Opinion
No. 05-18-00052-CV
06-13-2018
HELEN AUSTIN AND JOHN BENNETT WHITE, IV, Appellants v. MICHAEL W. MITCHELL, Appellee
On Appeal from the 14th Judicial District Court Dallas County, Texas
Trial Court Cause No. DC-17-17574
MEMORANDUM OPINION
Before Justices Francis, Fillmore, and Whitehill
Opinion by Justice Whitehill
The trial court granted a temporary injunction barring appellants from foreclosing on appellee's residence. Appellants perfected this interlocutory appeal from the injunction. In one issue they argue that the trial court abused its discretion for several different reasons. We reject appellants' arguments, concluding (i) the trial court properly considered an arbitration award setting forth steps Mitchell could take to prevent foreclosure, (ii) Mitchell showed a probable right to recover on his excessive demand and declaratory judgment claims, (iii) Mitchell adduced evidence that he made an adequate tender, and (iv) the trial court permissibly concluded that foreclosure would be an irreparable injury. Accordingly, we affirm.
I. BACKGROUND
A. Factual Allegations
Appellee Michael Mitchell alleged the following facts in his original petition and application for injunctive relief:
Mitchell and appellant Helen Austin were divorced in 2008. While the case was on appeal, they settled, and an amended agreed divorce decree was rendered in 2010.
Pursuant to the divorce decree, Mitchell executed a note payable to Austin in the principal amount of roughly $302,000. The note was secured by a deed of trust on Mitchell's homestead.
The divorce decree also contained agreements to mediate and, if necessary, arbitrate certain disputes. Austin persuaded the divorce court to remove the arbitrator stipulated in the divorce decree, Coye Conner Jr., and to replace him with a substitute arbitrator, but we granted Mitchell mandamus relief from those orders. See In re M.W.M., Jr., 523 S.W.3d 203 (Tex. App.—Dallas 2017, orig. proceeding).
In 2011, Austin sent Mitchell a letter stating that the note was in default. But there was no follow-up to that letter for several years.
In 2017, appellee John Bennett White IV, an attorney, began representing Austin.
On November 20, 2017, White on Austin's behalf sent Mitchell a notice of default and intent to accelerate the note. On December 11, 2017, White sent Mitchell a notice of foreclosure sale to occur on January 2, 2018. White exchanged emails with Mitchell's lawyer from December 15 through 19, 2017. In those emails, White said that Mitchell owed Austin about $350,000 in principal and interest, plus attorneys' fees ranging anywhere from $200,000 to $350,000, including almost $120,000 for White's services related to collecting amounts owed under the decree.
Mitchell disputed Austin's fee claim and scheduled an arbitration before Conner on December 21, 2017. Austin and White did not appear at the arbitration, and on December 21 Conner signed an arbitration award (i) accepting Austin's calculation of principal and interest due and (ii) finding that a reasonable attorneys' fee for collecting and enforcing the note was $5,000. The award also specified a procedure for Mitchell to pay the debt and avoid foreclosure:
• First, Austin had to deliver a release of lien to attorney Brad Jackson by December 26, 2017.
• If Austin did so, Mitchell had to wire Jackson the full amount of principal, interest, and attorneys' fees the arbitrator found.
• If Mitchell complied, Jackson would then disburse the funds as Austin directed.
If Austin did not comply with the procedure, she was not allowed to foreclose. If Austin complied and Mitchell did not, Austin was allowed to foreclose.
On December 22, 2017, White emailed Mitchell's lawyer a "payoff quote" saying that principal and interest on the note amounted to about $350,000 and Austin's attorneys' fees amounted to almost $178,000.
On December 26, 2017, Mitchell wired to Jackson the full amount stated in the arbitration award. Austin did not deliver the release of lien and did not advise Mitchell that the January 2, 2018 foreclosure sale would not go forward.
B. Procedural History
On December 27, 2017, Mitchell filed his original petition and application for injunctive relief seeking to stop the foreclosure sale. Mitchell asserted claims for (i) contract breach, (ii) excessive demand, and (iii) declaratory judgment. The contract claim asserted that appellants breached the note and deed of trust by seeking to foreclose despite Mitchell's tender. The declaratory judgment claim sought (i) "a determination regarding the reasonableness of the attorneys' fees" appellants claimed and (ii) a declaration that the arbitrator's findings and award "is correct and is confirmed."
The case was assigned to the 14th District Court of Dallas County, which is not the court that rendered the divorce decree. A temporary restraining order issued on December 28, 2017.
After a January 10, 2018 hearing, the trial court signed a temporary injunction enjoining appellees from foreclosing on Mitchell's homestead and setting the case for trial in December 2018.
Appellees timely appealed. See TEX. CIV. PRAC. & REM. CODE § 51.014(a)(4).
We take judicial notice that there is another appeal pending before this Court, No. 05-17-01309-CV, involving the same parties. In that case Mitchell appeals a divorce court order denying Mitchell's motion to compel arbitration of certain matters.
II. STANDARD OF REVIEW
We review the trial court's order granting a temporary injunction for abuse of discretion. Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002). The trial court abuses its discretion if it misapplies the law to established facts or if the evidence does not reasonably support the court's determinations of the existence of probable injury or probable right of recovery. See Loye v. Travelhost, Inc., 156 S.W.3d 615, 619 (Tex. App.—Dallas 2004, no pet.).
We view the evidence in the light most favorable to the trial court's order and indulge every reasonable inference in its favor. Schmidt v. Richardson, 420 S.W.3d 442, 445 (Tex. App.—Dallas 2014, no pet.).
III. ANALYSIS
Appellants' sole issue asserts that the trial court erred by granting the temporary injunction. They present several different arguments supporting their issue.
A. Applicable Law
An applicant must plead and prove three elements to obtain a temporary injunction: (i) a cause of action against the defendant, (ii) a probable right to the relief sought, and (iii) a probable, imminent, and irreparable injury in the interim. Butnaru, 84 S.W.3d at 204.
The probable right to recovery element does not require the applicant to show that it will prevail at trial, nor does it require the trial court to evaluate the probability that applicant will prevail at trial. Intercontinental Terminals Co., LLC v. Vopak N. Am., Inc., 354 S.W.3d 887, 897 (Tex. App.—Houston [1st Dist.] 2011, no pet.). Rather, the applicant must plead a cause of action and present enough evidence to raise a bone fide issue as to its right to ultimate relief. Id. This requires some evidence to support every element of at least one valid legal theory. Tex. Health Resources v. Pham, No. 05-15-01283-CV, 2016 WL 4205732, at *3 (Tex. App.—Dallas Aug. 3, 2016, no pet.) (mem. op.).
The irreparable injury requirement is sometimes described in terms of the injured party's having an inadequate legal remedy. See Butnaru, 84 S.W.3d at 211 ("[A] party can rarely establish an irreparable injury and an inadequate legal remedy when damages for breach of contract are available."); see also id. at 204 ("An injury is irreparable if the injured party cannot be adequately compensated in damages or if the damages cannot be measured by any certain pecuniary standard.").
B. Did the trial court err by giving effect to the arbitration award?
In the temporary injunction, the trial court relied on the arbitration award by finding that Mitchell tendered payment in full by escrowing the full amount the arbitrator awarded. Because the arbitration award is central to our analysis, we first address appellants' arguments that the trial court should not have given the arbitration award effect.
1. Applicable Law
An arbitration award has the same effect as a judgment of a court of last resort, is presumed valid, and is entitled to great deference. Holmes Builders at Castle Hills, Ltd. v. Gordon, No. 05-16-00887-CV, 2018 WL 1081635, at *2 (Tex. App.—Dallas Feb. 28, 2018, no pet. h.) (mem. op.).
Under the Texas Arbitration Act, a court may vacate an arbitration award if a party applies for that relief and proves a statutory ground for vacatur. TEX. CIV. PRAC. & REM. CODE § 171.088; see also Hoskins v. Hoskins, 497 S.W.3d 490, 495 (Tex. 2016) (statutory grounds for vacatur are exclusive).
2. Applying the Law to the Facts
a. Agreement to Arbitrate
Appellants first argue that the trial court should not have given effect to the arbitration award because the parties did not agree to arbitrate this dispute. The note and deed of trust do not contain arbitration clauses, and appellants argue that this dispute is not covered by the divorce decree's arbitration clause.
Although a party can obtain vacatur if "there was no agreement to arbitrate," CIV. PRAC. § 171.088(a)(4), here appellants did not apply to the trial court for vacatur on that or any other ground. Here, the award existed and was admitted into evidence at the temporary injunction hearing. Because the award had not been vacated, the trial court properly gave it effect. See Holmes Builders, 2018 WL 1081635, at *2.
After the temporary injunction issued, appellants filed an answer asserting that this Court's stay order in In re M.W.M., Jr., No. 05-17-01309-CV, prevented Austin from seeking vacatur.
b. Stay of Proceedings in Divorce Trial Court
Appellants' opening brief argued that the arbitration hearing and award violated this Court's stay order in a different appeal, In re M.W.M., Jr., No. 05-17-01309-CV, which arises from an order in the parties' divorce case. We subsequently clarified that stay order, and appellants withdrew this argument in their reply brief. Accordingly, we do not address it.
c. Arbitration Procedures Contrary to the Divorce Decree
Appellants next argue that the trial court should not have given effect to the arbitration award because the arbitrator did not comply with the procedures stated in the divorce decree. They contend, for example, that he improperly set the arbitration hearing with only six days' notice. Therefore, appellants conclude, the trial court erred by relying on the arbitration award in the injunction.
Again, appellants did not ask the trial court to vacate the arbitration award based on the arbitrator's alleged misconduct. See CIV. PRAC. § 171.088(a)(2)(C). Thus, when the trial court ruled, the arbitration award was an existing award entitled to the same effect as a judgment of a court of last resort. See Holmes Builders, 2018 WL 1081635, at *2. Moreover, appellants cite no evidence proving the arbitrator's alleged misconduct, and our record review has revealed none. Indeed, the divorce decree was not admitted into evidence, so the trial court could not have determined whether the arbitrator complied with its terms in any event.
For all these reasons, we reject appellants' argument.
3. Conclusion
Appellants have not shown that the trial court erred by giving effect to the arbitrator's award.
C. Did the trial court abuse its discretion by concluding that Mitchell showed a probable right to relief on his excessive demand claim?
Appellants argue that Mitchell failed to show a probable right to relief on his excessive demand claim because (i) Mitchell produced no evidence that appellants' demand was unreasonable or made in bad faith and (ii) appellants conclusively proved their demand was reasonable. We reject appellants' arguments.
1. Applicable Law
In a factually similar case, the Houston First Court of Appeals recently summarized excessive demand this way: "[T]o show a probable right of recovery, the homeowners must present some evidence . . . that the [demanded] attorney's fees were excessive and were either sought in bad faith or were unreasonable." Stewart Beach Condo. Homeowners Ass'n, Inc. v. Gili N Prop Invs., LLC, 481 S.W.3d 336, 346 (Tex. App.—Houston [1st Dist.] 2015, no pet.) (internal quotations and citations omitted).
2. Applying the Law to the Facts
The arbitrator's award was some evidence that appellants' attorneys' fee demand was both excessive and unreasonable. The arbitrator made the following findings:
[T]he amount of reasonable attorney's fees for collection and enforcement of the Note including expenses, costs and the trustee's fee is $5,000.00 . . . . The Arbitrator specifically rejects Ms. Austin's various claims that "$200,000 - $350,000" or approximately "160,000" are reasonable fees for collection and enforcement of the Note. That position is not supported by the law or the facts of this case.These findings tracked the Note's language regarding attorneys' fees: "Maker also promises to pay reasonable attorney's fees . . . if this note is placed in the hands of an attorney to collect or enforce the note." (Emphasis added.) Other evidence before the trial court showed that, on the day after the arbitration and award, appellants demanded attorneys' fees of about $178,000.
Appellants presented contrary expert testimony by business litigator Gerald Urbach. He testified that he had reviewed the records supporting appellants' fee demand. He further testified about the fees as follows:
I do not think they're excessive. There are some—some entries that I think probably are not part of what should be collected, but the overall demand, as I recall, was 177,000 I do not consider excessive. . . . I would say it's reasonable based on my review of the file.
The arbitration award arguably has preclusive effect. See Tanox, Inc. v. Akin, Gump, Strauss, Hauer & Feld, L.L.P., 105 S.W.3d 244, 270 (Tex. App.—Houston [14th Dist.] 2003, pet. denied) ("[C]ourts have held that an arbitration award can have preclusive effect, even though it is not confirmed and a judgment is not entered."). We need not decide that question here, though; it is enough to conclude that the arbitration award is some evidence that (i) appellants' reasonable attorneys' fees for collecting and enforcing the note were $5,000 and (ii) appellants' demands for $160,000 or more were unreasonable. When some substantive and probative evidence supports a trial court's discretionary decision, there is no abuse of discretion. See Gonzalez v. Gonzalez, 331 S.W.3d 864, 866 (Tex. App.—Dallas 2011, no pet.).
We reject appellants' position that Urbach's testimony was conclusive. Expert testimony can be conclusive if it is (i) not contradicted by another witness or attendant circumstances, (ii) clear, direct, and positive, and (iii) free from contradiction, inaccuracy, and circumstances tending to cast suspicion on it. See Ragsdale v. Progressive Voters League, 801 S.W.2d 880, 882 (Tex. 1990) (per curiam). Here, Urbach's testimony did not satisfy Ragsdale. His testimony was conclusory, referred to records not in evidence, and discussed no factors supporting reasonableness. He also acknowledged that the records contained some entries that were probably not recoverable. And the arbitration award contradicted his opinion. Under these circumstances, the trial court was not bound by Urbach's testimony.
We conclude that there was some evidence from which the trial court could reasonably have determined that Mitchell had a probable right to recovery on his excessive demand claim.
D. Did the trial court abuse its discretion by concluding that Mitchell showed a probable right to relief on his declaratory judgment claim to confirm the award?
We also hold that the trial court could have reasonably determined that Mitchell showed a probable right to relief on his declaratory judgment claim seeking award confirmation.
Mitchell's petition asked the trial court to "enter an order declaring that the [arbitration award] is correct and is confirmed." The arbitration award was admitted into evidence at the temporary injunction hearing. Appellants did not file an application to vacate, modify, or correct the award. "Unless grounds are offered for vacating, modifying, or correcting an award under Section 171.088 or 171.091, the court, on application of a party, shall confirm the award." CIV. PRAC. § 171.087 (emphasis added). As noted above, appellants did not offer evidence establishing that there was no agreement to arbitrate this dispute or that the arbitrator committed misconduct.
We conclude that there was some evidence from which the trial court could reasonably have determined that Mitchell had a probable right to recovery on his request for award confirmation.
E. Did the trial court abuse its discretion by finding that Mitchell made tender by complying with the arbitration award?
Appellants argue that Mitchell was not entitled to injunctive relief unless he unconditionally tendered the amount he conceded that he owed. The trial court, however, found that Mitchell "tendered payment in full" by escrowing the arbitration award amount in accordance with the award's terms. Because Mitchell did not make an unconditional tender, appellants conclude that the trial court abused its discretion by granting the temporary injunction.
A debtor seeking to enjoin a foreclosure sale must first tender the full sum of the admitted debt. Stewart Beach, 481 S.W.3d at 349. However, the tender requirement does not mean that the money must be brought into court or tendered as a condition precedent to injunctive relief; rather, the debtor must show only a readiness and willingness to pay and must act in good faith. Id. In Stewart Beach, the appellate court held that homeowners made adequate tender by posting a bond for the amount they admitted they owed plus the amount the trial court found was a reasonable attorney's fee. Id. at 349-50.
Here, the arbitration award spelled out a pay-off procedure to forestall foreclosure: (i) first, Austin had to escrow a release of lien, (ii) if she did so, Mitchell had to wire the escrow agent the amount of the debt and attorneys' fees the arbitrator found, and (iii) the escrow agent would then disburse the funds as Austin directed. Mitchell's performance actually exceeded that required by the arbitrator because he paid the money into escrow despite Austin's failure to execute and escrow a release of lien. The arbitration award has not been vacated, so it is entitled to the same effect as a judgment of a court of last resort. See Holmes Builders, 2018 WL 1081635, at *2. Thus, the arbitration award established, for this case, what would constitute an adequate tender.
We conclude that the trial court didn't abuse its discretion by finding that Mitchell made adequate tender by complying with (and exceeding his duties under) the arbitration award.
Appellants also argue that the trial court erred by adopting the arbitrator's pay-off procedure because that procedure effectively modified the deed of trust. But again, the arbitration award must be given the same effect as a judgment unless and until it is vacated. Id. Thus, the trial court did not abuse its discretion by enforcing the arbitration award.
F. Did the trial court abuse its discretion by concluding that Mitchell had no adequate legal remedy?
Appellants argue that the trial court abused its discretion by concluding that Mitchell had no adequate legal remedy. See Bank of Tex., N.A. v. Gaubert, 286 S.W.3d 546, 552 (Tex. App.—Dallas 2009, pet. dism'd w.o.j.). ("[G]ranting an injunction in the face of an adequate remedy at law is an abuse of discretion."). Specifically, they argue that Mitchell could simply have paid their entire demand and then sued for any overpayment. They also assert that Mitchell produced no evidence that the house in question is unique. We reject appellants' argument for two reasons.
First, "[w]hen ownership of real estate is at stake, existence of a right of action for damages is not ground for denying equitable relief." Irving Bank & Trust Co. v. Second Land Corp., 544 S.W.2d 684, 688 (Tex. Civ. App.—Dallas 1976, writ ref'd n.r.e.); see also Butnaru, 84 S.W.3d at 211 ("[A] trial court may grant equitable relief when a dispute involves real property."); Stewart Beach, 481 S.W.3d at 350 ("A temporary injunction is . . . appropriate to block foreclosure of real property."). Thus, injunctive relief is appropriate to block foreclosure of Mitchell's property pending trial.
Second, "[t]he existence of a remedy at law is not ground for denial of injunctive relief unless the legal remedy is as practical and efficient to the ends of justice as the equitable remedy." Irving Bank & Trust Co., 544 S.W.2d at 688; accord Sumner v. Crawford, 41 S.W. 994, 995 (Tex. 1897). The trial court could reasonably have determined that relegating Mitchell to legal remedies for a possibly wrongful foreclosure would not be as practical and efficient as temporarily enjoining the foreclosure sale.
Appellants rely on Ginther-Davis Center, Ltd. v. Houston National Bank, 600 S.W.2d 856 (Tex. Civ. App.—Houston [1st Dist.] 1980, writ ref'd n.r.e.). In that case, the trial court refused to enjoin a foreclosure sale, and the court of civil appeals affirmed. The appellate court concluded that the appellants had failed to show, among other things, the lack of an adequate legal remedy. Id. at 865. The court dismissed the appellants' argument that the property was unique because the appellants intended to sell the property themselves, not preserve it. Id. Here, by contrast, Mitchell testified that he lives in the property with his wife and child, and there is no evidence that Mitchell intends to sell the property. Moreover, the question in Ginther was whether the trial court abused its discretion by denying a temporary injunction, so it carries little weight when we assess whether this trial court abused its discretion by granting a temporary injunction. In sum, Ginther-Davis is not instructive.
We conclude that the trial court did not abuse its discretion by finding that Mitchell lacked an adequate legal remedy.
G. Conclusion
We conclude that the trial court did not abuse its discretion by granting a temporary injunction based on Mitchell's excessive demand claim or his award confirmation declaratory judgment claim. Appellants raise some other arguments regarding Mitchell's contract breach claim, but we need not address them. See TEX. R. APP. P. 47.1.
IV. DISPOSITION
We affirm the trial court's temporary injunction.
/Bill Whitehill/
BILL WHITEHILL
JUSTICE 180052F.P05
JUDGMENT
On Appeal from the 14th Judicial District Court, Dallas County, Texas
Trial Court Cause No. DC-17-17574.
Opinion delivered by Justice Whitehill. Justices Francis and Fillmore participating.
In accordance with this Court's opinion of this date, the trial court's temporary injunction signed on January 10, 2018 is AFFIRMED.
It is ORDERED that appellee Michael W. Mitchell recover his costs of this appeal from appellants Helen Austin and John Bennett White, IV. Judgment entered June 13, 2018.