D & R Constructors, Inc., Michael Rushing, Stephanie Rushing, Penn Rushing and Florence Rushing v. Texas Gulf Energy, Inc., CS Bankers V, LLC, Texas Gulf Fabricators, LLC, Timothy Connolly, Brian G. Hendry, and Lester H. Smith ( 2015 )

ACCEPTED
01-15-00604-cv
FIRST COURT OF APPEALS
HOUSTON, TEXAS
10/5/2015 5:43:39 PM
CHRISTOPHER PRINE
CLERK
NO. 01-15-00604-CV
__________________________________________________
In the FILED IN
1st COURT OF APPEALS
FIRST COURT OF APPEALS HOUSTON, TEXAS
at 10/5/2015 5:43:39 PM
HOUSTON, TEXAS CHRISTOPHER A. PRINE
Clerk
****************
D & R CONSTRUCTORS, INC., MICHAEL RUSHING, STEPHANIE RUSHING,
PENN RUSHING AND FLORENCE RUSHING, Appellants
v.
TEXAS GULF ENERGY, INC. ON BEHALF OF CS BANKERS V LLC AND
TEXAS GULF FABRICATORS, Appellees
****************
On Appeal from the 270th District Court
of Harris County, Texas
Trial Court Cause No. 2013-00543
__________________________________________________
BRIEF OF APPELLANTS
****************
THE GORE LAW FIRM, P.C.
George W. Gore
Lead Counsel
State Bar No. 24029582
6200 Savoy, Suite 1150
Houston, Texas 77036
(713) 224-2000 (Telephone)
(713) 224-2004 (Facsimile)
ATTORNEYS FOR D & R
CONSTRUCTORS, INC., MICHAEL
RUSHING, STEPHANIE RUSHING, PENN
RUSHING AND FLORENCE RUSHING.
ORAL ARGUMENT REQUESTED
NO. 01-15-00604-CV
__________________________________________________
In the
FIRST COURT OF APPEALS
at
HOUSTON, TEXAS
****************
D & R CONSTRUCTORS, INC., MICHAEL RUSHING, STEPHANIE RUSHING,
PENN RUSHING AND FLORENCE RUSHING, Appellants
v.
TEXAS GULF ENERGY, INC. ON BEHALF OF CS BANKERS V LLC AND
TEXAS GULF FABRICATORS, Appellees
****************
On Appeal from the 270th District Court
of Harris County, Texas
Trial Court Cause No. 2013-00543
__________________________________________________
BRIEF OF APPELLANTS
****************
THE GORE LAW FIRM, P.C.
George W. Gore
Lead Counsel
State Bar No. 24029582
6200 Savoy, Suite 1150
Houston, Texas 77036
(713) 224-2000 (Telephone)
(713) 224-2004 (Facsimile)
ATTORNEYS FOR D & R
CONSTRUCTORS, INC., MICHAEL
RUSHING, STEPHANIE RUSHING, PENN
RUSHING AND FLORENCE RUSHING.
ORAL ARGUMENT REQUESTED
IDENTITY OF PARTIES AND COUNSEL
D & R CONSTRUCTORS, INC................................................ Intervenor/Appellant
MICHAEL RUSHING, STEPHANIE RUSHING, PENN RUSHING AND
FLORENCE RUSHING. .......................... Defendants/Counter Plaintiffs/Appellants
George W. Gore .Counsel for Defendants, Intervenor & Counter Plaintiffs/Appellants
The Gore Law Firm, P.C.
6200 Savoy, Suite 1150
Houston, Texas 77036
Texas Gulf Energy, Inc., CS Bankers V, LLC, Texas Gulf Fabricators, Inc., and
Timothy Connolly ………………….……………..Plaintiffs & Counter
Defendants/Appellees
Gary M. Jewell .................. Counsel for Defendants & Counter Plaintiffs/Appellants
Christian Smith & Jewell
2302 Fannin, Suite 500
Houston, Texas 77002
Texas Gulf Fabricators, LLC, Brian Hendry and Lester Smith
…………………………………….…………………………..Cross
Defendants/Appellees
Paul Dobrowski .......................................... Counsel for Cross Defendants/Appellees
Dobrowski, Larkin & Johnson, LLP
4601 Washington Ave, Suite 300
Houston, Texas 77007
i
TABLE OF CONTENTS
Page(s)
IDENTITY OF PARTIES AND COUNSEL .............................................................i
TABLE OF CONTENTS .......................................................................................... ii
INDEX OF AUTHORITIES .....................................................................................iv
STATEMENT OF THE CASE .................................................................................. 1
REQUEST FOR ORAL ARGUMENT ..................................................................... 5
ISSUES PRESENTED ............................................................................................... 6
Point of Error One ............................................................................................
change of ownership The District Court committed error by
granting summary judgment on the issue of foreclosure:
a) the evidence attached to the Appellee's summary judgment
motions establishes the foreclosure was improper. As such, the
summary judgment in favor of Appellees should be set aside and
this Court court should render a judgment in favor of Appellants.
b) the foreclosure was also improper because the evidence presented
established Appellees blocked the notice of foreclosure and made
it impossible to make payments.
c) the foreclosure was also improper for a variety of other reasons. . . .
Point of Error Two
The District Court committed error which caused the rendition of an
improper order when it entered judgment dismissing the Quiet
Title cause of action. Since the foreclosure was improper, the
quiet title cause of action should also be set aside and the issue
resolved in accordance with the foreclosure ruling... .............................
Point of Error Three. ..........................................................................................
The District Court committed error by ignoring at least one cause
of action and signing orders exceeding the relief requested in
summary judgment motions
ii
Point of Error Four
The District Court committed error which caused the rendition of an
improper temporary injunction when it granted no-evidence
summary judgment and did not compel discovery responses... ..............
Point of Error Five. ............................................................................................
The District Court committed error which caused the rendition of
an improper order when it entered summary judgment on fraud,
breach of contract, quantum meruit, negligent misrepresentation,
breach of fiduciary duty, conversion, conspiracy, and tortuous
interference. .............................................................................................
Point of Error Six
The District Court committed error which caused the rendition of an
improper order when it entered sanctions in this matter .........................
Point of Error Seven. .........................................................................................
The District Court committed error which caused the rendition of
an improper order when it entered a judgment for attorneys’ fees
without proper segregation or support and which contradicts case
law requiring trial on whether the attorney’s fees are reasonable
and necessary. ..........................................................................................
STATEMENT OF FACTS ........................................................................................ 7
SUMMARY OF THE ARGUMENT ...................................................................... 10
ARGUMENT AND AUTHORITIES ...................................................................... 11
C Point of Error One ..................................................................................... 11
change of ownership The District Court committed error by
granting summary judgment on the issue of foreclosure:
a) the evidence attached to the Appellee's summary judgment
motions establishes the foreclosure was improper. As such, the
summary judgment in favor of Appellees should be set aside and
this Court should render a judgment in favor of Appellants.
iii
b) the foreclosure was also improper because the evidence presented
established Appellees blocked the notice of foreclosure and made
it impossible to make payments.
c) the foreclosure was also improper for a variety of other reasons. . . .
Point of Error Two
The District Court committed error which caused the rendition of an
improper order when it entered judgment dismissing the Quiet
Title cause of action. Since the foreclosure was improper, the
quiet title cause of action should also be set aside and the issue
resolved in accordance with the foreclosure ruling... ......................... 23
Point of Error Three. ...................................................................................... 24
The District Court committed error by ignoring at least one cause
of action and signing orders exceeding the relief requested in
summary judgment motions __________3
Point of Error Four
The District Court committed error which caused the rendition of an
improper temporary injunction when it granted no-evidence
summary judgment and did not compel discovery responses... .......... 24
Point of Error Five. ............................................................................................
The District Court committed error which caused the rendition of
an improper order when it entered summary judgment on fraud,
breach of contract, quantum meruit, negligent misrepresentation,
breach of fiduciary duty, conversion, conspiracy, and tortuous
interference. ......................................................................................... 25
Point of Error Six
The District Court committed error which caused the rendition of an
improper order when it entered sanctions in this matter ..................... 37
Point of Error Seven. ..................................................................................... 39
The District Court committed error which caused the rendition of
an improper order when it entered a judgment for attorneys’ fees
without proper segregation or support and which contradicts case
iv
law requiring trial on whether the attorney’s fees are reasonable
and necessary. ........................................................................................ 3
PRAYER .................................................................................................................. 41
APPENDIX .............................................................................................................. 43
CERTIFICATE OF SERVICE ................................................................................ 44
v
INDEX OF AUTHORITIES
Cases Page(s)
Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215-16 (Tex. 2003)
M.D. Anderson Hosp. & Tumor Inst. v. Willrich, 28 S.W.3d 22, 23 (Tex. 2000)
City of Houston v. McDonald, 946 S.W.2d 419, 420 (Tex. App.—Houston [14th Dist.]
1997, writ denied).
Casso v. Brand, 776 S.W.2d 551, 556 (Tex. 1989).
City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex. 1979).
Jones v. Tex. Pac. Indem. Co., 853 S.W.2d 791, 794 (Tex. App.—Dallas 1993, no
writ).
Sullivan v. Hardin, 102 S.W.2d 1110 (Tex. Civ. App. 1937)
Smith v. Albright (Tex. Com. App.) 288 S.W. 178.
Allbright v. Smith (Tex. Com. App.) 5 S.W.2d 970.
Reisenberg v. Hankins (Tex. Civ. App.) 258 S.W. 904, 910.
Park Place Hosp. v. Estate of Milo, 909 S.W.2d 508, 511 (Tex. 1995).
Longview Constr. & Dev., Inc. v. Loggins Constr. Co., 523 S.W.2d 771, 779 (Tex.
Civ. App.—Tyler 1975, writ dism'd by agr.).
Adebo v. Litton Loan Servicing, L.P., 2008 Tex. App. LEXIS 3935 at *10, No. 01-07-
00708-CV (May 29, 2008).
Jaster v. Comet II Constr., Inc., 2014 Tex. LEXIS 567 at *13.
Brown v. Cates, 99 Tex. 133 (1905).
Duty v. Graham, 12 Tex. 214 (1854).
Univ. Sav. Ass'n v. Springwoods Shopping Ctr., 644 S.W.2d 705, 706 (Tex. 1982).
League City State Bank v. Mares, 427 S.W.2d 336, 340 (Tex. Civ. App.--Houston
[14th Dist.] 1968, writ ref'd n.r.e.).
UMLIC VP LLC v. T & M Sales and Envtl. Sys., Inc., 176 S.W.3d 595, 610 (Tex.
App.--Corpus Christi 2005, pet. denied).
Harwath v. Hudson, 654 S.W.2d 851, 853 (Tex. App. Dallas 1983).
Longview Constr. & Dev., Inc. v. Loggins Constr. Co., 523 S.W.2d 771, 779 (Tex.
Civ. App.—Tyler 1975, writ dism'd by agr.).
Woodard v. Southwest States, Inc., 384 S.W.2d 674, 675 (Tex. 1964).
Miller v. Graves, 185 S.W.2d 745, 1945 Tex. App. LEXIS 649 (Tex. Civ. App. 1945),
writ ref'd),. Scott v. Walker, 141 Tex. 181, 170 S.W.2d 718 (Tex. 1943).
Vortt Exploration Co. v. Chevron U.S.A., Inc., 787 S.W.2d 942 (Tex. 1990).
Clower v. Brookman, 325 S.W.2d 440 (Tex.Civ.App. -- San Antonio, 1959, no writ).
Ferrous Prods. Co. v. Gulf States Trading Co., 323 S.W.2d 292, 296-97 (Tex. Civ.
vi
App.—Houston, 1959), aff'd, 160 Tex. 399, 332 S.W.2d 310, 312 (Tex. 1960).
Colbert v. Dallas Joint Stock Land Bank of Dallas, 129 Tex. 235, 102 S.W.2d 1031-
1034 (1937).
Gonzales v. McHugh, 21 Tex. 256.
Excess Underwriters at Lloyd's, London, 246 S.W.3d at 50.
Dallas Elec. Supply Co. v. Branum Co., 143 Tex. 366, 185 S.W.2d 427, 429 (Tex.
1945).
Rankin v. Naftalis, 557 S.W.2d 940, 944 (Tex. 1977).
Fitzgerald v. Hull, 237 S.W.2d 256, 264 (Tex. 1951).
Kinzbach Tool Co. v. Corbett-Wallace Corp., 160 S.W.2d 509, 514 (Tex. 1942).
Hunter Bldgs. & Mfg., L.P. v. MBI Global, L.L.C., 436 S.W.3d 9, 15-16 (Tex. App.
Houston 14th Dist. 2014).
Chon Tri v. J.T.T., 162 S.W.3d 552, 556 (Tex. 2005).
Kelly v. Galveston County, 520 S.W.2d 507, 513 (Tex. Civ. App. Houston 14th Dist.
1975).
John Paul Mitchell Sys. v. Randalls Food Mkts., 17 S.W.3d 721, 730 (Tex. App.
Austin 2000).
Southwestern Bell tel. Co. v. John Carlo Tex., Inc., 843 S.W.2d 470, 472 (Tex. 1992).
GTE Comms Sys. V. Tanner, 856 S.W.2d 725, 730 (Tex. 1993).
Lake Travis ISD v. Lovelace, 243 S.W.2d 244, 254 (Tex.App.—Austin 2007, no pet.).
Koch Oil Co. v. Wilber, 895 S.W.2d 854, 867 (Tex. App.—Beaumont 1995, writ
denied).
Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 310-11 (Tex. 2006).
AU Pharm., Inc. v. Boston, 986 S.W.2d 331, 336 (Tex. App.—Texarkana 1999, no
pet.).
Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 10-11 (Tex. 1991), modified on
other ground., Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299 (Tex. 2006).
City of Garland v. Dallas Morning News, 22 S.W.3d 351, 367 (Tex. 2000); Bocquet v.
Herring, 972 S.W.2d 19, 20-21 (Tex. 1998).
Fuqua v. Oncor Elec. Delivery Co., 315 S.W.3d 552, 2010 Tex. App. LEXIS 2323
(Tex. App. Eastland 2010).
Rules Page(s)
vii
TEX. R. CIV. P. , Rule 13 ..............................................................................................
Tex. R. App. P., Rule 39 ..............................................................................................
Statutes and Other Authorities Page(s)
Property Code 51.002-51.0075 ....................................................................................
Tex. R. Civ. P. 166a(i).
Secondary Sources Page(s)
Williston .......................................................................................................................
viii
TO THE COURT OF APPEALS FOR THE FIRST DISTRICT OF TEXAS:
Appellants, D & R Constructors, Inc. (“D&R”), George W. Gore and Michael
Rushing, Stephanie Rushing, Penn Rushing and Florence Rushing (“Rushings”)
(jointly “Appellants”), comes, by and through their attorney of record, and pursuant to
Rule 38.1 of the TEXAS RULES OF APPELLATE PROCEDURE presents this Brief of
Appellants and pray that the orders and judgment entered against Appellants from
Cause No. 2013-00543, Texas Gulf Energy, Inc. on Behalf of CS Bankers V, LLC and
Texas Gulf Fabricators v. Michael Rushing, Stephanie Rushing, Penn Rushing and
Florence Rushing, in the 270th District Court of Harris County, Texas, be set aside
(including all summary judgment orders, the final order including attorney’s fees, and
the sanctions order), that judgment be rendered in favor of Appellants on the issues of
foreclosure and quiet title, and, that the remaining causes of action be remanded to the
Trial Court with instructions to enter a new docket control order allowing a discovery
period of at least five months on the remaining causes of action before trial.
STATEMENT OF THE CASE
The Appellees initiated this case as a suit for conversion and an application for
an injunction. Appellants counter claimed for fraud, conversion, wrongful
foreclosure, intentional wrongful foreclosure, quiet title, tortuous interference,
negligent representation, breach of fiduciary duty, breach of contract, conspiracy,
1
quantum meruit and promissory estoppel. Appellants also brought in Hendry and
Smith as counter defendants to quiet title and for their participation in directing the
fraud.
The trial court granted several summary judgment orders which were
incorporated into one final order. There was no trial. As shown below, the summary
judgments fail to address all causes of action and are erroneous for other reasons as
well.
August 28, 2014; Order titled – CS Bankers’ Partial Summary Judgment on
Foreclosure; Doc # 62235529: CRI 593
October 31, 2014; Order titled - Final Summary Judgment; Doc # 63014312 (Smith);
CRI 1580
November 14, 2014; Order titled – Order Granting Joint Motion for Entry of
Supplemental Order; Doc # 63213850: CRII 1944
November 19, 2014; Order titled - Final Summary Judgment; Doc # 63290903
(Hendry & TGF) : CRII 1946
December 17, 2014; Order titled – Order Granting Texas Gulf Energy, Inc.’s Motion
for Partial Summary Judgment on the “Letter of Intent”; Doc # 63638422: CRII 1972
February 3, 2015; Order titled - Final Summary Judgment; Doc # 64155446: CRII
2027
February 3, 2015; Order titled – Order Assessing Sanctions; Doc # 64155445: CRII
2025
April 6, 2016; Order denying – Order Denying Appellants’ Motion for Summary
Judgment: CRI 976
April 13, 2015; Order titled – Final Judgment; Doc# 65332341: CRI 977
D&R Constructors is a second generation family company owned and
controlled by the Rushing family. The primary asset owned by D&R is a fabrication
plant, along with the equipment and tools located on that site. This case concerns a
2
dispute where Texas Gulf Energy (“TGE’) representatives convinced the Rushings to
join into a joint venture. In connection with that joint venture, CS Bankers V, LLC
(“CSB”), a subsidiary of TGE, purchased the note from the bank (approximately
$435,000 owed – Facility and equipment valued at over $2,000,000.00). In addition, a
lease was executed under which the lease payment was directed to CSB to cover any
payments as they became due. A Binding Letter of Intent (“BLOI”) containing the
major terms was signed at the same time. TGE did not follow through on its promises,
including never providing final paperwork or making a payment of $100,000.00
which was due only ten days after the BLOI was signed. Emails have been discovered
that indicate TGE had decided not to work with the Rushings (whether this was before
or shortly after the Binding Letter of Intent was signed is still in dispute). Instead of
terminating the joint venture and the lease, TGE promised final paperwork and
negotiated with the Rushings for about six months – but CSB secretly foreclosed on
the Facility as fast as it could - which was within three months. Since TGE was
leasing the Facility, it sent the foreclosure notice to itself and simply refused the
foreclosure notice by having its employees advise the postman that D&R was no
longer at that location. But, in truth, Michael and Penn Rushing were still working
there in connection with trying to get the joint venture moving and, along with D&R,
was still receiving mail there – except for the one foreclosure notice that was refused
3
by TGE staff. The funny thing is that the notice was defective anyway (no auction
time on mailed notice makes it defective as a matter of law). Still, in addition to
setting the improperly noticed trustee sale, the court should allow a cause of action for
intentional wrongful foreclosure with punitive damages due to the intentional blocking
of the notice.
Eventually, after about six month of continuing to negotiate with the Rushings
while “the attorneys prepared the paperwork,” TGE advised the Rushings they were
no longer welcome and that the locks would be changed. At that point, equipment and
other items were removed from the Facility and Appellees then filed suit and sought
orders in District Court requiring the return of equipment. Appellants counter claimed
for wrongful foreclosure, fraud, conversion and other claims as listed above.
The District Court denied multiple motions to compel discovery and depositions
against the Plaintiffs. Plaintiffs did not provide any meaningful discovery responses
and quashed all deposition notices (the lack of response is even more egregious
considering Plaintiffs waived their objections when they unilaterally terminated a Rule
11 agreement). Still, instead of ordering Plaintiffs to produce experts and corporate
representatives – and provide responses to discovery where it waived its objections,
the District Court found it more convenient to grant summary judgments (the oddest
was when, in response to a motion to compel documents and depositions from
4
Appellees, the trial court granted months old no evidence summary judgments). As
discussed in detail below, this was unfair and improper. Plaintiffs’ tactics are a sad
example of the games lawyers should not play – and, in this case, the District Court let
it slide through. All judgments in Appellees’ favor should be set aside, the case
remanded and a proper period for discovery be allowed.
This case also involves a sanctions issue. Emails were presented indicating
Lester Smith was controlling or directing TGE, Connolly, Hendry and others. As
such, he was sued by Appellants. However, the Rushings never had face to face
contact with Lester Smith. The District Court found that since there was no direct
contact, the causes of action for fraud and conspiracy to commit fraud were
sanctionable. However, it is not appropriate to sanction a party and counsel for
bringing a cause of action that should extended to be applicable to the case at hand.
Clearly, the cause of action should extend to cover a puppet master and not just the
minions.
TGE and its representatives made representations and executed a binding letter
of intent to obtain use of the Facility and to get the Rushing to work there. TGE now
claims the BLOI is not a contract. If it is a contract, then it should be enforced. If it is
not a contract, then the Rushings should still be able to recover their damages under
Quantum Meruit or Promissory Estoppel (a cause of action that was simply never
5
addressed by the Trial Court). Simply put, at the end of the day it is uncontested that
TGE took Appellants Facility. So, either it is damages for breach of contract
(Appellees claim the Facility was to come to them as part of the deal), quantum meruit
or promissory estoppel (if no contract then equity applies).
In short, the foreclosure notice was clearly defective and the appellate court
should render in Appellants favor and further quiet title back to D&R (there are many
reasons to set it aside but the most obvious and clear is the sworn evidence filed by the
Appellees clearly showing a defect). The other orders should be set aside and the case
should be remanded to allow discovery and then proceed to trial on the fraud and other
issues.
REQUEST FOR ORAL ARGUMENT
Appellants respectfully submit that this case merits oral argument under Rule
39 of the Texas Rules of Appellate Procedure because oral argument would
significantly aid the Court in the determination of the legal and factual issues
presented in this appeal of a complex, tripartite action.
ISSUES PRESENTED
Point of Error One .......................................................................................................
change of ownership The District Court committed error by granting summary
judgment on the issue of foreclosure:
a) the evidence attached to the Appellee's summary judgment
motions establishes the foreclosure was improper. As such, the
6
summary judgment in favor of Appellees should be set aside and
this Court should render a judgment in favor of Appellants.
b) the foreclosure was also improper because the evidence presented
established Appellees blocked the notice of foreclosure and made
it impossible to make payments.
c) the foreclosure was also improper for a variety of other reasons. . . .
Point of Error Two: The District Court committed error which caused the
rendition of an improper order when it entered judgment dismissing the Quiet
Title cause of action. Since the foreclosure was improper, the quiet title cause
of action should also be set aside and the issue resolved in accordance with the
foreclosure ruling.
Point of Error Three: The District Court committed error by ignoring at least one
cause of action and signing orders exceeding the relief requested in summary
judgment motions.
Point of Error Four: The District Court committed error which caused the
rendition of an improper temporary injunction when it granted no-evidence
summary judgment and did not compel discovery responses.
Point of Error Five: The District Court committed error which caused the rendition of
an improper order when it entered summary judgment on fraud, breach of contract,
quantum meruit, negligent misrepresentation, breach of fiduciary duty, conversion,
conspiracy, and tortuous interference.
Point of Error Six: The District Court committed error which caused the
rendition of an improper order when it entered sanctions in this matter.
Point of Error Seven: The District Court committed error which caused the rendition
of an improper order when it entered a judgment for attorneys’ fees without proper
segregation or support and which contradicts case law requiring trial on whether the
attorney’s fees are reasonable and necessary.
I.
STATEMENT OF FACTS
7
TGE, Connolly and CSB worked together to convince the Appellants to turn
over their Facility (including equipment and personal property located at the Facility)
and to work with them on a joint venture where Mike and Penn Rushing worked at the
Facility to produce jobs (Appellees promised a multi-million dollar backlog which did
not exist). RRI 782-800. To induce this turnover, Appellees executed a binding letter
of intent and a lease while promising to prepare the final agreement which would
include other terms requested by the Appellants. Id. But, after getting possession of
the Facility, Appellees refused to prepare the final paperwork and foreclosed on the
Facility without notifying the Appellants. Then, they changed the locks and advised
Appellants to leave and then sued to terminate the agreement. The end result of the
deal was the Appellees taking possession of Appellants Facility, personal property and
equipment to their benefit and to the detriment of the Appellants – despite supposedly
working “with” them in a joint venture. Id.
Texas Gulf Energy, Inc. (“TGE”) and its affiliates, CS Bankers V, LLC,
(“CSB”) and Texas Gulf Fabricators, Inc. (“TGF”), are controlled by a variety of
people, which are working together to defraud the Rushing family of their business
and their property. One of these people is Tim Connolly. He is the manager of TGF,
represents TGE in business dealings, created CSB and owned a portion of CSB and
now appears to own all of CSB. In addition, Appellees executed a Binding Letter of
8
Intent that has been breached and also breached a lease agreement. Cites below.
Appellees are simply trying to take the Appellants Property for themselves and not
pay for it. They want to steal a facility that is worth over two million dollars for less
than the five hundred thousand dollars they paid for the Note and ignore the dealings
that put them in position to take that property.
First, CSB legally did not even exist in 2012. And, even though it identified
itself as a Texas company, there is no such company in Texas then, now or ever. In
fact, even this suit was originally filed on behalf of the imaginary CSB, “A Texas
Corporation.” (See Page 1 of Original Petition). There is a CSB in Nevada that was
inactive in 2012 due to apparent nonpayment of taxes (since restored in late 2013).
Now, it seems that it has decided that CSB is that Nevada corporation (See Amended
Petition) – and an affiliate of TGE just like TGF. There is no apparent reason to have
involved an affiliate in the transaction other than fraud. TGE is charged with all
knowledge and awareness of its agents and representatives. As its parent, TGE had
equitable title in all of its property and had authority and direct knowledge. At the
time the Posting Letter was fraudulently mailed and intercepted, Connolly was CEO
of Texas Gulf Oil & Gas, Inc., a 100% owned subsidiary of TGE. Connolly was also
majority shareholder and Managing Member of the foreclosing lender, CS Bankers V,
LLC. CRI 517-535. At the same time, TGE purportedly owned a portion CS Bankers,
9
V, LLC. Id. TGF, who appear to currently claim ownership of the Property, was later
sold to CSB for the benefit of Connolly. CRI 517-535 at Exhibit G. And, through the
entire process, Connolly is bargaining on behalf of all the parties. Id at Exhibits H
(first deal offer), I (emails with TC offering portion of deal to Hendry).
This case revolves around one key event: the Defendants letting Appellees
take possession of the Facility after being fraudulently induced into entering a joint
venture with TGE on July 11, 2012. Id. Exhibit B. The purpose of that joint venture
was to form Texas Gulf Fabrication, Inc. – which would be 81% owned by the
Rushings. At the same time, TGE presented page 9 of the Loan Sale Agreement for
signature and stated they were going to purchase the Note so there were no concerns
about making the payments (this page does not identify CSB). The Defendants were
under the impression that the Note was being purchased by the joint venture. Instead
it was purchased by CS Bankers V LLC – which, as a subsidiary is owned, controlled
and part of TGE. CSB has been identified as “an affiliate of TGE” in the last amended
petition filed by TGE and CSB on July 16, 2014. An “affiliate” is defined as a person
or organization attached to a larger body.
It is important to note that during negotiations leading up to the execution of the
contract on July 11, 2012, several proposals had been made where the facility would
be foreclosed – and each was refused. Id at Exhibit H. The Rushings repeatedly
10
refused to agree to give up their facility. Id at Affidavits. That is why the Binding
Letter of Intent did not include them giving up their property. That is why a lease
agreement was executed. The sole purpose of the lease was to make it clear that the
Note payments were covered and that TGE was moving into the Property. But, on
July 24, Tim Connolly communicated to the Ayeds and other, excluding the
Appellants, that he had the foreclosure attorney set up to foreclose the property for the
cost of $1000. Exhibit J. Clearly, he was planning to foreclose – despite the fact that
the Rushing had said it was not allowed. Simply put, Connolly had a plan that
involved the facility and he was going to get it one way or the other. That plan
included taking over the facility, breaching the Binding LOI which it never intended
to follow, preventing the Rushings from getting any notices related to the foreclosure
in an attempt to take ownership and then kicking them out – which is exactly what
happened.
II.
SUMMARY OF THE ARGUMENT
The facts are that the Appellants owned a Facility and Equipment before
dealing with Appellees. Seven months later, Appellees claimed to legally own
everything and Appellants received nothing for it and were simply locked out with
nothing. Justice and equity serve to prevent this type of injustice.
11
It is about as clear as it gets that the foreclosure sale was improper, both
technically and because it was actively concealed. The summary judgment evidence,
which was provided by Appellees, shows that there was no notice of time, which
renders it improper as a matter of law. In addition, there are a lot of other defects as
listed below. Then, there are fact issues such as TGE actively intercepting the notice
and having it returned. In sum, the foreclosure sale must be set aside and judgment
rendered in favor of Appellants..
There are other clear mistakes. The first being that the District Court ignored an
open cause of action for promissory estoppels. The only order that might be
applicable is based on a no evidence summary judgment motion that never mentions
or seeks relief on promissory estoppel. The order is clearly defective for granting
relief not sought and the cause of action is still valid.
There were other causes of action brought relating to the actions taken by
Appellees. The court made errors with each and ignored fact issues. However, one
issue that applies across the board to each issue is the fact that the District Court
refused to compel discovery responses or depositions from the Appellees. It is
improper to grant a no-evidence summary judgment motion when you are not allowed
to take proper discovery.
12
The sanctions issue was also improperly addressed as it was based on
Appellants attempts to extend a cause of action. It is not harassing or sanctionable to
make a good faith argument to extend a cause of action. Here, Appellants sought to
extend a conspiracy to commit fraud cause of action to a puppet master that controlled
and profited from the conspiracy but never had direct contract with the defrauded
party. If the argument is colorable, even if not applied to extend the current case law,
it is sufficient and sanctions were not proper.
The attorney fees award in this matter is based on a non-segregated fees request
which is improper and in direct conflict with case law stating attorney’s fees may not
be granted in without trial.
III.
ARGUMENT AND AUTHORITIES
Point of Error One
The District Court committed error by granting summary judgment on the issue
of foreclosure:
a) the evidence attached to the Appellee's summary judgment
motions establishes the foreclosure was improper. As such, the
summary judgment in favor of Appellees should be set aside and
this Court court should render a judgment in favor of Appellants.
b) the foreclosure was also improper because the evidence presented
established Appellees blocked the notice of foreclosure and made
it impossible to make payments.
c) the foreclosure was also improper for a variety of other reasons.
The Court erred by granting the motion for summary judgment because TGF
13
and Hendry, as well as CSB, did not meet their burden of proving, as a matter of law,
the elements of foreclosure. Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d
211, 215-16 (Tex. 2003); M.D. Anderson Hosp. & Tumor Inst. v. Willrich, 28 S.W.3d
22, 23 (Tex. 2000); City of Houston v. McDonald, 946 S.W.2d 419, 420 (Tex. App.—
Houston [14th Dist.] 1997, writ denied). Unless the movant meets its burden, the
burden never shifts to the nonmovant. M.D. Anderson, 28 S.W.3d at 23; Casso v.
Brand, 776 S.W.2d 551, 556 (Tex. 1989); City of Houston v. Clear Creek Basin Auth.,
589 S.W.2d 671, 678 (Tex. 1979). The Court erred by granting the motion for
summary judgment because Appellants raised a fact issue on the element of
foreclosure. Jones v. Tex. Pac. Indem. Co., 853 S.W.2d 791, 794 (Tex. App.—Dallas
1993, no writ). The Court also erred because the “Notice of Posting” letter mailed to
Appellants was defective on its face because there was no time for the sale in the
letter. Property Code 51.002(c). In addition, there are several reasons that the
foreclosure was improper as listed below.
Strict Compliance
“Because sales by mortgagees and trustees under powers are more liable to
abuse, they are more zealously watched by courts of equity, and upon slight proof of
unfair conduct or violation of the powers given by the instrument, they will be set
aside. While it is true that the presumption of regularity exists generally in favor of
14
judicial sales, it is well-settled that no such presumption prevails as to trustee's sales
under powers granted by deeds of trust, the reason for the rule being that the exercise
of such powers is a harsh remedy and that it can only be exercised by strictly
complying with the terms and conditions imposed upon the power of sale by the
maker of the trust instrument.” Sullivan v. Hardin, 102 S.W.2d 1110 (Tex. Civ. App.
1937); Smith v. Albright (Tex. Com. App.) 288 S.W. 178; Allbright v. Smith (Tex.
Com. App.) 5 S.W.2d 970; Reisenberg v. Hankins (Tex. Civ. App.) 258 S.W. 904,
910. Simply put, there is no presumption to benefit the trustee. As such, when a sale
has an error, it must be set aside. Here, there are multiple errors, the sale must be set
aside.
The Evidence Shows Mailed Notice Was Defective
Any defect is sufficient to set aside a foreclosure, especially in a situation such
as we have here when the value of the foreclosed property greatly exceeds the amount
claimed on the lien. CRI 1688-1694. The only evidence presented to the Trial Court
of the notice mailed to D&R was filed by CS Bankers, who filed two affidavits
identifying the notice that was mailed to D&R. Appendix J; CRI 122-126; first MSJ
attempt: 439-448, Granted MSJ. Both affidavits identify three pages – and only three
pages as being mailed. Id. On page two, the “Notice of Posting” letter references an
attachment, but no such attachment was ever included – and the affidavits have
15
verified this fact twice (this makes sense because the attachments could not have been
prepared on the 13th since Schlanger was not trustee until a day later). Since the
attachment was not included, the notice is defective:
1 – It fails to identify the time of the sale as required under Section 51.002(c).
This one fact that Appellees evidence has established requires that judgment be
rendered in favor of Appellants.
2 – It fails to identify the location of the sale as required by Section 51.002(b)1.
3 – It fails to identify the substitute trustee. Section 51.0075(e) of the Property Code
requires that the notice provide a name and address for the substitute trustee. Here,
the letter does include the name and address of Schlanger, but it fails to actually
identify him as the substitute trustee that is going to conduct the sale.
4 – The Notice of Posting identifies Schlanger as a “debt collector” trying to collect a
debt. At the same time on the posting notice filed with the property clerk, Schlanger
is claiming to be the substitute trustee and, in fact, conducted the foreclosure sale as
substitute trustee. However, Section 51.0075(b) prohibits him from acted in both
capacities – “A trustee or substitute trustee is not a debt collector.” Section
51.0074(b)1 further clarifies that “A trustee may not be: (1) assigned a duty under a
security instrument other than to exercise the power of sale in accordance with the
terms of the security instrument.” Thus, Schlanger is not allowed to act as trustee and
16
perform other duties such as debt collection and acceleration. The letter he sent to
Appellants claimed he was a debt collector and that he was accelerating the debt. As
such, any later actions he took as a substitute trustee should be invalid – or the actions
taken in any other capacity should be invalid. Clearly, one cannot simply have dual
roles at the same time or change their role back and forth to claim the protections
afforded by the rules and not be bound by them. Here, Schlanger sent a letter
claiming to be a debt collector at the same time that he filed notices at the courthouse
claiming to be trustee. If Schlanger would have attached the “Notice of Substitute
Trustee’s Sale” to the Notice of Posting then he would be claiming a dual role in the
same letter. The Rule is clear - - - you cannot have a dual role. Thus, the actions and
notices should be found improper and set aside.
Again, Appellants presented their summary judgment motion on this issue.
CRI 2905-3022. Appellees did not even provide an exhibit in their response related to
this point or contest the issue. CRII 951-967. Appellees finally addressed this issue
in its supplement response to a new trial request – by claiming “the Rushing
Defendants intentionally present the Court with an incomplete copy of the letter.”
Appellants simply presented the sworn evidence that Appellees presented in both of
their summary judgment motions. Appellees also attached a non-sworn copy of the
Notice of Posting claiming the Notice of Substitute Trustee’s Sale was attached. First,
17
it is not sworn and is not evidence. Second, the sworn evidence says the attachment
was left off by Schlanger – not by the “Rushing Defendants.” It is too late to doctor
the evidence – Schlanger did not include the attachment and it is defective. The
evidence and black letter law demand judgment be rendered for Appellant finding the
foreclosure notice and sale improper.
Evidence Shows Notice was Blocked and Fact Issues Abound
The Court erred by granting the motion for summary judgment because there
is a disputed fact issue about the foreclosure being improper, including notice of the
foreclosure by CSB being fraudulently blocked from delivery, which must be
submitted to the jury. See Park Place Hosp. v. Estate of Milo, 909 S.W.2d 508, 511
(Tex. 1995).
Wrongful Interference
Appellees stated only half of the facts when they claimed that they gave
Defendants and D & R notice of the foreclosure. A defective notice letter was sent in
the mail, but TGE personnel working at the Property refused to sign for the letter and
falsely advised the postman that D&R no longer was there. CRI 464-536. By
intervening to prevent Defendants and D & R from receiving the foreclose notice,
Plaintiffs failed to comply with Section 51.002's notice requirements. Under Texas
law, when one party's wrongful interference prevents the other party's performance of
18
a contract, not only is the other party's performance excused, but the interfering party
has committed a breach of contract for which the other party may recover damages
sustained from the breach. Longview Constr. & Dev., Inc. v. Loggins Constr. Co., 523
S.W.2d 771, 779 (Tex. Civ. App.—Tyler 1975, writ dism'd by agr.). In this case, even
though the lease had been executed by TGF, TGE was occupying and running the
business located at the Property. CSB has identified itself as an affiliate. As such, it
effectively sent notice to itself – not to D&R. Then, it refused acceptance of the
certified mail claiming D&R was not at that address and no forwarding address was
available. Oddly, TGE allowed the Rushings, who were working there, to receive
other mail for D&R at that address during this time period. Id at 482-485; Exhibit A.
But, as shown in the attached booklet and affidavit, the notation on the letter shows
that “Delivery Attempted, addressee not known at place of address.”
CRI 510-516; Exhibit G, USPS Booklet. So, CSB and TGE fraudulently prevented
the notice from getting to D&R by refusing the notice.
Section 51.002 requires a creditor to provide notice to the debtor notice of a
pending foreclosure sale. Section 51.002 and its predecessors were enacted to stop the
sort of abuse that Plaintiffs are attempting to perpetrate here. See Armenta v.
Nussbaum, 519 S.W.2d 673, 677-78 (Tex. Ct. App. 13th Dist. –1975); see also Wylie
v. Hays, 263 S.W. 563, 567 (Tex. 1924). I n the late 1800's creditors, routinely preyed
19
upon defaulting property owners by deleting notice requirements in deeds of trust, and
holding foreclosure sales in counties distant from the property. See Armenta, 519
S.W.2d at 677-78 (phrasing the creditors acts as “an evil that was calculated to work
against the public welfare”). Although Section 51.002 creates constructive notice
when the creditor deposits the foreclose notice in the mail, the long history of Texas
foreclosure law shows that the creditor cannot then prevent actual notice and seize the
property.
Texas Law Permits the Admission of Evidence that Plaintiffs Prevented Delivery of the
Foreclosure Notice.
When analyzing whether a party's evidence is legally sufficient to raise an issue
of fact, a court looks to whether the evidence would ultimately be admissible at trial,
and whether it would “enable reasonable and fair-minded people to reach the verdict
under review.” See Adebo v. Litton Loan Servicing, L.P., 2008 Tex. App. LEXIS
3935 at *10, No. 01-07-00708-CV (May 29, 2008). When a debtor alleges that the
creditor failed to comply with Section 51.002's notice requirement, the debtor must
show that the creditor failed to serve the foreclosure notice. Id.
Here, Defendants and D & R alleged that Plaintiffs failed to meet the notice
requirements of Section 51.002 because Plaintiffs prevented Defendants and D & R
from receiving service. As stated above, despite Plaintiffs' claiming to conform with
Section 51.002(e)'s enumerated provisions, Plaintiffs cannot meet Section 51.002's
20
service requirement because they prevented the notice from reaching Defendants and
D & R. Consequently, Defendants and D & R have shown that 51.002(e) is not a legal
defense to their counterclaim, and thus 51.002(e) does not bar their evidence showing
that Plaintiffs wrongfully foreclosed the Property due to insufficient notice. See
Adebo, 2008 Tex. App. LEXIS 3935 at *10-11. Defendants' and D & R's evidence of
Plaintiffs' interference with the foreclosure notice's service would be admissible at
trial, and given every reasonable inference, is sufficient to raise an issue of fact to be
resolved by a jury. See Limestone Prods. Distrib., Inc., 71 S.W.3d at 308. As such,
summary judgment must be set aside.
Other Defects
No Amount Due A fact that must be established before a party is able to foreclose is
that there is a legal basis upon which to foreclose. In other words, there has to be a
legal instrument that gives a party a right to foreclose in certain circumstance and
those circumstances exist. In this case, there is no amount due – which means there
was no right to foreclose. Essentially, in July of 2012, three things happened as part
of one transaction: the note was assumed, the Binding LOI was executed and the lease
was signed. The purpose of the Lease was to work hand in hand to insure the Note
was paid and Appellants did not have to worry about ownership of the Property. CRI
482-485; Exhibit A. TGE took possession of the Property and was legally bound to
21
pay the Lease (note that TGF lease so tie it in and boost it up). If the Note is not in
default, there is no basis to foreclose. Brown v. Cates, 99 Tex. 133 (1905). The debt
is the “principal thing.” Duty v. Graham, 12 Tex. 214 (1854). Thus, claiming a debt
is owed because it breached by not paying itself should not be a basis for foreclosure.
Appellants contested that there was any amount due and Appellees failed to establish
any amount due. In fact, there is never a number presented anywhere. Thus, since
there is a fact issue as to whether there is any amount due, the summary judgment
must be set aside.
CSB violated the Deed of Trust by not notifying the Guarantors.
Section 14c of the Deed of Trust requires notice to all debtors obligated to pay
the debt G. CRI 517-535; Exhibit H, Deed of Trust at page 9. Exhibit A-1, a
modification of the Note, acknowledges the Guaranties by William Penn Rushing and
Charles Leon Rushing. No such notices were ever sent. Id. In and of itself, this
failure of notice is a breach of the deed of trust. Thus, not only was the deed of trust
violated, the foreclosure notice is inaccurate and defective.
CSB did not notify D&R of its purchase, address, balance, etc.
The original injunction in this matter required CSB to present its full
“foreclosure file” and it has stated it has done so. Yet, the only communication in the
file is the foreclosure notice. This lack of documentation shows CSB did not
22
accelerate the loan, notify that it would accelerate the loan, ask for a payment or even
notify D&R that a payment may be due. CSB failed to provide any D&R with an
address which made it impossible for D&R to provide a change of address or make a
payment. Id; Affidavits. Appellants, due to the lease that was in place, did not
believe any amounts were due and did not receive any invoice or demands for
payment which would support the fact that no amounts were due. Id.
The previous lender may have accelerated the loan years prior – but had taken
payments and rescinded that acceleration. Id. In fact, the previous lender had sent a
notice that it would accelerate if payments were not made – but never accelerated. Id.
So, at the time that CSB purchased the loan the loan had not been accelerated no
demand other than the normal billing statements had been received. After CSB
purchased the Note, D&R did not receive any correspondence no demands for
payment, no invoices, – no amounts were due and no amount had been demanded.
True, according to the terms of the Note, payments should have become due and the
previous lender had even sent statements to that regard prior to the transfer – but no
action was taken by the lender with that regard. CSB simply refused to notify D&R
that it had bought the Note or provide information which would show an amount was
due and where it could be paid. In short, CSB made it impossible to perform.
The Notice Letter is Defective and CSB acted in bad faith
23
Even of the Notice of Foreclosure had not been blocked by CSB, the notice was
defective beyond the fact that no time was given. Even if the Notice of Foreclosure
had not been blocked by CSB, the notice was defective. In a foreclosure situation,
even a small error is a basis to set aside the foreclosure. Harwath v. Hudson, 654
S.W.2d 851, 853 (Tex. App. Dallas 1983) citing Slaughter v. Qualls, 139 Tex. 340,
162 S.W.2d 671 (1942).
The notice letter has several errors:
-Introductory Paragraph states it is a Texas company which is incorrect. CSB is a
Nevada company and there is no such company in Texas. Thus, the notice is for a
company that does not exist and is invalid.
-Paragraph 1 states D&R was notified of a default, that the default had not been cured
and the cure period had expired. Again, CSB never sent a notice of default (or
demand for payment). There was no cure period provided. The entire paragraph is
incorrect. Id.
-Paragraph 2 states the “entire amount” is due but fails to provide an amount. It
further states it is due under the terms of the Note – which does not provide for
payment to CSB or an address for CSB.
-Paragraph 3 states to “contact the lender” for the amount due and costs that are being
added on. However, again there no contact information for the lender and the lender
24
is incorrectly identified as a Texas Company. There is no phone number to contact
CSB. Simply, it was impossible to perform.
-Paragraph 4 and 5 generally references Lender without providing information.
-Paragraph 6 purports to be a notice of default and an acceleration – without
identifying what it is accelerating, what amount was in default, the total amount or
what amount is due.
-Paragraph 7 grants D&R the right to reinstate after acceleration. But, again, provides
no amount or information which would allow reinstatement. Also, taken in context
with paragraph 6 claiming to be an acceleration, grants a right but in a method where
it is impossible to perform.
-Paragraph 8 acknowledges it is required to give notice to the guarantors and states it
is providing notice to “each guarantor.” But, it simply did not do so. Id.
So, out of 9 paragraphs, 7 are incorrect and the other 2 simply do not provide
information which should be in the notice. Seriously, how can you provide a valid
notice of default without identifying the amount in default, the balance or how to cure.
Especially when you acknowledge you are allowing cure in paragraph 1 – but then
fail to state how to cure, where to cure and incorrectly state who the cure should be
made with. CSB executed a lease making no amount due and misled D&R into
believing that no amount was due, and further made it impossible for D&R to make a
25
payment or obtain any information regarding the Note. Then, it sent a defective notice
in its attempt to foreclose.
Final summary of foreclosure errors:
- All evidence established notice of posting attachment was not sent, which
establishes the notice mailed did not include a time for the sale, identify the trustee or
location.
-The Posting Letter and posted Notice identify a Texas company that does not exist
(CS Bankers is a Nevada company to was not in good standing at the time of
foreclosure).
-Paragraph one of the Posting Letter incorrectly states D&R was notified of default
and a cure period – when in fact, no contact had ever been made by CS Bankers.
-The Posting Letter demands the “entire amount,” but fails to state a number – or
who to pay, or where.
-Paragraph 8 claims it is noticing each guarantor, as required by the deed of trust and
Section 51.002(b)3, but no such notices were ever sent.
-No amount was due under the Note. The joint venture included no payments being
due and lease executed by TGE and D&R was to show all payments were covered.
- Property Code prevents Schlanger form acting as substitute trustee and debt
collecter.
-Wrongful interference – TGE blocked delivery of the notice. These actions deem
the notice and foreclosure invalid. At the very least, this is a fact issue to be presented
to a jury.
-No notice to guarantors – The code and deed of trust required notice to each debtor,
still no such notice was provided – even thought the notice letter said it was sent.
-Impossibility of Performance - CS Bankers never contacted D&R, never made a
payment demand, never provided information by which it could be contacted, never
provided an address for payments, never provided an address by which D&R could
provide written notice of a change of address, etc. Simply put, CS Bankers hid from
D&R and made it impossible for them to be contacted.
Any one of these errors is sufficient to set aside the foreclosure sale. The
additional fact that no time, no address of sale and no identification of new substitute
trustee was provided, simply shows how much was hidden. The Court should set
26
aside the foreclosure order, all orders related to it and render a decision that the
foreclosure was improper for each of the reasons above.
Point of Error Two
Point of Error: The district court committed error which caused the
rendition of an improper order when it entered judgment dismissing the
Quiet Title cause of action. Since the foreclosure was improper, the quiet
title cause of action should also be set aside and the issue resolved in
accordance with the foreclosure ruling.
Quiet Title is related:
The issue of quiet title is secondary and follows any ruling related to
foreclosure. As noted in Appellants live petition, the property in dispute is now
owned by TGF – even though it was foreclosed by CSB. RRI 781-800. As such, it
would be improper to dismiss the quiet title action until the foreclosure action is
addressed properly. In addition, there are no claims against TGF and Hendry
regarding foreclosure – only that they conspired with CSB and later ended up with the
Property. There are no counter claims or affirmative defenses to the cause of action.
As such, there is no basis for the relief granted on the Order issued by the trial court.
This court should render a finding that since the foreclosure was improper, title should
be quieted back in favor of D&R.
Point of Error Three
27
Point of Error: The district court committed error by ignoring at least one
cause of action and signing orders exceeding the relief requested in
summary judgment motions.
Plaintiff’s multiple summary judgment motions fail to address the promissory
estoppel claims at all. (see all summary judgment motions) In addition, the breach of
the lease agreement is not addressed. Therefore, at a minimum, the promissory
estoppel claims are still outstanding against Plaintiffs in addition to the any other
outstanding claims that were not granted by summary judgment.
The Order Exceeds Requested Relief
The Order signed on February 3, 2015, dismisses all of Appellants’ claims
against TGE, TGF and Timothy Connolly. RRI 2027. The summary judgment
motion never mentions promissory estoppels – which was an outstanding cause of
action. RRI 1346-1375 This order exceeds the relief sought because it dismisses
claims which were not mentioned in the no evidence motions for summary judgment.
Id.
Specifically, the last amended petition states:
The acts above show that D&R and the Rushings were deprived of their
property, business and livelihood due to the actions and promises of the TGE,
TGFI, TGF, TC and CSB. Under quantum meruit and promissory estoppel,
D&R and the Rushings seek the return of their business and property or at least
monetary damages equivalent to the loss of services, material and property.
RRI 781-800. Clearly, promissory estoppel appears as a cause of action based on this
28
language. Clearly, it is not even mentioned in the no evidence motion for summary
judgment. Thus, the order granting the motion exceeds the relief sought and is
improper. In addition, there are no other motions or orders that should apply to the
promissory estoppels cause of action and the case should be remanded for it to be
addressed.
Point of Error Four
Point of Error: The district court committed error which caused the
rendition of an improper temporary injunction when it granted no-
evidence summary judgment and did not compel discovery responses.
Inadequate Time for Discovery
It is clear that the Court erred by granting the no-evidence motion for
summary judgment because there had not been adequate time for discovery. Tex. R.
Civ. P. 166a(i). Specifically, Appellants requested discovery and it simply was not
produced – and depositions were quashed. At the time the summary judgment
motions were filed, parties were still well in the discovery period which did not expire
until 2015. Appellants timely sought to compel discovery and the Court refused to
rule. While it appeared that this case had been on file for quite a while, docket
control orders were in place prohibiting discovery for most of the case (due to removal
and remand early in the case). Even after a new docket control order was entered in
January of 2014, there were multiple parties that were not served (some were never
29
served) and discovery was delayed waiting for those parties. Simply put, the Order
should be set aside because the discovery period still had not concluded and
Appellants were attempting to force responses because the responding parties simply
refused to sends responsive documents and quashed the deposition notices.
Point of Error Five
Point of Error: The district court committed error which caused the
rendition of an improper order when it entered summary judgment on
fraud, breach of contract, quantum meruit, negligent misrepresentation,
breach of fiduciary duty, conversion, conspiracy, and tortuous
interference.
Each of these causes of action, except breach of contract, was ruled on as a no
evidence ruling. There was evidence creating a fact issue with each as shown below.
CRI 1593-1715 (argument below refers the exhibits numbers for easier reference
within these pages). In addition, there was evidence showing a contract (the BLOI)
and the evidence presented was not sufficient to grant summary judgment on this
issue. CRI 1716-1839 (same).
Fraud
Connolly and TGE provided the Appellants with various deal offers and met
with them discussing their Facility. CRI 1593-1715: Exhibits E (RRI 1649), H (RRI
1654), I (RRI 1670); Affidavits at RRI 1608-1609. TGE provided representations
through its officers Craig Crawford (Crawford”) and David Mathews (“Mathews”) as
30
well as Connolly who, as shown below was a manager and owner of CSB as well as a
negotiator for TGE. Exhibits E; Affidavits. Connolly was an agent of TGE as well as
CSB and operated for himself. Exhibit C (RRI 1617), H. Connolly, Crawford and
Mathews knew the deal could not be performed as offered and only made such offers
to induce the Appellants into a deal where Appellees could take the Appellants
Facility, labor and Personal Items (“Assets”) Exhibit I, K (RRI 1677). Mathews even
discusses that the deal needs to be redone but acknowledges TGE owes the Rushings
the first $100,000 that is coming due – which was never paid. Id. Connolly even
promised that the TGE stock Appellants would receive would be worth around two
million dollars – and it was never delivered. Exhibit H. A lease was executed
wherein payments to CSB were to be satisfied and no payment would be due on the
Note. Exhibit D. Crawford and Mathews promised that there was a backlog of
business and that the joint venture would be so profitable that Appellants would make
$34 million dollars. Affidavits. The Appellants relied upon the representations and
have lost their Facility, labor and Personal Items to Appellees because they believed
the assertions put forth by Connolly, CSB and TGE representatives. Affidavits.
Simply put, Crawford, Mathews and Connolly, on behalf of themselves as well as
TGE and CSB, made direct representations to the Appellants which were either totally
false – or so far fetched that he knew that what he was promising was impossible and
31
those promises led to the Appellants losing their Assets which were taken for the
benefit of Connolly, CSB and TGE. At a minimum, the evidence presented creates a
fact issue for a jury.
Negligent Misrepresentation
As shown, TGE and Connolly received compensation. Exhibit G (RRI 1654), L
(RRI 1679). Connolly participated in the dealings between Appellants and Appellees
and proposed deal points that were not possible and were clearly nothing but an
incentive for the Appellants to deal with the Appellees. Exhibit H, E. Crawford,
Mathews and Connolly made promises and executed a binding LOI leading
Appellants into tendering their Assets for use by the joint venture. Affidavits. TGE,
through Crawford and Mathews, represented a backlog of business which would
create a large amount of revenue. Affidavits. Connolly joined in and encouraged this
position by referring to possible income. Exhibit H. TGE and Connolly also
represented that the TGE stock that the Appellants would receive was worth over two
million dollars. Id. Based on these representations and more made by Appellees,
Appellants entered into the transaction with the Appellees and suffered the loss of its
business, Facility, labor and Personal Items. Affidavits. Sadly, despite
acknowledging the $100,000 debt, it was never paid. Exhibit K. The evidence is and
was sufficient to create a fact issue for a jury.
32
Breach of Contract
Connolly made promises though himself and TGE. Affidavits (RRI 1726-
1730); Exhibit E (RRI 1769), H (RRI 1786). Appellees have claimed the binding
letter of intent is not sufficient since it was not formalized into a more comprehensive
agreement. The only reason the contract was not formalized with a more complete
writing is the bad acts of Appellees – they simply refused to finish the paperwork once
they got what they wanted. TGE secretly acknowledged its debt and desire to redo the
deal. Exhibit K. Laches and unclean hands serve to prevent Appellees from being
able to profit from such underhanded dealings. Specifically, Appellees are hoping to
profit from improperly refusing to finish the paperwork or make payments which was
their responsibility under the BLOI. To allow them to avoid liability under the
contract would be inequitable and a clear example of one profiting from its own bad
actions – a situation laches and unclean hands directly prevents.
Under Texas law, when one party's wrongful interference prevents the other
party's performance of a contract, not only is the other party's performance excused,
but the interfering party has committed a breach of contract for which the other party
may recover damages sustained from the breach. Longview Constr. & Dev., Inc. v.
Loggins Constr. Co., 523 S.W.2d 771, 779 (Tex. Civ. App.—Tyler 1975, writ dism'd
by agr.). In this case, Appellees interfered with the BLOI and prevented it from being
33
refined into a comprehensive agreement as set out in its own terms. Affidavits. As
such, Appellees may not claim the contract does not exist.
Even if the BLOI is found to not be complete, in such a case, the parties must
look at the situation where there is clearly a contract, even if it is not clearly defined
by writing. This situation is referred to as Quantum Meruit or Quasi contract – which
are the same. In this case, TGE and its agents negotiated the binding LOI and is
clearly involved in either the binding LOI or a quasi contract/quantum meruit situation
because it took the benefits of the bargain from the Appellants. TGE acknowledged
the debt under the BLOI where is discusses the $100,000 it is about to pay the
Rushing (email sent during the 10 days after execution before the payment was due).
Connolly took benefits of the bargain and was directly involved in moving the title of
the real property by foreclosure while avoiding the execution of a real estate contract.
Connolly, as manager of everyone involved, also took the benefits of the bargain as
shown by the separation agreement of CSB. Exhibit G. So, in this case, it is clear and
undisputed that the Appellants performed and tendered their Facility, Assets and
services to the Appellees and suffered the loss of the Facility and Assets. Affidavits.
Appellees breached by not performing under the Binding LOI. Affidavits(RRI 1726-
1730). In addition, even if the Binding LOI is found to not be complete, then there is
a quasi contract/quantum meruit situation created by the actions of the parties.
34
Quantum Meruit
As shown above, The Rushings provided services, equipment and real property
to the Appellees. CRI 1593-1715;1716-1839. These items were taken and used by
the TGE, CSB and Connolly while they were aware that the Appellants expected
compensation. See Attached Affidavits; see Exhibits H, E, K. In the end, TGE and
Connolly profited by taking Appellants Assets to the detriment of the Appellants.
As shown in the facts above, Appellants expected a lot of compensation for
getting involved with Plaintiffs. Not only was there immediate cash ($100k never
received that was due in 10 days) but there was also supposed to be $34 million in
value. Exhibit E, K. It is undisputed that Appellants provided their property, real and
personal, located at the Property. It is undisputed that the Property has been used for
the benefit of TGE and Connolly. Affidavits; Exhibits C, D. As discussed above, each
of these parties were aware of the LOI and that the Appellants expected compensation
for their contribution – it would be insane to claim that the Appellants were simply
donating their Property, personal property and time. Affidavits; Exhibits H, E. As
such each element is satisfied and this cause of action stands.
Quantum Meruit is Applicable for Damages for Loss of Real Property
The Trial Court accepted the idea that Quantum Meruit only applied to loss of
items and labor, not real estate. It did not consider a situation where loss of property
35
is the largest part of damages. There was no deed of trust or other transfer of the deed
of the property in this case. This is a deal where the Appellants agreed to work with
the opposing parties and allow them the use of their facilities and during that time the
opposing parties took possession of the real property and then foreclosed it. All of
which would not have been possible if the parties were not working under a binding
letter of intent.
If the binding letter of intent fails, then this becomes a quantum meruit situation
since no contract would be in place to control. There are no exclusions for real
property in quantum meruit – only for contracts. Quantum meruit is in place to
compensate a party that put forth value to its detriment where the other party has
profited off of its contribution – such as this case. And, Promissory Estoppel would
be the next backup position. In short, those three cause of action should work in hand
to cover all possibilities.
The law is clear that "(where) there exists a valid express contract covering the subject
matter, there can be no implied contract," and hence no recovery in quantum meruit.
Woodard v. Southwest States, Inc., 384 S.W.2d 674, 675 (Tex. 1964). It is black letter
law that a contract for the transfer of land must be in writing. As such, a typical real
estate transaction requires a contract – to be enforceable under the statute of frauds.
Thus, in a typical real estate transaction, quantum meruit would simply not be
36
applicable – but this does not mean it will not apply in a non-typical transaction. Such
as the situation here where the opposing party took possession of the real property
without a written contract. In this case, Appellants seek to recover under a contract –
but opposing parties are claiming no contract exists. In such a situation, Appellants
must seek recovery under alternative causes of action and since the real property was
not covered by contract – it falls into a quantum meruit cause of action. “The
expected payment does not have to be monetary; it may be any form of compensation.
Accordingly, quantum meruit recovery has been allowed when the original payment
sought was an interest in land, Miller v. Graves, 185 S.W.2d 745, 1945 Tex. App.
LEXIS 649 (Tex. Civ. App. 1945), writ ref'd), and the devise of a residence. Scott v.
Walker, 141 Tex. 181, 170 S.W.2d 718 (Tex. 1943).” Vortt Exploration Co. v.
Chevron U.S.A., Inc., 787 S.W.2d 942 (Tex. 1990).
It is true that an express contract and quantum meruit are distinct and different
relationships and inconsistent ideas, but the same record may contain evidence which
will support either theory. A plaintiff may allege both theories and recover as the
evidence may show. Clower v. Brookman, 325 S.W.2d 440 (Tex.Civ.App. -- San
Antonio, 1959, no writ). As Williston explains, "in situations involving true
contracts"—those created by "promise or mutual assent of the parties, express or
implied"—"the parties' rights are determined by law and by the terms of the contract;
37
by contrast, when quasi-contract [i.e. quantum meruit] is involved, liability is
determined by principles of equity and justice and the intent of the parties is
immaterial." Williston, § 1:6; see Ferrous Prods. Co. v. Gulf States Trading Co., 323
S.W.2d 292, 296-97 (Tex. Civ. App.—Houston, 1959), aff'd, 160 Tex. 399, 332
S.W.2d 310, 312 (Tex. 1960). Thus, "[a] court properly resorts to quasi-contract only
in the absence of an express contract or contract implied-in-fact." Williston, § 1:6.
The right to recover on quantum meruit does not grow out of the contract, but is
independent of it. It is based upon the promises implied by law to pay for
consideration rendered and knowingly accepted. Colbert v. Dallas Joint Stock Land
Bank of Dallas, 129 Tex. 235, 102 S.W.2d 1031-1034 (1937). When there has been
partial performance and an acceptance of the benefits, if any, arising there from by the
other party, then a recovery can be had for a quantum meruit; not by force of the
contract but independent thereof. Gonzales v. McHugh, 21 Tex. 256. In this case,
TGE has admitted the parties acted as if an agreement was in place and in that process
ended up receiving services from the Rushings and ownership of the real property –
which was the key element of the entire deal since it was not possible to have a joint
venture of any kind without the real property.
Many Texas cases speak of an “express” contract barring recovery in quantum
meruit, courts have recognized that contracts in which some or all of the terms are
38
implied-in-fact will also bar recovery in quantum meruit. This rule makes
jurisprudential sense because "mutual assent" is present in a contract "[r]egardless of
whether [it] is based on express or implied promises," and courts will not override
mutual assent by imposing a different bargain on the parties in quantum meruit.
Excess Underwriters at Lloyd's, London, 246 S.W.3d at 50; Dallas Elec. Supply Co. v.
Branum Co., 143 Tex. 366, 185 S.W.2d 427, 429 (Tex. 1945). Moreover, a contrary
rule that only express contracts in which every single term is stated by the parties can
bar recovery in quantum meruit would be extremely difficult to administer.
In other words, if the opposing parties had a contract for transfer of the real
property for which Appellants are seeking or a contract covering their dealings, then
that would preclude a quantum meruit claim on that property. Anything short of that
is simply not a proper basis to deny recovery under quantum meruit or promissory
estoppel.
Breach of Fiduciary Duty
Joint venturers owe a fiduciary duty to each other in dealings within the scope
of the joint venture. Rankin v. Naftalis, 557 S.W.2d 940, 944 (Tex. 1977); Fitzgerald
v. Hull, 237 S.W.2d 256, 264 (Tex. 1951). In addition, partners are fiduciaries.
Indeed, “it is well established in Texas that the mere failure of [a party] to disclose to
[a co-venturer] all aspects of their inducement in the transaction is in itself a breach of
39
his fiduciary duty”. Kirby, 688 S.W.2d at 165. It is clear that Connolly and TGE
breached their fiduciary duty to the Appellants when they foreclosed on the Facility,
when they attempted to negotiate other deals, when they profited, when they simply
refused to pay under the BLOI, when they caused the comprehensive agreement to not
be provided and when they did not deal with the Appellants with integrity. CRI 1726-
1730, 1608-1610; see Exhibits K (CRI 1675) (acknowledging $ not paid), M. They
did all these things while Appellants were led to believe they were acting under a
binding letter of intent. Id. A party that knowingly induces a breach of fiduciary duty
or participates can be held liable as a joint tortfeasor. Kinzbach Tool Co. v. Corbett-
Wallace Corp., 160 S.W.2d 509, 514 (Tex. 1942). “Under Texas common law, if a
third party knowingly participates in a defendant's breach of a fiduciary duty owed to
a plaintiff, the third party is jointly liable with the defendant for damages to the
plaintiff proximately caused by this breach of fiduciary duty, and the plaintiff has the
same equitable remedies against the defendant and the third party based upon this
breach.” Hunter Bldgs. & Mfg., L.P. v. MBI Global, L.L.C., 436 S.W.3d 9, 15-16
(Tex. App. Houston 14th Dist. 2014). Thus, since Connolly and TGE worked together
as mutual agents and to profit off of the Appellants, they are jointly liable.
These actions caused the Appellants to lose their Facility, personal items,
equipment and the value of their services for the joint venture – directly to CSB and
40
TGE who profited off of the transaction. Affidavits. Clearly, Appellants suffered and
Appellees directly profited despite being in a fiduciary relationship. The evidence
shows at least a fact issue and this issue should be remanded for further proceedings.
Conversion
The Rushings owned equipment, personal items and various other items,
including a sound studio (the “Personal Items”), that was located at the Facility. CRI
1726-1730, 1608-1610. Only D&R Constructors signed the Deed of Trust, and
consequently that document only reaches personal property owned by D&R
Constructors. The Deed of Trust cannot reach the personal property of Appellants
Michael, Florence or Penn Rushing that was at the Property. In addition to the
personal property located at the Property, on January 28, 2013, this Court ordered
Appellants to return personal property which had been removed back to the Property
until a final disposition in this case. Some of the returned personal property belonged
to Michael Rushing. Id. Accordingly, they took possession of the Property, they also
took possession of Michael Rushing’s personal property – and were subject to the
injunction for the returned property as well as the property that had not been removed
which belonged to the Rushings. Since then, the property has not been returned to the
Rushing and much of that property has been disposed of and is no longer at the
Property. CRI 1609.
41
Connolly, personally and as agent and manager for CSB and TGF, had direct
control of the location and property for a period of time. CSB owned the Facility
under the TGE umbrella as shown above. The Personal Items have not been returned
and they were personal property of the Appellants. CRI 1726-1730, 1608-1610.
Appellees each had control over the item and have not returned them – in fact,
Appellees have claimed they trashed many of the personal items. Id. Accordingly,
there is at least a fact issues and this cause of action stands should stand as asserted.
Conspiracy
A cause of action for conspiracy requires: 1) two or more persons; 2) an object
to be accomplished; 3) a meeting of the minds on the object or course of action; 4) one
or more unlawful, overt acts; and 5) damages as a proximate result. Chon Tri v. J.T.T.,
162 S.W.3d 552, 556 (Tex. 2005).
Here, the basic elements are met since Connolly is an agent for all Appellees,
CSB, TGE and Connolly. Since each is charged with awareness, there is clearly a
meeting of the minds on any actions taken. So, the parties had a meeting of the minds
on the subject since they reached deals where money was paid and property was
transferred – to Appellees benefit and to Appellants harm. Affidavits; See Exhibit G
(CRI 1654). Damage is clear since the Appellants were deprived of their Property,
real and personal, in addition to their family business. CRI 1726-1730, 1608-1610;
42
Exhibit N, Expert Report (CRI 1688-1694). The only other element in question is
regarding the unlawful or overt acts which is addressed within the rest of the motion
(ie fraud exists therefore conspiracy to defraud exists and so on). Thus, for each
active cause of action, there is evidence that conspiracy stands.
In this matter, Smith did not directly participate in the fraud since he never had
direct contact with the Appellants. However, the emails and other evidence indicate
he is the puppet master of the entire conspiracy to defraud. Appellants propose that a
conspiracy to defraud cause of action should apply to a puppet master who is directing
the activities of others and profiting from their actions as was alleged in this matter.
As such, the cause of action for conspiracy to defraud should be extended to cover a
puppet master and this claim against Smith should be remanded for further
proceedings.
Tortious Interference
Tortious interference with contract requires: 1) a valid contract, 2) the defendant
willfully and intentionally interfered with the contract, 3) the interference proximately
caused the plaintiff’s injury, and 4) damage. Here, Appellants held a lease with the
joint venture, which leased the Property from D&R Constructors, Inc. Exhibit D (CRI
16291648). Appellants also held a joint venture contract with TGE. Exhibit E (CRI
43
1649-1651). Tortious interference requires only that the defendant had knowledge of
facts and circumstances that would lead a reasonable person to believe there was a
contract in which the party had an interest. Kelly v. Galveston County, 520 S.W.2d
507, 513 (Tex. Civ. App. Houston 14th Dist. 1975); see also, e.g., John Paul Mitchell
Sys. v. Randalls Food Mkts., 17 S.W.3d 721, 730 (Tex. App. Austin 2000). Here,
TGE, CSB and Connolly knew that Appellants and TGE were joint venture partners
and had a lease for the Property. Here, it is clear that if the lease had been paid, then
the foreclosure would be improper. By causing no payments, Connolly, CSB and
TGE interfered with the lease. Connolly and CSB also interfered with the BLOI by
causing it to never be memorialized as promised and doing other self dealing. CRI
1726-1730, 1608-1610., 1654-1686; exhibit G, L. Of course, planning to foreclose
fourteen days after signing the deal without advising the Appellants is also a violation
of disclosure, self dealing etc. CRI 1675; Exhibit J. Thus, there is at least a fact issue
and this Court should set aside the summary judgment on this issue.
By negotiating with Hendry and Smith, Connolly and CSB caused TGE to
breach the binding letter of intent, or the quasi contract status they were operating
under, and due to that interference, the Appellants failed to receive the value of the
contract and lost their real property, personal property and the labor they contributed
to the joint venture with TGE. CRI 1726-1730, 1608-1610.
44
Intentional interference requires that the defendant intend to interfere with the
contract. Southwestern Bell tel. Co. v. John Carlo Tex., Inc., 843 S.W.2d 470, 472
(Tex. 1992). For these purposes, the intent requirement includes inducing one party to
breach an existing contract. John Paul Mitchell Sys., 17 S.W.3d at 730-31. Here,
Brian Hendry knew that Appellants and TGE, and Appellants and the joint venture,
had contracts. CRI 1726-1730, 1608-1610; Exhibit E. Consequently, there is an issue
of fact regarding whether Brian Hendry’s offer to purchase the Property induced TGE
to breach the Binding Letter of Intent, and breach the lease as a joint venture partner.
Again, there are fact issues here that should be presented to a jury.
Point of Error Six
Point of Error: The district court committed error which caused the
rendition of an improper order when it entered sanctions in this matter.
There is a good-faith argument to extend existing law – therefore not “groundless”
A groundless pleading is one that has no basis in law or fact and is not
warranted by a good-faith argument for the extension, modification, or reversal of
existing law. TRCP13; GTE Comms Sys. V. Tanner, 856 S.W.2d 725, 730 (Tex.
1993). If there is sufficient basis to extend existing law to be applicable, the argument
is not groundless. Lake Travis ISD v. Lovelace, 243 S.W.2d 244, 254 (Tex.App.—
Austin 2007, no pet.). In this case, Appellants presented evidence showing Smith was
45
working with the other parties (emails showing meetings at his house, requesting
release on his behalf, referring to him as investor, etc.). RRII 2421-2445. Appellants
asserted that this situation, where a party interacts, or even controls, the other
members conducting the fraud, that a conspiracy cause of action is valid even if there
is no direct contact. While the Court is bound to follow current precedent, it is not
sanctionable to present a good faith argument to challenge current precedent. In this
case, if the fraud had been proven against the other members of the conspiracy, it
would have been irresponsible to not have included the person that appears to be the
puppet master. Thus, Appellants and Gore should have the opportunity to extend
current law to cover this situation – and not be sanctioned for such actions.
A review of the pleading show that the “Third Amended Claims” as referenced
in the Sanctions Order, only contains claims for conspiracy to commit fraud. The
pleading:
Page 3: Emails established assertions regarding meeting at Smith’s home were true
(also referenced on page 5) and the quoted language was in the email attached to
Response.
Page 4: Appellants presented transcript recording of Crawford negotiating to get
Smith and Hendry a release – just as asserted in the pleading.
Page 5: “On information and belief, Lester Smith orchestrated and directed the,
members of the Gulf Group to make the deal happen.” This assertion, while
admittedly in the fraud section, only asserts conspiracy.
Pages 14-15: The conspiracy section outlining the conspiracy allegation.
RRI 782-800. As such, if this Court finds that conspiracy to commit fraud should
46
apply to a puppet master who, while not directly committing fraud, directed the
actions of other who did and profited from it, then the sanctions order must be set
aside. Further, to set aside the sanctions order, it is not necessary for current law to be
extended – it only has to be found that there is a basis to put forth the argument.
Appellants believe it is proper to find a puppet master liable for conspiracy to commit
fraud. There is no bad faith here and no evidence was presented showing there was.
At the very least, it makes sense to include a puppet master and it is not bad faith to
present the argument for extending current precedent.
So, again, Appellants assert there was no bad faith involved. Appellants are
challenging existing law because it seems that a puppet master should have liability.
As such, the claims are neither groundless nor made in bad faith.
Sanction Excessive and No Evidence on Attorney’s Fees
Appellants object to any evidence presented regarding attorney’s fees because
Smith’s counsel rested their case before any such evidence was presented. RR pg. 69.
Claimant did not introduce evidence on attorney’s fees during his portion of the
hearing. Instead, there was testimony in between his closing and Gore’s conclusion –
which should not be considered evidence.
The testimony presented on attorney’s fees was for Hendry and Smith together.
There was no evidence of apportionment. Hendry, the other party represented, would
47
have required at least ninety percent of the same services (motions, appearances, etc.),
if not all. It would be unjust to let a sanction stand that covers his legal fees simply
because they had the same counsel. Further, the testimony on the stand contradicted
itself and shows all fees were attributable to Hendry, not Smith. In sum, the
sanction should not have been levied and it is definitely excessive. As such, it should
be set aside.
Point of Error Seven
Point of Error: The district court committed error which caused the
rendition of an improper order when it entered a judgment for attorneys’
fees without proper segregation or support and which contradicts case law
requiring trial on whether the attorney’s fees are reasonable and
necessary.
TGE and CSB are not entitled to the amount of attorney fees claimed, if entitled
to any fees at all. A party seeking recovery of attorney fees has the burden to show
that the claim is one for which attorney fees are permitted and that the fees were
incurred against the particular defendant sought to be charged. Koch Oil Co. v.
Wilber, 895 S.W.2d 854, 867 (Tex. App.—Beaumont 1995, writ denied). In this case,
they did not show proof that they properly segregated the attorney fees incurred in this
dispute. CRII 2696-2873. When a case involves more than one claim, fees may be
recovered only for those claims falling within the statute or contract. Tony Gullo
Motors I, L.P. v. Chapa, 212 S.W.3d 299, 310-11 (Tex. 2006); AU Pharm., Inc. v.
48
Boston, 986 S.W.2d 331, 336 (Tex. App.—Texarkana 1999, no pet.). Here, there
were multiple claims and causes of action and Appellees did not identify or attempt to
identify which fees were applicable to which cause of action, which party or anything.
Also, when a plaintiff seeks to charge multiple defendants with liability in one suit,
the plaintiff must segregate the fees so defendants are charged only for the fees for
which they are responsible. Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 10-11
(Tex. 1991), modified on other grounds, Tony Gullo Motors I, L.P. v. Chapa, 212
S.W.3d 299 (Tex. 2006). Here, there is no division of claims and no division of
Defendants. Id. In fact, there is no explanation as to how the claimed number was
determined. Id. Instead, they claim they believe it is reasonable – with no
explanation. Such a claim with no explanation or division is simply not proper.
Their request for attorney fees in the event of appeal fail for the same reason.
No division of claims or people and no explanation as to why such a number is
reasonable. If one cause of action is remanded, then the fees must be set aside because
it is impossible to tell which applies. This same argument is why the fees should just
be set aside – you cannot tell what they were awarded for or why. Appellants objected
to the affidavits because they are insufficient as a matter of law. They simply cannot
say it is reasonable in a self serving manner without explanation.
49
Attorney Fees Prohibited: Case law directly on point concludes attorney fees are not
proper in this situation:
Section 37.009 provides that "the court may award costs and reasonable and
necessary attorney's fees as are equitable and just" in a declaratory judgment
proceeding. Pursuant to Section 37.009, the judge is to determine whether an
award of attorney's fees is equitable and just; however, even when declaratory
relief has been determined by summary judgment, the issue of whether
attorney's fees are reasonable and necessary is a question of fact for the jury to
determine when the jury is the trier of fact. City of Garland v. Dallas Morning
News, 22 S.W.3d 351, 367 (Tex. 2000); Bocquet v. Herring, 972 S.W.2d 19,
20-21 (Tex. 1998).
Fuqua v. Oncor Elec. Delivery Co., 315 S.W.3d 552, 2010 Tex. App. LEXIS 2323
(Tex. App. Eastland 2010). Thus, no attorney fees should be granted without a trial in
this situation. Thus, all attorney fees should be set aside.
PRAYER
Appellants, D & R Constructors, Inc. (“D&R”), George W. Gore and Michael
Rushing, Stephanie Rushing, Penn Rushing and Florence Rushing (“Appellants”),
pray that the orders and judgment entered against Appellants from Cause No. 2013-
00543, Texas Gulf Energy, Inc. on Behalf of CS Bankers V, LLC and Texas Gulf
Fabricators v. Michael Rushing, Stephanie Rushing, Penn Rushing and Florence
Rushing, in the 270th District Court of Harris County, Texas, be set aside (including
all summary judgment orders, the final order including attorney’s fees, and the
sanctions order), that judgment be rendered in favor of Appellants on the issues of
50
foreclosure and quiet title, and, that the remaining causes of action be remanded to the
Trial Court with instructions to enter a new docket control order allowing a discovery
period of at least five months on the remaining causes of action before trial.
Respectfully submitted,
THE GORE LAW FIRM, P.C.
By:___/s/ George W. Gore____
George W. Gore
State Bar No. 24029582
6200 Savoy, Suite 1150
Houston, Texas 77036
(713) 224-2000
(713) 224-2004
51
APPENDIX
A. Orders: August 28, 2014; Order titled – CS Bankers’ Partial Summary
Judgment on Foreclosure; Doc # 62235529: CRI 593
B. October 31, 2014; Order titled - Final Summary Judgment; Doc # 63014312
(Smith); CRI 1580
C. November 14, 2014; Order titled – Order Granting Joint Motion for Entry of
Supplemental Order; Doc # 63213850: CRII 1944
D. November 19, 2014; Order titled - Final Summary Judgment; Doc # 63290903
(Hendry & TGF) : CRII 1946
E. December 17, 2014; Order titled – Order Granting Texas Gulf Energy, Inc.’s
Motion for Partial Summary Judgment on the “Letter of Intent”; Doc # 63638422:
CRII 1972
F. February 3, 2015; Order titled - Final Summary Judgment; Doc # 64155446:
CRII 2027
G. February 3, 2015; Order titled – Order Assessing Sanctions; Doc # 64155445:
CRII 2025
H. April 6, 2016; Order denying – Order Denying Appellants’ Motion for
Summary Judgment: CRI 976
I. April 13, 2015; Order titled – Final Judgment; Doc# 65332341: CRI 977
J. Appellee Summary Judgment Evidence: Posting Notice Letter
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CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the above and foregoing
instrument has been served upon all counsel of record, via hand delivery, facsimile
and/or electronic service, on this 5th day of October, 2015:
Gary Jewell
Adam L. Tepper
CHRISTIAN, SMITH & JEWELL, LLP
2302 Fannin, Suite 500
Houston, Texas 77002
713.659.7617 (telephone)
713.659.7641 (facsimile)
Paul J Dobrowski
Cody Stafford
DOBROWSKI, LARKIN & JOHNSON, LLP
4601 Washington Ave, Suite 300
Houston, Texas 77007
T (713)659-2900
F (713)659-2908
By: /s/George W. Gore
George W. Gore
CERTIFICATE OF COMPLIANCE
I hereby certify that this brief is under 15,000 words. The number is 14,753.
By: /s/George W. Gore
George W. Gore
53