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Gray's Interesting Cases for November 2005

Updated and presented by David Gray
  1. In the Interest of G.H.D., No. 01-05-00228-CV, will not be published -- memo opinion (CA, Houston – 1st). On November 25, 2002, M filed a paternity suit against F who contested his paternity. The trial court signed a series of scheduling orders with the 4th order setting the case for trial on the merits on May 24, 2004. No one appeared for trial so on May 24th, the trial court signed a DWOP order. Earlier on April 29th, all parties appeared and agreed to a 5th scheduling order setting the case for trial on August 24, 2004. On August 24th M appeared ready for trial but F didn’t appear. The trial court then realized that he had DWOPed the case on May 24th so he sua sponte reinstated the case stating that the May 24th DWOP order was signed “by mistake.” The trial court then adjudicated F to be the child’s father; set child support at $950.00 per month; awarded M $19,600.00 in retro child support; and set October 1st for entry. Naturally no one appeared on October 1st so on October 7th the trial court signed a second DWOP order which was later set aside upon M’s timely motion. The trial court signed its “final” order on November 12th. F filed a mandamus claiming that the trial court had no juris to sign the November 12th order as the case had been dismissed on May 24th. M had not filed any motion to extend the trial court’s 30 day plenary power over the May 24th DWOP order so any subsequent orders (reinstatement on August 24th and final order on November 12th) were void. M argued that the 5th scheduling order on April 29th extended the trial court’s plenary power so the trial court still had the power to reinstate on August 24th.

    The Court of Appeals granted mandamus and set everything aside. Rule 165 a.3. says where there is a DWOP, a motion to reinstate must be filed within 30 days from the DWOP which was not done so the May 24th DWOP order became a final judgment on June 23rd. Although In re Burgett (23/124/3) might be construed to the contrary, a scheduling or docket control order does not supercede a DWOP order.

    Comment - This appears to be a Chinese fire drill involving all parties, attorneys, the trial court and its staff. This opinion cuts through this mess and holds that once a DWOP order is signed, it controls unless the trial court sets it aside during its plenary period even if the trial court “made a mistake.” Isn’t it sad that our 1st Court of Appeals doesn’t realize the significance of this opinion as evidenced by designating it as a memorandum opinion?

  2. In the Interest of K.K., et al, No. 01-04-00303-CV, not yet published (CA, Waco). Here’s something unusual – a published abatement order. A parental termination suit was filed against M regarding her four kids. As M was indigent, the trial court appointed her an attorney. Ultimately the trial court terminated M’s parental rights. M’s appointed trial attorney properly filed a notice of appeal. The trial court then appointed M an appellate attorney to represent her. One of the appellate attorney’s appeal points was that M’s trial attorney was a doofus thus M was represented by ineffective counsel which is prohibited by our Supremes in In re M.S. (115/534/3). The basis of this was the trial attorney’s failure to file a motion to dismiss due to the trial court’s failure to act within the one year rule, §263.401. Of course there was nothing in the court’s record to explain why M’s trial counsel failed to file the dismissal motion so M can’t prove on appeal the ineffectiveness of her attorney (In re J.W., 113/605/3).

    As an ineffective attorney is never going to prove his/her ineffectiveness on the court’s record, such an appellate point is a waste of time. Not so according to Waco. Relying on criminal law procedure, the Waco Court of Appeals ruled that in parental termination cases where you have appointed counsel and there is an appeal claim of ineffective counsel, the appeal is abated until the trial court can have an evidentiary hearing to develop the facts surrounding the ineffective counsel claim, i.e. put the alleged doofus attorney on the stand to explain his/her actions. The dissent says this abatement concept is brand new and should not be done – the same result could be achieved by the appellate attorney filing a H/C to develop these facts (where?)

    Comment – If the dissent’s H/C is filed in the Court of Appeals, doesn’t the Court of Appeals abate the appeal until it or the trial court hears the H/C? Seems to be the same result so what’s the big deal?

  3. In the Matter of the Marriage of Padilla, No. 10-05-00184-CV, will not be published – memo opinion (CA, Waco). Default divorce where H puts on no evidence concerning the value of the parties’ estate yet the trial court divided the parties’ property per H’s suggested division.

    Reversed – no evidence to support the trial court’s judgment.

    Comment – Yes, this should be a memo opinion as there is a legion of cases saying that even in a default case, there has to be evidence to support the trial court’s judgment. This is so elementary yet trial courts and attorneys continuously ignore this established rule of law. It’s so easy to prepare even a hand written inventory with values and have it admitted to support the trial court’s judgment. Yes, I know it’s rigged to support the appearing party’s suggested division but you have to do this to avoid a reversal and a possible malpractice claim. You can get away with this “no-evidence” trap if there is no record made of the trial but in this case there was a record made (proving no value evidence admitted) as this was also a SAPCR which requires a record in a default trial.

  4. Chu v. Hong, No. 2-04-279-CV, not yet published (CA, Austin). H & W owned a community donut shop which they jointly contracted to sell to X for $210,000.00. X put a stop payment order on his down payment check so W refused to go forward correctly claiming that the sales agreement was ended. H then went to X’s attorney (who knew that W had a community interest in the shop) and had him redraw the sales agreement as if H was the sole owner of the shop and authorized to complete the sale without W’s joinder. H completed the sale to X and he then sent the sales proceeds to some unknown location in Korea (presumably South Korea although the opinion doesn’t say so). When W went to the shop to make donuts, X threw her out (without even the donut holes) as he was the new owner. W then filed for divorce coupled with a suit against X and his attorney to set aside the sale under the Texas Uniform Fraudulent Transfer Act (TUFTA) and for damages arising from the fraudulent conspiracy between H, X and X’s attorney. After a jury trial in which X’s attorney, et al, were found to have been a part of the conspiracy and had acted fraudulently and with malice against W, the trial court set aside the sale; returned the shop to W; and awarded W a joint and several judgment against the defendants for $330,000.00 in actual damages (less $140,000.00 representing the shop value which was returned to W), $65,000.00 in attorney fees plus $1,500.000.00 in punitive damages. Oh yes, the divorce was granted. Only X’s attorney appeals (sure H went to Korea where the money was and X probably committed hari kari after losing the cash to H and the shop to W).

    The majority affirms holding:

    1. When H breaches his fiduciary duty to W by unfairly disposing community property, a third party (X’s attorney) may be held liable for H’s fiduciary breach if the third party knowingly participates in such breach.
    2. Under TUFTA:
      1. W is a “creditor” as she has a “claim” as she had a community interest in the property being transferred (the donut shop).
      2. The shop sale was done to hinder/defraud W’s community property claim.
      3. X’s attorney was an “insider” due to his close relationship with H arising from the conspiracy. Being so, the transactions between H and X’s attorney are subject to heavy scrutiny.
      4. Attorney fees can be awarded under §24.013 of TUFTA.

    The dissent would reverse because:

    1. For W to be “creditor” and H a “debtor,” the “claim” under TUFTA must exist before or shortly after the subject transfer, separate and apart from the fraudulent transfer. As W had no “claim” prior to the transfer, she wasn’t a “creditor” and could not sue under TUFTA.
    2. To hold X’s attorney liable there must be an underlying tort which H and X’s attorney conspired to commit.
    3. H’s fraudulent transfer is a fraud against the community, not a fraud against W personally.
    4. The Supremes in Schlueter (975/584/2) held that a spouse does not have an independent cause of action for actual or exemplary damages arising from the other spouse’s fraudulent disposition of community property thus there is no underlying tort to support the conspiring claim and the damages (including punitive) arising therefrom.
    5. TUFTA does not define “creditor” to include the community estate in a divorce action.

    Comment – WOW! If you accept the majority’s view, any time you have an unfair disposition of community property, you may have a hell of a law suit against third parties. This case is also note worthy as it gives all the jury definitions which you would use. Personally, I think the egregious conduct of H and X’s attorney blinded the majority to legal logic and the dissent’s analysis is correct. Punish H all you want (but no punitive damages) but X’s attorney isn’t liable. Maybe he might be disbarred but he’s not monetarily liable. Gosh, I hope this goes to the Supremes for a decision.

  5. In the Interest of R.J.P., No. 14-04-00521-CV, not yet published (CA, Houston 14th). H & W married in ‘88 and separated in ‘91. Four months after separation W gave birth. In ‘98 W filed a SAPCR (not coupled with a divorce) requesting child support. H & W then signed an agreed order establishing H as the biological father of the kid and ordering $200.00 per month child support. In ‘03 our beloved A.G. filed a motion to increase the child support to $400.00 per month. H then filed for divorce coupled with a petition to terminate his parental rights as he had DNA testing done on the child which proved he wasn’t the child’s biological father. The trial court ordered W and the child to be DNA tested but W refused. The ‘88 SAPCR and the ‘03 divorce were consolidated. At trial H offered his privately obtained DNA test results to disprove his paternity which was admitted over the A.G.’s objection. The trial court found that H was “probably not the child’s father” but didn’t find non-paternity. The trial court then granted the divorce and reduced H’s child support to zero.

    A.G. appeals, Reversed. As paternity of the child was in issue (although not contested) in the ‘88 SAPCR, H is collaterally estopped from contesting paternity in the subsequent divorce action thus the DNA test results were not admissible. As H put forth no evidence to justify the child support reduction, the trial court erred in reducing the child support to zero. The dissent, although legally incorrect, is absolutely correct in saying, “Social policy considerations such as . . . the welfare of the child have taken precedence over truth and equity” and “More over, the welfare of children should not fall upon one who is merely a victim of fraud.”

    Comment – Sometimes the law really is an ass especially when a trusting man involuntarily has to pay child support for a child born to a fork tongued female.

  6. Brock v. Brock, No. 10-04-00251-CV, will not be published – memo opinion (C.A., Waco) At the time of the parties’ marriage, H owned X shares of BTH, Inc. After the marriage BTH, Inc. voted to liquidate with the shareholders being paid cash out of retained earnings spread over a three-year period. The trial court held as a matter of law that these corporate liquidating dividends were H’s separate property. W called a so-called expert to testify that: (a) H never sold his stock; (b) during the liquidation of BTH, Inc., liquidating dividends were paid out of the corporation’s retained earnings/profits and (c) the cash liquidating dividends were community property. H objected that such testimony was not relevant as it would not aid the trial court in resolving a fact issue as the trial court has already resolved that issue. The trial court sustained that objection. W appeals.

    Reversed. The Court of Appeals found that there was a fact issue as to the character of the cash liquidating dividends thus the trial court erred by refusing to allow the so-called expert to testify. The dissent correctly points out that a distribution to a shareholder during liquidation is not a dividend (even though we commonly refer to such as a liquidating dividend) but only represents that which replaces the shareholder’s partial ownership (as represented by the shares of stock owned) of the corporation. As this is a mutation of the stock, the distribution takes the same character of the stock, Furham, 302/205/2. As H owned the stock before divorce, the cash received in dissolution is also separate property.

    Comment – This seems such a waste of time. Clearly the so-called expert’s opinion is wrong so what is going to happen is the trial court is going to hear the so-called expert’s opinion which is based on a misinterpretation of Texas community property law. Thereafter the trial court should disregard the faulty opinion and rule that the liquidating dividends are H’s separate property. What the Court of Appeals should have done is rule that the exclusion of the so-called expert’s opinion was harmless error as such opinion is contrary to the Texas law. Oh, well, the trial lawyers will just make more money.