Opinion issued April 21, 2015
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-14-00562-CV
———————————
ZUEHL LAND DEVELOPMENT, LLC, DOROTHY GOLDING AND
DIANE WIEMANN, Appellants
V.
ZUEHL AIRPORT FLYING COMMUNITY OWNERS ASSOCIATION,
INC., Appellee
On Appeal from the 274th District Court
Guadalupe County, Texas1
Trial Court Case No. 08-1872-CV
OPINION
1
Pursuant to its docket equalization authority, the Supreme Court of Texas
transferred the appeal to this court. See Misc. Docket No. 14–9121 (Tex. June 23,
2014); see also TEX. GOV’T CODE ANN. § 73.001 (West 2013) (authorizing
transfer of cases). We are unaware of any conflict between precedent of the Fourth
Court of Appeals and that of this Court on any relevant issue. See TEX. R. APP. P.
41.3.
This is a dispute between a group of landowners and a homeowners’
association for a subdivision immediately adjacent to the landowners’ properties.
The landowners were using one of the subdivision’s roads to access their land. The
homeowners’ association claimed that the road was private and built a fence along
its edge, thereby blocking access to the adjacent lands from the subdivision’s road.
The ensuing litigation between the landowners and the homeowners’ association
has lasted over 10 years, devolving into what one of the parties’ attorneys termed
“a nuclear war.”
This appeal follows the entry of an agreed partial summary judgment
addressing the merits of the litigants’ dispute and two subsequent orders
concerning peripheral issues, i.e., the denial of attorney’s fees authorized to
prevailing parties and the imposition of sanctions against one of the litigants. Only
these two peripheral issues are being appealed.
In two issues, a subset of the landowners contend that the trial court erred by
(1) denying their motion for attorney’s fees under section 5.006 of the Texas
Property Code, which mandates a fee award to a prevailing party in an action based
on a breach of a restrictive covenant and (2) imposing sanctions against one
particular landowner for bad-faith discovery and pleadings abuses.
We reverse and remand.
2
Background
This case has a complex and lengthy history. But because neither party
appeals the final resolution of the merits of their dispute, we will provide only an
overview of the relationship between the parties, the two pieces of land involved in
their dispute, and the ultimate resolution of the merits of the case.
At one time, Dorothy Golding and her late husband owned a 233-acre parcel
of land that contained a large aircraft runway. The paved runway was much wider
than needed for small, personal aircraft; therefore, Golding narrowed it and used
the outer strip of paved area as an aircraft taxiway and roadway to access other
portions of her land. Over time, Golding sold portions of her land to individual
buyers who wanted access to the runway. The area came to be known as the Zuehl
Flying Community.
In 1998, Golding had the community’s land platted. The plat map shows the
runway and attached taxiway/roadway marking the edge of the community
subdivision. All of the roads within the subdivision, including the outer strip of the
runway, are labeled Lot 119. The plat states that all streets within the subdivision
are dedicated to public use.
In 2003, Golding formed a neighborhood association, the Zuehl Flying
Community Property Owners’ Association, to control the common areas within the
3
subdivision. She conveyed Lot 119 and other common areas to the neighborhood
association she created.
Golding filed in the Official Real Property Records of Guadalupe County a
Declaration of Covenants, Conditions, and Restrictions 2 for the Zuehl Flying
Community Subdivision. The Declaration states, in relevant part, “No fence will be
placed within ten (10) feet of any taxiway.” It also provides that the association has
the right to “restrict access to Zuehl Flying Community and/or to fence the
perimeter of the Subdivision for security reasons . . . .”
Not all of Golding’s 233 acres were included in the subdivision. Golding
reserved 40 acres of land as unplatted, undeveloped rural land. That 40 acres was
immediately adjacent to the runway’s taxiway/roadway. In other words, the
perimeter of the subdivision ran between the taxiway/roadway and Golding’s 40
acres.
Over time Golding sold pieces of her 40 acres to individual buyers.
Ownership of that land did not include membership in the community or its
homeowners’ association. Nonetheless, the landowners who bought portions of the
40 acres used the subdivision’s taxiway/roadway to access their lands.
In 2003, the association built a fence along the perimeter of the subdivision.
The fence ran alongside the taxiway/roadway, was within 10 feet of the taxiway,
2
We will refer to this document as “the Declaration” or “the restrictive covenants.”
4
and blocked access to the 40 acres from the subdivision. The landowners
maintained that the taxiway/roadway was public or, alternatively, private and
subject to an easement for accessing the 40 acres. Litigation between the
association and various collections of landowners ensued.
Over the course of the next few years, the fence was taken down, rebuilt,
subjected to a court order requiring a gate for access to adjacent lands, then
removed again. Over the same period of time, the parties litigated in state and
federal court and presented their dispute to a mediator followed by an arbitrator.
Multiple orders were entered; some conflicted. At least one order was voided for
vagueness. In the end, the substantive issues between the parties—i.e., whether the
roadway was public or private and whether the association had authority to erect a
fence alongside the roadway to block access—were decided through an agreed
partial summary judgment.
We turn now to addressing the landowners’ challenges to the two orders
entered after partial summary judgment was granted on the merits.
Prevailing Party Attorney’s Fees
In the first issue, the landowners argue that they are entitled to attorney’s
fees as the prevailing party.
5
A. Background facts relevant to prevailing party status
In the early stages of the litigation, the trial court issued a temporary
injunction enjoining the association “from fencing any property at Zuehl Airport
along the boundaries of the easement commonly described as Lot 119, i.e., the
Common Area.” An agreed judgment was entered in 2006, following mediation,
allowing the association “to fence the boundary of the platted subdivision . . . and
amend the Covenants, Conditions and Restrictions” if such amendment were
approved of by at least 75 percent of the association’s members. The association
submitted to its membership a proposed amendment of the Declaration that would
have permitted the association to rebuild a fence alongside the taxiway. The
proposal failed to garner enough votes to pass. The fence was not rebuilt.
Later, in 2008, the association rebuilt the fence. This resulted in two separate
lawsuits being filed. In the first, the association obtained a temporary injunction
preventing defendant landowners from removing or otherwise tampering with the
fence. In the second suit, other landowners sued the association for violating the
Declaration by constructing a fence within 10 feet of a taxiway. The suits were
consolidated and referred to arbitration, by agreement. The arbitrator voided the
2006 agreed judgment for vagueness and found that, as an interim resolution, the
association should be permitted to keep the fence but the landowners should be
6
allowed to tie in a gate to access their lands adjacent to the subdivision. The trial
court adopted the arbitrator’s decision.
In 2011, the live pleading for the landowners—including Dorothy Golding
and James MacIvor, both of whom owned lots within the subdivision and portions
of the 40 acres adjacent to the subdivision—sought a declaration that the
association breached the restrictive covenant prohibiting a fence within 10 feet of a
roadway. The petition also asserted an easement right to access the 40 acres from
the roadway/taxiway referred to by the parties as Lot 119. Finally, the petition
sought attorney’s fees under section 5.006 of the Property Code, Chapters 37 and
38 of the Civil Practice and Remedies Code, and common law.
The parties settled their dispute and submitted to the trial court an agreed
partial summary judgment. The agreed order was entered in June 2012. It contains
various declarations, including that the roadway/taxiway is a private road burdened
by an easement for access to the 40-acre adjoining land, that the association’s
Declaration of restrictions does not allow a fence next to a taxiway, and that, while
a boundary fence is permissible under the Declaration, it cannot interfere with the
easement for use of the taxiway/roadway.
The agreed order states that the association voluntarily removed the fence
before entry of the order. Because the fence no longer presented an on-going
dispute in need of resolution, the order denies all tort claims and all claims for
7
breach of the restrictive covenants. The agreed order states that the parties take
nothing on their breach of covenant claims, except it “reserves for further
consideration the parties’ competing claims for attorneys’ fees” under section
5.006 of the Property Code. The agreed order then states, “Notwithstanding the
foregoing . . . construction of any fence or other barrier restricting the free and
unimpeded use of the easement . . . is prohibited.”
In January 2014, the association moved for entry of final judgment,
specifically arguing that, because the case had been settled, no party prevailed and
no attorney’s fees were authorized under section 5.006 of the Property Code. The
landowners filed a response requesting that attorney’s fees be awarded to them.
Following a hearing, the trial court entered a final judgment denying attorney’s
fees to the landowners.
B. Standard of review
Statutory construction is reviewed de novo. See Loaisiga v. Cerda, 379
S.W.3d 248, 254–55 (Tex. 2012). When construing a statute, the primary objective
is to ascertain and give effect to the Legislature’s intent. TEX. GOV’T CODE ANN.
§ 312.005 (West 2013); see TGS-NOPEC Geophysical Co. v. Combs, 340 S.W.3d
432, 439 (Tex. 2011). To discern that intent, we begin with the statute’s words.
TEX. GOV’T CODE ANN. § 312.003 (West 2013); see Tex. Dept. of Transp. v. City
of Sunset Valley, 146 S.W.3d 637, 642 (Tex. 2004). “Undefined terms in a statute
8
are typically given their ordinary meaning, but if a different or more precise
definition is apparent from the term’s use in the context of the statute, we apply
that meaning.” TGS-NOPEC Geophysical Co., 340 S.W.3d at 439. “[I]f a statute is
unambiguous, we adopt the interpretation supported by its plain language unless
such an interpretation would lead to absurd results.” Id. “We presume that the
Legislature chooses a statute’s language with care, including each word chosen for
a purpose, while purposefully omitting words not chosen.” Id.
Whether attorney’s fees are available under a particular statute is a question
of law, which we review de novo. Holland v. Wal-Mart Stores, Inc., 1 S.W.3d 91,
94 (Tex. 1999).
C. Statutory provision
Section 5.006(a) of the Property Code states as follows:
In an action based on breach of a restrictive covenant pertaining to
real property, the court shall allow to a prevailing party who asserted
the action reasonable attorney’s fees in addition to the party’s costs
and claim.
TEX. PROP. CODE ANN. § 5.006(a) (West 2014) (emphasis added).
D. The landowners prevailed through settlement
The landowners argue that they prevailed in the litigation because, under the
terms of the agreed partial summary judgment, the association is forbidden from
erecting the fence that they sought to have removed throughout the multi-year
litigation. The association argues that the statutory phrase “based on breach of a
9
restrictive covenant” requires that the landowners prevail on their breach claim to
be considered prevailing parties. According to the association, the landowners did
not prevail because the agreed partial summary judgment expressly denied their
claim for breach of the restrictive covenant and they were not “vindicated by the
judgment rendered.” See Jakab v. Gran Villa Townhouses Homeowners Ass’n,
Inc., 149 S.W.3d 863, 867 (Tex. App.—Dallas 2004, no pet.).
The Texas Supreme Court addressed “prevailing party” status in
Intercontinental Group Partnership v. KB Home Lone Star L.P., 295 S.W.3d 650
(Tex. 2009). In that case, the parties’ contract allowed for attorney’s fees to the
prevailing party but did not define that term. The Court held that a party prevails if
the court awards it monetary or equitable relief—in other words, “something that
materially alters the parties’ legal relationship.” Id. at 652, 655. The Court quoted,
with approval, the standard used by the United State Supreme Court in Farrar v.
Hobby, 506 U.S. 103, 113 S. Ct. 566 (1992), to analyze prevailing-party status
under a federal statute permitting attorney’s fees. KB Home, 295 S.W.3d at 654.
There, the Supreme Court held that, to qualify as a prevailing party, the plaintiff
must obtain at least some relief on the merits of his claim. The
plaintiff must obtain an enforceable judgment against the defendant
. . . or comparable relief through a consent decree or settlement . . .
[that] directly benefit[s] him at the time of the judgment or settlement.
Otherwise the judgment or settlement cannot be said to “affect the
behavior of the defendant toward the plaintiff.”
10
Farrar, 506 U.S. at 111, 113 S. Ct. 573 (emphasis added). Based on that federal
standard, the Texas Supreme Court held, in KB Home, that, because the party
seeking attorney’s fees “recovered no damages[,] . . . secured no declaratory or
injunctive relief[,] . . . obtained no consent decree or settlement in its favor[,] . . .
[and] received nothing of value of any kind, certainly none of the relief sought in
its petition,” it did not qualify as a prevailing party. KB Home, 295 S.W.3d at 655.
Two years later, the Texas Supreme Court specifically held that a party does
not have to obtain a favorable ruling from a court to “prevail.” Epps v. Fowler, 351
S.W.3d 862, 868 (Tex. 2011). The Court held that “a defendant is a prevailing
party when a plaintiff nonsuits a case with prejudice” because the res judicata
effect of a nonsuit with prejudice “works a permanent, inalterable change in the
parties’ legal relationship to the defendant’s benefit.” Id. at 868–89. The Court
further held that a dismissal without prejudice can cause the defendant to have
prevailed if the trial court determines, on the defendant’s motion, that the nonsuit
was taken to avoid an unfavorable ruling on the merits. Id. at 870. As these
holdings demonstrate, settlements and other events that do not involve a finding of
breach or liability can create “prevailing party” status.
Here, the agreed order denied the parties’ competing breach of restrictive
covenant claims. The order also denied the parties’ requests for injunctive relief
11
because the association had already removed the fence before requesting entry of
the agreed order:
[T]he court has received assurances from all parties and counsel that
the Association voluntarily removed the subject fence prior to entry of
this Order. Accordingly, and in light of the foregoing declarations of
this Court concerning the subject fence, the Court finds that there
exists no probably risk of imminent, and/or irreparable injury . . . .
Likewise, since Defendant has voluntarily removed the fence, there
exists no risk of harm . . . . Accordingly, the parties’ requests for
injunctive relief are hereby DENIED, and it is ORDERED,
ADJUDGED and DECREED that all parties take nothing by way of
their claims for injunctive relief asserted in this lawsuit.
Nonetheless, the trial court’s order contains declarations that are directly
relevant to the denied claims, beneficial to the landowners’ litigation position, and
binding on the association. For example, the agreed order declared that the
association’s restrictive covenants “do not authorize or provide any legal basis for
the fence” because the fence location is within 10 feet of a taxiway and would
interfere with easement rights for access to the 40-acre adjoining land. Following
the denial of injunctive relief, the order reads:
Notwithstanding the foregoing, Plaintiffs and Defendant, by
approving this Partial Summary Judgment, understand and agree to
abide by the terms of this Judgment and that the construction of any
fence . . . restricting the free and unimpeded use of the easement [to
the adjoining land] over and across Lot 119, as expressly recognized
in this Judgment, is prohibited. (emphasis added)
This case presents the unusual circumstance of an order that purports to deny
all causes of action and requests for injunctive relief but, at the same time and as a
12
result of a settlement agreement between the parties, prohibits the very conduct
alleged to constitute a breach—construction of a fence that blocks access to the
landowners’ property.
In our view, this situation is analogous to that found in Norton v. Deer Creek
Property Owners Ass’n, Inc., No. 03-09-00422-CV, 2010 WL 2867375, at *8
(Tex. App.—Austin July 22, 2010, no pet.) (mem. op.). A homeowner was sued by
her homeowners’ association for failing to remove a gazebo that the association
alleged was in violation of restrictive covenants. Id. at *2. The homeowner
removed the gazebo before the trial date. Id. Without an ongoing violation of the
restrictive covenants at the time of trial, the trial court did not make a ruling
whether the homeowner had breached. Id. at *3. At trial, the homeowner agreed
she would not reconstruct the gazebo. Id. The trial court entered a permanent
injunction requiring that she not. Id. at *8. On appeal, the homeowner argued that
the association was not entitled to prevailing-party attorneys’ fees because the
gazebo had been removed before trial. Id. at *7. The appellate court rejected her
argument, holding that the trial court did not err by awarding section 5.006
attorney’s fees. Id. at *8–9.
Similarly, here, the removal of the fence obviated the need to determine
whether the association breached the restrictive covenant. But the order goes on to
declare, “notwithstanding” that issue, the construction of a fence at that location is
13
a violation of the restrictions and is prohibited in the future. Thus, the parties
resolved by settlement what the landowners were seeking to achieve through trial.
That the case resolved favorably for them through a settlement and consent decree
instead of a jury trial and a finding of breach does not prevent the landowners from
having prevailed. See KB Home, 295 S.W.2d at 654–55 (stating that party can
prevail by obtaining “comparable relief through a consent decree or settlement”
(quoting Farrar, 506 U.S. at 111, 113 S. Ct. at 573)); see also Epps, 351 S.W.3d at
867 (holding that party cannot avoid causing its opponent to obtain “prevailing
party” status by nonsuiting to avoid adverse judgment).
Based on the agreed order, it cannot be said that the landowners “received
nothing of value of any kind” or “left the courthouse empty-handed.” KB Home,
295 S.W.3d at 655; Norton, 2010 WL 2867375, at *8. The agreed order
“materially alter[ed] the legal relationship between the parties” by prohibiting the
association from placing another fence in the objected-to area. KB Home, 295
S.W.3d at 654; Norton, 2010 WL 2867375, at *8.
Under section 5.006, an award of reasonable attorney’s fees to a prevailing
party is mandatory. TEX. PROP. CODE ANN. § 5.006; Inwood N. Homeowners’
Ass’n, Inc. v. Meier, 625 S.W.2d 742, 744 (Tex. App.—Houston [1st Dist.] 1981,
no writ); Mitchell v. LaFlamme, 60 S.W.3d 123, 131 (Tex. App.—Houston [14th
Dist.] 2000, no pet.). The reasonableness of the fee is determined by considering
14
“(1) the time and labor required; (2) the novelty and difficulty of the questions;
(3) the expertise, reputation, and ability of the attorney; and (4) any other factor.”
TEX. PROP. CODE ANN. § 5.006(b) (West 2014); Haas v. Ashford Hollow Cmty.
Improvement Ass’n, 209 S.W.3d 875, 886–87 (Tex. App.—Houston [14th Dist.]
2006, no pet.) The amount of the award is a question of fact that the trial court
must resolve on limited remand. Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1,
12 (Tex. 1991); Inwood N. Homeowners’ Ass’n, 625 S.W.2d at 747.
Having concluded that the landowners are prevailing parties, we sustain their
first issue, reverse the trial court’s order denying attorney’s fees, and remand the
attorney’s fee issue for an evidentiary hearing to determine the amount of
attorney’s fees reasonably incurred by the landowners to obtain the relief granted
in the order, considering the section 5.006(b) factors.
Sanctions
In the second issue, Golding challenges the sanctions order entered against
her.
A. Facts relevant to the sanctions issue
Before the merits of the case were settled by an agreed order, both parties
filed motions for summary judgment. The landowners attached affidavits to their
motion, along with various documents described in the affidavits, from Dorothy
Golding and James MacIvor. The affidavits detailed the two landowners’ past
15
transactions and their ownership interests in lands within the subdivision and the
adjacent 40 acres.
Both affidavits were executed in September 2011. Both indicated that
(1) MacIvor had executed contracts for deeds to purchase a portion of the 40 acres
from Golding, (2) the transactions had not been completed and a warranty deed
had not been executed, and (3) the contracts for deed referenced an existing
easement right for use of the taxiway/roadway to access portions of the 40 acres.
According to the landowners, the language in these contracts established one basis
from which the landowners in the 40 acres could claim a right to access their land.
The next month, the association moved to strike the two affidavits from the
summary-judgment evidence because Golding and MacIvor had been hiding
information regarding the status of the sale contemplated in the contracts for deed.
According to the affidavit, the sale was still pending. In truth, Golding sold that
land to MacIvor in 2009—while this litigation was pending and using outside
counsel not involved in the litigation. According to the association, Golding and
MacIvor were hiding these documents and lying about the status of the land sale in
their affidavits because the omission of easement language in the final deed
documents conclusively negated the landowners’ factual and legal argument that
an easement existed.
16
Golding and MacIvor responded by characterizing their misstatements and
omissions as admittedly “incorrect” yet “legally insignificant.” According to
Golding and MacIvor, whether one or the other owned the land had no effect on
their legal claims or the association’s defenses because the landowners were
claiming an easement by reservation, not an easement by necessity. Golding and
MacIvor tendered “revised and corrected affidavits” reflecting the earlier
completed sale of the land.
A hearing was held in December 2011, before the parties resolved the merits
of their dispute. At the hearing, in addition to complaining about the affidavits, the
association argued that Golding failed to produce the final sale document during
discovery even through it was directly responsive to a pending request for
production. The association further pointed out that Golding and MacIvor had the
exact same misstatements/omissions in their affidavits and argued that it was
unlikely both had forgotten the same transaction. According to the association, this
evidenced a conspiracy to misstate the facts. Finally, the association informed the
court that this was not the first allegation of perjury against Golding. Golding had
pleaded guilty to perjury in 2009 and was on probation for that offense at the time
she misstated the status of her land transaction with MacIvor.
17
Golding 3 was at the hearing. The trial judge requested that the lawyers
advise her of her Fifth Amendment rights and presupposed that she would not
testify. She did not.
The trial court found that both affidavits were made in bad faith and struck
them. While this ruling may have compromised the landowners’ ability to obtain
summary judgment, it was not a “death penalty sanction” and did not strike
pleadings necessary for the ultimate resolution of the litigation. The trial court
specifically noted that its ruling only affected the summary-judgment motions. The
court deferred to a later date the resolution of the amount of sanctions to be
imposed.
The hearing to set the amount of the sanction was held after the agreed order
resolving the merits of the case had been entered. Additionally, by the time the trial
court held the hearing, the association had settled with MacIvor and was no longer
seeking sanctions against him. The second hearing only addressed Golding’s bad
faith. Golding did not testify or offer evidence. Her counsel reiterated her position
that the misstatements were not relevant to the main issue in the case—whether the
association’s Declaration disallowed a fence within 10 feet of the taxiway.
The association argued that Golding’s affidavit, deposition testimony, and
live pleadings all contained the same false assertions that she continued to own the
3
She was over 80 years old at the time.
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property and that the contracts for deed were still valid agreements. The
association sought attorney’s fees for all aspects of the litigation that occurred
between the date when the association’s current counsel took over the litigation
(June 2010) and the date when the trial court made its finding of bad faith
(December 2011). The beginning date was not shown to be tied to the date of any
misrepresentations.
In addition to attorney’s fees for the 18-month period, the association sought
its litigation costs, including the full cost to depose Golding and to pay an expert
witness, the arbitrator’s fee, and “filing fees, postage, [and] copies” in the case.
Golding did not testify at this hearing either. Her counsel argued that the
inaccurate information was later corrected, did not change either side’s position in
the litigation, did not affect the issue of a restrictive covenant—which was at the
heart of the litigation—and did not influence the terms of the agreed judgment.
Golding’s counsel challenged the association’s failure to limit its sanction request
to those fees and expenses directly related to the false affidavit.
Golding objected to the submitted evidence on attorney’s fees, arguing that
fees from 2010 were not relevant because they were incurred before Golding
executed her affidavit. The trial court confirmed that he understood the objection:
I get your objection . . . . and I’m reading straight from the [sanction]
order . . . “It is further ordered that defendant is awarded reasonable
and necessary attorney’s fees to be assessed against Golding and
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MacIvor incurred as a result of [their] failure to disclose in the
respective affidavits and/or deposition testimony [the sale].
The parties then argued whether the requested fees were incurred because of the
misstatements/omissions. Golding submitted that the only fees that the association
incurred because of her misstatement were for “drafting the pleading pointing out
to this court that the statement was incorrect.”
The court found that the misstatements/omissions in the affidavits, discovery
responses, and deposition “were intentional, fraudulent, bad faith acts against the
Court under oath and therefore” supported sanctions, citing Rules of
Civil Procedure 13, 166a and 215.
The trial court’s sanction order concludes that Golding acted in bad faith in
connection with her false affidavit, false deposition testimony, and failure to
produce documents requested in discovery. It imposed a sanction against Golding
in the amount of $30,528 under Rules of Civil Procedure 13, 166a(h), 215.2(b),
and 215.3, as well as the court’s inherent power. 4
The trial court found that the evidence supported its conclusion of bad faith,
including that (1) the affidavit was signed after the litigation concerning ownership
and easement rights had already begun, (2) Golding and MacIvor used other
counsel, not involved in the litigation, to prepare the sale documents, leaving
4
At the hearing the association’s counsel stated that he was also seeking a sanction
under chapters 9 and 10 of the Civil Practice and Remedies Code; however, those
provisions were not listed in the subsequent sanction order.
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litigation counsel unaware of the sale, (3) the landowners amended their pleadings
after the sale was complete without altering their factual assertions or legal
arguments accordingly, (4) at her deposition and the arbitration proceeding,
Golding asserted that the sale had not been finalized even though it had, thus
contending that the contracts for deed language referencing an easement remained
relevant, (5) Golding failed to produce the sale documents though directly relevant
to pending discovery requests, and (6) neither Golding nor any other witness
offered “any legitimate explanation” for the failure to disclose the sale.
The trial court also found relevant to its bad faith determination that
MacIvor and Golding both omitted the same sale transaction from their affidavits.
As explained in the court’s order, “The corroborating omissions and
misrepresentation suggests that Golding was part of a collaborative effort to
conceal the existence of the General Warranty Deed dated May 28, 2009 from the
Court and the Association.” Finally, in support of the finding of bad faith, the trial
court noted that, “at the time that she signed the summary judgment affidavit[]
containing the false statements . . . Golding was actively serving a sentence of
criminal probation based upon her plea of “Guilty” to the charge of Perjury in [a
case] filed in the same county and judicial district as this suit.”
The trial court acknowledged that not all of the claimed expenses were
related to the misstatements. The court expressly stated that the sanctions were
21
intended to be “punitive” to address a “conspiracy to commit fraud on the Court.”
The trial court indicated that it would have imposed a sanction in the full amount
requested by the association, with Golding and MacIvor jointly and severally
liable, had MacIvor not already settled but, instead, awarded one-half of the
amount requested because only Golding remained in the suit.
B. Standard of review
We review a sanction order for an abuse of discretion. Low v. Henry, 221
S.W.3d 609, 614 (Tex. 2007) (sanctions under Rule 13); In re Bennett, 960 S.W.2d
35, 40 (Tex. 1997) (sanctions under court’s inherent power); Cire v. Cummings,
134 S.W.3d 835, 838–39 (Tex. 2004) (sanctions under Rule 215); Ramirez v.
Encore Wire Corp., 196 S.W.3d 469, 476 (Tex. App.—Dallas 2006, no pet.)
(sanctions under Rule 166a(h)). An appellate court may reverse a trial court’s
ruling imposing a sanction only if the trial court acted without reference to any
guiding rules and principles, such that the ruling was arbitrary or unreasonable.
Low, 221 S.W.3d at 614. When reviewing matters committed to the trial court’s
discretion, an appellate court may not substitute its own judgment for that of the
trial court. Bowie Mem’l Hosp. v. Wright, 79 S.W.3d 48, 52 (Tex. 2002). A trial
court will not be held to have abused its discretion merely because it decided a
discretionary matter differently than the reviewing appellate court would have in a
similar circumstance. Samlowski v. Wooten, 332 S.W.3d 404, 410 (Tex. 2011).
22
C. Challenge to whether sanctions were warranted
The sanction order identifies four sources of support for the trial court’s
ability to sanction Golding’s conduct. These include Rules of Civil Procedure 13,
166a, and 215, and the trial court’s inherent power.
A trial court may impose sanctions if a pleading is groundless and either
brought in bad faith or for the purpose of harassment. TEX. R. CIV. P. 13. A
pleading is groundless if it has “no basis in . . . fact.” Id. Bad faith is not simply
bad judgment or negligence; it is the “conscious doing of a wrong for dishonest,
discriminatory, or malicious purposes.” Elkins v. Stotts-Brown, 103 S.W.3d 664,
669 (Tex. App.—Dallas 2003, no pet.); Campos v. Ysleta Gen. Hosp., Inc., 879
S.W.2d 67, 71 (Tex. App.—El Paso 1994, writ denied). Courts presume that filings
were made in good faith. TEX. R. CIV. P. 13; Low, 221 S.W.3d at 614. The party
moving for sanctions must overcome that presumption. Id. A trial court must
examine the facts and circumstances in existence at the time the pleading was filed
to determine whether sanctions are appropriate. Mattly v. Spiegel, Inc., 19 S.W.3d
890, 896 (Tex. App.—Houston [14th Dist.] 2000, no pet.).
Rule 215 permits a trial court to impose a sanction on a party that fails to
comply with a discovery request in the amount of “reasonable expenses, including
attorney fees, caused by the failure.” TEX. R. CIV. P. 215.2(b)(8). The sanction is
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also available to redress an abuse of the discovery process in seeking, making, or
resisting discovery. TEX. R. CIV. P. 215.3.
Rule 166a allows for sanctions against a party who presents an affidavit in
support of or opposition to a summary-judgment motion in bad faith or solely for
the purpose of delay. TEX. R. CIV. P. 166a.
Finally, a trial court has inherent power to discipline an attorney’s behavior.
In re Bennett, 960 S.W.2d 35, 40 (Tex. 1997). This includes the power to sanction
a party’s bad-faith abuse of the judicial process, even if not covered by a particular
rule or statute. Id.; Pine v. Deblieux, 405 S.W.3d 140, 150 (Tex. App.—Houston
[1st Dist.] 2013, no pet.); Lawrence v. Kohl, 853 S.W.2d 697, 700 (Tex. App.—
Houston [1st Dist.] 1993, no writ). Inherent power exists only to the extent
necessary to deter, alleviate, and counteract bad faith abuse of the judicial process,
such as significant interference with the traditional core functions of Texas courts.
In re Tex. Dept. of Family and Protective Servs., 415 S.W.3d 522, 530 (Tex.
App.—Houston [1st Dist.] 2013, mand. denied).
Golding contends that the trial court “could not have properly found that
Golding acted with bad faith” to impose a sanction absent direct evidence of her
motive. According to Golding, without her testimony on the issue, her motives
remain unknown. Further, because her “incorrect statements” did not actually
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improve her legal position, she argues that there was no evidence from which the
trial court could have found bad faith.
“Improper motive is an essential element of bad faith.” Gomer v. Davis, 419
S.W.3d 470, 478 (Tex. App.—Houston [1st Dist.] 2013, no pet.). “The party
moving for sanctions must prove the pleading party’s subjective state of mind,”
which requires an evidentiary hearing to provide the trial court necessary evidence
of the pleading party’s motives and credibility. Id. at 480.
Contrary to Golding’s assertion, intent can be shown by circumstantial
evidence. See Owen v. Jim Allee Imp., Inc., 380 S.W.3d 276, 289–90 (Tex. App.—
Dallas 2012, no pet.); Dike v. Peltier Chevrolet, Inc., 343 S.W.3d 179, 194 (Tex.
App.—Texarkana 2011, no pet.); Schexnider v. Scott & White Mem’l Hosp., 953
S.W.2d 439, 441–42 (Tex. App.—Austin 1997, no pet.). Direct testimony from
Golding was not necessary for the trial court to determine that she acted in bad
faith. See Schexnider, 953 S.W.2d at 442 (affirming finding of bad faith based on
reasonable inference drawn from evidence without direct testimony from actor
concerning his intent).
There was ample circumstantial evidence to support the trial court’s implied
finding that Golding had an improper motive in making a misstatement in her 2011
amended pleading, deposition, and affidavit. The evidence included the warranty
deed evidencing the undisclosed sale of the land from Golding to MacIvor in 2009;
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Golding’s affidavit signed in 2011 stating that she was the owner of the land when,
in truth, she had already sold it to MacIvor; Golding’s deposition testimony that
the sale had not been completed; and the earlier contracts for deed containing
easement language on which Golding and MacIvor were relying. There also was
evidence that Golding had been charged in 2009 with aggravated perjury and
securing execution of a document by deception; she pleaded guilty to perjury in
2010; and she was on probation for that offense when, in 2011, she amended her
pleadings, gave her deposition, and filed her affidavit—all misstating ownership of
the land.
We conclude that the trial court did not abuse its discretion in concluding
from the aggregate evidence that Golding acted with an improper motive and in
bad faith by misstating that she owned the property and that the real property
records that referenced an easement continued to be the controlling documents.
The trial court did not abuse its discretion in concluding that the pleading
misstating those facts was groundless.
These conclusions are bolstered by the timing involved. The sale occurred
after the litigation has commenced, and Golding’s affidavit was executed after she
had already been found guilty of perjury. These conclusions are further supported
by the corroborating misstatements and omissions found in MacIvor’s affidavit.
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Accordingly, we overrule Golding’s challenge to the trial court’s
determination that sanctions were warranted. We turn next to whether the trial
court abused its discretion in setting the amount of the sanctions.
D. Challenge to sanction amount as arbitrary
1. Waiver
As an initial matter, the association contends that Golding has waived error
concerning the amount of the sanctions awarded by failing to file a post-judgment
motion with the trial court. See TEX. R. APP. P. 33.1(a) (providing that, as
prerequisite for complaint on appeal, party must make trial court aware of
complaint by timely request, objection or motion and provide opportunity to
address error). Rule 33.1 requires that a party make its complaint to the trial court
to preserve error; however, a post-trial motion is not the only mechanism by which
error can be preserved. Id.; see TEX. R. CIV. P. 324(b) (listing complaints for which
motion for new trial is prerequisite for complaint on appeal, but not including in
list error asserted here). An objection that makes the trial court aware of the
complaint suffices.
Golding objected to the evidence submitted by the association in support of
its sanctions request, specifically arguing that fees incurred before the
misstatements were not related to her conduct. We conclude, based on this record,
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that Golding’s objection adequately informed the trial court of her complaint and
was sufficient to preserve error.
2. Amount of sanctions imposed
Golding argues that her sanctions are not “just” because there is not a direct
nexus between the offense and the sanction imposed and because the sanction was
more severe than necessary.
Rule 166a(h) requires that the amount of sanction imposed be limited to that
reasonable caused by the filing of the bad-faith affidavits. TEX. R. CIV. P. 166a(h).
Rule 215 requires that a sanction be “just.” TEX. R. CIV. P. 215.2(b). “Due process
requires . . . that there be a direct nexus between the sanction and the sanctionable
conduct.” Nath v. Tex. Children’s Hosp., 446 S.W.3d 355, 373 (Tex. 2014).
Further, the sanction must be “no more severe than necessary to satisfy its
legitimate purpose.” TransAmerican Natural Gas Corp. v. Powell, 811 S.W.2d
913, 917 (Tex. 1991); Low, 221 S.W.3d at 620. In other words, the “punishment
should fit the crime,” TransAmerican, 811 S.W.2d at 917, and be limited to those
fees “incurred because of the sanctionable conduct.” See Low, 221 S.W.3d at 621.
A fee award that goes beyond that incurred because of the sanctionable
conduct and is “essentially the total” of fees incurred is an abuse of discretion. See
Knoderer v. State Farm Lloyds, No. 06-13-00027-CV, 2014 WL 4699136, at *14
(Tex. App.—Texarkana Sept. 19, 2014, no pet.) (mem. op.); Para-Chem S., Inc. v.
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Sandstone Prods, Inc., No. 01-06-01073-CV, 2009 WL 276507, at *11 (Tex.
App.—Houston [1st Dist.] Feb. 5, 2009, pet. denied) (mem. op.) (“Any attorney’s
fees awarded as a sanction should have been limited to those fees attributable to
the harm or prejudice caused by [the] sanctionable conduct.”).
The two sides disputed the importance of Golding’s misrepresentations and
the extent they impacted the legal arguments and added to the expense of the case.
Golding argued that the landowners had “two good arguments” for prevailing and
that the change in title was irrelevant to either of those. She, therefore, argued that
little of the association’s fees and expenses were related to the misstatements. The
association responded that at least one of the landowners’ legal arguments relied
entirely on the easement language that was superseded by the hidden, subsequent
sale.
a. Time period relevant to sanctions
Regarding the length of time from which to award sanctions, the association
argued that Golding took the “fraudulent position [since] the inception of the
lawsuit, which [was] filed back in 2008.” Yet we do not find in the record any
misstatement made earlier than 2011. The original, first-amended, and second-
amended petitions do not assert that there was a contract for deed instead of a
warranty deed. The issue of conveyance of that particular piece of land was not
raised in those pleadings. The third-amended petition is not in the appellate record,
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and we, therefore, do not know if it contained misstatements. It is not until the
fourth-amended petition, filed in 2011, that we locate a misstatement in a pleading
regarding ownership of the land MacIvor bought from Golding. This is the same
year that Golding gave her deposition testimony, filed her summary-judgment
motion, and attached the affidavit containing the same misstatements. Accordingly,
on the record before us, we cannot agree that sanctions were proven recoverable
for any period earlier than 2011.
b. Portion of fees linked to sanctionable conduct
Regarding the portion of incurred fees and expenses that were attributable to
the sanctionable conduct, the association requested all fees and expenses for the
designated 18-month period without differentiating the fees incurred defending
against the contractual easement language from those incurred defending against
the breach of restrictive covenant issue. To the extent the trial court did reduce the
fee amount by half, it clearly stated that the reduction was not made to reflect the
amount of fees caused by the sanctionable conduct, as required by Rule 215, but,
instead, to account for the settlement between the association and MacIvor.
Further, the trial court stated that the award was meant to be “punitive”—a penalty
not tied to sanctionable conduct or limited to those expenses incurred as a result of
that conduct. See TEX. R. CIV. P. 215.2(b)(8).
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All attorney’s fees and expenses incurred from the arbitrary date of June
2010 to December 2011 were not shown to be related to Golding’s
misrepresentation. As Golding’s own counsel made clear at the earlier hearing, the
easement claim based on the contracts for deed language was only one of her
theories. Other theories did not depend on the contracts for deed language or who
owned which adjoining lots. Further, the ultimate resolution of the merits of the
litigation did not turn on whether there was an easement by virtue of the deed
documents. Instead, the issue was whether the neighborhood association’s
Declarations restricted the association from constructing a fence along that
particular section of the subdivision’s perimeter.
Accordingly, we conclude that the trial court abused its discretion by
imposing sanctions that were tied to an arbitrary date and were not reduced based
on any determination of relatedness between the fees and expenses incurred and
the sanctionable conduct. See TransAmerican, 811 S.W.2d at 917; Low, 221
S.W.3d at 620; Knoderer, 2014 WL 4699136, at *14; Para-Chem S., 2009 WL
276507, at *11. The amount of the sanctions was arbitrary and unreasonable. We,
therefore, reverse the trial court’s order imposing sanctions, vacate that order, and
remand the sanction issue for further determination. See State v. PR Inv. &
Specialty Retailers, Inc., 180 S.W.3d 654, 676 (Tex. App.—Houston [14th Dist.]
2005, pet. denied) (concluding that sanction was excessive and remanding for trial
31
court to consider what amount of monetary sanctions would be just and not
excessive); Felderhoff v. Knauf, 828 S.W.2d 272, 274 (Tex. App.—Fort Worth
1992, writ denied) (remanding sanctions issue after concluding that sanctions
imposed were excessive); Cf. Low, 221 S.W.3d at 620–21 & n.5 (listing factors to
guide trial court, on remand, in determining sanction amount available under Civil
Practice and Remedies Code Chapter 10).
Conclusion
We sustain both issues. We reverse the trial court’s order denying the award
of attorney’s fees under section 5.006. We overrule the challenge to the trial
court’s determination that sanctions were warranted, but we sustain the challenge
to the amount of sanctions imposed. We, therefore, reverse and vacate that portion
of the sanctions awarding fees.
We remand the cause to the trial court for new evidentiary hearings to
determine a reasonable attorney’s fee award and a just sanction.
Harvey Brown
Justice
Panel consists of Chief Justice Radack and Justices Brown and Lloyd.
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