No Contingency Fee Interest in Restitution Paid for Criminal Case

Glen Stover was assaulted by two judgment-proof college students at a party in 2010, resulting in multiple surgeries, a shattered wrist and face, stitches, and broken teeth. He signed a contingency-fee agreement with John H. Carney & Associates, which provided for a 33% fee if the matter was settled before suit was filed. In the meantime, a criminal case proceeded against at least one of the assailants, Drew McClure, who agreed to accept a plea deal that included $100,000 in restitution to the victim. When that check was tendered to Carney by McClure’s father, Carney retained funds that he claimed as his contingency fee. A Dallas County district court disagreed, and the Dallas Court of Appeals affirmed, holding that the restitution was paid in satisfaction of McClure’s deferred adjudication order, not in settlement of any civil claim. The Court did not reach the question of whether an attorney could ever legally claim a fee from a criminal restitution payment, but noted in dicta that “we strongly discourage attorneys from engaging in such practices.”

John H. Carney & Assocs. v. Office of Attorney General, No. 05-13-01325-CV

Land Rush Leads to Double-Leasing and a Viable Fraud Claim

JPMorgan, as Trustee of the Red Crest Trust, signed a letter of intent for Orca Assets to lease oil and gas properties in the Eagle Ford Shale. Unfortunately, JPMorgan had leased those same properties to GeoSouthern Energy six months earlier. GeoSouthern recorded its lease three days after Orca signed the letter of intent with JPMorgan, but Orca did not conduct any forward-looking title searches after the letter of intent. Orca proceeded to sign the leases a month later and promptly recorded them. GeoSouthern then contacted JPMorgan about the duplicate leases, and the bank promptly offered to refund Orca’s $3.2 million lease payment. Instead, Orca sued for $400 million in lost profits. At a Rule 166 pretrial conference, the trial court dismissed all of Orca’s claims, ruling that the leases unambiguously disclaimed any warranties, and that Orca could not establish justifiable reliance as a matter of law. The Dallas Court of Appeals reversed in part, holding that the disclaimers in the leases foreclosed Orca’s breach of contract claim, but not fraud and negligent misrepresentation.

Under the express language of the contractual disclaimer, Orca was to be “without recourse” under the lease if title to the oil and gas interests failed. That was sufficient to negate contract liability for JPMorgan’s failure to convey good title, but not fraud and negligent misrepresentation. Noting that the leases did not also include any provisions disclaiming reliance on any extra-contractual representations, the Court held that Orca could proceed with claims based on an oral representation that the properties in question were “open” for lease. In the course of that holding, the Court analyzes a number of other recent fraudulent inducement cases, leaving the distinct impression that courts are going to continue drawing some pretty narrow distinctions in the wake of the Texas Supreme Court’s Italian Cowboy opinion.

Orca Assets, G.P., LLC v. JPMorgan Chase Bank, N.A., No. 05-13-01700-CV

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All Independent Grounds

The owner of an apartment complex sued the builder for construction defect claims. The defendant moved for summary judgment on limitations and lack of notice, which is an element of the plaintiff’s express warranty claim. The trial court granted the summary judgment motion without specifying the grounds. For reasons that are not clear from the opinion, the appellant limited its issues on appeal to the express warranty claim, but only addressed the limitations argument. That resulted in affirmation of the summary judgment ruling.  Because the appellant failed to challenge the other ground — i.e., lack of notice — on which summary judgment could have been granted, the Court of Appeals upheld the judgment based on the unchallenged ground.

ZZ&Z Props., Ltd. v. ZCC-ZPL,LLP, No. 05-14-00812-CV

Collections

A guarantor ignored the efforts of a court-appointed receiver to collect on an agreed judgment and subsequent turnover orders. The debtor eventually paid the judgment, but Frost Bank sought recovery of additional attorney fees incurred in enforcing the judgment. The trial court awarded $160,000 in attorney fees and approved the receiver’s fee of $129,000. The Court of Appeals reversed as to the attorney fees, holding that fees could not be recovered based on the contractual guarantee because the bank’s claims under that instrument were merged with and extinguished by the final judgment. Nor could post-judgment attorney fees be awarded under the turnover statute because the defendant had actually paid the judgment. However, the trial court did not abuse its discretion in approving the receiver’s fee — calculated as 10% of the sale proceeds from the defendant’s stock — as the court had conducted a hearing and determined that the fee was fair, reasonable, and necessary.

Evans v. Frost Nat’l Bank, No. 05-12-01491

Bad Fences Make Bad Neighbors

“The parties are owners of adjoining property whose homes overlook a golf course. The Roses built a fence that blocked the view from the Bonvinos’ home. The ensuing legal dispute has lasted almost a decade.” That description begins a memorandum opinion affirming a Collin County trial court’s order enforcing a permanent injunction requiring the Roses to reduce the maximum height of their fence to 6 feet. The case hinged on the trial court’s finding that the “2012 Fence” exceeded 6 feet when measured from the “unaltered and unimproved grade.”

And thus, peace and tranquility were restored to Far North Dallas.

Rose v. Bonvino, No. 05-14-007020-CV

The Knives Came Out in the Race for Kaufman County Commissioner

A Republican primary battle for the office of Kaufman County commissioner (precinct 2) resulted in a defamation claim against the challenger’s media consultant. It seems that two days before the election, a website went up that strongly implied the incumbent, Ray Clark, had intervened in multiple child molestation cases brought against his “nephew,” Stoney Adams. resulting in the charges being dismissed. A series of mailed-out fliers made similar allegations. In reality, Adams was only distantly related through a series of marriages on Clark’s wife’s side of the family, and Clark averred that he had never done anything to support or assist Adams in any criminal case. Based on those facts, the trial court denied the defendants’ motion to dismiss under the TCPA, finding that Clark had established a prima facie case for each element of his defamation claims. The Dallas Court of Appeals affirmed, rejecting the defendants’ argument that the statements were protected as “rhetorical hyperbole.” Similarly, the statements were not protected as non-actionable opinions just because they were attributed to Adams’ ex-wife, but were instead capable of being defamatory because they implied knowledge that Clark really had intervened in Adams’ child molestation cases. As for actual malice, the Court of Appeals credited Clark’s argument that the defendants had “carefully attempted to distance themselves” from the defamatory statements, which in turn demonstrated that they “entertained serious doubts” about them.

Campbell v. Clark, No. 05-14-01056-CV

Practice Tip: The Legislature Will Make You Pay for Your Court Reporter

Attorney Robert Cole failed to pay a court reporting service, Gwendolyn Parker, Inc., for the transcripts of two depositions. The Court of Appeals affirmed judgment in favor of the court reporter. Cole argued that Tex. Gov’t Code § 52.059 only allowed individual court reporters to sue for their fees, but the Court rejected that argument. Under that statute, the attorney who takes the deposition and his firm are jointly and severally liable for the court reporter’s charges unless other arrangements are stated on the record. Because nothing in the language of the statute limits the payment obligation to individual court reporters, Cole could not escape from his statutory liability to GPI. The Court also held that Cole could not prevail on the affirmative defense of failure of consideration or a counterclaim for damages because the record did not show that he pleaded either matter in response to the court reporter’s suit.

Cole v. Gwendolyn Parker, Inc., No. 05-13-01655-CV

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Arbitration Affirmed; “Related To” Defined

The Dallas Court of Appeals has affirmed the order confirming an arbitration award in favor of our firm’s client, Steven Pully. As explained in the Court’s opinion, Mr. Pully sued his former employer, Newcastle Capital Management, alleging that the company owed him substantial amounts of unpaid compensation. But some of his claims were also subject to arbitration, and the arbitrator ruled in favor of Mr. Pully. The district court affirmed the arbitration award, and that portion of the case was eventually severed from the remaining claims in the lawsuit. On appeal, Newcastle challenged the scope of the arbitration clause, which covered “[a]ny dispute, controversy or claim arising out of or relating to” the parties’ agreements. The Court noted that the phrase “relates to” is very broad, and that a claim relates to a contract “if it has a significant relationship with or touches matters covered by the contract.” Under that standard, Mr. Pully’s claims did indeed relate to the parties’ contracts, making the dispute arbitrable. The Court also rejected Newcastle’s argument that the parties’ oral agreement was against public policy, and therefore affirmed the arbitration award in its entirety.

Schwarz v. Pully, No. 05-14-00615-CV

Bank Error in Your Favor

After the real estate bubble burst in 2008, borrowers attempted all sorts of ways to get out of their obligations. Most notably, debtors repeatedly challenged the ways that their mortgages had been transferred and recorded (or not) by the banks that had held, swapped, sold, and securitized them. Long story short, it hardly ever worked, as courts across the country mostly (but not always) eschewed technical arguments in favor of the big picture of who owed what to whom. But a new opinion from the Dallas Court of Appeals shows that when the bank doesn’t follow the rules in litigation, the debtors may still escape liability on a loan.

In this instance, a pair of individual guarantors for a $748,000 loan were sued by Wells Fargo after the borrower defaulted. While the case was pending, Wells Fargo allegedly assigned the loan documents to another entity, Apex. Wells Fargo’s attorneys later filed a motion for withdrawal and substitution, which the trial court granted. The motion failed to mention the assignment of the loan documents to Apex. The guarantors then filed for no-evidence summary judgment, pointing out that Wells Fargo had conducted no discovery and that the discovery period was closed. The motion argued that there was no evidence to show who owned the guaranty. When Apex appeared and tried to cure that deficiency, the guarantors objected and moved to strike Apex’s summary judgment evidence. The trial court sustained the objections and granted summary judgment. The Court of Appeals affirmed, holding that it was not an abuse of discretion to exclude Apex’s evidence because it had waited 11 months after acquiring the loan to amend Wells Fargo’s discovery responses by disclosing its ownership. That was not “reasonably prompt,” and it acted as an unfair surprise to the guarantors to have that come out only in response to their summary judgment motion.

LSREF2 Apex (TX) II, LLC v. Blomquist, No. 05-14-00851-CV

It’s an Open Question Whether This Post Is Signed

Clyde Parks signed a $10,000 promissory note, bearing 15% interest and secured by Super Bowl tickets, in favor of Scott Seybold. Parks defaulted on the note, but did make some sporadic payments before limitations expired. When Seybold demanded payment after the limitations period had expired, Parks responded with emails stating that he was working to get the note paid and that he was not ignoring it. That was enough for both the trial court and the Dallas Court of Appeals to conclude that the claim was not barred by limitations, because the debtor had acknowledged the debt, in writing, as a current obligation. See Tex. Civ. Prac. & Rem. Code § 16.065. The Court of Appeals rejected Parks’ argument that he had not “signed” the emails pursuant to the Texas Uniform Electronic Transactions Act, affirming the trial court’s finding that the “Thank you, Clyde” salutation in each email was intended to be Parks’ signature. Notably, the Court of Appeals pointed out that it was expressing no opinion on whether the automatically-generated name and contact information block at the end of each email could constitute an electronic signature.

Parks v. Seybold, No. 05-13-00694-CV