Masoud Kahrobaie, Ebrahim Kahrobaie, and Joseph Kahrobaie A/K/A Yusef Kahrobee v. Wilshire State Bank

AFFIRMED; Opinion Filed October 30, 2014.
S
Court of Appeals
In The
Fifth District of Texas at Dallas
No. 05-13-01233-CV
MASOUD KAHROBAIE, EBRAHIM KAHROBAIE, AND JOSEPH KAHROBAIE
A/K/A YUSEF KAHROBEE, Appellants
V.
WILSHIRE STATE BANK, Appellee
On Appeal from the County Court at Law No. 4
Dallas County, Texas
Trial Court Cause No. CC-11-07903-D
MEMORANDUM OPINION
Before Justices Francis and Myers 1
Opinion by Justice Myers
Appellants Masoud Kahrobaie, Ebrahim Kahrobaie, and Joseph Kahrobaie, a/k/a Yusef
Kahrobee, appeal an order denying their motion to set aside and motion for new trial on appellee
Wilshire State Bank’s no-evidence summary judgment. In two issues, appellants contend (1) the
trial court erred by denying appellants’ motion to set aside the order granting no-evidence
summary judgment and for new trial on the basis that there was no meritorious defense, and (2)
the trial court abused its discretion by denying appellants’ motion for new trial that was based on
newly discovered evidence. We affirm.
1
Justice David Lewis was a member of the panel and participated in the submission of this case, but he did not
participate in the issuance of the opinion. See TEX. R. APP. P. 41.1(b).
BACKGROUND AND PROCEDURAL HISTORY
This breach of contract lawsuit was originally brought by appellee, Wilshire, for
collection of a deficiency on a promissory note following a foreclosure sale. Appellants signed
guarantee agreements along with the promissory note. The documents were executed in July of
2007. The promissory note was payable to appellee in the amount of $3,375,000, and the loan
proceeds were used by appellants to purchase a hotel located on Camp Wisdom road in
Duncanville, Texas (the “hotel”). The loan was secured by a first lien mortgage to appellee.
Appellants made payments to appellee on the note. However, in December of 2010 a fire
occurred at the hotel and part of the property was damaged. The hotel continued to operate in a
diminished capacity, but appellants were unable to make the monthly mortgage payments, and
appellee ultimately foreclosed on the hotel. Appellee hired Pyles Whatley Corporation to
prepare an appraisal report for the purpose of selling the hotel at a foreclosure sale. The
restricted appraisal report, sent to appellee in January of 2012, concluded that forty guest rooms
of the 123 room hotel remained available as rented rooms, and that the property had an “as is”
market value of $500,000. The hotel sold at a foreclosure sale in Dallas County, Texas on May
1, 2012, for $550,000.
Appellee filed its breach of contract suit against appellants on November 15, 2011.
Appellants answered, after which they counterclaimed against appellee for fraud, fraud by
nondisclosure, and statutory fraud. On May 8, 2013, appellee filed a no-evidence motion for
summary judgment. Appellants did not respond to the motion. On June 3, 2013, the trial court
signed a final judgment ordering that appellants were jointly and severally liable to appellee in
the amount of $2,982,758.49, together with interest, attorneys’ fees, and court costs. The trial
court also ordered that appellants take nothing from appellee. In their June 3, 2013 motion to set
aside the order granting appellee’s no-evidence motion for summary judgment and motion for
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new trial, appellants’ counsel argued he was unaware the no-evidence motion for summary
judgment had been filed and set for a hearing. The motion to set aside was heard on July 8,
2013. After the hearing, the trial court signed an order denying the motion to set aside on July
10, 2013. This appeal followed.
DISCUSSION
Craddock Factors
Appellants frame their first issue as follows:
Did the trial court err when it denied Appellants’ Motion for New Trial, on the
reasoning that there was no meritorious defense of fraud by nondisclosure in a
foreclosure sale, when the evidence presented demonstrated that Appellees made
false and/or misleading statements to potential bidders orally and in an appraisal
report, with the knowledge that the potential bidders would relay that information
to Appellants?
We review a trial court’s denial of a motion for new trial following a post-answer default
for an abuse of discretion. In re R.R., 209 S.W.3d 112, 114–15 (Tex. 2006); Dir. State Emps.
Workers’ Comp. Div. v. Evans, 889 S.W.2d 266, 268 (Tex. 1994). A default judgment should be
set aside and a new trial granted if (1) the failure to answer or appear was not intentional or the
result of conscious indifference but was due to a mistake or accident; (2) the defendant sets up a
meritorious defense; and (3) the motion is filed at such time that granting a new trial would not
result in delay or otherwise injure the plaintiff. See Cliff v. Huggins, 724 S.W.2d 778, 779 (Tex.
1987) (citing Craddock v. Sunshine Bus Lines, 134 Tex. 388, 133 S.W.2d 124, 126 (1939)).
When applied to the summary judgment context, various Texas courts, including this Court,
require the party seeking a new trial to show, regarding the second prong of the test, factual
proof that raises a material question of fact. See, e.g., Costello v. Johnson, 680 S.W.2d 529, 531
(Tex. App.––Dallas 1984, writ ref. n.r.e.); Washington v. McMillan, 898 S.W.2d 392, 395 (Tex.
App.––San Antonio 1995, no writ). The defaulting defendant has the burden of proving that all
three elements of the Craddock test are met before a trial court is required to grant a motion for
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new trial. Utz v. McKenzie, 397 S.W.3d 273, 278 (Tex. App.––Dallas March 1, 2013, no pet.);
Scenic Mountain Med. Ctr. v. Castillo, 162 S.W.3d 587, 590 (Tex. App.––El Paso 2005, no pet.).
If the defendant fails to meet any one of the three requirements, the trial court does not abuse its
discretion by denying a new trial. See Continental Carbon Co. v. Sea–Land Serv., Inc., 27
S.W.3d 184, 191 (Tex. App.––Dallas 2000, pet. denied); 4180 Belt Line, Ltd. v. Lone Star Valet
Parking Servs., Inc., No. 05–10–00943–CV, 2012 WL 602922, at *1 (Tex. App.––Dallas Feb.
24, 2012, no pet.) (mem op., not designated for publication).
Appellants’ issue stresses the second element of the Craddock test––whether they set up
a meritorious defense. Appellants do not discuss the third element except to argue it is not at
issue, and as support they point to the hearing on their motion to set aside, where, according to
appellants, the representations of the trial court during the hearing showed that the only issue
preventing the granting of the motion for new trial was whether appellants presented a
meritorious defense. We have reviewed the reporter’s record of the July 2013 hearing, and what
it shows is that the trial court focused most, if not all, of its attention on the second Craddock
element. The third element was barely mentioned, much less discussed, and at no point during
the hearing did the trial court indicate that the third element had been established, nor did
appellee’s trial counsel concede the issue. Furthermore, the trial court’s order denying the
motion to set aside and motion for new trial did not specify a basis for the court’s ruling.
The purpose of the third element of the Craddock test “is to protect a plaintiff against the
sort of undue delay or injury that would result in a disadvantage when presenting the merits of
the case at a new trial, ‘such as the loss of witnesses or other valuable evidence.’” Dolgencorp
of Tex., Inc. v. Lerma, 288 S.W.3d 922, 925 (Tex. 2009) (quoting Evans, 889 S.W.2d at 270);
L’Arte De La Mode, Inc. v. Neiman Marcus Group, 395 S.W.3d 291, 297 (Tex. App.—Dallas
2013, no pet.). The general rule is that once a defendant alleges that the granting of a new trial
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will not injure the plaintiff, the burden shifts to the plaintiff to establish proof of injury. Evans,
889 S.W.2d at 270; L’Arte De La Mode, 395 S.W.3d at 297; Hampton-Vaughan Funeral Home
v. Briscoe, 327 S.W.3d 743, 749 (Tex. App.—Fort Worth 2010, no pet.). But “[a]n equitable
principle is involved and courts should deal with the facts on a case by case basis in order to do
equity.” Evans, 889 S.W.2d at 270; see Hornell Brewing Co., Inc. v. Lara, 252 S.W.3d 426, 428
(Tex. App.—Houston [14th Dist.] 2008, no pet.); Hahn v. Whiting Petroleum Corp., 171 S.W.3d
307, 311 (Tex. App.—Corpus Christi 2005, no pet.). The fact that a defendant offered to
reimburse the plaintiff for costs associated with the default judgment and stated it is prepared for
an immediate trial are two important factors to consider in making such a case-by-case
determination. See Evans, 889 S.W.2d at 270 n.3; Cliff, 724 S.W.2d at 779; Jaco v. Rivera, 278
S.W.3d 867, 873–74 (Tex. App.—Houston [14th Dist.] 2008, no pet.); Hornell, 252 S.W.3d at
428; Titan Indem. Co. v. Old South Ins. Group, Inc., 221 S.W.3d 703, 712 (Tex. App.––San
Antonio 2006, no pet.); Hahn, 171 S.W.3d at 311.
In this case, appellants’ motion alleged that “the granting of a new trial will not occasion
delay or injure Wilshire, as the discovery deadline has not yet passed.” There was, however, no
such statement in the supporting affidavit from appellants’ trial counsel, which explained that his
failure to appear at the hearing on appellee’s no-evidence motion for summary judgment was due
to a mistake on his part and not the result of conscious indifference. Neither the motion nor the
affidavit alleged that appellants were ready, willing, or able to go immediately to trial, nor did
they offer to reimburse appellee for the expenses incurred in obtaining summary judgment. As
the Texas Supreme Court has stated, conclusory allegations are insufficient to establish the
Craddock factors. See Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 82 (Tex. 1992). And
appellants were required to prove all three elements of the Craddock test to show that the trial
court abused its discretion. See Utz, 397 S.W.3d at 278. Given the record in this case, we cannot
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say the trial court abused its discretion. We overrule appellants’ first issue.
Newly Discovered Evidence
In their second issue, appellants contend the trial court abused its discretion by denying
the motion for new trial “based on ‘good cause’ or ‘justice’ grounds, when newly discovered
evidence demonstrated that there was a potential claim for conversion against Appellee.”
Rule 320 of the Texas Rules of Civil Procedure provides, in part, that “[n]ew trials may
be granted and judgment set aside for good cause, on motion or on the court’s own motion on
such terms as the court shall direct.” TEX. R. CIV. P. 320. When a party moves for a new trial
based upon the existence of newly discovered evidence, that party has the burden of showing:
(1) the evidence has come to light since trial; (2) it is not due to lack of diligence that it was not
produced sooner; (3) the new evidence is not cumulative; and (4) the new evidence is so material
that it would probably produce a different result if a new trial were granted. Waffle House, Inc.
v. Williams, 313 S.W.3d 796, 813 (Tex. 2010); Chapman v. Abbot, 251 S.W.3d 612, 620 (Tex.
App.––Houston [1st Dist.] 2007, no pet.); see also Armendariz v. Redcats, USA, L.P., 390
S.W.3d 463, 471 (Tex. App.––El Paso 2012, no pet.). Whether a motion for new trial based on
newly discovered evidence will be granted or refused generally is a matter left to the sound
discretion of the trial court. Jackson v. Van Winkle, 660 S.W.2d 807, 809 (Tex. 1983), overruled
in part on other grounds by Moritz v. Preiss, 121 S.W.3d 715 (Tex. 2003). Accordingly, we
review the trial court’s failure to grant a motion for new trial for an abuse of discretion and
indulge every reasonable presumption in favor of upholding the order. Id. at 809–10.
In their motion to set aside and motion for new trial, appellants stated that “new evidence
of misconduct on the part of Wilshire Bank has been recently discovered by interviewing and
speaking to various individuals who had attempted to purchase the note on the hotel prior to the
foreclosure by Wilshire Bank.” Appellants alleged that their newly discovered evidence “will
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show there are individuals who engaged in extensive negotiations with Wilshire prior to the
foreclosure of the Hotel,” and that appellants “believe the evidence will show that Wilshire
rejected the offer of approximately $1,000,000” for the purchase of the hotel in order to sell it for
the much lower value of $550,000. Appellants supported their motion with affidavits from two
acquaintances of appellants who were allegedly interested in purchasing the hotel after appellee
foreclosed on it––Fred Bahari and Don (Giddon) Barad. Their affidavits stated that appellee
represented to Barad, a liaison for Bahari, that the value of the hotel after the December 2010 fire
“was more than $1,000,000.” The affidavits also alleged that appellee refused to sell Barad and
Bahari the promissory note because of their acquaintance with appellants, believing appellants
were the ones attempting to purchase the note.
Appellants’ motion for new trial simply does not meet the requirements for a new trial
based on newly discovered evidence. The affidavits from Bahari and Barad do not demonstrate
that the evidence was “newly” discovered or that the failure to discover it sooner should be
excused. See Waffle House, 313 S.W.3d at 813. In fact, appellants acknowledge that they were
personally acquainted with Barad and Bahari, yet they made no effort to show why the evidence
regarding appellee’s alleged valuation of the Hotel at over $1,000,000, or its alleged refusal to
sell the note to Barad and Bahari, could not have been discovered sooner with the exercise of due
diligence. The trial court noted this deficiency when it overruled the motion to set aside, telling
appellants’ trial counsel that Barad and Bahari were “friends of your clients” and
“that these gentlemen all know each other,” but there was no explanation as to why appellants
“couldn’t have discovered all of this information prior to June 7th, 2013, when these men signed
these affidavits.” Nor did the motion show the new evidence was so material that it would
probably produce a different result were a new trial granted. See id. The trial court therefore
could have reasonably concluded appellants did not demonstrate grounds for a new trial based on
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newly discovered evidence. We overrule appellants’ second issue.
The trial court’s judgment is affirmed.
131233F.P05
/ Lana Myers/
LANA MYERS
JUSTICE
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S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
MASOUD KAHROBAIE, EBRAHIM On Appeal from the County Court at Law
KAHROBAIE, AND JOSEPH No. 4, Dallas County, Texas
KAHROBAIE A/K/A YUSEF Trial Court Cause No. CC-11-07903-D.
KAHROBEE, Appellant Opinion delivered by Justice Myers.
Justice Francis participating.
No. 05-13-01233-CV V.
WILSHIRE STATE BANK, Appellee
In accordance with this Court’s opinion of this date, the judgment of the trial court is
AFFIRMED. It is ORDERED that appellee WILSHIRE STATE BANK recover its costs of
this appeal from appellants MASOUD KAHROBAIE, EBRAHIM KAHROBAIE, AND
JOSEPH KAHROBAIE A/K/A YUSEF KAHROBEE.
Judgment entered this 30th day of October, 2014.
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