                                                                                   ACCEPTED
                                                                              13-14-00516-CV
                                                                THIRTEENTH COURT OF APPEALS
                                                                      CORPUS CHRISTI, TEXAS
                                                                          3/4/2015 5:56:21 PM
                                                                            DORIAN RAMIREZ
                                                                                       CLERK

                        NO. 13-14-00516-CV

                                                     FILED IN
            IN THE COURT OF APPEALS         FOR    THEOF APPEALS
                                             13th COURT
                                          CORPUS CHRISTI/EDINBURG, TEXAS
              THIRTEENTH DISTRICT OF TEXAS    3/4/2015 5:56:21 PM
__________________________________________________________________
                                               DORIAN E. RAMIREZ
                                                      Clerk
           PATRICK HLAVATY AND JEFF STRNADEL,
                          Appellants and Cross-Appellees,

                                  v.

    COMMERCIAL STATE BANK OF EL CAMPO, TEXAS, INC.,
                              Appellee and Cross-Appellant.
__________________________________________________________________

       CROSS-APPELLANT COMMERCIAL STATE BANK
     OF EL CAMPO, TEXAS, INC.’S APPELLANT’S BRIEF
__________________________________________________________________

         From the District Court of Wharton County, Texas,
          329th Judicial District; Trial Court Case No. 44081
__________________________________________________________________

DAWN S. HOLIDAY
TBA No. 24046090
MIA B. LORICK
TBA No. 24091415
Roberts Markel Weinberg Butler Hailey PC
2800 Post Oak Blvd, 57th Floor
Houston, TX 77056
Tel: (713) 840-1666
Fax: (713) 840-9404
dholiday@rmwbhlaw.com
mlorick@rmwbhlaw.com
ATTORNEYS FOR APPELLEE / CROSS-APPELLANT,
COMMERCIAL STATE BANK OF EL CAMPO, TEXAS, INC.


                ORAL ARGUMENT REQUESTED
                IDENTITY OF PARTIES AND COUNSEL

Appellants      Trial Court Counsel             Appellate Counsel
/ Cross-
Appellees
Patrick         Howard H. Singleton             Walter James Kronzer, III
Hlavaty         Singleton Law Firm              Walter James Kronzer, III,
and             109 East Milam Street           P.C.
Jeff Strnadel   Wharton, TX 77488               3000 Weslayan, Suite 247
                Tel: (979) 532-9800             Houston, TX 77027
                Fax: (979) 532-9805             Tel: (713) 622-5756
                singletonlaw@sbcglobal.net      Fax: (713) 622-5445
                                                wkronzer@kronzer.com

                                                Howard H. Singleton
                                                Singleton Law Firm
                                                109 East Milam Street
                                                Wharton, TX 77488
                                                Tel: (979) 532-9800
                                                Fax: (979) 532-9805
                                                singletonlaw@sbcglobal.net

Cross-          Trial Court Counsel             Appellate Counsel
Appellant /
Appellee
Commercial      Gregg S. Weinberg               Dawn S. Holiday
State Bank      Dawn S. Holiday                 Mia B. Lorick
of El Campo,    Chase A. Evans                  Roberts Markel Weinberg
Texas, Inc.     Roberts Markel Weinberg         Butler Hailey PC
                Butler Hailey PC                2800 Post Oak Blvd, 57th Fl
                2800 Post Oak Blvd., 57th Fl.   Houston, TX 77056
                Houston, TX 77056               Tel: (713) 840-1666
                Tel: (713) 840-1666             Fax: (713) 840-9404
                Fax: (713) 840-9404             dholiday@rmwbhlaw.com
                gweingerg@rmwbhlaw.com          mlorick@rmwbhlaw.com
                dholiday@rmwbhlaw.com
                cevans@rmwbhlaw.com


                                     ii
                   TABLE OF CONTENTS

IDENTITY OF PARTIES & COUNSEL . ……………………………………ii

TABLE OF CONTENTS ... ……………………………………………………iii

TABLE OF AUTHORITIES ... …………………………………………………v

RECORD REFERENCES ………………………………………………..…vii

STATEMENT OF THE CASE ………………………………………………viii

ISSUES PRESENTED .......... …………………………………………………ix

STATEMENT REGARDING ORAL ARGUMENT ... ………………………x

STATEMENT OF FACTS .. ……………………………………………………1

PROCEDURAL HISTORY ..... …………………………………………………7

SUMMARY OF THE ARGUMENT…………………………………………..9

ARGUMENTS AND AUTHORITIES ………………………………………10

   I.   The trial court was without jurisdiction to issue an order of
        sanctions six months after it lost plenary power……………10

        A.   Standard of Review ………………………………………10

        B.   CSB’s nonsuit allowed the trial court a reasonable
             amount of time to rule on collateral matters, nothing
             more. ………………………………………………………11

        C.   Three and a half years is in no way a reasonable
             amount of time. ……………………………………………13




                                iii
               D.      The trial court lost plenary power on December 16,
                       2013, and therefore, was without jurisdiction to enter
                       an order of sanctions on June 11, 2014. ………………15

       II.     If the trial court did have jurisdiction—which it did not—it
               abused its discretion in entering the order of sanctions …..18

               A. Standard of review……………………………………………18

               B. The trial court abused its discretion by failing to provide a
                  basis for its order of sanctions. ……………………………18

               C. The trial court abused its discretion by failing to verify
                  the attorney’s fees. …………………………………………20

               D. The trial court abused its discretion by entering an order
                  of sanctions based on alleged non-compliance with
                  vacated orders. ………………………………………………21

CONCLUSION ......................................................................................... 23

PRAYER ............................ ……………………………………………………23

CERTIFICATE OF COMPLIANCE .. ………………………………………25

CERTIFICATE OF SERVICE. ………………………………………………25

APPENDIX .............................. ………………………………………………26




                                                  iv
                                 TABLE OF AUTHORITIES

Cases

Cook v. Cameron,
  733 S.W.2d 137, 140 (Tex. 1987)... ...................................................... 15

Frost Nat’l Bank v. Fernandez,
  315 S.W.3d 494, 502 (Tex. 2010)... ...................................................... 10

Hawkins v. Estate of Volkmann,
  898 S.W.2d 334, 346 (Tex. App.—San Antonio 1994, writ denied).. . 18

In re Bates,
   429 S.W.3d 47 (Tex. App.—Houston [1st Dist.] 2014, no pet. h.). ..... 15

In re Bennett,
   960 S.W.2d 35, 38 (Tex. 1997). ............................................................ 12

In re Ford Motor Co.,
   988 S.W.2d 714, 718 (Tex. 1998). ........................................................ 18

In re Fuentes,
   960 S.W.2d 261, 262 (Tex. App.—Corpus Christi 1997, no writ).. .... 15

In re Metro. Lloyds Ins. Co.,
   No. 05-08-01712-CV, 2009 Tex. App. LEXIS 1764 at *7 (Tex. App.—
   Dallas, March 13, 2009). ...................................................................... 13

Scott & White Mem’l Hosp. v. Schexnider,
  940 S.W.2d 594, 596 (Tex. 1996)... ...................................................... 16

Smalley v. Smalley,
  436 S.W.3d 801, 806 (Tex. App.—Houston [14th Dist.] 2014, no
  pet.)... .................................................................................................... 15

Spohn Hosp. v. Mayer,
  104 S.W.3d 878, 882 (Tex. 2003)... ...................................................... 18

                                                        v
Tex. Comm’n on Envtl. Quality v. Bonser-Lain,
  438 S.W.3d 887, 891 (Tex. App.—Austin 2014, no pet.)... ................. 10

Texas Ass’n of Bus. v. Texas Air Control Bd.,
  852 S.W.2d 440, 443 (Tex. 1993)... ...................................................... 11

Tourneau Houston, Inc. v. Harris County Appraisal Dist.,
  24 S.W.3d 907, 910 (Tex. App.—Houston [1st Dist.] 2000, no pet.). . 11

TransAmerican Natural Gas Corp. v. Powell,
  811 S.W.2d 913, 917 (Tex. 1991). .................................................. 18, 19

Univ. of Texas Med. Branch at Galveston v. Estate of Blackmon,
  195 S.W.3d 98, 101 (Tex. 2006). .................................................... 11, 12

Statutes

Tex. R. Civ. P. 13... ................................................................................... 19

Tex. R. Civ. P. 162. ............................................................................. 11, 12




                                                    vi
                       RECORD REFERENCES

Citations in this Cross-Appellant’s Brief to the Parties are as follows:

Cross-Appellant Commercial State Bank of El Campo, Texas, Inc. will

be referred to as “CSB.”

Cross-Appellee Patrick Hlavaty will be referred to as “Hlavaty.”

Cross-Appellee Jeff Strnadel will be referred to as “Strnadel.”



Citations in this Cross-Appellant’s Brief to the record are as follows:

CR – Clerk’s Record designated by Commercial State Bank of El

Campo, Texas, Inc. and filed in this Court on 10/27/2014 (i.e. CR [page];

e.g. CR 1)




                                    vii
                      STATEMENT OF THE CASE


Nature of the case:        This appeal arises from an order of
                           sanctions entered against CSB by the trial
                           court after the trial court determined it lost
                           plenary jurisdiction as to all parties in this
                           case.

Trial Court Disposition:   Hlavaty and Strnadel filed a Motion to
                           Compel and Sanctions against CSB. (CR
                           308). On June 3, 2014, the trial court
                           entered an order stating that it had plenary
                           lost jurisdiction as to all parties in this case
                           as of December 15, 2013 and that it had no
                           further authority to act. (CR 784). But, on
                           June 11, 2014, the trial court granted
                           Hlavaty and Strnadel’s motion for
                           sanctions. (CR 788). CSB filed a Motion to
                           Vacate the Order for Sanctions for lack of
                           jurisdiction. (CR 791). However, on August
                           29, 2014, the trial court denied CSB’s
                           Motion to Vacate the Order for Sanctions.
                           (CR 853).

Trial Court:               329th Judicial District of Wharton County,
                           Texas.




                                  viii
                         ISSUES PRESENTED

1.   Whether the trial court had jurisdiction to enter an order of

     sanctions on June 11, 2014, which is six months after the trial

     court declared that it lost plenary jurisdiction as to all parties as

     of December 15, 2013.

2.   If the trial court did have jurisdiction to enter the June 11, 2014

     order of sanctions—which it did not—whether the trial court

     abused its discretion in entering the order of sanctions without

     sufficient basis.




                                   ix
          STATEMENT REGARDING ORAL ARGUMENT

     Pursuant to Appellate Procedure Rule 52.8(b)(4), Cross-Appellant

respectfully requests oral argument on belief it will materially aid the

Court in determination of the legal and procedural issues presented for

review.




                                   x
                       STATEMENT OF FACTS

      This case was brought by CSB against nine defendants following

internal investigations that revealed fraudulent conduct on behalf of

the defendants.1 CSB nonsuited its claims against all defendants;

however, the trial court entered an order of sanctions six months after it

lost plenary jurisdiction.2 The entry of the order of sanctions post

expiration of the trial court’s plenary jurisdiction is the subject of this

appeal. CSB will timely respond to all issues raised by Appellant in

challenging the trial court’s loss of plenary jurisdiction in CSB’s

Appellee’s Brief on issues presented by Appellant.

1.    CSB Generally.

      This is a case brought by CSB for damages arising from fraud and

dishonesty committed by former bank employees.3 CSB has been in the

business of banking since February 7, 1921.4 One of the services it

makes available to its customers is that of interim construction lending,

both residential and commercial.5 CSB relies on mortgage lenders,



1 CR 23.
2 CR 559; CR 788.
3 CR 23-43.
4 CR 25.
5 Id.


                                     1
mortgage bankers, mortgage companies, realtors, builders, and

developers as potential sources of its interim loan business.6

      Often times the process of obtaining an interim loan begins

through a mortgage broker.7 The mortgage broker obtains permanent

financing for individuals who seek to either acquire raw land to build

their own new structure, or acquire an existing structure and make

improvements on it.8 Whether the transaction goes forward, depends

upon the buyer obtaining permanent financing.9 At this point, the

mortgage broker will request a “financial package” from the buyer,

consisting of things such as tax returns, bank statements, financial

statements, and any appraisals that the buyer may have in his

possession.10 A credit inquiry will also be made by the loan processor to

determine credit scores.11

       After assembling the financial package, the mortgage broker then

shops the permanent loan to a permanent lender, by submitting the




6 Id.
7 Id.
8 CR 25.
9 Id.
10 CR 26.
11 Id.


                                    2
financial package to the permanent lender for examination.12 Once a

permanent lender has committed to make a permanent loan, the

mortgage broker then contacts a lender that specializes in interim

financing.13 A loan committee then decides whether to make the loan to

the buyer.14

2.    The fraudulent acts of CSB’s employees give rise to this
      suit.

      A.    Hlavaty

      On or about February 17, 1987, Patrick Hlavaty (“Hlavaty”) began

employment with CSB as vice president in the mortgage lending

department.15 He was responsible for marketing the bank’s services as

well as evaluating and recommending mortgage lending and real estate

loans to the loan committee.16 On October 31, 2007, Hlavaty was asked

to resign from his position because internal investigations revealed

dishonesty, fraud, self-dealing, and numerous breaches of fiduciary

duties owed to CSB.17 The acts that led to Hlavaty’s requested

resignation were falsifying information, failing to disclose his interest in

12 Id.
13 Id.
14 Id.
15 CR 27.
16 Id.
17 Id.


                                     3
certain corporations, and accepting kickbacks on loans made to various

customers.18

      Hlavaty’s bad acts gave rise to this lawsuit.19 Specifically, a pre-

suit internal investigation into the fraudulent activities of Hlavaty was

conducted at the request for CSB’s counsel.20 The investigation was

conducted by Moritz & Associates, Inc. and a report of the findings of

the investigations was provided to CSB’s counsel and dated November

2, 2007, known and referred to in this litigation as the “Moritz

Report”.21 The Moritz Report noted that Hlavaty signed a yearly Code

of Ethics and Annual Declaration of Personal Circumstances document

with CSB that, among other things, neither he nor any family member

(1) had any business connections with CSB or conducted any personal

business activities that could conflict with CSB; (2) had received income

for services performed from sources other than CSB; (3) or was licensed

to sell real estate and had received money from such transaction within

the last 12 months.22



18 CR 32-37.
19 CR 354.
20 Id.
21 Id.
22 CR 355.


                                    4
      Hlavaty admitted to the investigator that he lied about him and

his wife’s (Helen Hlavaty) involvement in a home building business

relationship between Helen Hlavaty Homes and Waldron Development

(a long-time customer of CSB).23 The Moritz Report stated:

             . . . At this point, Mr. Hlavaty admitted he had lied
      about involvement with Waldron Development and stated “I
      am the front man for Waldron. I am the front man through
      Helen Hlavaty Homes for Waldron Development. Helen
      knows Waldron but that’s all, she doesn’t do anything. I am
      the one who does it. I get a commission from Waldron on the
      transactions.” Investigator Moritz showed Mr. Hlavaty an
      email from Mr. Waldron telling Mr. Hlavaty he was getting
      him into Westbound Bank as no other bank would take
      Helen Hlavaty Homes checks. Mr. Hlavaty read it and then
      repeated he did get a commission. Mr. Hlavaty stated “If
      you got it off of my computer, I can’t deny it. I thought you
      did but I didn’t know and I can’t deny anything you get off
      my computer.” Mr. Hlavaty was shown the bank draws
      discovered in the computer forensic examination and after
      examining them, he stated he had signed the draws. He
      stated “Now I know I shouldn’t have done this. I didn’t
      think it was wrong before but I do now.” . . .24

                               ***
      Mr. Hlavaty stated that Mr. Waldron was sent to CSB by 1st
      Bank Mortgage a “long time ago.” He stated he was the
      “front for loans for Waldron Development’ and would get
      loans for Waldron Development. Mr. Hlavaty stated he ran
      Helen Hlavaty Homes out of the CSB office and used their
      computers and phones.25


23 CR 359.
24 Id.
25 CR 360.


                                    5
      B.    Strnadel

      Jeff Strnadel (“Strnadel”) was also an employee of CSB.26 Part of

Strnadel’s duties and responsibilities was to make physical site

inspections of construction sites to determine whether improvements

had been made, whether construction had been made in a good and

workmanlike manner, and whether payment on requested draws should

be authorized.27 Strnadel failed to inspect job sites and accurately

report his findings to his superiors.28 CSB incurred damages because of

Strnadel’s inability to complete his job duties.29

      As early as 2007, Strnadel’s bad acts were being investigated by

the Secret Service.30 In a fidelity claim submitted by CSB regarding

“forgery and alteration of documents used for loan approval and

presentation” committed by Hlavaty and Strnadel, it was noted:

      . . . Mr. Strnadel performed certain onsite inspections of one
      property in which the work had not been completed, but the
      draws approved based upon inspections. Mr. Strnadle did
      not have an explanation nor could he justify this actions.




26 CR 39.
27 CR 39.
28 Id.
29 Id.
30 CR 777-778.


                                     6
      Losses have also been occurred due to the presentation of
      fraudulent earnest money contracts, by certain builders
      under investigation.

      As indicated above the Secret Service has an ongoing
      investigation that has been able to develop the case with
      subpoenas into other Banks and entities. The Bank is in
      contact with Agent Jonathan Breedlove 713-868-2299 who
      has advised that there is indication that there were
      monetary gains received by the officers involved. Mr.
      Breedlove is unable to give us specifics at this time; however,
      he has advised that as soon as he is at liberty to provide
      information, he will do so. Mr. Breedlove has also advised
      that if the Insurance Company would need to speak to him
      regarding this information, he is available at the phone
      number above. . . .31

      CSB brought suit in 2009 against Hlavaty, Strnadel, and seven

other defendants alleging fraud, fraud by nondisclosure, negligent

failure to disclose, breach of fiduciary duty, breach of the duty of loyalty,

unjust enrichment, and negligence.32

                       PROCEDURAL HISTORY

      On October 23, 2009, CSB filed its Original Petition against nine

defendants, including Patrick Hlavaty and Jeff Strnadel.33 The

Defendants filed an Original Answer on November 20, 2009, and




31 Id.
32 CR 23-43.
33 CR 23.


                                      7
subsequently filed an Amended Answer on December 2, 2009.34

Defendants Hlavaty and Strnadel filed a Motion for Rule 13 Sanctions

on March 17, 2010.35 On June 23, 2010, CSB filed a notice of nonsuit as

to defendants Hlavaty and Strnadel.36 The trial court signed the

dismissal order as to Hlavaty and Strnadel on June 24, 2010.37

Thereafter, on September 1, 2010, CSB nonsuited the remainder of the

defendants in the lawsuit.38 However, because an objection was made by

Hlavaty and Strnadel, as to the form of the dismissal order relating to

other defendants, the proposed order of non-suit was not signed by the

trial court at that time.

      On November 15, 2013, the trial court signed the final order of

nonsuit as to the last two remaining defendants.39 On April 8, 2014,

CSB filed its Motion to Dismiss and Vacate Orders.40 The trial court

granted CSB’s motion and dismissed the case, specifically stating that

the trial court’s “plenary jurisdiction as to all parties in this case ended




34 CR 47-49.
35 CR 56-59.
36 CR 100.
37 CR 100.
38 CR 126.
39 CR 559.
40 CR 561.


                                     8
on December 15, 2013.”41 Seven months after all defendants had been

nonsuited and six months after the trial court declared that it lost

plenary jurisdiction, on June 11, 2014, the trial court issued an order of

sanctions against CSB.42 CSB filed a Motion to Vacate the Order of

Sanctions, which the trial court denied.43 This appeal followed.

                  SUMMARY OF THE ARGUMENT

      The trial court did not have jurisdiction to enter an order of

sanctions against CSB on June 11, 2014 after the trial court determined

that it lost plenary jurisdiction as of December 15, 2013 and that no

further proceedings in this case would be heard.

      The trial court should have ruled on Hlavaty and Strnadel’s

pending motions for sanctions within a reasonable amount of time after

CSB’s final nonsuit was filed on September 1, 2010. Instead, the trial

court waited three years and entered a ruling after it lost jurisdiction.

Specifically, the trial court entered a final order of nonsuit in November

of 2013; therefore, the trial court lost its plenary power in December of

2013—30 days after the final order, which the trial court itself

determined. However, six months after the court lost jurisdiction, it
41 CR 785-86.
42 CR 788.
43 CR 791-94.


                                    9
entered the order of sanctions. As such, the trial court was without

subject matter jurisdiction to enter such order as a matter of law. The

trial court erred in refusing to vacate the order of sanctions entered

after it lost plenary jurisdiction to enter such order.

      Even if the trial court had jurisdiction—which it did not—the

court abused its discretion in entering the order of sanctions because it

did not provide sufficient facts to show a direct relationship between the

alleged conduct and the sanctions imposed.

      As a result, the order of sanctions should be set aside for want of

jurisdiction; or, in the alternative, the order of sanctions should be

vacated for an abuse of discretion.

                    ARGUMENTS & AUTHORITIES

I.    The trial court was without jurisdiction to issue an order
      of sanctions six months after it lost plenary power.

      A.    Standard of Review

      Whether a trial court had subject matter jurisdiction is a question

of law that the appellate court reviews de novo.44 Subject matter




44Frost Nat’l Bank v. Fernandez, 315 S.W.3d 494, 502 (Tex. 2010); Tex. Comm’n on
Envtl. Quality v. Bonser-Lain, 438 S.W.3d 887, 891 (Tex. App.—Austin 2014, no
pet.).
                                      10
jurisdiction is essential for a court to have authority to decide a case.45

It is never presumed.46 It cannot be waived.47 Therefore, a lack of

subject matter jurisdiction is a fundamental error; and, it can be raised

by the appellate court or by a party for the first time on appeal.48

      B.    CSB’s nonsuit allowed the trial court a reasonable
            amount of time to rule on collateral matters, nothing
            more.

      Pursuant to Texas Rule of Civil Procedure 162, “at any time before

the plaintiff has introduced all of his evidence, other than rebuttal

evidence, the plaintiff may dismiss a case, or take a non-suit.”49 If there

are no pending affirmative claims before the court at the time a nonsuit

is filed, the nonsuit extinguishes the case or controversy from the

moment the motion is filed.50 While the date the trial court signs the

nonsuit is relevant to determine when the court’s plenary power

expires, the nonsuit is effective when filed.51


45 Texas Ass’n of Bus. v. Texas Air Control Bd., 852 S.W.2d 440, 443 (Tex. 1993).
46 Id.
47 Id.
48 Tourneau Houston, Inc. v. Harris County Appraisal Dist., 24 S.W.3d 907, 910

(Tex. App.—Houston [1st Dist.] 2000, no pet.) (citing Fed. Underwriters Exch. v.
Pugh, 174 S.W.2d 598, 600 (Tex. 1943)).
49 Tex. R. Civ. P. 162.
50 Univ. of Texas Med. Branch at Galveston v. Estate of Blackmon, 195 S.W.3d 98,

101 (Tex. 2006) (citing Shadowbrook Apts. v. Abu-Ahmad, 783 S.W.2d 210, 211
(Tex. 1990); see also Greenberg v. Brookshire, 640 S.W.2d 870, 872 (Tex. 1982)).
51 In re Bennett, 960 S.W.2d 35, 38 (Tex. 1997).


                                       11
      Rule 162 provides that a plaintiff’s nonsuit shall not prejudice the

right of an adverse party to be heard on a pending claim for affirmative

relief and shall have no effect on a motion for sanctions or attorney’s

fees pending at the time of the nonsuit.52 The trial court has discretion

to defer signing an order of dismissal so that it can “allow a reasonable

amount of time” for holding hearings on the matters which are

“collateral to the merits of the underlying case.”53 However, even though

Rule 162 permits motions for sanctions and attorney’s fees to be heard,

it must be done within a reasonable amount of time and does not

preclude the nonsuit’s effect of rendering the merits of the case moot.54

      Here, CSB filed a nonsuit dismissing Hlavaty and Strnadel from

the underlying matter on June 23, 2010; and, the court entered an order

of nonsuit.55 On September 1, 2010, CSB filed its final nonsuit as to the

remaining defendants.56 At the time of the final nonsuit on September

1, 2010, Hlavaty and Strnadel did not have pending affirmative claims

before the court. Hlavaty and Strnadel did however have pending

motions for sanctions and attorney’s fees—collateral matters. While

52 Tex. R. Civ. P. 162.
53 In re Bennett, 960 S.W.2d at 38-39.
54 Univ. of Texas, 195 S.W.3d at 101.
55 CR 96-101.
56 CR 126-129.


                                         12
Hlavaty and Strnadel will undoubtedly attempt to assert that they did

in fact have affirmative claims based on their filing of motions entitled

“counterclaims,”57 their motions are nothing more than a request for

attorney’s    fees—making       them     collateral   matters,     rather    than

affirmative claims.58

      Because collateral matters were the only motions pending at the

time of CSB’s final nonsuit, the trial court, pursuant to Rule 162, only

had a reasonable amount of time to resolve the pending motions—not

three and half years to twiddle its thumbs and make a ruling when it

got around to it. The trial court clearly failed to resolve the collateral

matters within a reasonable amount of time and therefore, was without

jurisdiction when it entered an order of sanctions over three years later.

      C.     Three and a half years is in no way a reasonable
             amount of time.

      The trial court entered an order on Hlavaty and Strnadel’s

pending motions for sanctions over three years after the final notice of



57CR 61-66.
58 In re Metro. Lloyds Ins. Co., No. 05-08-01712-CV, 2009 Tex. App. LEXIS 1764 at
*7 (Tex. App.—Dallas, March 13, 2009) (holding that when pleading an affirmative
claim the pleader must give every element of a cause of action so that the opposing
party may prepare a defense, and in determining whether a cause of action is pled,
you look to the substance of the pleading and not merely its title.)
                                        13
nonsuit was filed by CSB.59 This is certainly not what the Texas

Supreme Court meant when it allowed trial courts a reasonable amount

of time to hold hearings and resolve collateral matters. The trial court’s

blatant disregard for timely resolving this case should not be affirmed

or tolerated, as it is not in the best interest of an efficient judicial

system. To hold otherwise would set the precedent that upon the filing

of a nonsuit and dismissal of a case, a judge’s power to rule on collateral

matters continues for eternity—allowing for cases and controversies to

continue forever. Such result is absurd.

        In addition to the trial court’s unreasonable delay in ruling on

pending motions, Hlavaty and Strnadel also failed to take any action

with regard to their motion for sanctions. Hlavaty and Strnadel failed

to do anything that could be reasonably construed as them pursuing

sanctions within a reasonable amount of time after the nonsuit as to all

defendants was filed. As such, the trial court was without jurisdiction

when it entered the order of sanctions, sua sponte, over three years

after the final notice of nonsuit. And, this Court should decline to

reward such inaction and unreasonable delay.



59   CR 788.
                                    14
      D.    The trial court lost plenary power on December 16,
            2013, and therefore, was without jurisdiction to enter
            an order of sanctions on June 11, 2014.

      Even if there is an argument to be made that three years is a

reasonable amount of time—which no such argument exists—the trial

court lost its plenary power on December 16, 2013.

      Once a trial court’s plenary power ends, it loses subject matter

jurisdiction.60 A judgment is void when it is apparent that the court

rendering judgment had no jurisdiction of the parties, no jurisdiction of

the subject matter, no jurisdiction to enter judgment, or no capacity to

act as a court.61 Therefore, orders issued outside of a trial court’s

plenary power are void because a court cannot act once it has no

jurisdiction to enter judgment.62 A void order is null within itself and its

nullity cannot be waived.63 Although a trial court is free to “impose

sanctions   while    it   retains   plenary   jurisdiction,”   after   plenary




60  In re Bates, 429 S.W.3d 47 (Tex. App.—Houston [1st Dist.] 2014, no pet. h.);
Smalley v. Smalley, 436 S.W.3d 801, 806 (Tex. App.—Houston [14th Dist.] 2014, no
pet.).
61 Cook v. Cameron, 733 S.W.2d 137, 140 (Tex. 1987) (quoting Browning v. Placke,

698 S.W.2d 362, 363 (Tex. 1985).
62 In re Fuentes, 960 S.W.2d 261, 262 (Tex. App.—Corpus Christi 1997, no writ).
63 Id.


                                      15
jurisdiction has expired a trial court may not sanction counsel for pre-

judgment conduct.64

         In this case, the trial court signed a final order of nonsuit on

November 15, 2013—even though it should have entered an order

within a reasonable amount of time after the September 1, 2010

nonsuit. However, the entering of the final order triggered the

expiration of the trial court’s plenary power. Because the final order of

nonsuit was entered on November 15, 2013, the trial court’s plenary

power expired 30 days later, on December 16, 2013.

         What is extremely interesting is that the trial court entered a

final order dismissing all claims on June 3, 2014, and in the order, the

trial court admitted to having lost its jurisdiction on December 15,

2013. The trial court stated:

         This court signed its final order of nonsuit as to defendants
         The Lending Center and Larry Tew on November 15, 2013,
         even though it had a ministerial duty to do so within a
         reasonable time after September 1, 2010. This court is aware
         of no reason which would justify the three year delay. This
         event finally triggered the expiration of this court’s
         plenary jurisdiction in this case on December 15, 2013,
         thirty days later. No pleading has been filed which would
         operate to extend this court’s plenary jurisdiction.65


64   Scott & White Mem’l Hosp. v. Schexnider, 940 S.W.2d 594, 596 (Tex. 1996).
65   CR 784-86 (emphasis added).
                                           16
The trial court further stated “because this court’s plenary jurisdiction

as to all parties in this case ended on December 15, 2013, no further

proceedings in this court will be heard.”66

        However, on June 11, 2014, the same trial court that admitted it

lost jurisdiction in December of 2013, entered an order of sanctions for

conduct that allegedly occurred pre-judgment.67 The trial court was

without a doubt lacking subject matter jurisdiction to enter such order

and not only violated the rules of civil procedure, but also violated its

own order. As a result, the trial court erred by taking action after its

plenary jurisdiction expired.

        Because the trial court was without subject matter jurisdiction to

enter an order of sanctions, this Court should set aside the trial court’s

order as null and void as a matter of law.




66   CR 786.
67   CR 788-90.
                                     17
II.   If the trial court did have jurisdiction—which it did not—it
      abused its discretion in entering the order of sanctions.

      A.    Standard of review

      If the trial court did in fact have subject matter jurisdiction, then

the standard of review when analyzing the sufficiency of an order of

sanctions is whether the trial court abused its discretion.68

      B.    The trial court abused its discretion by failing to
            provide a basis for its order of sanctions.

      When a trial court awards a party sanctions the sanctions

imposed must be just under the circumstances.69 When determining

whether the sanctions imposed are just, the court considers two factors:

(1) whether there is a direct relationship between the offensive conduct

and the sanctions; and (2) whether the sanctions are excessive.70 A just

sanction must be directed against the abuse and towards remedying the

prejudice caused to the innocent party.71 And, the trial court must at




68 Hawkins v. Estate of Volkmann, 898 S.W.2d 334, 346 (Tex. App.—San Antonio
1994, writ denied).
69 TransAmerican Natural Gas Corp. v. Powell, 811 S.W.2d 913, 917 (Tex. 1991); In

re Ford Motor Co., 988 S.W.2d 714, 718 (Tex. 1998).
70 Id.
71 Spohn Hosp. v. Mayer, 104 S.W.3d 878, 882 (Tex. 2003).


                                       18
least attempt to determine whether the offensive conduct is attributable

to counsel only, or to the party only, or to both.72

      Furthermore, sanctions awarded under Texas Rule of Civil

Procedure 13 must be based on good cause and must describe the

conduct giving rise to good cause.73

      In this case, the sanctions order the court entered was void of facts

justifying the sanction.74 While the trial court stated that it entered

sanctions due to alleged disrespect and non-compliance with prior

orders, the order fails to articulate any specific facts or details to show

that the court was within its discretion to enter such order. Because

sufficient facts showing good cause were not stated in the order, there is

no way to determine whether a direct relationship exists between the

conduct and the sanctions. However, even without sufficient facts, the

record contains evidence that the trial court abused its discretion and

entered an order of sanctions for an amount equal to Hlavaty and

Strnadel’s attorney’s fees without any justification.

      Specifically, at a hearing on a Motion to Dismiss, the trial judge

asked Hlavaty and Strnadel how much their attorney’s fees were
72 TransAmerican, 811 S.W.2d at 917.
73 Tex. R. Civ. P. 13.
74 CR 788-90.


                                       19
through September 1, 2010—the same date the judge stated he thought

the case should have been over. And, in correspondence sent to the

court by Hlavaty and Strnadel, the attorney’s fees equaled $12,113.50

for Hlavaty and $6,151.00 for Strnadel.75 The trial court judge signed

the order for sanctions 5 days later for the exact amount of the

attorney’s fees sent to the court 5 days prior. However, the trial court

was extremely broad and failed to state how this amount was related to

the alleged sanctionable conduct.76 Because the trial court failed to

state a basis or provide sufficient facts as to why it entered an order of

sanctions, the trial court abused its discretion.

      C.    The trial court abused its discretion by failing to verify
            the attorney’s fees.

      The above-referenced correspondence, sent by Hlavaty and

Strnadel, is the only document presented in support of the sanctions

award.77 The document Hlavaty and Strnadel’s counsel provided to the

court providing a total of attorney’s fees allegedly incurred without any

supporting documentation, is just that – a document and does not

constitute evidence. There was no evidentiary hearing to justify how the


75 CR 787.
76 CR 788-90.
77 CR 787.


                                     20
awarded attorney’s fees relate to the alleged sanctionable conduct, and

therefore, there is no sworn testimony in the record to support the trial

court’s award.

      Additionally, due to the trial court’s failure to hold an evidentiary

hearing, CSB had no opportunity to rebut the nature and amount of

attorney’s fees; so, there is no evidence in the record to support the

actual fees incurred and awarded. Specifically, no fee bills or invoices

were produced by Hlavaty and Strnadel, and the trial court failed to

determine whether the attorney’s fees claimed were reasonable and

necessary. The trial court further failed to determine whether the fees

were actually incurred and related to this matter. Therefore, there is

insufficient evidence to support the claimed attorney’s fees and the

entering of an order based on unverified fees is an abuse of discretion. It

is an abuse of discretion for the trial court to award attorney’s fees

based on numbers pulled out of thin air without any evidence to support

it.

      D.   The trial court abused its discretion by entering an
           order of sanctions based on alleged non-compliance
           with prior vacated orders.
      Even if the trial court stated the purpose of the order of sanctions

was to remedy any prejudice—which it did not—such assertion would
                                    21
be false. Specifically, in the order of sanctions, the trial court states that

“the [c]ourt has considered that prior orders designed to require

[c]ounterdefendant to participate in the litigation process in good faith

and in compliance with court orders were ineffective.”78 Because the

only prior orders in the record are discovery orders, it would appear

that the trial court is claiming the alleged prejudice was CSB’s non-

compliance with prior discovery orders. But, what the trial court seems

to forget is that a mere eight days prior, it entered a final order that,

inter alia, stated “[t]his court concludes that all orders entered in

this cause after September 1, 2010, other than the order of nonsuit

on November 15, 2013, are a nullity, and to the extent this court has

the authority to do so, they are hereby VACATED.”79

      The prior orders in the record—referenced in the order of

sanctions—are an order on a motion to compel, entered on July 22,

2013, and an order nunc pro tunc, entered on August 21, 2013.80 These

discovery orders were clearly entered after September 1, 2010.

Meaning, per the trial court’s final order, cited supra, the discovery

orders were vacated. Therefore, the trial court abused its discretion by
78 CR 788 (emphasis added).
79 CR 786 (emphasis added).
80 CR 504; CR 541.


                                     22
entering an order of sanctions based upon discovery orders that it

vacated.

     As a result, the trial court, without a doubt, abused its discretion

by entering an order of sanctions without good cause, without stating

facts sufficient to determine whether the sanctions were directly related

to alleged wrongful conduct, without sworn verification of the amount

awarded, and based upon non-compliance with prior orders that it

vacated. Because the trial court abused its discretion, the order of

sanctions should be vacated.

                            CONCLUSION

     The trial court was without subject matter jurisdiction to enter an

order of sanctions on June 11, 2014; therefore, the order should be set

aside because it is void. However, if this Court determines the trial

court did in fact have subject matter jurisdiction—which it did not—the

trial court abused its discretion in entering such order and the order of

sanctions should be vacated.

                               PRAYER

     For these reasons, Cross-Appellant Commercial State Bank of El

Campo, Texas, Inc. respectfully requests this Court to reverse the trial


                                   23
court’s Order Denying Commercial State Bank’s Motion to Vacate Order

of Sanctions and set aside Hlavaty and Strnadel’s June 11, 2014 Order

for Sanctions against Cross-Appellant Commercial State Bank of El

Campo, Texas, Inc. and grant Cross-Appellant Commercial State Bank

of El Campo, Texas, Inc. any such other and further relief to which it is

entitled.

                       Respectfully submitted,

                       ROBERTS MARKEL WEINBERG BUTLER HAILEY PC

                       /s/ Dawn S. Holiday
                       ____________________________________
                       DAWN S. HOLIDAY
                       TBA No. 24046090
                       MIA B. LORICK
                       TBA No. 24091415
                       2800 Post Oak Blvd, 57th Floor
                       Houston, TX 77056
                       Tel: (713) 840-1666;
                       Fax: (713) 840-9404
                       dholiday@rmwbhlaw.com
                       mlorick@rmwbhlaw.com
                       ATTORNEYS FOR APPELLEE / CROSS-
                       APPELLANT, COMMERCIAL STATE BANK
                       OF EL CAMPO, TEXAS, INC.




                                   24
                  CERTIFICATE OF COMPLIANCE

     Pursuant to Rule 9.4 i(3) of the Texas Rules of Appellate

Procedure, I certify that the word count in this Cross-Appellant’s Brief

is 4,388 words.

                                  /s/ Dawn S. Holiday
                                  _________________________________
                                  DAWN S. HOLIDAY




                    CERTIFICATE OF SERVICE

      I hereby certify that a true and correct copy of the      foregoing
instrument was served upon the parties listed below by         facsimile,
messenger, regular U.S. Mail, certified mail, return receipt   requested
and/or electronic service in accordance with the Texas          Rules of
Appellate Procedure on this the 4th day of March, 2015.

Via Email:                           Via Email:
wkronzer@kronzer.com                 singletonlaw@sbcglobal.net
Walter James Kronzer, III            Howard H. Singleton
Walter James Kronzer, III, P.C.      Singleton Law Firm
3000 Weslayan, Suite 247             109 East Milam Street
Houston, TX 77027                    Wharton, TX 77488




                           /s/ Dawn S. Holiday
                           _____________________________________
                           DAWN S. HOLIDAY


                                   25
                           APPENDIX



TAB 1:   Trial Court Order Denying Commercial State Bank’s Motion
         to Vacate Order for Sanctions, signed August 29, 2014.



TAB 2:   Trial Court Order of Sanctions signed June 11, 2014.




                                26 
 
    APPENDIX
     TAB 1




         
 
                                    Cause No. 44,081

COMMERCIAL STATE BANK                     §               IN THE DISTRICT COURT
OF EL CAMPO, TEXAS, INC.,                 §
                 Counterdefendant         §
                                          §
v.                                        ·§       OF WHARTON COUNTY, TEXAS
                                          §
PATRICK HLAVATY, et al.,                  §
                Counterplaintiffs         §               329th JUDICIAL DIS'IRICT


 ORDER DENYING COMMERCIAL STATE BANK'S MOTION TO VACATE ORDER
                       FOR SANCTIONS



      On this day came on-for consideration Counterdefend~;IDts Commercial State Bank

of El Campo, Texas' Motion to Vacate Order and for Sanctions and the Court, after

having considered the Motion and thereto, believes that said Motion should in all things

be denied.

      ORDERED, ADJUDGED and DECREED that Bank' s Motion to Vacate Order

and for Sanctions is denied.

      Signed this2fJ__ day of       &/.2014.
                                               D

      APPROVED & ENTRY REQUESTED:



By:
                                                         l!~fio~o:QM.
                                                                 AUG 2 9 20\4
      SBN: 18436200
      109 East Milam                                                            ., TEXAS
      Wharton, Texas 77488                                ------~~--~~~y
      (979) 532-9800
      (979) 532-9805 FAX
      ATTORNEY FOR COUNTERPLAINTIFFS
      PATRICK HLAVATY AND JEFF STRNADEL
    APPENDIX
     TAB 2




         
 
                                                         b\IDo~2f'r.
                                                                 JUN 11 2.0'4
                                    CsllSeNo. 44,081      ~~~·=
COMMERCIAL STATE BANK                         §        ~~OURT ·
OF EL CAMPO, TEXAS, INC.,                     §
               . Plaintiff,                   §
                                              §
v.                                            §       OF WHARTON COUNTY, TEXAS
                                              §
PATRICK HLAVATY~ et al.,                      §
            Defendants.                       §        329th JUDICIAL DISTRICT


                                 QJWER OF SANCTIONS

      BE IT R£MEllvffiERED that on previous occasions this Court has carried with this

case various prayers for sanctions of Defendant!Counterplaln.tiff Patrick Inavaty and

Defendant/Counterplaintiff Jeff S1madel.          It has become clear to the Couxt that

Plaintifii'Counterdefendao.t Commercial State Bank of El Campo, Texas, Inc.

("Counterdefendanf') has      rep~tedly   conducted itself in the course of this case without

due regard for the authority of this Court as a   coUrt:. Such persistent disrespect has been

an affront to the dignity of this and all courts. This Court accordingly recognizes a need

for it to exercise its inherent authority pursuant to Willy v. Coastal Corp:, 503 U.S . 13 L

( 1992), to sanction this litigan-t for deliberate mi~behavior in the course of these

proceedings.

       In so doing, the Coun has considered that prior orders designed to require

counterdefendant to participate in the litigation process in good faith and :in compliance

with court orders were ineffective. The Court has determined that there is no lesser or
other type of o,;-der or sanction which would serve the purpose of the sanctions o~dered

below. The Court has also considered that the recalcitrant behavior has ocCWTed while

Counterdefendant bas been represented by a succession of different attorneys of recor~

indicating that the disrespect for the judicial process is not a product of poor

representation by counsel but of an underlyjng attitude on the part of the

Counterdefendant itself.

       Counterdefendant Commercial State Bank ofEl Campo~ Texas, Inc. accordingly is

hco:eby ORDERED to pay as a """cti011 by              ¢(! 'f                         , 20l4, to
Cotmterplaintiff Patrick J'avaty and his attorney of record jointly the sum of

                              12-.l/'3.£()
and to Counterplaintiff    Jr.  I
                                 Stmadel and his attorney of record jointly the sum of

                              k 1 l S I , oo                                                .
       It is further ORDERED, AJVDGED~ and DECREED that if Coun.terdefendant

unsuccessfully seeks appellate review of any part of this Order, Counterdef'endant is

ordered to pay reasonable and necessary attorneys'                 fees   of $15,000.00 for

Coll.Ilte:tplaintiffs to respond to such appellate action. If appellate relief is uus.uccessfully

sought from the Supreme Court, Counterdefendant is ordered to pay an additional award

of$10~000.00    in reasonable and necessary attorneys' fees to CounterplaiD.tiffs' and their

attorney ofrecord jointly.


                                                                                                    •
        ORDERED, AD.nJDGED, and DECREED that execution will issue on any part of

this Order that is not timely pai.d.



SIGNED this                             /L           day of _ _ _d~t.-~
                                                                      '---..-4. .=. ;: : . ._·~·, 2014.




                                                    .. ......
      I ~·   I   "" • I   • "   1 o 0   t   1   '
