Dike v. Peltier Chevrolet Inc.

343 S.W.3d 179

Danny DIKE, Appellant,

v.PELTIER CHEVROLET, INC., Appellee.

No. 06–10–00080–CV.

Court of Appeals of Texas, Texarkana.

Submitted March 9, 2011.Decided April 1, 2011.

Chad Baruch, The Law Office of Chad Baruch, Rowlett, TX, for appellant.J. Stephen Gibson, Christopher D. Kruger, Kevin C. Haynes, Lisa A. Songy, Shannon, Gracey, Ratliff & Miller, LLP, Dallas, TX, for appellee.Before MORRISS, C.J., CARTER and MOSELEY, JJ.

OPINION

Opinion by Justice MOSELEY.

Peltier Chevrolet, Inc., apparently upset with multiple lawsuits brought against it by the Weinstein Law Firm, sought sanctions against Jeffrey Weinstein, the principal in the firm, James Owen, his employee or associate, and Danny Dike, their client. This is an appeal from an award of sanctions on behalf of Peltier against Weinstein, Owen, and Dike.

I. FACTUAL AND PROCEDURAL HISTORY

Dike had purchased a 2005 Chevrolet Colorado from Peltier on September 14, 2005; as a part of the deal, Peltier had caused the financing to be arranged through a retail installment transaction (the transaction).¹ Over three years later (March 4, 2009), Dike formally retained his attorneys to represent him with respect to certain claims against Peltier arising from the transaction. On January 19, 2010, Dike filed his original petition alleging certain promises were made by Peltier to him at the time of the transaction. Dike alleged fraud, negligent misrepresentation, money had and received, intentional infliction of emotional distress, and promissory estoppel as a result of the 2005 automobile purchase. Attorneys Weinstein and Owen were listed on the petition as representing Dike, but only Owen signed the petition. In his petition, Dike alleged that Peltier's fraud “was inherently undiscoverable.”

Thereafter, on April 23, 2010, Peltier filed its traditional motion for summary judgment alleging the statute of limitations barred Dike's claims. Peltier maintained that Dike's causes of action accrued in 2005 at the time of the transaction and, therefore, were all barred by the relevant two-year and four-year limitations statutes. Rather than filing a response to the motion for summary judgment, Dike filed a motion to nonsuit his claims; those claims were nonsuited without prejudice.

Peltier then filed a motion for sanctions under Section 10.001 of the Texas Civil Practice and Remedies Code and Rule 13 of the Texas Rules of Civil Procedure, asserting that Dike's suit was frivolous and filed in bad faith for the purpose of harassment. Peltier argued that Dike should have known his claims were barred by the statute of limitations. The trial court conducted a hearing on the motion for sanctions, in which Dike agreed his claims were subject to two- and four-year statutes of limitations. Dike maintained, however, that because his claims were inherently undiscoverable and information regarding his claims was fraudulently concealed from him, the accrual of his claims did not begin until such time as they were discovered.

The trial court rejected this argument, primarily because Dike concedes he discovered his claims in March 2009, some six months before the four-year statute of limitations for his fraud claims expired.² The trial court granted the motion and sanctioned Dike, Owen, and Weinstein $15,353.00, representing Peltier's attorneys' fees in defending Dike's claims. The sanctions were imposed jointly and severally against Dike and his attorneys.

II. APPLICABLE LAW AND STANDARD OF REVIEW

We review the imposition of sanctions under Chapter 10 of the Texas Civil Practice and Remedies Code and Rule 13 of the Texas Rules of Civil Procedure for an abuse of discretion. Low v. Henry, 221 S.W.3d 609, 614 (Tex.2007); Cire v. Cummings, 134 S.W.3d 835, 838 (Tex.2004). Under this standard, courts view the evidence in the light most favorable to, and indulge every presumption in favor of, the trial court's action. In re Liu, 290 S.W.3d 515, 519 (Tex.App.-Texarkana 2009, orig. proceeding). “An appellate court may reverse the trial court's ruling only if the trial court acted without reference to any guiding rules and principles, such that its ruling was arbitrary or unreasonable.” Low, 221 S.W.3d at 614. A trial court abuses its discretion in awarding sanctions only if the order is based on an erroneous assessment of the evidence or the law. Dolenz v. Boundy, 197 S.W.3d 416, 421 (Tex.App.-Dallas 2006, pet. denied).

Rule 13 authorizes the imposition of sanctions against an attorney, a represented party, or both, who filed a pleading that is either: (1) groundless and brought in bad faith; or (2) groundless and brought to harass. Tex.R. Civ. P. 13; see also Rudisell v. Paquette, 89 S.W.3d 233, 236 (Tex.App.-Corpus Christi 2002, no pet.). The rule defines “groundless” as having “no basis in law or fact and not warranted by good faith argument for the extension, modification, or reversal of existing law.” Tex.R. Civ. P. 13. Sanctions may only be imposed for good cause under Rule 13, the particulars of which must be stated in the order. Tex.R. Civ. P. 13; Rudisell, 89 S.W.3d at 237.

Similarly, to award sanctions under Chapter 10, it must be shown that: (1) the pleading or motion was brought for an improper purpose; (2) there were no grounds for the legal arguments advanced; or (3) the factual allegations or denials lacked evidentiary support. See Tex. Civ. Prac. & Rem.Code Ann. § 10.001 (Vernon 2002); Low, 221 S.W.3d at 614; Armstrong v. Collin County Bail Bond Bd., 233 S.W.3d 57, 62 (Tex.App.-Dallas 2007, no pet.). Chapter 10 specifies that one of the aims for imposition of sanctions for the filing of frivolous or groundless pleadings is to “deter repetition of the conduct or comparable conduct by others similarly situated.” Tex. Civ. Prac. & Rem.Code Ann. § 10.004(b) (Vernon 2002). We construe the phrase “improper purpose” as the equivalent of “bad faith” under Rule 13. See Tex.R. Civ. P. 13; cf. Save Our Springs Alliance, Inc. v. Lazy Nine Mun. Util. Dist. ex rel. Bd. of Directors, 198 S.W.3d 300, 321 (Tex.App.-Texarkana 2006, pet. denied) (“nonfrivolous” requirement is same as “good faith” requirement); Elwell v. Mayfield, No. 10–04–00322–CV, 2005 WL 1907126, at *5 (Tex.App.-Waco Aug. 10, 2005, pet. denied) (mem.op.) (same). An order imposing a sanction under Chapter 10 “shall describe ... the conduct the court has determined violated Section 10.001 and explain the basis for the sanction imposed.” Tex. Civ. Prac. & Rem.Code Ann. § 10.005 (Vernon 2002).

In determining whether sanctions are appropriate, the trial court must examine the facts available to the litigant and the circumstances existing when the litigant filed the pleading. Robson v. Gilbreath, 267 S.W.3d 401, 405 (Tex.App.-Austin 2008, pet. denied); Alejandro v. Robstown Indep. Sch. Dist., 131 S.W.3d 663, 669 (Tex.App.-Corpus Christi 2004, no pet.). Courts should presume parties and their counsel file all papers in good faith, and the party seeking sanctions must overcome that presumption. See Tex.R. Civ. P. 13; GTE Commc'ns Sys. Corp. v. Tanner, 856 S.W.2d 725, 731 (Tex.1993). The party seeking sanctions has the burden of showing its right to relief. Tanner, 856 S.W.2d at 731; Elkins v. Stotts–Brown, 103 S.W.3d 664, 668 (Tex.App.-Dallas 2003, no pet.).

III. ANALYSIS OF POINTS OF ERROR

On appeal, Dike claims (1) the trial court abused its discretion in assessing sanctions against him, absent any evidence he did anything other than entrust legal representation to his lawyers; (2) the trial court abused its discretion in assessing sanctions against Weinstein absent evidence of his involvement in the petition on which the sanctions order is founded; and (3) the trial court abused its discretion in assessing any sanctions because the claims were not groundless and had a nonfrivolous legal basis. We initially address Dike's contention that the trial court abused its discretion in assessing sanctions based on the record before us.

A. The Trial Court Erred in Assessing Sanctions Under Rule 13

To impose sanctions under Rule 13 of the Texas Rules of Civil Procedure, the proponent of sanctions must establish that the suit was groundless and brought (1) in bad faith or (2) for purposes of harassment. Tex.R. Civ. P. 13. A pleading is groundless when it has no basis in law or in fact. Tex.R. Civ. P. 13.

(1) Peltier Failed to Establish that Dike's Petition Was Groundless

The party seeking sanctions has the burden of showing his right to relief. Tanner, 856 S.W.2d at 731. Groundlessness turns on the legal merits of a claim. Robson, 267 S.W.3d at 405. Thus, in order to establish Dike's claim was groundless, Peltier had the burden of showing that the claim had no legal merit, i.e., that Dike's claim had no basis in law or fact and was not warranted by good faith argument for the extension, modification, or reversal of existing law. Tex.R. Civ. P. 13. Further, a lawsuit is “groundless,” as used in Rule 13, if “there is no arguable basis for the cause of action.” Attorney Gen. of Tex. v. Cartwright, 874 S.W.2d 210, 215 (Tex.App.-Houston [14th Dist.] 1994, writ denied).

Dike's original petition asserted, among other things, claims of fraud in connection with the purchase of a motor vehicle from Peltier in an installment transaction.³ More specifically, the petition alleged that Peltier made “overt false statements of material facts” and failed to “disclose material facts” required to be disclosed, and that the resulting harm was inherently undiscoverable. The basis for the imposition of sanctions rested primarily on the trial court's finding that the petition alleged time-barred causes of action, which, by definition, lacked legal merit.⁴ In response to the motion for sanctions, Dike relied on the discovery rule, alleging that the statute of limitations did not begin to run on his claims until such time as they were discovered, said claims being “inherently undiscoverable” and fraudulently concealed by Peltier.

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