NO.05-10-01021-CV IN THE COURT OF APPEALS FOR THE FIFTH

Transcription

JAMES H. OWEN,
Appellant,
v.
JIM ALLEE IMPORTS, INC.
d/b/a RUSTY WALLIS VOLKSWAGEN,
Appellee.
ON APPEAL FROM THE COUNTY COURT AT LAW #4,
DALLAS COUNTY, TEXAS
Trial Court No. CC-09-03189-D
BRIEF OF APPELLEE
KENT F. BROOKS
LAW OFFICE OF KENT F. BROOKS
State Bar No. 03070710
8117 Preston Rd., Ste. 300
Dallas, TX 75225
Telephone: (214) 706-9151
Facsimile: (214) 706-9152
TRACEY EDWARD GAJAK
SULLIVAN & COOK, LLC
2301 Cedar Springs Rd.
Suite 200
Dallas, Texas 75201
(214) 520-7494
(214) 528-6925 (fax)
ORAL ARGUMENT REOUESTED
5th Court of Appeals
FILED: 04/08/2011
IN THE COURT OF APPEALS
FOR THE FIFTH JUDICIAL DISTRICT OF TEXAS
AT DALLAS, TEXAS
Lisa Matz, Clerk
NO.05-10-01021-CV
STATEMENT REGARDING ORAL ARGUMENT
Oral argument is essential in this case to the understanding of the issues relating to
appellate waiver. Also, oral argument will assist in determining whether the argument on
appeal for why Bledsoe might be reversed reflects a good faith argument.
TABLE OF CONTENTS
STATEMENT REGARDING ORAL ARGUMENT ............................ I
TABLE OF CONTENTS .................................................. ii
INDEX OF AUTHORITIES .............................................. iv
REPLY ISSUES PRESENTED .............................................. 2
REPLY ISSUE ONE:
The sanctions represent a proper application of the governing law to
the facts established by probative evidence.
STATEMENT OF FACTS ................................................ 2
SUMMARY OF REPLY ARGUMENT ...................................... 7
ARGUMENT AND AUTHORITIES ........................................ 8
REPLY ISSUE ONE ................................................ 8
The sanctions represent a proper application of the governing law to
the facts established by probative evidence.
1. Appellate waiver precludes reversal.
a. Appellant failed to challenge an independent basis for the
sanctions -- under Chapter lOon the basis of improper
purpose.
2. The Smail affirmative defense defeats the Finance Code claim.
3. Suing repeatedly within the Fifth District "even though it's a loser" is
sanctionable under Chapter 10.
11
4. There was no evidence that Appellant had a good faith argument for reversal of
Bledsoe and Stephens
5. The 2009 Amendment to the Finance Code can be constitutionally
applied retroactively.
6. Appellant's stonewalling his client was relevant.
7. There was no factual basis for the DTPA, fraud and intentional infliction
of emotional distress claims.
8. There was evidence of Appellant's subjective "bad faith" for Rule 13
and §17.50(c), DTPA.
CROSS POINT NO. ONE: ................................................ 42
The appeal is frivolous under Rule 45, Texas Rules of Appellate
Procedure and warrants an award to Appellee/Cross Appellant of just
damages.
CONCLUSION ........................................................ .47
PRAyER ............................................................. 48
CERTIFICATE OF SERVICE ............................................. 49
APPENDIX ............................................................ 50
APP.-l ............. California Civil Code §2982
APP.-2 ............. 12 C.F.R. Part 226 Supplement I
APP.-3 ............. Affidavit of Tracey E. Gajak
111
INDEX OF AUTHORITIES
CASES
Baker Hughes Oilfield Operations, Inc, v. Hennig Production Co., Inc., ......... 44,45
164 S.W.3d 438 (Tex. App. - Houston [14th Dist.] 2005, no pet.)
Bennett v. State o/Texas, ................................................. 14
No. 05-99-01788-CV, 2001 Tex. App. LEXIS 3461
(Tex. App. - Dallas May 29,2001, pet. denied)
Blanche v. First Nation wide Mortg. Corp., ................................... 36
74 S.W.3d 444 (Tex. App.- Dallas 2002, no pet.)
Bledsoe Dodge, LLC v. Kuberski, ..................... 6,8, 17-22,25,28,41-43,47
279 S.w.3d 839 (Tex. App. - Dallas 2009, no pet.)
Brown v. Lubbock County Comm. Court, ..................................... 14
185 S.W.3d 499 (Tex. App. - Amarillo 2005, no pet.)
Dike v. Peltier Chevrolet, Inc., ............................................ 40
(Tex. App. - Texarkana April 1, 2011, no pet.)
Gasparotto v. Gallangher Power Fence, Inc., ................................ .42
(Tex. App. - Austin January 23, 2004, no pet.).
General Electric Credit Corp. v. Smail, ................................... .12-15
584 S.W.2d 690 (Tex. 1979)
HSAM, Inc. d/b/a HSA Mortgage Co. v. Gatter, ............................... 14
814 S.W.2d 887 (Tex. App. - San Antonio 1991, writ dism'd)
Hughes v. Aycock, . ...................................................... 14
No. 0l-01181-CV, 1996 Tex. App. LEXIS 3489
(Tex. App. - Houston [1 st Dist.] July 11, 1996, writ dism'd w.o.j.)
IV
In re Hansen, ........................................................ 10, 11
(Tex. App. - Dallas March 20, 2007, no pet.)(memo op.)
Keever v. Finlan, ....................................................... 38
988 S.W.2d 300 (Tex. App. - Dallas 1999, pet. dism'd)
Keith v. Salls, ........................................................... 37
256 S.W.3d 912 (Tex. App. - Dallas 2008, no pet.)
LaChance v. McKown, ................................................... 39
649 S.W.2d 658 (Tex. App. - Texarkana 1983, writ ref'd n.r.e.)
Law Office of Windle Turley, P. C. v. French, .............................. 16, 17
Low v. Henry, .......................................................... 33
221 S.W.3d 609 (Tex. 2007)
Mobile Vision Imaging Serv., L.L. C. v. LifeCare Hasp. ofN Tex., ................. 18
260 S.W.3d 561 (Tex. App. - Dallas, no pet.)
McCain v. NME Hasps, Inc., ............................................ 11, 40
856 S.W.2d 751 (Tex. App. - Dallas 1993, no writ)
National Carloading Corp. v. Phoenix-El Paso Express, Inc., . . . . . . . . . . . . . . . . . . .. 31
176 S.W.2d 564 (Tex. 1943)
Okere v. Middleton, ..................................................... 44
20 S.W.3d 176 (Tex. App. - Dallas 2000, pet. den.)
Parkway Co. v. Woodruff, ................................................. 36
901 S.W.2d 434 (Tex. 1995)
Plano Surgery Center v. New You Weight Mgmt Ctr., ..................... 13,43,45
Republic Ins Co. v. Silverton Elevators, Inc., .................................. 25
493 S.W.2d 748 (Tex. 1973)
v
Roson v. Crown Cork & Seal Co., ....................................... 30-32
No. 06-0714,2010 Tex. Lexis 796, 56 Tex. Sup. Ct. J. 71 (Tex. 2010)
Riley v. Cohen, ....................................................... 10, 11
(Tex. App. - Austin February 19, 2009, pet. den.)(memo op.)
Satterfield v. Crown Cork & Seal Co., ..................................... 30-32
268 S.W.3d 190 (Tex. App. - Austin 2008, no pet.)
Sears, Roebuck & Co. v. Meadows, ......................................... 34
877 S.W.2d 281 (Tex. 1994)
Smith v, Brown, ........................................................ .43
51 S.W.3d 367(Tex. App. - Houston [1 st Dist.] 2001, pet. denied)
Smith v. Chapman, ....................................................... 13
614 F.2d 986 (5 th Cir.1980)
Smith v. National Resort Communities, Inc., .................................. 34
585 S.W.2d 655 (Tex. 1979)
Spoljaric v. Percival Tours, Inc., ............................................ 34
708 S.W.2d 432 (Tex. 1986)
State v. Cartwright, ..................................................... 15
874 S.W.2d 210 (Tex. App.- Houston [14 th Dist.] 1994, writ den)
Stephens v. Friendly Chevrolet, Ltd., ..................................... 23,24
(Tex. App. - Dallas Ap. 28, 2005, pet. denied)
Stephens v. Friendly Chevrolet, Ltd., ............................... 18-22,25,43
No.05-08-00881-CV, 2009 Tex. App. LEXIS 8170
(Tex. App. - Dallas October 22, 2009, no pet.)
Stromberger v. Law Office of Windle Turley, .................................. 39
No. 05-04-00050 -CV, 2005 Tex. App. LEXIS 2321
(Tex. App. - Dallas March 28,2005, no pet.)
VI
Texas Prop. & Cas. Ins. Guar. Ass 'n v. Southwest Aggregates, Inc., ............... 25
982 S.W.2d 600 (Tex. App. - Austin, no pet.)
Thompson v. 10,000 RV Sales,Inc., ............................. 20,21,25,26,45
31 Cal. Rptr.3d 18 (Cal. Ct. App. 2005)
TO. Stanley Boot Co. v. Bank ofEl Paso, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. .34
847 S.W.2d 218 (Tex. 1992)
CODES AND STATUTES
CAL. CIY. C. §2982(a)(1)(A) .............................................. .26
TEX. ADMIN C. tit. 43, §8.224(1) ........................................... 23
TEX. ADMIN C. tit. 43, §8.224(8) ........................................... 23
TEX. ADMIN C. tit. 43, §8.224(14) .......................................... 23
TEX. ADMIN C. tit. 43, §8.249 ............................................ 23
TEX. ADMIN C. tit. 43, §8.250 .............................................. 23
TEX. ClY. PRAC. & REM. C. §10.001(1) ................................. 11, 15-16
TEX. CIY. PRAC. & REM. C. §1O.001(2) ...................................... 18
TEX. CIY. PRAC. & REM. C. §1O.001(3) ....................................... 18
TEX. FIN. C §348.004 ............................................. 20,21,25
TEX. FIN. C. §348.004(a) .................................................. 23
TEX. FIN. C. §348.412(b) ................................................. 13
TEX. FIN. C § 349.001 ........................................ 6, 12,20,24,28
RULES OF PROCEDURE
TEX. R. ApP. PRO. 33.1(a)(I) ......................................... 13, 19,42
VIl
TEX. R. ApP. PRO. 41.3 ................................................... 18
TEX. R. Cry. PRO. 13 ................................. 9-12,15,18,28,36,37,40
TEX. R. Cry. PRO. 94 ..................................................... 13
TEX. R. Cry. PRO. 166a(c) ................................................. 18
REGULATIONS
12 C.F.R. §226.2(a)(9) ................................................ 25, 27
12 C.F.R. §226.2(b)(3) .................................................... 25
12 C.F.R. § 226.18 ...................................................... 26
12 C.F.R. §226.18(b)(1) .................................................. 27
12 C.F.R. §226.18(b)(2).................................................. 27
12 C.F.R. §226.18(b)(3) ................................................... 27
12 C.F.R. §226.18(d) ..................................................... 27
12 C.F.R. § 226.180) ..................................................... 27
12 C.F.R. Part 226 Supplement 1. ........................................... 27
viii
TO THE HONORABLE FIFTH DISTRICT COURT OF APPEALS:
Jim Allee Imports, Inc. d/b/a! Rusty Wallis Volkswagen ("RW"), Appellee and
defendant/movant below, files this its Appellee's Brief and would show as follows:
The Clerk's Record consists of one volume and will be cited as "c" followed by the
page number assigned by the Clerk. Example: Plaintiffs Original Petition will be cited:
(C:9-14).
The Reporter's Record consists of five (5) volumes. Citation will be to the assigned
volume number followed by "R" for Reporter. For example, something found in the second
volume of the Reporter's Record would be cited "2R:" All of the hearing testimony is
contained in volume two of the Reporter's Record. A cite to the hearing testimony will be
"2R:" followed by the page number and then the line numbers. Example: (2R: p. _, I. _-~.
Volumes three, four and five contain the exhibits from the hearing, some tabbed by
the Reporter as Plaintiffs (those of attorney Owen -Appellant) and some as Defendant's
(those of Appellee RW). As a general matter, an exhibit will be cited by volume number
(i.e., 3R) and then P's orD's Ex. using the exhibit number on the tab. Example: Defendant's
Exhibit 11 will be cited: (4R: D's Ex. 11).
Defendant's Exhibit 12 consists of the entire deposition of Krisle and the exhibits to
that deposition. All of the deposition testimony is in volume four. All exhibits to her
deposition are in volume five. So, Krisle's testimony will be cited: (4R: D's Ex. 12, p. _, I.
_-~.
An exhibit to Krisle's deposition will be cited: (4R; D's Ex. 12, 5R: Ex, _ thereto).
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REPLY ISSUES PRESENTED
REPLY ISSUE ONE:
The sanctions represent a proper application of the governing law to the facts
established by probative evidence.
STATEMENT OF FACTS
RW is dissatisfied with Appellant's Statement of Facts. The first two paragraphs of
it do not contain a single citation to the record, which violates Rule 38.1(g), TEX. R. ApP.
PRO. The two paragraphs also violate Rule 38.1(g) because they contain argumentation.
The named partner of the firm that employed Appellant stipulated on the record of
Krisle's deposition that Krisle had done nothing that violated Rule 13 and that everything
that was done was done on her behalf with his knowledge and with information of which
Krisle was not in any way a part. (4R: D's Ex. 12, p.5, I. 7-21).
Prior to the suit being filed by Appellant, Krisle had gone on the website of the firm
Appellant worked for. (4R: D's Ex. 12, p.27, I. 1-7). The website listed questions relating
to "Auto Finance Fraud" it claimed are "red flags" to look for in your auto purchase
paperwork. (4R: D's Ex. 12 p. 28, I. 5-12, 5R:Ex. 7 thereto). These questions included:
-Did you have a trade-in?
-Were you "upside down" in your trade?
-Did the paperwork show a higher trade-in allowance than the dealership
actually gave you?
-Did the dealer arrange your financing? (4R: D's Ex 12; 5R: Ex.7 thereto).
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The website informed: "The ads suggest that the dealership will assume your old-car debt or
lease to get your business. But the debt doesn't simply disappear. Whatever you owe on
your old vehicle.... are rolled into your new loan.... " Id. It said: "To determine if you have
a claim, we need to review your vehicle purchase paperwork, specifically the "Retail
Installment Sales Contract." Id.
Krisle called the number listed on the website and spoke to a female who told her to
send in her contract and the window sticker, which Krisle did. (4R:D's Ex. 12, p. 30, 1. 6-25,
p.31, 1. 1-17). One of the transactional documents (Exhibit 2) that was not requested or
provided listed a sale price of$35,964, plus tax, title and license and "PO" (payoff) followed
by a number 7000 that was changed into a 9000. (4R:D's Ex. 12, p.14,1.13-22;5C: Ex. 2
thereto). Krisle was offered the vehicle at the sticker price, with her being responsible for
the cost of the taxes, title and license for the vehicle. (4R: D's Ex. 12, p: 15,1.9-11). The
actual sticker on the vehicle she purchased had a purchase price of$35,964. (4R: D's Ex. 12,
p.20, 1. 13-25; p. 21, 1.1-10). Krisle also understood she was going to be responsible for the
payoff of her trade-in whatever that number might be. (4R: D's Ex. 12, p. 15,1. 12-15). She
knew that the deal she had entered into included negative equity. (4R: D's Ex. 12. p. 16,1.1619). No one at Appellant's law firm ever asked Krisle any questions about the content of
Exhibit 2 after it was produced in discovery. (4R: D's Ex. 12, p. 58, 1. 8-21).
Krisle knew that the Retail Instalment Contract ("RIC") was the document that would
be used to get the lender to loan her the money to purchase the vehicle from RW. (4R: D's
-3-
Ex. 12, p.18, 1. 11-15). She recalled that the $14,500 listed on the RIC as the UC (used car)
Allowance was approximately what she owed on her trade-in vehicle. (4R: D's Ex. 12,
p.19,123-25; p. 20.1. 1-1-8; p. 21, 1. 17-25, p. 22, 1. I-II). RW did arrange Krisle's financing.
(4R: D's Ex. 12,p.29, 1. 16-19).
Approximately one month after Krisle sent in her RIC and a window sticker, she
received a letter from the firm telling her that they had reviewed the documents and that she
had a case. (4R: D's Ex. 12, p. 32, 1. 4-24). She also spoke to Jennifer at the firm and told
her that she had bought a vehicle using a trade-in that was upside down and that the listed
trade-in allowance was higher than what was actually given on the trade. (4R: D's Ex. 12,
p. 47, 1. 5-16; p. 59, 1. 6-14).
Jennifer told her that the attorneys at the firm had reviewed the paperwork and that
she had a case relating to cash price/auto finance fraud. (4R: D's Ex. 12, p. 33,1. 4-19). It
was recommended that Krisle sign a fee agreement and send it in so the firm could pursue
her claim, which Krisle did. (4R: D's Ex. 12, p. 34, 1. 8-13; p. 35, 1. 9-22). There was no
further communication between Krisle and the firm until six months later when Krisle
contacted the firm to find out the status and was told that a suit had already been filed for her.
(4R: D's Ex. 12, p. 35, 1. 23-25; p. 36, p. 37, 1. 1-16). Nobody at the firm sent her a copy of
the lawsuit that was filed. (4R: D's Ex. 12, p. 37, 1. 23-25). Krisle's Original Petition does
not mention negative equity. (C:9-14).
-4-
In September of2009, Appellant's firm had done discovery on the lender. (4R:D's Ex.
9). Krisle was contacted by Appellant before Christmas of2009 about mediation that had to
occur by approximately December 29 th • (4R: D's Ex. 12, p.53, 1. 4-25; p, 54, 1. 1-7). Krisle
was willing to mediate as the court had ordered. (4R: D's Ex. 12, p. 53, 1. 4-24). In the
conversation between Krisle and Appellant about mediation, the topic of a settlement demand
was raised when Appellant asked Krisle what she wanted to get out of the suit and would be
"looking for" to settle. (4R: D's Ex. 12, p. 59, 1. 23-25; p. 60,1. 1-23). He asked Krisle what
she thought her case was worth and did not give her any range of numbers based upon a best
case scenario versus the risk of trial and delay. Id. She replied that she did not know, just
whatever they thought. Id.
She did not mediate the case and did not know to date why the case had not been
mediated. (4R: D's Ex. 12, p. 54, 1. 2-10). The mediator was told by the law firm that they
had not been able to contact Krisle about the mediation and the mediator was still operating
under that impression on December 28 th • (4R: D's Ex. 12, 5R:Ex. 11 thereto). Even after the
mediation date of December 29 th had passed, the mediator still attempted to get mediation
dates from Appellant (4R: D's Ex. 12, 5R:Ex Ex. 15 thereto), but Krisle was not contacted
to ask her for any other available dates. (4R: D's Ex. 12, p. 66, 1.24-25; p. 67, 1. 1-4).
After Appellant had received discovery from RW on December 29, 2009 that
identified that the loan amount was the MSRP plus tax, title and license and the negative
equity of$5,500 (4R: D's Ex. 12, 5R:Ex. 12 thereto), he made a $7000 demand contingent
-5-
"if they [Rusty Wallis] would like to do that before we mediate," (4R: D's Ex. 12, 5R: Ex.
13 thereto), but this amount was not discussed with Krisle and she was never told that
Appellant had made the demand. (4R: D's EX. 12, p. 62, 1. 20-25; p. 63, 1. 1-15).
In the first week in January, 2010 Krisle had her next communication with the firm
when she received a response to her request for the status of the case and was told by
counsel that the case was not going to settle and that there was a trial setting for January the
12th. (4R: D's Ex. 12, p.54,1. 17-25; p. 55, 1.1-2).
Thereafter, RW filed its motions for take nothing summary judgment on all claims in
Krisle's Original Petition. (C: 18-27). RW expressly raised negative equity and the holding
in Bledsoe Dodge, LLC v. Kuberski in its motion as a basis for a take nothing judgment on
Krisle's §349.001, TEX. FIN. C. claims. (C:21). Krisle was never sent a copy of these
motions. (4R: D's Ex. 12, p.77, 1.15-17). Appellant then filed Krisle's First Amended
Petition (C:40-53) and Response to the summary judgments (C:54-80) without informing her
that he had filed them (4R: D's Ex. 12, p. 78, 1.6-11; p. 79, 1. 24-25; p. 80, 1. 1) or
contemporaneously sending her a copy. (4R: D's Ex. 12, p, 81, 1. 3-13). Neither of these
pleadings addressed negative equity although they both asserted a claim under §349 .00 1. (C:
40-53; 54-80). Krisle signed an affidavit Appellant had drafted and sent to her (4R: D's Ex.
12, p. 78, 1. 6-25; p. 791-22) that did not address the facts of the transaction with RW
concerning the existence and treatment of negative equity. (C:73-74).
-6-
Shortly after Krisle returned that affidavit she spoke with the finn to be told that they
suggested she non-suit the case due to a Dallas court of appeals case and because Krisle
knew that the transaction included negative equity. (4R: D's Ex. 12, p. 93, 1.23-25; pp. 94-5;
p. 96, 1. 1-13; 97, 1.3-9). She accepted their assessment and advice and agreed to have the
case non-suited. Id. She thought that the non-suit was going to occur without responding
to the motions for summary judgment. (4R: D's Ex. 12, p. 93, 1.23-25; p. 94,1. 1-9). She was
wrong; the Response was filed using her affidavit on March 15, 2009, the day she signed and
returned it. (C:54-5;73-4). The motion for non-suit was filed March 19,2009. (C:81). Her
arrangement with the law firn was a contingency fee with her having no obligations for costs
so that was not any part of her decision to non-suit. (4R: D's Ex. 12, p. 97,1. 10-25; p. 98,
1. 1-14).
SUMMARY OF REPLY ARGUMENT
Under principles in this Court's prior holdings, the sanctions can be summarily
affinned because Appellant failed to challenge one or more sufficient independent bases
given in the Order for the sanctions.
The anti-waiver provision of the Finance Code does not overrule the Supreme Court's
holding that a plaintiff cannot recover statutory penalties if in pari delicto with the defendant,
which is an illegality defense (not a waiver defense) under this Court's prior holdings.
Appellant cites only cases not involving amendments to statutory causes of action and
penalties to argue that filing pleadings post-amendment for recovery of penalties for violation
-7-
of the Finance Code was based upon a "correct" argument that the retroactive application of
the amendment to the civil penalties for these claims would be unconstitutional. Since the
cases involve only common law causes of action, they provide no support for that argument.
In fact, the Supreme Court case Appellant cited continues to confirm that statutory causes of
action may be altered or repealed with retroactive effect.
Appellant's argument on appeal that he had a good faith argument that Stephens and
Bledsoe should be reversed ignores that there is no citation to the record of the sanctions
hearing where he made the argument being made on appeal as what he believed at time he
filed the pleadings. And, the "reversal of Bledsoe" argument ignores the evidence at the
sanctions hearing that Appellant believed that Bledsoe did not change the relevant law and
that Bledsoe did not address the same issues involved in Krisle's claims.
ARGUMENT AND AUTHORITIES
REPLY ISSUE ONE:
The sanctions were a proper application of the governing law to the facts
established by probative evidence.
1. Appellate waiver precludes reversal.
a. Appellant failed to challenge an independent basis for the sanctions -- under
Chapter 10 on the basis of improper purpose. Sanctions under Chapter 10 of the Texas
Civil Practices & Remedies Code can be based strictly on filing any pleading or motion
-8-
(including non-groundless or non-frivolous ones) for any "improper purpose.,,1 The Order
states:
... Respondent signed and filed a groundless suit, without evidentiary support
for the allegations claimed, in bad faith, and for purposes of harassment or
other improper purpose in violation of Rule 13 of the Texas Rules of Civil
Procedure, Section 10 of the Texas Civil Practices and Remedies Code, and
DTPA §17.S0(c)(C:1S9)
The Court FINDS that Respondent's signing and filing of claims for violation
ofthe Texas Finance Code and ongoing pursuit of such claims despite Krisle' s
actual knowledge of and agreement with the inclusion of the negative equity
in the negotiated cash price, the law in effect at the time ofthe filing ofthe suit
and the amendment to the law that occurred during the suit was groundless,
without evidentiary support of the allegations claimed, in bad faith, and done
for the purposes of harassment or other improper purpose in violation of
Rule 13 of the Texas Rules of Civil Procedure, SectionlO of the Texas Civil
Practices & Remedies Code, and DTPA § l7.S0(c)(C:162)
of the DTPA, fraud and intentional infliction of emotional distress was
groundless, without evidentiary support of the allegations claimed, in bad
faith, and done for the purposes of harassment or other improper purpose
in violation of Rule 13 of the Texas Rules of Civil Procedure, Section 10 of
the Texas Civil Practices and Remedies Code, andDTPA §17.S0(c). (C: 163).
110.00 1.
Signing of Pleadings and Motions
The signing of a pleading or motion as required by the Texas Rules of Civil Procedure constitutes a certificate by the
signatory that to the signatory's best knowledge, information, and belief, formed after reasonable inquiry:
(1) the pleading or motion is not being presented for any improper purpose, including to harass or to cause
unnecessary delay or needless increase in the cost of litigation;
10.004. Violation; Sanction
(a) A court that determines that a person has signed a pleading or motion in violation of Section 10.001 may impose
a sanction on the person, a party represented by the person, or both.
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The Order made findings of "improper purpose" in violation of Chapter 10 of the Texas Civil
Practices & Remedies Code three (3) different times. Appellant's Brief only addresses
"improper purpose" in paragraph 9 (beginning at page 27) stating that the trial court's abuse
of discretion related to improper purpose was "in assessing sanctions under Rule 13 and the
DTP A." Notably missing is any reference to sanctions under Chapter 10.
The Court and other courts of appeals have addressed an appellant's failure to attack
all independent bases or grounds that support a sanctions order. In re Hansen, No. 05-0600585-CV, 2007 Tex. App. LEXIS 2115 (Tex. App. - Dallas March 20, 2007, no pet.)(memo
op.); Riley v. Cohen, No. 03-08-00285-CV, 2009 Tex. App. LEXIS 1162 (Tex. App. - Austin
February 19,2009, pet. den.)(memo op.). In Hansen, the Court noted that the sanction order
and findings found violations for the same conduct under both Rule 13 and Chapter 10. Id,
It noted that the appeal did not challenge the award of sanction under Chapter 10. Id. Itheld
that when an independent ground fully supports the complained-of ruling or judgment, but
the appellant assigns no error to that independent ground, then (1 )[it] must accept the validity
ofthat independent ground and (2) any error in the grounds challenged on appeal is harmless
because the unchallenged independent ground fully supports the complained-of ruling or
judgment. The Court in Hansen overruled the challenges to the sanctions that were raised
under Rule 13 without further analysis.
Riley cites Hansen as authority for its holding that when the sanctions order reflects
that it is based on a motion for sanction for violations of Rule 13 and the Civil Practices &
-10-
Remedies Code, but fails to elaborate further on the basis for the sanctions, the appellant's
challenge to only one basis on appeal waives any complaint with an unchallenged ground for
the sanction order and requires summary affirmance. Riley v. Cohen, No. 03-08-00285-CV,
2009 Tex. App. LEXIS 1162 (Tex. App. - Austin February 19, 2009, pet. den.)(memo op.).
The Court should apply Hansen (and Riley) and overrule all challenges to the Order
since Appellant failed to challenge it under one sufficient independent basis for sanctions
under Chapter 10, --- an "improper purpose" under § 10.001(1). This failure to attack all
independent bases and grounds for the sanctions renders any error in regard to every
challenged basis "harmless" under Riley.
i. Bad faith and improper purpose. Appellant states that the evidence of bad faith
"is the conscious doing of a wrong for dishonest, discriminatory, or malicious purposes"
citing an El Paso Court of Appeals case. However, this Court has held "bad faith" under
§ 17 .50(c) of the DTP A can be established if the plaintiff had a reckless disregard for the
rights of the defendant. McCain v. NME Hosps, Inc., 856 S.W.2d 751, 758 (Tex. App. Dallas 1993, no writ)(listing malice, discrimination and reckless disregard in the disjunctive).
The sanction of $20,000 was assessed under Rule 13, Chapter 10 and DTPA
§ 17.50(c). (C: 165). Since Appellant's appeal has not challenged the amount of sanctions or
the evidence to support the amount of sanctions assessed, evidence of reckless disregard for
the rights ofRW would support the "bad faith" findings relating to the filing of the DTPA
claim and the $20,000 in sanctions.
-11-
ii. Groundless. Appellant only cites to the record for a mention of groundless in the
Order on page 23 of the Brief within his argument that the statutory amendments to the
Finance Code did not bar Krisle' claims. The Brief quotes language from page 3 of the
Order (C: 161) which is lifted from a paragraph relating strictly to the filings Appellant made
after the amendment to the Finance Code2 • Therefore, Appellant's challenge relates only to
the groundlessness of the Finance Code claim made post-amendment, i.e., in the 1st Amended
Original Petition and Response to motions for summary judgment, and only as to the quoted
finding found on page 3 of the Order. No challenge is made to the groundless finding as to
the post-amendment filings for Finance Code violations made on page 4 of the OrdeL l
Because the Order assessed $20,000 in sanctions under Rule 13, Chapter 10 and the
DTPA and the amount of sanctions has not been challenged, anyone of the above listed
failures of Appellant is fatal to the appeal.
2. The Smail affirmative defense defeats the Finance Code cIaim. 4 The first four (4)
pages of the Order address the sanctionable conduct relating to the pleading of Finance Code
2
The entire statement in the Order at page 3 is:
The Court FINDS that Movant's analysis of the savings clause with respect to the reduction of penalty is a correct
statement of the law and that Respondent's claim on behalf of Krisle for the recovery of civil penalty under §349.001
ceased to exist as a result of the enactment ofRB 2438. Respondent's attempts to recover such penalty after
September I, 2009 is demonstrative of his bad faith, given the groundless nature of such claim. (C:161)
l "The Court FINDS that Respondent's signing and filing of claims for violation of the Texas Finance
Code ... despite the amendment to the law that occurred during the suit was groundless ... " (C:162)
4 This section of RW' Brief addresses subparagraph 5 of Appellant's Brief found at pages 21-22, thereto.
RW has chosen to address it at this point in its Brief because if the Smail affirmative defense applies, the Court need
not address most of the other issues Appellant has attempted to raise.
-12-
violations. (C: 159-62). The trial court found:
Respondent testified at the hearing before the Court that what Krisle Imew
about the transaction and what she may have orally agreed to did not need to
be investigated or considered by him because it was the Retail Installment
Agreement that was the contract that memorialized the transaction .
... Respondent intentionally blinded himself to relevant facts and proceeded
filing a lawsuit seeking penalties against Movant, despite the fact that Krisle
was aware of and agreeable to the conduct complained of, thus making her in
pari delicto with Movant. (C:160).
Appellant does not challenge these factual findings and the legal conclusion. s Rather, his
entire argument concerning in pari delicto is that it is the same thing as waiver and therefore
is barred as an affirmative defense under TEX. FIN. C. §348.412(b) (Vernon 2006).6
This Court has held that in pari delicto conduct establishes the affirmative defense of
illegality. Plano Surgery Center v. New You Weight Mgmt Ctr., 265 S.W.3d 496,501-02
(Tex. App. - Dallas 2008, no pet.). Rule 94 provides a non-exclusive list of affirmative
defenses and includes both waiver and illegality. See TEX. R. Crv.
PRO.
94. Therefore,
waiver and illegality (i.e., in pari delicto conduct) are not the same. Since illegality is not
waiver, Appellant's sole argument attacking the in pari delicto basis for the sanctions
concerning the Finance Code violations fails.
While not necessary to the determination of this issue, Appellant's argument about the
5 In fact, the Order cites General Electric Credit Corp. v. Smail, 584 S.W.2d 690, 698 (Tex. 1979) as the
basis of its legal conclusion concerning in pari delicto (C:160), yet Appellant's Brief does not mention Smail, much
less attempt to distinguish it.
6 Appellant's Brieffails to cite to the record for where this anti-waiver provision argument was raised
below. Ifi! was not raised below it is not preserved for review on appeal. See Rule 33. 1(a)(1), TEX. R. ApP. PRO.
-13-
policies involved in the federal Truth in Lending Act fails to provide a basis for an abuse of
discretion. First, Krisle never asserted a claim under the federal Truth in Lending Act (C:914,40-53). Second, the Fifth Circuit in Smith v. Chapman, 614 F.2d 986,977 (5 th Cir.1980)
conducted a second and separate analysis of whether there was a violation under Texas law.
So, the Fifth Circuit did not opine on the policies behind the applicable Texas statutes.
However, Smail has been cited as one example of upholding the Texas policy in its
statute relating to consumer financing to avoid "harm, victimization, abuse or economic
hardship" to the consumer. See HSAM, Inc. d/b/a HSA Mortgage Co. v. Gatter, 814 S.W.2d
887 (Tex. App. - San Antonio 1991, writ dism' d). In HSAM, the plaintiffs hired an attorney
based upon a direct mailer to owners of manufactured homes. The jury found that a technical
violation of the Texas Consumer Code was the result of the plaintiffs effort, after it hired
the attorney, to create the cause of action. HSAM reversed the trial court's judgment for the
plaintiff against the lender and rendered a take nothing judgment using an equitable doctrine
based on that finding while noting the lack of harm by the violation. !d. at 892.
Sanctions are appropriate for frivolous filing of claims, based on the existence of
affirmative defenses to those claims.' Bennett v. State o/Texas, No. 05-99-01 788-CV, 2001
Tex. App. LEXIS 3461 (Tex. App. - Dallas May 29,2001, pet. denied)(forma pauperis suit
frivolous due to defense oflimitations); Brown v. Lubbock County Comm. Court, 185 S.W.3d
499 (Tex. App. - Amarillo 2005, no pet.)(prisoner suit dismissed for lack of arguable basis
7
Appellant's Brief does not argue that sanctions cannot be properly based on ignoring applicable defenses.
-14-
in law due to immunity from liability defense); Hughes v. Aycock, No. 0l-OII8I-CV, 1996
Tex. App. LEXIS 3489 (Tex. App. - Houston [1" Dist.] July 11, 1996, writ dism'd
w.o.j .)(claim "groundless" under TRCP 13 where affirmative defenses of issue preclusion
and statute of limitations exist); State v. Cartwright, 874 S.W.2d 210 (Tex. App.- Houston
[I4'h Dist.] 1994, writ den)(sanctions under TRCP 13 and Frivolous Claims Act against State
appropriate due to res judicata).
Since Smail provides an illegality affirmative defense to statutory violations where
there was in pari delicto conduct, sanctions were appropriate even if the alleged conduct of
RW otherwise stated a prima facie case of statutory liability under the Finance Code.
3. Suing repeatedly within the Fifth District "even though it's a loser" is sanctionable
under Chapter 10. Appellant states: "Rule 13, Chapter 10 and the DTPA all require some
showing of a groundless or meritless claim to justify imposition of sanctions."(emphasis
added). He is wrong as to sanctions under Chapter 10. 8 The sanctions can be sustained
8
10.001. Signing of Pleadings and Motions
The signing of a pleading or motion as required by the Texas Rules of Civil Procedure constitutes a certificate by the
signatory that to the signatory's best knowledge, information, and belief, formed after reasonable inquiry:
(1) the pleading or motion is not being presented for any improper purpose, including to harass Or to cause
utmecessary delay or needless increase in the cost of litigation;
(2) each claim, defense, or other legal contention in the pleading or motion is warranted by existing law or by a
nonfrivolous argument for the extension, modification, or reversal of existing law or the establishment of new law;
(3) each allegation or other factual contention in the pleading or motion has evidentiary support or, for a specifically
identified allegation or factual contention, is likely to have evidentiary support after a reasonable opportunity for
further investigation or discovery; and
(4) each denial in the pleading or motion ofa factual contention is wan-anted on the evidence or, for a specifically
identified denial, is reasonably based on a lack of information or belief.
-15-
against him under §§1O.001(l) and (3), Tex. Civ. Prac. & Rem. C., even ifhe had a good
faith/non frivolous argument for the modification or reversal of the existing Texas law. See
e.g., Law Office a/Windle Turley, P. C. v. French, 164 S.W.3d 487,491-92 (Tex. App.Dallas 2005, no pet.)(§ 10.001(1) sanctions affirmed on suit filed for improper purpose to
circumvent imminent adverse ruling of another court on same claim and unnecessarily
prolong and increase litigation expense based on history between the parties).
The Order indicates that the trial court considered the fact that Appellant told RW's
attorney he would try the case even if it was a loser unless RW paid $7,000 in settlement.
(C:167). RW's counsel had already tried a case Appellant had brought and beat Appellant
in that case. (3R: Def.'s Ex. 6)(" ... you might lose this time or you might go to 2-0 against
me ... "). Appellant was aware that RW was willing to try these cases Appellant brought
against it and thatthe defense was expensive. (2R: p.124, 1. 10-18; 3R: Defs Ex. 6 )("ifyou
want to spend $15,000 for a shot of beating me on a $7,000 case that is ok with me").
Appellant and RW's counsel had a history and personal issues. (3R: Defs Ex. 6 )("1 try and
not take those 'dog and Pony' comments too personally.").
RW's February 22, 2010 Motion for summary judgment sought a take nothing
judgment on the claims in the Original Petition. (C:18-39). The hearing on this dispositive
motion was set for March 22,2010. (C:28). Plaintiffs First Amended Original Petition, filed
on March 15, 2010, dropped all claims in the Original Petition other than a claim under the
-16-
Finance Code and recast the facts and changed the Finance Code claim to a previously
unpled "cash price violation" claim without mentioning negative equity. Compare (C:9-14)
with (C:40-53). Appellant filed a Response to RW's motion for summary judgment claiming
that it had raised a fact issue on the new cash price violation claim without mentioning
negative equity. (C:58). The Response takes the position that an amended petition requires
an amendment or supplement to a pending take nothing motion for summary judgment
because a court cannot grant summary judgment on a cause of action not expressly addressed
in the motion. (C:56).
A trial court abuses its discretion "only if it based its order on an erroneous view of
the law or a cleadyerroneous assessment of the evidence." Law Office of Windle Turley, 164
S.W.3d at 490. The trial court could have determined that the filing of the First Amended
Petition and Response to motions for summary judgment after RW had filed its motions for
summary judgment was to avoid a looming adverse final dispositive take nothing summary
judgment on the case and to unnecessarily prolong the litigation to add increased expense as
a personal "payback" for RW and/or its attorney.
The Order states in pertinent part:
The Court considered that the advertising done on the Jeffrey L. Weinstein,
P.c. Website specifically identifies a potential claimant as a person with
negative equity in his or her trade-in whose Retail Installment Contract inflated
the trade-in value and the purchase price of the vehicle being acquired.
Therefore, these individuals have fact patterns that fall squarely within that of
the Dallas Court of Appeals case of Bledsoe which held that no cash price
violation is established by those facts. In this case, Respondent filed suit in this
state court that is within the jurisdiction of the Fifth District Court of Appeals
-17-
after the Bledsoe opinion was released asserting such a claim and filed the
First Amended Original Petition continuing to assert such a claim after
Respondent's attempt in Stephens to have the Dallas Court of Appeals
determine that Bledsoe was wrongfully decided had been unsuccessful.
(C: 165-66).
Within the Fifth District, one panel may not overrule a prior panel decision of this
Court absent an intervening change in the law made by the legislature, a higher court, or this
Court sitting en bane. Mobile Vision Imaging Serv., L.L. C. v. LifeCare Hosp. ofN Tex., 260
S.W.3d 561, 566 (Tex. App. - Dallas, no pet.). Further, ifthe Supreme Court transfers a case
from one court of appeals to another, the transferring court's precedent controls the outcome
of the case. See TEX. R. ApP. PRO. 41.3. So, when the proper venue of a suit against a
defendant is within the Fifth District, the parties are held to the law of the Fifth District
absent one ofthe "intervening changes" in the law. Both Rule 13 and some provisions of
Chapter 10 focus on the "existing law." See TEX. R. Cry. PRO. 13; §10.001(2), TEX. CIV.
PRAC. & REM. C. Within the Fifth District, Bledsoe9 and Stephens 10 are the existing law.
So, the question is:
Can an inference of bad faith and/or improper purpose be drawn from
Appellant, whose firm advertises for people like Krisle with negative equity
rolled into the stated cash price line of her RIC, continuing to file and/or assert
the alleged Finance Code violation in pleadings in a trial court within the Fifth
District in light of Bledsoe and Stephens, even ifit is a loser, to demand $7,000
in settlement where the negative equity issue is not raised in these pleadings?
9Bledsoe Dodge, LLC v. Kuberski, 279 S.W.3d 839 (Tex. App. - Dallas 2009, no peL)
Stephens v. Friendly Chevrolet, Ltd., No. 05-08-00881-CV, 2009 Tex. App. LEXIS 8170 (Tex. App.Dallas October 22,2009, no peL)
10
-18-
That conduct can support such an inference since, without having raised the issue in the
pleadings (including the response to the motion for summary judgement ll ), Appellant's client
could not achieve appellate review of the issue en bane in the Fifth District or review in the
Texas Supreme Court to have Bledsoe and Stephens overruled See TEX. R. ApP. PRO. 33.1.
Appellant argues that the fact that the Dallas Court of Appeals did not sanction him
when he (and present appellate counsel) filed the appeal in Stephens is indicative that the
argument for reversal of Bledsoe that is being made in the present appeal is not frivolous.
There are several reasons that argument fails. First, Rule 45 of the Rules of Appellate
Procedure does not require a court of appeals without a motion requesting damages to make
a determination that an appeal is frivolous. See Rule 45, TEX. R. APP. PRO. So, no inference
can be drawn from the lack of sua sponte sanctions. Second, there was no evidence before
the trial court at the sanctions hearing of what was the basis of the argument made in
Stephens that Kuberski should be reversed and Stephens only states "in their reply brief, the
Stephens ackoowledge Kuberski is dispositive, but urge that it was wrongfully decided and
should not be followed in ths case." Stephens, 2009 Tex. App. LEXIS 8170 at *2. Third,
Appellant has not cited to the record of the sanctions hearing for any testimony that he had
relied on the argument he made in Stephens that Kuberski was wrongfully decided when he
filed suit for Krisle.
Basically Appellant's argument is that the Court should assume that his belieffor why
See Rule 166a(c), TEX. R. eIV. PRO. ("Issues not expressly presented to the trial court by written motion,
answer or other resonse shall not be considered on appeal as grounds for reversal.")
11
-19-
Bledsoe (and Stephens) was wrongfully decided when he filed suit for Krisle in April of2009
was the same as what he now articulates in his appeal brief in this case, and assume that the
argument made in his Appellant's Brief is the same as the argument in the Reply Brief in
Stephens. An abuse of discretion has to be established from the record evidence before the
trial court not from assumptions of matters outside the record.
4.
There was no evidence that Appellant had a good faith argument for reversal of
Bledsoe and Stephens. 12 The Brief argues at length concerning what Texas and federal law
provides about which items must be placed in itemized charges and which items can be
properly placed in the number on the cash price line of a retail installment contract.
Appellant asserts that he had a good faith argument that Bledsoe was wrongfully decided and
should be reversed when the canon of expressio unius is applied to the language of §348.004
of the Texas Finance Code and of federal Regulation Z, especially in light of a 2005
California intermediate appellate court's opinion in Thompson. 13 However, this is an appeal
of the assessment of sanctions under the abuse of discretion standard. The Order stated:
The Court further finds that Respondent's attempt to bring suit under Texas
Finance Code 349.001 is made in bad faith ...... (C: 162). Respondent's present
explanation that Bledsoe was distinguishable and therefore of no concern to
Krisle's Finance Code claim for a cash price violation is contradicted by his
12 This portion ofRW's Brief addresses paragraph 3 of Appellant's Brief starting at page 15. Appellant's
Briefstates that it is not attempting to show that Bledsoe was wrongfully decided just that Appellant's belief that it
should be reversed was in good faith.
13 Appellant's argument that the lack of sanctions in Stephens indicates that the argument he has made in
this appeal for reversal is in good faith and not frivolous would require that the Reply Brief he filed in Stephens cite
and argue the canon of expressio unius, §348.004 of the Texas Finance Code and the 2005 California opinion in
Thompson. There was no evidence before the trial court that the Reply Brief in Stephens did cite and argue them.
-20-
actions in not asserting this in Krisle's response to motion for summary
judgment and in his acknowledgment (albeit far into the litigation) that there
was a Dallas Court of Appeals case that made her claim unfavorable in a
Dallas court. A good faith belief of Respondent would have been the basis for
advising her to go forward with the case and the summary judgment hearing,
not dismiss it through non-suit. (C:166).
The issue on appeal is: was there no evidence to support these findings which support
sanctions? The Brief does not challenge these findings, address Appellant's testimony that
Bledsoe was distinguishable, 14 cite evidence where he made the same argument being made
in this appeal IS about why Bledsoe should be reversed or cite where he testified that the
argument being made on appeal was the basis of his belief that it should be reversed at the
time he filed the various pleadings. 16 The trial court had to operate on the evidence before
it; any abuse of discretion is tested by that evidence. Arguments developed after the
sanctions hearing do not substitute for careful legal research and consideration of the law
before the suit and other trial pleadings were filed.
14 Stephens discloses that Appellant (and present appellate connsel) had argued "the trial court erred when
it concluded ... a dcaler does not violate the Texas Finance Code when it includes financed negative equity in the
stated cash price for a vehicle"' and that "the Stephens acknowledge Kuberski is dispositive"' but "wrongfully
decided."' Stephens, 2009 Tex. App. LEXIS 8170 at *2. It is difficult to see how Appellant could have had a good
faith argwnent that Bledsoe is distinguishable when the issue in Krisle's case, as framed by Appellant, is: "does a
dcalcr violate the Texas Finance Code whcn it includes financcd negative equity in the stated cash price for a
vehicle."
15
Appellant's Bricfrefers to what purports to be a publication of the National Automobile Dealers
Association. However, there is no citation to the record where this evidence was offered, much less admitted, or
even brought to the attention of the trial conrt as a basis for Appellant's beliefs.
16 The Brief fails to cite to evidence at the hearing where Appellant testified that §348.004 of the Texas
Finanee Code, the canon of expressio unius and the case of Thompson v. 10,000 RV Sales played any part in any
belief he had about why Bledsoe and Stephens should be reversed.
-21-
There was evidence that Appellant's beliefin filing Krisle' s suit was that Bledsoe and
Stephens did not provide a controlling rule or principle applicable to her cash price claims
because they were distinguishable. Appellant's Summary of Argument at page 3 admits: " ...
Kuberski and Stephens did reject the cash price violation alleged by Ms. Krisle .... " further
confirming that the bad faith of the "distinguishable" argument has evidentiary support.17
Appellant argues that since the RIC and buyer's order listed a cash price greater than
the vehicle's sticker price, those fact established a "straightforward cash price violation" and
17
Compare Appellant's position in his Brief with his testimony at the hearing on the sanctions motion
POSITION IN BRIEF
TESTIMONY AT HEARING
Kuberski changed everything by holding that an
auto dealer may list any amount as the cash price in
a consumer's retail installment contract without
having contracted for that cash price with the
consumer, and without running afoul of state and
federal disclosure requirements designed to promote
transparency in retail installment transactions. (Brief
page 17)(emphasis added).
Q. There was some reference to the Kuberski case and
the Stephens case, that those cases changed the state
of the law as to the Krisle claim that we are here
about as you understand it.
A. I don't think so. (2R:p.98, l. 5-9)(emphasis added)
******
Q. All right. And you are familiar with the Kuberski
decision and the history of that case; is that fair?
A. Yes.
Q. As you read and understand that case, does it deal
with the specifies on how to handle negative equity in
the financing paperwork?
A. No. It --it really didn't concern itself with
disclosure ......
Q. Okay. And it did not deal with Exhibit Nwnber- or
Exhibit 1, whether or not it need to be separately
disclosed or anything along those lines, Right?
A. No.----- (2R:p.86, 1.15-25;87, 1.1-9)(emphasis
added)
-22-
that "Ms. Krisle established a cash price violation simply by showing her cash price exceeded
the sticker price, but that the difference was not comprised of any permissible enumerated
item." The first problem with this argument is that Appellant first obtained the buyer's order
in December (3R: D's Ex. 5) months after he filed the suit in April. (C:9).
Moreover, the only sticker Appellant ever had was the Moroni sticker which is the
manufacturer's required sticker stating its suggested retail price (the MSRP sticker). (C:74,
80-1); (2R: p. 871. 25, p. 88, I. 1-16); See 43 TAC §8.224(14). A vehicle can have other
window mounted items, such as the Dealership Addendum and a dealership's advertisement.
See 43 TAC §8.224(1), (8). The Dealer's advertised sale price is that price at which the
dealer is willing to sell the vehicle to any retail buyer. See 43 TAC §8.250. The MSRP
sticker price is not necessarily the dealer's advertised sale price. Compare 43 TAC
§8.249("with respect to ads placed with local media in Texas by a manufacturer or distributor
which include the names of local dealers for the vehicle advertised, if the price of a vehicle
is stated in the advertisement, such price must include all costs include all costs and charges
for the vehicle advertised") with 43 TAC §8.250. Even the dealer's advertised price is not
necessarily the cash price. See §348.004(a), TEX. FIN. C.(" ... An advertised price does not
necessarily establish a cash price.").
Appellant cites Stephens
Ji8 for the proposition that a "vehicle's sticker price"
constitutes some evidence of an offer to sell at that price and that RW "advertised and
Stephens v. Friendly Chevrolet, Ltd., No. 05-04-00788-CV, 2005 Tex. App. LEXIS 3170 (Tex. App. Dallas Ap. 28, 2005, pet. denied)( "Stephens t')
18
-23-
offered the vehicle for one cash price ... " However, in Stephens I, the summary judgment
evidence that raised a fact issue on that plaintiff s Finance Code violation claim included (1)
the dealer's invoice reflecting a price of$40,075, (2) the dealer's representative's deposition
testimony that the MSRP was "about $40,000" and that a cash purchaser would have been
able to purchase the vehicle for the MSRP, (3) the plaintiffs testimony that he had been told
his trade-in allowance credit was $35,000 and that the $60,000 price was the only price
discussed, (4) the retail installment contract that showed a purchase price of$61,574.19 and
(5) the dealer's representative's affidavit testimony that the cash price was not the MSRP,
but rather was $60,007.
So, in Stephens I it does not appear that the MSRP sticker was involved, rather it was
the dealer's invoice price and the dealer's statement that a cash buyer could purchase the
vehicle for the MSRP that conflicted with other dealer representative testimony that the cash
price was $60,007. Under Stephens I, the MSRP sticker is not "some evidence" of a cash
price violation when it is less than the cash price listed on a RlC. In Stephens I, the
plaintiffs deposition testimony, which the trial court was bound to accept on summary
judgment, excluded any discussion between the dealership and the plaintiff about the actual
price or their agreement and understanding about it. Just as in Stephens I, what the plaintiff
client knew about the transaction and says happened during the negotiations are essential to
the prima facie cash price violation. 19
19
Appellant asserts a "cash price" violation comes within Finance Code section 349.001 which provides:
-24-
Appellant's argument on appeal is that "Section 348.004 prohibited the inclusion of
anything in the cash price other than the enumerated items" by virtue of the canon expressio
unius. Section 348.004 of the Texas Pinance Code and 12 C.P.R. §226.2(a)(9) (Reg Z) both
provide that the cash price "may include" certain enumerated items and only expressly
exclude a finance charge from inclusion in the cash price. The law is clear that "may
include" is illustrative and enlarging and not exclusive. Republic Ins Co. v. Silverton
Elevators, Inc., 493 S.W.2d 748, 753 (Tex. 1973)(even "shall include" was not a limitation).
Moreover, this interpretation has been held to defeat the application of the canon expressio
unius. Texas Prop. & Cas. Ins. Guar. Ass 'n v. Southwest Aggregates, Inc., 982 S.W.2d 600,
608 (Tex. App. - Austin, no pet.)(citing federal authority). Section 226.2(b )(3) of Reg Z
states that unless defined in this regulation, the words used have the meaning given to them
by state law or contract. See 12 C.P.R. §226.2(b)(3)(emphasis added).
§ 349.001. Liability for Contracting For, Charging, or Receiving Excessive Amount
(b) A person who violates this subtitle by contracting for, charging, or receiving a charge, other
than interest or time price differential, greater than the amount authorized by this subtitle is
liable to the obligor for an amount equal to:
(1) the greater of:
(A) three times the amount computed by subtracting the amount of the charge
authorized by this subtitle from the amount of the charge contracted for, charged,
or received; or
(B) $ 2,000 or 20 percent of the amount of the principal balance, whichever is
less; and
(2) reasonable attorney's fees set by the court.
-25-
Thompson,20 the single California court of appeals case cited as the support for
Bledsoe and Stephens being wrongfully decided, construed the language of a California
statute (the ASFA) which had been amended in 1999 "to revise the definition of ' cash price'
and the requirements for itemizing the amount financed." As amended, California Civil
Code §2982(a)(l)(A) provides that in a conditional sales contract, "[t]he contract shall
contain the following disclosures, as applicable, which shall be labeled 'itemization of the
amount financed:' The cash price, exclusive of ... prior credit or lease balance on property
being traded in ... " (emphasis added)(Appendix-Tab 1- California Civil Code §2982).
The quote in the Brief from Thompson at page 978 is misleading (and inaccurate)
since Appellant left out the whole second sentence from the larger quote without using an
ellipse to disclose that omission. What was left out read: "This interpretation ofthe ASFA
is consistent with the remedial purpose of protecting consumers from inaccurate and unfair
credit practices through full and honest disclosures." (emphasis added). Moreover, and to
compound the misleading nature of the argument from Thompson, Appellant falsely
attributes the quotation at page 961 to the court of appeals ("the California Court of Appeals
held") where it was under a capitalized heading FACTUAL AND PROCEDURAL
BACKGROUND and was the opinion testimonv ofMr. Ross, a witness in the case!
A California case interpreting a California statute that states what a California contract
"shall contain" and how items "shall be labeled" is never going to provide any good faith
20
Thompson v. 10,000 RV Sales, Inc., 31 Cal. Rptr.3d 18 (Cal. Ct. App. 2005)
-26-
argument for what "may include" means to a Texas court interpreting Reg Z or a Texas
statute relating to Texas financing since under Reg Z "may include" in the federal statute and
regulations is to be interpreted under Texas law.
Regulation Z sets out how certain things are calculated and what things have to be
disclosed. See 12 C.P.R. § 226.18.
The "Amount financed" is a total calculated by
determining the cash price [§226.l8(b)(1)], adding any other amounts that are financed by
the creditor and are not part of the finance charge [§226.18(b)(2)] and subtracting any
prepaid finance charge[§226.18(b )(3)]. Id. "Cash price" is also a defined term. See 12 C.P.R.
§226.2(a)(9). It means the price at which a creditor, in the ordinary course of business, offers
to sell for cash property or service that is the subject of the transaction. Id.
By express
mention in the Regulation, the term "cash price" does not include any finance charge. Id.
"Total sales price" is the sum of the cash price, the items described in paragraph
(b)(2), and the finance charge disclosed under § 226.l8(d). See 12 C.P.R. § 226.18(j). The
Commentary to the definition of "cash price" informs that cash price is the starting point in
computing the amount financed and the total sales price under § 226.18 for credit sales and
that "any charges imposed equally in cash and credit transactions may be included in the cash
price21, or they may be treated as other amounts financed under §226.18(b)(2)." See 12
21 Here is why the cash price is the same for a cash and a finance transaction. A buyer (B) has a trade-in
vehicle that has $10,000 owed on it with a trade-in value of $8,000. The dealer's advertised price for the new car is
$40,000. IfB finances the deal using the trade-in, the before tax, title and license amount the buyer will need to
close the transaction is $42,000, the price of the new car ($40,000), plus the $2,000 to clear the title to the trade-in.
IfB wants the dealership to accept and handle getting rid of the trade-in car as part oflhe deal (say to avoid the
hassle to of selling the car herself and possible DTPA liability of selling to a individual consumer) and pays all cash,
B will also need $42,000 to close the transaction.
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C.F.R. Part 226 Supplement I. (Appendix Tab 2- 12 C.F.R. Part 226 Supplement I).
So, under Regulation Z, the "cash price" can include the charge for the amount paid
to discharge the negative equity in a Buyer's trade-in, unless that charge for the negative
equity varies solely based on whether the transaction is a credit or cash transaction. This is
what Bledsoe reflects: negative equity is not a finance charge under the Finance Code. The
failure to accurately separately itemize (i.e., disclose) the aspects of the negative equity does
not make it improper to include the charge to pay off the negative equity in the cash price,
in the total sales price or in the amount financed. That is why Bledsoe holds that the issue of
disclosure is not relevant to a "cash price" violation since the charge for paying off the
negative equity is not a "finance charge" which cannot be included in the cash price under
federal and Texas law.
Whether versus how?22
The Order states, in pertinent part:
The Court further finds that Respondent's attempt to bring suit under the Texas
Finance Code §349.00lis made in bad faith. Specifically, Finance Code
348.404 authorizes up to 100% of the negative equity in a transaction to be
included in the amount financed in a retail installment contract. As a result,
the inclusion of the negative equity in the negotiated sales price of a vehicle
is not a violation of §349.001, based on the language of the version of the
Finance Code §348.404 that applies in the instant case.(C:162)
of the Texas Finance Code and ongoing pursuit of such claims despite Krisle's
22
This portion ofRW' Response Brief addresses the argument in subparagraph 4 of Appellant's Brief.
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actual knowledge of and agreement with the inclusion of the negative equity
in the negotiated cash price, the law in effect at the time of the filing of the suit
and the amendment to the law that occurred during the suit was groundless,
without evidentiary support for the allegations claimed, in bad faith, and done
for the purposes of harassment or other improper purpose in violation of Rule
13 of the Texas Rules of Civil Procedure, Section 10.001 of the Texas Civil
Practice & Remedies Code, and DTPA 17.50(c).(C:162)
Appellant now takes the position on appeal that "no one disputes that a dealer may finance
negative equity; the argument is about how to do so. Mr. Owen contended that the proper
way to do so was to use the line on the retail installment contract designated for disclosure
of financed negative equity, while the improper way was to leave that line blank (leading to
the conclusion that no negative equity was financed), then stuff the negative equity into the
cash price where no one could see it."
"No one could see it?" Appellant attempts to engage in specious deflection. The trial
court found that the law firm Appellant worked for trolled the Internet for clients who knew
they had a negative equity amount rolled into the cash price and added to the trade-in
allowance to assert a cash price violation on their behalf(C: 160-61, 165) and that Krisle was
one of those clients. The Order states:
" ... Court FINDS that Respondent intentionally blinded himself to relevant
facts and proceeded filing a lawsuit seeking penalties against Movant, despite
the fact that Krisle was aware of and agreeable to the conduct complained
of..." (C:160)(emphasis added).
Appellant does not challenge those fact findings. It is the fact of negative equity that
accounted for the increased amount on the cash price line of the RIC that Appellant chose
not to see (using an intake process rather than direct client contact) and did not address in
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the live pleadings he drafted, signed and filed prior to the non-suit that is a basis of the
sanctions. 23
5.
The 2009 Amendment to the Finance Code can be constitutionally applied
retroactively.24 Appellant expressly acknowledges in his Brief that RW and the trial court
correctly interpreted the effect of the 2009 amendments. Appellant's argument is only that
his mention of a possible constitutional concern of its application to Krisle's claims at the
sanctions hearing had a good faith basis.
Appellant misstates the facts of Satterfield v. Crown Cork & Seal Co., 268 S.W.3d
190 (Tex. App. - Austin 2008, no pet.) through omission of the central issue in that case. It
is hard to miss since the opening two (2) sentences of Satterfield state:
The issue presented is whether a statute that extinguishes a litigant's right to
pursue an accrued and pending common law cause of action--without
providing a grace period--transcends the legislature's power. Within that
context, does the presumption of a statute's constitutionality survive an express
prohibition of the Texas Constitution? Appellant Rosemarie Satterfield,
representative ofthe Estate of Jerrold Braley, seeks damages for injuries that
Braley sustained by his exposure to asbestos-containing products. Jd. at
I 94. (emphasis added).
Therefore, Sattefield has no application to amendments to statutes creating statutory causes
of action. Reliance (then or now) on Satterfield evidences a lack of a good faith basis of an
23 Appellant concedes on appeal that "at somc point in the discovery process, Mr. Owen became aware that
the cash price difference derivcd from financing negative equity." See Appellant's Briefpage. 17. This information
was provided to Appellant in December of 2009 and that thereafter Appcllant signed and filed both the 1" Amended
Original Petition and Responses to the motions for summary judgment without mentioning or addressing this
negative equity.
24
This section ofRW' Brief addresses subparagraph 6 of Appellant's Brieffound at pages 22-26, thereto.
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argument concerning the existing law on retroactivity or a change thereto.
Similarly, Robinson v. Crown Cork & Seal Co., No. 06-0714, 2010 Tex. Lexis 796,
56 Tex. Sup. Ct. 1. 71 (Tex. 2010) notes that:
As a threshold matter, it is important to note the precise issue before us. The
Robinsons' pleading on which Crown moved for summary judgment asserted
common-law causes ofaction for negligence and strict liability. and claimed
compensatory and punitive damages. For herself, Barbara claimed damages
for John's medical expenses that she had incurred, as well as her loss of
consortium and mental anguish, and punitive damages. (emphasis added)
Robinson then addresses the issue of the nature of the rights involved as follows:
We first consider the nature of the rights claimed by the Robinsons and
Chapter 149's impact on them. Chapter 149 does not directly restrict the
Robinsons' common law action for personal injuries due to exposure to
asbestos in the workplace. Rather, it supplants the usual choice-of-law rules
for determining what state's successor liability law should apply in asbestos
cases in Texas by mandating Texas courts to apply Texas law, then for the first
time prescribes limits on that liability, even if, as here, successor liability arose
under the law of another state. Crown argues that by allowing for an expansion
of liability beyond the tortfeasor to include a successor by merger, successor
liability is largely remedial in natnre, and in any event, is a creatnre of statnte
in which there can be neither right nor expectation. Crown cites Dickson v.
Navarro County Levee Improvement District, where we gave immediate effect
to a statnte that repealed a special, statntory cause of action. 135 Tex. 95, 139
S. W.2d 257 (Tex. 1940).
But the successor liability in this case is not a creatnre of Texas law; the parties
agree that without Chapter 149, New York or Pennsylvania law would apply,
and that under the law of those states, Crown's successor liability is
unquestionable. So this is not a case like Dickson, in which the Legislatnre
abolished a cause of action it had itself created; Chapter 149 limits liability
created under other states' laws.
Robinson continues the distinction between statntes that effect a change to common law
causes of action (Robinson, Satterfield) and statntes that create statntory causes of action and
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provide for statutory remedies (Dickson) for purposes of constitutional analysis. Robinson
also confirms the continuing validity of Dickson. The general rule is and has always been
that a statutory cause of action is controlled by the present terms of the statute. National
Carloading Corp. v. Phoenix-El Paso Express, Inc., 176 S.W.2d 564, 568-70 (Tex.
1943)(citing Dickson).
Appellant's explanation that the amendment was unconstitutional if retroactively
applied came after his testimony established that as of the date of the hearing (May 24,20 I 0)
he was unaware that because the 2009 amendment to §348.404 to reduce the available
penalties had no savings clause, the provisions of the Code Construction Act as written
allowed that reduction to be applied retroactively. (2R: p. 56, 1. 4-25; p.57, P 58, 1. 1_3).25
Appellant had no good faith basis in the then existing law back in 2009 when he filed the
First Amended Petition and Response to the motions for summary judgment containing the
Finance Code claim in part because he was totally unaware that the Code Construction Act
provisions applied to give the previous amendment to the Finance Code retroactive
application to the reduction in penalties. Nor would Satterfield and Robinson have provided
Appellant a good faith basis for arguing the unconstitutionality of retroactive application of
Appellant's testimony was as follows:
A. Are you saying there's a retroactive application of it?
Q. That's exactly what I'm saying.
A. Okay.
Q. Are you aware of that?
A. I'm not aware of that, and I don't believe that's constitutional.
Q. Okay. Even with respect to a penalty section regarding savings clause?
A. Yes. (2R, p.57, 1. 19-25; p. 58, 1. 1-3)
25
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amendments to his statutory cause of action ifhe had been aware of the issue prior to filing
those pleadings.
6.
Appellant's stonewalling his client was relevant. 26 Appellant argues that it was an
abuse of discretion for the trial court to consider that he basically kept Krisle in the dark until
he was going to be forced to defend the suit at the summary judgment hearing and, even
after, when the motion for sanctions was filed. Appellant argues that this was not a proper
basis for sanctions. However, the trial court was required to consider the factors in Low v.
Henry in determining the amount of sanctions to be assessed. Low v. Henry, 221 S.W.3d
609, 620 n 5 (Tex. 2007). Since Appellant has not appealed the amount of the sanctions or
asserted that the testimony could not be (or was not) properly considered under Low v. Henry
in determining the amount of sanctions, an abuse of discretion cannot be established.
7.
There was no factual basis for the DTPA, fraud and intentional infliction of
emotional distress claimsY On appeal, Appellant asserts that the fact that RW placed the
$5,500 in negative equity into the cash price rather than put it on the negative equity line of
the RIC gave rise to her fraud and DTPA causes of action "regardless of whether Ms. Krisle
knew the negative equity was being financed." No citation to authority is made for this
proposition, and therefore it is waived on appeal.
26 This portion ofRW's Response Brief addresses the argument in subparagraph 7 of Appellant's Brief
found at page 25 thereto.
27 This portion ofRW's Response Brief addresses the argument in subparagraph 8 of Appellant's Brief
found at pages 25-27 thereto.
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Plaintiff's Original Petition sets out "the facts" in paragraph IV. (C: 10). Appellant
pled fraud on Krisle's behalf in Plaintiff's Original Petition specifically based on detailed
"misrepresentations" and failures to disclose that resulted in damages to Krisle. (C: 10). The
DTPA claim Appellant pled on Krisle's behalf expressly asserted that Krisle relied on
something to her detriment and that RW's conduct was a producing cause of damages to
Krisle. (C:13).
The fraud and DTPA claims. Actionable fraud occurs if the defendant makes a
material representation, that is false, either known to be false when made or is asserted
without knowledge of its truth, that is intended to be and is relied upon, and that causes
injury. Sears, Roebuck & Co. v. Meadows, 877 S.W.2d 281, 282 (Tex. 1994); T.O. Stanley
Boot Co. v. Bank ofEI Paso, 847 S. W.2d 218,222 (Tex. 1992). When circumstances impose
upon a party a duty to speak and the party remains silent, the silence itself can be a false
representation. Spoljaric v. Percival Tours, Inc., 708 S.W.2d432, 435 (Tex. 1986); Smith v.
National Resort Communities, Inc., 585 S.W.2d 655, 658 (Tex. 1979). But as with
affirmative misrepresentations, the allegedly defrauded party must have reasonably relied on
the silence to his detriment. See Spoljaric, 708 S.W.2d at 435.
Krisle knew the price of the vehicle was $35,964 and that there was a negative
number, calculated by subtracting the trade-in value ($9,000) from the amount owed on the
trade-in ($14,500), that would be added to that number as part of the deal and was okay with
that. (4R: D's Ex. 12, p.20, 1.16-25; pp.21-22, 1.1-12). She was happy with the vehicle she
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purchased, characterized her experience with the dealership as "good", and indicated that
both the sales and finance employees had been attentive to her needs and had answered her
questions and explained things to her to a reasonable degree. (4R: D's Ex. 12, p.22, 1.13-25;
p.23, I. 1- 20). She was specifically asked aboutthe factual allegations set forth in paragraph
IV of Plaintiffs Original Petition by Appellant and testified to the contrary of those
allegations(4R: D's Ex. 12, pp.38-44, 1.1-22) thereby negating any misrepresentation, failure
to disclose and any reliance to her detriment on any misrepresentation or failure to disclose
to her that caused her injury. Therefore, there was evidence that Appellant had no factual
basis for the allegations he made in the Original Petition concerning fraud and/or the DTPA.
Emotional distress claim. The Order states: "Krisle's testimony indicates that ... she
suffered no severe emotional distress." (C: 163). "Filing of a claim for intentional infliction
of emotional distress on the basis of the client being 'unhappy' is not in good faith" (C: 16667). Appellant argues that sanctions for filing an intentional infliction of emotional distress
claim were an abuse of discretion because "the trial court could not possibly determine what
information Mr. Owen possessed at the time he filed suit." His testimony was as follows:
Q. With respect to her severe infliction of emotional distress claim, if she
testified in her deposition that she was actually happy with this whole
transaction and had no severe emotional distress, what was your basis for filing
that claim?
A. My--my understanding was that she was upset with the transaction. (2R:
p.58, I. 14-20)
Appellant's argument fails because he did testify that it was his understanding that Krisle
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was "upset with the transaction" that was his basis for pleading the claim. He also testified
about the source of his understanding that Krisle was upset with the transaction as follows:
Q. Okay. What was that based on?
A. I guess based on Mr. Weinstein's intake process. (2R: p.63, 1. 22-24)
The question before the trial court became:
Assuming that Krisle was "upset with the transaction,"did this provide a
sufficient evidentiary basis to assert a prima facie case for an intentional
infliction of emotional distress cause of action?28
Severe emotional distress is emotional distress that no reasonable person could be expected
to endure without undergoing unreasonable suffering. Blanche v. First Nation wide Mortg.
Corp., 74 S.W.3d 444,454 (Tex. App.- Dallas 2002, no pet.). The plaintiff must show more
than mere worry, anxiety, vexation, embarrassment, or anger. !d. In Blanche, the plaintiff's
affidavit stated he felt "intense embarrassment" as well as feeling "humiliated" and
"frustrated" because he had to explain his bad credit reports to other creditors and his
employer. The Court held that these emotions do not rise, as a matter oflaw, to the level of
being legally compensable injuries. Id. (citing Parkway Co. v. Woodruff, 901 S.W.2d 434,
444 (Tex. 1995». Summary judgment was proper on the Blanches' infliction of emotional
distress claim because they did not provide any evidence of unreasonable suffering and
consequently failed to raise a fact issue regarding severe emotional distress. Id.
Applying Blanche, the trial court could reasonably conclude that filing an intentional
28 Rule 13 and § 17 .SO(c), DTP A all focus, at least in part ,on every allegation having a basis in fact or
evidentiary support.
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infliction of emotional distress claim based only on the fact that Krisle was upset with the
transaction was a filing without evidentiary support.
8.
There was evidence of Appellant's subjective "bad faith" for Rule 13 and
§17.50(c), DTPA.
Rule 13. Appellant's Brief states: "To justify Rule 13 sanctions, Jim Allee had to
prove Mr. Owen's subjective state of mind." The Court has held "[w]hile we presume
pleadings are filed in good faith, direct evidence of a person's subjective intent is not
required to rebut the presumption." Keith v. Salls, 256 S.W.3d 912,919 (Tex. App. - Dallas
2008, no pet.). Keith affirmed an award of sanctions against an attomeyunder Rule 13 when
challenged on the basis of lack of evidence of bad faith. In Keith, the sanctioned attorney
had testified at the hearing on the motion for sanctions.
Keith held that intent can be shown by circumstantial evidence as well as direct
evidence and for that proposition cited authority that held that a finding of bad faith or intent
to harass was not precluded just because the sanctioned attorney did not testify at the hearing.
Id.(citing Schexnider v. Scatt& White Mem. Hasp., 953 S.W.2d439,441 (Tex. App. -Austin
1997, no pet.).
In Schexnider, the only testimony at the sanctions hearing was of an
employee of the defendant and the defendant's counsel. Id. atn 1. Schexnider parenthetically
cited In re Sheppard, 815 S.W.2d 917,921 (Tex. Spec. Ct. Rev. 1991) as authority for its
holding that the reasonable inferences from this testimony was held to be "augmented by the
fact that [the target plaintiffs attorney] did not testify regarding his reasons and purposes in
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signing the petition." [d. at 442("litigant's failure to testify justifies inference thattrnth would
not have aided his case.").
Keith also cited prior Fifth District authority that held that there was no abuse of
discretion in sanctioning an attorney although the attorney had testified that the challenged
affidavit was "unartfully drafted" and that he never intended to mislead the court. Keith v.
Solis, 256 S.W.3d at 919. (citing Keever v. Finlan, 988 S.W.2d 300,331 (Tex. App. - Dallas
1999, pet. dism'd). The Court held that under the abuse of discretion standard, the trial court
judges the credibility of the witnesses and may resolve conflicting testimony. Id.
Here, Appellant testified and Krisle's deposition was admitted into evidence in full
at the hearing. Therefore, any requirement of evidence at the hearing for sanctions has been
met. In Keever, a party's attorney had filed an affidavit in support of his client's motion for
summary judgment wherein the client had sought recovery of attorney's fees "billed" to the
client in a specific amount. There was evidence introduced at the hearing on sanctions that
the client had not ever been billed for any attorney's fees and that the amount stated in the
affidavit as the fees for services rendered was overstated by $9,000. The target attorney
testified that the affidavit was accurate albeit unartfully drafted and that it was his
understanding that the client would be individually responsible for the payment of the fees
if the court had determined that the client was not being sued in his official capacity. The
sanctioned attorney testified further in a hearing on his motion to reconsider the sanctions
that he had not read the affidavit before signing it, his affidavit had been withdrawn 6 days
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after it was filed "for tactical reasons" and that he had not intended to deceive the court.
The Court noted that even if it considered all the evidence (both from the sanctions
hearing and the motion for reconsideration hearing), "[u ]nder abuse of discretion, the trial
court judged the credibility of the witnesses and was entitled to believe or disbelieve any of
[the attorney]'s evidence." It held "[t]he trial court's choices among merely conflicting
pieces of evidence cannot be an abuse of discretion." The Court affirmed the sanctions
award. So should the Court affirm the sanctions against Appellant.
Section 17.50(c) of the DTPA. Appellant argues that "To obtain secure (sic)
attorney's fees under § 17 .50(c) of the DTPA, a plaintiff s suit must be brought in bad faith
or for purpose of harassment, and the court must conclude that the suit is groundless" citing
the 1983 case of LaChance v. McKown 29 Well, not exactly. Section 17.50(c) of the DTPA
was amended way back in 1995 to change "groundless and in bad faith, or for the purpose
of harassment" to the current language "groundless in fact or in law or brought in bad faith,
or brought for the purpose of harassment." The Court has noted that § 17 .50(c) of the DTPA
provides three alternative grounds for recovery offees. Stromberger v. Law Office o/Windle
Turley, No. 05-04-00050 -CV, 2005 Tex. App. LEXIS 2321 (Tex. App. - Dallas March 28,
2005, no pet.)(groundless in fact or law; bad faith; purpose of harassment are independent
grounds). Stromberger reviewed the evidence from the sanction in mass and found that it
29
LaChance v. McKown, 649 S.W.2d 658 (Tex. App. - Texarkana 1983, writ rerd n.r.e.)
-39-
supported sanctions under both groundless and bad faith grounds. The Court affimled the
sanctions that had been entered on the findings that the sanctioned party lied and had not
presented any evidence to support his position. A "groundless" finding is not essential to the
DTPA sanctions.
Appellant argues generally that the evidence before the trial court was not "sufficient
to overcome the presumption of good faith." The presumption of good faith applies in
sanctions under Rule 13. However, § 17 .50(c) ofthe DTP A does not contain the presumption
set forth in Rule 13. Appellant also asserts that bad faith "is the conscious doing of a wrong
for dishonest, discriminatory, or malicious purposes" citing an El Paso Court of Appeals case
interpreting Rule 13.
The Court has held "bad faith" under § 17 .50(c) of the DTP A can
established if the plaintiff had a reckless disregard for the rights of the defendant. McCain
v. NME Hosps,Inc., 856 S.W.2d 751, 758 (Tex. App. - Dallas 1993, no writ)(listing malice,
discrimination and reckless disregard in the disjunctive). The ample evidence of reckless
disregard to support the DTPA sanctions on a bad faith ground have not been challenged.
Appellant argues that Krisle's decision to non-suit was no evidence to support
sanctions against him.30 Appellant states, without citation to the record, that Krisle "testified
30
This is not a situation where there is no direct or circumstantial cvidenee regarding the motive in filing
the non-suit. Dike v. Peltier Chevrolet, Inc., No. 06-1O-00080-CV, 2011 Tex. App. LEXIS 2382 (Tex. App. Texarkana April!, 2011, no pet.). In Dike, the Weinstein finn, Appellant and their client (Dike) were all sanctioned
for filing a suit and then non-suiting the case, but neither the clicnt nor Appellant testified. The sole evidence was
nineteen (19) other petitions and corresponding non-suits involving the Weinstein finn and related Peltier
dealerships. The Texarkana court of appeals noted "the fact that other, sirrdlar lawsuits were filed and subsequently
nonsuited gives cause for concern that those lawsuits lacked merit and were filed for purposes of harassment." The
Court held that without a showing that any of these other suits were without merit, it could not infer that they and the
Dike suit were brought in bad faith although "[i]t may well be that if the record had been more fully developed in this
regard, ample evidence of bad faith may well have been established."
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that she was simply ready to get out of the lawsuit." Appellant postulates the "Ms. Krisle
might have non-suited her claims for a variety ofreasons, including the costs oflitigation, the
likelihood that Jim Allee would force him to incur enormous costs in pursuing her claims, or
a host of personal reasons unrelated to the litigation."( emphasis added).
However,
unmentioned by Appellant, Krisle directly testified to the process of and her reason for
agreeing to Appellant filing a non-suit of the case. (4R: D's Ex. 12, p.94, 1. 25; 95-97, 1. 1-9).
It was the law firm's suggestion to Krisle (after she sent her March 15,2010 affidavit back
to the firm that Appellant used in the response to motions for summary judgment he filed that
day) that she non-suit based on an unfavorable Dallas Court of Appeals case and the fact that
the firm knew Krisle knew that the transaction included negative equity. Id. Krisle testified
directly on the issue of whether any litigation costs were part of her consideration in deciding
whether to non-suit and she said that they were not, that it was just that the firm was
suggesting she non-suit. (4R: D's Ex. 12, p. 97, 1. 10-25; p.98, 1.1-14).
Nothing in the Order indicates that Krisle' s personal reason(s) for non-suiting (if she
had one) was what the trial court relied on in determining Appellant's culpability. Rather, the
Order focused on the good faith of Appellant's position that he testified to in the sanctions
hearing that Bledsoe was distinguishable as follows:
At the same time he filed the First Amended Original Petition, Respondent filed
a Response to Motion for Summary Judgment that did not expressly raise any
issue concerning negative equity to defeat Movant's motions for summary
judgment nor did the response address Bledsoe even though Bledsoe had been
expressly made a basis of Movant's grounds for a take nothing summary
judgment on the cash price violation claim. By failing to expressly raise any
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issue concerning his argument in support of a cash price violation where there
is negative equity, Respondent could not raise any complaint on appeal about
it to secure reversal if the Court had entered a summary judgment.
Respondent's present explanation that Bledsoe was distinguishable and
therefor of no concern to Krisle's Finance Code claim for a cash price violation
is contradicted by his actions in not asserting this in Krisle's response to motion
for summary judgment and his acknowledgment to Krisle (albeit far into the
litigation) that there was a Dallas Court of Appeals case that made her claim
unfavorable would have been made in response to the motion for summary
judgement and, if it was as actual good faith belief of Respondent would have
been the basis for advising her to go forward with the case and the summary
judgment hearing, not dismiss it through a non-suit. (C: 166).
Evidence of bad faith can consist of internal inconsistencies in the sanctioned party's
testimony. Gasparotto v. Gallangher Power Fence, Inc., No. 03-03-00383-CV, 2004 Tex.
App. LEXIS 667 (Tex. App. - Austin January 23,2004, no pet.). If inconsistencies between
one's testimony can support a bad faith finding, then an inconsistency between testimony and
actions does as well since actions speak louder than words.
The trial court could believe that Appellant's total failure to address Bledsoe in an upfront and direct manner at any time in the pleadings he filed so that it could be raised on
appeal, combined with advising Krisle to non-suit based upon a unfavorable Dallas Court of
Appeals case and her lmowledge that the transaction included negative equity after his
settlement demand/litigate a loser ploy was unsuccessful, was circumstantial evidence
sufficient to establish that the pleadings Appellant had filed were in bad faith.
CROSS POINT NO. ONE:
The appeal is frivolous under Rule 45, Texas Rules of Appellate Procedure and
warrants an award to Appellee/Cross Appellant of just damages.
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Appellant's Brieffails to cite the record for facts stated in its Statement of Facts and
the Argument and Authorities in violation of Rule 38.1(g) and (i) of the Texas Rules of
Appellate Procedure. The Brief seeks a reversal based on arguments not raised below which
cannot happen because they were not properly preserved as required under Rule 33.1. It fails
to challenge all bases for the sanctions which renders the appeal incapable of establishing the
required reversible error under Rule 44.1. It asserts that in pari delicto conduct proves the
defense of waiver without citing Plano Surgery Center v. New You Weight Mgmt Ctr, onpoint Fifth District authority that in pari delicto conduct proves an illegality defense.
It claims Appellant's argument in Stephens for reversal of Bledsoe is some indication
that his argument in this appeal is in good faith without any evidence at the sanctions hearing
of what his argument in the Reply Brief in Stephens was and that his belief that Bledsoe was
wrongfully decided at the time he filed the pleadings for Krisle was based on his prior
argument in Stephens.
Courts assess damages for frivolous appeals because these appeals place an
unnecessary burden on the other party, further enlarge the courts of appeal's already crowded
dockets and take the court of appeal's attention away from appeals filed in good faith thereby
wasting time that could be spent by the court on those good faith appeals. Smith v, Brown, 51
S.W.3d 367,381 (Tex. App. - Houston [1 $I Dist.) 2001, pet. denied).
An appeal is frivolous for purposes of Rule 45, Texas Rules of Appellate Procedure
when (1) it is pursued in bad faith or (2) if, at the time asserted, the advocate had no
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reasonable grounds to believe judgment could be reversed. D Design, L.P. v. MMP Corp., 0510-00032-CV, 2011 Tex. App. LEXIS 2032, *21 (TexApp. - Dallas March 22, 2011, nopet.).
Truly egregious circumstances warrant sanctions. Id. (citing Univ. of Tex. Sys. v. Carter, No.
05-07-00592-CV, 2008 Tex. App. LEXIS 1355 (Tex. App. - Dallas Feb. 25, 2008, pet.
denied) (mem. op)).
Where the underlying litigation is viewed by the court of appeals as being in bad faith,
the court of appeals has no hesitancy in concluding that the appeal of the judgment in the bad
faith litigation is objectively frivolous. Okere v. Middleton, 20 S.W.3d 176, 178 (Tex. App. Dallas 2000, pet. den.). In Okere, there was no indication that either of the trial courts in the
two suits consolidated for appeal had found the litigation to be sanctionable, but the Court
deemed the litigation to have a bad faith purpose and from that concluded that the appeals
were objectively frivolous. Id. Logically, under Okere, if the Court affirms the trial court's
determination that filings in the underlying litigation were sanctionable against Appellant as
being made for an improper purpose, it can conclude that Appellant's appeal of the sanctions
order is objectively frivolous and truly egregious.
Univ. of Tex. Sys. cites Baker Hughes Oilfield Operations, Inc. 3! in regard to "truly
egregious." Candidly, it is somewhat difficult to discern whether the Baker Hughes court and
this court in Univ. of Tex. Sys. are indicating that even ifthere is appellate record evidence of
an appellant's failure to present a complete record on appeal, his attempt to raise critical issues
31 Baker Hughes Oilfield Operations, Inc. v. Hennig Production Co., Inc., 164 S.W.3d 438 (Tex. App. Houston [14" Dis!.] 2005, no pe!.).
-44-
for the first time on appeal, his filing of an inadequate brief misstating the record and making
unsupported accusations, that might not be sufficiently egregious for sanctions. Both cases
seem to compare the sanctions motion to the absence of record evidence of the allegations in
the motion. But even if the holdings are meant to direct that "if established by the appellate
record, this is not truly egregious," sanctions are warranted in this appeal.
Courts consider the duty of candor set forth in the Texas Disciplinary Rules of
Professional Conduct 3.03(a)(l), the Texas Lawyer's Creed and the Texas Standards of
Appellate Conduct that directs that an attorney not make a false statement of a material fact
or law to a tribunal or misrepresent, mischaracterize, misquote or miscite facts (or a factual
record) or authorities to gain an advantage in finding bad faith to warrant the award of just
damages. See Sassi v. Willette & Guerra LLP, 139 S.W.3d 85, 89 (Tex. App. - Corpus Christi
2004, no pet.). While not binding precedent on the Court, one panel of the Fifth District has
looked at the Texas Disciplinary Rules of Professional Conduct 3.03(a)(I) in assessing
sanctions under Rule 45. RDW v. State, No. 05-00-01416-CV, 2001 Tex. App. LEXIS
6585(Tex. App. - Dallas Sept. 28, 2001, no pet.)(not designated for pUblication).
There is evidence in the appellate record that Appellant has breached the duty of
candor by mischaracterizing witness testimony as a court's holdings in Thompson, by omitting
significant portions of that case without an ellipse and by not addressing the adverse authority
of Plano Surgery Center v. New You Weight Mgmt Ctr. That goes much farther than what
occurred (or was alleged to have occurred) in D Design, Univ. a/Tex. Sys. and Baker Hughes.
-45-
The acts and omissions of Appellant constitute truly egregious circumstances.
Indicia of bad faith warranting appellate sanctions include whether the appellant has
failed to raise well-researched, arguable issues or has shown a conscious indifference to
settled rules oflaw. Parkerv. State Farm Mut. Auto. Ins., Co., 4 S.W.3d 358, 365 (Tex. App.
- [1" Dist.] Houston 1999, no peL); Texas Employers' Ins. Ass 'n v. Armstrong, 744 S.W.2d
755,756 (Tex. App. - Houston [1 st Dist.] 1989, no writ). Another panel of the Fifth District
has applied Parker in finding bad faith for purposes of assessing just damages against the
appellant for a bad faith appeal under Rule 45. See Puckett v. Robinson, No. 05-98-01852-CV,
2001 Tex. App. LEXIS 2967, *6-7 (Tex. App. - Dallas May 8,2001, no pet.)(not designated
for publication).
While Puckett is not binding precedent on the Court, it does exemplify the application
of the rule in Parker. Since the appeal in Puckett raised the issue of the sufficiency of the
evidence, the court held that making one record reference to argue that insufficiency and then
ignoring the remainder of the record which contained a great deal of evidence supporting the
judgment showed a conscious indifference to settled rules of law and that no reasonable
person could believe, based on that record, that the trial court would be reversed on the
grounds presented in Puckett's brief. This Court should adopt the test in Parker and apply it
(as was done in Puckett) to find Appellant's appeal in bad faith.
The amount of just damages is not only appellate attorneys fees, it can also include an
amount measured by the judgment appealed, exclusive of the attorney fees awarded in that
-46-
judgment. See American Paging of Tex., Inc. v. El Paso Paging, Inc., 9 S.W.3d 237,242
(Tex. App. - El Paso 1999, pet. den.)(just damages set at Yzjudgment amount excluding fees
and interest). The affidavit supporting the Cross-point indicates that there have been (and will
be) a total of $19,500 in reasonable and necessary fees incurred by RW in defense of this
appeal. (Appendix Tab- 3 Affidavit). RW seeks its "just damages "of $22,000 comprised of
$12,000.00 in appellate fees (in addition to the $7,500 conditional award of appellate fees in
the Order) and $10,000 representing one-half the amount of the sanctions assessed below.
CONCLUSION
The Court "got it right" in Bledsoe. Negative equity in a trade-in is not a finance
charge. Therefore, there is no cash price violation when negative equity is rolled into the
figure placed on the cash price line of a Retail Installment Contract.
The trial court "got it right" in assessing sanctions. Krisle was a knowing, willing and
happy participant in the financing of the purchase price of her new car and the negative equity
of her trade-in. There was no basis for the pleading of common law fraud, intentional
infliction of emotional distress and DTP A violation causes of action. The non-waiver
affirmative defense based on in pari delicto conduct defeats recovery of penalties for technical
violations of credit/finance statutory requirements. Therefore, even if Appellant had a good
faith argument that Bledsoe was wrongfully decided, he could not file a Finance Code claim
for Krisle in good faith.
If Appellant had bothered to look at the retroactivity issue that arises every time a
-47-
statutory cause of action is amended or repealed, he would have known that his Finance Code
claim for civil penalties had ceased to exist.
It cost RW $28,000 in attorney's fees to get the case disposed of below. So now
Appellant gets to pay RW back $20,000 of those fees plus some appellate fees.
PRAYER
Jim Allee Imports, Inc. d/b/a/ Rusty Wallis Volkswagen, requests that the Court affirm
the order of the trial court and grant Appellee its just damages for a frivolous appeal in an
amount not less than $22,000 and all other and further relief to which it may be entitled.
ResP:::it~
_~L/ )u7JLfh
/
Kent F. Brooks
Bar No. 03070710
LAW OFFICE OF KENT F. BROOKS
8117 Preston Rd., Suite 300
Dallas, Texas 75225
(214) 706-9151 - Phone
(214) 706-9152 - Facsimile
Tracey E. Gajak
SULLIVAN & COOK, LLC
2301 Cedar Springs Rd.
Suite 200
Dallas, Texas 75201
(214) 520-7494
(214) 528-6925 (fax)
ATTORNEYS for APPELLEE
-48-
CERTIFICATE OF SERVICE
I certify that a true and correct copy of the foregoing was transmitted certified mail,
return receipt requested to the counsel listed below on this 7th day of April, 2011.
Charles "Chad" Baruch
THE LAW OFFICE OF CHAD BARUCH
3201 Main Street
Rowlett, Texas 75088
/~,~
KENt F. BROOKS
-49-
APPENDIX
APP.-l ............. California Civil Code §2982
APP.-2 ............. 12 C.F.R. Part 226 Supplement I
APP.-3 ............. Affidavit of Tracey E. Gajak
-50-
APPENDIX 1
Get a Document - by Citation - Cal Civ Code § 2982
Page 1 of2
Cal Civ Code § 2982 (2011)
§ 2982. Disclosures required ill a cOllditional sale contract
A conditional sale contract subject to this chapter shall contain the disclosures required by
Regulation Z, whether or not Regulation Z applies to the transaction. In addition, to the extent
applicable, the contract shall contain the other disclosures and notices required by, and shall
satisfy the requirements and limitations of, this section. The disclosures required by subdivision
Ca) may be itemized or subtotaled to a greater extent than as required by that subdivision and
shall be made together and in the sequence set forth in that subdivision. All other disclosures
and notices may appear in the contract in any location or sequence and may be combined or
interspersed with other provisions of the contract.
(a) The contract shall contain the following disclosures, as applicable, which shall be labeled
"itemization of the amount financed:"
(1)
(A) The cash price, exclusive of document preparation fees, business partnership
automation fees, taxes imposed on the sale, pollution control certification fees, prior credit or
lease balance on property being traded in, the amount charged for a service contract, the
amount charged for a theft deterrent system, the amount charged for a surface protection
product, the amount charged for an optional debt cancellation agreement, and the amount
charged for a contract cancellation option agreement.
(8) The fee to be retained by the seiler for document preparation.
(C) The fee charged by the seller for certifying that the motor vehicle complies with
applicable pollution control requirements.
(D) A charge for a theft deterrent device.
(E) A charge for a surface protection product.
(F) Taxes imposed on the sale.
(G) The amount of any optional business partnership automation fee to register or transfer
the vehicle, which shall be labeled "Optional DMV Electronic Filing Fee."
(H) The amount charged for a service contract.
(1) The prior credit or lease balance remaining on property being traded in, as required by
paragraph (6). The disclosure required by this subparagraph shall be labeled "prior credit or
lease balance (see downpayment and trade-in calculation)."
(3) Any charge for an optional debt cancellation agreement.
(I<) Any chal-ge for a used vehicle contract cancellation option agreement.
(l) The total cash price, which is the sum of subparagraphs CA) to (K), inclusive.
eM) The disclosures described in subparagraphs CD), (E), and (K) are not required on
contracts involving the sale of a motorcycle, as defined in Section 400 of the Vehicle Code, or
on contracts involving the sale of an off-highway motor vehicle that is subject to identification
under Section 38010 of the Vehicle Code, and the amounts of those charges, if any, are not
https://www.lexis.comlresearcblretrieve?_ m=84 7a27 62090 525 6ec86609340d9c2af5 &csvc=... 4/6/2011
Get a Document - by Citation - Cal Civ Code § 2982
Page 2 of2
required to be reflected in the total price under subparagraph (l).
https:llwww.lexis.comlresearchlretrieve?_m=847a27 620905256ec86609340d9c2af5&csvc=... 4/612011
APPENDIX 2
Page I
12 CFR PART 226 SUPPLEMENT I
13 of 15 DOCUMENTS
LEXISNEXIS' CODE OF FEDERAL REGULA TIONS
Copyright © 2010, by Matthew Bender & Company, a member
of the LexisNexis Group. All rights reserved.
***
THIS SECTION IS CURRENT THROUGH THE MAY 19,20 I 0 ISSUE OF
'*' THE FEDERAL REGISTER ***
***
TITLE 12 -- BANKS AND BANKING
CHAPTER II -- FEDERAL RESERVE SYSTEM
SUBCHAPTER A -- BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
PART 226 -- TRUTH IN LENDING (REGULATION Z)
SUBPART G--SPECIAL RULES APPLICABLE TO CREDIT CARD ACCOUNTS AND OPEN-END CREDIT
OFFERED TO COLLEGE STUDENTS
Go to the CFR Archive Directory
SUPPLEMENT I TO PART 226 -- OFFICIAL STAFF INTERPRETATIONS (PART I OF III)
Introduction
1. Official status. This commentary is the vehicle by which the staff of the Division of Consumer and Community
Affairs of the Federal Reserve Board issues official staff interpretations of Regulation Z. Good faith compliance with
this commentary affords protection from liability under 130(1) of the Truth in Lending Act. Section 130(1) (I5 US.c.
1640) protects creditors from civil liability for any act done or omitted in good faith in conformity with any
interpretation issued by a duly authorized official or employee of the Federal Reserve System.
2. Procedure for requesting interpretations. Under appendix C of the regulation, anyone may request an official
staff interpretation. Interpretations that are adopted will be incorporated in this commentary following publication in the
Federal Register. No official staff interpretations are expected to be issued other than by means of this commentary.
3. Rules of construction. (a) Lists that appear in the commentary may be exhaustive or illustrative; the appropriate
construction should be clear from the context. In most cases, illustrative lists are introduced by phrases such as
"including, but not limited to," "among other things," II for example," or "such as."
(b) Throughout the commentary, reference to "this section" or "this paragraph" means the section or paragraph in
the regulation that is the subject of the comment.
4. Comment designations. Each comment in the commentary is identified by a number and the regulatory section
or paragraph which it interprets. The comments are designated with as much specificity as possible according to the
particular regulatory proviSion addressed. For example, some of the comments to § 226.18(b) are further divided by
subparagraph, such as comment 18(b)(1)~ I and comment 18(b )(2)-1. In other cases, comments have more general
application and are designated, for example, as comment 18-1 or comment 18(b)-1. This introduction may be cited as
comments I-I through 1-4. Comments to the appendices may be cited, for example, as comment app. A-!.
Subpart A--General
Section 226.1--Authority, Purpose, Coverage, Organization, Enforcement and Liability
Page 2
12 CFR PART 226 SUPPLEMENT!
1(c) Coverage.
1. Foreign applicability. Regulation Z applies to all persons (including branches of foreign banks and sellers
located in the United States) that extend consumer credit to residents (including resident aliens) of any state as defined
in § 226.2. Ifan account is located in the United States and credit is extended to a U.S. resident, the transaction is
subject to the regulation, This will be the case whether or not a particular advance or purchase on the account takes
place in the United States and whether or not the extender of credit is chartered or based in the United States or a foreign
country. For example, if a V.S, resident has a credit card account located in the consumer's state issued by a bank
(whether V.S. or foreign-based), the account is covered by the regulation, including extensions of credit under the
account that occur outside the United States. In contrast, if a U.S, resident residing or Visiting abroad, or a foreign
national abroad, opens a credit card account issued by a foreign branch of a U.S. bank, the account is not covered by the
regulation,
led) Organization,
Paragraph 1(d)(l).
1. [Reserved].
Paragraph 1(d)(2).
1. [Reserved].
Paragraph I (d)(3).
1. Effective date. The Board's amendments to Regulation Z published on May 19,2009 apply to covered loans
(including refinance loans and assumptions considered new transactions under § 226.20) for which the creditor receives
an application on or after July 30, 2009,
Paragraph 1(d)(4).
I. [Reserved].
Paragraph l(d)(5).
1. Effective dates, The Board's revisions published on July 30, 2008 (the ufinal rules") apply to covered loans
(including refinance loans and assumptions considered new transactions under § 226.20) for which the creditor receives
an application on or after October 1, 2009, except for the final rules on advertising, escrows, and loan servicing. But see
comment 1(d)(3)~1. The final rules on escrow in § 226.35(b)(3) are effective for covered loans (including refinancings
and assumptions in § 226.20) for which the creditor receives an application on or after April 1,2010; but for such loans
secured by manufactured housing on or after October 1, 2010. The final rules applicable to servicers in § 226,36(c)
apply to all covered loans serviced on or after October 1,2009. The final rules on advertising apply to advertisements
occurring on or after October 1, 2009. For example, a radio ad occurs on the date it is first broadcast; a solicitation
occurs on the date it is mailed to the consumer. The following examples illustrate the application of the effective dates
for the final rules.
i. General. A refinancing or assumption as defined in § 226.20(a) or (b) is a new transaction and is covered by a
provision of the final rules if the creditor receives an application for the transaction on or after that provision's effective
date. For example, if a creditor receives an application for a refinance loan covered by § 226.35(a) on or after October 1,
2009, and the refinance loan is consummated on October 15,2009, the provision restricting prepayment penalties in §
226.35(b)(2) applies. However, if the transaction were a modification of an existing obligation's terms that does not
constitute a refinance loan under § 226.20(a), the final rules, including for example the restriction on prepayment
penalties, would not apply.
ii. Escrows. Assume a consumer applies for a refinance loan to be secured by a dwelling (that is not a
manufactured home) on March 15,2010, and the loan is consummated on April 2, 2010. The escrow rule in §
226.35(b)(3) does not apply.
iii. Servicing, Assume that a consumer applies for a new loan on August 1,2009. The loan is consummated on
September 1,2009, The servicing rules in § 226.36(c) apply to the servicing of that loan as of October 1,2009.
Paragraph l(d)(6).
Page 3
1. Mandatory compliance dates. Compliance with the Board's revisions to Regulation Z published on August 14,
2009 is mandatory for private education loans for which the creditor receives an application on or after February 14,
2010. Compliance with the final rules on co-branding in §§ 226.48(a) and (b) is mandatory for marketing occurring on
or after February 14, 2010. Compliance with the final rules is optional for private education loan transactions for which
an application was received prior to February 14, 20 I 0, even if consummated after the mandatory compliance date.
2. Optional compliance, A creditor may, at its option, provide the approval and final disclosures required under §§
226.47(b) or (c) for private education loans where an application was received prior to the mandatory compliance date.
If the creditor opts to provide the disclosures, the creditor must also comply with the applicable timing and other rules in
§§ 226.46 and 226.48 (including providing the consumer with the 30~day acceptance period under § 226.48(c), and the
right to cancel under § 226.48(d». For example if the creditor receives an application on January 25, 20 I 0 and approves
the consumer's application on or after February 14,2010, the creditor may, at its option, provide the approval
disclosures under § 226.47(b), the final disclosures under § 226.47(c) and comply with the applicable requirements §§
226.46 and 226.48, The creditor must also obtain the self-certification form as required in § 226.48(e), if applicable. Or,
for example, lfthe creditor receives an application on January 25,2010 and approves the consumer's application before
February 14,2010, the creditor may, at its option, provide the final disclosure under § 226,47(c) and comply with the
applicable timing and other requirements of §§ 226,46 and 226.48, including providing the consumer with the right to
cancel under § 226,48(d). The creditor must also obtain the self-certification form as required in § 226.48(e), if
applicable.
Paragraph 1(d)(7),
I, [Reserved],
Section 226.2--Definitiol1s and Rules of Construction
2(a)(2) Advertisement.
1, Coverage, Only commercial messages that promote consumer credit transactions requiring disclosures are
advertisements. Messages inviting, offering, or otherwise announcing generally to prospective customers the availability
of credit transactions, whether in visual, oral, or print media, are covered by Regulation Z (12 CFR part 226).
i. Examples include:
A. Messages in a newspaper, magazine, leaflet, promotional flyer, or catalog,
B. Announcements on radio, television, or public address system.
C. Electronic advertisements, such as on the Internet.
D, Direct mail literature or other printed material on any exterior or interior sign.
E, Point of sale displays.
F, Telephone solicitations,
G, Price tags that contain credit information,
H, Letters sent to customers or potential customers as part of an organized solicitation of business.
L Messages on checking account statements offering auto loans at a stated annual percentage rate.
J. Communications promoting a new open-end plan or closed-end transaction,
Ii. The term does not include:
A. Direct personal contacts, such as follow~up letters, cost estimates for individual consumers, or oral or written
communication relating to the negotiation of a specific transaction.
B, Informational material, for example,
interest~rate
and loan-term memos, distributed only to business entities,
C, Notices required by federal or state law, if the law mandates that specific information be displayed and only the
information so mandated is included in the notice,
D, News articles the use of which is controlled by the news medium.
E.
Market~research
or educational materials that do not solicit business,
Page 4
F. Communications about an existing credit account (for example, a promotion encouraging additional or different
uses of an existing credit card account).
2. Persons covered. All persons must comply with the advertising provisions in §§ 226.16 and 226.24, not just
those that meet the definition of creditor in § 226.2(a)(I 7). Thus, home builders, merchants, and others who are not
themselves creditors must comply with the advertising provisions of the regulation if they advertise consumer credit
transactions. However, under section 145 of the act, the owner and the personnel of the medium in which an
advertisement appears, or through which it is disseminated, are not subject to civil liability for violations.
2(a)(3) Reserved,
2(a)(4) Billing cycle or cycle,
1. Intervals. In open-end credit plans, the billing cycle determines the intervals for which periodic disclosure
statements are required; these intervals are also used as measuring points for other duties of the creditor. Typically,
billing cycles are monthly, but they may be more frequent or less frequent (but not less frequent than quarterly).
2. Creditors that do not bill. The term cycle is interchangeable with billing cycle for definitional purposes, since
some creditors' cycles do not involve the sending of bills in the traditional sense but only statements of account activity.
This is commonly the case with financial institutions when periodic payments are made through payroll deduction or
through automatic debit of the consumer's asset account.
3. Equal cycles, Although cycles must be equal, there is a permissible variance to account for weekends, holidays,
and differences in the number of days in months. If the actual date of each statement does not vary by more than four
days from a fixed "day" (for example, the third Thursday of each month) or "date" (for example, the 15th of each
month) that the creditor regularly uses, the intervals between statements are considered equaL The requirement that
cycles be equal applies even if the creditor applies a daily periodic rate to determine the finance charge, The requirement
that intervals be equal does not apply to the first billing cycle on an open-end account (i.e" the time period between
account opening and the generation of the first periodic statement) or to a transitional billing cycle that can occur if the
creditor occasionally changes its billing cycles so as to establish a new statement day or date. (See comments 9(c)( I )-3
and 9(e)(2)-3,)
4, Payment reminder. The sending of a regular payment reminder (rather than a late payment notice) establishes a
cycle for which the creditor must send periodic statements.
2(a)(6) Business day,
1. Business function test. Activities that indicate that the creditor is open for substantially all of its business
functions include the availability of personnel to make loan disbursements, to open new accounts, and to handle credit
transaction inquiries. Activities that indicate that the creditor is not open for substantially all of its business functions
include a retailer's merely accepting credit cards for purchases or a bank's having its customer-service windows open
only for limited purposes such as deposits and withdrawals, bill paying, and related services.
2, Rule for rescission, disclosures for certain mortgage transactions, and private education loans. A more precise
rule for what is a business day (all calendar days except Sundays and the Federal legal holidays specified in 5 U.s.c.
6J03(a) applies when the right of rescission, the receipt of disclosures for certain dwelling-secured mortgage
transactions under §§ 226.l9(a)(1 )(ii), 226. I 9(a)(2), 226,31 (c), or the receipt of disclosures for private education loans
under § 226,46(d)(4) is involved, Four Federal legal holidays are identified in 5 U.S.C, 6103(a) by a specific date: New
Year's Day, January 1; Independence Day, July 4; Veterans Day, November 11; and Christmas Day, December 25.
When one of these holidays (July 4, for example) falls on a Saturday, Federal offices and other entities might observe
the holiday on the preceding Friday (July 3), In cases where the more precise rule applies, the observed holiday (in the
example, July 3) is a business day.
2(a)(7) Card issuer.
L Agent. An agent of a card issuer is considered a card issuer. Because agency relationships are traditionally
defined by contract and by state or other applicable law, the regulation does not define agent. Merely providing services
relating to the production of credit cards or data processing for others, however, does not make one the agent of the card
issuer. In contrast, a financial institution may become the agent of the card issuer if an agreement between the institution
and the card issuer provides that the cardholder may use a line of credit with the financial institution to pay obligations
incurred by use of the credit card.
Page 5
2(a)(8) Cardholder.
1. General rule. A cardholder is a natural person at whose request a card is issued for consumer credit purposes or
who is a co~obligor or guarantor for such a card issued to another. The second category does not include an employee
who is a co-obligor or guarantor on a card issued to the employer for business purposes, nor does it include a person
who is merely the authorized user of a card issued to another.
2. Limited application of regulation. For the limited purposes of the rules on issuance of credit cards and liability
for unauthorized use, a cardholder includes any person, including an organization, to whom a card is issued for any
purpose~~including a business, agricultural, or commercial purpose.
3. Issuance. See the commentary to § 226.12(a).
4. Dual-purpose cards and dual~card systems. Some card issuers offer dual~purpose cards that are for business as
well as consumer purposes. If a card is issued to an individual for consumer purposes, the fact that an organization has
guaranteed to pay the debt does not make it business credit. On the other hand, if a card is issued for business purposes,
the fact that an individual sometimes uses it for consumer purchases does not subject the card issuer to the provisions on
periodic statements, billing~error resolution, and other protections afforded to consumer credit. Some card issuers offer
dual~card systems--that is, they issue two cards to the same individual, one intended for business use, the other for
consumer or personal use. With such a system, the same person may be a cardholder for general purposes when using
the card issued for consumer use, and a cardholder only for the limited purposes of the restrictions on issuance and
liability when using the card issued for business purposes.
2(a)(9) Cash price.
1. Components. This amount is a starting point in computing the amount financed and the total sale price under §
226.18 for credit sales, Any charges imposed equally in cash and credit transactions may be included in the cash price,
or they may be treated as other amounts financed under § 226.18(b)(2).
2. Service contracts. Service contracts include contracts for the repair or the servicing of goods, such as mechanical
breakdown coverage, even if such a contract is characterized as insurance under state law.
3. Rebates. The creditor has complete flexibility in the way it treats rebates for purposes of disclosure and
calculation. (See the commentary to § 226.18(b).)
2(a)(10) Closed-end credit.
1. General. The coverage of this term is defined by exclusion. That is, it includes any credit arrangement that does
not fall within the definition of open~end credit. Subpart C contains the disclosure rules for closed-end credit when the
obligation is subject to a finance charge or is payable by written agreement in more than four installments.
2(a)(II) Consumer.
1. Scope. Guarantors, endorsers, and sureties are not generally consumers for purposes of the regulation, but they
may be entitled to rescind under certain circumstances and they may have certain rights if they are obligated on credit
card plans.
2. Rescission rules. For purposes of rescission under §§ 226.15 and 226.23, a consumer includes any natural person
whose ownership interest in his or her principal dwelling is subject to the risk of loss. Thus, if a security interest is taken
in A's ownership interest in a house and that house is A's principal dwelling, A is a consumer for purposes ofrescission,
even if A is not liable, either primarily or secondarily, on the underlying consumer credit transaction. An ownership
interest does not include, for example, leaseholds or inchoate rights, such as dower.
3. Land trusts. Credit extended to land trusts, as described in the commentary to § 226.3(a), is considered to be
extended to a natural person for purposes of the definition of consumer.
2(a)(12) Consumer credit.
1. Primary purpose. There is no precise test for what constitutes credit offered or extended for personal, family, or
household purposes, nor for what constitutes the primary purpose. (See, however, the discussion of business purposes in
the commentary to § 226.3(a).)
2(a)(13) Consummation.
APPENDIX 3
NO.05-10-01021-CV
IN THE COURT OF APPEALS
FOR THE FIFTH JUDICIAL DISTRICT OF TEXAS
AT DALLAS, TEXAS
JAMES H. OWEN,
Appellant,
v.
JIM ALLEE IMPORTS, INC. d/b/a RUSTY WALLIS VOLKSWAGEN,
Appellee.
ON APPEAL FROM THE COUNTY COURT AT LAW #4
DALLAS COUNTY, TEXAS
Trial Court No. CC-09-03189-D
AFFIDAVIT OF TRACEY EDWARD GAJAK
STATE OF TEXAS
COUNTY OF DALLAS
§
§
§
BEFORE ME, the uudersigned authority, on this day personally appeared TRACEY
EDWARD GAJAK, known to me to be the person whose signatnre is subscribed below and,
who, after being duly swom on his oath did depose and say:
"My name is TRACEY EDWARD GAJAK. I am over the age of eighteen (18) years of
age, of sound mind, and competent to make this Affidavit. I have personal knowledge of the facts
set forth herein, and they are true and correct.
Page 1 of3
I am an attorney at law licensed to practice in the State of Texas. I have practiced law in
the state of Texas since November 1997. I have concentrated my practice in the area of litigation
and civil trial practice. I have been counsel of record in civil appeals in the Dallas and Fort Worth
Conrts of Appeals and the Supreme Court of Texas. I am an associate in the law firm of Sullivan
& Cook, LLC. I am familiar with reasonable and necessary attorney's fees in Dallas County,
Texas. In my opinion an hourly rate of $300.00 per hour is a reasonable rate for appellate work
inDallas County, Texas.
I have represented Defendant Jim Allee Imports, Inc. d/b/a Rusty Wallis Volkswagen in
this case from its inception, including on appeal. I have also worked directly with associated
counsel Kent Brooks.
The services rendered to Appellee Jim Allee Imports, Inc. d/b/a Rusty Wallis Volkswagen
include the review of the Appellant's brief, the cases cited therein, the Reporter's record and
Clerk's record. The services also include research of the relevant cases and pertinent statutory
authority. The services also include the drafting of Appellee's reply brief.
I am also familiar with the nature of the services which must be perfonned to perfect and
prosecute an appeal of the type brought in this matter as well as the nature of the services which
must be performed to defend such an appeal. My opinions are based on my experience and
background, my familiarity with the legal services rendered in connection with this proceeding,
my general review of the documents, briefing and record on file in this matter, and also my
consideration of the following factors: (J) the time and labor required; (2) the difficulties of the
issues and the skill required to solve them; (3) the experience, ability and reputation of the
attorneys who have worked on this matter; (4) the amount involved; (5) the customary fees
charged for similar services in the community; and (6) the results obtained and the responsibility
involved.
In my opinion, as a licensed attorney and considering the foregoing factors, I believe the
fees incurred and to be incurred by Jim Allee Imports, Inc. d/b/a Rusty Wallis Volkswagen
through oral argument will total $12,000.00 and are reasonable and necessary for the
representation of Appellee in this appeal. The aforementioned $12,000.00 is in addition to the
$7,500.00 in conditional appellate fees awarded below. The additional $12,000.00 in fees is
warranted as "just damages" as set forth in Rule 45 of the Texas Rules of Appellate Procedure for
the reason's set forth in Appellee's Brief. This amount covers the billings from the perfection of
the appeal by Appellant through oral argument."
Further affiant sayeth not.
Page 20f3
SUBSCRIBED AND SWORN TO BEFORE ME on this
certify which witness my hand and official seal.
AFFIDAVIT OF
Page 30f3
e~1ft
day of April 2011 to

NO.05-10-01021-CV IN THE COURT OF APPEALS FOR THE FIFTH

Transcription

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