INTERESTING CASES: April 5, 2017

/INTERESTING CASES: April 5, 2017

INTERESTING CASES: April 5, 2017

1. In re Morgan, 2016 Tex. App. LEXIS 11810 (Tex. App. – Houston [1st Dist.] November 1, 2016, orig. proceeding) (Cause No. 01-16-00530-CV)

NOTE: Better late than never. I missed this Opinion when it came out in early November 2016. Thank you Ami Feltovich for bringing it to my attention and congrats on your victory.

H filed suit for divorce and sought appointment of the children’s primary parent JMC. The parties entered into agreed temporary orders. H served W with discovery which included a request for production seeking records relating to W’s medical, psychological and/or psychiatric treatment, consultation diagnoses, including related prescriptions since January 2011. W objected on the basis that the request was outside the scope of discovery, unduly burdensome, and sought information subject to the physician-patient privilege. .After hearing the trial court issued an order which found that H was relying upon W’s medical condition (a nerve disorder or injury known as Reflex Sympathetic Dystrophy or RDS) as part of his claim or defense for conservatorship, making records related to her condition relevant and thus an exception to the privilege under TRE 509(e)(4). The court ordered production of the documents for in camera inspection and upon such review thereafter ordered them produced, but contemplated W’s filing of a petition for writ of mandamus. W did in fact file such a petition. W argued that no pleading supported reliance upon any medical condition sufficient to support the litigation exception of the physician-patient privilege. The COA determined that the test for determining whether the exception applies is not simply whether the condition is relevant because almost any litigant could plead matters in a way to make it relevant wherein the privilege would cease to exist. The COA also found that the exception is not met when the condition is merely an evidentiary or intermediate issue of fact rather than an ultimate issue to the claim or defense. In other words, the exception does not exist if the condition is merely tangential to a claim rather than central to it. The COA holds that the condition itself upon which discovery is sought must be so central as to require the jury, as part of its determination of the claim or defense, to make factual determinations concerning the condition itself. The COA notes that H’s pleadings make no assertion that W’s medical condition affects her suitability as a conservator of the children. Further W’s pleadings raise no issue regarding her condition. As such the trial court abused its discretion by ordering the records produced under the litigation exception to the attorney client privilege. Mandamus granted. COMMENT: If a party suffers from a physical and/or mental condition which would or could influence their suitability as a conservator, it would be prudent to include brief factual allegations concerning the condition within pleadings seeking relief, demonstrating reliance upon the condition as part of a claim or defense and in turn supporting requested discovery on the issue. I’m confident other evidence would need to be offered if the discovery was resisted, but the pleadings would at least set the groundwork for the arguments to be made more effectively.

2. Banker v. Banker, 2017 Tex. App. LEXIS 1799 (Tex. App. – Corpus Christi March 2, 2017) (Cause No. 13-15-00385-CV)

H & W married in 1990. During marriage they purchased two businesses, Banker Corp. Insurance agency run by W and El Campo Livestock (ECL) run by H. W filed for divorce in 2010 and the case proceeded to a bench trial in April 2013. The court admitted W’s I&A, most of her exhibits regarding value of the assets as well as her testimony. W sought to admit the testimony of two experts, one a property valuation expert and the other a business valuation expert regarding the value of ECL and support for W’s claims that H had committed fraud by selling off a large number of livestock and thereafter hid the proceeds from W. H objected to both experts on various grounds and offered a rebuttal expert. The trial court ultimately excluded the property valuation expert altogether and while the business valuation expert offered some evidence, the court issued findings that his opinions were not credible. H offered his testimony on value and a few exhibits, however the majority of his exhibits were not admitted, including his I & A. After trial the court deferred its ruling and ordered the parties to attend mediation which proved unsuccessful. In April 2014, one year after trial, the court circulated a draft decree to the parties. W filed a motion to reconsider and motion to divide property. In July 2014 the court entered a final decree. H was awarded ECL, multiple vehicles and trailers titled in his name and “all goods in H’s possession or subject to his control.” W was awarded the insurance agency and other assets. The division was said to represent a 55/45 split in favor of W and to equal that outcome the court awarded W a money judgment and lien against H in the amount of $455,133. W requested findings and filed a MNT and a motion to reform the judgment. W also filed a 2nd amended petition and motion for leave which requested pre-judgment interest for the first time. In January 2015 the court granted W’s motion to reform and indicated it would increase the judgment against H to $676,733. H filed a motion to reform the judgment asking to decrease it to $573,640 but the court denied his request. The court entered a modified decree keeping the judgment at $676.733 but did not include pre-judgment interest. Ultimately the court issued findings on this judgment rejecting W’s fraud claims, finding that pre-judgment interest should be awarded, but never modified the decree again to grant that relief. W appealed challenging the valuation of certain assets, asserting error in the two year delay between valuation and rendition of judgment and complaining about the failure to award pre-judgment interest. As to the valuation of ECL, the trial court found it to be worth $1.44 million. W argued that since H’s I&A was not admitted, that the only evidence of value was her experts value at close to $1.7 million. The COA readily agreed that an I&A must be admitted into evidence before it can be considered. However the COA focused on the “property-owner” rule as a means of providing evidence of valuation, noting that the owner of a business can, within limits, testify as to the value of the business. To do so property the owner must provide the factual basis upon which his opinion rests, including possibly information regarding how much was paid for the business, nearby sales, tax valuations, appraisals and online resources. A bare assertion of value of a business will not be sufficient. Here the COA found that the H’s testimony regarding ECL included many sound reasons as a basis for his $1.44 valuation which properly invoked reliance upon the property-owner valuation rule. W further argued that the trial court erred in rejecting her request that ECL good will be valued as an asset. The COA agreed that goodwill is a divisible asset, however the COA found no error in the trial court’s decision to reject the only testimony supporting it which came from W’s business valuation expert because his “income based” valuation approach to ECL overall was rejected and the good will value was derived from this overall valuation, thus W failed to carry her burden of producing proper evidence of good will value. W also complained about the value of the vehicles awarded to H, however her arguments relied upon valuations prepared by her property valuation expert whose testimony had been wholly excluded at trial and W had not complained on appeal about the trial court’s decision to exclude this witness. W also complained that the trial court “overvalued” two bank accounts awarded to her by $44,133, based on values provided in H’s I&A which was not admitted in evidence. The COA determined that no evidence supported the $44K figure and that the last viable evidence of value supported something closer to $32K. The COA then suggested a “remittitur” to W from H of $4,914 which represented 55% of the differential in the value found and the actual evidence. The COA found that the valuation discrepancy did not render the overall division manifestly unjust and ruled that if H voluntarily remitted the $4914 amount to W within 15 days of their Opinion it would consider reversible error cured. W further complained about the delay between the trial and evidence and the ultimate rendition and entry of judgment. The COA notes that W carried to burden to establish that the delay was unreasonable and caused harm. The COA found that much of the delay was attributed to the various motions that W herself had filed post trial. The COA was also unpersuaded by the changing values of property over the delay period noting that if the court had issued its decision immediately following the trial in 2013, the values of the various properties awarded would have still fluctuated and the W would have been in the exact same position. Finally the COA rejected W’s claim of newly discovered evidence (involving change in asset values) because they determined such evidence to be merely “new evidence” not “newly discovered evidence” which was otherwise cumulative only. W also asserted that the trial court had erred in failing to divide certain livestock in H’s possession, specifically 6 horses. H argued that the court had in fact awarded these to him because the decree specified he was awarded all “goods” in his possession which he argued included the horses. The COA disagreed finding that the decree also awarded W “goods” and then separately awarded W any other livestock in her possession, indicating that the court did not intend “goods” to include livestock. The COA remanded the issue of valuation and division of the horses to the trial court. Finally, the COA rejected W’s arguments supporting her timely pleading request for pre-judgment interest, determining that W’s pleading after the first judgment was signed was too late. Property division reversed and remanded for determination of value of 6 horses and re-division of property thereafter based on existing evidence. Remittitur of $4914 suggested and if accepted, valuation of all other assets conditionally affirmed. All other matters affirmed. COMMENT: This is the first time I can remember ever seeing “remittitur” used as a device to otherwise correct error in a property division on appeal. In my experience, a $10K valuation error in an overall $2 million++ estate would be considered “de minimis” and would not result in reversible error on a division of property. Here however the COA finds the error reversible but offers the H an inexpensive way out of a complete property division reversal. I’m guessing payment of $4,914 versus the fees and expenses involved in a complete new trial makes for an easy decision on H’s part.

3. In re V.J.A.O., 2017 Tex. App. LEXIS 2049 (Tex. App. – Dallas March 9, 2017) (mem. opinion) (Cause No. 05-15-01534-CV)

M and F had one child born in France. When the child was an infant, M and the child moved to the US to live with F. They never married but lived together and purchased a residence together. When the separated, F moved out and later remarried. M and F continued to share custody of the child. In a parentage action the court named the parties JMC and gave M the exclusive right to establish the child’s residence in Dallas and contiguous counties and to make decisions regarding education. F was given an SPO with expanded elections. F was ordered to pay $5,000 in child support per month and W was awarded $30,600 in fees. F appealed the child support orders. F asserted that the factors in TFC 154.123(b) for determining whether guideline child support was unjust could only be considered in those cases where the obligor’s net resources were below $8550. F claimed that when ordering child support beyond the presumed amount because the obligor’s net resources exceeded $8550, the court could only consider the needs of the child and the resources and circumstances of the parties as provided in TFC 154.126(a). Although the COA agreed that the child support issue in this case was to be considered under TFC 154.126(a), it found no error upon the trial court’s consideration of other factors. The COA noted that the broad scope of the factors identified within TFC 154.123(b) were subsumed within the three criteria in TFC 154.126 (needs of child, resources and circumstances of parties) and that the evidence established the proven needs of the child justifying the amount of child support ordered in this case. Regarding attorney fees the COA found that M’s attorney did not testify to the special factors required to support an award of paralegal/legal assistant fees (qualifications, work performed, hourly rate and hours expended), necessitating a slight modification of the fee award. Judgment affirmed.

4. King v. King, 2017 Tex. App. LEXIS 2075 (Tex. App. – Dallas March 9, 2017) (mem. opinion) (Cause No. 05-16-00467-CV)

During marriage, H participated in the Texas Municipal Retirement System (TMRS). In divorce proceedings the parties entered into an MSA which awarded W a specified amount of H’s TMRS account and awarded the balance to H. The decree specifically awarded W this amount and awarded H his TMRS account with the City of Mesquite except that portion awarded to W. The Decree expressly represented a merger of the MSA and the parties agreed the Decree would control in the event of any conflicts. Sometime after the divorce was final, W filed a Chapter 9 suit, asserting that the City matching contributions to H’s retirement (maintained in a separate general fund but held for H’s benefit and paid only at retirement) had not been divided upon divorce. At trial W offered expert testimony that the matching contribution was not paid until retirement and held in an accumulated fund separate from the participants contribution account. W’s expert testified that in his opinion, the “account” awarded to H under the terms of the decree only awarded H his contribution amounts. W testified that she assumed any matching funds would follow the award of the contributed funds, such that she would receive that portion of the matching funds that followed her $32,000 award from H’s TMRS account. At the conclusion of W’s case, H moved for judgment which the trial court granted, finding that the parties’ Decree “intended” to divide all assets and that the Decree and MSA combined to partition all assets. W appealed. On appeal W focused on the decree’s division of H’s TMRS “account” which she argued contained only his contributed funds. In contrast, H focused on the parties expressed intent to fully and completely resolve the issues in their divorce including a just and right division of their estate. The COA noted that W could not have truly believed the matching funds would follow her portion of the award if she did not also believe that these matching funds had been disposed of. The COA concluded that the trial court’s interpretation was supported by H’s argument that a complete division had been intended and that H had been awarded everything in his TMRS plan except the specified portion awarded to W. Judgment affirmed.
5. United States v. No. Tracts 31A, Lots 31 and 32, No. 16-40588 (Tex. 5th Cir. – March 9, 2017) (per curiam)

Note: Thank you Susan Meyers for bringing this case to my attention. This 5th Circuit decision results from a case on appeal from the U.S. District Court, Eastern District of Texas. The full Opinion on this case can be accessed at the following link:

http://www.ca5.uscourts.gov/opinions/pub/16/16-40588-CV0.pdf

H agreed to forfeit two annuities held solely in his name as a part of a plea agreement with the United States of America. W contended that the District Court erred in effectively ordering the forfeiture of her one-half community interest in those annuities. The District Court found that Texas law provides that property held in one spouse’s name is presumed to be sole management community property, and if the named spouse conveys such property to a third party, the third party is entitled to rely upon the authority of that spouse to convey the property if, in pertinent part, the third party “does not have actual or constructive notice of the spouse’s lack of authority” to deal with the property. TFC § 3.104(b)(2)(B). Affirming the judgment of the District Court, the Fifth Circuit holds that the Government was entitled to rely on the legal presumption that the annuities were H’s sole management community property under § 3.104(a) because they were held in H’s name only.
6. In re Burrows, 2017 Tex. App. LEXIS 2299 (Tex. App. – Texarkana March 17, 2017, orig. proceeding) (mem. opinion) (Cause No. 06-17-00014-CV)

After the divorce was filed in October 2016, by Rule 11 Agreement, H & W agreed to the appointment of Attorney K as the amicus attorney for their 3 year old daughter. H changed counsel in December and thereafter filed a motion to remove Attorney K as the amicus, asserting a disqualifying conflict of interest. Evidence at the hearing to disqualify established that all of the attorneys involved practiced in Longview, Texas and were otherwise part of a small famiy law bar in that community. It further established that W’s attorney and the amicus had traveled together, had once shared a case and fees in that case, that W’s attorney had thrown a baby shower for the amicus attorney and was godmother to the amicus’ child. H argued that these facts created circumstances in which the amicus would be predisposed to side with W because of her counsel. In response the amicus asserted that her husband was Catholic and the appointment of a godparent carried no legal responsibilities but only a hope that the godparent would always be a positive influence on the child. W’s attorney denied hosting a shower for the amicus but pointed out that the wife of H’s first attorney did. The amicus and W’s attorney admitted sharing a prior case. They also admitted traveling together but noted that it was with other attorneys and their spouses and the amicus identified other attorneys in the community she had traveled with as well. Ultimately the trial court found no disqualifying conflict and denied the motion. H sought mandamus relief. The COA noted that because the TFC gives courts the discretionary authority to appoint amicus attorneys, it follows that they likewise have discretion to remove them. The COA reviewed the evidence admitted and found that the trial court acted within its discretion to deny the motion. Interestingly the Opinion suggests that while the amicus made certain statements and admissions to the court during the hearing, when she was called to testify as a witness by H’s counsel she objected, arguing that she could not be compelled to testify under TFC 107.007. The trial court sustained her objection and the H made no offer of proof as to what her testimony might have been. Further H did not call W’s counsel to testify. The COA determined that nothing precluded H from obtaining an adequate record to establish his claims but he did not do so. Mandamus denied.

7. In re J.R.W., 2017 Tex. App. LEXIS 2384 (Tex. App. – Dallas March 21, 2017) (mem. opinion) (Cause No. 05-15-1479-CV)

M and F had one child and separated when the child was only few weeks old. F filed a SAPCR in December 2010 seeking appointment as JMC. Temporary orders were issued in January 2011 giving F supervised access at the residence of his mother, PGM. In 2013 PGP filed a petition in intervention. M filed a motion to strike which was denied. At a subsequent temporary hearing both M and PGM admitted that F had committed family violence and had substantial issues with drugs and mental illness. The Court appointed M as temporary SMC and gave PGM rights of access with the child. The case proceeded to a bench trial and M and PGM were appointed JMC of the child, M was given exclusive rights to determine residence. M filed a MNT again challenging PGM’s standing. The post-judgment motion was denied and M appealed. M argued that PGM failed to establish her standing under either TFC 102.004(b) (allowing GP to intervene seeking custody if evidence establishes that neither parent should be named SMC or both parents should not be named JMC because such orders would significantly impair the physical health and emotional development of the child. M also argued that PGM failed to establish standing under TFC 153.432(c) by filing an affidavit sufficient to establish that denial of grandparent access would significantly impair the child’s physical health or emotional well-being. PGM initially argued that standing had been conferred by consent which had been given by either M or F in prior ancillary hearings but records from those hearings had not been provided by M on appeal. The COA found that M has consistently challenged PGM’s standing, after intervention was filed, in a subsequent hearing for that specific purpose, again at trial and thereafter in her MNT, thus consent to standing could not be implied. The COA further examined M’s argument that the COA could consider no evidence supporting standing after the initial intervention was filed, M claiming that standing must be determined at the time suit is filed. However, the COA found that neither TFC 102.004 nor 153.432 (the statutes upon which PGM’s standing was based) limit evidence supporting standing to that which exists at the time of the intervention. Noting that TRAP 44.1 requires the COA to determine if a trial court’s error resulted in the rendition of an improper judgement, the COA found that it could consider evidence of circumstances at any tie leading up to the judgment to determine if the court acted properly in allowing PGM standing through her intervention. The COA found that PGM’s affidavit established sufficient facts to support a determination that the child would suffer substantially if PGM was not granted access, thus the trial court’s final orders allowing PGM possession of the child were not an abuse of discretion. Regarding conservatorship, the COA considered the TX Supreme Court decision in Brook v. Brook (882 SW2 297) which found that when a non-parent is appointed JMC with a parent the standard for such appointment is best interest of the child. Acknowledging the subsequent US Supreme Court decision in Troxel, the Dallas COA was unwilling to reach a decision as to whether the Troxel decision abrogated the TX Supreme Court decision in Brook, finding it unnecessary because the final order in this case did not contain the mandatory findings required by TFC 154.333. Effectively side-stepping the issue, the COA reversed and remanded the final order for further proceedings consistent with its opinion, in other words, for the trial court to issue the required findings. Presumably once the trial court does so, the more substantive questions regarding PGM’s standing to seek conservatorship and sufficiency of the evidence on that issue will be addressed.

8. In re Reardon, 2017 Tex. App. LEXIS 2562 (Tex. App. – Fort Worth March 23, 2017, orig. proceeding) (mem. opinion) (Cause No. 02-16-0455-CV)

M and F filed competing MTM’s and the case went to trial in May 2015. The trial court signed a final order in August 2016 but set it aside in November 2016 and signed a new final order in May 2016. In June F filed a MTM the May 2016 order, alleging a material and substantial change and seeking to restrict M’s periods of possession. M filed a counter petition to modify. M also filed a MNT of the May 2016 order or alternatively, a motion to reform it. The trial court granted M’s motion to reform and signed a second reformed order in July 2016. M filed another MNT as well as a notice of appeal from the July 2016 order. Beginning in September 2016 the trial court began conducting hearings in the modification proceeding, continuing on through November. In November F filed a motion in the trial court asking that all relief sought by M in the modification proceeding be denied and that he be awarded attorneys fees and costs. The trial court issued temporary injunctions enjoining F from engaging in certain activities related to the child’s physical and mental health (not sure what this means exactly, but it’s what the opinion says) and thereafter denied F’s motion to deny relief. F sought a writ of prohibition from the COA, arguing that the trial court had no authority to proceed in the underlying modification action while the order sought to be modified was the subject of a pending appeal. The COA granted a stay, requested a response and ultimately heard oral argument in the case. F relied on the 2015 El Paso COA decision in E.W.N. (482 SW3 150), which held that a trial court lacks jurisdiction to proceed over a modification proceeding in these circumstances because exclusive jurisdiction over the prior order rests with the appellate court while an appeal is pending. F argued that the FW COA in this case was bound by the decision in E.W.N.. because E.W.N. originated in the FW COA and was only transferred to the El Paso COA under a Supreme Court docket equalization order. Initially the COA considered whether a transferor court (FW in this case) was bound by the decisions of a transferee court (El Paso) when cases were shuffled in these circumstances. The COA determined it was not required to treat decisions of the transferee court as binding precedent under TRAP 44.3. Thereafter the COA considered the more substantive issue of whether or not a trial court had jurisdiction to consider a modification petition in situations where the prior order sought to be modified remained at issue on appeal. The COA acknowledged that two other decisions out of Houston 1st and Dallas held that the trial court could proceed (Blank v. Nuszen, Case No. 01-13-01061-CV; 2015 WL 4747022 and Hudson v. Markum, 931 SW2 336) while E.W.N. from El Paso decided the issue differently. M argued that under TFC Chp. 155 a trial court has continuing jurisdiction to modify its orders and nothing in the TFC restricts of limits this authority when an appeal is pending. F asserted that TFC 109.001 (regarding temporary orders pending appeal from SAPCR orders) would be rendered meaningless if the trial court retained jurisdiction because TFC 109.001 gave the trial court a very specific time period (30 days after notice of appeal) in which it could act to issue further orders before the appellate court’s exclusive jurisdiction over the final order kicked in. F also argued that if modifications were allowed to proceed even while an appeal from the prior order remained pending, this would eventually render most appeals moot if the prior order was thereafter modified before the appeal concluded, such a ruling would allow trial courts to evade appellate review of their orders by entertaining modifications in a revolving door fashion and finally it would increase costs significantly if parties were required to fight on two separate fronts (trial court and appeal). The FW COA considered all of these arguments and reasoned that even though all of these concerns were a possibility the did not persuade the COA to carve out any exceptions to a party’s right to seek modification while an appeal was pending. The COA found that the authority to grant temporary orders on appeal for the safety and welfare of the child under TFC Chp. 109 did not conflict with TFC Chp. 156 permitting a party to go before the trial court and seek permanent relief when there had been a material and substantial change in circumstances. The COA noted that a modification suit is a new and separate lawsuit and a trial court does not lose its jurisdiction over that new suit solely because an appeal is pending from a final judgment in a prior lawsuit. The COA agreed that if the modification proceeding was finalized before the appeal, it likely would render an appeal on the modified issue moot but held this did not require them to alter their opinion. Further, the COA recognized that while F’s argument concerning increased costs was viable, there were a variety of remedies available to address this (i.e. TFC 156.005, CPRC 10.001, TRCP 13 if suit was groundless and TFC 106.001-002). The COA found that if modification claims were not groundless, a party should not be barred from asserting them simply because it would involve more resources to litigate them. Writ of prohibition denied. COMMENT: While I fully understand how the COA technically reaches this decision, I’m not a fan. In such a case, I believe the trial court would still have discretion to consider a motion to abate the modification suit while the appeal ran its course. In a new modification suit the trial court would not be limited by the strict time frames under TFC 109.001 and could issue any temporary orders warranted by the evidence of material and substantial change as needed while the case was abated. Further, the trial court could lift the abatement under any subsequent motion if the need arose. One issue the COA does not address is the shifting evidentiary window that exists in SAPCR modifications, making a prior order res judicata as to most all evidence which preceded the date of that order. If a prior order is ultimately reversed on appeal, this would expand the available evidence by reopening the old modification suit and allowing evidence back to the date of the MSA or last rendition. On the other hand, if the prior order was affirmed then evidence in the new modification suit should be limited. It would seem that the trial court would be justified in knowing the outcome of the appeal so the evidentiary parameters of the modification trial could be determined and so that any errors which might be established in that appeal could be corrected or avoided. Perhaps someone involved in this case will ask the Supreme Court to review based on the conflicting COA decisions. Stay tuned.

2017-09-01T02:30:37+00:00 April 5th, 2017|SideFeatured-Home|