Patrick Hlavaty & Jeff Strnadel v. Commercial State Bank of El Campo, Texas, Inc.

ACCEPTED
13-14-00516-CV
THIRTEENTH COURT OF APPEALS
CORPUS CHRISTI, TEXAS
No. 13-14-00516-CV 4/30/2015 6:00:44 PM
DORIAN RAMIREZ
CLERK
In the 13TH District
Court of Appeals of Texas FILED IN
13th COURT OF APPEALS
CORPUS CHRISTI/EDINBURG, TEXAS
4/30/2015 6:00:44 PM
PATRICK HLAVATY AND JEFF STRNADEL,
DORIAN E. RAMIREZ
Appellants/Cross-Appellees,
Clerk
VS.
COMMERCIAL STATE BANK OF EL CAMPO, TEXAS, INC.
Appellee/Cross-Appellant.
On Appeal from the
th
329 District Court of Wharton County, Texas
CROSS-APPELLEES PATRICK HLAVATY
AND JEFF STRNADEL’S BRIEF
________________________________
WALTER JAMES KRONZER, III, P.C.
Walter James Kronzer, III
State Bar No. 11735001
wkronzer@kronzer.com (e-mail)
3000 Weslayan, Suite 247
Houston, Texas 77027
713-622-5766
713-622-5445 (fax)
THE SINGLETON LAW FIRM
Howard H. Singleton
State Bar No. 1843620
singletonlaw@sbcglobal.net (e-mail)
109 East Milam
Wharton, TX 77488
979-532-9800
979-532-9085 (fax)
Attorneys for Cross-Appellees Patrick Hlavaty
and Jeff Strnadel
Oral Argument Requested
STATEMENT REGARDING ORAL ARGUMENT
As stated in their earlier brief in this appeal, Patrick Hlavaty and Jeff
Strnadel request oral arguments to preserve their right to participate in any
such arguments. But, as stated earlier, they suggest oral arguments are not
necessary. This is simply an appeal involving a question of whether a trial
court mistakenly believed it lacked jurisdiction over Patrick Hlavaty and
Jeff Strnadel’s claims. They believe this Court can reach a decision without
oral arguments.
i
TABLE OF CONTENTS
page
Statement Regarding Oral Arguments. ........................................................... i
Table of Contents............................................................................................. ii
Index of Authorities. ........................................................................................ v
Statement of Facts............................................................................................ 1
Summary of Argument................................................................................... 10
Standard of Review. ....................................................................................... 11
Argument and Authorities. ............................................................................ 12
I. THE TRIAL COURT ERRONEOUSLY CONCLUDED IT HAD
LOST JURISDICTION OVER THIS CASE SINCE NONE OF
THE PRIOR NONSUIT ORDERS IN THIS CASE AMOUNTED
TO A FINAL JUDGMENT.................................................................... 12
A. The Bank confuses an interlocutory process trapped
by claims against other defendants with an
interlocutory process where the only remaining trial
court issue is a defendant’s sanction claim................................ 13
B. The Bank ignores cases such as Unifund CCR
Partners v. Villa, 299 S.W.3d 92 (Tex. 2009) (per
curiam) and Crites v. Collins, 284 S.W.3d 839 (Tex.
2009) (per curiam) in concluding that somehow the
trial court had some very limited amount of time to
consider a sanctions motion even though the trial
court never signed a final judgment disposing of all
parties prior to the Final Order on June 3, 2014....................... 16
1. The Agreed Order of Nonsuit for Defendants, The
Lending Center and Larry Durwood Tew signed on
November 15, 2013 was not a final, appealable
judgment in this matter.. .................................................. 17
ii
2. In Unifund CCR Partners v. Villa, 299 S.W.3d 92
(Tex. 2009) (per curiam) the Texas Supreme Court
held a trial court still had plenary jurisdiction over a
sanctions claim some nine months after a dismissal
order made it the only claim pending before the trial
court................................................................................... 18
3. Crites v. Collins, 284 S.W.3d 839 (Tex. 2009) (per
curiam) also supports the conclusion the trial court
still had jurisdiction in June 2014 when it signed the
Order of Sanctions............................................................. 19
4. The trial court still had jurisdiction in June 2014 as
the trial court did not sign the last order of nonsuit
until late 2013, and Hlavaty and Strnadel had
asserted claims which prevented that nonsuit order
from being a final, appealable judgment.......................... 21
C. None of the nonsuit orders in this case expressly
addressed Hlavaty and Strnadel’s claims in their
First Amended Counterclaims against the Bank.. .................... 22
II. ASSUMING THE TRIAL COURT HAD JURISDICTION TO
ISSUE ITS JUNE 11, 2014 ORDER OF SANCTIONS, THE
TRIAL COURT DID NOT ABUSE ITS DISCRETION IN
INVOKING ITS INHERENT POWER TO SANCTION THE
BANK’S BAD FAITH CONDUCT.. ...................................................... 26
A. The Bank waived any complaints about the four
prior orders against the Bank.................................................... 26
B. The trial court did not abuse it discretion in signing
the June 11, 2014 Order of Sanctions as the trial
court complied with necessary due process
requirements.............................................................................. 28
iii
1. The basis of the trial court’s Order of
Sanctions is its inherent power to
sanction bad faith conduct, but the Bank
focuses on Texas Rule of Civil Procedure
13 instead of the stated trial court’s
inherent power.. ............................................................... 29
2. The final Order of Sanctions was the
fifth order against the Bank following
four prior, valid, enforceable despite the
Bank arguing to the contrary.. .......................................... 31
3. The trial court’s June 11, 2014 Order of
Sanctions complied with necessary due
process requirements....................................................... 33
C. Any error regarding the evidence supporting the
monetary award or lack of particularity in the
sanctions order is harmless because the trial court
did not obscure its reasoning at the hearing, and the
situation is adequately presented to this Court.. ...................... 35
Prayer............................................................................................................. 39
Certificate of Compliance.............................................................................. 40
Certificate of Service. .................................................................................... 40
Appendix Tab
April 11, 2011 Order as to Jeff Stranadel’s [sic] Motion
to Compel Error & Omissions Policy. (CR Supp __). .................................... A
September 8, 2011 Order granting Counter-Plaintiff Jeff Strnadel
and Patrick Hlavaty’s Motion to Compel (CR Supp __)................................ B
Order Nunc Pro Tunc on Counterplaintiffs Motion to Compel
& For Sanctions & Supplement to Counterplaintiffs Motion
to Compel & for Sanctions (CR 3:541)............................................................ C
iv
INDEX OF AUTHORITIES
Cases Page
American Heritage Cap., LP v. Gonzalez,
436 S.W.2d 865 (Tex. App.–Dallas 2014, no pet.). .................. 14, 17, 21
Barr v. Resolution Trust Corp.,
837 S.W.2d 627 (Tex.1992). ................................................................ 24
Crites v. Collins,
284 S.W.3d 839 (Tex. 2009) (per curiam). ............................. 10, 14, 19
Cuellar v. Maldonado,
No. 13-14-00491-CV, 2015 Tex. App. LEXIS 2138 (Tex.
App.–Corpus Christi - Edninburg Mar. 5, 2015, n.w.h.)
(memorandum op.). .................................................................. 11, 31-32
CTL/Thompson Tex., LLC v. Starwood Homeowner’s Assoc., Inc.,
390 S.W.3d 299 (Tex. 2013) (per curiam)..................................... 10, 14
In re A.M.B.V.,
No. 13-13-00081-CV, 2015 Tex. App. LEXIS 59 (Tex.
App.–Corpus Christi - Edninburg Jan. 8, 2015, orig.
proceeding) (memorandum op.)................................................... 10, 30
In re Barnett & Garcia, PLLC,
No. 09-15-00019-CV, 2015 Tex. App. LEXIS 542 (Tex.
App.–Beaumont Jan. 22, 2015, orig. proceeding)
(memorandum op.). ....................................................................... 19-20
In re Bexar Co. Crim. Dist. Atty.’s Office,
No. 04-14-00804-CV, 2014 Tex. App. LEXIS 13872 (Tex.
App.–San Antonio Dec. 31, 2014, orig. proceeding). .......................... 14
In re Brookshire Grocery Co.,
250 S.W.3d 66 (Tex. 2008) (orig. proceeding). ............................ 20-21
In re J.M.B.,
No. 13-14-00365-CV, 2014 Tex. App. LEXIS 8579 (Tex. App.–
Corpus Christi-Edinburg, Aug. 7, 2014, no pet.)................................. 15
v
In re Reynolds,
No. 14-14-00329-CV, 2014 Tex. App. LEXIS 7105 (Tex.
App.–Houston [14th Dist.] July 1, 2014, orig. proceeding)
(memorandum op.). .................................................................. 14, 17, 21
In re Walker & Twenhafel, LLP,
No. 13-14-00065-CV, 2014 Tex. App. LEXIS 1729 (Tex. App.–
Corpus Christi-Edinburg, Feb., 14, 2014, orig. proceeding)
(memorandum op.). ............................................................................ 22
John Kleas Co. Inc. v. Prokop,
No. 13-13-00401-CV, 2015 Tex. App. LEXIS 3162 (Tex.
App.–Corpus Christi-Edinburg, Apr. 2, 2015, n.p.h.)............. 11, 27, 35
Kutch v. Del Mar College,
831 S.W.2d 506 (Tex. App.–Corpus Christi 1992,
no writ)................................................................................. 10-11, 30-32
Powers v. Palacios,
771 S.W.2d 716 (Tex. App.--Corpus Christi 1989,
writ denied)............................................................................... 35, 37-38
Rudisell v. Paquette,
89 S.W.3d 233 (Tex. App.--Corpus Christi 2002, no pet.). ............... 27
Spohn Hosp. v. Mayer,
104 S.W.3d 878 (Tex. 2003). ......................................................... 33-34
State & County Mutual Fire Ins. Co. v. Miller,
52 S.W.3d 693 (Tex.1992). .................................................................. 24
Travelers Ins. Co. v. Joachim,
315 S.W.3d 860 (Tex. 2010).....................................................................
Unifund CCR Partners v. Villa,
299 S.W.3d 92 (Tex. 2009) (per curiam). .......................... 10, 14, 17-18
vi
Univ. of Tex. Med. Branch at Galveston v. Estate of Blackmon
ex rel. Shultz,
195 S.W.3d 98 (Tex. 2006) (per curiam)............................................. 14
Villafani v. Trejo,
251 S.W.3d 466 (Tex. 2008)................................................................. 14
Rules
TEX. R. APP. P. 38.1(i). ............................................................................. 28, 30
TEX. R. APP. P. 44.1(a). ............................................................................ 35, 38
TEX. R. CIV. P. 41............................................................................................ 25
vii
STATEMENT OF FACTS
Cross-Appellees offer their own Statement of Facts as allowed by
Texas Rule of Appellate Procedure 38.2(a)(1)(B) as Cross-Appellees are
dissatisfied with Cross-Appellant’s statement. Cross-Appellant’s Statement
of Facts is inadequate as it does not convey all pertinent procedural facts in
this case. The omitted procedural facts are a necessary to properly help the
Court determine this appeal. Cross-Appellees present these omitted
procedural facts here as part of their Statement of Facts.
The beginnings
On October 23, 2009, Plaintiff Commercial State Bank of El Campo,
Texas (“the Bank”) filed suit against multiple defendants, including Patrick
Hlavaty, Jeff Strnadel, and seven other defendants. CR 1:23. The claims
varied against the various defendants. CR 1:32-49. For example, as to
Defendant Hlavaty, the Bank alleged causes of actions for theft, fraud,
conversion, negligent failure to disclose, breach of fiduciary duties,
constructive trust, conspiracy to defraud, and unjust enrichment. CR 1:32-
39. As to Defendant Strnadel, the Bank alleged causes of action for breach
of fiduciary duty and negligence. CR 1:39-40.
On March 29, 2010, Hlavaty and Strnadel file their respective
counterclaims, both asserting counterclaims under Texas Civil Practice &
Remedies Code section 37.009, as well as counterclaims for an award of
1
sanctions under Texas Rule of Civil Practice Rule 13. CR 1:61, 64. Hlavaty’s
pleadings stated, “Counterplaintiff would further show that
Counterdefendant's pleadings herein are groundless and were brought in
bad faith. Counterplaintiff is accordingly entitled to an award of sanctions
under Tex.R.Civ.P. Rule 13—which at a minimum should include
reimbursement to Counterplaintiff of his attorneys' fees.” CR 1:61.
Strnadel’s pleading stated, in part, “Counterplaintiff would further show
that Counterdefendant's pleadings herein are groundless and were brought
in bad faith. . . . Counterplaintiff is accordingly entitled to an award of
sanctions under TEx.R.Civ.P. Rule 13—which at a minimum should include
reimbursement to Counterplaintiff of his attorneys' fees.” CR 1:64-65.
The first order against the Bank
Hlavaty filed his Motion for Sanctions against the Bank on March 17,
2010. CR 1:56. Hlavaty requested the trial court order the Bank to produce
certain documents. CR 1:57-58. The trial court signed an order granting
discovery sanctions against the Bank on March 29, 2010. CR 1:60. The
order required the bank to produce the documents by April 12, 2010. CR
1:60.
2
The first nonsuit order
On June 25, 2010, the Bank filed its Notice of Nonsuit against only
defendants Hlavaty and Strnadel. CR 1:96.1 “Plaintiff has decided to
non-suit all claims regarding the above matter against Patrick Hlavaty and
Jeffrey Strnadel, and hereby moves the Court to NON-SUIT all claims as to
the aforesaid specific Defendants Strnadel and Hlavaty named herein
without prejudice. All costs in this matter have been paid.” CR 1:96. The
nonsuit does not address, mention, or seek to adjudicate Hlavaty and
Strnadel’s claims against the Bank. CR 1:96.
On June 28, 2010, the trial judge signs Order of Non-suit for
Defendants Hlavaty and Strnadel Without Prejudice. CR 1:100.2 The order
states that the Bank’s claims “against Patrick Hlavaty and Jeffrey Sttnadel is
hereby NONSUITED without prejudice.” CR 1:100 (emphasis in original).
The order does not address, mention, or seek to adjudicate Hlavaty and
Strnadel’s claims against the Bank. CR 1:100.
The second nonsuit order
On July 20, 2010 the Bank files its Notice of Nonsuit against only
defendants Mark Waldron, Marshall Waldron, Blake Waldron, Waldron
1
The certificate of service shows a June 23, 2010 filing date despite the June 25, 2010
file stamp date. CR 1:10.
2
While the order shows a June 24, 201 signing, the docket sheet shows a June 28, 2010
signing. CR 1:10.
3
Development, and Michael Paul. CR 1:102. The nonsuit did not address,
mention, or seek to adjudicate Hlavaty and Strnadel’s claims against the
Bank. CR 1:102-03. On July 28, 2010, the trial judge signed the Order of
Non-suit for these defendants. CR 1:124. The order did not address,
mention, or seek to adjudicate Hlavaty and Strnadel’s claims against the
Bank. CR 1:124.
The last nonsuit is filed
On September 1, 2010, the Bank had filed its Notice of Nonsuit
against the last remaining defendants The Lending Center and Larry
Durwood Tew. CR 1:126. The nonsuit did not address, mention, or seek to
adjudicate Hlavaty and Strnadel’s claims against the Bank. CR 1:126. The
trial court did not sign an order of nonsuit for these defendants until
November 15, 2013. CR 3:559.
Plaintiff’s motion for summary judgment and Hlavaty and
Strnadel’s response
On March 15, 2011, the Bank filed its Motion for Summary Judgment
regarding the Alleged Declaratory Judgment Counterclaims. CR 1:172. This
motion was directed at Hlavaty and Strnadel’s declaratory judgment action
claim. CR 1:172-73. Hlavaty and Strnadel’s Rule 13 claims were not at issue,
“This Motion is not directed at the Counterclaims which assert a violation
of TRCP 13 (which are essentially Motions for Sanctions). This Motion
4
seeks Summary Judgment on the Declaratory Judgment counterclaims
only.” CR 1:174-75.
In March 2015 Hlavaty and Strnadel amended their pleadings. CR:
249, 255. Strnadel first filed his First Amended Counterclaim of
Defendant/Counterplaintiff Jeff Strnadel on March 15, 2011. CR 2:249. He
asserted claims against the Bank, in addition to the earlier asserted
declaratory judgment and sanctions claims, claims for breach of
employment contract, quantum meruit, restitution, or unjust enrichment.
CR 2:249-50.
On March 29, 2011, Hlavaty followed suit and filed his First Amended
Counterclaim of Defendant/Counterplaintiff Patrick Hlavaty. CR 2:255.
Like Strnadel, he asserted claims against the Bank, in addition to the earlier
asserted declaratory judgment and sanctions claims, claims for breach of
employment contract, quantum meruit, restitution, or unjust enrichment.
CR 2:255-57. Hlavaty and Strnadel also filed their Counterplaintiffs’
Summary Judgment Response on March 29, 2011. CR 2:261. The docket
sheet shows a notation, “10/25/11 Bank’s MSJ denied.” CR 1:8.
5
The second order against the Bank
Strnadel filed his Jeff Stranadel’s [sic] Motion to Compel Error &
Omissions Policy on March 31, 2011. CR Supp __.3 On April 11, 2011 the
trial court signed an order as to this motion. CR Supp __ (see Appndx,
Exhibit A). The Docket Sheet reflects the order’s signing that day. CR 1:14.
The order required the Bank produce any effective error and omissions
policy within two weeks. CR Supp __.
The third order against the Bank
Hlavaty and Strnadel filed their Counter Plaintiffa [sic] Motion for
Continuance and to Compel Completion of Discovery on August 23, 2011.
CR Supp __. On September 8, 2011 the trial court signed an order as to this
motion. CR Supp __ (see Appndx, Exhibit B). The Docket Sheet reflects the
order’s signing that day. CR 1:8. The order required the Bank produce (1)
David Melanson for deposition, and (2) any investigative reports as to
Strnadel within forty-five days. CR Supp __.
The fourth order against the Bank
On March 8, 2013 Hlavaty and Strnadel filed their Motion to Compel
and for Sanctions. CR 2:308. Their motion addressed problems with
3
Hlavaty and Strnadel realized after the Bank filed its Appellant’s Brief that two
discovery motions and their accompanying signed orders not in the appellate record
were necessary to address the Bank’s issue. Hlavaty and Strnadel filed their request for a
Supplemental Clerk’s Record containing these motions and orders with the Wharton
County District Clerk. The Supplemental Clerk’s Record is forthcoming shortly.
6
request for Disclosure, the Bank's Request for Production, requests for
production, the Bank’s compliance with court orders, and depositions as to
Don Zwememann and David Melanson. CR 2:309-21. The prayer in this
motion stated:
WHEREFORE, Movants/Counterplaintiffs Patrick Hiavaty and
Jeff Strnadel move the Court for an order of sanctions against
Counterdefendant Commercial State Bank of El Campo, Texas,
Inc. Movants pray that whatever the Court orders will be
sufficient to impress upon the Bank and its counsel the need to
participate in discovery in good faith; and that the relief granted
will recompense the Movants for at least some of the time and
money which have been wasted pursuing what ought to have
been routine discovery from the Bank.
CR 2:321. On July 22, 2013 the trial court signed an order granting the
motion. CR 3:504. On August 21, 2013 the trial court signed its Order Nunc
Pro Tunc on Counterplaintiffs’ Motion to Compel and for Sanctions and
Supplement to Counterplaintiffs Motion to Compel and for Sanctions. CR
3:541. In that order the trial court ordered the bank to produce various
documents within forty-five days. CR 3:541-42. As to Hlavaty and
Strnadel’s request for sanctions, the order states, “The prayer of
Counterplaintiffs for further Sanctions in the Motion and the Supplement is
neither granted nor denied, but shall be carried with this case.” CR 3:543.
The last nonsuit order is signed
The trial court finally signs an order of nonsuit for the defendants The
Lending Center and Larry Durwood Tew until November 15, 2013. CR
7
3:559. The order simply limits its focus to the Bank and these remaining
defendants, “It is accordingly ORDERED by this Court that the above cause
of action brought by Commercial State Bank of El Campo, Texas, Inc.
against The Lending Center, Inc. and Larry Durwood Tew is hereby
NONSUITED without prejudice.” CR 3:559. The order does not address,
mention, or seek to adjudicate Hlavaty and Strnadel’s claims against the
Bank. CR 3:559.
The trial court dismisses claims against the Bank
On April 8, 2014, the Bank files its Commercial State Bank of El
Campo, Texas’s [sic] Motion to Dismiss and Vacate Orders. CR 3:561. On
June 3, 2014, the trial court signed a Final Order in this matter. CR 4:784.
On June 11, 2014, it signed an Order of Sanctions whereby it granted
Hlavaty and Strnadel monetary sanctions against the Bank. CR 4:788.
The fifth order against the Bank
On August 19, 2014, the trial court signed an Agreed Order whereby
the trial court, pursuant to Texas Rule of Civil Procedure 306a(4),
determined that all parties did not receive notice of the June 2014 orders
signing until late July 2014 - July 28 for Hlavaty and Strnadel, July 29 for
The Bank. CR 4:812-13. The Bank filed a Motion to Vacate Order for
Sanctions order on July 31, 2014. CR 4:791. This motion to vacate did not
directly reference the four prior orders nor complain about any prior orders
8
against the Bank beyond implicitly arguing the trial court lack jurisdiction
over certain matters. CR 4:791-93. Hlavaty and Strnadel filed a motion to
set aside the June 3, 2014 Final Order on August 28, 2014. CR 4:814.
Hlavaty and Strnadel filed their Notice of Appeal on September 11, 2014.
CR 4:855.
9
SUMMARY OF ARGUMENT
The trial court just did not “get it” when it came to nonsuits,
sanctions, and plenary jurisdiction. Its holdings in its June 3, 2014 Final
Order reflect a knowledge of, but not an understanding of, cases such as
CTL/Thompson Tex., LLC v. Starwood Homeowner’s Assoc., Inc., 390
S.W.3d 299 (Tex. 2013) (per curiam), Unifund CCR Partners v. Villa, 299
S.W.3d 92 (Tex. 2009) (per curiam), and Crites v. Collins, 284 S.W.3d 839
(Tex. 2009) (per curiam). Patrick Hlavaty and Jeff Strnadel had multiple
pending claims, including a sanctions claim, as well as an employment
breach of contract claim, when the trial court dismissed and struck Hlavaty
and Strnadel’s claims in the June 3, 2014 Final Order. Therefore, the basis
of the trial court’s June 3, 2014 Final Order is faulty and requires a remand
the matter to the trial court for further proceedings.
As to the June 11, 2014 Order of Sanctions, Texas trial courts have the
inherent power to sanction a party for abusing the judicial process through
bad faith conduct. Kutch v. Del Mar College, 831 S.W.2d 506, 509 (Tex.
App.--Corpus Christi 1992, no writ); see In re A.M.B.V., No. 13-13-00081-
CV, 2015 Tex. App. LEXIS 59 *33 (Tex. App.–Corpus Christi - Edninburg
Jan. 8, 2015, orig. proceeding) (memorandum op.). The Court should
affirm the Order of Sanctions as the order complied with necessary due
process requirements.
10
STANDARD OF REVIEW
The Court reviews the imposition of sanctions using an abuse of
discretion standard. John Kleas Co. Inc. v. Prokop, No. 13-13-00401-CV,
2015 Tex. App. LEXIS 3162 *45 (Tex. App.– Corpus Christi-Edinburg, Apr.
2, 2015, n.p.h.) (citing to Low v. Henry, 221 S.W.3d 609, 614 (Tex. 2007)).
The Court will reverse the trial court's sanctions ruling “only if the trial
court acted without reference to any guiding rules and principles, such that
its ruling was arbitrary or unreasonable.” Id. The Court examines whether
there is a direct nexus between the improper conduct and the sanction
imposed to determine if the sanctions were appropriate or just. Id. The
scope of the Court’s review is not limited to the sanctions hearing - it
includes the entire record that was before the trial court. Cuellar v.
Maldonado, No. 13-14-00491-CV, 2015 Tex. App. LEXIS 2138 *33 (Tex.
App.–Corpus Christi - Edninburg Mar. 5, 2015, n.w.h.) (memorandum op.);
Kutch v. Del Mar College, 831 S.W.2d 506, 508 (Tex. App.--Corpus Christi
1992, no writ).
11
ARGUMENTS AND AUTHORITIES
I. THE TRIAL COURT ERRONEOUSLY CONCLUDED IT HAD LOST
JURISDICTION OVER THIS CASE SINCE NONE OF THE PRIOR
NONSUIT ORDERS IN THIS CASE AMOUNTED TO A FINAL
JUDGMENT.
Cross-Appellant Commercial State Bank of El Campo, Texas (“the
Bank”) argues that the trial court lacked jurisdiction to issue the June 11,
2014 Order of Sanctions. Cross-Appellant’s Brief at pages 10-17. Thus the
Bank contends the Court should reverse the trial court and strike the
sanctions award against it. As the Bank states:
However, on June 11, 2014, the same trial court that admitted it
lost jurisdiction in December of 2013, entered an order of
sanctions for conduct that allegedly occurred pre-judgment.
The trial court was without a doubt lacking subject matter
jurisdiction to enter such order and not only violated the rules
of civil procedure, but also violated its own order. As a result,
the trial court erred by taking action after its plenary
jurisdiction expired.
Cross-Appellant’s Brief at page 17. The Bank’s argument advocates the
theory that as long as a trial court says it is dark outside, it is dark outside . .
. even if the sun is shining bright. However, saying so does not make it true,
and the trial court had jurisdiction over this matter when it said it did not
have such in its June 3, 2014 Final Order. It also had jurisdiction when it
signed the June 11, 2014 Order of Sanctions.
This Court cannot allow itself to be confused as the trial court was.
This is not an “A sues B, B seeks sanctions, A nonsuits B,” and the question
12
concerns whether the trial court still had jurisdiction over B’s claims long
after the trial court grants the nonsuit. This is an “A sues B-G, B seeks
sanctions, A nonsuits B, A does not nonsuit C-G for several years,” and the
question concerns whether the trial court still had jurisdiction over B’s
claims after the trial court grants the last nonsuit. Stated another way, none
of the nonsuits in this case specifically disposed of Hlavaty and Strnadel’s
sanctions claim. As Hlavaty and Strnadel argue in their own Appellants’
Brief, the trial court got it wrong, and abused its discretion in doing so. This
Court should hold the trial court had jurisdiction over this matter on June
11, 2014 when it granted sanctions against the Bank.
A. The Bank confuses an interlocutory process trapped by claims
against other defendants with an interlocutory process where
the only remaining trial court issue is a defendant’s sanction
claim.
In voicing the phrase “pursuing sanctions under Rule 13 with
reasonable diligence and within a reasonable time after the non-suits were
filed” the trial court echoed the Bank’s arguments in Cross-Appellant’s
Commercial State Bank of El Campo, Texas’s [sic] Motion to Dismiss and
Vacate Orders. CR 3:571-72. In its brief the Bank again argues “pursuing
sanctions within a reasonable amount of time after the nonsuit as to all
defendants was filed.” Cross-Appellant’s Brief at page 14. The concept is
that while a nonsuit order may extinguish the merits of the case between
13
the parties, “a dismissal ‘shall have no effect on any motion for sanctions,
attorney's fees or other costs, pending at the time of dismissal.’” Univ. of
Tex. Med. Branch at Galveston v. Estate of Blackmon ex rel. Shultz, 195
S.W.3d 98, 100 (Tex. 2006) (per curiam) (citing TEX. R. CIV. P. 162). The
line of cases often cited to by appellate courts (and even in part by the Bank
in its trial court filings) deal with a scenario often repeated - whether the
plaintiff’s nonsuit in a case started a trial court’s post judgment plenary
jurisdiction time clock or mooted a permissible accelerated appeal (i.e., it
began an appellate timetable or resolved all issues, including orders on
appeal). CTL/Thompson Tex., LLC v. Starwood Homeowner’s Assoc., Inc.,
390 S.W.3d 299, 300 (Tex. 2013) (per curiam); Unifund CCR Partners v.
Villa, 299 S.W.3d 92, 96-97 (Tex. 2009) (per curiam); Crites v. Collins, 284
S.W.3d 839 (Tex. 2009) (per curiam); Villafani v. Trejo, 251 S.W.3d 466,
468 (Tex. 2008); Estate of Blackmon ex rel. Shultz, 195 S.W.3d at 100-01;
In re Bexar Co. Crim. Dist. Atty.’s Office, No. 04-14-00804-CV, 2014 Tex.
App. LEXIS 13872 *6 (Tex. App.–San Antonio Dec. 31, 2014, orig.
proceeding); In re Reynolds, No. 14-14-00329-CV, 2014 Tex. App. LEXIS
7105 *16-17 (Tex. App.–Houston [14th Dist.] July 1, 2014, orig. proceeding)
(memorandum op.); American Heritage Cap., LP v. Gonzalez, 436 S.W.2d
865 (Tex. App.–Dallas 2014, no pet.).
14
However, the simple truth is that in this case events occurred that
were interlocutory and unreviewable until years later, at best. The trial
court signed the nonsuit order as to Hlavaty and Strnadel on June 28, 2010.
CR 1:100.4 Without addressing what claims actually survived that nonsuit at
this time, the trial court states some three plus years later, “The notice of
non-suit as to Hlavaty and Strnadel did not prevent them from pursuing
sanctions from the trial court under Rule 13.” CR 4:785. If in October 2010
the trial court had signed an order on the sanctions, such an order was not
appealable at that time as it was merely an interlocutory order. Assuming
the losing party attempted an appeal one can envision the Court stating in
addressing that attempted appeal:
As a general rule, appeals may be taken only from final
judgments. . . . Appellate courts have jurisdiction to consider
immediate appeals of interlocutory orders only if a statute
explicitly provides such jurisdiction. . . . The Court, having
examined and fully considered the documents on file, is of the
opinion that we lack jurisdiction over this attempted appeal.
In re J.M.B., No. 13-14-00365-CV, 2014 Tex. App. LEXIS 8579 *6, 10 (Tex.
App.– Corpus Christi-Edinburg, Aug. 7, 2014, no pet.) (citations omitted)
(dismissing an appeal of an interlocutory sanction order). The case
4
While the order shows a June 24, 2011 signing, the docket sheet shows a June 28, 2010
signing. CR 1:10.
15
remained pending, and Hlavaty and Strnadel continued to pursue sanctions
and other claims as the Bank pursued orders against them.5
The Bank did not merely bring suit against just Patrick Hlavaty and
Jeff Strnadel in October 2009, they sued seven other defendants. CR 1:23.
The Bank painstakingly analogizes the time elapsed in the case in
comparison to other cases as if there were only three parties - Hlavaty,
Strnadel, and it. Of course that is a deft sleight of hand that should not
divert the Court’s attention from what was the state of affairs in late 2013,
not 2010. At that time Hlavaty and Strnadel asserted claims that were
pending and valid.
B. The Bank ignores cases such as Unifund CCR Partners v. Villa,
299 S.W.3d 92 (Tex. 2009) (per curiam) and Crites v. Collins,
284 S.W.3d 839 (Tex. 2009) (per curiam) in concluding that
somehow the trial court had some very limited amount of time
to consider a sanctions motion even though the trial court never
signed a final judgment disposing of all parties prior to the Final
Order on June 3, 2014.
In this Court the Bank blatantly argues what it argued to the trial
court - a thirty-day plenary jurisdiction deadline running from November
2013 can apply to this matter. Cross-Appellant’s Brief at 16; CR 3:573. In
arguing such the Bank would want a reviewing court to put blinders on to
post-Estate of Blackmun cases such as Unifund CCR Partners, and Crites.
5
The Bank filed a motion for summary judgment based on the pleadings in February
2011 (CR 1:172), and then complained when Hlavaty and Strnadel filed amended
pleadings in response to the motion for summary judgment (CR 2:270).
16
But, they stand as logical impediments to the an argument that Hlavaty and
Strnadel’s claims were somehow long dead. That is why the trial court still
had jurisdiction over this matter in June 2014.
1. The Agreed Order of Nonsuit for Defendants, The
Lending Center and Larry Durwood Tew signed on
November 15, 2013 was not a final, appealable judgment
in this matter.
On November 15, 2013 the trial court signed Agreed Order of Nonsuit
for Defendants, The Lending Center and Larry Durwood Tew. CR 3:559.
The Texas Supreme Court has held “that an order of dismissal pursuant to
nonsuit is not a final, appealable order when the order does not
"unequivocally express an intent to dispose of all claims and all parties . . ..”
Unifund CCR Partners, 299 S.W.3d at 96.“Unless the motion (for
sanctions) was specifically referenced as having been disposed of by the
dismissal order, the order did not necessarily dispose of (the sanctions)
motion.” Id. “And if a sanctions request is a ‘claim’ that survives a nonsuit, a
judgment is not final and appealable until the sanctions request is
specifically disposed of by the trial court, or until the trial court issues an
order with sufficient finality language.” In re Reynolds, No. 14-14-00329-
CV, 2014 Tex. App. LEXIS 7105 *13; see also American Heritage Cap., LP,
436 S.W.2d at 871. Despite any Cross-Appellant arguments to the contrary,
the trial court had never ruled on, one way or the other, Hlavaty and
17
Strnadel’s pre-nonsuit sanctions claim. Consequently, the sanctions claim
still existed after November 15, 2003. Unifund CCR Partners, 299 S.W.3d
at 96.
2. In Unifund CCR Partners v. Villa the Texas Supreme
Court held a trial court still had plenary jurisdiction over a
sanctions claim some nine months after a dismissal order
made it the only claim pending before the trial court.
In Unifund CCR Partners, the Texas Supreme Court considered
whether a trial court still had plenary jurisdiction to consider a sanctions
motion some nine months after a dismissal order made the sanctions claim
the sole remaining issue before the trial court. As the Court noted, “[W]e
address Unifund's claim that the sanctions order is void because the trial
court's plenary power expired before it signed the order nine months after
the order dismissing Unifund's suit.” Id. at 95. The Court rejected the lack
of jurisdiction argument finding, “We explained that the trial court had
power to grant sanctions so long as its plenary authority had not expired
and whether the trial court acted within its plenary power depended on
whether the order of dismissal was a final judgment.” Id. at 96.
A nine-month period after a dismissal order was still timely in
Unifund CCR Partners. Here, the trial court signed a sanctions order and
dismissed Hlavaty and Strnadel’s sanctions claim less than seven months
after the non-final nonsuit order. The trial court’s Final Order of June 3,
18
2014 is contrary to Unifund CCR Partners. Consequently, the trial court
still had jurisdiction when it signed the June 11, 2014 sanctions order.
3. Crites v. Collins also supports the conclusion the trial
court still had jurisdiction in June 2014 when it signed the
Order of Sanctions.
In Crites the defendant sought sanctions after the plaintiff filed their
nonsuit, but before the trial court signed the order on the nonsuit. It was a
medical malpractice case. Crites, 284 S.W.3d at 841. The plaintiff filed a
motion for nonsuit, and the defendant filed a motion for sanctions before
the trial court signed the order of nonsuit. Id. The trial court signed the
order on January 19, 2006 but did not hold a hearing on the motion to
sanctions until February 24, 2006 - more than thirty-days after the order of
nonsuit. Id. Ultimately the Texas Supreme Court remanded the matter to
the court of appeals to consider the sanctions motion. Id. at 843.
A recent mandamus action also illustrates the hole in the “lost
jurisdiction three and a half years ago” logic. See In re Barnett & Garcia,
PLLC, No. 09-15-00019-CV, 2015 Tex. App. LEXIS 542 (Tex.
App.–Beaumont Jan. 22, 2015, orig. proceeding) (memorandum op.). In
this case the relator argued that the trial court lost plenary jurisdiction over
the real party in interest’s motion for sanctions. As the Beaumont Court of
Appeals stated:
19
The real parties in interest . . . filed a motion for sanctions
before the trial court signed an order of dismissal. . . . The order
of dismissal, which stated that the cause was dismissed on the
plaintiff's notice of non-suit without mentioning the opposing
party's motion for sanctions, did not dispose of the motion for
sanctions. . . . Relators have not shown that the trial court
signed orders in the case after the expiration of its plenary
power. Accordingly, we deny the petition for writ of mandamus.
Id. at 2015 Tex. App. LEXIS 542 at *1-2. To determine the actual dates
involved you have to go behind the scenes and examine that court of
appeals’ website records. As the petition for mandamus in that case sets
out: (1) the plaintiffs filed a notice of nonsuit on September 11, 2014; (2) the
defendants file a motion for sanctions on September 12, 2014; (3) the trial
court signs a dismissal order on September 15, 2014; and (4) the trial court
signs an order withdrawing the dismissal order on December 17, 2014.
Petition for Writ of Mandamus, Appdnx P, Id.,
http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=07b6
4ec4-3c95-4061-bab3-f933ff52f4ee&coa=coa09&DT=Brief&MediaID=f29f
dc1d-b4f3-4b5a-a65c-d35ade7a9b9d. The Bank would argue that the trial
court’s order signed approximately ninety days later was undoubtably void.
Yet, the Beaumont Court of Appeals do not grant mandamus relief. In re
Barnett & Garcia, PLLC, No. 09-15-00019-CV, 2015 Tex. App. LEXIS 542
at *2.6
6
Mandamus would be appropriate where a trial court has issued an order after the
expiration of its plenary power because such orders are void. In re Brookshire Grocery
20
4. The trial court still had jurisdiction in June 2014 as the
trial court did not sign the last order of nonsuit until late
2013, and Hlavaty and Strnadel had asserted claims which
prevented that nonsuit order from being a final,
appealable judgment.
The Bank, like the trial court, misunderstands how a sanctions claim
interacts with a trial court’s jurisdiction. Both the Bank and the trial court’s
mindset is pre-Unifund CCR Partners, pre-Crites, pre-every other case that
would say a nonsuit order is not the be-all and end-all of plenary
jurisdiction. On June 3, 2014 the trial court’s Final Order states, in
referring to the December 2013 nonsuit, “This event finally triggered the
expiration of this court's plenary jurisdiction in this case on December 15,
2013, thirty days later. No pleading has been filed which would operate to
extend this court's plenary jurisdiction.” CR 4:786. As has been detailed in
this brief, the December 2013 order was not a final, appealable judgment as
Hlavaty and Strnadel’s pending sanction claims, if nothing else, prevented
the nonsuit order from being final since “a judgment is not final and
appealable until the sanctions request is specifically disposed of by the trial
court, or until the trial court issues an order with sufficient finality
language.” In re Reynolds, No. 14-14-00329-CV, 2014 Tex. App. LEXIS
7105 *13; see also American Heritage Cap., LP, 436 S.W.2d at 871.
Co., 250 S.W.3d 66, 68 (Tex. 2008) (orig. proceeding) (citing In re Sw. Bell Tel. Co., 35
S.W.3d 602, 605 (Tex. 2000) (orig. proceeding)).
21
The trial court’s fixture, like the Bank’s fixture, on refusing to accept
that the December 2013 nonsuit order was not a final judgment “clearly
fails to correctly analyze or apply the law.” In re Walker & Twenhafel, LLP,
No. 13-14-00065-CV, 2014 Tex. App. LEXIS 1729 *2 (Tex. App.– Corpus
Christi-Edinburg, Feb., 14, 2014, orig. proceeding) (memorandum op.).
Unifund CCR Partners would say the trial court’s conclusion incorrectly
analyzes or misapplies Texas law. Crites would say such a conclusion
incorrectly analyzes or misapplies Texas law. This Court should say such a
conclusion incorrectly analyzes or misapplies Texas law. Therefore, the
Court should affirm the trial court’s grant of sanctions against CR0ss-
Appellant.
C. None of the nonsuit orders in this case expressly addressed
Hlavaty and Strnadel’s claims in their First Amended
Counterclaims against the Bank.
The nonsuit orders first signed as to Hlavaty and Strnadel were
simply interlocutory, non-appealable orders that did not dispose of their
pending claims against the Bank. Even the Bank conceded such in the trial
court as can be shown when it filed its Motion for Summary Judgment
regarding the Alleged Declaratory Judgment Counterclaims on March 15,
2011 - some eight plus months after the trial court signed the nonsuit order.
CR 1:172. This motion was directed at Hlavaty and Strnadel’s respective
declaratory judgment action claims. CR 1:172-73. As the Bank states, “This
22
Motion is not directed at the Counterclaims which assert a violation of
TRCP 13 (which are essentially Motions for Sanctions). This Motion seeks
Summary Judgment on the Declaratory Judgment counterclaims only.” CR
1:174-75.7 The thrust was only directed to whether Hlavaty and Strnadel
had a viable declaratory judgment action. CR 1:175-80.
In the face of this motion for summary judgment Hlavaty and
Strnadel did more then simply stand on their current pleadings. In March
2015 Hlavaty and Strnadel amended their pleadings. CR: 249, 255. Those
amended claims were viable, stand alone claims made in a pending case. In
its June 3, 2014 Final Order the trial court held, “This court concludes that
the amended counterclaims filed by Hlavaty and Strnadel on March 15 and
29, 2011, are a nullity, and to the extent this court has the authority to do
so, they are hereby STRICKEN.” CR 4:786 (emphasis in original). The trial
court abused its discretion in making such a ruling.
Strnadel first filed his First Amended Counterclaim of
Defendant/Counterplaintiff Jeff Strnadel on March 15, 2011. CR 2:249. The
first claim in the amended pleading concerned a breach of an employment
agreement. CR 2:249. He stated:
Counterdefendant Commercial State Bank has breached its
employment contract and agreement with Jeff Strnadel. It was
promised to Jeff Strnadel that the Bank would carry error and
7
The docket sheet shows a notation, “10/25/11 Bank’s MSJ denied.” CR 1:8.
23
omission type insurance to cover any attorneys' fees and
expenses Jeff Strnadel may incur due to any allegations related
to his employment with the Bank. In addition to providing a
defense, the insurance was to provide coverage for any liability.
Jeff Strnadel has incurred attorney's fees, court cost and
expenses related to a lawsuit and allegations the promised "E &
0" insurance policy was to being paying and providing coverage.
CR 2:249. He also asserted claims against the Bank, in addition to the
earlier asserted declaratory judgment and sanctions claims, for quantum
meruit, restitution, or unjust enrichment. CR 2:249-50.
On March 29, 2011, Hlavaty followed suit and filed his First Amended
Counterclaim of Defendant/Counterplaintiff Patrick Hlavaty. CR 2:255.
Like Strnadel, he also raised a similar breach of an employment agreement.
CR 2:255. Like Strnadel, he also asserted claims against Plaintiff, in
addition to the earlier asserted declaratory judgment and sanctions claims,
a claim for quantum meruit, restitution, or unjust enrichment. CR 2:255-57.
Hlavaty and Strnadel also filed their Counterplaintiffs’ Summary Judgment
Response on March 29, 2011. CR 2:261.
These are matters involving the same parties that were before the trial
court. Assuming the Bank had not nonsuited its claims Hlavaty and
Strnadel would have been required to bring these claims in the case lest
they be barred by res judicata. State & County Mutual Fire Ins. Co. v.
Miller, 52 S.W.3d 693, 696 (Tex.1992); Barr v. Resolution Trust Corp., 837
S.W.2d 627, 630 (Tex.1992). If Hlavaty and Strnadel had filed these as a
24
separate lawsuit in March 2011 it would have been proper to consolidate
their lawsuit with this lawsuit and their pending claims against the same
party.
Hlavaty and Strnadel asserted these claims.8 This Court should say
that these independent claims translated to the trial court continuing to
have subject matter jursdiction over this case in June 2014. Therefore, the
argument that the trial court’s belief it lacked jurisdiction could form the
basis for reversing the June 11, 2014 Order of Sanctions should fall on deaf
ears.
8
It may be that the Bank would have had a right to seek severance of these additional
claims. TEX. R. CIV. P. 41. But, the Bank never sought such relief.
25
II. ASSUMING THE TRIAL COURT HAD JURISDICTION TO ISSUE
ITS JUNE 11, 2014 ORDER OF SANCTIONS, THE TRIAL COURT
DID NOT ABUSE ITS DISCRETION IN INVOKING ITS INHERENT
POWER TO SANCTION THE BANK’S BAD FAITH CONDUCT.
Hlavaty and Strnadel concede the Court must reverse the trial court’s
decision to grant sanctions against the Bank if the trial court did not have
jurisdiction at the time it issued the sanctions order. However, in the event
the Court finds the trial court abused its discretion in dismissing Hlavaty
and Strnadel’s claims as they contend, the Court should affirm the trial
court’s sanctions order against the Bank. The record in this case supports
the trial court’s use of its inherent power to sanction bad faith conduct on
the Bank’s part.
A. The Bank waived any complaints about the four prior orders
against the Bank.
Regardless of whether the bank preserved its right to complain about
the non-jurisdictional aspects of the June 11, 2014 Order of Sanctions, it
waived any complaints about the four prior orders against it other than the
argument the trial court lacked jurisdiction to issue any prior order. CR
4:792. The trial court had previously signed four orders against the Bank:
March 29, 2010 - CR 1:60;
April 11, 2011 - CR Supp __, CR 1:14
September 8, 2011 - CR Supp __, CR 1:8; and
26
August 21, 2013 - CR 3:541.9
The Bank filed a Motion to Vacate Order for Sanctions order on July 31,
2014. CR 4:791. This motion to vacate did not directly reference the four
prior orders nor complain about any prior orders against the Bank beyond
implicitly arguing the trial court lack jurisdiction over certain matters. CR
4:791-93. The Bank has not preserved for appellate review any complaints
against these prior orders beyond its “lacks jurisdiction” argument. John
Kleas Co. Inc. v. Prokop, No. 13-13-00401-CV, 2015 Tex. App. LEXIS 3162
*34 (Tex. App.– Corpus Christi-Edinburg, Apr. 2, 2015, n.p.h.); Rudisell v.
Paquette, 89 S.W.3d 233, 236 (Tex. App.--Corpus Christi 2002, no pet.).
Further, the Bank does not specifically mention or reference the first
three orders in its brief. Cross-Appellant’s Brief at page 18-23. As to the last
order it merely argues that the trial court vacated the order on the basis that
the trial court contending it had lacked jurisdiction to sign it - maybe this is
also an implicit jurisdictional argument against the non-referenced earlier
orders. Cross-Appellant’s Brief at page 22-23. The Bank makes no other
appellate complaints about those orders. It does not argue that the trial
court abused its discretion in granting the relief in those orders.
Consequently, the Bank waives any arguments it might have that the trial
9
The trial court actually signed an order on July 22, 2013. CR 3:504. However, as the
August 2013 order was nunc pro tunc, the early July order is not necessary to resolve the
question.
27
court committed reversible error in signing those earlier orders. TEX. R.
APP. P. 38.1(i). Therefore, assuming the trial court did in fact have
jurisdiction to issue those orders, the Court is faced with the reality that the
Bank’s conduct required the trial court to repetitively order it to comply
with Hlavaty and Strnadel’s valid discovery requests.
B. The trial court did not abuse it discretion in signing the June 11,
2014 Order of Sanctions as the trial court complied with
necessary due process requirements.
Jurisdictional arguments aside, the Bank’s arguments amount to (1)
the trial court did not follow proper procedures, and (2) no evidence
supported the monetary award. Cross-Appellant’s Brief at page 18-22.
These arguments are either simple boiler plate complaints or fail to
consider this Court’s dictates to look beyond the four corners of the order.
There is also the question of whether the Bank waived any arguments
beyond jurisdictional arguments as it never focuses on the basis of the trial
court’s action - the inherent power to punish a party’s bad conduct. But,
regardless of the Bank’s arguments, the trail court did not abuse its
discretion in awarding sanctions. Therefore, the Court should affirm the
June 11, 2014 Order of Sanctions.
28
1. The basis of the trial court’s Order of Sanctions is its
inherent power to sanction bad faith conduct, but the
Bank focuses on Texas Rule of Civil Procedure 13 instead
of the stated trial court’s inherent power.
To read the Bank’s brief one is hard pressed to know what was the
basis of the trial court’s Order of Sanctions. The one reference is,
“Furthermore, sanctions awarded under Texas Rule of Civil Procedure 13
must be based on good cause and must describe the conduct giving rise to
good cause.” Cross-Appellant’s Brief at page 19, 20 (the Bank repeats the
exact sentence agin on the following page). But, while the Bank cites to Rule
13, the trial court’s Order of Sanctions unequivocally states:
It has become clear to the Court that (the Bank) has repeatedly
conducted itself in the course of this case without due regard for
the authority of this Court as a court. Such persistent disrespect
has been an affront to the dignity of this and all courts. This
Court accordingly recognizes a need for it to exercise its
inherent authority pursuant to Willy v. Coastal Corp., 503 U.S.
131 (1992), to sanction this litigant for deliberate misbehavior in
the course of these proceedings.
CR 4:788. The order never mentions Rule 13. Hlavaty and Strnadel’s
motion seeking sanctions was not limited to a specific Texas Rule of Civil
Procedure. CR 3:634-37. It asked the trial court to enforce its earlier order,
sanctions, “and for such other and further releif for which (Hlavaty and
Strnadel) may be justly entitled.” CR 3:636. Frankly, Hlavaty and Strnadel
suggest the Bank the Bank waived any arguments it might have that the
29
trial court lacked the inherent power to sanction the Bank. TEX. R. APP. P.
38.1(i).
But, even if the Court does not agree the Bank waived any arguments
against the basis for order by not briefing or addressing the question of
inherent power to sanction, this Court adheres to the proposition the
inherent power to sanction conduct is an available trial court power, “We
hold Texas courts have inherent power to sanction for bad faith conduct
during litigation.” Kutch v. Del Mar College, 831 S.W.2d 506, 509 (Tex.
App.--Corpus Christi 1992, no writ); see In re A.M.B.V., No. 13-13-00081-
CV, 2015 Tex. App. LEXIS 59 *33 (Tex. App.–Corpus Christi - Edninburg
Jan. 8, 2015, orig. proceeding) (memorandum op.).
The Court held “that Texas Courts have the inherent power to
sanction for abuse of the judicial process which may not be covered by rule
or statute. This power includes the power to sanction appropriately for
failure to comply with a valid court order incident to one of the core
functions of the judiciary.” Kutch v. Del Mar College, 831 S.W.2d at 510.
The trial court’s power is limited by due process. Id. at 511. A review of the
proceedings in this case demonstrate the trial court’s order satisfies due
process.
30
2. The final Order of Sanctions was the fifth order against
the Bank following four prior, valid, enforceable despite
the Bank arguing to the contrary.
In reviewing the Order of Sanctions the Court should remember that
this was the fifth order against the Bank. The scope of the Court’s review is
not limited to the sanctions hearing - it includes the entire record that was
before the trial court. Cuellar v. Maldonado, No. 13-14-00491-CV, 2015
Tex. App. LEXIS 2138 *33 (Tex. App.–Corpus Christi - Edninburg Mar. 5,
2015, n.w.h.) (memorandum op.); Kutch, 831 S.W.2d at 508. But, despite
this Court’s pronouncement that review goes beyond the Order of
Sanctions, the Bank wants the Court to only focus on two of the trial court’s
prior orders, if that:
Specifically, in the order of sanctions, the trial court states that
“the [c]ourt has considered that prior orders designed to
require (the Bank) to participate in the litigation process in
good faith and in compliance with court orders were
ineffective.. . . The prior orders in the record10 — referenced in
the order of sanctions—are an order on a motion to compel,
entered on July 22, 2013, and an order nunc pro tunc, entered
on August 21, 2013. These discovery orders were clearly entered
after September 1, 2010. Meaning, per the trial court’s final
order, cited supra, the discovery orders were vacated.”
10
The Bank plays it a bit tricky with the “record” reference. The Bank never mentions in
its brief the March 29, 2010 discovery order against it even though it is in the Clerk’s
Record. CR 1:60. Also, while at that time the April 11, 2011 and September 8, 2011
orders were not part of the appellate record, the bank has the burden of proof and chose
not to bring these prior orders to the Court’s attention despite Docket Sheet references.
CR 1:8 (September 8, 2011 order); 14 (April 11, 2011 order).
31
Cross-Appellant’s Brief at page 22 (emphasis in original). As discussed
earlier, the trial court had previously signed four orders against the Bank:
March 29, 2010 - CR 1:60;
April 11, 2011 - CR Supp __, CR 1:14;
September 8, 2011 - CR Supp __, CR 1:8; and
August 21, 2013 - CR 3:541.
The question of sanctions had been considered earlier, even though the trial
court had not granted monetary sanctions earlier. An example of where the
trial court carried along a prayer for sanctions is shown in its Aprill 11, 2011
order where it struck out the sanctions language with the hand-written
notation “under advisement.” Supp. CR __. The trial court also stated in
the August 21, 2013 order, “The prayer of Counterplaintiffs for further
Sanctions in the Motion and the Supplement is neither granted nor denied,
but shall be carried with this case.” CR 3:543.
The trial court signed years worth of orders against the Bank. The
Court should consider the whole record, not simply what the Bank says is
the record. Cuellar, No. 13-14-00491-CV, 2015 Tex. App. LEXIS 2138 *33;
Kutch, 831 S.W.2d at 508. A review of the entire record demonstrates the
trial court followed due process in imposing sanctions through its inherent
power to sanction bad faith conduct.
32
3. The trial court’s June 11, 2014 Order of Sanctions
complied with necessary due process requirements.
While the Bank may argue that the trial court somehow did not
provide a basis for its decision, everything that should be there is there for
the Court to review the sanctions order. Hlavaty and Strnadel take little
issue with the cases the bank cites supporting its general statements
concerning applicable standards but, as is often the case with “abuse of
discretion” determinations, the devil lies in the details of those cases as well
as this case. Take for instance one of the cited cases, Spohn Hosp. v. Mayer,
104 S.W.3d 878 (Tex. 2003) - a case appealed from this Court. The Texas
Supreme Court held that the trial court’s sanctions were excessive.
In Spohn Hosp., the Texas Supreme Court correctly outlined the need
that “[a] just sanction must be directed against the abuse and toward
remedying the prejudice caused to the innocent party, and the sanction
should be visited upon the offender.” Id. at 882. But, as the Court noted,
one could not tell in Spohn Hosp. who the sanctions were against.
“Although the sanctions were generally ‘directed against’ the alleged abuse,
the record contains no evidence that the sanctions were ‘visited on the
offender.’ In fact, neither the trial court nor the court of appeals discusses
whether counsel or their clients were responsible for the discovery abuse.”
Id. at 883-84.
33
Contrast that to the sanctions order in this case. Here, the trial court
states, “The Court has also considered that the recalcitrant behavior has
occurred while (the Bank) has been represented by a succession of different
attorneys of record, indicating that the disrespect for the judicial process is
not a product of poor representation by counsel but of an underlying
attitude on the part of the (the Bank) itself.” CR 4:789. It is the bank who is
expressly ordered to pay the monetary sanctions. CR 4: 789. Consequently,
unlike in Spohn Hosp., we know who the sanctions are directed against -
the Bank (i.e., the party).
Also, the sanctions in Spohn Hosp. were severe - a jury instruction
that certain facts were established. Spohn Hosp., 104 S.W.3d at 881. Unlike
this case, where Hlavarty and Strnadel had pursued numerous motions to
compel, the plaintiffs in Spohn Hosp. went straight for the sanctions
without ever having tried less stringent or severe options. Id. at 880. The
Court detailed alternative sanctions that implictly delineate, if not expressly
state, lesser sanctions that would have been proper. Id. at 883.
Here, unlike in Spohn Hosp., Hlavaty and Strnadel pursued lesser
sanctions first - four prior court orders. Yet, those less sever efforts did not
dissuade the bank’s conduct and achieve the results the trial court intended.
Faced with a recalcitrant litigant, the trial court ordered monetary
sanctions. CR 789. The Spohn Hosp. Court would have seen this as a logical
34
progression as the earlier orders were ineffective against the Bank.
Therefore, the trial court’s June 11, 2013 Order of Sanctions did not violate
due process requirements.
C. Any error regarding the evidence supporting the monetary
award or lack of particularity in the sanctions order is harmless
because the trial court did not obscure its reasoning at the
hearing, and the situation is adequately presented to this Court.
The Bank attacks the sanctions order, arguing, “In this case, the
sanctions order the court entered was void of facts justifying the sanction. .
. . Because sufficient facts showing good cause were not stated in the order,
there is no way to determine whether a direct relationship exists between
the conduct and the sanctions.” Cross-Appellant’s Brief at 19. However, it
would not matter in this case if the order lacked the necessary particularity
as the transcripts of the hearings in this case adequately present the case to
this Court. John Kleas Co. Inc., No. 13-13-00401-CV, 2015 Tex. App. LEXIS
3162 at *36; see TEX. R. APP. P. 44.1(a).
As this Court stated, “In 1989, this Court held that the failure of a
sanctions order to comply with the particularity requirements was harmless
because ‘[t]he trial court did not obscure its reasoning at the hearing, and
the situation has been adequately presented to us.’” Id. (citing to Powers v.
Palacios, 771 S.W.2d 716, 719 (Tex. App.--Corpus Christi 1989, writ
denied)). This Court has before it the transcripts of two hearings: (1) March
35
22, 2013 - RR 2; and (2) May 21, 2014 - RR 3 and 4. The Bank complains
that no evidence of fees was introduced at the May 21, 2014 hearing, but
does not make any reference to the earlier hearing. Cross-Appellant’s Brief
at pages 20-21. The fees were part of the March 22, 2013 hearing:
It should be remembered that the June 11, 2014 Order of Sanctions
awarded Hlavaty $12,113.50, and Strnadel $6,151.00 CR 4:789. Hlavaty and
strnadel’s counsel sent a letter to the trial court on June 6, 2014 about eh
amount of fees in this matter. CR 4:787. In it, their counsel states:
At our last hearing on May 21, 2014, you asked what was the
original attorney's fees demand by Counterplaintiffs made prior
to the non-suit of the Bank's claims against Counterplaintiffs. I
could not remember the exact figure at the time but I have now
looked it up and the amount is as follows: $6,151.00 for Jeff
Strnadel and $12,113.50 for Patrick Hlavaty. These figures were
conveyed in a letter to Donald Zwernemann dated April 14,
2010.
CR 4:787. The letter shows it being faxed to the Bank’s counsel. CR 4:787.
The appellate record does not reflect any response from the bank’s counsel,
and the Bank does not reference any response in its brief. The trial court
signed the Order of Sanctions five days later. CR 4:790. However, this was
not the only word on fees in this matter.
At the March 22, 2013 hearing Howard Singleton, Hlavaty and
Strnadel’s counsel, argued to recover specific costs that had been expended
in this matter relating to representing his clients, including pursuing
36
repeated discovery. RR 2:26-28. He delineated fees and costs expended in
this matter that far exceeded the awarded amounts. For instance he states,
“And releated to my efforts to get the Melanson deposition scheduled on my
- - some of which is documented on my Exodus scroll here. I had - - I had in
excess of 80 hours which would equal $225 an hour at $18,000.” RR 2:27.
He delineates Hlavaty’s prior counsel’s work in this case and states,
“(Hlavaty’s previous counsel) has spent in excess of 48 hours at $300 an
hour which equals $14,400, which also includes at least four different trips
to the 23rd District Court seeking Motions to Compel and/or overcoming
the bank’s objections to producing the items, which still today haven’t been
produced.” RR 2:27-28. Frankly, when adding up the dollar amounts Mr.
Singleton lays out for fees and expenses, the math comes to a total in excess
of $39,000. RR 2:26-28. Yet, the trial court only awarded a total of
$18,264.50. CR 4:789.
The amounts were out there for the trial court. No, Mr. Singleton was
not sworn in as a witness. RR 2:28. But, he threw himself out there as an
officer of the Court. RR 2:28. The Bank’s counsel did not address the
amount of the fees or make any type of objection before or after Mr.
Singleton delineated the amounts. RR 2:1-54.
What happened here is similar to what happened in Powers v.
Palacios, 771 S.W.2d 716 (Tex. App.--Corpus Christi 1989, writ denied). The
37
appellee’s attorney had been awarded $2,500, but had asked for $4,500. Id.
at 719. The Court will recall that the attorney seeking sanctions in that case
was not sworn in. Id. Interestingly, when faced with the question of the
basis of the fee amount, the attorney instead “explained the legal authority
for the sanction” - he did not answer the question asked. Id. Opposing
counsel did not ask any questions or make any objections. Id. This Court
stated, “The trial court was aware of the numerous hearings and pleadings
and the discovery in the case. We find the evidence sufficient to sustain the
$ 2,500 figure.” Id.
The Court looked beyond the sanctions order in determining that the
trial court in Powers had not abused its discretion. Like the trial court in
Powers, when the Court looks beyond the Order of Sanctions it can also see
a trial court was aware of the numerous hearings and pleadings and the
discovery in this case. The trial did not abuse its discretion in only awarding
a total of $18,264.50 as a monetary sanction against a bad faith litigant.
Any error here is harmless. TEX. R. APP. P. 44.1(a). Therefore, the Court
should affirm the trial court’s Order of Sanctions.
38
PRAYER
The trial court improperly dismissed Cross-Appellees’ claims against
Cross-Appellant. However, the trial court properly awarded Cross-
Appellees monetary sanctions against Cross-Appellant. While the Court
should reverse the trial court’s June 3, 2014 Final Order and remand the
matter to the trial court for further proceedings, the Court should affirm the
June 11, 2014 Order of Sanctions against Cross-Appellant. Cross-Appellees
also pray for any further relief to which they may be entitled.
Respectfully submitted,
WALTER JAMES KRONZER, III, P.C.
/s/ Walter James Kronzer, III
Walter James Kronzer, III
State Bar No. 11735001
wkronzer@kronzer.com
3000 Weslayan, Suite 247
Houston, Texas 77027-5753
713-622-5766
713-622-5445 (fax)
wkronzer@kronzer.com (e-mail)
THE SINGLETON LAW FIRM
Howard H. Singleton
State Bar No. 1843620
109 East Milam
Wharton, TX 77488
979-532-9800
979-532-9085 (fax)
singletonlaw@sbcglobal.net (e-mail)
ATTORNEYS FOR CROSS-APPELLEES PATRICK
HLAVATY AND JEFF STRNADEL
39
CERTIFICATE OF COMPLIANCE
Pursuant to TEX. R. APP. P. 9.4, I hereby certify that this Cross-
Appellees Patrick Hlavaty and Jeff Strnadel’ Brief contains 9,042 words.
This is a computer-generated document created in Corel WordPerfect X7,
using 14-point typeface for all text, except for footnotes which are in
12-point typeface. In making this certificate of compliance, I am relying on
the word count provided by the software used to prepare the document.
/s/ Walter James Kronzer, III
Walter James Kronzer, III
CERTIFICATE OF SERVICE
I certify that on April 30, 2015 a copy of Cross-Appellee Patrick
Hlavaty and Jeff Strnadel’s Brief has been served via electronic service
or fax to:
Dawn S. Holiday
Gregg S. Weinberg
Mia B. Lorick
Roberts Markel Weinberg Butler Hailey PC
2800 Post Oak Blvd. 57th Floor
Houston, TX 77056
713-840-9404 (fax)
dholiday@rmwbhlaw.com
gweinberg@rmwbhlaw.com
/s/ Walter James Kronzer, III
Walter James Kronzer, III
40
Exhibit A
April 11, 2011 Order as to Jeff Stranadel’s [sic] Motion
to Compel Error & Omissions Policy (CR Supp __)
Cause No. 44,081
COMMERCIAL STATE BANK § IN THE DISTRICT COURT
OF EL CAMPO, TEXAS, INC., §
Plaintiff/Counter-Defendant, §
§
v. § WHARTON COUNTY, TEXAS .
§
PATRICK HLAVATY, et al., §
Defendants/Counter-Plaintiffs . § 23rct JUDICIAL DISTRICT
ORDER
ON THIS DAY, came on for consideration the Defendant/Counter-Plaintiff's Motion to Compel
Error & Omission Insurance PolicY. and fer other ralisf B:ftd the Co'tll't, ttfter "HaYing re • ie wed tfte,
am;rropriate pleadings on file, evidence contained thareiR, mtd ha..,ing eeRsieered the argmnents ..
o£.cauasel, if any, believes tlaat said motion is meritorious and should ht all thing~ be gramed. It
ORDERED, AJ)U IDGFD aad D~CREBD tftt.tt tfte metieR is gFanted,
ORDERED, ADITTDGED and DECRE@ that Counter-Defendant Commercial State ,
dL- ,..:..,```` ~
Bank produc~ ~e Error & Omission insurance policy(s),within the next 2 weeks. ~
ORDERED, ADUIDGFD