David Jason West and Pydia, Inc. v. State

Decision Date21 July 2006
Docket NumberNo. 03-05-00724-CV.,03-05-00724-CV.
Citation212 S.W.3d 513
PartiesDAVID JASON WEST AND PYDIA, INC. d/b/a www.bankopp.com, Appellants, v. STATE of Texas, Appellee.
CourtTexas Court of Appeals

Mark D. Hopkins and C. Wilson Shirley, III, Savrick, Schumann, Johnson, McGarr, Kaminski & Shirley, Austin, for Appellants.

David M. Ashton, Mary Taylor Henderon, Nanette Marie Dinunzio, Asst. Atty. Gen., Austin, for Appellees.

Before Chief Justice LAW, Justices PURYEAR and PEMBERTON.

OPINION

BOB PEMBERTON, Justice.

In this interlocutory appeal, we must determine whether the district court abused its discretion by granting the State's request for a supplemental temporary injunction and asset freeze against appellants, David West and Pydia, Inc. d/b/a www.bankopp.com (collectively "West"). In three issues, West asserts that the district court erred by granting the temporary injunction because the State did not demonstrate (1) a probable right to recovery or (2) a probable injury, and (3) the order did not specifically state the reasons for its issuance. Because we hold that the district court did not abuse its discretion, we affirm the supplemental temporary injunction order.

BACKGROUND

At the supplemental temporary injunction hearing, the court admitted evidence of a printed copy of West's Web site, testimony from an investigator employed by the Consumer Protection and Public Health Division of the Texas Attorney General's office, and documents from Hibernia National Bank in Baton Rouge provided in response to the State's civil investigative demand. The investigator's testimony and the Web site evidence revealed that West used an Austin radio commercial, a recorded telephone message (identified as a "phone overview"), and a Web site to advertise meetings at a local hotel about a "banking opportunity" that would allow any "U.S. Citizen" to pay off all personal debt—including "credit cards, mortgages, student loans, vehicles, loans, IRS settlements, and back child support"—before December 31, 2005, by securing a "loan" from an unnamed bank. West's "www.bankopp.com" Web site also stated that "David [West] found a Bank that is willing to give individuals loans to pay off their debts. Then the Bank is willing to turn around and forgive that loan so it doesn't have to be paid off." It asserted that "two little known banking practices . . . Fractional Banking and Forgiven Loans" made this "one shot opportunity" possible. The site claimed that although "this opportunity is legal," the "Federal Reserve will undoubtedly close the loopholes that allowed the project to take place this once. While the system intended on well connected, wealthy individuals to be able to take advantage of this, it was never intended that regular every day people would gain access to it."

The site further claimed that the unnamed bank had agreed to pay off $100 million in debt and that "[the] project is about David [West]'s looking for others to add their debt to the pile David started." The idea was to accumulate $100 million in debt for the bank to "fractionalize then forgive" so that "the bank can make money and the folks with David can get out of debt." The site claimed that, after "David told his 10 closest friends about the project," word spread quickly throughout Louisiana and Mississippi. The site also explained that West accelerated its marketing of the project following Hurricane Katrina:

After Hurricane Katrina hit the area he had been putting the word out in, David switched gears to Radio advertising across the South and is now starting a hectic schedule of FREE open meetings in major Southern Cities. These Open Meetings will have hundreds of people in attendance and are expected to help reach[] the goal of $100 Million in debt before Thanksgiving. This would leave plenty of time for the bank to pay before December 31st (the bank only needs 10 business days).

As a signal of their "commitment to be involved with the project," the site asked participants to deposit a wire transfer of $5,000 to a bank account in Panama, or to the "Del Sur International Holdings" account with Hibernia National Bank in Baton Rouge. According to the site, after the money was submitted, the bank would perform a financial analysis and might contact the participant to discuss any issues: "[T]he bank will analyze each project member's debt and provide feedback if there are concerns." Also after wiring their $5,000 "commitment/deposit money," the site stated that participants would receive a document "guarantee[ing] that the loan that [they] are signing will be forgiven and that [they] will not have to pay it back!" Visitors to the Web site were not informed that the Del Sur International Holdings account, to which the $5,000 wire transfers were directed, was the sole proprietorship of David West.

The State filed suit under the Deceptive Trade Practices-Consumer Protection Act, Tex. Bus. & Com.Code Ann. §§ 17.46(a)-(b), .47 (West Supp. 2005) ("DTPA") against David West, Roxana Suadi West,1 Carlos M. Suadi, and Pydia, Inc. d/b/a www.bankopp.com, seeking civil penalties and injunctive relief based on the debt elimination "service for sale to consumers." The State obtained a temporary restraining order and temporary injunction against West, preventing any further marketing in Texas of the "banking opportunity."2

After learning that David West attempted to withdraw all funds from the Baton Rouge account to which the participants' $5,000 wire transfers had been directed,3 the State obtained a supplemental restraining order, freezing the funds in the Hibernia bank account. The State also sought to convert the supplemental restraining order into a supplemental temporary injunction, maintaining the freeze on the account. Following a hearing on October 25, 2005, the district court entered an order preventing David West, Roxana Suadi West, Carlos M. Suadi, and Pydia, Inc. d/b/a www.bankopp.com from accessing the Hibernia bank account.

Specifically, the order enjoined them (and those associated with them) from

• transferring, spending, hypothecating, concealing, encumbering, withdrawing, removing or allowing the transfer, removal, or withdrawal of any funds from Account # [], held at Hibernia National Bank; and

• transferring, spending, hypothecating, concealing, encumbering, withdrawing, removing or allowing the transfer, removal, or withdrawal of any funds from any other financial institution and/or account into which Defendants have placed or caused to be placed, funds from consumers to participate in Defendants' "bank opportunity."

The order also set the case for trial.

West appeals only from the district court's October 25 supplemental temporary injunction order that froze the assets in the Hibernia bank account. It asserts that the district court abused its discretion by entering the supplemental temporary injunction because the State did not demonstrate (1) a probable right to recovery or (2) a probable injury, and (3) the order did not specifically state the reasons for its issuance. We consider each of these assertions.

DISCUSSION

Standard of review

The purpose of a temporary injunction is to preserve the status quo of the litigation's subject matter pending trial on the merits. Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex. 2002). Because the decision to grant or deny a temporary injunction lies within the sound discretion of the trial court, we will not disturb that decision absent a clear abuse of discretion. Id. at 204. We view the evidence in the light most favorable to the trial court's order, indulging every reasonable inference in its favor. Brammer v. K.B. Home Lone Star, L.P., 114 S.W.3d 101, 105-06 (Tex.App.-Austin 2003, no pet.). This Court may not substitute its judgment for that of the trial court unless its action was so arbitrary that it exceeded the bounds of reasonable discretion. Butnaru, 84 S.W.3d at 204. The trial court does not abuse its discretion if some evidence reasonably supports its decision. Id. at 211.

Probable right to recovery

In its first issue, West argues that the district court erred in granting the temporary injunction because the State did not demonstrate a probable right to recovery. West asserts that the transaction at issue is a loan of money, which is neither a "good" nor a "service" under the DTPA. See Riverside Nat'l Bank v. Lewis, 603 S.W.2d 169, 174 (Tex. 1980); see also Tex. Bus. & Com.Code Ann. § 17.45(1), (2) (West 2002). West argues that the DTPA applies to transactions in which the borrower's objective is to purchase or lease goods or services, but the DTPA is inapplicable if a borrower's objective is merely an attempt to acquire money. See La Sara Grain Co. v. First Nat'l Bank of Mercedes, 673 S.W.2d 558, 566-67 (Tex. 1984); Megason v. Red River Employees Fed. Credit Union, 868 S.W.2d 871, 872 (Tex.Civ.App.-Texarkana 1993, no writ).

The State responds that West's "banking opportunity" is not a "loan" because it specifies that repayment is unnecessary. Cf. Tex. Fin.Code Ann. § 301.002(a)(10) (West Supp. 2005) (defining "loan" as "an advance of money that is made to or on behalf of an obligor, the principal amount of which the obligor has an obligation to pay the creditor"). Alternatively, the State argues that West is offering a loan forgiveness service.

The district court's finding of a probable right to recovery under the DTPA is supported by the evidence that West's Web site, offers a service—specifically, the elimination of debt—in exchange for $5,000. According to the site, after the money was submitted, "the bank [would] analyze each project member's debt and provide feedback if there are concerns." The site also informed the public that, after wiring $5,000, participants would receive a document "guarantee[ing] that the loan that [they] are signing will be forgiven and that [they] will not have to pay it back!"

"Services" are defined in the DTPA as "work, labor, or service purchased or...

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