Clayton Mountain Dev. v. Ruff, 11-20-00101-CV

CourtCourt of Appeals of Texas
Writing for the CourtW. BRUCE WILLIAMS, JUSTICE
Docket Number11-20-00101-CV
Decision Date05 August 2021



No. 11-20-00101-CV

Court of Appeals of Texas, Eleventh District

August 5, 2021

On Appeal from the 29th District Court Palo Pinto County, Texas Trial Court Cause No. C46164-2

Panel consists of: Bailey, C.J., Trotter, J., and Williams, J.



After an arbitration panel awarded Appellee Suzann Ruff $49, 000, 000 in actual damages on her tort claims against her son, Michael Ruff, [1] Suzann asserted claims in this suit against Appellant Clayton Mountain Development, LLC (CMD), among other defendants, based on CMD's alleged participation in Michael's conduct. Subsequently, in her sixth amended petition, Suzann sought (1) to recover actual damages of over $15, 000, 000 on her claims for "knowing participation and breach of fiduciary duty and conspiracy;" (2) punitive damages on her claims for conspiracy, fraud, breach of fiduciary duties, and intentionally wrongful conduct; and (3) enforcement of the constructive trust imposed in an arbitration award on Michael's interest in certain entities and property. Suzann also requested that any defendant that had marketed and sold tracts of land from her property be required to account for its participation in the marketing and sale of the property and the disposition of funds received from the sales.

Based on CMD's failure to comply with discovery orders, the trial court struck CMD's answer and rendered default judgment against CMD. The trial court ordered that Suzann was the sole owner of CMD and that (1) a deed between CMD and Appellant MAR Living Trust (MAR); (2) a deed between MAR and Clayton Mountain Partners, LLC (CMP), which is not involved in this ligation; and (3) a Memorandum of Assignment of Developer's Rights between MAR and CMP were void. The trial court then severed Suzann's claims against CMD into a separate lawsuit. After we abated this appeal, the trial court signed an amended judgment in the severed cause of action in which it clarified that the judgment against CMD was final.

In six issues, CMD contends (1) that the assigned judge did not have authority to sign the amended final judgment; (2) that the amended final judgment is interlocutory; and (3) that the trial court erred when it granted the motion to sever, struck CMD's answer, granted relief that "amounts to unliquidated damages" without hearing evidence, and granted judgment against MAR. We hold that the assigned judge had authority to sign the amended judgment and that the amended judgment is final. After considering the merits of CMD's remaining issues, we (1) affirm the trial court's sanctions order in which it struck CMD's answer, (2) reverse the amended judgment and the trial court's order in which it severed Suzann's claims against CMD, and (3) remand this case to the trial court for further proceedings.


In 2011, Suzann sued Michael in probate court in Dallas County. On February 19, 2014, the probate court granted Michael's motion to compel arbitration and stayed the litigation in the probate court. While the arbitration was pending, Suzann filed this case in Palo Pinto County on October 21, 2014, against CMD; Destination Development Partners, Inc. (DDP); Destination Development Community III, Ltd., f/k/a Icarus Investments IV, Ltd. (DDC); CM Resort LLC; and CM Resort Management LLC (collectively the Original Defendants). Suzann alleged that, based on her contribution of real property located in Palo Pinto County to a development project, she was a limited partner, joint venturer, or investor in the project and did not received any distribution of assets when the project was liquidated. Suzann asserted claims for breach of fiduciary duty, conspiracy, and conversion. Suzann also requested an accounting and the imposition of a constructive trust (1) on all proceeds, funds, or property in the possession of the Original Defendants that was obtained as a result of DDP's and DDC's breaches of fiduciary duty or as a result of a conspiracy between DDP, CMD, CM Resort, and CM Resort Management to breach DDP's fiduciary duties to Suzann; (2) on all future proceeds obtained or received from the sale or transfer of any of the real property in Palo Pinto County; and (3) on all land that was part of the real property that Suzann contributed to the project that had not been purchased for value by bona fide purchasers.

On December 7, 2017, the arbitration panel issued a decision in which it found that Michael committed numerous torts against Suzann and awarded Suzann actual damages of $49, 000, 000 plus interest, attorney's fees, and expenses. In Suzann's favor, the arbitration panel also imposed a constructive trust (1) on any real property belonging to or originating from property belonging to Suzann and held or owned, in whole or in part, by Michael, in any capacity, "relating in any way to the so-called Palo Pinto County, Texas, properties" and (2) on Michael's interests, of whatever nature, in any entity that he formed or in which he invested using funds or property misappropriated from, and originating with, Suzann. The arbitration panel listed specific entities and properties in which Michael's interest was subject to the constructive trust, including "4, 683 acre real property asset located in Palo Pinto County, Texas." CMD was not one of the listed entities. The probate court subsequently confirmed the arbitration award (the Probate Judgment), and Michael unsuccessfully appealed the Probate Judgment to the Dallas Court of Appeals. See Ruff v. Ruff, No. 05-18-00326-CV, 2020 WL 4592794, at *15 (Tex. App.-Dallas Aug. 11, 2020, pet. denied) (mem. op.).

On December 27, 2017, Suzann filed a first amended petition in this litigation in which she named additional defendants, including Michael, and amended her claims against the Original Defendants. Suzann's amended claims were based on the constructive trust imposed by the arbitration award, Michael's alleged misappropriation and hiding of her assets, and the other defendants' alleged participation in Michael's conduct. Suzann served the Original Defendants with her first requests for production of documents on December 27, 2017. On December 28, 2017, Suzann served the Original Defendants with her second requests for production of documents, noticed the depositions of Michael and of the corporate representative of DDP, and filed a motion for expedited discovery. Suzann filed an amended motion for expedited discovery on January 4, 2018.

In the amended motion, Suzann expressed concern that Michael would hide or divest assets before the Dallas County probate court confirmed the arbitration award. Suzann argued that Michael had "consistently" refused to provide an accounting to Suzann or to produce documents or answer questions about the location of her assets. Suzann requested that the trial court order Michael to produce documents within four days after the trial court considered the motion and that she be allowed to depose Michael, a corporate representative of DDP, and Joel Taylor no later than January 18, 2018.

On January 11, 2018, the trial court granted the motion, in part, and ordered the Original Defendants to produce to Suzann "any and all materials responsive" to the two requests for production no later than 5:00 p.m. on January 15, 2018 (the January 11 discovery order). The trial court also ordered Michael to appear for deposition on January 18, 2018, and the corporate representative of DDP to appear for deposition on January 19, 2018.

On January 22, 2018, Suzann filed an amended motion to compel and a motion to prohibit the movement of assets. Suzann complained that, rather than complying with the January 11 discovery order, the Original Defendants produced records that were not in compliance with the order, filed a motion to reconsider, and asserted "various objections." Suzann also complained that Michael failed to answer a number of questions during the depositions.

Suzann requested that the trial court (1) hold Michael in contempt for failing to produce documents in compliance with the January 11 discovery order and for his behavior during the depositions, (2) order Michael and his counsel to pay all costs and attorneys' fees associated with those depositions, (3) order Michael to reappear for deposition both as an individual and as the corporate representative of DDP, (4) direct the Palo Pinto County Sheriff's Department to seize all records and computers from the 7-R Ranch offices and obtain the passwords to those computers so that Suzann could examine them, (5) overrule the objections to Suzann's requests for production, (6) order the Original Defendants to produce all documents responsive to the requests for production, and (7) prohibit "any of the Defendants in this case" from moving assets absent further order of the trial court. Suzann attached to the amended motion to compel a sanctions order issued against Michael in the arbitration; excerpts from three preliminary hearings in the arbitration; an order from the Dallas County probate court that prohibited Michael from moving assets; the arbitration award; and the transcripts of Michael's depositions, individually and as the corporate representative of DDP.

On January 30, 2018, the trial court granted, in part, Suzann's amended motion to compel (the January 30 discovery order). The trial court found that Michael and DDP failed to comply with the January 11 discovery order and ordered Michael to reappear for deposition, both individually and as the corporate representative of DDP, no later than February 9, 2018, and to pay the court reporter's charges for the first depositions. The trial court also overruled the Original Defendants' objections to Suzann's first and second requests for production and ordered the Original Defendants to...

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