Mattly v Spiegel Inc.

• Decision Date: 08 June 2000
• Citation: 19 S.W.3d 890
• Parties: <!--19 S.W.3d 890 (Tex.App.-Houston 2000) DIANE S. MATTLY and DAVID VALLANCE, Appellants v. SPIEGEL, INC. AND FIRST CONSUMERS NATIONAL BANK, Appellees NO. 14-98-00239-CV In The Fourteenth Court of Appeals
• Court: Texas Court of Appeals

Page 890

19 S.W.3d 890 (Tex.App.-Houston [14th Dist.] 2000)

DIANE S. MATTLY and DAVID VALLANCE, Appellants v. SPIEGEL, INC. AND FIRST CONSUMERS NATIONAL BANK, Appellees

NO. 14-98-00239-CV

In The Fourteenth Court of Appeals

June 8, 2000.

On Appeal from the 270th Judicial District Harris County, Texas Trial Court Cause No. 96-57143

[Copyrighted Material Omitted] Panel consists of Justices Yates, Fowler and Frost.

O P I N I O N

Wanda McKee Fowler, Justice

Diane S. Mattly and David Vallance appeal from a sanctions order awarding Spiegel, Inc. and First Consumers National Bank (FCNB) a judgment of $5,000.00, plus interest and taxable court costs. In five points of error, Mattly and Vallance complain of the following: (1) the trial court lacked plenary jurisdiction to enter the sanctions award; (2) the sanctions order was not sufficiently specific; (3) Mattly and Vallance did not bring the claim in bad faith; and (4) Mattly's claim was not groundless. Spiegel and FCNB filed an appeal as well, complaining that the amount of sanctions awarded was so low that it was unjust and against the great weight and preponderance of the evidence. We find that the trial court abused its discretion (1) when it entered a sanctions order that was not sufficiently specific, and (2) when it found that Mattly and Vallance brought this claim in bad faith. Consequently, we reverse the judgment of the trial court and render judgment that appellees take nothing in their counterclaim for sanctions.

FACTUAL AND PROCEDURAL HISTORY

Diane Mattly had experienced problems with credit card fraud in the past. In the few years before this lawsuit, imposters had obtained Mattly's name and social security number and obtained approximately eighteen credit cards in her name. Mattly contacted several credit reporting agencies about these problems, and they advised her to place a red flag on her credit report. This "flag" would alert credit agencies that no credit accounts should be opened in Mattly's name unless the credit application was confirmed by calling Mattly at her home telephone number.

Mattly alleged that, after she had put a red flag on her credit report, Spiegel and/or FCNB issued a credit card to an imposter without checking Mattly's credit report.¹ The individual charged over two thousand dollars in merchandise through Spiegel's catalogue. One of Spiegel's employees contacted Mattly about the charges. Mattly explained that she did not apply for the credit card and had placed a red flag on her credit report to prevent unauthorized charges. Spiegel alleges that seven months before a representative contacted Mattly, she knew that Spiegel was listed in her credit report and failed to notify Spiegel of the problem.

Because of Mattly's refusal to pay the charges, Spiegel gave the account to a credit agency that began efforts to collect the debt from Mattly. Mattly ended up hiring both an investigator and an attorney to help her resolve the problem. Even after hiring the investigator and a lawyer, Spiegel and FCNB continued to contact Mattly regarding the debt. At some point, FCNB sent Mattly a document entitled "affidavit of forgery", requesting that she fill it out. Because of her previous problems with credit card fraud, she showed the form to her investigator and asked him if she should fill it out. He gave her several reasons why she should not complete the form. First, he noted that the form asked for confidential information such as her social security number. Next, he told her that the name of the company requesting the information - FCNB - was not listed with Dunn and Bradstreet. And, finally, he said that FCNB was not listed with directory assistance in the city listed on the return address, nor did the fire department or police department in the city recognize the name. The investigator told her that he was worried it was not a request from a legitimate company. Based on this information and advice, Mattly did not return the form. However, she did give FCNB some information; her investigator testified that he spoke with someone representing FCNB and provided that person with the names of the personnel with the various law enforcement agencies who were investigating the fraudulent use of Mattly's credit and name. However, not having received the affidavit of forgery form, FCNB and Spiegel continued to attempt to collect the account.

Mattly originally filed this suit against Spiegel and FCNB alleging that they negligently issued credit to an imposter who claimed to be Mattly. She also alleged that they violated the Fair Credit Reporting Act. The sole actual damages requested in the lawsuit were (1) the attorney's fees incurred by Mattly through her California lawyer (who helped her clear up the problem with Spiegel), and (2) the attorney's fees incurred through David Vallance, who represented Mattly in her suit against Spiegel. Spiegel and FCNB denied the charges, and counterclaimed for sanctions, alleging that the pleading was groundless and should be subject to sanctions under rule 13 of the Texas Rules of Civil Procedure. After the suit had been on file for almost one year, Spiegel moved for summary judgment on the merits of Mattly's negligence claim, but it was never heard because Mattly nonsuited her case. The counterclaim for damages was tried to the trial court which awarded Spiegel and FCNB only $5,000 plus interest and taxable court costs) of the $70,000 they requested.

DISCUSSION AND HOLDINGS

Plenary Jurisdiction

In their first point of error, Mattly and Vallance argue that the trial court did not have jurisdiction to enter the sanctions award against them. They argue that a nonsuit is a final judgment disposing of all claims, and that the trial court's plenary power extended only thirty days after the nonsuit was signed. Because the trial court did not enter its written order awarding sanctions until forty-three days after it granted Mattly's nonsuit, Mattly and Vallance claim it acted outside its plenary power, rendering the sanctions order void. As we explain below, their argument is misplaced.

Mattly and Vallance are correct that, "the plaintiff's right to take a nonsuit is unqualified and absolute as long as the defendant has not made a claim for affirmative relief." BHP Petroleum Co. Inc. v. Millard, 800 S.W.2d 838, 840 (Tex. 1990); Georgiades v. Di Ferrante, 871 S.W.2d 878, 880 (Tex. App.--Houston [14th Dist.] 1994, writ denied). However, when a defendant has filed a counterclaim seeking affirmative relief, a plaintiff cannot discontinue the suit and preclude the counterclaim from being heard. See Tex. R. Civ. P. 96. A claim for affirmative relief must state a cause of action independent of the plaintiff's claim, that entitles the defendant to relief even if the plaintiff abandons or fails to establish her cause of action. See Georgiades, 871 S.W.2d at 880; Leon Springs Gas Co. v. Restaurant Equip. Leasing Co., 961 S.W.2d 574, 577 (Tex. App.--San Antonio 1997, no pet.). "A claim for frivolous lawsuit damages is a claim for affirmative relief." Page v. Page, 780 S.W.2d 1, 3 (Tex. App.--Fort Worth 1989, no writ). A request for rule 13 sanctions under the Texas Rules of Civil Procedure is also a request for affirmative relief. See id.

Here, Spiegel and FCNB filed counterclaims under rule 13, seeking damages for a groundless suit brought in bad faith or for purposes of harassment. Mattly's nonsuit did not affect these claims for affirmative relief; they were still properly before the court after the nonsuit. Therefore, the trial court acted within its jurisdictional power when it granted the order awarding sanctions, and Mattly's and Vallance's first point of error is overruled.

Specificity of Sanctions Order

In their second point of error, Mattly and Vallance argue that the trial court's order does not comply with (1) that part of rule 13, which requires the court to state the particularities upon which sanctions were issued and (2) section 10.005 of the Civil Practice and Remedies Code, which requires the court to describe the conduct warranting sanctions. We find nothing in the order reflecting that the judge ruled on the basis of section 10.005; therefore, we will address only rule 13. As to that rule, Mattly and Vallance argue that the trial court failed to specify facts showing that Mattly's case was groundless, and brought in bad faith or for purposes of harassment. We agree.

Whether to impose rule 13 sanctions is within the trial court's sound discretion. See Monroe v. Grider, 884 S.W.2d 811, 816 (Tex. App.--Dallas 1994, writ denied). We will not set aside a sanctions order under rule 13 unless an abuse of discretion is shown. See Falk & Mayfield L.L.P. v. Molzan, 974 S.W.2d 821, 824 (Tex. App.--Houston [14th Dist.] 1998, pet. denied). Nonetheless,"rule 13 imposes a duty on the trial court to point out with particularity the acts or omissions on which sanctions are based." Zarsky v. Zurich Management, Inc., 829 S.W.2d 398, 399 (Tex. App.--Houston [14th Dist.] 1992, no writ). Requiring the trial court to state the particulars of the good cause for imposing sanctions is mandatory. See GTE Communications Sys. Corp. v. Curry, 819 S.W.2d 652, 654 (Tex. App.--San Antonio 1991, no writ). A mere statement in the order that good cause was shown is insufficient to sustain the sanctions order. See id.

As we explain below, this judgment ordering sanctions does not meet these mandatory requirements. The judgment recites only the ultimate conclusions the court is required to make in assessing sanctions, and does not state any facts to support it. The judgment states the following:

1. Plaintiff/Counter-Defendant and her attorney, Mr. David Vallance, filed this lawsuit in bad faith and for improper purposes, including harassment of Defendants/Counter-Plaintiffs.

2. At the time that Plaintiff/Counter-Defendant and her attorney, Mr. David Vallance, filed this lawsuit, they lacked any basis to believe that...