or an appeal under Section 42.26, the chief appraiser may satisfy the requirement to reasonably support
by substantial evidence an increase in the appraised value of the property in the following tax year by presenting evidence
showing that the inequality in the appraisal of property has been corrected with regard to the properties that were considered
in determining the value of the subject property. The burden of proof is on the chief appraiser to support an increase in the
appraised value of property under the circumstances described by this subsection.

(f) The selection of comparable properties and the application of appropriate adjustments for the determination of an appraised
value of property by any person under Section 41.43(b)(3) or 42.26(a)(3) must be based on the application of generally accepted
appraisal methods and techniques. Adjustments must be based on recognized methods and techniques that are necessary to
produce a credible opinion.

(g) Notwithstanding any other provision of this section, property owners representing themselves are entitled to offer an opinion
of and present argument and evidence related to the market and appraised value or the inequality of appraisal of the owner's
property.
Credits
Acts 1979, 66th Leg., p. 2252, ch. 841, § 1, eff. Jan. 1, 1982. Amended by Acts 1985, 69th Leg., ch. 823, § 5, eff. Jan. 1, 1986;
Acts 1997, 75th Leg., ch. 1039, § 21, eff. Jan. 1, 1998; Acts 2009, 81st Leg., ch. 619, § 1, eff. Jan. 1, 2010; Acts 2009, 81st
Leg., ch. 1211, § 1, eff. Jan. 1, 2010; Acts 2009, 81st Leg., ch. 1405, § 2, eff. Jan. 1, 2010; Acts 2011, 82nd Leg., ch. 91 (S.B.
1303), § 27.001(56), (57), eff. Sept. 1, 2011; Acts 2015, 84th Leg., ch. 101 (H.B. 2083), § 1, eff. Jan. 1, 2016.
Notes of Decisions (127)
V. T. C. A., Tax Code § 23.01, TX TAX § 23.01
Current through the end of the 2015 Regular Session of the 84th Legislature
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© 2015 APP. 35 2
Rule 13. Effect of Signing of Pleadings, Motions and Other..., TX R RCP Rule 13
Vernon's Texas Rules Annotated
Texas Rules of Civil Procedure
Part I. General Rules (Refs & Annos)
TX Rules of Civil Procedure, Rule 13
Rule 13. Effect of Signing of Pleadings, Motions and Other Papers; Sanctions
Currentness
The signatures of attorneys or parties constitute a certificate by them that they have read the pleading, motion, or other paper;
that to the best of their knowledge, information, and belief formed after reasonable inquiry the instrument is not groundless and
brought in bad faith or groundless and brought for the purpose of harassment. Attorneys or parties who shall bring a fictitious
suit as an experiment to get an opinion of the court, or who shall file any fictitious pleading in a cause for such a purpose,
or shall make statements in pleading which they know to be groundless and false, for the purpose of securing a delay of the
trial of the cause, shall be held guilty of a contempt. If a pleading, motion or other paper is signed in violation of this rule, the
court, upon motion or upon its own initiative, after notice and hearing, shall impose an appropriate sanction available under
Rule 215, 1 upon the person who signed it, a represented party, or both.
Courts shall presume that pleadings, motions, and other papers are filed in good faith. No sanctions under this rule may be
imposed except for good cause, the particulars of which must be stated in the sanction order. “Groundless” for purposes of this
rule means no basis in law or fact and not warranted by good faith argument for the extension, modification, or reversal of
existing law. A general denial does not constitute a violation of this rule. The amount requested for damages does not constitute
a violation of this rule.
Credits
Oct. 29, 1940, eff. Sept. 1, 1941. Amended by orders of July 15, 1987, eff. Jan. 1, 1988; April 24, 1990, eff. Sept. 1, 1990.
Editors' Notes
COMMENT--1990
To require notice and hearing before a court determines to impose sanctions, to specify that any sanction imposed be
appropriate, and to eliminate the 90-day “grace” period provided in the former version of the rule.
Notes of Decisions (591)
Footnotes
1 Probably Vernon's Ann.Rules Civ.Proc., rule 215.2(b).
Vernon's Ann. Texas Rules Civ. Proc., Rule 13, TX R RCP Rule 13
Current with amendments received through 6/1/2015
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© 2015 APP. 36 1
EXHIBIT 10 APP. 37
EXHIBIT 10 APP. 38
EXHIBIT 10 APP. 39
EXHIBIT 10 APP. 40
Ch. 949 68th LEGISLATURE-REGULAR SESSION
FRAUD-REAL ESTATE OR STOCK TRANSACTIONS
CHAPTER 949
H. B. No. 1849
AN ACT
relating to fraud in a transaction involving real estate or stock
in a corporation or joint stock company.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Subsections (b) and (c), Section 27.01,
Business & Commerce Code, are amendedsto read as follows:
(b) A person who makes a false representation or false
promise commits[ 7 --and--a--perses--whe--henef&%s--Ifem--that-faese
represeanaea-e-Eeise-ptemnset-eemmit] the fraud described in
Subsection (a) of this section and is [are-enoiy-amd-sevealiy)
liable to the person defrauded for actual damages. (Whe-meaesue-ef
aetua-damge-s-4.e-d£feteeee-ke~ween--the- -ve~ve--eE--the--vea&
esaee-teke-e saede-~ sd- and- ts-ae~ua&-va~ie- f
(c) A person who [w&&fully] makes a false representation or
false promise with actual awareness of the falsity thereof
commits[i--and--a--persen--wke--kwingly--benefite--feem--a--(aese
tepteseRtet~en--et--fa~ee--pem~see--eeMMi&] the fraud described in
Subsection (a) of this section and is [are] liable to the person
defrauded for exemplary damages [aet-te-emeeed-twiee-the-ameunt-eof
the-aowal--damages]. Actual awareness may be inferred where
objective manifestations indicate that a person acted with actual
awareness.
SECTION 2. Section 27.01, Business & Commerce Code, is
9
amended by adding Subsections (d) and (e) to read as follows:
(d) A person who (1) has actual awareness of the falsity of
a representation or promise made by another person and (2) fails to
8. V.T.C.A. Bus. & C.§ 27.01, subsecs. (b), (c).
9. V.T.C.A. Bus. & C.§ 27.01, subsecs. (d), (e).
Additions in text indicated by underline; deletions by [strs4eeO ts]
5208
EXHIBIT 11 APP. 41
68th LEGISLATURE-REGULAX SESSION Ch. 949
disclose the falsity of the representation or promise to the nor-so
defrauded, and (3) benefits from the false representation or
promise commits the fraud described in Subsection (a) of this
section and is liable to the person defrauded for exemplary
damages. Actual awareness may be inferred where obiective
manifestations indicate that a person acted with actual awareness.
(e) Any person who violates the provisions of this section
shall be liable to the person defrauded for reasonable and
necessary attorney's fees, expert witness fees, costs for copies of
depositions, and costs of court.
SECTION 3P° This Act applies to fraud if every element of the
fraud occurred on or after the effective date of thin Act. If an
element of fraud occurred before the effective date of this Act,
the fraud is governed by Section 27.01, Business & Commerce Code,
as it existed before being amended by this Act, and that law is
continued in effect for that purpose.
SECTION 4.1 The provisions of Section 27.01,
Business & Commerce Code, as amended, and this Act do not abrogate
or repeal any other laws relating to the rights, duties,
obligations, or liabilities of principals and agents to one another
or to third parties.
SECTION 5. This Act takes effect September 1, 1983.
SECTION 6. The importance of this legislation and the
crowded condition of the calendars in both houses create an
emergency and an imperative public necessity that the
constitutional rule requiring bills to be read on three several
days in each house be suspended, and this rule is hereby suspended.
Passed by the House on April 20, 1983, by a non-record vote; House concurred in
Senate amendments to H.B. No. 1849 on May 19, 1983, by a non-record vote; passed by
the Senate, with amendments, on May 18, 1983, by a viva-voce vote.
Approved June 19, 1983.
Effective Sept. 1, 1983.
10. V.T.C.A. Bus. & C. § 27.01 note.
Additions in text indicated by underline; deletions by [Wliet u1]
5209
EXHIBIT 11 APP. 42