Alma Investments, Inc. v. Bahia Mar Co-Owners Association, Inc. ( 2015 )

ACCEPTED
13-14-00428-cv
THIRTEENTH COURT OF APPEALS
CORPUS CHRISTI, TEXAS
5/15/2015 4:46:42 PM
DORIAN RAMIREZ
CLERK
NO. 13-14-00428-CV
__________________________________________________________________
FILED IN
13th COURT OF APPEALS
IN THE COURT OF APPEALS
CORPUS CHRISTI/EDINBURG, TEXAS
THIRTEENTH DISTRICT OF TEXAS 5/15/2015 4:46:42 PM
AT CORPUS CHRISTI / EDINBURG, TEXAS
DORIAN E. RAMIREZ
Clerk
__________________________________________________________________
ALMA INVESTMENTS, INC.,
Appellant,
v.
BAHIA MAR CO-OWNERS ASSOCIATION, INC.,
Appellee,
__________________________________________________________________
On Appeal From the 197th Judicial District Court
of Cameron County, Texas
__________________________________________________________________
BRIEF OF APPELLEE
__________________________________________________________________
LANCE A. KIRBY
State Bar No. 00794096
lakirby@jgkl.com
PAOLA R. GUERRERO
State Bar No. 24038929
pguerrero@jgkl.com
JONES, GALLIGAN, KEY & LOZANO, L.L.P.
Town Center Tower, Suite 300
2300 West Pike Boulevard
Post Office Drawer 1247 (78599-1247)
Weslaco, Texas 78596
Telephone: (956) 968-5402
Telecopier: (956) 969-9402
ATTORNEYS FOR APPELLEE,
BAHIA MAR CO-OWNERS ASSOCIATION, INC.
ORAL ARGUMENT REQUESTED
IDENTITY OF PARTIES AND COUNSEL
Appellant: Appellant’s Counsel:
Alma Investments, Inc. Richard B. Phillips, Jr.
THOMPSON & KNIGHT, LLP
One Arts Plaza
1722 Routh Street, Suite 1500
Dallas, Texas 75201
Telephone: (214) 969-1700
Telecopier: (214) 969-1751
rich.phillips@tklaw.com
Appellee: Appellee’s Counsel:
Bahia Mar Co-Owners Lance A. Kirby
Association, Inc. Paola R. Guerrero
JONES, GALLIGAN, KEY & LOZANO, L.L.P.
Town Center Tower, Suite 300
2300 West Pike Boulevard
Post Office Drawer 1247
Weslaco, Texas 78599
Telephone: (956) 968-5402
Telecopier: (956) 969-9402
lakirby@jgkl.com
pguerrero@jgkl.com
ii
TABLE OF CONTENTS
Identity of Parties and Counsel ................................................................................ ii
Table of Contents ............................................................................................ iii, iv, v
Index of Authorities .............................................................................. vi, vii, viii, xi
Statement of the Case ................................................................................................ x
Statement on Record References .............................................................................xi
Reply to Appellant’s Issues Presented ................................................................... xii
Statement of Facts ..................................................................................................... 1
Summary of the Argument ........................................................................................ 9
Argument and Authorities ....................................................................................... 11
Reply to Appellant’s Issue No. 1 ............................................................................. 11
A trial court’s ruling on a motion for sanctions is reviewable by an
appellate court for abuse of discretion. The trial court did not abuse its
discretion since it had the power to make the orders that Appellant
failed to follow and because the death penalty sanctions were clearly
justified as it was apparent that no lesser sanctions would promote
Appellant’s compliance with the Texas Rules of Civil Procedure. .............. 11
A. The two deposition orders cannot serve as a basis to attack the
death penalty sanctions. ...................................................................... 12
1. Appellant waived its right to object to the depositions. ........... 12
2. The two deposition orders were valid orders. ........................... 14
B. The trial court did not commit error by ordering the death
penalty sanctions because it considered the factors enumerated
iii
by the Texas Supreme Court to determine that the sanctions
were warranted. ................................................................................... 20
1. The death penalty sanctions directly relate to the
offensive conduct committed by Appellant. ............................ 21
2. The death penalty sanctions were not excessive relative
to Appellant’s wrongful conduct because the trial court
properly considered and ordered lesser sanctions prior to
imposing the death penalty sanctions. ..................................... 24
3. The death penalty sanction was appropriate because
Appellant’s conduct justified the presumption that its
defenses lacked merit. ............................................................... 29
Reply to Appellant’s Issue No. 2 ............................................................................ 31
Appellant’s Issue 2 should be overruled because the trial court did not
commit error by awarding attorney fees since the declaratory
judgment action requested independent relief and since the request for
attorney fees was not made moot by the sale of the property. ..................... 31
Reply to Appellant’s Issue No. 3 ............................................................................ 38
Whether the trial court erred by awarding prejudgment interest on the
attorney fee award is an issue of first impression in the Thirteenth
Court of Appeals. Neither the Texas Supreme Court nor this Court
have specifically determined whether an award of prejudgment
interest on attorney fees that have been paid to the date of judgment is
proper. ........................................................................................................... 38
Conclusion .............................................................................................................. 41
Prayer ....................................................................................................................... 41
Certificate of Compliance ....................................................................................... 42
Certificate of Service .............................................................................................. 43
iv
Appendix
1 — Commercial Contract dated November 20, 2009 ............................ Tab 1
2 — Order on Plaintiff’s Motion to Compel
(Supp. CR 271) ............................................................................. Tab 2
3 — Order Partially Granting Plaintiff’s Motion for Audit
(CR 29) ......................................................................................... Tab 3
4 — Order Granting Alternative Venue and Method of Depositions
(CR 27) .......................................................................................... Tab 4
5 — Order
(CR 30) .......................................................................................... Tab 5
6 — Order
(Supp. 281-282) ............................................................................. Tab 6
7 — Plaintiff’s Original Petition & Request for Disclosure ................... Tab 7
v
INDEX OF AUTHORITIES
Cases Page
A.V.I, Inc. v. Heathington, 842 S.W.2d 712
(Tex. App. – Amarillo 1992, writ denied) .................................................... 39
Allright, Inc. v. Van Scoyoc, 784 S.W.2d 942
(Tex. App. – Houston [14th Dist.] 1990, no writ) ........................................ 32
Allstate Ins. Co. v. Hallman, 159 S.W.3d 640
(Tex. 2005) .............................................................................................35, 36
Allstate Petrol. Operations, Inc. v. Morgan, No. 11-96-013-CV,
1996 WL 33674377, at *3 (Tex. App. – Eastland
Mar. 21, 1996, no writ) ................................................................................. 17
Alma Invs., Inc. v. Bahia Mar Co-Owners Ass'n, 999 S.W.2d 820
(Tex. App. – Corpus Christi 1999, pet. denied) ............................................. 1
In re Ampace Freightliners, Inc., No. 05-00-00371-CV, 2000 WL 354775
(Tex. App. – Dallas, April 7, 2000, no pet.) ................................................. 12
American Flood Research, Inc. v. Jones, 192 S.W.3d 581
(Tex. 2006) ................................................................................................... 13
Berry Property Management Inc. v. Bliskey, 850 S.W.2d 644
(Tex. App. – Corpus Christ 1993, writ dism’d by agr.) .........................10, 40
Bohmfalk v. Linwood, 742 S.W.2d 518
(Tex. App. – Dallas 1987, no writ) ............................................................... 12
Camarena v. Texas Emp’t Comm’n, 754 S.W.2d 149
(Tex. 1998) .............................................................................................35, 36
Carbona v. CH Med., Inc., 266 S.W.3d 675
(Tex. App. – Dallas, 2008, no pet.) .............................................................. 39
Cavnar v. Quality Control Parking Inc., 696 S.W.2d 549
vi
(Tex. 1985) ................................................................................................... 38
Chrysler Corp. v. Blackmon, 841 S.W.2d 844, 850
(Tex. 1992) ................................................................................................... 28
Cire v. Cummings, 134 S.W.3d 835
(Tex. 2004) ...........................................................................11, 26, 27, 28, 30
Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238
(Tex. 1985) ................................................................................................... 11
Etan Industries, Inc. v. Lehmann, 359 S.W.3d 620
(Tex. 2011) .......................................................................................34, 36, 37
Finley Oilwell Serv., Inc. v. Retamco Operating, Inc., 248 S.W.3d 314
(Tex. App. – San Antonio 2007, pet. denied) .........................................11, 20
First State Bank, Bishop v. Cappell & Handy, P.C., 729 S.W.2d 917
(Tex. App. – Corpus Christi 1987, writ ref’d n.r.e.) ..................14, 15, 19, 20
Fisher v. Cont’l Ill. Nat’l Bank & Trust Co. of Chi., 424 S.W.2d 664
(Tex. Civ. App. – Houston [14th Dist.] 1968, writ ref’d n.r.e.) ................... 14
Hansen v. JP Morgan Chase Bank, N.A., 346 S.W.3d 769
(Tex. App. – Dallas 2011, no pet.) .............................................32, 35, 36, 37
Hartford Casualty Insurance Co.v. Budget Rent-A-Car Systems, Inc.,
796 S.W.2d 763 ( Tex. App. – Dallas 1990, writ denied) ......................36, 37
Imagine Auto. Grp. v. Boardwalk Motor Cars, Ltd., 430 S.W.3d 620
(Tex. App. – Dallas 2014, pet. filed) ............................................................ 20
Kidd Pipeline & Specialties, Inc. v. Campagna, 712 S.W.2d 238
(Tex. App. – Houston [14th Dist.] 1986, writ ref’d n.r.e.) .....................14, 19
MBM Financial Corp. v. Woodlands Operating Co, 292 S.W.3d 660
(Tex. 2009) ................................................................................................... 34
MMR Intern. Ltd. v. Waller Marine, Inc., CIV.A. H-11-1188,
2013 WL 6491186, at *12 (S.D. Tex. Dec. 10, 2013) ................................. 38
vii
Marrs & Smith P’ship. v. D.K. Boyd Oil & Gas Co., Inc., 223 S.W.3d 1
(Tex. App. – El Paso 2005, pet. denied) ....................................................... 39
In re Nalle Family Limited Partnership, 406 S.W.3d 168
(Tex. 2013) ................................................................................................... 40
Nova Cas. Co. v. Turner Construction Co., 335 S.W.3d 698
(Tex. App. – Houston [14th Dist.] 2011, no pet.) ......................................... 38
Response Time v. Sterling Commerce (N. Am.), 95 S.W.3d 656
(Tex. App. – Dallas 2002, no pet.) ............................................................... 20
Sanus/N.Y. Life Health Plan, Inc. v. Dube-Seybold-Sutherland Mgmt., Inc.,
837 S.W.2d 191 (Tex. App. – Houston [1st Dist.] 1992, no writ) ............... 17
Thompson v. Dart, 746 S.W.2d 821
(Tex. App. – San Antonio 1988, no writ) ..................................................... 14
TransAmerican Natural Gas Corporation v. Powell, 811 S.W.2d 913
(Tex. 1991) .......................................................................................12, 28, 30
Universal Printing Co. v. Premier Victorian Homes, Inc. 73 S.W.3d 283
(Tex. App. – Houston [1st Dist.] 2001, pet. denied) .................................. 34
Weaver v. AIDS Services of Austin, Inc., 835 S.W.2d 798
(Tex. App. – Austin 1992, writ denied) ........................................................ 34
Will. v. Colthurst, 253 S.W.3d 353
(Tex. App. – Eastland 2008, no pet) ............................................................. 39
Statutory Authority
Declaratory Judgment Act ...............................................................9, 10, 35, 36, 37
Texas Civil Practice & Remedies Code
Section 37.009 ............................................................................................. 32
viii
Texas Property Code
Section 81.209 ........................................................................................2, 22
Section 81.209(c) ......................................................................................... 22
Section 82.057(a) ......................................................................................... 37
Rules and Regulations
Texas Rules of Civil Procedure
Rule 176.3 ..............................................................................................16, 18
Rule 192.6(a) ............................................................................................... 12
Rule 199.3 ..............................................................................................16, 18
Rule 199.2(b)(1) .......................................................................................... 15
Rule 199.2(b)(2) .......................................................................................... 16
Rule 199.2(b)(2)(B) ...............................................................................15, 18
Rule 199.2(b)(2)(C) ...............................................................................15, 16
Rule 199.2(b)(2)(E) ...............................................................................15, 16
Rule 199.4 ..............................................................................................12, 13
ix
STATEMENT OF THE CASE
Nature of the case. This dispute involves Alma Investments, Inc.’s
(hereinafter “Alma” or “Appellant”) inappropriate
collection and use of maintenance fees, inappropriate
charging of management fees, and its breach of the
declaration restrictions for the Bahia Mar Resort. (Supp.
CR 103-104.)
Course of Proceedings. The trial court imposed death penalty sanctions against
Appellant by striking its answer and all of its defenses,
and entering a default judgment against it as to liability
due to its violation of three discovery orders. (CR 173-
175.) Two of the orders violated were sanctions orders
pertaining to the depositions of Appellant’s sole owner
and sole officers. (CR 30; CR 66-68; Supp. CR 281-282;
App. 5, 6.) The third was an order for production of
accounting records, audit of Appellant’s financial records
and an order for a monetary deposit. (CR 29; App. 2, 3.)
Trial Court Disposition. After a jury trial on damages, Bahia Mar Co-Owner’s
Association, Inc. (hereinafter “Bahia Mar” or
“Appellee”) was awarded actual damages and
prejudgment interest for Appellant’s breach of fiduciary
duty, attorney fees under the Declaratory Judgment Act,
and prejudgment interest on the attorney fees paid up to
the date of judgment. (2d Supp. CR 4.)
x
STATEMENT ON RECORD REFERENCES
Appellant is Alma Investments, Inc. (hereinafter “Alma” or “Appellant”).
Appellee is Bahia Mar Co-Owners Association, Inc. (hereinafter “Bahia Mar” or
“Appellee”). The record on this appeal consists of a Clerk’s Record, Supplemental
Clerk’s Record, Second Supplemental Clerk’s Record, Reporter’s Record, and
Supplemental Reporter’s Record. The Clerk’s Record will be hereinafter referred
to as “CR [page]”. The Supplemental Clerk’s Record will be hereinafter referred
to as “Supp. CR [page]”. The Second Supplemental Clerk’s Record will be
hereinafter referred to as “2d Supp. CR [page]”. The Reporter’s Record will
hereinafter be referred to as “[volume] RR [page]”. The Supplemental Reporter’s
Record will hereinafter be referred to as “[volume] Supp. RR [page]”. References
to Appellee’s appendix will be designated as “App. [tab]”.
xi
REPLY TO APPELLANT’S ISSUES PRESENTED
REPLY TO APPELLANT’S ISSUE 1
A trial court’s ruling on a motion for sanctions is reviewable by
an appellate court for abuse of discretion. The trial court did not abuse
its discretion since it had the power to make the orders that Appellant
failed to follow and because the death penalty sanctions were clearly
justified as it was apparent that no lesser sanctions would promote
Appellant’s compliance with the Texas Rules of Civil Procedure.
Appellant’s Issue 1 should be overruled.
REPLY TO APPELLANT’S ISSUE 2
Appellant’s Issue 2 should be overruled because the trial court
did not commit error by awarding attorney fees since the declaratory
judgment action requested independent relief and since the request for
attorney fees was not made moot by the sale of the property.
REPLY TO APPELLANT’S ISSUE 3
Whether the trial court erred by awarding prejudgment interest
on the attorney fee award is an issue of first impression in the
Thirteenth Court of Appeals. Neither the Texas Supreme Court nor
this Court have specifically determined whether an award of
prejudgment interest on attorney fees that have been paid to the date
of judgment is proper.
xii
STATEMENT OF FACTS
This case is not the first case between these same parties to reach the court
of appeals.1 The first case involved the issue of whether Alma could own numerous
condominium units and exempt itself from paying maintenance fees for upkeep of
the common facilities while charging all of the other condominium owners. This
court held that Alma must pay its share of the fees and that it was against public
policy to allow Alma to exempt itself. Alma never followed the court’s decision
and operated the Bahia Mar Maintenance Association improperly which resulted in
the filing of this suit.
This appeal arises out of a lawsuit filed on July 20, 2006, in the 197th
Judicial District of Cameron County by the co-owner’s association of the Bahia
Mar Resort against the Bahia Mar Maintenance Association (hereinafter
“BMMA”) and Appellant. (CR 22.) Appellant is the former owner of both the
Resort and of BMMA. (Supp. CR 103; Supp. CR 109; Supp. CR 239.) The basis of
the lawsuit involved Appellant’s inappropriate collection and use of the
maintenance fees paid by each co-owner’s association member to BMMA and
Appellant’s breach of the declaration restrictions. (Supp. CR 103-104.)
Specifically, Bahia Mar alleged that Appellant and BMMA failed to properly
maintain, manage and insure the Bahia Mar Resort common facilities, in addition
1
The first case between these parties was Alma Invs., Inc. v. Bahia Mar Co-Owners Ass'n, 999
S.W.2d 820, 822 (Tex. App. – Corpus Christi 1999, pet. denied).
1
to commingling funds and expenses between them and charging fees for the
purported services provided. (Supp. CR 110-112.) Bahia Mar further alleged that
Alma failed to allow the owners to vote on officers and directors as required by
Texas law. (Supp. CR 112-113.) While the underlying lawsuit was pending,
Appellant sold the Bahia Mar Resort for $10,000,000.00 in late 2009 early 2010.
(App. 1; 4 Supp RR 22-23.)
During the litigation, Bahia Mar sought an audit of the financial records of
BMMA. (Supp. CR 315.) On January 19, 2010, the trial court ordered an audit
under Texas Property Code § 81.209 for the years 2000-2008. (Supp. CR 318.)
Appellant and BMMA ignored the order which required Bahia Mar to compel the
audit. (Supp. CR 271.) After a hearing, Alma was ordered to deposit $10,000.00
into the registry of the court and to produce all books and records for BMMA for
the period of 2004-2008 to the auditor by April 30, 2010. (App. 2; Supp. CR 271.)
The audit was first conducted for the year 2004 and the results were
provided to Bahia Mar on December 9, 2011. (Supp. CR 313.) Amongst other
things, the audit revealed serious problems with the booking and accounting of
BMMA and revealed that Alma had not fulfilled its fiduciary obligations due to the
lack of proper documentation, the absence of an annual audit and the lack of timely
accountability to the owners. (Supp. CR 335-336.) Alma failed to comply with the
court’s order to turn over the accounting records which made it impossible to
2
conduct a true audit. (Supp. CR 322-323.) The auditor for the 2004 audit stated, in
part, that:
ALMA did an inadequate job of managing the financial, budgeting
and accounting matters of BMMA. . . .Based on the results of our
special audit procedures, the lack of proper documentation for the
expenses, the absence of an annual audit, and the lack of timely
accountability to the unit owners, we do not believe Alma fulfilled its
fiduciary obligations.
(Supp. CR 335.) Based on the results of this audit, Bahia Mar filed a Motion to
Enforce Order Granting Plaintiff’s Motion for Audit, seeking the audit of the
records for the other years as had been previously ordered in January 2010. (Supp.
CR 312.) On April 11, 2012, the trial court granted Bahia Mar’s motion and
ordered the financial books and records of BMMA to be audited for the year 2005.
(CR 29; App. 3.) In addition, Appellant was ordered to deposit $20,000.00 with the
registry of the court to pay the court appointed auditor. (CR 29; App. 3.) Appellant
failed and refused to comply with this order. More than a year after the date for
compliance, their counsel claimed (without providing any evidence) that it did not
have the funds to make the deposit. (2 Supp. RR 10-11; 5 Supp. RR 19.) This
claim is highly suspect considering the property sold for $10,000,000.00, most of
which went directly to Alma related to its 501(c)(3) sale, as noted on the settlement
statement. (App. 1.) Alma never challenged the court order that required an audit
and never took any action to comply with it. In addition to failing to produce
documentation related to the audit and failing to pay for the audit, Alma refused to
3
make its corporate representatives, sole owner and officers available for
deposition.
While Alma was ignoring the audit order, Bahia Mar attempted to depose
Alma’s sole owner, Kahil Pakideh and his son Martin Pakideh who was the only
other corporate officer. (CR 27; CR 30; Supp. CR 281-282; App. 4, 5, 6.) These
depositions are the subject of three separate orders signed by the trial court. (CR
27; CR 30; Supp. CR 281-282.; App. 4, 5, 6.)
The first order was entered on December 6, 2011 and granted an alternative
venue and method of taking the depositions. (CR 27; App. 4.) As stated therein, the
depositions of the Pakidehs were to be taken “in the place of each deponent’s
residency, or via telephone or video conferencing technology acceptable to the
Court.” (CR 27; App. 4.) Based on this order, counsel for Bahia Mar made
numerous efforts to schedule the depositions. (Supp. CR 346; Supp. CR 348; Supp.
CR 350-351.) However, Alma refused to cooperate in getting the depositions
scheduled using alternate means. (Supp. CR 346; Supp. CR 348; Supp. CR 350-
351; 2 Supp. RR 22-23.)
On August 23, 2013, a status hearing was held at which the trial court had
discussion pertaining to Appellant’s failure to comply with the December 6th
discovery order and Bahia Mar’s need for the depositions. (2 Supp. RR 21-30.)
Alma had its in-house counsel, Josh Farr present for the hearing as a representative
4
of Alma, but not as its counsel. (2 Supp. RR 5.) Counsel for Bahia Mar informed
the trial court that the Pakidehs’ depositions were necessary because the corporate
representative that had previously been produced by Alma did not have knowledge
of events prior to 2008. (2 Supp. RR 25-26.) Bahia Mar’s counsel additionally
stated that he would be willing to depose the witnesses at the Brownsville,
Cameron County office of counsel for Klas Management, if Mr. Sorola (who was
representing Klas Management) was ultimately retained by Alma. (2 Supp. RR
26.) The depositions of the Pakidehs were being discussed as corporate
representative depositions since the previous corporate representatives had no
knowledge of Alma’s operations prior to 2008. (2 Supp. RR 22.)
At the status hearing, the trial court ordered the depositions of Appellant’s
two owners as corporate representatives to be held in Hidalgo County, essentially
as sanctions for Appellant’s failure to cooperate in working out video conferencing
for the depositions.2 (2 Supp. RR 26-30.) This second order was signed on
September 6, 2012 (although orally ordered on August 23, 2012), and stated that
the depositions of Kahil Pakideh and Martin Pakideh were to be held on September
28, 2012 at the law offices of Jones, Galligan, Key & Lozano, L.L.P., in Weslaco,
Texas, unless agreed otherwise. (2 Supp. RR 29-30; CR 30; App. 5.) After
2
The trial judge emphasized that the order was necessary because the parties had not been able
to come to an agreement in spite of the court’s attempt to accommodate Appellant as best as it
could. (2 Supp. RR 29-30.)
5
ordering the depositions, the court took up the motion to withdraw filed by Kevin
Landau as to his representation of Alma and granted his withdrawal. (2 Supp. RR
37-38.) Alma was present for the hearing through its in-house counsel Josh Farr,
and thus, received notice of the court’s order. (2 Supp. RR 35-37.) During the
hearing, the trial court also imposed a date by which Appellant was to hire new
counsel within 10 days of August 23, 2012. (2 Supp. RR 37-38.) Appellant failed
to hire new counsel until three weeks after the date it was ordered to do so even
though in-house counsel was present for the court’s order. (CR 32; CR 67.)
Additionally, appellant failed to tender the witnesses for the September 28, 2012
depositions. (CR 67.) Furthermore, appellant failed to object to the depositions or
file a motion to quash the depositions that were scheduled for September 28, 2012.
After the Pakidehs failed to appear for their depositions, Plaintiff, on
October 25, 2012, noticed the depositions of Defendant’s Corporate
Representatives Kahil Pakideh and Martin Pakideh. (CR 56-58; CR 63-65.) That
same day, Appellant filed its Motion to Quash Plaintiff’s Notice of Oral Deposition
of Defendant’s Corporate Representative Kahil Pakideh and its Motion to Quash
Plaintiff’s Notice of Oral Deposition of Defendant’s Corporate Representative
Martin Pakideh. (CR 52-58; CR 59-65.) In response, Bahia Mar filed a Motion for
Contempt and Motion for Sanctions on October 30, 2012, for violation of the
previous deposition order and violation of the audit order. (CR 66.)
6
On November 13, 2012, Appellant filed affidavits on behalf of Martin
Pakideh and Kahil Pakideh in support of the October 25th motions to quash their
depositions. (CR 77-80; CR 81-84.) The affidavits were never offered into
evidence nor did the court take judicial notice of them. Thereafter, on November
19, 2012, Plaintiff noticed a third corporate representative (Kahil and Martin
Pakideh being the first two) deposition without naming the person. (CR 88-91.) As
a result, Alma filed another motion to quash the third corporate representative
deposition on November 27, 2012. (CR 85-95.) Bahia Mar filed its Plaintiff’s
Response to Defendant’s Motion to Quash Depositions on December 11, 2012,
stating that Alma’s corporate representative had never been deposed on the topics
requested by the November 19th deposition notice and that the owner(s) of Alma
were the only persons with knowledge of when and why the company had been
dissolved. (CR 96-97.)
On December 18, 2012, the court signed the third deposition order which
stated that the depositions of Kahil Pakideh and Martin Pakideh were to be held on
January 25, 2013, again at the law offices of Jones, Galligan, Key & Lozano,
L.L.P. (Supp. CR 281-282; App. 6.) The trial court explicitly found at the hearing
on the matter that the Pakidehs transacted business in Cameron County and could
be ordered to be deposed. (4 Supp. RR 42-43.) The trial court denied Alma’s
7
motions to quash the depositions.3 (Supp. CR 281-282; App. 6.) Nevertheless,
Appellant did not make its witnesses available for their depositions as ordered. (CR
152; CR 155.)
On January 30, 2013, Plaintiff filed its First Amended Motion for Contempt
and Motion for Sanctions for Violation of Court Orders, complaining about
Appellant’s failure to comply with the court’s two discovery sanctions orders and
the audit order. (CR 131.) On May 16, 2013, the trial court granted the motion and
entered the Order on Plaintiff’s Motion for Contempt and Motion for Sanctions
(the “Sanctions Order”). (CR 173-175.) By the Sanctions Order, the trial court
imposed death penalty sanctions against Alma, striking its answer and all of its
defenses and entering a default judgment against it as to liability on Bahia Mar’s
remaining claims of breach of fiduciary duty and declaratory judgment. (CR 173.)
Alma did not challenge the Sanctions Order, and trial on the issue of
damages was begun on January 21, 2014. (1 RR 3.) On the date of trial, however,
Alma filed an Original Writ of Mandamus and Motion for Emergency Relief in
this Court, complaining about the death penalty sanctions. The writ and motion
were denied that same day by Justices Rodriguez, Garza and Perkes in a per curiam
opinion. The next day, after trial had commenced, Alma filed a Petition for Writ of
3
A review of the transcript of the December 13, 2012 hearing shows that Appellant neither
offered the Pakidehs’ affidavits into evidence, nor did the trial court take judicial notice of them.
(2 Supp. RR 1-40.)
8
Mandamus and Motion for Emergency Relief with the Texas Supreme Court. The
Court denied the petition for writ and motion on February 28, 2014.
The trial court entered judgment for Bahia Mar after the jury trial on
damages. (2d Supp. CR 4.) Bahia Mar was awarded actual damages and
prejudgment interest for Alma’s breach of fiduciary duty, attorney fees under the
Declaratory Judgment Act, and prejudgment interest on the attorney fees paid by
Bahia Mar up to the date of judgment. (2d Supp. CR 4.) Thereafter, Alma’s second
motion for new trial was denied and this appeal followed. (CR 238.)
SUMMARY OF ARGUMENT
Appellant’s violation of the audit order and deposition orders justified the
death penalty sanctions entered by the trial court. Alma violated the trial court’s
April 2012 order by failing to produce its accounting records and by failing to
deposit $20,000 with the registry of the court so that a court supervised audit of its
financial records could be conducted. Alma did not challenge the order nor did it
explain why it failed to comply. In addition, Alma violated the trial court’s
September 2012 and December 2012 discovery orders by failing to make its
witnesses available for deposition in Hidalgo County, even though these orders
were entered as sanctions for its failure to comply with a discovery order that
allowed the depositions to be taken at their convenience. Prior to the entry of the
Sanctions Order, these depositions and audit were the subject and cause of
9
numerous delays, motions to compel, motions for continuance, and hearings.
(Supp. CR 338; Supp. CR 356; 2 Supp. RR 21-31; 3 Supp. RR 39-65.) Based on
Appellant’s flagrant disregard for the trial court’s orders and the Rules of
Procedure, in addition to thwarting Bahia Mar’s attempts at establishing its liability
and damages, the trial court’s imposition of the death penalty sanctions was “just.”
The attorney fees awarded to Bahia Mar under the Declaratory Judgment
Act (hereinafter “DJA”) are appropriate. Bahia Mar asserts that the award of
attorney fees by the trial court was proper, as the death penalty sanctions
conclusively established Appellant’s liability under the DJA prior to the award,
and the dispute over the attorney fees was a live controversy before the trial court.
The DJA was not used as a vehicle to obtain attorney fees. The DJA action sought
different relief than the relief sought under other causes of action. Whether the
award of prejudgment interest of the attorney fees that had been paid (as opposed
to awards in contingency cases) to the date of judgment should be upheld,
however, is an issue of first impression in the Thirteenth Court of Appeals. While
other appellate courts in this State have found awards of prejudgment interest on
such attorney fees to be proper, neither this Court’s decision in Berry Property
Management Inc. v. Bliskey, 850 S.W.2d 644 (Tex. App. – Corpus Christ 1993,
writ dism’d by agr.), nor decisions made by the Texas Supreme Court directly
address this issue.
10
ARGUMENT AND AUTHORITIES
REPLY TO APPELLANT’S ISSUE 1
A trial court’s ruling on a motion for sanctions is reviewable by
an appellate court for abuse of discretion. The trial court did not abuse
its discretion since it had the power to make the orders that Appellant
failed to follow and because the death penalty sanctions were clearly
justified as it was apparent that no lesser sanctions would promote
Appellant’s compliance with the Texas Rules of Civil Procedure.
Appellant’s Issue 1 should be overruled.
Whether a trial court abused its discretion is not based on whether the
reviewing court believes the facts present an appropriate case for the trial court’s
action, but “whether the court acted without reference to any guiding rules and
principles.” Cire v. Cummings, 134 S.W.3d 835, 838 (Tex. 2004) (quoting Downer
v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241 (Tex. 1985)). When
reviewing a trial court’s imposition of sanctions, appellate courts view conflicts in
the light most favorable to the trial court’s ruling, and resolve all inferences in
favor of the trial court’s judgment. Finley Oilwell Serv., Inc. v. Retamco
Operating, Inc., 248 S.W.3d 314, 319 (Tex. App. – San Antonio 2007, pet.
denied). Reversal of a trial court’s ruling on a motion for sanctions is warranted
only if the court’s ruling was arbitrary or unreasonable. Cire, 134 S.W.3d at 838.
The record in this case demonstrates that Appellant’s wrongful conduct and
flagrant disregard for the trial court’s orders during the course of the litigation
warranted the death penalty sanctions. Moreover, the record demonstrates that the
11
trial court properly considered the factors enumerated by the Texas Supreme Court
in TransAmerican Natural Gas Corporation v. Powell, 811 S.W.2d 913 (Tex.
1991) when ordering the sanctions. As a result, the trial court did not abuse its
discretion in imposing the death-penalty sanctions against Appellant.
A. The two deposition orders cannot serve as a basis to attack the death penalty
sanctions.
Appellant’s attack of the deposition orders as a means to challenge the death
penalty sanctions is meritless. Contrary to Appellant’s argument, the two orders
mandating the depositions to be held in Hidalgo County were proper orders.
Furthermore, by failing to object to the depositions ordered at the August 23, 2012,
hearing, Appellant waived any objection to the time and place of the depositions
and cannot now complain.
1. Appellant waived its right to object to the depositions.
To object to the time and place designated for an oral deposition, the party or
witness must file a motion for protective order or a motion to quash the notice of
deposition. Tex. R. Civ. P. 192.6(a), 199.4. A party objecting to the deposition has
a duty to object as soon as possible and the objection must be made before the date
and time of the deposition. Bohmfalk v. Linwood, 742 S.W.2d 518, 520 (Tex. App.
– Dallas 1987, no writ) (holding that the witness waived any objection to the
deposition by failing to object prior to the date of the deposition); In re Ampace
12
Freightliners, Inc., No. 05-00-00371-CV, 2000 WL 354775 (Tex. App. – Dallas,
April 7, 2000, no pet.) (not designated for publication) (concluding that the party
waived any objection to the deposition notice or duces tecum because it was
required to raise any objection at or before the time of the deposition). If the
motion is filed by the third business day after service of the notice of deposition, an
objection to the time and place of the deposition stays the oral deposition until the
motion can be determined. Tex. R. Civ. P. 199.4
Here, the trial court ordered the date and place of the Pakidehs’ depositions
during the status hearing held on August 23, 2012, at which in-house counsel for
Appellant was present. (2 Supp. RR 26-27.) The order that was signed on
September 6, 2012, specified that the depositions were to be held on September 28,
2012, at 9:00 am at the law offices of Jones, Galligan, Key & Lozano, L.L.P., in
Weslaco, Texas, unless agreed otherwise. (CR 30; App. 5.) Appellant did not
object to the time or place of these depositions as allowed by the Rules, and chose
instead to simply ignore the trial court’s order. See American Flood Research, Inc.
v. Jones, 192 S.W.3d 581, 584 (Tex. 2006) (noting that counsel should have moved
to stay the depositions as allowed by the Rules and holding that sanctions against
counsel were appropriate for employees’ failure to appear at scheduled
depositions).
13
In fact, Appellant did not object to the depositions until October 25, 2012,
after it received Bahia Mar’s subsequent deposition notices for the same
depositions that had already been ordered once before. (CR 30; CR 56-58; CR 63-
65; CR 52-58; CR 59-65; App. 5.) Consequently, Appellant waived its right to
object the depositions and cannot now complain that the orders were invalid and
the sanctions for its failure to comply with the orders are not warranted. Even if
this court finds that the objections to the depositions were not waived, the trial
court entered appropriate orders for these depositions.
2. The two deposition orders were valid orders.
The rules as to the taking of depositions vest broad discretion in the trial
court. Fisher v. Cont’l Ill. Nat’l Bank & Trust Co. of Chi., 424 S.W.2d 664, 670
(Tex. Civ. App. – Houston [14th Dist.] 1968, writ ref’d n.r.e.). The trial court has
broad discretion to determine whether a deposition should be taken and can control
the time, place, and manner of taking depositions. Thompson v. Dart, 746 S.W.2d
821 (Tex. App. – San Antonio 1988, no writ). Because a trial court has great
latitude in ordering discovery, such orders should not be reversed absent an abuse
of discretion. First State Bank, Bishop v. Cappell & Handy, P.C., 729 S.W.2d 917,
922 (Tex. App. – Corpus Christi 1987, writ ref’d n.r.e.); Kidd Pipeline &
Specialties, Inc. v. Campagna, 712 S.W.2d 238, 241 (Tex. App. – Houston [14th
Dist.] 1986, writ ref’d n.r.e.).
14
The Texas Rules of Civil Procedure provide the locations where the
deposition of a witness can be taken. For corporate representative depositions
under 199.2(b)(1), the depositions may be taken in the county of suit. Tex. R. Civ.
P. 199.2(b)(2)(C). Bahia Mar was seeking to take the Pakidehs’ depositions as
corporate representatives. (2 Supp. RR 22.) It is important to note that Bahia Mar’s
need for these corporate representative depositions stemmed, in part, from the fact
that the corporate representative that had been designated by Alma did not have
information prior to 2008. (2 Supp. RR 25-26.) After the Pakidehs failed to appear
for the court ordered depositions on September 28, 2012, the corporate
representative notices were sent out again. (CR 56-58; CR 63-65.) Appellant
attempted to quash the notices, but Appellant’s motions to quash were denied. (CR
281-282; 4 Supp. RR 48-49.)
The fact that the depositions were not ordered to occur in Cameron County,
as required under either Rule 199.2(b)(2)(B) or (b)(2)(C), but in the adjoining
county of Hidalgo, does not mean the orders were improper. The trial court was
authorized to order the depositions be held at any other convenient location. See
Tex. R. Civ. P. 199.2(b)(2)(E). And the record demonstrates that the trial court
considered the convenience of the Pakidehs when ordering the location of the
depositions. (4 Supp. RR 43-44.) See Tex. R. Civ. P. 199.2(b)(2)(E). Thus, the trial
court was authorized to order the depositions to take place in Hidalgo County, even
15
though it was not the county of suit. See First State Bank, Bishop, 729 S.W.2d at
922-923 (holding that the order requiring the company chairman to appear at a
location outside the county of suit was reasonable because the witness had been
difficult and the court had gone to great lengths to oblige the company and
chairman). Since the depositions were noticed as corporate representative
depositions (Alma did not object to the failure to include topics), the place for the
depositions was appropriate under the rules and the court’s findings.
Even if this Court ignores the fact that the depositions were noticed as
corporate representatives, the depositions were appropriate for other reasons.
Under Rule 199.2(b)(2), the deposition of a witness can be held in “the county
where the witness is employed or regularly transacts business in person.” Tex. R.
Civ. P. 199.2(b)(2)(B). If the witness is a “party or a person designated by a party”
to testify on its behalf, the deposition can be taken in the county of suit. Tex. R.
Civ. P. 199.2(b)(2)(C). The deposition can also be held “at any other convenient
place directed by the court in which the cause is pending.” Tex. R. Civ. P.
199.2(b)(2)(E). In addition, if the witness “is a party or is retained by, employed
by, or otherwise subject to the control of a party,” the Rules allow the witness to be
deposed at those same locations, in addition to any other location permitted under
Rule 199.2(b)(2). See Tex. R. Civ. P. 176.3, 199.3.
16
Based on its broad discretionary power, the authority granted by the Rules,
and the evidence before it, the trial court determined that Appellant’s witnesses
could be deposed in Hidalgo County. The trial court was the trier of fact upon the
issues of control over the witnesses, the extent to which they transacted business in
the county, and the reasonableness of the place designated for the taking of their
depositions. See Allstate Petrol. Operations, Inc. v. Morgan, No. 11-96-013-CV,
1996 WL 33674377, at *3 (Tex. App. – Eastland Mar. 21, 1996, no writ) (not
designated for publication) (citing Sanus/N.Y. Life Health Plan, Inc. v. Dube-
Seybold-Sutherland Mgmt., Inc., 837 S.W.2d 191, 199 (Tex. App. – Houston [1st
Dist.] 1992, no writ). In that role, the trial court could draw reasonable inferences
from the evidence presented. See id. With regard to Alma’s two owners, the trial
court explicitly found that:
[Y]our people, for better or for worse, owned property in Cameron
County that got itself into litigation. So your people are here in
Cameron County, and need to --- they are a corporation, and these are,
I believe, people they control.
(3 Supp. RR 42.)
[F]rom what I understand, . . . I am under the impression that the main
thing, this will be what qualifies as a small business, and they had a
number of people down here, and the people that basically owned the
corporation were on the ground, manager, local management, and
they were involved in it.
(3 Supp. RR 44.) Based on the evidence, the trial court determined that the
Pakidehs were under the control of Alma and were involved in managing the
17
corporation. See Tex. R. Civ. P. 176.3, 199.3. The trial court also determined that
the evidence supported a finding that the Pakidehs transacted business in person in
Cameron County. See Tex. R. Civ. P. 199.2(b)(2)(B). Accordingly, the trial court
stated:
[T]he court is going to deny the motion to quash. In so doing, I’m
taking into account those matters that have been raised today as well
as things that have been raised in the past relative to this issue where
this issue has been both procedurally litigated in recent months and,
secondly, on the issue of whether or not – because the Pakidehs raise
issues in their affidavits about the extent of their involvement with the
company Alma, the defendant, one of the defendants, the court is
going to take into account everything that has transpired in this case.
From the beginning the court has heard numerous hearings on
numerous things, witnesses under oath. And to the extent there has
been testimony in those matters referencing Pakideh this and Pakideh
that and so forth. The Court takes all that into account and does find
that these individuals have sufficient connection with the actual
portion of parts of this case that may involve them as witnesses, that
they do have sufficient knowledge to be required to attend. They were
doing business in Cameron County. And I’m going to order their
depositions to occur.
(4 Supp. RR 42-43.) Although it was not admitted into evidence, Martin Pakideh
specifically acknowledged in his affidavit that as an owner of Alma, he was
involved with the property. (CR 79.) Similarly, Khalil Pakideh’s purported
affidavit (also not admitted into evidence and signed by Klas Management LLC)
admitted that he visited the property approximately 3 times a year for 5 days to
make sure it was “in good shape” and admitted that he was the sole owner. (CR
84.)
18
Thus, based on the trial court’s findings and the Rules, the trial court was
authorized in ordering the Pakidehs be deposed in Texas. Furthermore, trial court
orders mandating depositions in circumstances similar to those here, where the
overall nature and circumstances of the cause of action make it necessary to depose
the witness as the sole possessor of certain corporate knowledge, have been found
to be proper. See Kidd Pipeline & Specialties, Inc., 712 S.W.2d at 241 (finding that
the former president of the company could be deposed in spite of claims that the
she was not a party to the lawsuit).
It is clear that this is not a situation where the trial court abused its discretion
by ordering the deposition of a non-resident, non-party witness be held in a place
not authorized by Rule 199.2, as is claimed by Appellant. Nor is this a situation
warranting reversal of the sanctions due to an invalid deposition order. In fact,
appellate courts have affirmed the imposition of sanctions against corporate
entities where their witnesses have failed to comply with deposition orders that
were found to be valid. See First State Bank, 729 S.W.2d at 920-922 (holding that
the failure to comply with discovery requests and the trial court’s orders permitting
the deposition of the company chairman justified sanctions); Kidd Pipeline &
Specialties Inc., 712 S.W.2d 238, 241-242 (holding the trial court did not abuse its
discretion in dismissing the case due to the witness’ failure to comply with
discovery requests and court orders).
19
Because the deposition orders entered by the trial court in this case were
proper, Appellant’s argument that the death penalty sanctions order should be
vacated fails.
B. The trial court did not commit error by ordering the death penalty sanctions
because it considered the factors enumerated by the Texas Supreme Court to
determine that the sanctions were warranted.
Discovery sanctions serve three purposes: (1) to secure the parties’
compliance with the discovery rules; (2) to deter other litigants from violating the
discovery rules; and (3) to punish parties who violate the discovery rules. Imagine
Auto. Grp. v. Boardwalk Motor Cars, Ltd., 430 S.W.3d 620, 633 (Tex. App. –
Dallas 2014, pet. filed); Response Time v. Sterling Commerce (N. Am.), 95 S.W.3d
656, 659 (Tex. App. – Dallas 2002, no pet.). In assessing sanctions, the trial court
may consider everything that has occurred during the litigation. Finley Oilwell
Serv., Inc. v. Retamco Operating, Inc., 248 S.W.3d 314, 319 (Tex. App. – San
Antonio 2007, pet. denied); First State Bank, Bishop v. Cappell & Handy, P.C.,
729 S.W.2d 917, 921 (Tex. App. – Corpus Christi 1987, writ ref’d n.r.e.). Here, the
record demonstrates that the death penalty sanctions were warranted because
Appellant had so abused the rules of procedure, in spite of the trial court’s
imposition of lesser sanctions, that its position could be presumed to lack merit and
it would have been unjust for it to have been allowed to present it.
20
1. The death penalty sanctions directly relate to the offensive conduct
committed by Appellant.
The trial court did not abuse its discretion because the record shows that the
sanctions directly related to Appellant’s offensive conduct and its disregard for
three court orders.
The death penalty sanction was, in part, a final sanction for Appellant’s
failure to comply with two prior deposition sanctions orders and an audit order.
(CR 173-174.) Notably, Appellant did nothing to attack the two discovery orders
or audit order. Instead, Appellant simply ignored the court’s mandates, causing
significant delays in the proceeding. (Supp. CR 340-341; Supp. CR 358-359; 2
Supp. RR 21-22; 3 Supp. RR 40-42.) In addition, Appellant’s actions ultimately
prevented Bahia Mar from obtaining information that was essential to its claims
and which could only be provided by the Pakidehs. For example, since Alma
allegedly “no longer exists” as of 2012, no persons other than the Pakidehs could
provide information regarding the entity and its financial status. (CR 84, 96-97.)
And although the deposition of a corporate representative had been taken, the
record shows that the person designated did not have information prior to 2008. (2
Supp. RR 25-26.)
The death penalty sanction was also imposed due to Appellant’s failure to
comply with the order for audit of BMMA’s financial records. (CR 29; CR 173-
21
174; Supp. CR 271; App. 2, 3.) Similar to the deposition orders, Appellant’s failure
prevented Bahia Mar from obtaining essential information to its lawsuit. In
addition to failing to pay for the audit, Alma was ordered to turn over accounting
documents which it never did. (Supp. CR 271.) The results of the audit were
necessary for Bahia Mar to determine if money had been comingled, if it had been
properly accounted for, if the financial statements were accurate, if the expenses
had been comingled and if Alma took money from BMMA. (Supp. CR. 340.)
Based on the results of the previous year’s audit, it was clear that the 2005 audit
would have contained information relevant to its claims. Moreover, Bahia Mar was
entitled to the information by law under the Texas Property Code Ann. § 81.209,
which states that “the books and records of a condominium regime must comply
with good accounting procedures and must be audited at least once a year by an
auditor who is not associated with the condominium regime.” Tex. Prop. Code
Ann. § 81.209(c) (West 2014). Appellant’s counsel claimed (without providing
any evidence) that it did not comply with the order because it did not have the
financial ability to do so, and that it was denied its constitutional due process rights
as a result. However, Alma should have been obtaining and paying for an audit of
the financial records of BMMA on an annual basis under Texas law without being
court-ordered to do so, and its failure to comply with its legal obligation cannot be
the basis for such a claim. (Appellant’s Brief at 24) (5 Supp. RR 23.) Moreover,
22
the veracity of Appellant’s claim is highly questionable given that it sold the Bahia
Mar Resort for $10,000,000.00.4 (5 Supp. RR 22; App. 1.) Because Appellant
refused to make its witnesses available for deposition, Bahia Mar was also denied
the opportunity to obtain essential information regarding Alma’s ability to pay for
the audit and its use of those sale proceeds. 5 (CR 99; CR 103-106; 5 Supp. RR 22.)
It is clear from the record that the sanction bore a direct relationship to the
abuse committed by Appellant and to its flagrant disregard for the trial court’s
orders. Appellant’s actions in refusing to make its witnesses available for
deposition and refusing to conduct an audit and to turn over its financial records
hindered the discovery process, caused significant delays, and ultimately thwarted
Bahia Mar’s efforts to establish Alma’s liability and damages. As a result, the trial
court found that:
There is a direct relationship between the sanction and the offensive
conduct in that Alma has been previously ordered to remit $20,000.00
into the registry of the Court to pay for a court ordered audit of their
books. For more than one year, Alma has failed and refused to remit
such funds. . . . The Court also finds that Alma’s refusal to abide by
Court orders requiring depositions has prevented Plaintiff from
obtaining discovery that it is entitled to obtain. Alma should not be
4
The sale of the Bahia Mar Resort is now the basis of a separate lawsuit styled Bahia Mar Co-
Owners Association, Inc. v. MSP Partners Realty, LLC, et al., Cause No. 2014-DCL-04099, in
the 197th Judicial District of Cameron County, in which Bahia Mar asserts that the sale proceeds
were fraudulently transferred. (App. 7.)
5
In fact, the record shows that Appellant attempted to use to its benefit Bahia Mar’s lack of
evidence regarding the Pakidehs’ ownership of Alma and the sale of the Bahia Mar Resort. (5
Supp. RR 23-26.)
23
allowed to present defenses when it refuses to abide by discovery
orders and other orders of the court.
(CR 174.) The finding in the Sanctions Order that the failure to comply with the
three discovery orders was directly attributable to Alma is also supported by the
record. (CR 174; 5 Supp. RR 52-53.) Appellant was not only the entity owned by
the deponents, but it was also the entity that owned and controlled BMMA. (Supp.
CR 103.) Therefore, the death penalty sanction was properly directed against the
abuse committed by Alma and towards remedying the prejudice caused Bahia Mar
by its actions.
2. The death penalty sanctions were not excessive relative to Appellant’s
wrongful conduct because the trial court properly considered and
ordered lesser sanctions prior to imposing the death penalty sanctions.
Appellant claims that the death penalty sanctions were excessive because the
trial court neither considered nor ordered lesser sanctions before entering the death
penalty sanctions. This claim is not supported by the record and consequently,
fails.
In support of its argument that the sanctions were excessive, Appellant states
that there were a number of lesser sanctions that would have been effective.
(Appellant’s Brief at 25.) However, the record demonstrates that none of the lesser
sanctions suggested by Appellant would have achieved their purpose. Appellant
argues that the trial court could have ordered the Pakidehs to be deposed by
24
telephone, videoconference or in Michigan. (Appellant’s Brief at 25.) However,
this is exactly what the trial court ordered in the original discovery order that
Appellant ignored. (CR 27; App. 4.) Appellant also argues that Alma could have
been ordered to pay for Bahia Mar’s counsel to travel to Michigan to take the
depositions. (Appellant’s Brief at 26.) However, counsel for Bahia Mar made that
same request to Appellant and Appellant did not agree or even attempt to come to
agreeable terms regarding the request. (Supp. CR 346; Supp. CR 348; Supp. CR
350.) Furthermore, by this time, Alma’s counsel was taking the position that Alma
was unable to pay for anything. An order to pay for travel expense would have also
been ignored. Additionally, Appellant argues that the trial court could have
excluded testimony from either of the Pakidehs unless they agreed to be deposed in
Texas. (Appellant’s Brief at 27.) Excluding their testimony would not have cured
the problem. Bahia Mar wanted and was entitled to their testimony. Their
testimony would have supported Bahia Mar’s case. (CR 30; Supp. CR 281-282;
App. 6.) In regard to the order for audit, Appellant argues that Bahia Mar could
have paid for it itself. (Appellant’s Brief at 28.) However, Texas law required
Appellant to conduct the audit and the fact that it was requested in litigation does
not change that. Additionally, Alma never provided the financial records they were
ordered to provide so there was nothing to audit. (Supp. CR 271; App. 2.)
25
Appellant then states that the trial court could have ordered discovery to
determine Alma’s ability to pay for the audit. (Appellant’s Brief at 28.) However,
Bahia Mar attempted to obtain this information through the Pakidehs’ court-
ordered depositions that did not occur. (CR 99; CR 103-106; 5 Supp. RR 22.)
Finally, Appellant argues that the sanction could have been limited to its books and
records for 2005. (Appellant’s Brief at 28.) However, the record shows that
Appellant’s misconduct extended past the 2005 audit, as Appellant ignored an
order for audit of years 2000-2008.6 (Appellant’s Brief at 28; Supp. CR 318.) Thus,
it is clear that the lesser sanctions suggested by Appellant would not have been
effective.
Turning toward the actions taken by the trial court, the Sanctions Order
reflects a finding that the sanction was no more severe than necessary. (CR 174.)
The record shows that the trial court considered other lesser sanctions before
imposing the death penalty sanctions, but determined that those would not have
been effective. See Cire v. Cummings, 134 S.W.3d 835, 840 (Tex. 2004) (stating
that “the trial court must analyze the available sanctions and offer a reasoned
explanation as to the appropriateness of the sanction imposed.”). For example, the
trial court found that due to Alma’s having failed for more than one year to remit
the funds ordered for the audit, “monetary sanctions against Alma are not
6
Appellant incorrectly states that Bahia Mar “never sought an audit for any other year.”
(Appellant’s Brief at 28.)
26
effective.” (CR 173-174.) The trial court also found that due to Appellant’s
“egregious misconduct,” a sanction lesser than the death-penalty sanctions could
not be imposed. (CR 174.) The Sanction Order states:
A lesser sanction cannot be imposed because Alma committed
egregious misconduct in failing to comply with three separate court
orders. This Court considered lesser sanctions, but they would not
have been effective. Monetary sanctions would not be effective
because Alma has failed and refused to pay $20,000.00 to the registry
of the Court to conduct another year’s audit, and counsel for Alma has
stated that Alma does not have the ability to pay any monetary
sanctions. Further, Mr. Pakideh has stated in his affidavit filed
November 12, 2013, that ‘Alma no longer exists.’ A lesser sanction of
again ordering the witnesses to appear for depositions would not be
effective as that has been ordered twice, and Alma has not complied
with this order.
(CR 174.)
In addition, the Sanctions Order reflects a finding that lesser sanctions had
been ordered against Appellant prior to it being subjected to the death penalty
sanctions.7 (CR 174 at paragraph b.) Because the trial court recognized that
Appellant failed to comply with the two deposition sanctions orders, it
consequently found that “[t]hose orders were not sufficient as sanctions as the
witnesses failed to appear for their depositions.” (CR 174; 5 Supp. RR 26-27.)
Thus, the record shows that the trial court properly ordered lesser sanctions.8 The
7
Consequently, a finding by the trial court that the misconduct was of the exceptional nature that
would have allowed it to impose death penalty sanctions without trying lesser sanctions first, as
required by Cire, was not necessary. (Appellant’s Brief at 30.)
8
The record even shows that Appellant considered as sanctions the order requiring the deposit of
$20,000 into the registry of the court. (5 Supp. RR 19.)
27
trial court was not required to order every lesser sanction that could possibly be
imposed before imposing death penalty sanctions. See Cire v. Cummings, 134
S.W.3d 835, 842 (Tex. 2004).
The situation here is not like that found in either TransAmerican Natural
Gas Corporation v. Powell, 811 S.W.2d 913 (Tex. 1991) or Chrysler Corp. v.
Blackmon, 841 S.W.2d 844, 850 (Tex. 1992), cases relied upon by Appellant,
where the trial court failed to consider or even test lesser sanctions. See
TransAmerican Natural Gas Corp., 811 S.W.2d at 918 (additionally finding that
no determination was made regarding whether the party or its attorney was at fault
for the discovery abuse); Chrysler Corp., 841 S.W.2d at 850 (finding no direct
relationship between the conduct and the sanction, that the sanction was excessive,
and no evidence to support that the defenses lacked merit). Instead, the record here
demonstrates that the trial court did not abuse its discretion because it not only
considered the availability of lesser sanctions, but also ordered other lesser
sanctions, and found that those sanctions were ineffective. (CR 174; 5 Supp. RR
52.) Furthermore, the Sanction Order contains an “extensive, reasoned explanation
of the appropriateness of the sanction imposed, demonstrating that the trial court
considered the availability of less stringent sanctions,” as required. See Cire, 134
S.W.3d at 843.
28
Consequently, the record and Sanctions Order reflect that due to Appellant’s
misconduct and flagrant disregard for the three court orders, the ineffectiveness of
ordering the witnesses to appear for deposition for the fourth time, and the fact that
Appellant claims that it does not have the ability to pay any monetary sanctions
and continued to refuse to produce accounting records as ordered, the death penalty
sanctions ordered in this case were not excessive.
3. The death penalty sanction was appropriate because Appellant’s
conduct justified the presumption that its defenses lacked merit.
Appellant’s argument that its conduct did not support a presumption that its
defenses lacked merit also fails. By claiming that Bahia Mar should have taken
different action with regard to the depositions and audit, minimizing the effect of
the 2004 audit results, disregarding that it was required under Texas law to obtain
(and pay for) the 2005 audit requested, and ignoring the fact that it had previously
been granted the opportunity to have the depositions taken at their convenience,
Appellant’s argument fails. (Appellant’s Brief at 32-35.) Regardless of Appellant’s
characterization of the events, the fact is that Appellant violated three court orders,
two of which were imposed as lesser sanctions. (CR 174 at paragraph b.) Due to
Appellant’s actions, the trial court correctly determined that Appellant’s conduct
justified the presumption that its defenses lacked merit. Accordingly, the Sanctions
Order states:
29
Alma’s conduct justifies the presumption that its defenses lack merit.
Alma has refused to allow the depositions of owners of Alma in this
case. In affidavits filed with the court on November 12, 2013, Khalil
Pakideh and Martin Pakideh acknowledge that they were owners of
Alma and state that Alma no longer exists. Alma has refused to allow
another audit to be conducted. In the audit that was conducted for the
2004 year the court appointed auditor, Moises Gomez, on October 10,
2011, concluded as follows: ‘Based upon the results of our special
audit procedures, the lack of proper documentation of expenses, the
absence of an annual audit, and the lack of timely accountability to the
unit owners, we do not believe Alma fulfilled its fiduciary
obligations.’ Alma’s failure to allow additional audits and the failure
to appear for depositions justifies the death penalty sanctions.
(CR 174.) Consequently, the facts and circumstances of this case meet the Texas
Supreme Court’s directive when it stated that:
Discovery sanctions cannot be used to adjudicate the merits of a
party’s claims or defenses unless a party’s hindrance of the discovery
process justifies a presumption that its claims or defenses lack merit.
However, if a party refuses to produce material evidence, despite the
imposition of lesser sanctions, the court may presume that an asserted
claim or defense lacks merit and dispose of it.
Cire, 134 S.W.3d at 839 (quoting TransAmerican Natural Gas Corp., 811 S.W.2d
at 918). This is exactly what happened in this case. Alma was ordered in 2010 to
produce its books and records for the 2004-2008 time period. (Supp. CR 271; App.
2.) Alma did not even provide the records for the audited year of 2005 and
provided nothing for the remaining years. (Supp. CR 322-323.) Because the record
demonstrates that Alma refused to make its witnesses available for deposition and
refused to allow an audit of its financial records despite the imposition of lesser
30
sanctions, the trial court did not abuse its discretion in imposing the death penalty
sanctions.
REPLY TO APPELLANT’S ISSUE 2
Appellant’s Issue 2 should be overruled because the trial court
did not commit error by awarding attorney fees since the declaratory
judgment action requested independent relief and since the request for
attorney fees was not made moot by the sale of the property.
The relief requested by the declaratory judgment was a substantial reason for
the filing of the lawsuit and the claim makes clear that one of the major issues
involved was the owners’ right to vote on directors and officers of BMMA.
Plaintiff’s 10th Amended Petition states:
Taxation without representation…the founding bedrock of the United
States of America…the reason for the revolution. The thirteen British
colonies and citizens of America grew weary of paying taxes to Great
Britain while not having any representatives in the British Parliament.
Great Britain was happy to tax the colonies but refused to give them
any political voice for their taxes. Alma Investments has taken a
similar approach since the year 2000 after the judgment of the Court
became final on appeal. Alma Investments did not like the Court’s
ruling requiring it to pay its share of maintenance fees. Since that
time, Alma Investments has ruled as a dictator while taking money
from owners in the form of assessments. Since the ruling on the
previous case became final, Alma Investments has refused to give any
voice or any vote to the persons who are paying these assessments.
Such conduct violates public policy and violates the spirit of the
condominium act, and this conduct as well as the poor management
(occurring after the previous judgment) has forced the filing of this
subsequent lawsuit.
Appellant’s liability under the declaratory judgment act was established
prior to trial at the time the death penalty sanctions were ordered. (CR 173.) When
31
a default judgment is rendered, the defendant’s liability for all causes of action
pled is conclusively established and all allegations of fact in the petition, except the
amount of damages, are deemed admitted. See Allright, Inc. v. Van Scoyoc, 784
S.W.2d 942, 945 (Tex. App. – Houston [14th Dist.] 1990, no writ). Therefore,
Appellant’s liability under the DJA, and thus, Bahia Mar’s right to the declaration
granted, was conclusively established before the damages and attorney fees were
awarded.
At the time of trial, the only issue involving the declaratory relief requested
was the amount of fees that should be awarded to Bahia Mar through its request for
attorney fees under the DJA. (CR 173.) Under the Act, “the court may award costs
and reasonable and necessary attorney’s fees as are equitable and just.” Tex. Civ.
Prac. & Rem. Code Ann. § 37.009 (West 2008). A party to a declaratory judgment
action is not required to prevail to recover an award of attorney fees. Hansen v. JP
Morgan Chase Bank, N.A., 346 S.W.3d 769, 773 (Tex. App. – Dallas 2011, no
pet.). However, as Appellant’s liability was established by the death penalty
sanctions, the trial court did not err in awarding Bahia Mar its attorney fees as the
prevailing party to the action.
Appellant’s arguments that the declaratory judgment claim was used as a
vehicle to obtain otherwise impermissible fees and that there was no real
controversy between the parties also fail to establish Appellant’s right to relief.
32
First, the record does not support the argument that the claim was made solely to
obtain the fees. As demonstrated by Bahia Mar’s 10th Amended Petition, the
declaratory judgment claim sought specific relief, separate and apart from the relief
sought by the claim for breach of fiduciary duty. The declaratory judgment action
sought the right to vote and a declaration
that the Maintenance Association as run by Alma is contrary to public
policy and void in that it does not provide for officers and a board
with voting rights being granted pro-rata to its members in accordance
with the square footage that they lease.
(Supp. CR 114.) On the other hand, the breach of fiduciary claim asserted that
Alma breached its fiduciary duty
by using Maintenance Association funds to pay the bills of Alma
Investments, by comingling Maintenance Association funds with
those of Alma Investment, by failing to property maintain the
common elements of the Maintenance Association, by overcharging
the owners, and by failing to pay its own dues.
(Supp. CR 120.) and
by failing to obtain insurance on the common elements which caused
damage when there was no insurance for the damage caused by
Hurricane Dolly.
(Supp. CR 121.) Clearly, the declaratory judgment claim does not merely duplicate
the issues litigated in the breach of fiduciary duty claim. A determination that
Appellant violated Texas law by not allowing members of BMMA to vote is
neither related or necessary to a determination that Appellant breached its fiduciary
duty to those members through its mishandling of BMMA’s financial and
33
maintenance issues. The breach of fiduciary claim could not have achieved the
equitable result that Texas law required. The owners had the right to vote which
was being denied to them. Unlike the circumstances in Etan Industries, Inc. v.
Lehmann, 359 S.W.3d 620 (Tex. 2011) and MBM Financial Corp. v. Woodlands
Operating Co, 292 S.W.3d 660 (Tex. 2009), cases relied on by Appellant, the
declaratory claim here was not used for the sole purpose of obtaining an award of
attorney fees.9 See Etan Indus. Inc., 359 S.W.3d at 624 (finding that the declaratory
judgment duplicated the trespass claim by declaring that neither the easements nor
the pole attachment agreements gave the right to place lines on the properties);
MBM Fin. Corp., 292 S.W.3d at 671 (finding that the declarations about timely
notice and designation of a return location were part of the contract claim). Since
Bahia Mar’s pleadings demonstrate that the issues involved with its claims are not
duplicative, Appellant’s argument cannot be a basis to conclude that the award was
erroneous.
Next, Appellant argues the declaratory judgment claim was “merely
pretextual” because there was no real controversy between the parties at the time of
9
Instead, the situation here can be more likened to that in Universal Printing Co. v. Premier
Victorian Homes, Inc. 73 S.W.3d 283 (Tex. App. – Houston [1st Dist.] 2001, pet. denied) and
Weaver v. AIDS Services of Austin, Inc., 835 S.W.2d 798 (Tex. App. – Austin 1992, writ denied).
Although Appellant cited these to support its position, the appellate court in each case rejected
the argument that the declaratory judgment claim was used solely as a means to obtain attorney’s
fees and found that its use was appropriate. See 73 S.W.3d at 296 (holding that the declaratory
judgment action was appropriate); 835 S.W.2d at 803 (rejecting the appellant’s attempt to
characterize the declaratory judgment action as a means of providing an “avenue to attorney’s
fees”.)
34
trial. While it is true that Alma sold the Bahia Mar property for $10,000,000.00 in
2010, and it is true that the new owner is allowing the owners to vote, that did not
make the dispute over attorney fees moot. (App. 1.) Alma never allowed the
owners to vote and never agreed that it had an obligation to do so. Regardless, a
dispute over attorney fees is a “live controversy” that prevents a declaratory
judgment claim from becoming moot. See Camarena v. Texas Emp’t Comm’n, 754
S.W.2d 149, 151 (Tex. 1998); Allstate Ins. Co. v. Hallman, 159 S.W.3d 640, 642-
643 (Tex. 2005); Hansen v. JP Morgan Chase Bank, N.A., 346 S.W.3d 769, 773
(Tex. App. -Dallas 2011, no pet.). The 10th Amended Petition specifically sought
an award of attorney fees pursuant to the Declaratory Judgment Act. (Supp. CR
124.) At the time of the trial on damages, Bahia Mar continued to seek those
attorney fees and continues to assert its entitlement to the award in this appeal.
Thus, Bahia Mar’s claim for those fees is a live controversy.
The situation here is similar to that in Hansen v. JP Morgan Chase Bank,
N.A., 346 S.W.3d 769, 773 (Tex. App. – Dallas 2011, no pet.). In that case, the
executor of a homeowner’s estate filed a declaratory judgment action against the
members of the homeowner’s family and a prospective buyer of the homeowner’s
house, seeking a declaration that it had authority to sell the house. Id. at 771-772.
Prior to the day of trial, the homeowner’s son dropped his objections to the sale
and after being assigned the rights in the contract for sale by the buyer, became the
35
ultimate purchaser of the property. Id. at 772. As a result, the plaintiff amended its
petition and withdrew its declaratory judgment claim, but continued to seek
attorney fees. Id. The trial court awarded the fees, and upon the defendants’
complaints, the appellate court was faced with determining whether the plaintiff’s
claim for the fees prevented the declaratory judgment action from becoming moot
when the house was sold. Id. at 772-773. After analyzing the Supreme Court’s
decisions in Camarena and Allstate Insurance Co., the court concluded that those
cases “stand for the proposition that a case under the Declaratory Judgment Act
remains a live controversy, even if all requests for substantive declaratory relief
become moot during the action’s pendency, as long as a claim for attorneys’ fees
under the Act remains pending.” Id. at 774-775. Thus, the court determined that the
plaintiff’s claim for attorney fees kept the claim from becoming moot even though
the homeowner’s son dropped his objection to the sale and the house was sold
prior to trial. Id. at 775. Alma never allowed voting. It simply sold the property,
however, the claim for attorney fees remained after the sale.
Like in Hansen, Bahia Mar’s declaratory judgment claim was not moot, in
spite of the change in Alma’s involvement with the Bahia Mar Resort. The
decisions in Etan Industries, Inc. and Hartford Casualty Insurance Co.v. Budget
Rent-A-Car Systems, Inc., 796 S.W.2d 763 ( Tex. App. – Dallas 1990, writ denied),
cases relied upon by Appellant, do not change this result. First, the court in each of
36
those cases concluded that the declaratory judgment claims were merely
duplicative of the other claims asserted. See Etan Indus. Inc., 359 S.W.3d at 624;
Hartford Cas. Ins. Co., 796 S.W.2d at 772 (noting that the plaintiff had no need for
declaratory relief because a “declaratory relief plea may not be coupled to a
damage action simply in order to pave the way to recover attorney fees”). Indeed,
the court in Hansen noted that cases in which the declaratory judgment claim
duplicated other claims were distinguishable from the case before it. See Hansen,
346 S.W.3d at 775. Second, the courts in Etan Industries, Inc. and Hartford
Casualty Insurance Co. did not consider the issue of whether the plaintiff’s claim
for attorney fees under the Declaratory Judgment Act prevented the claim from
becoming moot, as is the case here. See Hansen, 346 S.W.3d at 775.
Consequently, the trial court did not err in awarding attorney fees and
Appellant’s Issue 2 should be overruled. The finding in the court’s judgment to the
effect that “Alma's operation of the Maintenance Association violated Texas law in
that Alma did not allow members of the Association to vote or have a voice in the
Maintenance Association” is, at worst, an unnecessary finding by the court. Under
Texas law, this finding is certainly correct. See Tex. Prop. Code Ann. § 82.057(a)
(West 2014). Appellant argues that the finding is moot because Alma had sold the
property. Even if that is the case, the request for attorney fees related to the
declaratory judgment action was not moot.
37
REPLY TO APPELLANT’S ISSUE 3
Whether the trial court erred by awarding prejudgment interest
on the attorney fee award is an issue of first impression in the
Thirteenth Court of Appeals. Neither the Texas Supreme Court nor
this Court have specifically determined whether an award of
prejudgment interest on attorney fees that have been paid to the date
of judgment is proper.
Appellant complains in its third issue that prejudgment interest was
improperly awarded because the attorney fees that had been paid up to the date of
judgment are not damages. This is an issue of first impression in the Thirteenth
Court of Appeals.
In Cavnar v. Quality Control Parking Inc., 696 S.W.2d 549 (Tex. 1985), the
Texas Supreme Court held that “a prevailing plaintiff may recover prejudgment
interest compounded daily (based on a 365-day year) on damages that have
accrued by the time of judgment.” (italics in original). Based on this holding,
awards of prejudgment interest on attorney fee awards have been affirmed by
appellate courts in this state. For example, the court in Nova Cas. Co. v. Turner
Construction Co., 335 S.W.3d 698, 706 (Tex. App. – Houston [14th Dist.] 2011, no
pet.) held that prejudgment interest is allowed on awards of attorney fees where
there is evidence that the fees have already been paid. This case was cited with
approval by the Federal Southern District of Texas in MMR Intern. Ltd. v. Waller
Marine, Inc., CIV.A. H-11-1188, 2013 WL 6491186, at *12 (S.D. Tex. Dec. 10,
2013) when applying Texas law to award prejudgment interest on the attorney fees
38
that had been paid before the entry of judgment. Similarly, the court of appeals in
Williams v. Colthurst, 253 S.W.3d 353, 362 (Tex. App. – Eastland 2008, no pet)
found that the trial court had not erred in awarding prejudgment interest on the
attorney fees that had been paid prior to the entry of judgment. And in A.V.I, Inc. v.
Heathington, 842 S.W.2d 712 (Tex. App. – Amarillo 1992, writ denied), the court
found that the award of prejudgment interest on the attorney fees paid by the time
of judgment was “entirely proper.” See also Marrs & Smith P’ship. v. D.K. Boyd
Oil & Gas Co., Inc., 223 S.W.3d 1, 25-26 (Tex. App. – El Paso 2005, pet. denied)
(recognizing that prejudgment interest on attorney fees paid at the time of
judgment is recoverable and therefore, limiting the award accordingly).
The circumstances underlying the award of prejudgment interest to Bahia
Mar mirror those in the foregoing cases. Bahia Mar had paid its attorney fees and
provided evidence of those statements at the trial. (3 RR 85-90.) The judgment
reflected prejudgment interest only on the attorney fees that had been paid up to
the date of judgment. (2d Supp. CR 4.) Based on the weight of authority,10 the trial
court did not err in awarding prejudgment interest on Bahia Mar’s “damages” –
attorney fees that had been paid up to the time of trial.
10
The only Texas Court of Appeals that has denied prejudgment interest on attorney fees where
the fees were paid before trial is the Fifth Court of Appeals. See Carbona v. CH Med., Inc., 266
S.W.3d 675, 688 (Tex. App. – Dallas, 2008, no pet.)
39
Appellant argues that this Court should reverse the attorney fee award and
affirm its holding in Berry Property Management Inc. v. Bliskey, 850 S.W.2d 644
(Tex. App. – Corpus Christ 1993, writ dism’d by agr.); however, the facts of that
case are distinguishable from those here. That case involved an award of
prejudgment interest for attorney fees that had not been paid prior to judgment.
Thus, Berry Property Management Inc. did not address the situation at hand.
Nor has the Texas Supreme Court directly addressed the issue. In In re Nalle
Family Limited Partnership, 406 S.W.3d 168 (Tex. 2013), a case relied on by
Appellant, the Court held that attorney fees were neither compensatory damages
nor costs for purposes of suspending enforcement of a money judgment under
Texas Civil Practice & Remedies Code § 52.006. Id. at 176. Although it did not
specifically address the issue of prejudgment interest, the Court stated that attorney
fees are not “damages.” Id. at 173. Consequently, how In re Nalle Family Limited
Partnership, Cavner, Berry Property Management Inc., and case law from the
appellate courts in Texas affirming awards of prejudgment interest on attorney fees
that had been paid up to the time of trial should apply here is an issue for this Court
to decide. Appellant notes that the cases awarding prejudgment interest on attorney
fees were decided before the Supreme Court held that attorney fees are not
damages in a different context. However, since the issue has not been decided in
40
the Corpus Christi court of appeals, Appellee leaves this issue of first impression in
this court’s capable hands.
CONCLUSION
The law and the record demonstrate that the trial court did not abuse its
discretion in ordering the death penalty sanctions against Appellant. Appellant’s
violation of three court orders not only hindered the discovery process, but it also
prevented Bahia Mar from obtaining evidence essential to its case and caused
significant delays in the proceedings. Most importantly, it also demonstrated
Appellant’s flagrant disregard for the Texas Rules of Civil Procedure and for the
authority of the trial court for a period of over 3 years. The record shows that the
sanction was directly related to Appellant’s wrongful conduct, that it was not
excessive because lesser sanctions were considered and ordered, and that
Appellant’s conduct warranted a presumption that its defenses lacked merit.
Consequently, the trial court’s imposition of death penalty sanctions and award of
attorney fees was not error.
PRAYER
For the reasons stated herein, Appellee, Bahia Mar Co-Owner’s Association,
asks the Court to overrule Appellant, Alma Investments Inc.’s issues and that it
affirm the judgment of the 197th Judicial District Court of Cameron County, and
grant any other relief to which it may show itself justly entitled.
41
Respectfully submitted,
By: /s/ Lance A. Kirby
LANCE A. KIRBY
State Bar No. 00794096
lakirby@jgkl.com
PAOLA R. GUERRERO
State Bar No. 24038929
pguerrero@jgkl.com
JONES, GALLIGAN, KEY & LOZANO, L.L.P.
Town Center Tower, Suite 300
2300 West Pike Boulevard
Post Office Drawer 1247 (78599-1247)
Weslaco, Texas 78596
Telephone: (956) 968-5402
Telecopier: (956) 969-9402
COUNSEL FOR APPELLEE
BAHIA MAR CO-OWNERS
ASSOCIATION, INC.
CERTIFICATE OF COMPLIANCE
As required by Texas Rule of Appellate Procedure 9.4(i)(3), I certify that
this document was produced on a computer using Microsoft Word 2010 and
contains approximately 10,208 words as determined by the computer software’s
word-count function, excluding the sections of the document listed in Texas Rule
of Appellate Procedure 9.4(i)(1).
/s/ Lance A. Kirby
LANCE A. KIRBY
42
CERTIFICATE OF SERVICE
As required by Texas Rules of Appellate Procedure 6.3 and 9.5(b), (d), (e), I
hereby certify that I have served the foregoing instrument on all parties – which are
listed below – on this 15th day of May, 2015, in the manner indicated:
Dorian E. Ramirez, Clerk VIA ELECTRONIC FILING
Thirteenth Court of Appeals
Administration Building
100 E. Cano, 5th Floor
Edinburg, Texas 78539
Richard B. Phillips, Jr. VIA ELECTRONIC SERVICE
THOMPSON & KNIGHT, LLP
One Arts Plaza
1722 Routh Street, Suite 1500
Dallas, Texas 75201
Telephone: (214) 969-1700
Telecopier: (214) 969-1751
rich.phillips@tklaw.com
/s/ Lance A. Kirby
LANCE A. KIRBY
43
TAB
1
Gommercial Contract for 63(30 Padre Boulevard, South Padre islahd, Texas
GOMWIERGIAL CONTRACT - liyiPRC^EO PF^f^RTY
BAHIA MAR HOTEL RESORT «^<®NFeRENOE RENTER
This Gommercial GontraQt for Improved Property {"Agreemenf) is made effective: tills of Noyember. 2Q09
("EffectiveDate*').
1. PARTIES: Seller agrees, to sell andconvey to Buyer the Pcppejly described In PgraSraph% Buyer agrefes to .buy the
Property from Seller for the sales price stated In Paragraph. 3. The partjes.tothis .cohtrect are:
Seller: WISP Partners Reaify, LLC. (fOFmeriy known as Alma Investments,^ Iiie.)
Address: mpakldehiikiasmanagemenkcom;
Phone: {246) 203-2128 Fax: (246) 203-24#6
klandau(5)klasmanaaement.CQm
Buyer NewBaHla lWarDeVelopmehty
Address: 36Q5 Booa Ciilca, Suite 11. Brownsville, Texas 78521
Phone: 1956) ^3731 Fax: 5##65
dsanGhez@swlz.eem
2. PROPERTY:
A. "Property" means-that real property, and all linprovemettls, .eqoiprnent.and perpphal.
situated In South Padre Island, Ganneron County, Texas at .Bpu^vardirS^oath Pad" Island, Gamefoh
County, Texas.and that Is legally described on the attaehed Exhibit A the sdrvey oflhe Property Is a
hereto as Exhibit B.
B, Sellerwill sell and conveythe Property together with
(1) all buildings, improvements, and fixtures;
(2) all rights, privileges^and appurtenances pertaining tOthe='Prqpert|, ;inpl""" SellaTs: right, tille, and interest in
=any minerals, ufilltles, adiaeent streets, alleys, stripSi.gores, ahd dght^#wayi:
(3) Seller's interest in afl leases, rents, time share contracts, andsecurity deposits fojf all or part Of the Property;
(4) Seller's interest In all llcenses.and permits related to the Property;
(5) Seller's interest In all third party warranties or guaraoties, if transferable, relating to the Property, or any
fixtures;
(6) Seller's Developer Rights and Interest In any potion of the Property {ndiudmg; malntenancB agreements,
management agreements in connection with the Property (Incjbding all Of Sellers InteTest Ift any Bahia Mar
Maintenance Association and other corporate entity which provides malntenaTiee or managerial services to
any portion ofthe Property (hereafter the "Development Rights"); and
(7) all Seller's tangible personal property, if any, located on the Property that is used In connection with the
Property's operations;
3. SALES PRIGE; At or before closing, Buyer wilfpay the following sales price forThe ppoperty:
Cash payable by Buyer at closmg (Ten Million andno/i06 Dollars),.., ,$10,000,000.00
4. Intentionally Left Blank.
5. EARNESTWIONEY:
A. Contemporaneous with the execution ofthis Agreement by both Parties, Buyer Will deposit as earnestmoney, two
P age I
ALMA POST 000013
TAB
2
MAR. 30.2010 2;04PM J..6..K..&L 956-96H402 NO. 607 P. 3
CAUSE NO. 2006-07-3289-C
BAHIA MAR CO-OWNERS § IN THE DISTRICT COURT
ASSOCIATION, INC. §
I
V8 § 197®' JUDICIAL DISTRICT
§
BAHIAMAR MAINTENANCE §
ASSOCIATION, §
ALMA INVESTMENTS. INC. §
d/b/a TEXAS ALMA INVESTMENTS. INC. § CAMERON COUNTY,
ORDER ON PLAINTIFFS MOTION TO COMPEL
After considering plaintiff, Bahia Mar Co-Ownors Association. Inc.'s motion to
compel, Alma Investments, Inc.'s motion for reconsideration, the response, and
arguments of counsel, the court
GRANTS plaintiffs motion to compel in part and ORDERS Alma Investments, inc.
d/b/a Texas Alma Investments. Inc. to:
• Deposit $10,000.00 Into the registry ofthe court by April 30, 2010 In relation
to the audit;
The Court FURTHER ORDERS Alma Investments, Inc. and Bahia Mar
Maintenance Association to:
• Produce to Moises Gomez ail books and records for the period from 2004
through 2008 for Bahia Mar Maintenance Association, including but not
limited to the original bank statements, cancelled checks. Invoices supporting
payment of expendKures, receipts for payment of association dues and any
other records needed to audit Bahia Mar Maintenance Association by April
30, 2010. To the extent that any books and records related to Alma
Investments, Inc. are needed to conduct the audit, such information shall
also be produced.
SIGNED on ' . 2010.
DE LA GARZA, CLERK
APR 05 2010
cp.e,»: APR 06 2010
Lanoo A. Klrby, Po«t Office Dfiwef 1247, Wetiaco, Texas 78588; Fax (856) 868-8402
Richard Valder, Esquire, 316 WSst Tyler, Herllngen, Texee 78550; Fax (956) 425-6665
Nathan Barrow, 802N. Carancahua, Suite 1300, Corpus Christ!, Texas 78470; Fax(3B1) 684-7261
Dennis Sanchez, 3505BocaChtea Blvd., Ste. 100, BfownsvHIe, Texas 78521-4064; Faxili (956) 546-3766
271
TAB
3
APR. 10.2012 9:33AM J..G.,K.,&L 956-969-9402 NO. 843 P. 3
CAUSE NO. 2008-07.3289.0
BAHIA MAR CO.OWNERS § IN THE DISTRICT COURT
ASSOCIATION, INC. §
§
§
vs. § 197" JUDICIAL DISTRICT
§
BAHIA MAR MAINTENANCE §
ASSOCIATION, §
ALMA INVESTMENTS, INC. §
d/b/a TEXAS ALMA INVESTMENTS, INC. § CAMERON COUNTY,
ORDER PARTIALLY GRANTING PLAINTIFF'S MOTION FOR AUDIT
After considering plaintiff, Bahia Mar Co-Owners Association. Inc.'s motion to
enforce order granting plaintiffs motion for audit, the response, and arguments of counsel,
the court
GRANTS plaintiffs motion In part as follows:
IT IS THEREFORE ORDERED. ADJUGED AND DECREED, that the financial
books and records of BahIa Mar Maintenance Assoclatlo^e audited by Morses Gomez,
who will conduct an audit for the calendar year . To the extent necessary,
the auditor is authorized to review records of Alma Investments, Inc. if needed In the
auditing process.
IT IS FURTHER ORDERED, ADJUDGED AND DECREED, that Alma Investments,
inc. d/b/a Texas Alma Investments, Inc. shall pay the named independent auditor for
perfomriing the audit of financial records. Alma shall deposit $20,000.00 with the registry of
the court by no later than July 16,2012 at the close of business.
SIGNED on CiphJb II 2012.
PRESIDIN^UDGE
APR 11 M12
Copies to: !SPRnZOI2
Lance A. Wrby, Post Office Drawer 1247, Weslaco, Texas 78699; Fax (966) 969-9402
Kevin Landau, 38500 Woodward Ave.. 8te. 200, Bloomfield, Ml 46304; Fax (248) 203-2448
Hector J. Torres, 416 East Dove Ave., McAllen, Texas 78504; Fax (966) 630-0189
Louis S.Sorola 1999 W. Jefferson St. - Brownsville, Tx 78520
29
TAB
4
CAUSE NO. 2006-07-003289-0
BAHIA MAR CO-OWNERS IN THE DISTRICT
ASSOCIATION, INC.
Plaintiff, 197th JUDICIAL DISTRICT
Alma Investments, Inc. dba Texas Alma Investments
vs.
BAHIA MAR MAINTENANCE CAMERON COUNTY,
TEXAS
ASSOCIATION, ALMA INVESTMENTS, INC.
d/b/a TEXAS ALMA INVESTMENTS, et al
Defendants.
ORDER GRANTING ALTERNATIVE VENUE AND METHOD OF DEPOSmONS
After considering the Defendants', Alma Investments and Bahia Mar Maintenance Association, objections
to the Plaintiffs Motion for Continuance ofthe Summary Judgment Submission Date, the pleaings,
response and arguments of counsel;
ITIS THEREFORE ORDERED AND ADJUDGED that the parties shall cooperate infinding a
mutually agreeable, alternative venue forthetaking ofdepositions for thedefendants', their agents,
consultants oremploys and that such depositions shall be taken in the place ofeach deponents residency,
or, via telephone, or, videoconferencing technology acceptable to the Court.
ITIS FURTHER ORDERED AND ADJUDGED that theDefendants' costs, expenses and
attorney fees, forhaving to oppose the Plaintiffs' untimely Motion for a continuance, shall betaken under
advisement by the Court fora period not to exceed 90 days from the datehereof.
ITISFURTHER OPRDERED AND ADJUDGED thattheparties shall, in a timely manner, not
toexceed Sixty (60) days from the date hereof, use all reasonable prudence and cooperation in completing
the following three (3) depositions ofthe Defendants, asnamed by Plaintiffs counsel on the record; (a)
Khalil Pakideh; (b)Martin Pakideh and (c)Alma's corporate representative previously deposed.
NOW, THEREFORE, ITIS ORDERED AND ADJUDGED that the Defendant's Summary
Judgment Submission Date shall beextended until March 9,2012, or sooner, provided, that, no
unforeseen circumstances arise such as a natural disaster, thereby preventing such submission from
occurring.
SIGNED on 2011.
12/07/11 COPIES TO:
JUDGE PRESIDING
ON. LANCE A. KIRBY
HON. DENNIS SANCHEZ O'CLOCK^
HON. KEVIN LANDAU AURORA DE LA QARZA, CLEW
HON. ROBERT L. GUERRA
DEC 06 2011
TAB
5
» M 23.2012 1:46PM J., 6., K. .& L 956-969-94(^2 NO. 328 P. 2
CAUSE NO. 2006-07-3289-C
BAHIA MAR CO-OWNERS § IN THE DISTRICT COURT
ASSOCIATION. INC. §
§
§
vs. § 187"* JUDICIAL DISTRICT
BAHIA MAR MAINTENANCE
ASSOCIATION,
ALMA INVESTMENTS, INC.
d/b/a TEXAS ALMA INVESTMENTS, INC. CAMERON COUNTY.
ORDER
On August 23, 2012 a status hearing was held.
After considering the arguments of counsel, the court hereby
ORDERS Kahil Pakideh and Martin Pakldeh to appear for deposition at the law
offices of Jones. Galllgan, Key & Lozano, L.L.P., 2300 West Pike Blvd. Suite 300,
Weslaco, Texas 78696. (956) 968-5402 on September 28. 2012 at 9:00 a.m., unless
agreed otherwise.
The court FURTHER sets Defendants' motion for summary judgment for
submission (no hearing will be held) before the 197^ Judicial District Court, on
November 19. 2012 at 9:00 a.m. and orders Plaintiff to file their response by
November 9. 2012
SIGNED 2012.
PRESioiNGlUDGE /
FlJED^mli—O'CLOCK,
O'CLOCK
ORADELAQARZACIERK
AUnORAOElAQARZA.'
OCT 01 2012
COURT '.TEXAS
OCT 0 1 PUTY
Copies to:
Lance A. Wrtjy, Post OfRce Drawer 1247, Weslaco, Texas 76699; Fax (966) 969-9402
HactOf J. Torres, 418 East Dove Ave., McADen, Texas 78604; Fax (966) 630-0189
LouisS. Sorola, 1999 West Jefferson Street Brownsville, Texas 78620; Fax (966) 644-7766
Alma inveatments, inc.. 38600 V\toodward Ave Suite 200, BloomfielO Hills, Michigan 48304; Fax (248)671-0884
TERRY D. KEY
DENNIS SANCHEZ
BAHIA MAR INAINTENANCE ASSOCIATION
30
TAB
6
CAUSE NO. 2006^-^89-0
BAHIAMAR CO-OWNERS § IN THE DISTRICT COURT
ASSOCIATION. INC. §
§
V8. § 19/^ JUDICIAL DISTRICT
§
BAHIA MAR MAINTENANCE §
ASSOCIATION. §
ALMAINVESTMENTS. INC. §
TEXAS ALMA INVESTMENTS. INC. § CAMERON COUNTY.
ORDER
On December 13,2012 a hearing was held on^he fbRowIng moOone:
1. Defandanfs Motion to Quaih Plainlifrs Notioe of Oral Deposilion of Oefendanft
Kahl PaMdeh (dad 1(V2S/12);
z. uorancunrt Moaon to uunn rnamiirs nouoo oi urai uspotnon or Mwim paKxMn
(flled1(V28^12)and;
3. Motion to Quash Plaintttrs Notioe of Oral Depotttions of Defendant's Corporate
Representative (dad 11/21/12);
AAar considering the arguments of counsel, along with the pievioue order requalng
depositions to take plaM that is dated September 6.2012. the court hereby
ORDERS KahM Paiddeh and Martin Palddeh to appear for depositions at the law
ofRoes of Jones, QeRgtti. Key & Lozano, LLP., 2300 West Pflre Blvd. Suite 300,
WoBlaco, Texas 78598, (9M) 968-5402 on January 26,2013 at MO ajn. and 1:00 pjn.
respectively. Kahl Palddeh. Martin PaMdeh andfor Alma Investments. Inc. wd be
responsfcte for Kahfland Martin Palddeh's transportation expenses to and from Wdslaco.
The court FURTHER ORDERS that the deposition of Akna Inveshnents. Inc.'s
oorporsAe repfesentativeCs) which is the sutiiect of item 3 atwve win not take piaoe until
after March 1.2013.
Pao6lof2
281
TAB
7
FILED
2014-DCL-04099
6/23/2014 12:01:29 PM
Aurora De La Garza
^ rv/%1 AitnoQ Cameron County District Clerk
CAUSE NO. 2014-DCL-U4U5>» By Oralia White Deputy Clerk
BAHIA MAR GO-OWNERS § IN THE DISTRICT COURT
ASSOCIATION, INC. §
Plaintiff, §
§
vs. §
§
MSP PARTNERS REALTY, LLC, a Florida § JUDICIAL DISTRICT
Limited Liability Company, §
MSP PARTNERS REALTY, VLC a Texas §
Limited Liability Company, §
Alma Investments, Inc., §
KHALILPAKIDEHand §
MARTIN S. PAKIDEH §
Defendants. § CAMERON COUNTY, TEXAS
PLAINTIFF'S ORIGINAL PETITION & REQUEST FOR DISCLOSURE
1. Plaintiff seeks onlymonetary relief over $1,000,000.00, including damages
of any kind, penalties, costs, expenses, prejudgment interest, and attorney fees. TRCP
47(c)(6).
A. DISCOVERY CONTROL PLAN
2. Plaintiff intends to conduct Level 3 discovery under Texas Rule of Civil
Procedure 190.4.
B. PARTIES
3. Plaintiff, Bahia Mar Co-Owners Association, Inc., is a corporation that is
organized under the laws of the State of Texas.
4. Defendant, MSP Partners Realty, LLC, a Florida limited liability company
"MSP", is a corporation that is incorporated under the laws of the State of Florida.
Defendant MSP was originally incorporated in Texas as MSP Partners Realty, LLC, a
Texas Limited Liability Company ("MSP Texas"). In 2010, MSP Texas converted into
Pa9e|1