JANIS GRAHAM JACK, District Judge.
On this day came to be considered (1) Intervenors Maria and Arturo Trevino's Motion for Partial Summary Judgment (D.E. 124); (2) Intervention-Defendants Vanderbilt Mortgage and Finance, Inc. and CMH Homes' Motion for Summary Judgment (D.E. 145); (3) Intervention-Defendant Kevin Clayton's Motion for Summary Judgment (D.E. 146); and (4) Intervention-Defendant Clayton Homes, Inc.'s Motion for Summary Judgment (D.E. 147). For the reasons explained below, the Intervenors' Motion for Partial Summary Judgment (D.E. 124) is DENIED. Intervention-Defendants Vanderbilt, CMH Homes and Clayton Homes Inc.'s Motions for Summary Judgment, (D.E. 145, 147) are DENIED IN PART and GRANTED IN PART. Intervention-Defendant Kevin Clayton's Motion for Summary Judgment (D.E. 146) is GRANTED.
This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1331, federal question, because Intervenors Maria and Arturo Trevino brought claims under the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-1968 ("RICO"), and Intervention-Defendant CMH Homes, Inc. properly removed the case to this Court pursuant to 28 U.S.C. § 1441. (D.E. 34.)
The general factual and procedural background of this case is laid out in the Court's August 25, 2010 Orders on Intervention-Defendants' previous motions to dismiss. (D.E. 148, 149.) The facts on which the parties base their motions for summary judgment are as follows:
Intervention-Defendant CMH Homes, the retail arm of Intervention-Defendant Clayton Homes, Inc., operates a network of manufactured home retail centers across the United States. CMH offers its customers the opportunity to purchase a
Around January 5, 2002, Counter-Plaintiffs Cesar Flores and Alvin E. King purchased a manufactured home from CMH Homes in Corpus Christi in a "land in lieu" transaction. Upon signing their purchasing documents, they confirmed that two vacant lots located in Jim Wells County (Lots 34 and 35) and owned by the Trevinos would serve as additional security for their obligation to make payments on the manufactured home. (D.E. 144, p. 4)
The DOT and the BML both contain the purported signatures of Maria and Arturo Trevino and were apparently notarized by Public Notary Benjamin Frazier. (D.E. 144, Ex. 13 (DOT), 14 (BML).) However, the Intervenors allege that they did not voluntarily pledge their property to secure the purchase of Flores and King's manufactured home. Rather, they contend they were not present when the lien documents were signed, that their signatures were forged, and that their signatures were then falsely notarized by CMH employees. (D.E. 124, p. 4; D.E. 98, p. 4; D.E. 144, Ex. 12 (Maria Trevino deposition), p. 38-39; Ex. 25 (Arturo Trevino deposition), p. 89.)
The Intervention-Defendants dispute the allegations that the Trevinos' signatures on the lien documents were forged. They claim the signatures on the DOT and BML are the genuine signatures of Maria and Arturo Trevino and that no forgery took place. They contend that the Trevinos participated voluntarily in the transaction placing liens on their property. (D.E. 144, p. 5.) As to the Intervenors' contention that their signatures on these lien documents were falsely notarized by CMH
Based on these events, Maria and Arturo Trevino brought the following claims against Vanderbilt, CMH Homes, Clayton Homes, Inc., and Kevin T. Clayton (collectively, the "Intervention-Defendants"): (1) fraudulent liens under Tex. Civ. Prac. & Rem.Code § 12.002(2); declaratory judgment that Flores and King's debt under the Contract was "paid in full"; (3) common law unfair debt collection; (4) Texas Debt Collection Act ("TDCA"); (5) money had and received; (6) common law fraud; (7) civil conspiracy; (8) and RICO. (D.E. 98, p. 19-33.) They also requested damages based on mental anguish. (D.E. 98, p. 20, 21.)
The Intervenors now move for Partial Summary Judgment on their fraudulent lien claim, asking the Court to find as a matter of law that the Intervention-Defendants filed fraudulent liens on the Trevinos' property in violation of Tex. Civ. Prac. & Rem.Code §§ 12.002 et seq. (D.E. 124.) The Intervention-Defendants also move for Summary Judgment on all of the Intervenors' claims. (D.E. 145).
Under Federal Rule of Civil Procedure 56, summary judgment is appropriate if the "pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c)(2). The substantive law identifies which facts are material. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202
On summary judgment, "[t]he moving party has the burden of proving there is no genuine issue of material fact and that it is entitled to a judgment as a matter of law." Rivera v. Houston Indep. Sch. Dist., 349 F.3d 244, 246 (5th Cir.2003); see also Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If the moving party meets this burden, "the non-moving party must show that summary judgment is inappropriate by setting forth specific facts showing the existence of a genuine issue concerning every essential component of its case." Rivera, 349 F.3d at 247. The nonmovant "may not rely merely on allegations or denials in its own pleading; rather, its response must. . . set out specific facts showing a genuine issue for trial." Fed.R.Civ.P. 56(e)(2); see also First Nat'l Bank of Arizona v. Cities Serv. Co., 391 U.S. 253, 270, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968). The nonmovant's burden "is not satisfied with some metaphysical doubt as to the material facts, by conclusory allegations, by unsubstantiated assertions, or by only a scintilla of evidence." Willis v. Roche Biomedical Labs., Inc., 61 F.3d 313, 315 (5th Cir.1995); see also Brown v. Houston, 337 F.3d 539, 541 (5th Cir.2003) (stating that "improbable inferences and unsupported speculation are not sufficient to [avoid] summary judgment"). Summary judgment is not appropriate unless, viewing the evidence in the light most favorable to the non-moving party, no reasonable jury could return a verdict for that party. Rubinstein v. Adm'rs of the Tulane Educ. Fund, 218 F.3d 392, 399 (5th Cir.2000).
The Intervenors request partial summary judgment on their fraudulent lien claim pursuant to Federal Rule of Civil Procedure 56(d)(2). (D.E. 124.) Rule 56(d) provides: "[i]f summary judgment is not rendered on the whole action, the court should, to the extent practicable, determine what material facts are not genuinely at issue. The court should so determine by examining the pleadings and evidence before it and by interrogating the attorneys. It should then issue an order specifying what facts—including items of damages or other relief—are not genuinely at issue. The facts so specified must be treated as established in the action." Fed. R.Civ.P. 56(d)(1). Under Rule 56(d)(2), "[a]n interlocutory summary judgment may be rendered on liability alone, even if there is a genuine issue on the amount of damages." Fed.R.Civ.P. 56(d)(2). "A partial summary judgment order in accordance with Rule 56(d) is not a final judgment but is merely a pre-trial adjudication that certain issues are established for trial of the case." F.D.I.C. v. Massingill, 24 F.3d 768, 774 (5th Cir.1994); see Preston Exploration Co. v. Chesapeake Energy Corp., 716 F.Supp.2d 656, 658 n. 1 (S.D.Tex.2010) (citing Massingill). "Rule 56(d) empowers the Court to determine what material facts are not genuinely at issue, where summary judgment is not rendered on the whole action, so as to clarify the triable issues that remain." Barrington Group Ltd., Inc. v. Classic Cruise Holdings S. De R.L., 2010 WL 184307, at *4 (N.D.Tex. Jan. 15, 2010) (internal quotation marks omitted).
Both parties have moved for summary judgment on the Intervenors' fraudulent
Tex. Civ. Prac. & Rem.Code § 12.002(a). One who violates the fraudulent lien statute may become liable to an injured person to the greater of $ 10,000 or the actual damages caused by such violation in addition to incurring liability for court costs, reasonable attorney's fees, and even exemplary damages as determined by the court. § 12.002(b).
The Court first addresses whether Intervenors have standing to sue under the fraudulent lien statute. In enacting Section 12.002, "the Legislature intended to provide a civil action for injunctive relief and monetary damages to all persons owning an interest in real or personal property against which a fraudulent lien is filed." Centurion Planning Corp., Inc. v. Seabrook Venture II, 176 S.W.3d 498, 506 (Tex.App.-Houston 2004). Section 12.003 states that the persons who can bring suit under this section include, "in the case of a fraudulent lien or claim against real or personal property or an interest in real or personal property, the obligor or debtor, or a person who owns an interest in the real or personal property." § 12.003(a)(8) (emphasis added).
Intervention-Defendants contend the Intervenors lack standing to sue under Section 12.003 because they no longer own an interest in the vacant lots subjected to the lien used to secure the manufactured home purchased by Flores and King. (D.E. 144, p. 9.) Intervenors concede that they no longer own the property at issue at the time they filed suit. (D.E. 144, p. 5; Ex. 12 (Maria Trevino Deposition), p. 18-21; Ex. 20 (deed transferring property to Flores.)) As such, Intervention-Defendants argue, the Trevinos no longer qualify as "person[s] who own[] an interest in [the] real or personal property" under Section 12.003. See § 12.003.
The Intervenors object that this is an "absurd interpretation" of the statute. They state that the "rather obvious purpose of the cause of action granted to a person with an ownership interest in the property is to provide a remedy for the acts constituting a violation of the Statute. There is no reason why a party that subsequently sells the property should lose this remedy." (D.E. 156, p. 13.)
As an initial matter, standing under Section 12.003 is not even limited to property owners. In Taylor Elec. Services, Inc. v. Armstrong Elec. Supply Co., the Court of Appeals held "that one who is liable as an
In this case, like the plaintiff in Taylor, the Trevinos were obligated and indebted under the liens filed on their property. (D.E. 144, Ex. 13(DOT), Ex. 14 (BML.)) The DOT provides that the conveyance of the Trevino's property is "made in Trust to secure payment of one (1) Retail Installment Contract. . . ." (D.E. 144-13 at 2.) It further provides that "[s]hould Grantor do and perform all of the covenants and agreements herein contained, and make prompt payment of said indebtedness as the same shall become due and payable, then this conveyance shall become null and void and further force and effect, and shall be released at the expense of Grantor. . . ." (Id.) Similarly, the BML, between "Owner," identified as the Trevinos, and "Contractor," identified as CMH Homes, provides, "Owner agrees to pay Contractor the sum of $40,815.19 (Contract Price) for the purchase of the home and all improvements associated therewith. Owner shall pay the Contract Price pursuant to the terms of the Retail Installment Contract executed by Owner and Contractor. . . ." (D.E. 144-14 at 2.) The conveyance shall become "void" if "Owner performs all covenants and pays the Retail Installment Contract according to its terms." (D.E. 144-14 at 3.) Thus, the Intervenors qualify as "debtors" and "obligors" under Section 12.003 because they were obligated under the DOT and the BML to make payments pursuant to the Retail Installment Contract until the liens were released in 2005. (D.E. 144 at 10.)
Moreover, unlike the plaintiff in Taylor, who did not actually own the property subjected to the allegedly fraudulent liens, here, the Trevinos also once owned the property subjected to the liens created by the DOT and the BML. (D.E. 144, Ex. 13(DOT), Ex. 14 (BML.)) During the period from January 2002, when the DOT and BML were recorded, to July 2002, when it was conveyed, the Trevinos qualified as both property owners, and debtors or obligors within the meaning of the statute. There is no additional requirement in Section 12.003 that the Intervenors currently meet this status.
The Intervention-Defendants nonetheless contend that the Trevinos lack standing to bring their claim because their standing must be measured at the time of their intervention in this lawsuit; and the Trevinos no longer own their property and so are apparently no longer obligated to defend their title to the land or pay any debts under the DOT and the BML. As such, they are no longer property owners, debtors or obligors under Section 12.003. (D.E. 144, p. 9-10) (citing Kitty Hawk Aircargo, Inc. v. Chao, 418 F.3d 453, 458 (5th Cir.2005)). Intervention-Defendants cite only one case for this proposition. This case is inapposite. In Kitty Hawk, a case not involving Section 12.002, the plaintiff sought injunctive relief to avoid
The Intervention-Defendants also contend the Intervenors lack standing because the liens on the Trevino's (former) property have been released. As such, the Trevinos "are not obligated to defend any title against the [BML] or the [DOT] and [those documents] do not impair any title, because both instruments were admittedly released in 2005. Neither CMH nor Vanderbilt have taken any action against [the Trevino's property], and neither company threatens to do so now." (D.E. 144 at 10). This argument fails for similar reasons. Texas courts have clearly held that the release of a fraudulent lien does not preclude the ability of a plaintiff to claim damages under Section 12.002(a). In Esau v. Robinson, the Court of Appeals rejected defendant's argument that the plaintiff could not obtain attorney's fees and damages under Section 12.002(a) because the defendant had voluntarily removed the lien that encumbered the plaintiff's property. See 2008 WL 2375861, *1, 2008 Tex.App. LEXIS 4260, *1 (Tex.App.-Corpus Christi June 12, 2008). The court explained:
Id. at *2, 2008 Tex.App. LEXIS 4260 at *1 (citing § 12.003(a)(8)) (emphasis added). Given this clear interpretation of Section 12.003, the Intervention-Defendants' argument that their release of the liens precludes the Trevinos' ability to recover damages fails.
In conclusion, this Court finds as a matter of law that the Intervenors have standing to pursue their fraudulent lien claim. The Trevinos qualify as property owners, or debtors or obligors, with respect to the liens placed on their property.
The Intervention-Defendants have raised the statute of limitations as an affirmative defense to the Intervenors' fraudulent lien claim under Texas Civil Practice and Remedies Code § 12.002 et seq. (D.E. 144, p. 10-15.) The Intervention-Defendants assert that the statute of limitations period on the Intervenors' claim was four years. They assert that because more than seven years passed between the recordation of the allegedly fraudulent liens on January 14, 2002, and Maria Trevino's intervention in this lawsuit on October 26, 2009, the Intervenors' claim is time-barred as a matter of law. (D.E. 144, p. 10.)
As an initial matter, Intervention-Defendants are correct that a four-year statute of limitations period applies to the Intervenors' claim. In fraudulent lien causes of action brought under Section
Nonetheless, when the Trevino's cause of action accrued depends on which accrual provision applies. Under Texas law, there are two accrual provisions that may apply. Under the "legal injury rule," a claim accrues "when a wrongful act causes some legal injury, even if the fact of injury is not discovered until later, and even if all resulting damages have not yet occurred." Rivera, 262 S.W.3d at 840 (citing Murphy v. Campbell, 964 S.W.2d 265, 270 (Tex.1997)). Under this rule, the Trevinos' case would be time-barred. The evidence shows the injury occurred in January 2002 when the liens were placed on the Trevinos' property. Maria Trevino did not file her Intervention complaint until October 26, 2009, over seven years later. (D.E. 144, p. 4, 10.)
However, under the "discovery rule," a cause of action accrues once the claimant knows or is put on notice that he has been legally injured by the alleged wrong. TIG Ins. Co. v. Aon Re, Inc., 521 F.3d 351, 355 (5th Cir.2008). "The discovery rule has been applied in limited categories of cases to defer accrual of a cause of action until the plaintiff knew or, exercising reasonable diligence, should have known of the facts giving rise to a cause of action." HECI Exploration Co. v. Neel, 982 S.W.2d 881, 886 (Tex.1998) (citations removed). As the Supreme Court of Texas explained in HECI, for the discovery rule to apply, "the injury must be inherently undiscoverable and . . . objectively verifiable." Id.
The Intervenors urge this Court to apply the discovery rule to their fraudulent lien claim. (D.E. 162, p. 6-9.) "A defendant moving for summary judgment on the affirmative defense of limitations has the burden to conclusively establish that defense. Thus, the defendant must (1) conclusively prove when the cause of action
The Intervention-Defendants give two reasons why this Court should not apply the discovery rule. First, they argue that the liens on the Trevino's property were not inherently undiscoverable because they were filed in the public land records of Jim Wells County and as such were discoverable through the exercise of reasonable diligence. (D.E. 144, p. 13.) Second, Intervention-Defendants argue that application of the discovery rule to fraudulent lien claims, in general, would disserve public policy. (D.E. 144, p. 14.) The Court addresses each argument in turn.
The Intervention-Defendants first argue that the discovery rule does not apply because the filing of a lien is the type of injury that could be discovered through exercise of due diligence, given that documents creating the liens were filed in the public land records of Jim Wells County and were available for the Trevinos to discover at any time. (D.E. 144, p. 13.) The Intervention-Defendants argue that the public availability of these records rendered the liens inherently discoverable because "[m]atters appearing in the public record are not, by definition, inherently undiscoverable, even if their appearance in the record does not charge the world with constructive notice." (D.E. 144, p. 13.)
The Court does not agree with Intervention-Defendants' argument. The Intervention-Defendants cite several cases where courts have relied, to some extent, on the availability of public records in concluding that a claim was not inherently undiscoverable under the circumstances. (D.E. 144, p. 13-14) (citing HECI, 982 S.W.2d at 887; Archer Motor Sales Corp. v. Mazda Motor of Am., Inc., No. Civ. A. H-08-3587, 2009 WL 3012835, at *5 (S.D.Tex. Sept. 17, 2009); Choice Personnel No. Four, Inc. v. 1715 Johanna Square Ltd., 2007 WL 1153046, *7 (Tex.App.-Houston [1st Dist.], 2007)). These cases fail to support Intervention-Defendants' broad proposition that the public availability of records makes an injury, by definition, not inherently undiscoverable. (D.E. 144, p. 13.)
In HECI, the plaintiff's cause of action was based upon the defendant-lessee's alleged breach of an implied covenant contained in an oil and gas lease, requiring the defendant to notify royalty interest owners of his intent to sue an adjoining operator. 982 S.W.2d at 883. The court found information regarding defendant's intent to sue was discoverable by due diligence, in part because it was published in the public records. Id. at 886. The court stated that, even if they do not necessarily provide "constructive notice" to interested parties, "filings and other materials publicly available from [in this case] the Railroad Commission are a ready source of information, and a cause of action for failure to provide that same information is not inherently undiscoverable." HECI Exploration Co., 982 S.W.2d at 887 (citations removed.) However, this statement was directed specifically at the context of royalty interest
In Archer, No. Civ. A. H-08-3587, 2009 WL 3012835, at *5, the court took a similar approach, examining the facts to determine whether, under the circumstances, the plaintiffs should have discovered their causes of action sooner by exercise of due diligence. The court ultimately found that the discovery rule did not apply to plaintiff's breach of contract claim based on a car dealer's sale of a car to another customer because, among other things, the parties were "diligent contracting parties," the car dealership was located on the public highway, and the offer to the other customer was a matter of public record with the Texas Department of Transportation. Id. As in HECI, this court's analysis indicates only that, in some circumstances, public availability of records that would indicate a violation of a legal right can charge a plaintiff with a duty of reasonable diligence to check the public records to protect his interests.
Contrary to Intervention-Defendants' assertions, none of these cases establishes a sweeping rule that public availability of information relating to a plaintiff's claim renders the claim not "inherently undiscoverable." Indeed, with regard to the related doctrine of "constructive notice," the Fifth Circuit has explicitly held that parties are not charged with constructive notice of information merely because it appears in the public record. Kansa Reinsurance Co. v. Congressional Mortg. Corp. of Texas, 20 F.3d 1362, 1369-70 (5th Cir.1994).
In certain cases, those with an interest in property have a heightened duty to search for information contained in the property's chain of title. For example, "`[a] purchaser of land has constructive notice of all information contained in his grantor's chain of title, and he is bound by every recital, reference and reservation contained in or fairly disclosed by any instrument which forms an essential link in that chain.'" Jones v. Texaco, Inc., 945 F.Supp. 1037 (S.D.Tex.1996) (quoting
Applying these principles to the case at bar, the Court finds that, under the circumstances, the Trevinos' injury was inherently undiscoverable. The Trevinos state in their depositions that the liens were placed on their land in January 2002 entirely without their knowledge. (D.E. 98, p. 4; D.E. 144, Exhibit 12, p. 38-39 (Maria Trevino); Exhibit 25, p. 89 (Arturo Trevino.)) In October 2005 the Intervention-Defendants released the liens without informing the Trevinos either that their property had been subject to the liens or that the liens were now released. (D.E. 98, p. 5-7; D.E. 144, p. 6). Hugh Statum, Vice President of CMH, who signed many of the releases filed by Vanderbilt in 2005, testified himself that he did not expect landowners to inspect their property records to discover the releases had been filed.
As this Court noted in its August 25, 2010 Order, by publicly filing the lien documents, Intervention-Defendants made them available for property owners or any member of the public, including the Trevinos, to discover during a title search. (D.E. 149, p. 15) (citing Texas Local Gov't Code § 191.006 ("All records belonging to the office of the county clerk to which access is not otherwise restricted by law or by court order shall be open to the public at all reasonable times. A member of the public may make a copy of any of the records.")) However, public recording of the liens does not mean property owners automatically had a duty to perform a title search to discover them. There are no special circumstances giving rise to such a duty in this case. Unlike in HECI, 982 S.W.2d at 886, where the court found that gas royalty interest owners had reason to be mindful of other operators in the area, property owners such as the Trevinos had no reason to suspect liens might be placed on their property. Unlike in Archer, 2009 WL 3012835, at *5, where the court noted that the parties were "diligent contracting parties" with strong incentives to protect their present contractual interests, landowners who are not presently involved in a transaction respecting their land have no such incentive. Absent circumstances giving property owners some reason to perform a title search, there simply is no case law holding current landowners have a standing duty to check the public records to verify the state of their title. See Kansa., 20 F.3d at 1369-70; Lightfoot, 763 S.W.2d at 627; Cox, 237 S.W.2d at 804.
Having considered these circumstances, the Court finds the Trevinos exercised reasonable diligence in discovering the liens on their property. As such, their injury is generally of the type that could not be discovered by reasonable diligence and is "inherently undiscoverable." See HECI, 982 S.W.2d at 886.
The Intervention-Defendants also argue the Court should not apply the discovery rule because application of the discovery rule to fraudulent lien claims would disserve public policy. The Intervention-Defendants contend that because the Trevinos were not "actually harmed" by the liens placed on their property, any wrong alleged is "one that almost by definition occurs, if at all, in the public record." (D.E. 144, p. 14.) They argue that if the statute of limitations could always be tolled in such cases, victims could wait "nearly a decade or more, until a lawyer or some other person mining the public records informed them of their `injury,'" to bring a claim under the statute. "[T]he land records would become a source not of instruments giving notice to the public, but of stale claims." (D.E. 144, p. 14.)
The Intervention-Defendants' concern—that applying the discovery rule to all fraudulent liens filed in the public record would result in stale claims—is not implicated by this Court's decision. The Court holds only that claims such as the Trevinos, in which the evidence suggests property owners had no other reason to suspect liens had been placed on their property, are "inherently undiscoverable."
To summarize, the Court finds the Trevinos' injury is generally of the type that could not be discovered by reasonable diligence and, as such, is "inherently undiscoverable." See HECI Exploration Co., 982 S.W.2d at 886. Because they failed to negate that the discovery rule applies, the Intervention-Defendants have failed to prove the affirmative defense of limitations. See Velsicol Chem. Corp. v. Winograd, 956 S.W.2d 529, 530 (1997); KPMG Peat Marwick, 988 S.W.2d at 748. The Trevinos claim accrued when they discovered
Given that the Intervenors have standing to sue and their claims are not time-barred, this Court next must determine whether to grant either party's motion for summary judgment on the Trevinos' claim under Tex. Civ. Prac. & Rem.Code § 12.002(a)(1)-(2). Section 12.002 requires showing that Intervention-Defendants made, presented, or used a document with: (1) knowledge that the document was a fraudulent lien or claim against real or personal property or an interest in real or personal property; (2) intent that the document or other record be given legal effect; and (3) intent to cause another person to suffer: (A) physical injury; (B) financial injury; or (C) mental anguish or emotional distress. Tex. Civ. Prac. & Rem.Code § 12.002(a); see Aland v. Martin, 271 S.W.3d 424, 430 (Tex.App.-Dallas 2008). The Intervenors have the burden to prove all three elements of their claim. See Preston Gate, LP v. Bukaty, 248 S.W.3d 892, 896-97 (Tex.App.-Dallas 2008, no pet.).
The first element a plaintiff seeking summary judgment under Section 12.002 must prove is "knowledge that the document or other record is a fraudulent court record or a fraudulent lien or claim against real or personal property or an interest in real or personal property." § 12.002(a)(1). The statute does not define "knowledge," but generally "knowledge" means "awareness or understanding of a fact or circumstance." BLACK'S LAW DICTIONARY 950 (9th ed.2009). Courts have held in the context of § 12.002 that a defendant must have the requisite knowledge "at the time the lien was filed." Aland, 271 S.W.3d at 431-32.
The Trevinos contend that "[i]t is undisputed that the Intervention-Defendants presented the Land Documents [the DOT and the BML] with the fraudulent notarization to the County Clerk for recording knowing that such Land Documents had not been properly authenticated and contained forged signatures." (D.E. 124, p. 13.) The Intervention-Defendants have not specifically addressed the issue of whether they knew the DOT and BML were forged or falsely notarized. Rather, the Intervention-Defendants argue that the Intervenors have failed to prove the Trevinos' signatures on the lien documents were forged at all, and that false notarizing alone would not make the land documents qualify as "a fraudulent court record or a fraudulent lien or claim against real or personal property" (D.E. 144, p. 20) (quoting Section 12.002(a)). They argue that "[if] the instruments were not fraudulent under section 12.002, none of the Intervention-Defendants can have acted with the knowledge requisite to establish a violation." (D.E. 144, p. 20.)
The Court agrees that the Trevinos have not succeeded in proving as a matter of law that their signatures were forged. The Trevinos state in their separate testimonies that none of the signatures on the documents are theirs. (Ex. G, p. 31-44; Ex. H, p. 49-55.) However, the Intervention-Defendants' handwriting expert, Larry Stewart, indicates that the Trevinos'
However, as to the Intervenors' contention that the liens were falsely notarized, there appears to be little dispute. The Intervenors have presented convincing evidence of rampant misuse of notary stamps at the Corpus Christi store by CMH employees.
The Court does not agree with Intervention-Defendants' argument. The fact that the transaction underlying the falsely notarized documents might still be valid as between the parties, see Tex. Property Code § 13.001(b), is irrelevant to the issue of whether fraudulently notarized documents are "fraudulent" instruments for purposes of Tex. Civ. Prac. & Rem.Code § 12.002(a). "[Section 12.002(a)] expressly applies to any document or record that is `a fraudulent lien or claim' against real or personal property and that is intended to be `given the same legal effect' as a court record or document `evidencing a valid lien or claim against real property.'" Centurion Planning Corp. v. Seabrook Venture II, 176 S.W.3d 498, 505 (Tex.App. Houston 1st Dist.2004) (quoting § 12.002(a)(1), (2)). Although Section 12.002(a) does not define "fraudulent," Texas courts have interpreted "fraudulent" within the context of Section 12.002(a) according to its plain meaning: a "knowing misrepresentation of the truth or concealment of a material fact with intent to induce another to act to his or her detriment." See Walker & Assocs. Surveying v. Roberts, 306 S.W.3d 839, 849 (Tex.App.Texarkana 2010) (quoting Black's Law Dictionary 730 (9th ed.2009)).
Under this definition, documents creating liens on property owners' land that have been falsely notarized constitute a "fraudulent lien or claim." Such documents are filed with the county clerk in order to establish a valid record of title. Texas law requires these documents to be properly notarized or otherwise authenticated before they are recorded.
Not only did CMH management sign off on individual transactions, CMH did not take precautions to ensure these transactions were properly executed. CMH instituted a notary verification requirement that did not require the individual who purportedly signed the land documents to appear before an independent lawyer or title company to sign them. (D.E. 156, Ex. F (Frazier Deposition), e.g., p. 159, 312.) Instead, CMH allowed its own employees to notarize lien documents directly at the Corpus Christi store. (D.E. 156, Ex. F (Frazier Deposition), pp. 112-114, 158-160, 163-168.) CMH did not have corporate notary procedures in place. (D.E. 124, Ex. B (Moore Deposition), p. 150-152; Ex. D (Booth Deposition), p. 103). CMH did not even have policies instructing its notary employees on the import of having property owners actually appear before them when notarizing a document.
Lax notary procedures undoubtedly made it easier for CMH Homes to sell manufactured homes to customers using real property as collateral.
The second element of § 12.001 requires showing Intervention-Defendants acted with the "intent that the document or other record be given the same legal effect as a court record or document of a court created by or established under the constitution or laws of this state or the United States [.]" See § 12.001(a)(2). The Intervenors have satisfied this element. It is undisputed that CMH Homes sales associates presented the DOT and the BML to the County Clerk to record the liens on the Trevino's property and create security interests in that property in favor of Vanderbilt and CMH, respectively. (D.E. 124, p. 14; D.E. 144, p. 4-5.) As a matter of law, the Intervention-Defendants intended that the lien documents be given legal effect.
The final element of § 12.001 requires that the Intervenors demonstrate the Intervention-Defendants acted with the "intent to cause another person to suffer: (A) physical injury; (B) financial injury; or (C) mental anguish or emotional distress." § 12.002(a)(3). Although it is not defined in § 12.002, the term "intent" generally means that "the actor desires to cause the consequences of his act or that he believes the consequences are substantially certain to result from his act." Gavrel v. Lieberman, 2010 WL 1270334, *2 (Tex.App.-Ft. Worth Apr. 1, 2010) (citing Reed Tool Co. v. Copelin, 689 S.W.2d 404, 406 (Tex.1985)). Intent to cause injury under § 12.002 can be proven by direct or
The Intervenors allege that the evidence demonstrates as a matter of law that Intervention-Defendants intended to cause financial injury to the Trevinos by filing liens on their property. To support their claim, the Intervenors point to the express terms of the BML and the DOT. The BML states:
(D.E. 124, p. 15; D.E. 144, Ex. 14.) The BML goes on to state that should the Owners fail to pay the balance "Contractor can request Trustee (Kevin Clayton) to foreclose on this lien." (D.E. 124, p. 17; D.E. 144, Ex. 14.)
The DOT likewise purports to create a financial obligation by the Trevinos with respect to the manufactured home. The DOT states:
(D.E. 124, p. 18; D.E. 144, Ex. 13.) The DOT goes on to state that "in the event of default in the performance of any obligation under the Retail Installment Contract hereby secured, in accordance with the terms thereof . . . the Trustee shall sell the above described property." (D.E. 124, p. 20; D.E. 144, Ex. 13.)
The Intervenors contend that the only purpose of these documents was to encumber the Trevinos' property with liens and to obligate the Trevinos to make payments to secure the indebtedness of Flores and King, even though the Trevinos were not in any way obligated to pay for the manufactured home. (D.E. 124, p. 15-20.) As such, they argue, "[b]y the express terms of the forged and fraudulent documents, prepared, created, used and recorded by the Intervention-Defendants, the Intervention-Defendants intended to cause financial harm to the Trevinos." (D.E. 124, p. 19.)
The Intervention-Defendants respond that the mere fact that the lien documents purported to financially obligate the Trevinos and encumber their property is insufficient to support a finding of intent to cause financial harm. (D.E. 144, p. 18.) They contend that Texas courts have made clear that evidence that a lien document created a financial obligation and encumbered a plaintiff's property "is insufficient as a matter of law to prove that the Intervention-Defendants had the intent required by the fraudulent lien statute." (D.E. 144, p. 16) (citing Aland, 271 S.W.3d at 433; Preston Gate, 248 S.W.3d at 897.) Intervention-Defendants point out that neither Vanderbilt nor CMH Homes attempted to enforce the terms of the DOT or the BML, despite the fact that Flores and King were chronically late on their payments to Vanderbilt. (D.E. 144, p. 18.) To the contrary,
The Court disagrees with Intervention-Defendants' argument. Some Texas courts have held that in order to show intent to cause financial injury, the plaintiff must bring more evidence than simply the existence of a wrongful lien on an owner's property. Specifically, in two cases the Texas Court of Appeals for the Fifth District overturned jury verdicts finding that Intervention-Defendants intended to cause plaintiffs financial harm by placing unwarranted liens on their property and refusing plaintiffs' demands to remove them. See Preston Gate, 248 S.W.3d at 897; Aland, 271 S.W.3d at 433 (finding the evidence before the jury was no "more consistent with an intent on the part of [defendant] to cause the requisite injury to [plaintiff] than with a lack of intent to cause such injury.") (citing Preston Gate, 248 S.W.3d at 897). However, as this Court has already explained, Texas courts have interpreted the "intent" element in fraudulent lien claims to require only some additional evidence that Intervention-Defendants were aware of the harmful effect that filing such a lien could have on a landowner. (D.E. 149, p. 9.) See Taylor, 167 S.W.3d at 531 (upholding jury's finding of intent to cause financial injury when there was "at least some evidence that [defendant] was aware of the potential harm filing a lien on [the property] could have on [plaintiff.]") If additional evidence of such an awareness is present, then the evidence of intent to cause financial injury is not necessarily deficient "as a matter of law." Rather, the question of intent must be left for a finder of fact.
Applying these principles to the case at bar, the evidence is sufficient to preclude summary judgment for the Intervention-Defendants on the issue of intent to cause financial injury. The Intervention-Defendants created, executed, and filed the BML and the DOT. Intervention-Defendants desired to cause the consequences of these acts: namely, obligating the Trevinos to pay for the manufactured home of Flores and King and subjecting their property to the threat of foreclosure should the payments not be made. It does not matter that the Intervention-Defendants never required the Trevinos to pay any of these debts and never foreclosed on the Trevinos' property. The possibility of these occurrences existed at the time the liens were filed; otherwise, the filing of the liens would have been without purpose. See Aland, 271 S.W.3d at 431-32 (intent judged from time lien filed.) Nor does it matter that Vanderbilt ultimately released the liens. See Esau, 2008 WL 2375861, *2, 2008 Tex.App. LEXIS 4260, *1 ("the mere filing of a release of lien would not fully dispose of the issue as to whether the lien was initially fraudulently filed with intent to cause either physical or financial harm.") (citing § 12.002(a)). Indeed, the fact that Intervention-Defendants ultimately released the liens without informing the Trevinos because they thought it was "the right thing to do" supports the conclusion that Intervention-Defendants recognized the injury such liens created. (D.E. 144, p. 6.) As in Taylor, all of these actions suggest that Intervention-Defendants recognized that filing liens created negative consequences for property owners. As such, the evidence of intent to cause financial injury is sufficient to preclude summary judgment on this issue.
On the other hand, summary judgment for the Intervenors on the issue of intent would also be inappropriate. In Taylor,
To summarize, summary judgment for either party on the merits of the Intervenors' fraudulent lien claim is inappropriate. Issues of fact remain as to whether the Intervention-Defendants knew that the lien documents were forged or falsely notarized. Issues of fact remain as to whether Intervention-Defendants intended to cause the Trevinos financial injury by filing forged or falsely notarized documents creating liens on the Trevinos' property.
The Intervenors seek a declaratory judgment that the amounts due on the Retail Installment Contract between Cesar Flores and Alvin E. King and CMH Homes have been released or otherwise `paid in full' as a result of CMH Homes and Vanderbilt filing releases in the real property records of Jim Wells County, Texas. (D.E. 98 at 20.) The Intervention-Defendants seek a summary judgment determination that the Trevinos' lack standing to bring this claim, given that they no longer own their property and, as such, will be under no obligations to make payments under Flores and King's Contract if the Court finds the Contract has not, in fact, been paid in full. (D.E. 145, p. 8.)
The Declaratory Judgment Act provides, "[i]n a case of actual controversy within its jurisdiction, . . . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such." 28 U.S.C. § 2201(a). "To possess standing to sue under the Act, a party must have a `legal interest[] threatened in an actual controversy.'" Stanley v. Wal Mart Stores, 839 F.Supp. 430, 435 (N.D.Tex.1993) (quoting Collin County v. Homeowners Assoc. (HAVEN), 915 F.2d 167, 170 (5th Cir. 1990)). "A party's legal interest must relate to a justiciable claim arising under the law for which the Court has jurisdiction." Id.
The Court finds the Trevinos have standing to pursue a declaratory judgment as to whether the underlying debt on Flores and King's Contract was paid in full. As the Court explained in its August 25, 2010 Orders on Intervention-Defendants' Motions to Dismiss (D.E. 148, 149), the effect of the "paid in full" language is a threshold issue in this litigation, necessary for determination of many claims and factual disputes. (D.E. 149, p. 40.) It is particularly relevant to the Intervenors' fraudulent lien claim because CMH's and Vanderbilt's intentions in releasing the liens on the Trevinos' property will help a fact-finder determine their intentions in executing the liens on the Trevinos' property in the first place. As discussed above, whether the Intervention-Defendants intended to cause the Trevinos' financial injury is the primary element that the Trevinos must prove under § 12.002. As such, the Trevinos' have a legal interest in determining whether Flores and King's debt under the Contract has been paid in full, and their interest relates to a justiciable claim between themselves and the Intervention-Defendants. Stanley, 839 F.Supp. at 435.
The Intervention-Defendants seek summary judgment on the Intervenors'
Although Vanderbilt made significant efforts to collect on the debt allegedly owed by Flores and King on their manufactured home, (D.E. 125, p. 18; Ex. H), it is undisputed that Vanderbilt never moved to collect any debt from the Trevinos based on the liens on their property and never moved to foreclose on the Trevinos' property, even though Flores and King were delinquent in their payments. (D.E. 145, Ex. 16 (Krupacs Decl.) ¶ 7; Ex. 17 (Statum Decl.) ¶ 7.) The Intervenors do not contend otherwise, and certainly have made no showing that the conduct at issue was "wanton, malicious," and intended to inflict "bodily harm." The Court grants Intervention-Defendants' motions for summary judgment as to the Intervenors' common law debt collection claim.
The Intervention-Defendants move for summary judgment on the Intervenors' claim under the Texas Debt Collection Practices Act ("TDCA"). The TDCA prohibits various forms of threatening, coercive, harassing or abusive conduct by debt collectors, see Tex. Fin.Code. §§ 392.301-392.306, against a "consumer," defined as "an individual who has a consumer debt." § 392.001(1). A "consumer debt" is defined as "an obligation, or an alleged obligation, primarily for personal, family, or household purposes and arising from a transaction or alleged transaction." § 392.001(2).
The Court agrees with the Intervention-Defendants that the Trevinos do not qualify as "consumers" under the TDCA. They are not individuals with a "consumer debt" arising from personal, family or household purposes. See Cushman v. GC Servs., LP, 657 F.Supp.2d 834, 841 (S.D.Tex.2009) ("having `a consumer debt' is the only prerequisite to "consumer" status.") (citing Tex. Fin.Code § 392.001(1)). The Trevinos concede that they never purchased the manufactured home for which the liens serve as collateral and do not argue that they voluntarily took on any other obligation with respect to the liens on their property. (D.E. 156, p. 17.) The Court grants Intervention-Defendants' summary judgment motion as to the Intervenors' TDCA claim.
The Intervention-Defendants seek summary judgment on the Intervenors' money had and received claim. (D.E. 145, p. 9-10.) To prove a claim for money had and received, "a plaintiff must show that a defendant holds money which in equity and good conscience belongs to him." Edwards v. Mid-Continent Office Distribs., L.P., 252 S.W.3d 833, 837 (Tex.App.Dallas 2008) (citing Best Buy Co. v. Barrera, 248 S.W.3d 160, 162-63 (Tex. 2007) (per curiam)). The Intervenors present no evidence to support they paid any money to Vanderbilt or CMH, and they do not respond to the Intervention-Defendants' arguments for summary judgment on this claim. The Court grants
Intervention-Defendants seek summary judgment on the Intervernors' fraud claim. To establish common law fraud under Texas law, a plaintiff "bears the burden to prove the existence of the following: `[1] a material misrepresentation, [2] which was false, and [3] which was either known to be false when made or was asserted without knowledge of the truth, [4] which was intended to be acted upon, [5] which was relied upon, and [6] which caused injury.'" Johnson & Johnson Med., Inc. v. Sanchez, 924 S.W.2d 925, 929-30 (Tex.1996); see also GeoSurveys, Inc. v. State Nat'l Bank, 143 S.W.3d 220, 226 (Tex.App.Eastland 2004).
In light of this Court's August 25, 2010 Orders on the Intervention-Defendants' Motions to Dismiss (D.E. 148, D.E. 149), the Trevinos' remaining fraud theories are: (1) that the Intervention-Defendants engaged in fraud by filing lien documents in the public record that were forged and falsely notarized (D.E. 149, p. 13-15; D.E. 156, p. 17-18.); and (2) that they engaged in fraud by secretly filing releases of these liens in the public record, while continuing to collect on the debt and without informing Flores and King or the Trevinos that the releases had been filed. (D.E. 149, p. 15-17.)
Vanderbilt contends that the Intervenors cannot show the elements of material misrepresentation, reliance, or injury. (D.E. 145, p. 10-14.) The Court disagrees with respect to the Intervenors' first theory. As explained above, issues of fact remain as to whether Intervention-Defendants forged and falsely notarized the BML and DOT creating liens on the Trevinos' property. If they were forged or falsely notarized, then filing these liens in the public record constituted misrepresentations of fact—that they contained the Trevinos' signatures and that these signatures were properly notarized as required by Texas law. See Alvarado, 2002 WL 1072067, *5. By recording these documents in the public records, the Intervention-Defendants necessarily intended to induce reliance upon them by any member of the public inspecting them.
As to the Intervenors' second theory, issues of fact remain as to whether Flores and King's debt was discharged by the releases. As such, it remains for a fact-finder to determine whether filing the releases without informing Flores and King or the Trevinos, while continuing to collect on the debt from Flores and King, constituted fraud. However, the evidence shows the Trevinos no longer owned their property when the releases were filed in October 2005, and that Vanderbilt never attempted
The Court grants Intervention-Defendants' motion for summary judgment on the Intervenors' fraud claim based on filing of the releases, but denies summary judgment on the Intervenors' fraud claim based on filing the allegedly fraudulent DOT and BML.
The elements for civil conspiracy are: "(1) two or more persons; (2) an object to be accomplished; (3) a meeting of the minds on the object or course of action; (4) one or more unlawful, overt acts; and (5) damages as a proximate result." Chon Tri v. J.T.T., 162 S.W.3d 552, 556 (Tex.2005). Intervention-Defendants argue that Intervenors have failed to show any unlawful acts underlying the conspiracy or a "meeting of the minds" on the objects of the conspiracy. (D.E. 145, p. 15-16.) Intervenors respond that the underlying tort was the filing of fraudulent liens on the Trevinos' property. They contend that the evidence demonstrates that Vanderbilt, Clayton Homes, Inc., CMH Homes and Kevin Clayton all worked together to file fraudulent documents creating liens on the Trevinos' property, and that they would not have been able to do so if there were not a "meeting of the minds." (D.E. 156, p. 19.)
The Court finds the summary judgment evidence is sufficient to raise issues of fact as to whether there was a "meeting of minds" among the named defendants to generate fraudulent liens on the Trevinos' property. "A conspiracy may be established by circumstantial evidence." Pasley v. Pasley, 2005 WL 1992255, *5, 2005 Tex.App. LEXIS 6680, *12-13 (Tex.App. Amarillo Aug. 18, 2005) (citing Lesikar v. Rappeport, 33 S.W.3d 282, 302 (Tex.App.Texarkana 2000, pet. denied)). "An agreement between parties on a course of action need not be formal but may be tacit." Id. (citing J.T.T. v. Tri, 111 S.W.3d 680, 684 (Tex.App.Houston [1st Dist.] 2003), rev'd on other grounds, 162 S.W.3d 552 (Tex.2005)). "It is also not essential that each conspirator have knowledge of the details . . . inferences of concerted action may be drawn from participation in the transactions and from the enjoyment of the fruits of the transactions." Id. (citing Lesikar, 33 S.W.3d at 302) (citing International Bankers Life Ins. Co. v. Holloway, 368 S.W.2d 567, 581-82 (Tex.1963)) (emphasis added).
As described at length above, CMH Homes employees at the Corpus Christi store executed the "land in lieu" transactions, signing and notarizing the documents that created liens on property as collateral to support manufactured home sales. These transactions were approved by store manager John Wells. The documents were then sent to CMH's headquarters in Tennessee where another corporate employee signed off on them. CMH Homes was responsible for the policies and procedures that allowed the alleged forgery and false notarizing to occur—and, according to Intervenors—actually encouraged it in order to reduce the cost of its business. Vanderbilt provided the financing for all of these transactions, owned a security interest in the property used as collateral on these sales, and alleges that it was the sole assignee of the retail contracts on which the sales were based. Vanderbilt profited off of these transactions by collecting payments from home purchasers and by selling securities generated from the debts created by sales contracts that were backed by real property. Finally, Kevin T. Clayton was a member of the board of directors of CMH Homes and
While none of this evidence directly indicates an express agreement among these entities to forge and falsely notarize lien documents, it suggests a tacit agreement on the part of all players to carry on or allow fraudulent activities to occur, with the knowledge that they generated profits for the Clayton Homes business and for the individuals involved in it. See Pasley, 2005 WL 1992255, *4-5, 2005 Tex.App. LEXIS 6680, *12-13 (finding that defendant "knowingly participating" in financial transactions to his benefit created the inference of concerted action sufficient to support jury verdict of conspiracy). Issues of fact remain as to whether the Intervention-Defendants had an express or tacit agreement to forge or falsely notarize documents creating liens on the Trevinos' property in order to generate profits. Summary judgment on the Intervenors' conspiracy claim is inappropriate as well.
The Intervenors have alleged violations of each subsection of RICO, 18 U.S.C. §§ 1962(a)-(d). In light of this Court's August 25, 2010 Orders on Intervention-Defendants' Motions to Dismiss the Intervenors' Claims (D.E. 148, 149), the only remaining RICO claims at issue in Intervention-Defendants' Motions for Summary Judgment are the alleged violations of § 1962(c) and § 1962(d). Many of the arguments discussed below have already been addressed in the Court's Orders on Intervention-Defendants' Motions to Dismiss. (D.E. 148, D.E. 149.) However, the Court returns to these arguments in light of the new evidence on record to determine whether the Intervenors have met their burden to withstand summary judgment on these claims.
As an initial matter, the Court must determine the threshold issue of standing. The standing provision of civil RICO provides that "any person injured in his business or property by reason of a violation of section 1962 of this chapter may sue therefor ... and shall recover threefold the damages he sustains." 18 U.S.C. § 1964(c). There is "no distinct `racketeering injury' requirement." Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 495, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985). However, the "plaintiff only has standing if, and can only recover to the extent that, he has been injured in his business or property." Id. As the Fifth Circuit has explained, "speculative damages are not compensable under RICO," nor are "intangible property interest[s]." In re Taxable Mun. Bond Sec. Litig., 51 F.3d 518, 523 (5th Cir.1995). It is well established that "injuries to property are not actionable under RICO unless they result in tangible financial loss to the plaintiff." Fisher v. Halliburton, 2009 WL 5170280, at *5 (S.D.Tex. Dec. 17, 2009) (emphasis added); see In re Taxable Mun. Bond Sec. Litig., 51 F.3d at 523 (must show a "conclusive financial loss").
The Intervention-Defendants contend the Intervenors lack standing because they have not suffered out-of-pocket expenses due to alleged RICO violations. (D.E. 145, p. 16-17.) The Intervenors concede that they have conveyed the property once subjected to allegedly fraudulent liens and have presented no evidence whatsoever that Intervention-Defendants' actions resulted in financial loss to them. In fact, when deposed, Arturo Trevino was asked by counsel for the Intervention-Defendants whether, because of the liens filed on his property, he "suffered any losses of any kind." Mr. Trevino conceded that he did not. (Arturo Trevino Deposition, June 23, 2010 p. 90.) Ms. Trevino similarly
As such, Intervention-Defendants' summary judgment motions with respect to the Intervenors' RICO cause of action under either Section 1962(c) or 1962(d) is granted.
Intervention-Defendants contend that the Intervenors have not met their burden on summary judgment to support their demand for mental anguish damages. (D.E. 145, p. 24-25.) The Intervenors respond that they have sufficiently alleged mental distress. Maria Trevino alleges she "became very angry and was extremely upset" when she was first shown the DOT and the BML containing hers and Arturo Trevinos' signatures. She alleges she was concerned in part because she had already deeded her lots to her brother Gilbert, and was not sure what he would think if he found out there was a lien on the property that she and her husband had given to him. (D.E. 145, Ex. 18, No. 7.)
The Court finds these bare allegations of mental anguish, without more supporting facts or evidence, insufficient as a matter of law. "[D]amages for mental anguish must be supported by either "`direct evidence of the nature, duration, and severity of [plaintiffs'] anguish, thus establishing a substantial disruption in the plaintiffs' daily routine,' or other evidence of `a high degree of mental pain and distress that is more than mere worry, anxiety, vexation, embarrassment, or anger.'"" Dinn v. Hooking Bull Boatyard, Inc., 2009 WL 2161676, *8, 2009 U.S. Dist. LEXIS 60702, *25-26 (S.D.Tex. July 16, 2009) (citing Burlington Coat Factory Warehouse of El Paso, Inc. v. Flores, 951 S.W.2d 542, 548 (Tex.App.-El Paso 1997, no writ) (quoting Parkway Co. v. Woodruff, 901 S.W.2d 434, 444 (Tex.1995))). Neither of the Intervenors has seen a doctor or presented any other evidence regarding their alleged mental anguish.
The Intervenors' citation to debt collection cases, in which Texas courts have been more lenient in allowing recovery for mental anguish damages, see Ledisco Financial Services, Inc. v. Viracola, 533 S.W.2d 951 (Tex.App.1976), is inapposite. As discussed above, the Trevinos have not alleged, or provided facts to support, that either CMH or Vanderbilt attempted to collect debts from them. The Intervenors also argue that because they have brought a claim under Tex. Civ. Prac. & Rem.Code § 12.002, which requires proving the defendant acted with intent to cause another person to suffer physical injury, financial injury, or "mental anguish or emotional distress," this warrants damages for mental distress. (D.E. 156, p. 23.) However, Section 12.002 explicitly provides for damages in the amount of the greater of $10,000 or actual damages, in addition to court costs, reasonable attorney's fees, and exemplary damages as determined by the court. § 12.002(b). It makes no mention of mental anguish damages. Moreover, the Trevinos do not base their claim under § 12.002 on the allegation that Intervention-Defendants intended to cause them mental anguish or emotional distress; rather they allege intent to cause financial injury. (D.E. 156, p. 14.) Without further proof of mental anguish, the Trevinos are not automatically entitled to mental anguish damages simply because they bring claims under the fraudulent lien statute.
The Intervenors have failed to meet their burden on summary judgment to demonstrate they suffered mental anguish as a result of Intervention-Defendants' conduct. The Court grants Intervention-Defendants' motion for summary judgment on the Intervenors' claim for mental anguish damages.
Intervention-Defendants argue that even if the Court finds Vanderbilt and CMH Homes liable for any of the above claims, the Court cannot hold CHI, i.e. "Clayton Homes, Inc.," liable for the violations of its subsidiaries. (D.E. 144, p. 22; D.E. 146, p. 3-4; D.E. 147, p. 3-4.) It is a bedrock principle of corporate law that a parent corporation is not liable for actions taken by its subsidiaries. See United States v. Bestfoods, 524 U.S. 51, 61, 118 S.Ct. 1876, 141 L.Ed.2d 43 (1998); see also Bridas S.A.P.I.C. v. Gov't of Turkmenistan, 447 F.3d 411, 416 (5th Cir.2006), cert. denied, 549 U.S. 1051, 127 S.Ct. 664, 166 L.Ed.2d 513 (2006) ("Bridas II"). However, under the alter ego doctrine, a parent company can be found liable if: "(1) the company exercised complete control over the corporation with respect to the transaction at issue, and (2) such control was used to commit a fraud or wrong that injured the party seeking to pierce the veil." Bridas S.A.P.I.C. v. Gov't of Turkmenistan, 345 F.3d 347, 359 (5th Cir.2003) ("Bridas I").
Intervention-Defendants contend that the Intervenors cannot show the alter ego doctrine applies to CHI's relationship with CMH Homes because there is no evidence CHI had "complete control" over CMH or that it specifically controlled CMH employees' execution of the documents creating liens on the Trevinos' property. (D.E. 144, p. 22-23.) The Court
In this case, the summary judgment evidence implicates several of these "control factors." CHI is incorporated in Delaware. Intervention-Defendants contend it does no business in Texas and is not involved in the day-to-day activities of CMH Homes' retail establishments or in Vanderbilt's financing activities. (D.E. 144, p. 3; Ex. 3 (Ponce Decl. ¶¶ 5, 7, 8.)) However, there is evidence that CHI's and CMH's daily operations are not kept separate. CHI's 10K Report to the SEC states that CHI makes and owns the manufactured homes sold by CMH's network of company-owned and independent retailers. Upon order from the retailer, CHI completes production of the home and transports the home to the retail center through independent carriers. (D.E. 156, Ex. A, p. 2.) CHI made, owned, and transported the home that was sold to Flores and King at the Corpus Christi store. (D.E. 156, Ex. K.) In addition, CHI played a role in controlling how its retailers marketed CMH's services.
This evidence is sufficient to raise a genuine issue of material fact as to the extent of CHI's control over CMH operations. Whether the alter ago doctrine applies is a fact-intensive inquiry appropriate for a jury to decide. Bridas I, 345 F.3d at 359.
Intervention-Defendant Kevin Clayton contends that, even if Vanderbilt, CMH and CHI are liable for the above claims, Kevin Clayton cannot be personally liable for any actions in which he was not directly involved. (D.E. 144, p. 23-25; D.E. 146, p. 3-4.) The Intervenors object that, contrary
"It is well settled law that when corporate officers directly participate in or authorize the commission of a wrongful act, even if the act is done on behalf of the corporation, they may be personally liable." Moss v. Ole South Real Estate, Inc., 933 F.2d 1300, 1312 (5th Cir.1991) (citations omitted). "Texas courts have routinely found that `a corporate officer may not escape liability where he had direct, personal participation in the wrongdoing, as to be the `guiding spirit behind the wrongful conduct or the central figure in the challenged corporate activity.'" Morrison v. Western Builders of Amarillo, Inc. (In re Morrison), 555 F.3d 473, 481 (5th Cir.2009) (emphasis added).
As the Court has noted elsewhere (D.E. 91, 158), there is some evidence suggesting that Kevin Clayton was personally involved in the events giving rise to this lawsuit. Clayton is the President and CEO of CHI and a member of the Board of Directors of CMH Homes. (D.E. 144, Ex. 4. (Clayton Decl.) ¶ 1.) Clayton attests that his duties as President and CEO of CHI are "to provide leadership and strategic oversight in order to position CHI at the forefront of the manufactured housing industry. This includes assisting the executive management of CHI's operating subsidiaries [CMH and Vanderbilt] as appropriate, in order to advance CHI's overall corporate objectives of growth, profitability, and leadership in the industry." (D.E. 144, Ex. 4 (Clayton Decl.) ¶ 3). He clarifies that "the day-to-day responsibilities of running the subsidiaries and managing their operations are handled by the management and employees of each respective subsidiary." (D.E. 144, Ex. 4 (Clayton Decl.) ¶ 3).
Clayton is also the named trustee on many of the lien documents involved in this case, including those relating to the Trevinos' property. (D.E. 144, Ex. 13, Ex. 14, Ex. 4 (Clayton Decl.) ¶ 10.) As trustee on the lien documents, he commonly signed releases of the liens for various reasons, (D.E. 156, Ex. O (Clayton deposition), p. 54), though he did not sign the releases of the DOT and BML on the Trevinos' land. (D.E. 144, Ex. 4 (Clayton Decl.) ¶ 13.)
In the wake of allegations at the Corpus Christi store, Clayton traveled to Corpus Christi several times, (D.E. 144, Ex. 4 (Clayton Decl.) ¶ 6; D.E. 156, Ex. O (Clayton Deposition), p. 135), though he attests that he never actually visited the Corpus Christi store while it was open. (D.E. 144, Ex. 4 (Clayton Decl.) ¶ 1.) Clayton was also involved in settling the lawsuits resulting from the alleged fraud by CMH employees. (D.E. 156, Ex. O, p. 135). On May 25, 2004, Clayton issued an employee-wide voicemail to CMH Homes sales associates addressing the recent law suits and reminding them to use proper procedures when notarizing documents in "land in lieu" transactions. (D.E. 144, Exhibit A, p. 39-40, 43).
Clayton was also apparently involved in dealing with complaints from customers claiming their signatures on BML's and DOT's had been forged. For example, on March 22, 2004, he personally signed a release of a lien on real estate for a customer from Georgia. (D.E. 156, Ex. X; D.E. 156, Ex. O (Clayton Deposition), p. 49-53.) The Intervenors allege that Clayton signed the release because the Georgia customer had complained of forgery in the execution of the lien—apparently contradicting Clayton's January 6, 2005 testimony
The above evidence clearly establishes that Clayton was involved in dealing with the fall-out from the events at the Corpus Christi store. But his actions are not unusual for a corporate executive addressing and attempting to rectify accusations of fraud on the part of company employees. There is very little additional evidence that Clayton was directly involved in the allegedly fraudulent conduct of CMH employees or that he had a direct role in supervising those employees. Clayton's 2004 voicemail to CMH employees indicates only that he recognized, after the fact, that some employees may have been engaged in false notarizing and that he was fulfilling his role as leader of the corporation to urge employees not to engage in fraud.
The Intervenors' contention that Clayton was lying in his 2005 deposition testimony when he said he was not aware of complaints from locations other than the Corpus Christi store is also not supported by the record. In his August 24, 2010 deposition, Clayton was questioned about his March 2004 signature on the release of the Georgia customer's lien. Clayton objected to counsel's suggestion that his signature on the release indicates that his 2005 statement that he knew of no complaints from outside Lot 214 was inaccurate. (D.E. 156, Ex. O (Clayton deposition), p. 54-56.) Clayton admitted to signing the release, but stated that it would be "a very common practice" for him to sign a lien release and that the reason for the release was not necessarily a complaint of forgery.
The Court finds that, based on this evidence, no reasonable trier of fact could find Clayton's conduct constituted "direct, personal participation" in the allegedly fraudulent activities of CMH employees or in the alleged efforts of CMH and Vanderbilt's management to conceal those acts. Mozingo v. Correct Mfg. Corp., 752 F.2d 168, 174 (5th Cir.1985). See also Anderson, 477 U.S. at 248, 106 S.Ct. 2505 (summary judgment is inappropriate "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.") Kevin Clayton's Motion for Summary Judgment is therefore granted.
For the reasons stated above, the Intervenors' Motion for Partial Summary Judgment (D.E. 124) is DENIED. Intervention-Defendants Vanderbilt, CMH Homes and Clayton Homes Inc.'s Motions for Summary Judgment, (D.E. 145, D.E. 147), are hereby DENIED IN PART and GRANTED IN PART. Specifically, the Court GRANTS Intervention-Defendants Vanderbilt, CMH Homes and Clayton Homes Inc.'s Motions for Summary Judgment with respect to the following causes of action: (1) common law unfair debt collection; (2) Texas Debt Collection Act; (3) money had and received; (4) common law fraud (based on filing the lien releases); (5) RICO claims under 18 U.S.C. § 1962(c), § 1962(d) and (6) claims for mental anguish damages. The Court DENIES Intervention-Defendants Vanderbilt, CMH Homes and Clayton Homes Inc.'s Motions for Summary Judgment with respect to the following causes of action: (1) fraudulent lien claim under Tex. Civ. Prac. & Rem.Code § 12.002; (2) declaratory judgment that Flores and King's debt under the Contract was "paid in full"; (3) common law fraud (based on filing the allegedly fraudulent liens); and (4) civil conspiracy. Intervention-Defendant Kevin T. Clayton's Motion for Summary Judgment (D.E. 146) is hereby GRANTED.
SIGNED and ORDERED.
