R.M. Dudley Construction Company, Inc. v. Dan Dawson, William W. Dawson, Jr. (Dan Dawson's Dad), Rudy Briner, Steven Clark Hays and James K. Ashlock

IN THE
TENTH COURT OF APPEALS
No. 10-06-00228-CV
R.M. DUDLEY CONSTRUCTION COMPANY, INC.,
Appellant
v.
DAN DAWSON, WILLIAM W. DAWSON, JR.
(DAN DAWSON'S DAD), RUDY BRINER,
STEVEN CLARK HAYS AND JAMES K. ASHLOCK,
Appellees
From the 361st District Court
Brazos County, Texas
Trial Court No. 03-002534-CV-361
OPINION
Carlos Martinez was a concrete supervisor for Appellant R.M. Dudley
Construction Company (Dudley Construction), which is owned by Mark Dudley
(Dudley). Dudley Construction did some work for Appellee Dan Dawson, and
Martinez supervised the concrete crew on that job. Dawson subsequently hired
Martinez to do some more construction work “on the side,” and in doing so, Martinez
used Dudley Construction’s equipment, supplies, and employees who were being paid
by Dudley Construction while doing the work on the side. Martinez was thus able to
charge Dawson significantly less than the going rate for such work.
The other Appellees in this case—William W. Dawson, Jr. (Dan Dawson’s Dad),
Rudy Briner, Steven Clark Hays, and James K. Ashlock—all learned about Martinez’s
discounted, on-the-side construction work from each other and had Martinez do
similarly discounted construction work for them. Dudley learned that Martinez had
done work for the Appellees using Dudley Construction’s equipment, supplies, and
employees, and he filed constitutional and mechanic’s and materialman’s lien affidavits
on the Appellees’ properties where Martinez had done the concrete work on the side.
The Appellees filed a summary motion to remove Dudley Construction’s liens
under section 53.160 of the Property Code, claiming that the liens were invalid because
they were filed on the Appellees’ homestead properties and no written contracts were
executed before the construction work commenced, as required by Property Code
section 53.254.1 See TEX. PROP. CODE ANN. §§ 53.160, 53.254 (Vernon 2007). The
Appellees requested the trial court to remove the liens and to award them their
attorney’s fees under section 53.156. See id. §§ 53.156, 53.160. Dudley Construction
answered, filing a general denial. It also filed a counterclaim entitled “Original
Counterclaim and Suit to Foreclose Lien” and alleging claims for unjust enrichment,
fraud, theft liability act, conversion, conspiracy, tortious interference with contractual
relations, and quantum meruit.
1 What the Appellees term a “lien” was actually Dudley Construction’s “Affidavit Claiming
Constitutional and Mechanic’s and Materialman’s Lien,” all of which included this notice: “Notice: This
is not a Lien. This is only an affidavit claiming a Lien.”
R.M. Dudley Construction Co. v. Dawson Page 2
The trial court issued an order finding that the liens are invalid and should be
removed and instructing the county clerk of Brazos County to file the order to show
that the liens are invalid and are to be removed so as not to be a cloud on the Appellees’
property titles. A hearing on attorney’s fees incurred to have the liens removed took
place, but the trial court deferred ruling on the Appellees’ request for attorney’s fees
until all issues in the case had been determined.
About ten months later, the Appellees answered Dudley Construction’s
counterclaim, asserting a general denial and their own counterclaim in which they
claimed that Dudley Construction’s counterclaim was “groundless in fact or brought in
bad faith or brought for the purpose of harassment.” The Appellees also sought to
recover their attorney’s fees in defending Dudley Construction’s counterclaim.
A jury trial was held, and after Dudley Construction had rested, the trial court
granted the Appellees’ motion for directed verdict on all of Dudley Construction’s
claims except for its conspiracy-to-breach-fiduciary-duty claim against Appellees Dan
Dawson and Rudy Briner. The jury found against Dudley Construction on that claim,
and Dudley Construction thus took nothing on its counterclaim. The trial court did not
submit any jury issues on the Appellees’ remaining claims or on attorney’s fees.
Continuance
We begin with Dudley Construction’s second issue, which asserts that the trial
court erred by denying its first and only motion for continuance. We review a ruling on
a motion for continuance for abuse of discretion. Villegas v. Carter, 711 S.W.2d 624, 626
(Tex. 1986).
R.M. Dudley Construction Co. v. Dawson Page 3
On August 12, 2005, this case was set for jury trial on December 5, 2005, with a
final pretrial on December 2. The “notice of setting” states: “Conflicting settings of
counsel will not be a reasonable ground [for a continuance] unless the conflicting
setting was given prior in time to this notice, . . .” At the December 2 final pretrial, the
trial court sua sponte moved the trial to December 7. On December 6, Dudley
Construction filed a motion for continuance, alleging that its attorney had received
notice on November 30 that two of his clients in another legal proceeding had just been
added to a NASD arbitration that was scheduled to begin on December 6. The trial
court denied the motion, and another attorney from the law firm of Dudley
Construction’s attorney tried the case for Dudley Construction.
In general, absence of counsel is not good cause for a continuance, but the trial
court has the discretion to allow a continuance if good cause is shown. TEX. R. CIV. P.
253; see Rehabilitation Facility at Austin, Inc. v. Cooper, 962 S.W.2d 151, 155 (Tex. App.—
Austin 1998, no pet.) (citing State v. Crank, 666 S.W.2d 91, 94 (Tex. 1984)). The record
does not show the efforts, if any, taken by Dudley Construction’s attorney to have the
conflicting arbitration proceeding reset, nor does it adequately explain the arbitration’s
precedence over the December 5 jury trial setting for which notice was given on August
12. Furthermore, there is no explanation why the motion for continuance was filed after
the pretrial and on the day before trial.
Nothing in the record suggests that the new attorney was incapable of rendering
adequate representation or did not render adequate representation. See Rehabilitation
Facility, 962 S.W.2d at 156 (citing Echols v. Brewer, 524 S.W.2d 731, 734 (Tex. Civ. App.—
R.M. Dudley Construction Co. v. Dawson Page 4
Houston [14th Dist.] 1975, no writ)). Dudley Construction points to the trial court’s
exclusion of some telephone records because they had not been timely produced, but
the record does not reflect that a different ruling would have been made if Dudley
Construction’s original attorney had been present or that the records’ exclusion
prejudiced Dudley Construction.
Based on the circumstances in the record before us, we cannot say that the trial
court abused its discretion. See id. at 155-56 (trial court did not abuse its discretion by
denying continuance on ground that lead counsel for hospital was in trial for another
client in another city where attorney from same law firm represented hospital at trial,
and record did not indicate lead counsel had tried to avoid scheduling conflict or had
demonstrated why other case took precedence over hospital’s case). We overrule
Dudley Construction’s second issue.
Directed Verdict
The trial court directed a verdict and rendered judgment in favor Appellees
William W. Dawson, Jr. (Dan Dawson’s Dad), Hays, and Ashlock on all of Dudley
Construction’s claims (unjust enrichment, fraud, theft liability act, conversion,
conspiracy, tortious interference with contractual relations, and quantum meruit)
against them. It also directed a verdict in favor of Appellees Dan Dawson and Briner on
Dudley Construction’s claims for unjust enrichment, fraud, theft liability act,
conversion, tortious interference with contractual relations, and quantum meruit, but
not on the conspiracy claim. The only claim of Dudley Construction that the trial court
submitted to the jury was its claim for conspiracy to breach fiduciary duty against
R.M. Dudley Construction Co. v. Dawson Page 5
Appellees Dan Dawson and Briner (i.e., that they conspired with Martinez to breach his
fiduciary duty to Dudley Construction), and the jury found against Dudley
Construction on that claim.
Dudley Construction’s third issue complains that the trial court erred by entering
a directed verdict on Dudley Construction’s claims for quantum meruit and unjust
enrichment against all the Appellees. Dudley Construction is not appealing the
directed verdict in favor of Appellees William W. Dawson, Jr. (Dan Dawson’s Dad),
Hays, and Ashlock on its claims for fraud, theft liability act, conversion, conspiracy, and
tortious interference with contractual relations. Dudley Construction is not appealing
the directed verdict in favor of Appellees Dan Dawson and Rudy Briner on its claims
for fraud, theft liability act, conversion, and tortious interference with contractual
relations, nor is it appealing the adverse jury finding on its conspiracy claim against
Appellees Dan Dawson and Briner.
In reviewing the granting of a motion for directed verdict, we follow the
standards for assessing the legal sufficiency of the evidence. City of Keller v. Wilson, 168
S.W.3d 802, 809-28 (Tex. 2005). There is legally insufficient evidence or “no evidence”
of a vital fact when (a) there is a complete absence of evidence of a vital fact; (b) the
court is barred by rules of law or of evidence from giving weight to the only evidence
offered to prove a vital fact; (c) the evidence offered to prove a vital fact is no more than
a mere scintilla; or (d) the evidence conclusively establishes the opposite of the vital
fact. Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997); see also
Prudential Ins. Co. v. Fin. Review Servs., Inc., 29 S.W.3d 74, 77 (Tex. 2000) (directed verdict
R.M. Dudley Construction Co. v. Dawson Page 6
proper only when evidence conclusively establishes right of movant to judgment or
negates right of opponent or evidence is insufficient to raise material fact issue); Cain v.
Pruett, 938 S.W.2d 152, 160 (Tex. App.—Dallas 1996, no writ) (directed verdict proper
when evidence reflects no other verdict can be rendered and moving party is entitled to
judgment as matter of law).
Quantum Meruit
Quantum meruit is an equitable theory of recovery intended to prevent unjust
enrichment when there is an implied agreement to pay for goods or services provided.
In re Kellogg Brown & Root, 166 S.W.3d 732, 740 (Tex. 2005); Vortt Exploration Co. v.
Chevron U.S.A., Inc., 787 S.W.2d 942, 944 (Tex. 1990). “Generally, a party may recover
under quantum meruit only when there is no express contract covering the services or
materials furnished.” Vortt Exploration, 787 S.W.2d at 944. Stated another way, a party
generally cannot recover under quantum meruit when there is a valid contract covering
the services or materials furnished. Murray v. Crest Constr., Inc., 900 S.W.2d 342, 345
(Tex. 1995). In this case, it in undisputed that each of the Appellees had an express oral
contract with Martinez on their respective side jobs with him and that they paid him
under those oral contracts. That precludes recovery under quantum meruit as a matter
of law, and Dudley Construction makes no contrary argument. The trial court did not
err in entering a directed verdict on Dudley Construction’s quantum meruit claims.
Unjust Enrichment
Unjust enrichment, itself, is not an independent cause of action but
rather “characterizes the result of a failure to make restitution of benefits
either wrongfully or passively received under circumstances that give rise
R.M. Dudley Construction Co. v. Dawson Page 7
to an implied or quasi-contractual obligation to repay.” Friberg-Cooper
Water Supply Corp. v. Elledge, 197 S.W.3d 826, 832 (Tex. App.—Fort Worth
2006, pet. filed) (quoting Walker v. Cotter Props., Inc., 181 S.W.3d 895, 900
(Tex. App.—Dallas 2006, no pet.)), [rev’d on other grounds, 240 S.W.3d 869
(Tex. 2007)]; Mowbray v. Avery, 76 S.W.3d 663, 679 (Tex. App.—Corpus
Christi 2002, pet. denied); see Best Buy Co. v. Barrera, 214 S.W.3d 66, 73
(Tex. App.—Corpus Christi 2006, pet. filed), [rev’d on other grounds, ---
S.W.3d ---, 2007 WL 4216615 (Tex. Nov. 30, 2007)]. The doctrine applies
the principles of restitution to disputes where there is no actual contract,
based on the equitable principle that one who receives benefits that would
be unjust for him to retain ought to make restitution. Friberg-Cooper, 197
S.W.3d at 832; Mowbray, 76 S.W.3d at 679. Unjust enrichment is not a
proper remedy “merely because it ‘might appear expedient or generally
fair that some recompense be afforded for an unfortunate loss’ to the
claimant, or because the benefits to the person sought to be charged
amount to a windfall.” Heldenfels Bros. Inc. v. City of Corpus Christi, 832
S.W.2d 39, 42 (Tex. 1992) (quoting Austin v. Duval, 735 S.W.2d 647, 649
(Tex. App.—Austin 1987, writ denied)); Mowbray, 76 S.W.3d at 679. To
recover under an unjust enrichment theory, the benefits to the other party
must be actually unjust under the principles of equity. Mowbray, 76
S.W.3d at 679; Burlington N. R.R. v. Sw. Elec. Power Co., 925 S.W.2d 92, 97
(Tex. App.—Texarkana 1996), aff’d, 966 S.W.2d 467 (Tex. 1998).
Argyle ISD v. Wolf, 234 S.W.3d 229, 246-47 (Tex. App.—Fort Worth 2007, no pet. h.).
Unjust enrichment is also found under circumstances in which one person has
obtained a benefit from another by fraud, duress, or the taking of an undue advantage.
Heldenfels Bros., 832 S.W.2d at 41. In its brief, Dudley Construction points to its
allegations that the Appellees had obtained the benefit of Dudley Construction’s labor
and materials through fraud and taking undue advantage of Dudley Construction in
their transactions with Martinez, which includes the same factual matters as the alleged
conspiracy with him to breach his fiduciary duty to Dudley Construction by diverting
concrete jobs.
As with our disposition of Dudley Construction’s quantum meruit claim, we
R.M. Dudley Construction Co. v. Dawson Page 8
note that on Dudley Construction’s unjust enrichment claim, each of the Appellees had
an express oral contract with Martinez on their respective side jobs and they paid him
under those contracts. Thus, the equitable remedy of unjust enrichment is not
applicable. See Argyle ISD, 234 S.W.3d at 246-47 (unjust enrichment doctrine applies
principles of restitution to disputes where there is no actual contract).
Additionally, the availability of an adequate legal remedy may render equitable
claims like unjust enrichment unavailable. See Best Buy Co. v. Barrera, --- S.W.3d ---, ---
n.1, 2007 WL 4216615, at *1 n.1 (Tex. Nov. 30, 2007) (citing and quoting BMG Direct
Mktg., Inc. v. Peake, 178 S.W.3d 763, 770 (Tex. 2005) (“Like other equitable claims and
defenses, an adequate legal remedy may render equitable claims of unjust enrichment
and equitable defenses of voluntary-payment unavailable.”)). In this case, the trial
court submitted Dudley Construction’s common-law cause of action of conspiracy to
breach fiduciary duty, and the jury found against Dudley Construction. That adequate
legal remedy was available to Dudley Construction in its case against Appellees.
Moreover, the record shows that Dudley Construction had yet another available legal
remedy—a separate lawsuit pending against Martinez for his liability to Dudley
Construction over the same side jobs.
Finally, unjust enrichment based on the Appellees’ alleged fraudulent conduct
was subsumed within, or was a close version in equity of, Dudley Construction’s
conspiracy claim, which was submitted to the jury. Submitting a separate jury question
on unjust enrichment would have been superfluous and confusing. See Hyundai Motor
Co. v. Rodriguez, 995 S.W.2d 661, 665-66 (Tex. 1999) (trial court should not submit
R.M. Dudley Construction Co. v. Dawson Page 9
differently worded questions that call for same factual finding “to avoid confusing the
jury and the possibility of inconsistent findings”); Texas Genco, LP v. Valence Operating
Co., 187 S.W.3d 118, 125 (Tex. App.—Waco 2006, pet. denied). For these reasons, the
trial court did not err in directing a verdict on Dudley Construction’s unjust enrichment
claims. We overrule Dudley Construction’s third issue.
Attorney’s Fees and Sanctions
We now turn to Dudley Construction’s first issue, which complains that the trial
court erred in awarding attorney’s fees to the Appellees as sanctions. As noted above,
after the trial court ordered the removal of the liens, a hearing took place on the
Appellees’ claim for attorney’s fees and costs incurred to have the liens removed. See
TEX. PROP. CODE ANN. § 53.156. The Appellees’ attorney testified to attorney’s fees and
costs in the amount of $7,377.70 at that point in the litigation. The trial court deferred
ruling on the Appellees’ request for attorney’s fees at that time.
After the jury trial on Dudley Construction’s counterclaim, the Appellees filed a
post-trial “motion to assess attorney’s fees.” It first recited the history of their motion to
remove the liens and their request for attorney’s fees in that motion, then it asserted that
Dudley Construction’s conspiracy claim “was groundless, was brought in bad faith and
for the purpose of harassment.” The motion sought recovery of all of the Appellees’
attorney’s fees. After Dudley Construction filed a response complaining that the
Appellees’ motion did not cite any rules or statutes, the Appellees filed an amended
motion that cited section 53.126 [sic] for their request for attorney’s fees to remove the
liens and that cited for their frivolous pleading claim section 53.156 “and/or” Rule of
R.M. Dudley Construction Co. v. Dawson Page 10
Civil Procedure 13 “and/or” chapter 10 of the Civil Practice and Remedies Code.
Because the trial judge recused himself, an assigned judge presided over the
Appellees’ motion to assess attorney’s fees. After a hearing, the assigned judge granted
the motion, and an award of attorney’s fees on the Appellees’ motion was incorporated
in the judgment “based on Section 53.156 of the Property Code, and/or Chapter 10 of
the Civil Practices & Remedies Code, and/or Rule 13, Texas Rules of Civil Procedure.”2
The judgment awarded attorney’s fees as follows: $35,259.93 through entry of
judgment; $12,500 in the event of an unsuccessful appeal; $10,000 in the event of an
unsuccessful petition for review, and $7,500 in the event oral argument is presented on
an unsuccessful petition for review.
The assigned judge issued findings of fact and conclusions of law, and the
judgment closely tracked the language of the findings and conclusions. The
summarized findings or conclusions are:
1. The Appellees filed the case to invalidate the liens wrongfully filed by
Dudley Construction on their homesteads.
2. Dudley Construction’s counterclaim sought to establish and foreclose
liens on the Appellees’ homesteads.
3. The liens were invalid and ordered stricken.
4. The entire case was “of the type” referenced in section 53.156 of the
Property Code.
5. [Actual amounts of attorney’s fees awarded, as noted above].
6. The amounts are both equitable and just.
7. Dudley Construction’s filing liens against the Appellees’ homesteads
2 Trial courts should eschew “and/or” language like that used in the judgment to identify the legal bases
for a sanctions award. For notice purposes and for more efficient appellate review, trial courts should
precisely specify the legal basis for sanctions, rather than providing a “shotgun” or “cover-all-the bases”
approach.
R.M. Dudley Construction Co. v. Dawson Page 11
intended to harass them [as follows:3]
8. Dudley Construction’s filing liens against the Appellees’ homesteads
without written and signed contracts is contrary to Texas law.
9. Dudley Construction’s liens were fraudulent under section 51.901 of the
Government Code.
10. Dudley Construction refused to release the liens after receiving written
demand delivered to it under section 32.49 of the Penal Code.
11. The specific dollar amounts claimed as due in the liens were not
supported by systematically kept records.
12. The specific dollar amounts in a sworn affidavit in the separate case
against Martinez were for substantially different amounts than the
amounts sworn to in the liens.
13. The amounts claimed in a sworn affidavit in the separate case against
Martinez were merely estimates of the amounts that Dudley Construction
would have charged had it done the jobs at issue.
14. As to Appellees Hays, Ashlock, and William W. Dawson (Dan Dawson’s
Dad), no credible evidence was introduced showing that they conspired to
defraud Dudley Construction.
Property Code Section 53.156
Section 53.156 of the Property Code provides: “In any proceeding to foreclose a
lien . . . or in any proceeding to declare that any lien or claim is invalid or unenforceable
in whole or in part, the court may award costs and reasonable attorney’s fees as are
equitable and just.” TEX. PROP. CODE ANN. § 53.156. We review an award of attorney’s
fees under a statute such as section 53.156 for an abuse of discretion. See, e.g., Bocquet v.
Herring, 972 S.W.2d 19, 21 (Tex. 1998); cf. TEX. CIV. PRAC. & REM. CODE ANN. § 37.009
(Vernon 1997) (under Declaratory Judgments Act, trial court may award “reasonable
and necessary attorney’s fees as are equitable and just”). “Whether to award attorney’s
fees, and to which party, is a decision that is solely within the trial court’s discretion
and will not be reversed absent a clear abuse of that discretion.” Sammons v. Elder, 940
3 In the judgment, the assigned judge identified findings 8 to 14 as evidence of Dudley Construction’s
intent to harass.
R.M. Dudley Construction Co. v. Dawson Page 12
S.W.2d 276, 284 (Tex. App.—Waco 1997, writ denied).
The determination of whether a trial court abused its discretion is a question of
law. Jackson v. Van Winkle, 660 S.W.2d 807, 810 (Tex. 1983), overruled in part on other
grounds by Moritz v. Preiss, 121 S.W.3d 715, 721 (Tex. 2003). A trial court abuses its
discretion when it acts arbitrarily and unreasonably, without reference to guiding rules
or principles, or when it misapplies the law to the established facts of the case.
Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223, 226 (Tex. 1991). “A trial court has no
discretion to determine what the law is or in applying the law to the facts and,
consequently, the trial court’s failure to analyze or apply the law correctly is an abuse of
discretion.” In re American Homestar of Lancaster, Inc., 50 S.W.3d 480, 483 (Tex. 2001).
Dudley Construction asserts that the assigned judge abused his discretion in
awarding attorney’s fees and costs under section 53.156 for fees and costs incurred after
the trial court found the liens invalid and ordered them stricken on March 10, 2004. We
agree. On March 24, 2004, the trial court held a hearing on the Appellees’ request for
attorney’s fees and costs under section 53.156, and the Appellees’ attorney testified to
attorney’s fees and costs in the amount of $7,377.70. In its brief, Dudley Construction
does not dispute that the “Appellees were entitled to reasonable attorney’s fees in their
efforts to remove the liens on their respective properties.” (Appellant’s Brief at 21).
Dudley Construction argues that once the trial court found the liens invalid and
ordered them stricken in the Appellees’ section 53.160 summary-motion proceeding, no
proceeding to foreclose on a lien or to declare a lien invalid was pending and the
R.M. Dudley Construction Co. v. Dawson Page 13
Appellees could not recover attorney’s fees under section 53.156 in defending Dudley
Construction’s common-law and equitable counterclaims. We agree, as did the trial
court before recusal occurred: At a January 23, 2006 hearing on the Appellees’ motion
for attorney’s fees, the trial court stated that, upon the liens being held unenforceable,
“The way I view it at that point in time, I basically took it [the lien issue in the case] out
of the Property Code. . . .”
The Appellees argued then and argue now that because Dudley Construction left
language seeking to establish liens on the Appellees’ properties in its counterclaim, the
lien issue remained in the case. The trial court did not necessarily agree with the
Appellees, but the assigned judge apparently did with his conclusion that the entire
case was “of the type” referenced in section 53.156 of the Property Code. The language
in Dudley Construction’s pleading was an alternative request for the imposition of and
foreclosure on a judicial equitable lien and a constructive trust to enable Dudley
Construction to recover damages. That pleading language, however, even if construed
as a “proceeding to foreclose a lien” as required by section 53.156, does not fall within
the ambit of section 53.156 because judicial or equitable liens are not governed by Title
5, Subtitle B of the Property Code, which section 53.156 is a part of. See TEX. PROP. CODE
ANN. § 51.001(2) (Vernon 2007) (“this subtitle does not affect . . . a lien that is not treated
in this subtitle, include a lien arising under common law, in equity”).
In conclusion, because the trial court ruled that Dudley Construction’s liens were
invalid and ordered them stricken, thus taking them out of the case, and because the
request for the imposition of and foreclosure on a judicial equitable lien is not governed
R.M. Dudley Construction Co. v. Dawson Page 14
by section 53.156, the assigned judge abused his discretion by misapplying the law in
his conclusion that the entire proceeding was of the type referenced in section 53.156.
We hold that the Appellees cannot recover attorney’s fees and costs under section
53.156 for the litigation that continued after the trial court’s March 10, 2004 order
declaring the liens invalid and ordering their removal. But because the trial court held
a hearing and received evidence of attorney’s fees and costs at the conclusion of the
section 53.160 summary-motion proceeding, we hold that the Appellees are entitled to
recover attorney’s fees and costs in the amount of $7,377.70 under section 53.156.
Rule 13 Sanctions
Imposing Rule 13 sanctions is within the trial court’s sound discretion. Monroe v.
Grider, 884 S.W.2d 811, 816 (Tex. App.—Dallas 1994, writ denied). Accordingly, we
review a trial court’s order for Rule 13 sanctions under an abuse of discretion standard.
Cire v. Cummings, 134 S.W.3d 835, 838 (Tex. 2004).
Rule 13 authorizes a trial court to impose sanctions against an attorney, a
represented party, or both, who file a groundless pleading brought in bad faith or
brought for the purpose of harassment. TEX. R. CIV. P. 13. “The imposition of Rule 13
sanctions involves the satisfaction of a two-part test. First, the party moving for
sanctions must demonstrate that the opposing party’s filings are groundless, and
second, it must be shown that the pleadings were filed either in bad faith or for the
purposes of harassment.” Estate of Davis v. Cook, 9 S.W.3d 288, 297 (Tex. App.—San
Antonio 1999, no pet.).
Rule 13 directs a trial court to presume that a pleading was filed in good faith.
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TEX. R. CIV. P. 13; GTE Comm. Sys. v. Tanner, 856 S.W.2d 725, 731 (Tex. 1993). “Thus, the
burden is on the party moving for sanctions to overcome this presumption.” Tanner,
856 S.W.2d at 731. A groundless pleading is not sanctionable unless it also was brought
in bad faith or for the purpose of harassment. Id.
Rule 13 also provides: “No sanctions under this rule may be imposed except for
good cause, the particulars of which must be stated in the sanction order.” TEX. R. CIV.
P. 13; see Appleton v. Appleton, 76 S.W.3d 78, 86 (Tex. App.—Houston [14th Dist.] 2002,
no pet.) (“the trial court is required to make particularized findings of good cause
justifying the sanctions”). In reviewing an award of sanctions, we ordinarily look to the
particulars of good cause set out in the sanction order. Woodward v. Jaster, 933 S.W.2d
777, 782 (Tex. App.—Austin 1996, no writ).
Dudley Construction asserts that because the assigned judge did not make a
specific finding that Dudley Construction’s counterclaims were groundless, the
assigned judge abused his discretion in imposing sanctions under Rule 13. We partially
agree. In setting out its good cause findings with particularity, the trial court must find
the pleading groundless as part of the two-part test. See Tanner, 856 S.W.2d 731 (to be
sanctionable, pleading must be groundless and also brought in bad faith or for the
purpose of harassment); Estate of Davis, 9 S.W.3d at 297 (“First, the party moving for
sanctions must demonstrate that the opposing party’s filings are groundless, . . . ”);
Karlock v. Schattman, 894 S.W.2d 517, 522 (Tex. App.—Fort Worth 1994, orig.
proceeding) (“The trial court must find that the pleadings are in fact groundless and
brought in bad faith or to harass.”); McCain v. NME Hosps., Inc., 856 S.W.2d 751, 757
R.M. Dudley Construction Co. v. Dawson Page 16
(Tex. App.—Dallas 1993, no writ) (“The trial court must find that the pleadings are in
fact groundless and were brought in bad faith or to harass.”).
In their amended motion to assess attorney’s fees, the Appellees identified
Dudley Construction’s conspiracy claim as the pleading in question, and in his findings
and conclusions, the assigned judge found or concluded: “As to Steven Clark Hays,
James K. Ashlock, and William W. Dawson (Dan Dawson’s Dad), no credible evidence
was introduced showing that they conspired to defraud R. M. Dudley Construction
Company, Inc.” It is therefore clear that, if the assigned judge found a claim groundless
and sanctionable under Rule 13, it was Dudley Construction’s conspiracy claim. We
will therefore apply Rule 13’s groundlessness test to the pleading of that claim.
Rule 13 defines “groundless” as having “no basis in law or fact and not
warranted by good faith argument for the extension, modification, or reversal of
existing law.” Id. 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. Alejandro v. Bell, 84 S.W.3d 383, 392 (Tex. App.—Corpus
Christi 2002, no pet.). The trial court uses an objective standard to determine if a
pleading was groundless: did the party and counsel make a reasonable inquiry into the
legal and factual basis of the claim? In re United Servs. Auto Ass’n, 76 S.W.3d 112, 115
(Tex. App.—San Antonio 2002, orig. proceeding).
Because of the assigned judge’s finding or conclusion that Dudley Construction
did not introduce any credible evidence that Hays, Ashlock, and William W. Dawson
(Dan Dawson’s Dad) conspired to defraud Dudley Construction, we know that the
R.M. Dudley Construction Co. v. Dawson Page 17
assigned judge plainly did not apply Rule 13’s groundlessness test.4 This
misapplication of the law is an abuse of discretion. See In re American Homestar, 50
S.W.3d at 483 (“trial court’s failure to analyze or apply the law correctly is an abuse of
discretion”). Without a proper groundlessness finding under Rule 13, the Appellees
cannot recover attorney’s fees as sanctions under Rule 13, and any recovery under Rule
13 would be an abuse of discretion.
Civil Practice and Remedies Code Chapter 10 Sanctions
Sanctions can be ordered for a violation of section 10.001. TEX. CIV. PRAC. & REM.
CODE ANN. § 10.002(a) (Vernon 2002). The assigned judge’s findings and the judgment
reflect that sanctions were ordered under sections 10.001(1) and 10.001(3). Under
section 10.001, signing a pleading or motion 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;
...
(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.
Id. § 10.001(1), (3) (emphases added).
Sanctions under chapter 10 are reviewed for abuse of discretion. Low v. Henry,
221 S.W.3d 609, 614 (Tex. 2007). Rule 13 directs a trial court to presume that a pleading
4 In response to the motion to assess attorney’s fees, Dudley Construction filed Mark Dudley’s affidavit
detailing his factual investigation that formed the basis of Dudley Construction’s claims.
R.M. Dudley Construction Co. v. Dawson Page 18
was filed in good faith. TEX. R. CIV. P. 13; Tanner, 856 S.W.2d at 731. “Thus, the burden
is on the party moving for sanctions to overcome this presumption.” Tanner, 856
S.W.2d at 731. The Appellees, as the movants for sanctions, had the burden of proving
violations of sections 10.001(1) and 10.001(3).
Chapter 10, by its own terms, is limited to frivolous pleadings and motions:
“The signing of a pleading or motion . . . .” TEX. CIV. PRAC. & REM. CODE ANN. § 10.001;
see Low, 221 S.W.3d at 614. The affidavits claiming liens that Dudley Construction filed
with the county clerk of Brazos County are not pleadings or motions.
It is unclear whether the assigned judge imposed sanctions for a violation of
section 10.001(1) with respect to Dudley Construction’s counterclaim to establish and
foreclose on the liens, or with respect to Dudley Construction’s filing of affidavits
claiming liens. The findings and conclusions refer to the counterclaim and then to the
liens, and the judgment’s principal references to the liens are to highlight how they
played a role in Dudley Construction’s intent to harass the Appellees. The findings and
the judgment do not expressly find or conclude that Dudley Construction’s
counterclaim was intended to harass the Appellees. To the contrary, the judgment, after
reciting the case’s procedural history, “concludes and finds that R.M. Dudley
Construction Company, Inc. intended to harass the Plaintiffs/Counter-Defendants for
any one of the following reasons: . . .” Those following reasons are Findings 8 to 14, set
forth above. Therefore, to the extent that the assigned judge’s findings and judgment
assessed chapter 10 sanctions for the filing of the lien affidavits because their filing by
Dudley Construction was intended to harass the Appellees, in violation of section
R.M. Dudley Construction Co. v. Dawson Page 19
10.001(1), the assigned judge abused his discretion by not correctly applying the law.
Regardless, if Dudley Construction’s counterclaim was the offending pleading,
sanctions under section 10.001(1) fail for another reason. A trial court must hold an
evidentiary hearing to make the necessary factual determinations about the party’s or
attorney’s motives and credibility. Alejandro v. Robstown ISD, 131 S.W.3d 663, 670 (Tex.
App.—Corpus Christi 2004, no pet.); see, e.g., Low, 221 S.W.3d at 613, 617 (referring to
trial court’s evidentiary hearing on motion for chapter 10 sanctions); Trantham v. Isaacks,
218 S.W.3d 750, 752, 755-56 (Tex. App.—Fort Worth 2007, pet. denied) (same), cert.
denied, 128 S. Ct. 340 (2007); Law Offices of Windle Turley, P.C. v. French, 164 S.W.3d 487,
491-92 (Tex. App.—Dallas 2005, no pet.) (same). Without such an evidentiary hearing,
the trial court has no evidence before it to determine that a pleading was filed in bad
faith or to harass. Robstown ISD, 131 S.W.3d at 670; Karlock, 894 S.W.2d at 523. The
party moving for sanctions must prove the pleading party’s subjective state of mind.
Brozynski v. Kerney, 2006 WL 2160841, at *4 (Tex. App.—Waco Aug. 2, 2006, pet. denied)
(citing Mattly v. Spiegel, Inc., 19 S.W.3d 890, 896 (Tex. App.—Houston [14th Dist.] 2002,
no pet.)). In the case of section 10.001(1), the movant must show, and the court must
describe and explain, that the pleading was filed for the improper purpose of
harassment. See TEX. CIV. PRAC. & REM. CODE ANN. § 10.001(1); id. § 10.005 (“A court
shall describe in an order imposing a sanction under this chapter the conduct the court
has determined violated Section 10.001 and explain the basis for the sanction
imposed.”).
Evidence must be admitted under the rules of evidence at the evidentiary
R.M. Dudley Construction Co. v. Dawson Page 20
hearing for a trial court to consider it in a sanctions context. Bell, 84 S.W.3d at 393; see
McCain, 856 S.W.2d at 757 (motions and arguments of counsel are not evidence in a
sanctions hearing context). The pleading alone cannot establish that the represented
party or its attorney brought their case in bad faith or to harass. McCain, 856 S.W.2d at
757.
At the hearing on the Appellees’ motion to assess attorney’s fees as sanctions, the
Appellees requested that the assigned judge take judicial notice of the file and include
the evidence from the jury trial as a part of the record of the hearing. The assigned
judge, however, presided over only this one hearing, and the only evidence filed for the
Appellees’ motion was Dudley’s affidavit that detailed his pre-suit investigation.
In some circumstances, a trial court may take judicial notice of the case file for
purposes of ruling on a sanctions motion. Elkins v. Stotts-Brown, 103 S.W.3d 664, 667
(Tex. App.—Dallas 2003, no pet.) (citing Tex.-Ohio Gas, Inc. v. Mecom, 28 S.W.3d 129, 139
(Tex. App.—Texarkana 2000, no pet.) (noting that, under some circumstances, trial court
may be able to make determination regarding motives and credibility of person signing
petition by taking judicial notice of items in case file)); see also Walston v. Lockhart, 2005
WL 428433, at *3 (Tex. App.—Waco Feb. 23, 2005, pet. denied); cf. Emmons v. Purser, 973
S.W.2d 696, 701 (Tex. App.—Austin 1998, no pet.) (reversing sanctions order and noting
that parties were present at hearing but weren’t called to testify, and although court
took judicial notice of case file, nothing in case file proved bad faith or harassment). But
this case is not a circumstance where the assigned judge could take judicial notice of the
case file and include the trial evidence—which the assigned judge heard none of—as a
R.M. Dudley Construction Co. v. Dawson Page 21
part of the evidentiary record on the Appellees’ motion for attorney’s fees as sanctions.
Except for Dudley’s uncontroverted affidavit,5 the assigned judge had no
evidence before him to determine Dudley’s motives and credibility in filing Dudley
Construction’s counterclaim. With no evidence that Dudley Construction’s
counterclaim was filed to harass the Appellees, the assigned judge’s award of attorney’s
fees as sanctions under section 10.001(1) is an abuse of discretion.
The only other finding that could support the imposition of chapter 10 sanctions
is Finding 14, which states that, as to Appellees Hays, Ashlock, and William W. Dawson
(Dan Dawson’s Dad), “no credible evidence was introduced showing that they
conspired to defraud” Dudley Construction. The applicable standard in section
10.001(3) is that, to the signatory’s best knowledge, information, and belief, formed after
reasonable inquiry, each allegation or other factual contention in a pleading 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. TEX. CIV. PRAC. & REM. CODE ANN. § 10.001(3). Case law
under Rule 13 is instructive in interpreting section 10.001(3). Griffin Indus. v. Grimes,
2003 WL 1911993, at *4-6 (Tex. App.—San Antonio April 23, 2003, no pet.).
In determining whether a party conducted a reasonable inquiry, the facts and
evidence available to the party and the circumstances existing when the party filed the
pleading must be examined. See Estate of Davis, 9 S.W.3d at 297; Karagounis v. Property
5 Dudley’s affidavit details his thorough pre-suit investigation and includes alleged admissions of
wrongdoing by all five Appellees, three of whom allegedly admitted wrongdoing to Dudley. Dudley’s
affidavit contains no evidence of an intent to harass.
R.M. Dudley Construction Co. v. Dawson Page 22
Co. of Am., 970 S.W.2d 761, 764 (Tex. App.—Amarillo 1998, pet. denied) (“the
circumstances pivotal to the determination of whether sanctions should issue are those
in existence at the time the pleading in question was signed and filed”); see, e.g., Low,
221 S.W.3d at 616-17 (court evaluated attorney’s inquiry and knowledge as of time of
lawsuit’s filing). Sanctions for frivolous or groundless pleadings do not apply to the
pursuit of an action later determined to be groundless after pleadings were filed.
Overman v. Baker, 26 S.W.3d 506, 509 (Tex. App.—Tyler 2000, no pet.); Karagounis, 970
S.W.2d at 764 (Rule 13 “says nothing about levying sanctions if one pursues an action or
pleading thought legitimate when filed but subsequently found baseless”).
On Dudley Construction’s conspiracy claim against Appellees Hays, Ashlock,
and William W. Dawson (Dan Dawson’s Dad), the assigned judge’s finding fails to
apply section 10.001(3)’s standard, and it also does not provide the proper temporal link
to the offending pleading. Therefore, any sanction under section 10.001(3) is an abuse
of discretion.
We sustain Dudley Construction’s first issue in part and overrule it in part. To
the extent the assigned judge sanctioned Dudley Construction under Rule 13 or chapter
10 or awarded attorney’s fees under section 53.156 for the litigation that continued after
the trial court’s March 10, 2004 order declaring the liens invalid and ordering their
removal, he abused his discretion. And because this appeal is part of the litigation that
continued after March 10, 2004 and Dudley Construction has not appealed the trial
court’s order finding the liens invalid and ordering their removal, the Appellees cannot
recover additional attorney’s fees for this appeal under section 53.156.
R.M. Dudley Construction Co. v. Dawson Page 23
The Appellees are only entitled to recover attorney’s fees and costs in the amount
of $7,377.70 under section 53.156, and we modify the judgment to provide that the
Appellees shall recover that sum from Dudley Construction.
Conclusion
We modify the judgment to find that the Appellees shall recover from Dudley
Construction $7,377.70 as attorney’s fees and court costs. As modified, the judgment is
affirmed.
BILL VANCE
Justice
Before Chief Justice Gray,
Justice Vance, and
Justice Reyna
(Chief Justice Gray dissents. A separate opinion will not issue.)
Affirmed as modified
Opinion delivered and filed May 28, 2008
[CV06]
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