1st & Trinity Super Majority, LLC v. Milligan

Decision Date14 July 2022
Docket Number08-20-00230-CV
Citation657 S.W.3d 349
Parties 1ST AND TRINITY SUPER MAJORITY, LLC, and 3rd and Congress Super Majority, LLC, Appellants, v. Gregory S. MILLIGAN, in His Individual Capacity and as Receiver for WC 1st and Trinity LP and WC 3rd and Congress, LP ; the Roy F. & JoAnn Cole Mitte Foundation; Stephen Wayne Lemmon; Ray Charles Chester; and Rhonda Bear Mates, Appellees.
CourtTexas Court of Appeals

Michael A. Shaunessy, Andrew Edge, Austin, for Appellees Chester, Ray, The Roy F. & Joann Cole Mitte Foundation.

Ray Chester, Pro Se.

Rhonda Mates, Stephen W. Lemmon, for Appellees Gregory S. Milligan, in his Individual Capacity and as Receiver for WC 1st and Trinity LP and WC 3rd and Congress, LP, Lemmon, Stephen Wayne, Mates, Rhonda Bear.

Michael J. Wynne, Houston, for Appellants Michael John Wynne, PLLC, Gregor Wynne Arney, PLLC.

Michael J. Wynne, Pro Se.

Henry J. Paoli, El Paso, for Appellant Wynne, Michael J.

Eric John Cassidy, Houston, for Appellants 3rd and Congress Super Majority, LLC, 1st and Trinity Super Majority, LLC.

Before Rodriguez, C.J., Palafox, and Alley, JJ.

OPINION

JEFF ALLEY, Justice This appeal arises from a lawsuit filed by the majority owners in two limited partnerships against a court appointed receiver, the attorneys advising the receiver, a nonprofit entity that moved for the appointment of the receiver, and its attorney. The decision to appoint the receiver was separately challenged in a different case appealed to the Third Court of Appeals, which recently upheld the appointment. See WC 1st & Trinity, LP v. Roy F. & JoAnn Cole Mitte Found. , No. 03-19-00799-CV, 2021 WL 4465995 (Tex.App.--Austin Sept. 30, 2021, pet. denied) (mem. op.).1 In our case, the trial court dismissed the claims against all the defendants based on the Texas Citizens Participation Act (the TCPA) and Rule 91a of the Texas Rules of Civil Procedure. The trial court further awarded attorney's fees and sanctions to the named defendants. For the reasons explained below, we affirm the trial court in all respects.

I. FACTUAL BACKGROUND

We draw the following factual background from the record in our case, as well as that outlined in the Third Court's recent opinion in WC 1st & Trinity, LP and related cases.2 And as we detail below, the same trial judge that entered the order here also heard the principal matters at issue in WC 1st & Trinity, LP. Accordingly, the several proceedings below cannot be considered in isolation of each other.

A. The Original Agreement

Nate Paul is a real estate investor who does business through a network of entities which used "World Class" or "WC" in their names. One such entity is the "World Class Capital Group," but he also owned and controlled two other entities, known as "WC 1st and Trinity, LP" and "WC 3rd and Congress, LP" (collectively, the Limited Partnerships). These two limited partnerships each owned properties in downtown Austin at the locations suggested by their names: "WC 1st and Trinity, LP" owned property at the corner of First and Trinity Streets, and "WC 3rd and Congress, LP" owned property at the corner of Third Street and Congress Avenue.

The Limited Partnerships designated the World Class Capital Group as their limited partner and named the general partners and the majority interest holders as two limited liability corporations with almost the same name as the partnerships themselves: "WC 1st and Trinity GP, LLC" and "WC 3rd and Congress GP, LLC" (collectively, the World Class General Partners). Nate Paul also owns and controls these two entities. WC 1st & Trinity, LP , 2021 WL 4465995, at *1. In accordance with the limited partnership agreements, each general partner owned a controlling interest in its respective limited partnership and had sole authority to manage the respective limited partnership's affairs.

In 2011, Appellee, the Roy F. & Joann Cole Mitte Foundation (Mitte), a nonprofit organization that provides community grants and scholarships, invested a portion of its endowment with the Limited Partnerships. It acquired approximately 16% of the Trinity Limited Partnership, and approximately 6% of the Congress Limited Partnership. Id. Mitte signed agreements in which it acknowledged that the World Class General Partners would retain the sole authority to manage the partnerships.

B. The Document Production Lawsuit and the Arbitration Proceedings

The dispute between Mitte and the several World Class entities began in 2018, when the World Class General Partners allegedly refused Mitte's request to review financial information about the Limited Partnerships. Mitte sued in the 126th District Court of Travis County, naming as defendants the World Class General Partners and the Limited Partnerships (collectively, the World Class Entities). In response to the suit, the World Class Entities invoked an arbitration provision in the limited partnership agreements.

In July 2019, the parties reached a settlement agreement in the arbitration proceedings under which the World Class General Partners agreed to purchase Mitte's interests in the Limited Partnerships for $10.5 million. But four days before the payment was due, the FBI raided the World Class Entities’ office, as well as Nate Paul's residence, in connection with a pending federal criminal investigation. On the day before the payment deadline, the World Class Entities informed Mitte that no payment would be made under the settlement agreement. The settlement agreement gave Mitte two options at that point: (1) end the arbitration and sue for breach of the settlement agreement; or (2) declare the agreement void and continue with the arbitration. Mitte chose the latter option, and the arbitration continued.

C. The Arbitrator Appoints a Receiver

In October 2019, Mitte filed a motion asking the arbitrator to appoint a receiver over the Limited Partnerships, asserting that their assets were "at imminent risk of being lost, removed, or materially injured." The motion cited the FBI raid, the World Class Entities’ failure to pay the amount due under the settlement agreement, and other factors showing that the entities might be in financial distress. The arbitrator granted the motion and appointed Appellee Gregory S. Milligan as the receiver. But at the World Class Entities’ request, the arbitrator delayed signing the receivership order over a weekend to accommodate their request for more time to review the order. By Monday, however, the World Class Entities represented to the arbitrator and Mitte's attorney that they had sold the two properties to unnamed "affiliates" of the World Class Entities; the Trinity property had purportedly sold for $23 million, and the Congress property for $25 million—a representation later found to be false.

The arbitrator, though, signed the order appointing Milligan as receiver over the properties. Less than a month later, Mitte filed a petition with the district court to confirm Milligan's appointment as receiver, which Judge Joe Carroll, as presiding judge for the 126th district court, granted (the Confirmation Order). The World Class Entities then filed an interlocutory appeal from the Confirmation Order as well as a petition for mandamus relief with the Third Court of Appeals, seeking a stay of the order. The Third Court temporarily stayed the Confirmation Order, and "prohibit[ed] the alienation of the real property owned by the [Limited] Partnerships while the Court's stay is in place." In re WC 1st & Trinity, LP , No. 03-19-00798-CV, 2019 WL 5793123, at *1 (Tex.App.--Austin Nov. 6, 2019, order) (mem. op.) (per curiam).

D. The District Court Appoints a Receiver

In the meantime, Mitte petitioned the same district court to appoint a receiver over the Limited Partnerships and the partnership properties under section 64.001 of the Civil Practice and Remedies Code. See TEX.CIV.PRAC. & REM.CODE ANN. § 64.001 (enumerating circumstances under which "[a] court of competent jurisdiction may appoint a receiver"); see also TEX.BUS.ORGS.CODE ANN. § 11.404 ("Appointment of Receiver to Rehabilitate Domestic Entity"). The World Class Entities moved to stay the receivership proceedings in the district court, arguing that their interlocutory appeal of the Confirmation Order stayed further proceedings in the district court proceedings.

Judge Jan Soifer, sitting as presiding judge, held a hearing on both the stay motion and the motion for an appointment of the receiver. Testimony at the hearing outlined, among other things, the false representation the World Class Entities had made to the arbitrator about the sale of the properties. Judge Soifer then issued an order appointing Milligan as receiver over the Limited Partnerships and all their properties (the Appointment Order). The Appointment Order not only granted Milligan all powers to control the Limited Partnerships’ assets, but also granted Milligan the same authority to manage the Limited Partnerships that the general partners themselves possessed under the respective partnership agreements.

The World Class Entities subsequently filed an interlocutory appeal from the Appointment Order and sought emergency relief prohibiting the alienation of the properties, which the Third Court of Appeals granted. WC 1st & Trinity, LP v. Roy F. & JoAnn Cole Mitte Found. , No. 03-19-00905-CV, 2019 WL 6972679, at *1 (Tex.App.--Austin Dec. 19, 2019, order) (mem. op.) (per curiam). The Third Court of Appeals also abated the appeal and remanded the case to the district court to determine whether it should require the World Class Entities to file a supersedeas bond. Judge Soifer thereafter ordered the World Class Entities to post a $3,875,305 supersedeas bond that was ultimately due by April 21, 2020. WC 1st & Trinity, LP v. Roy F. & JoAnn Cole Mitte Found. , No. 03-19-00905-CV, 2020 WL 2832486, at *1 (Tex.App.--Austin May 29, 2020, order) (mem. op.) (per curiam).

No bond was posted by that date, but on April 21, 2020, Nate Paul created two Delaware corporate entities, which are our Appell...

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