Angeles/Quinoco Securities Corp. v. Collison

• Citation: 841 S.W.2d 511
• Decision Date: 05 November 1992
• Docket Number: No. C14-92-00018-CV,C14-92-00018-CV
• Parties: ANGELES/QUINOCO SECURITIES CORP., Angeles Corporation, Quinoco Oil & Gas, Inc., Quinoco Resources, Inc., Quinoco Energy, Inc., Energy Development Partners, Ltd., Appellants, v. William A. COLLISON, Sr., Juanita Collison, et al., Appellees. (14th Dist.)
• Court: Texas Court of Appeals

Page 511

841 S.W.2d 511

ANGELES/QUINOCO SECURITIES CORP., Angeles Corporation Quinoco Oil & Gas, Inc., Quinoco Resources, Inc. Quinoco Energy, Inc., Energy Development Partners, Ltd., Appellants, v. William A. COLLISON, Sr., Juanita Collison, et al., Appellees.

No. C14-92-00018-CV.

Court of Appeals of Texas Houston (14th Dist.).

Nov. 5, 1992.

Bruce H. Golden, Randall C. Owens, Houston, for appellants.

C. Henry Kollenberg, Michael M. Wilson, Houston, for appellees.

Before JUNELL, ROBERTSON and DRAUGHN, JJ.

OPINION

ROBERTSON, Justice.

Appellants bring this interlocutory appeal from the district court's granting of appellees' motion to maintain their cause of action as a class action. TEX.R.CIV.P. 42; TEX.CIV.PRAC. & REM.CODE ANN. § 51.014(3) (Vernon Supp.1992). Appellants bring four points of error. We affirm.

The district court granted certification on behalf of the class consisting of all limited partners of the twelve Quinoco Income Partnerships (QUIP) and the six Quinoco Pension Partnerships (QPI). QUIP and QPI were limited partnerships formed from 1982 to 1985. On August 4, 1986, Energy Development Partners, Ltd. (EDP) along with the general partners of the eighteen limited partnerships made an exchange offer to the limited partners of both QUIP and QPI. Appellees are limited partners of QUIP and QPI. Appellees claim the exchange offer was unfair as to all limited partners of QUIP and QPI, and therefore, appellants breached their fiduciary duty by making the offer. Appellees allege the offer was structured and promoted for the benefit of the appellants and not in the interest of the appellees.

Our review of the trial court's determination that this case should proceed as a class action is limited to determining whether the trial court abused its discretion. Amoco Production Co. v. Hardy, 628 S.W.2d 813, 816 (Tex.App.--Corpus Christi 1981, writ dism'd). A trial court abuses its discretion by failing to properly apply the law to the undisputed facts. Id. The findings and the determinations of the trial court should not be disturbed on appeal unless there exists a clear abuse of discretion. Chappell Hills, Inc. v. Boatwright, 702 S.W.2d 687, 690 (Tex.App.--Houston [14th Dist.] 1985, no writ). An abuse of discretion may be found only in cases where, after searching the record, it is clear that the trial court's decision was arbitrary and unreasonable. Adams v. Reagan, 791 S.W.2d 284, 287 (Tex.App.--Fort Worth 1990, no writ) (citations omitted). We are required to view the evidence in the light most favorable to the trial court's action, and indulge in every presumption which would favor the trial court's action. Parks v. U.S. Home Corp., 652 S.W.2d 479, 485 (Tex.App.--Houston [1st Dist.] 1983, writ dism'd w.o.j.).

Rule 42 required the appellees to show their cause of action was suitable for class certification. Appellees had the burden to prove: (1) the number of plaintiffs were so numerous as to be impracticable to join all class members; (2) there are common questions of law or fact to the class; (3) the representative parties have claims or defenses typically common to the class; and (4) the representative parties will fairly and adequately protect the interest of the class. TEX.R.CIV.P. 42(a). In addition, the appellees had to show the action was maintainable under one of the provisions of 42(b). On October 22, 1991 a hearing was held and on December 9, 1991, the trial judge signed the order certifying the appellees' cause of action as a class action. In its order the court expressly found:

... the requirements of Rule 42(a)(1), (2), (3) and (4) and of Rule 42(b)(4) are satisfied. Specifically, the Court finds that (1) the class is so numerous that joinder of all common members is impracticable, (2) there are questions of law and fact common to the class, (3) the claims of the plaintiff class representatives are typical of the claims of the class, and (4) the plaintiff class representative will fairly and adequately protect the interest of the class. Further, the Court expressly finds that the questions of law and fact common to the members of the class predominate over any issues affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy.

Although we have been provided with the trial court's conclusions of law as recited in its order, they are not supported by findings of fact. The rules of appellate procedure provide a trial judge need not file findings of facts and conclusions of law, in connection with appealable interlocutory orders, but may do so within 30 days after the order is signed. TEX.R.APP. 42(a)(1). In Franklin v. Donoho, the court said that in appeals involving the question of whether the trial court abused its discretion findings of fact embody the trial judge's determinations on the controlling factual issues. 774 S.W.2d 308, 311 (Tex.App.--Austin 1989, no writ). The court carefully explained why such findings of facts were so important in appeals involving abuse of discretion:

[i]n appeals of this kind, it is axiomatic that every presumption is indulged in favor of the trial judge's decision, and the appellant must provide an appellate record sufficient to demonstrate that the decision does indeed carry the vice of reversible error. Where, as here, the record contains no specific findings of fact, but it does contain a statement of facts and the documents introduced in evidence, the appellate court is bound to presume the trial judge found every issuable factual proposition necessary to sustain his judgment, provided: (1) the proposition is one raised by the pleadings and supported by the evidence; and (2) the trial judge's decision can be sustained on any reasonable theory that is consistent with the evidence and the applicable law, considering only the evidence favorable to the decision. To prevail in this situation, the appellant may show that the undisputed evidence negatives one or more of the elements essential to the decision; or he may show that the appellee's pleadings omit one or more of the essential elements, and that the trial was confined to the pleadings.

Id. (citations omitted) (emphasis in original). As in Franklin, the appellants do not complain of any defect in appellees' pleadings. Therefore, we must conclude the order below is presumptively correct, and that the undisputed facts do not negative any essential element of the trial court's decision to issue the order.

In their first point of error, appellants contend the trial court erred in its determination that appellees, as class representatives, would adequately represent the members of the class. In particular, appellants point to the five year delay between the filing of the lawsuit and the actual hearing for certifying the class. In support of this contention, appellants cite a litany of cases where courts have denied certification because of delay. ¹

Rule 42 requires that as soon as practicable, a determination should be made on whether a cause of action should be maintained as a class action. TEX.R.CIV.P. 42(c)(1). The federal provision is very similar. FED.R.CIV.P. 23(c)(1). The United States Supreme Court has said the failure of a named plaintiff to move for certification bears strongly on the issue of the adequacy of representation. East Texas Motor Freight System Inc. v. Rodriguez, 431 U.S. 395, 405, 97 S.Ct. 1891, 1897, 52 L.Ed.2d 453 (1977).

However, the court did not say delay in and of itself was enough to show inadequate representation. It is still a question for the trial judge to review and to use discretion to make the appropriate determination. Of the twelve cases cited by appellants, eight are opinions from federal district courts. These district courts used their discretion to determine the delay in each individual case justified the denial of class certification. The facts of many of the cases cited by appellants have no bearing on this case. Even if a particular case could be considered somewhat similar, our review would still be predicated on finding an abuse of discretion by the lower court.

In oral argument, counsel for appellants asked this court to hold that a delay of five years showed inadequacy of representation as a matter of law. This we cannot do. We think the determination should be made by the trial court looking at the facts of each case. Just as the facts of the cases cited by appellants caused the courts to deny certification, so have the facts of other cases involving delays as long as six years not precluded certification. ² Therefore, the delay in this case would not set a dangerous precedent as predicted by counsel for appellants during argument before this court. Judicial discretion has been frequently applied where the claim of untimeliness is raised in regard to a class certification motion. Sanders v. Lum, 76 F.R.D. 1, 3 (S.D.N.Y.1976) (citations omitted).

Appellees argue that appellants must show more than delay alone, that they must also show prejudice by the delay. We agree that delay should only play a decisive role if it results in prejudice to the class or the opposing party. Appellants state they have been prejudiced because of the change in their business relationships and the departure of many key defense witnesses. However, a delay of six years was found not sufficiently prejudicial despite claims of fading memories and unavailability of defense witnesses. Dura-Bilt Corp. v. Chase Manhattan Corp., 89 F.R.D. 87, 101-02 (S.D.N.Y.1981). Some courts have considered the defendant's failure to bring to the court's attention the delay of plaintiff's in seeking class certification as a relevant factor when considering prejudice allegedly caused by the delay. Id. at 102 (citing Finley v. Parvin/Dohrmann Co., Inc., 520 F.2d 386, 392 (2d Cir.1975)).

Appellants allege the appellees' motion for certification contained no allegations or information...