Opinion
No. 05-07-01527-CV
Opinion Filed April 16, 2009.
On Appeal from the County Court at Law No. 3, Dallas County, Texas, Trial Court Cause No. CC-06-01248-C.
Before Justices RICHTER, LANG, and MURPHY.
MEMORANDUM OPINION
Statewide Remodeling, Inc., appeals the trial court's oral sanction order, requiring Statewide to pay $2,000 in attorney's fees to appellees Joseph R. Odom and Rhonda Odom. Statewide raises two issues on appeal, arguing the trial court erred when it (1) imposed sanctions on Statewide two days after this Court stayed all proceedings in the case, and (2) issued an oral sanction order without satisfying the requirements of Texas Rule of Civil Procedure 13 as to notice, hearing, and stated good cause. Odoms have not filed a brief in this proceeding.
We conclude the trial court erred when it orally ordered sanctions of $2000 in attorney's fees to be paid by Statewide to Odoms without first giving Statewide notice and an opportunity to be heard. Appellant's second issue is decided, in part, in its favor. Accordingly, we reverse the trial court's oral sanction order and vacate that order. We need not address the first issue or other arguments raised by appellant. Because all dispositive issues are well settled in law, we issue this memorandum opinion. See Tex. R. App. P. 47.2(a), 47.4.
I. PROCEDURAL AND FACTUAL BACKGROUND
Odoms sued Statewide for breach of contract, fraud, and violations of the Deceptive Trade Practices and Consumer Protection Act. The case proceeded to arbitration. Statewide filed three motions to enforce the arbitration ruling, but the trial court did not confirm the arbitration award.
On July 25, 2007, Statewide filed a petition for writ of mandamus with this Court, seeking to compel the trial court to rule on Statewide's second amended motion to enforce the arbitration ruling and to confirm the arbitration award. See In re Statewide Remodeling, Inc., 2007 WL 2447272 (Tex.App. 2007, orig. proceeding) (mem. op.). Concurrently, Statewide filed a motion for emergency relief, which this Court granted pursuant to Texas Rule of Appellate Procedure 52.10(b). See id. As of July 25, 2006, all proceedings in the case were stayed until disposition of the petition for writ of mandamus. See id.
On July 27, 2007, Odoms's counsel appeared at a hearing scheduled for Statewide's second amended motion to enforce the arbitration ruling. Neither Statewide, nor its counsel appeared. First, Odoms's counsel advised the trial court that her clients chose not to appear for the hearing because of the stay order issued by the Court of Appeals. Then, the following argument was made by counsel for Odoms to the trial court:
I am not sure if we are going forward today. I got a phone call and a letter faxed to my — well, first I get a phone call from the court clerk in the Fifth Circuit Court of Appeals asking for my bar number, saying that Statewide field a petition for mandamus and a stay of all further actions from this court. And I was not ever made aware of it, I was never served with anything. . . .[then] I get a phone call on my cell stating that the order was signed. . .I actually received. . .a copy of the petition [late on July 26th]. At this point, Odoms's counsel showed the trial court a copy of the stay order. The trial court stated on the record the court had no knowledge of the filing of the petition for writ of mandamus and the issuance of the stay order. Then, Odoms's counsel made a general oral motion to dismiss Statewide's case, which the trial court denied. Further, Odoms's counsel made an oral motion for sanctions and the trial court responded:
I'll let you make an oral motion for sanctions. . .and will grant you sanctions for $2,000 [in attorney's fees] since there is no notice of any mandamus whatever, and this was still on the docket today. I will allow them a motion for rehearing on this. I will need to put this into your motion to-which I expect filed later this afternoon-correspond with the date you made the oral motion . . . But they had notice to be here. There is no reason why they're not that I can determine. So I will grant you the 2,000.
Later that day, Odoms filed a written motion for sanctions based on Texas Rule of Civil Procedure 13. The record contains no written order granting either the oral or the written motion for sanctions.
On August 30, 2007, we conditionally granted the petition for writ of mandamus and ordered the trial court to rule on Statewide's second amended motion to enforce the arbitration ruling and to confirm the arbitration award in light of Odoms's failure to file a motion to vacate the arbitration ruling. See In re Statewide, 2007 WL 2447272. O n October 5, 2007, the trial court signed a final judgment confirming the arbitration award.
On October 30, 2007, Statewide filed a motion for reconsideration of the trial court's oral sanction order. In its motion, Statewide alleged that on October 19, 2007, it received a letter from the trial court that referred to the hearing on July 27, 2007. Statewide asserted the letter prompted it to review the reporter's record of the hearing and upon reviewing the reporter's record, it first learned of the trial court's oral sanction order. This appeal followed.
II. ORAL SANCTION ORDER
As a preliminary matter, we address the effect of an oral sanction order. Generally, to be effective, an order must be in writing. See State Farm Ins. Co. v. Pults, 850 S.W.2d 691, 693 (Tex.App. 1993, no writ) ( citing Utilities Pipeline Co. v. American Petrofina Marketing, 760 S.W.2d 719, 723 (Tex.App. 1988, no writ). However, this Court has determined an oral sanction order may be effective if appellant (1) refers to the oral pronouncement as an "order," and (2) does not argue that the "want of an order of record denies the trial court the right to impose the sanctions in question." Tate v. Commodore County Mutual Ins. Co., 767 S.W.2d 219, 221-22 (Tex.App. 1989, writ denied).
We must examine Statewide's treatment of the subject order. See id. First, Statewide concedes the trial court's pronouncement at the hearing on July 27, 2006 was an oral "order" that was not reduced to writing. Cf. id. at 221. Specifically, it states in its supplemental letter brief, "no written order of sanctions was ever entered," and further "the transcript of the hearing is the only known memorialization of the sanction order." Second, Statewide does not complain on appeal about the want of a written sanction order, but instead challenges the issuance of the oral sanction order on procedural grounds. Cf. id. at 222. Accordingly, as in Tate, we conclude "the fact that the [July 27, 2007] order was not reduced to writing by the trial court and entered of record does not destroy the effectiveness of the order." See id. at 222. Thus, we examine the issues on appeal.
III. IMPOSITION OF SANCTIONS
In its second issue, Statewide argues the trial court erred when it orally ordered sanctions of $2000 in attorney's fees to be paid by Statewide to Odoms without satisfying the requirements of Texas Rule of Civil Procedure 13 as to notice, hearing, and stated good cause.
A. Standard of Review
In reviewing a sanction order, we review the entire record. Am. Flood Research, Inc. v. Jones, 192 S.W.3d 581, 583 (Tex. 2006); see also Response Time, Inc. v. Sterling Commerce, Inc., 95 S.W.3d 656, 659 (Tex.App. 2002, no pet.). We will not set aside a sanction order absent an abuse of discretion. Cire v. Cummings, 134 S.W.3d 835, 838 (Tex. 2004). A trial court abuses its discretion by (1) acting arbitrarily and unreasonably, without reference to any guiding rules or principles, or (2) misapplying the law to the established facts of the case. Id. at 839 ( citing Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985).
B. Applicable Law
A trial court has "all powers necessary for the exercise of its jurisdiction and the enforcement of lawful orders." Tex. Gov't Code Ann. § 21.001(a) (Vernon 2004). Also, a trial court has the power to punish abuses of the legal process based on various rules, including Rule 13, and the power implicit in a statute. See Metzger v. Sebek, 892 S.W.2d 20, 50-51 (Tex.App. 1994, writ denied). Further, a trial court has inherent power to sanction for an abuse of the judicial process that may not be covered by any specific rule or statute. See Eichelberger v. Eichelberger, 582 S.W.2d 395, 398 (Tex. 1979).
The power to sanction is limited by the due process clause of the United States Constitution. In re Bennett, 960 S.W.2d 35, 40 (Tex. 1997). Fundamental due process requires that a motion for sanctions provide "notice reasonably calculated, under the circumstances, to appraise interested parties of the pendency of the action and afford them the opportunity to present their objections." See In re L.A.M. Assocs., 975 S.W.2d 80, 83 (Tex.App. 1998, orig. proceeding) ( citing Peralta v. Heights Med. Ctr., Inc., 485 U.S. 80, 84 (1988)). When an interested party does not receive notice that sanctions might be levied and is denied the opportunity to be heard on the issue of sanctions, it is error for the trial court to impose sanctions. Bisby v. Dow Chem. Co., 931 S.W.2d 18, 21 (Tex.App. 1996, no writ); see also Plano Saving Loan Ass'n v. Slavin, 721 S.W.2d 282, 284 (Tex. 1986).
C. Application of Law to the Facts
While Odoms's written motion for sanctions relies on Rule 13, according to the reporter's record from the hearing on July 27, 2007, Odoms's counsel did not state a legal basis for the oral motion for sanctions. Similarly, the trial court was silent as to any specific rule, statute, or common law basis for the oral sanction order.
Regardless of whether sanctions were imposed under the authority of Rule 13 or under the trial court's inherent power to sanction, Statewide was entitled to notice and an opportunity to be heard. See L.A.M., 975 S.W.2d at 83 ( citing Peralta, 485 U.S. at 84). In this case, the hearing on July 27, 2007 was set to address Statewide's second amended motion to enforce the arbitration ruling. Yet, it was then and there, without notice to Statewide, Odoms's counsel made her oral motion for sanctions and the trial court orally ordered sanctions. Cf. Bisby, 931 S.W.2d at 21. In Bisby, addressing a similar fact situation, the Houston First District Court of Appeals concluded the trial court erred when it imposed sanctions on appellant at a hearing set to address a matter unrelated to any motion for sanctions where appellant was neither present, nor represented by counsel. See id. at 20.
We conclude the trial court abused its discretion when it imposed sanctions on Statewide because Statewide did not receive advance notice of Odoms's motion for sanctions and was denied an opportunity to be heard prior to the imposition of sanctions. See Bisby, 931 S.W.2d at 21. Statewide's second issue is decided in Statewide's favor as to this argument. We need not address Statewide's first issue or other arguments raised.
IV. CONCLUSION
We conclude the trial court erred when it orally ordered sanctions of $2000 in attorney's fees to be paid by Statewide to Odoms without providing Statewide with notice of the motion for sanctions and an opportunity to be heard prior to the imposition of sanctions.
We reverse the trial court's oral sanction order of July 27, 2007 awarding attorney's fees of $2000 to be paid to Odoms by Statewide and vacate that order.