GuideOne Lloyds Insurance Company v. First Baptist Church of Bedford

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH

NO. 2-07-230-CV

LYNN DUNAVIN, INDIVIDUALLY AND APPELLANT
D/B/A DIVA DESIGNS

V.

MINDY MEADOR, THERESA MARTINEZ, APPELLEES
JACQULIENE DYAN, AND MONIQUE RODEN

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FROM THE 96TH DISTRICT COURT OF TARRANT COUNTY

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MEMORANDUM OPINION 1

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Appellant Lynn Dunavin appeals a trial court order imposing sanctions

against her in the amount of $8,521.20 in favor of Appellees Mindy Meador,

Theresa Martinez, Jacquliene Dyan, and Monique Roden. In six issues,

Appellant argues that she did not receive an adequate motion for sanctions nor

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… See T EX. R. A PP. P. 47.4.
written notice of the hearing; that there is no basis for sanctions under Texas

Civil Practices and Remedies Code chapters 9 or 10 nor Texas Rule of Civil

Procedure Rule 13; and that there is no factual basis for sanctions nor any

factual basis to support the amount awarded to Appellees. We modify the trial

court’s order and affirm it as modified.

Background

Appellees are employees of a beauty salon and spa—Lovell Salon,

Inc.—owned and operated by Judy Lovell. Appellant opened a jewelry store

called Diva Designs next door to the Lovell Salon in March 2004.

In July 2004, Appellant sued Lovell, Lovell Salon, Inc., and five “Jane

Does” for libel, slander, stalking, and intentional infliction of emotional distress,

alleging that Lovell or her employees had placed defamatory signs on

Appellant’s property.2 After obtaining the names of Lovell’s employees,

Appellant joined six of the employees—including Appellees—as defendants in

February 2006.3 On May 10, 2006, Appellees filed first amended answers,

asserting general denials and seeking sanctions under chapters 9 and 10 of the

2
… Lovell and Lovell Salon, Inc. are not parties to this appeal.
3
… The other two named defendants were never served and are not
parties on appeal.

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Texas Civil Practices and Remedies Code and under Rule 13 of the Texas Rules

of Civil Procedure.

Appellant deposed Appellees on September 11, 2006. On September 19,

2006, Appellant nonsuited her claims against Appellees Meador, Martinez, and

Dyan. Appellee Roden remained a defendant, ostensibly because her

handwriting exemplar (including misspelling the word “laundering” as

“laundrying”) was similar to that found on the signs placed outside Appellant’s

business. The trial court set the case for trial for the week of January 22,

2007, but it was not reached. On that date, Appellant filed a motion to nonsuit

all remaining defendants. On January 25, 2007, the trial court held a sanctions

hearing.

The parties presented the following evidence at the sanctions hearing.

Appellant, a legal assistant and real estate broker, testified that she drafted the

pleadings in this suit, as well as requests for production, interrogatories, and

requests for admission for her lawyer—who was also her employer—to review

and sign. She only met Lovell one time, and that was when she was opening

her boutique next door to Lovell’s salon. Then a series of events happened that

caused her to believe “something was going on.” A note was left on her car

by Lovell about bags of trash on her back porch. She received a letter from

Lovell advising her that a fence she put up was on Lovell’s property and visually

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offensive. A few days later, she found tree limbs and trash in front of her front

door. Someone painted a sign on her curb that said, “Some village is missing

an idiot.” Appellant testified that these events were “mean” and “hateful” and

formed the basis for her suit against Lovell.

Appellant testified that someone placed objectionable, handwritten signs

in the yard in front of her shop when she was vacating the premises. She

formed the belief that at least two people wrote the signs because it looked like

there were two different handwritings. Based on that belief, she joined

Appellees in the suit against Lovell, claiming intentional infliction of emotional

distress, defamation, and stalking. She decided Lovell’s employees were

involved based, in part, on the notes Lovell left for her and Lovell’s “pattern”

of behavior. She did not know who was responsible for the signs. She did not

see anyone put them up and had no personal knowledge that any Appellee did

it.

Appellant said that she joined Meador so that she could take her

deposition and try to determine if she had any involvement. She acknowledged

that she knew from her experience as a legal assistant that one can probably

depose a witness without joining them as a party to a suit and that she had

sent deposition notices to nonparty witnesses. Her lawyer deposed Appellees

and found no involvement by Meador, Martinez, or Dyan, and dropped them

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from the suit by amended pleading in September of 2006. Appellant testified

that she had no personal knowledge and no evidence that Roden put up the

signs, but Roden’s misspelling of “laundering” in her handwriting exemplar was

the same as the misspelling in one of the offensive signs.

After hearing evidence and argument, the trial court entered an order

dismissing Appellant’s suit and—regarding Appellees’ motions for

sanctions—ordering as follows:

The Court, having considered [the sanctions motions] and being
fully advised of the premise and having heard the evidence and
argument of counsel thereon, finds that the motions for sanctions
. . . are well taken and should be granted and that Plaintiff Lynn
Dunavin presented no evidence to support the claims that she
made against [Appellees].

The Court further finds that [Appellees] incurred reasonable
and necessary attorneys’ fees in the sum of $8,521.20, in
connection with defending this suit, and that an appropriate
sanction herein, would be to award judgment against Lynn Dunavin
and in favor of [Appellees]. [Emphasis added.]

This appeal followed.

Discussion

A. Standard of Review

We review the imposition of sanctions under an abuse of discretion

standard. Low v. Henry, 221 S.W.3d 609, 614 (Tex. 2007). An appellate

court may reverse the trial court’s ruling only if the trial court acted without

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reference to any guiding rules or principles, such that the ruling was arbitrary

or unreasonable. Id.

B. No Written Notice of a Hearing and No Motion for Sanctions

In her first issue, Appellant argues that the trial court held a hearing

without proper written notice and that there was no pending motion for

sanctions for the trial court to consider.

1. Notice of Hearing

Appellant argues that she did not receive written notice of a hearing on

Appellees’ request for sanctions; she contends that she received only a

telephone call from the trial court on January 23, 2007, notifying her of the

hearing on sanctions scheduled for January 25, 2007. Appellant argues that

the trial court abused its discretion by orally scheduling a hearing without

written notice.

As a general rule, a court is required to provide the subject of a sanctions

motion with written notice of the allegations and a reasonable opportunity to

respond. Id. at 618. But a party waives a complaint regarding lack of written

notice if the party fails to preserve the complaint. Id. The proper method to

preserve a notice complaint is to bring the lack of adequate notice to the

attention of the trial court at the hearing and object to the hearing going

forward or move for a continuance. Id.

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 At the hearing on January 25, 2007, the trial court announced that it was

ready to proceed on the motion for sanctions under chapters 9 and 10 and rule

13. Appellant did not object to the hearing based on lack of adequate notice.

To the contrary, in his opening statement at the hearing, Appellant’s attorney

acknowledged that “the motion for sanctions are [sic] addressed in the answers

of the codefendants.” Appellant’s attorney then stated: “I’m prepared to go

forward.” When the trial court confirmed that the hearing would cover motions

filed by all the defendants with the exceptions of Lovell and Lovell Salon, Inc.,

Appellant’s attorney again stated: “I’m . . . I’m prepared to address [the

sanctions] then, Your Honor.” Appellant’s attorney did not object to the

hearing nor did he seek a continuance either before or during the hearing.

Appellant first complained of lack of notice in her motion for new trial.

A lack-of-notice complaint filed in a motion for new trial is untimely. Id. We

therefore hold that Appellant waived any complaint regarding the lack of written

notice and overrule this portion of Appellant’s first issue.

2. No Motion for Sanctions

In the remaining part of her first issue, Appellant argues that there was

no pending motion for sanctions for the trial court to consider. Appellees

counter that their amended answers clearly sought sanctions. We are unaware

of, and Appellant has failed to cite, any authority holding that sanctions cannot

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be sought in a defendant’s answer. Proceedings for sanctions must afford a

party notice and an opportunity to be heard. In re Acceptance Ins. Co., 33

S.W.3d 443, 451 (Tex. App.—Fort Worth 2000, orig. proceeding) (holding

written notice required for sanctions). A party’s pleadings may satisfy the

notice requirement. See, e.g., Davila v. World Car Five Star, 75 S.W.3d 537,

543 (Tex. App.—San Antonio 2002, no pet.) (holding request for sanction in

pleading sufficient to support sanctions order); see also Hamlett v. Holcomb,

69 S.W.3d 816, 820 (Tex. App.—Corpus Christi 2002, no pet.) (affirming

sanctions order where defendant sought sanctions in counterclaim not

challenged); Sadeghian v. Webb, No. 02-03-00367-CV, 2005 WL 737424, at

*7–8 (Tex. App.—Fort Worth 2005, pet. denied) (mem. op., not designated for

publication) (same); Addington v. Addington, No. 14-03-00340-CV, 2004 WL

1472127, at *1 (Tex. App.—Houston [14th Dist.] July 1, 2004, no pet.) (mem.

op., not designated for publication) (holding form in which sanctions are

brought is a matter of whether sufficient pleadings were on file to support the

sanctions award).

Appellees’ amended answers explicitly sought sanctions under chapters

9 and 10 of civil practices and remedies code and Rule 13 of the rules of civil

procedure. Appellant’s attorney was aware that the sanctions were asserted

in Appellees’ answers, stating his understanding at the beginning of the hearing

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that the only things to be heard that day were “the sanctions motions by -- or

counterclaims or motions, however we’re going to phrase it.” The burden was

on Appellant to file a special exception or object to the form in which Appellees

brought their sanction claims. See T EX. R. C IV. P. 90. Appellant failed to do so.

Moreover, she did not complain of lack of adequate notice that sanctions were

being sought before or during the hearing. Therefore, we hold that she has

waived any potential defect in Appellees’ pleadings regarding sanctions. Low,

221 S.W.3d at 618–19. We overrule the remaining portion of Appellant’s first

issue.

C. Grounds for Sanctions

In her second, third, fourth issues, Appellant argues that there is no basis

for sanctions under chapters 9 and 10 of the civil practice and remedies code

and rule 13 and no evidence to show that she engaged in sanctionable conduct.

The trial court’s sanctions order does not identify the statute or rule under

which the court imposed sanctions, but a judgment imposing sanctions will be

upheld “on any applicable theory that finds support in the record.” Bradt v.

Sebek, 14 S.W.3d 756, 764 (Tex. App.—Houston [1st Dist.] 2000, pet.

denied); N.Y. Underwriters Ins. Co. v. State Farm Mut. Auto. Ins. Co., 856

S.W.2d 194, 205 (Tex. App.—Dallas 1993, no writ). To determine whether

any applicable theory finds support in the record, we must consider the

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“theories” under which Appellees sought sanctions, chapters 9 and 10 of the

civil practice and remedies code and rule 13.

Civil practice and remedies code section 9.011 provides that

The signing of a pleading as required by the Texas Rules of Civil
Procedure constitutes a certificate by the signatory that to the
signatory’s best knowledge, information, and belief, formed after
reasonable inquiry, the pleading is not:

(1) groundless and brought in bad faith;

(2) groundless and brought for the purpose of harassment; or

(3) groundless and interposed for any improper purpose, such as to
cause unnecessary delay or needless increase in the cost of
litigation.

T EX. C IV. P RAC. & R EM. C ODE A NN. § 9.011 (Vernon 2007) (emphasis added).

The trial court may award sanctions if it determines that a pleading has been

signed in violation of any one of the standards prescribed by section 9.011. Id.

§ 9.012(a). The court may not order an offending party to pay the incurred

expenses, including attorney’s fees, of an opposing party if the offending party

withdraws the sanctionable pleading or moves for dismissal of the offending

pleading within ninety days after the court determines that the offending party

violated section 9.011. Id. § 9.012(d). Chapter 9 does not apply to any

proceeding to which section 10.004 of chapter 10 or rule 13 applies. Id.

§ 9.012(h); Low, 221 S.W.3d at 614.

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 Section 10.001 of the civil practice and remedies code provides that

The signing of a pleading or motion as required by the Texas Rules
of Civil Procedure constitutes a certificate by the signatory that to
the signatory’s best knowledge, information, and belief, formed
after reasonable inquiry:

(1) the pleading or motion is not being presented for any improper
purpose, including to harass or to cause unnecessary delay or
needless increase in the cost of litigation;

(2) each claim, defense, or other legal contention in the pleading or
motion is warranted by existing law or by a nonfrivolous argument
for the extension, modification, or reversal of existing law or the
establishment of new law;

(3) each allegation or other factual contention in the pleading or
motion has evidentiary support or, for a specifically identified
allegation or factual contention, is likely to have evidentiary support
after a reasonable opportunity for further investigation or discovery;
and

(4) each denial in the pleading or motion of a factual contention is
warranted on the evidence or, for a specifically identified denial, is
reasonably based on a lack of information or belief.

T EX. C IV. P RAC. & R EM. C ODE A NN § 10.001 (Vernon 2007) (emphasis added).

A court that determines that a person has signed a pleading or motion in

violation of section 10.001 may impose sanctions on the person, a party

represented by the person, or both. Id. § 10.004 (Vernon 2007). When

imposing sanctions under Chapter 10, the trial court “shall describe in an order

imposing a sanction under this chapter the conduct the court has determined

violated Section 10.001 and explain the basis for the sanction imposed.” T EX.

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C IV. P RAC. & R EM. C ODE A NN . § 10.005 (emphasis added); see Rudisell v.

Paquette, 89 S.W.3d 233, 238 (Tex. App.—Corpus Christi 2002, no pet.);

Bishop, 997 S.W.2d 350, 355 (Tex. App.—Fort Worth 1999, pet. denied).

Rule of civil procedure 13 provides that

The signatures of attorneys or parties constitute a certificate
by them that they have read the pleading, motion, or other paper;
that to the best of their knowledge, information, and belief formed
after reasonable inquiry the instrument is not groundless and
brought in bad faith or groundless and brought for the purpose of
harassment. . . . If a pleading, motion or other paper is signed in
violation of this rule, the court, upon motion or upon its own
initiative, after notice and hearing, shall impose an appropriate
sanction available under Rule 215, upon the person who signed it,
a represented party, or both.

Courts shall presume that pleadings, motions, and other
papers are filed in good faith. No sanctions under this rule may be
imposed except for good cause, the particulars of which must be
stated in the sanction order. “Groundless” for purposes of this rule
means no basis in law or fact and not warranted by good faith
argument for the extension, modification, or reversal of existing
law.

T EX. R. C IV. P. 13 (emphasis added).

From the emphasized language of the statutes and rules, it is apparent

that a trial court may impose sanctions under chapter 9 if a pleading is

groundless and brought in bad faith, for the purpose of harassment, or for any

undue purpose and may impose sanctions under rule 13 if a pleading is

groundless and brought in bad faith or for the purpose of harassment. In other

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words, a pleading sanctionable under chapter 9 or rule 13 must fail two

elements: It must have no basis in law or fact, and it must be brought in bad

faith, for harassment, or for an improper purpose.

By contrast, a pleading is sanctionable under chapter 10 if it violates just

one of the certifications set out in section 10.001. In other words, a pleading

is sanctionable under chapter 10 if, for example, it is presented for an improper

purpose or it lacks evidentiary support and is unlikely to have evidentiary

support after a reasonable opportunity for further investigation. See T EX. C IV.

P RAC. & R EM. C ODE A NN. §§ 10.001, 10.004(a).

In this case, the trial court’s sanctions order recited one ground for

sanctions: “Plaintiff [Lynn] Dunavin presented no evidence to support the claims

she made against [Appellees].” Setting aside for the moment whether this was

an appropriate ground for sanctions under any theory, we can rule out chapter

9 and rule 13 as the basis for the trial court’s order because the trial court did

not find that the pleadings were brought in bad faith, for harassment, or for an

improper purpose as required for the imposition of sanctions under chapter 9

and rule 13. See id. §§ 9.011, 9.012(a); T EX. R. C IV. P. 13. Thus, the only

theory for the imposition of sanctions supported by the record is chapter 10

because it is the only theory that does not require the existence of an additional

element beyond lack of evidentiary support and a likelihood of evidentiary

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support after further investigation. See T EX. C IV. P RAC. & R EM . C ODE A NN.

§§ 10.001, 10.004(a). We sustain Appellant’s third and fourth issues, in

which she complains that there was no basis for sanctions under chapter 9 or

rule 13.

We must now determine whether the basis for sanctions set out in the

trial court’s sanctions order supports sanctions under chapter 10. Again, we

observe that as the basis for sanctions, the trial court stated that “Plaintiff

[Lynn] Dunavin presented no evidence to support the claims that she made

against [Appellees].” See id. § 10.005 (requiring the trial court to describe in

a sanctions order the conduct the court had determined violated section

10.001).

The basis on which the trial court ordered sanctions—that Appellant

presented no evidence at the sanctions hearing to support her claims—is not a

basis authorized by chapter 10. Under section 10.001(3), a signatory certifies

by signing a pleading that each allegation or factual contention has support or

is likely to have support after a reasonable opportunity for further investigation.

Id. § 10.001(3). The trial court must examine the circumstances existing at

the time the pleading was filed, not at the time of the sanctions hearing. Shaw

v. County of Dallas, 251 S.W.3d 165, 171 (Tex. App.—Dallas 2008, no pet.

h.) (analyzing sanctions under rule 13); Younts v. First Prosperity Bank, No.

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13-02-00545-CV,____WL________ at *2 (Tex. App.–Corpus Christi Mar. 17,

2005, no pet.) (mem. op.) (analyzing sanctions under chapter 10); Griffin Indus.

v. Grimes, No. 04-02-00430-CV, 2003 WL 1911993, at *6 (Tex. App.—San

Antonio Apr. 23, 2003, no pet.) (mem. op., not designated for publication)

(same). Moreover, the absence of evidentiary support when a party signs a

pleading is not sanctionable if evidentiary support is likely after a reasonable

opportunity for further investigation or discovery. T EX. C IV. P RAC. & R EM. C ODE

A NN. § 10.001(3).

We hold that the trial court, by imposing sanctions because Appellant

presented no evidence at the sanctions hearing, acted without reference to the

rules and guiding principle articulated in section 10.001(3), which authorizes

sanctions when a pleading lacks evidentiary support and the likelihood of

evidentiary support at the time a pleading is signed. We therefore hold that the

trial court abused its discretion by imposing sanctions on the basis stated in its

order. See Low, 221 S.W.3d at 614. We sustain Appellant’s second issue. 4

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… Even if the trial court had specifically found that Appellant’s
allegations against Appellees lacked evidentiary support and the likelihood of
evidentiary support when they were signed, the stark contrast between the
facts of this case and the facts in Low would call that conclusion into question.
In Low, the supreme court affirmed a sanctions order under section 10.001(3)
because the plaintiff—who asserted medical malpractice claims against doctors
for negligently prescribing a particular medication—had in his possession at the
(continued...)

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 Conclusion

Having overruled Appellant’s first issue and sustained her second, third,

and fourth issues, and not having reached her fifth or sixth issues, we vacate

the portion of the trial court’s April 24, 2007 order awarding sanctions to

Appellees, and we affirm the trial court’s order dismissing the suit as modified.

ANNE GARDNER
JUSTICE

PANEL B: DAUPHINOT, GARDNER, and MCCOY, JJ.

DELIVERED: July 17, 2008

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(...continued)
time he sued the doctors medical records showing that the defendant doctors
never prescribed the drug in question. Id. at 617. Thus, the supreme court
held that the plaintiff’s allegations against the doctors had neither evidentiary
support nor the likelihood of evidentiary support after further investigation. Id.
The record in this case reflects no such exculpatory evidence in Appellant’s
possession when she sued Appellees.

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