ALLSTATE INSURANCE COMPANY, ET AL. v. DAVID GARCIA AND SAVANNAH ROBINSON--Appeal from County Court at Law No 1 of Hidalgo County

NUMBER 13-02-092-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG

ALLSTATE INSURANCE COMPANY, ET AL., Appellant,

 
v.

DAVID GARCIA AND SAVANNAH ROBINSON, Appellees.

 
On appeal from the County Court at Law No. 1
of Hidalgo County, Texas.
MEMORANDUM OPINION
Before Justices Hinojosa, Ya ez, and Castillo
Opinion by Justice Castillo

This is an appeal from the denial of a motion for attorney sanctions arising out of a bad-faith insurance claim regarding toxic mold. Allstate Insurance Company, Allstate Texas Lloyd's Company, and Robert H. Heard ("Allstate"), appellants, appeal an order denying their motion for sanctions against David Garcia and Savannah Robinson ("plaintiffs' counsel"), appellees. In a single issue, Allstate contends that the trial court abused its discretion in refusing to sanction plaintiffs' counsel. We affirm. This is a memorandum opinion. The parties are familiar with the facts, procedural history, pleadings, and evidence. We will not recite them here except as necessary to advise the parties of our decision and the basic reasons for it. See Tex. R. App. P. 47.4.

I. PROCEDURAL BACKGROUND

On August 1, 2001, plaintiffs' counsel filed suit against Allstate on behalf of Fred Wood and Naomi Wood. Shortly thereafter, they filed a "Motion to Deposit Funds in the Registry of the Court" to provide additional living expenses for the Woods because toxic mold made their home untenable. The trial court granted the motion on September 13, 2001. Before it deposited the funds required by the order, Allstate learned that Fred Wood had instructed plaintiffs' counsel not to pursue the litigation. On September 27, 2001, Allstate filed a "Sworn Motion to Show Authority and for Sanctions." In response, plaintiffs' counsel produced an attorney fee contract signed by Fred Wood and Naomi Wood. On October 3, 2001, pursuant to Fred Wood's instructions, plaintiffs' counsel filed "Plaintiff's [sic] Motion for Nonsuit without Prejudice." On October 5, 2001, Allstate filed an "Amended Verified Motion to Show Authority; Amended Motion for Sanctions; and Motion to Vacate or Set Aside Order Compelling Deposit of Funds into Registry of Court." In the amended motion, Allstate requested sanctions against plaintiffs' counsel on the grounds that the lawsuit was brought in bad faith and for the purpose of harassment in violation of rule 13 of the rules of civil procedure (1) and section 10.004 of the civil practice and remedies code. (2) The trial court held a hearing on the motions. Fred Wood testified he had not directed plaintiffs' counsel to file the lawsuit, although his wife had, nor had he authorized them to file the motion to deposit funds. He said that the mold problem in their home was not severe enough to require the Woods to have it removed or to live elsewhere. The parties do not dispute that Allstate did not deposit any funds into the registry of the court pursuant to the court's order. The trial court signed an "Order Denying Post Litigation Motions" on November 26, 2001. On March 4, 2002, the trial court signed an order granting the non-suit. This appeal ensued.

II. JURISDICTION

Allstate filed its original "Sworn Motion to Show Authority and for Sanctions" on September 27, 2001, before the plaintiffs filed their motion for nonsuit on October 3, 2001. Accordingly, we find that the trial court had continuing jurisdiction to hear and determine the sanctions motions after the nonsuit. Tex. R. Civ. P. 162; see In re Bennett, 960 S.W.2d 35, 38 (Tex. 1997) (per curiam).

III. APPLICABLE LAW
A. Presumptions and Burdens of Proof in Sanctions Motions

Generally, courts presume that pleadings and other papers are filed in good faith. GTE Communications Sys. Corp. v. Tanner, 856 S.W.2d 725, 730 (Tex. 1993) (orig. proceeding). In determining if sanctions are proper, the trial court must examine the circumstances existing when the litigant filed the pleading. See Griffin Indus. v. Grimes, No. 04-02-00430-CV, 2003 Tex. App. LEXIS 3439, at *11-12 (San Antonio Apr. 23, 2003, no pet. h.) (applying presumption to chapter 10); Home Owners Funding Corp. of Am. v. Scheppler, 815 S.W.2d 884, 889 (Tex. App.-Corpus Christi 1991, no writ) (applying presumption to rule 13). The trial court considers the acts or omissions of the represented party or counsel, not merely the legal merit of a pleading or motion. Grimes, 2003 Tex. App. LEXIS 3439, at*11; N.Y. Underwriters Ins. Co. v. State Farm Mut. Auto. Ins. Co., 856 S.W.2d 194, 205 (Tex. App.-Dallas 1993, no writ). The party seeking sanctions bears the burden of overcoming the presumption of good faith in the filing of pleadings. Tanner, 856 S.W.2d at 731.

B. Standard of Review

Imposing an available sanction is left to the sound discretion of the trial court. Koslow's v. Mackie, 796 S.W.2d 700, 704 (Tex. 1990); Rudisell v. Paquette, 89 S.W.3d 233, 236 (Tex. App.-Corpus Christi 2002, no pet.). We may not substitute our judgment for the trial court's. Davis v. Huey, 571 S.W.2d 859, 862 (Tex. 1978). The test for determining whether the trial court abused its discretion is whether it acted arbitrarily or unreasonably, without reference to any guiding rules or principles. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985); Alejandro v. Bell, 84 S.W.3d 383, 392 (Tex. App.-Corpus Christi 2002, no pet.). A trial court abuses its discretion in imposing sanctions only if it bases its order on an incorrect view of the law or an erroneous assessment of the evidence. Randolph v. Jackson Walker, L.L.P., 29 S.W.3d 271, 276 (Tex. App.-Houston [14th Dist.] 2000, pet. denied). These standards apply to a trial court's refusal to impose a particular sanction as well as its imposition of sanctions. See, e.g., Smithson v. Cessna Aircraft Co., 665 S.W.2d 439, 442-43 (Tex. 1984); Tenngasco Gas Gathering Co. v. Fischer, 624 S.W.2d 301, 303 (Tex. App.-Corpus Christi 1981, writ ref'd n.r.e.). A party attacking a trial court's decision as an abuse of discretion carries a heavy burden. Johnson v. Fourth Court of Appeals, 700 S.W.2d 916, 917 (Tex. 1985) (orig. proceeding).

IV. ANALYSIS

In arguing for reversal, Allstate relies on authority upholding a trial court's discretionary imposition of sanctions. It does not cite any authority in which an appellate court reversed a trial court's decision not to impose sanctions under rule 13 or chapter 10, nor have we found any. On the other hand, courts readily affirm a trial court's refusal to impose sanctions. See, e.g., Smithson, 665 S.W.2d at 443 (discovery sanction request); Grimes, 2003 Tex. App. LEXIS 3439, at *20 (chapter 10 sanction request); EP Operating Co. v. MJC Energy Co., 883 S.W.2d 263, 270 (Tex. App.-Corpus Christi 1994, writ denied) (discovery sanction request). We note that one court held that a trial court's refusal to exclude a witness's testimony as a discovery sanction was an abuse of discretion. Dennis v. Haden, 867 S.W.2d 48, 51 (Tex. App.-Texarkana 1993, writ denied). However, the abuse of discretion in that case occurred in the context of the trial court's error in excluding other testimony. Id. at 52. We are not persuaded that Allstate met its heavy burden of showing that the trial court's refusal here to impose sanctions was an abuse of discretion. See Johnson, 700 S.W.2d at 917.

The fee agreement produced by plaintiffs' counsel showed that the Woods authorized plaintiffs' counsel's representation. Plaintiffs' counsel promptly complied with Fred Wood's instructions to dismiss the case. Allstate was not required to deposit any funds into the registry of the court. Scrutinizing the record with an abuse-of-discretion standard in mind, as we must, we cannot conclude the trial court acted unreasonably, arbitrarily, or without reference to rule 13 or section 10 in denying Allstate's motion for sanctions. Tex. R. Civ. P. 13; Tex. Civ. Prac. & Rem. Code Ann. 10.004 (Vernon 2002). "An abuse of discretion does not exist if the trial court bases its decision on conflicting evidence and some evidence reasonably supports the trial court's decision." Zorilla v. Wahid, 83 S.W.3d 247, 255 (Tex. App.-Corpus Christi 2002, no pet.). We overrule Allstate's sole issue.

Accordingly, we affirm the trial court's sanction denial order.

ERRLINDA CASTILLO

Justice

Opinion delivered and filed

this 18th day of July, 2003.

1. Tex. R. Civ. P. 13.

2. Tex. Civ. Prac. & Rem. Code Ann. 10.004 (Vernon 2002).