Sherman v. Boston

• Decision Date: 28 January 2016
• Docket Number: NO. 14–14–00764–CV,14–14–00764–CV
• Citation: 486 S.W.3d 88
• Parties: Edward J. Sherman and Edward J. Sherman Enterprises Inc. d/b/a Find It Apartment Locators & Citi Homes, Appellants v. Datril Boston and Apartment Express, LLC d/b/a Mr. Day Rents, Appellees
• Court: Texas Court of Appeals

486 S.W.3d 88

Edward J. Sherman and Edward J. Sherman Enterprises Inc. d/b/a Find It Apartment Locators & Citi Homes, Appellants

v.Datril Boston and Apartment Express, LLC d/b/a Mr. Day Rents, Appellees

NO. 14–14–00764–CV

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

Opinions filed January 28, 2016

Rehearing Overruled March 3, 2016

Clayton C. Cannon, Houston, TX, Lauri Jane Anderson, Houston, TX, for Appellants.

Datril Boston, Houston, TX, pro se.

Panel consists of Chief Justice Frost and Justices Jamison and Busby.

OPINION

J. Brett Busby, Justice

Appellants Edward J. Sherman and Edward J. Sherman Enterprises, Inc. d/b/a Find It Apartment Locators and Citi Homes (Find It) appeal from a conversion judgment in favor of appellees Datril Boston and Apartment Express, LLC d/b/a Mr. Day Rents (Mr. Day Rents), which the trial court signed following a bench trial. Appellants first challenge the trial court's personal jurisdiction over Find It. Because citation was never issued and served on Find It in a manner provided by law, the trial court did not acquire personal jurisdiction over Find It. We therefore reverse the judgment against Find It and render judgment dismissing appellees' claims against Find It.

Sherman also argues that Boston did not have standing to bring his common-law conversion claim against him. Because the evidence establishes that the referral fees allegedly converted by Sherman belonged to Mr. Day Rents, we agree that Boston does not have standing to pursue a common-law conversion cause of action. We therefore reverse the judgment in favor of Boston and dismiss Boston's conversion cause of action against Sherman.

Finally, appellants contend that the evidence is legally insufficient to support the conversion judgment in favor of Mr. Day Rents because Mr. Day Rents was not represented by a licensed attorney at the time of the bench trial. Because Mr. Day Rents was not represented, the evidence offered by Boston (proceeding pro se) has no legal effect, rendering the evidence legally insufficient to support the judgment. We therefore reverse the judgment in favor of Mr. Day Rents and render judgment that Mr. Day Rents take nothing from Sherman.

Background

Sherman and Find It operate a number of apartment locating businesses. Boston worked off and on as an agent for Find It. As a Find It agent, Boston located apartments for potential tenants in exchange for a referral fee paid by the apartment complex.

Boston eventually obtained his own broker's license through the Texas Real Estate Commission. Boston stopped working for Find It and formed his own apartment locating business: Mr. Day Rents. After forming Mr. Day Rents, Boston approached Sherman about Sherman and his companies factoring apartment complex referral fee invoices. Sherman testified that under this factoring arrangement, Sherman advanced a percentage of the referral fees to Boston, and Sherman and Find It then received the proceeds when the apartment complex paid the referral fee invoice. Sherman and Boston signed a Factoring Agreement providing: (1) that Boston would submit all factored invoices to “the [c]orporate office” for collection, and (2) funds would be advanced to Boston against the factored invoices.¹

The renewed relationship lasted about eleven months. During this time, Boston submitted invoices for factoring totaling approximately $159,000, and Find It advanced about $110,000 through checks made payable to Boston. From the invoices submitted for factoring, Sherman and Find It collected only about $92,000, creating a shortfall of approximately $18,000.

Sherman eventually grew concerned that Boston was collecting and cashing the apartment complex referral fee checks rather than submitting them in payment of the factored invoices. Sherman had Find It's accounting department contact various apartment complexes regarding the payment of referral fees. In Sherman's view, the investigation confirmed that Boston was not bringing Find It the apartment complex referral fee checks against which he had been advanced money, but instead was collecting and cashing the checks himself. Sherman testified that the investigation revealed that Boston had collected a total of $15,672 in this manner.

As a result of the investigation, Find It stopped making advance payments to Boston. Find It also sent statements directly to apartment complexes on invoices against which it had advanced money to Boston. Several of these apartment complexes then sent Find It checks for Mr. Day Rents' apartment placement referral fees. According to Sherman and Find It's accountant, Find It had already advanced Boston money against each of the checks it received.

Find It sued Boston, alleging multiple causes of action including breach of contract and quantum meruit. Eventually, an amended petition was filed naming Edward J. Sherman, individually, as the only plaintiff. Find It was not listed as a party on this or any subsequent petition. Boston eventually filed an answer. Soon after filing the answer, Boston's attorney withdrew from representing Boston.

In addition to seeking damages, Sherman also sought a temporary injunction, which the trial court granted. Among other things, the temporary injunction required Boston “to place all funds previously collected, which were held in [Boston's] former attorney's trust account, into the registry of the court.” In accordance with the temporary injunction, Boston's former attorney deposited $11,410.04 into the registry of the court.

Boston obtained the services of a second attorney. That attorney filed breach of contract and conversion counterclaims on behalf of Boston and Mr. Day Rents against Sherman and Find It. Find It was never served with citation and it did not otherwise make an appearance in the lawsuit. Boston's second attorney soon withdrew from the case, and at no point after that were Boston or Mr. Day Rents represented by legal counsel.

The case went to trial before the bench. At trial, Boston, appearing pro se, admitted that he had received checks from Find It totaling $110,629.97. Boston argued that the money was not paid to him pursuant to the Factoring Agreement, which he pointed out had been signed by Sherman and Boston only in their individual capacities. Boston further testified that he had never actually worked under the Factoring Agreement. Boston testified that he believed that the $110,629.97 he had received from Find It was a loan for which he had pledged his receivables as collateral. Boston further testified that he believed Find It had advanced the money to him because he was a “nice guy.” Boston also argued during trial that Find It had negotiated the checks made out to Mr. Day Rents without authority to do so.

Sherman testified that all of the checks made out to Mr. Day Rents, and negotiated by Find It, were checks against which Boston had already received advances under the Factoring Agreement. In addition, Find It's accountant testified that Boston had authorized her to negotiate checks made payable to Mr. Day Rents.

After the bench trial concluded, the trial court signed a Final Judgment in favor of Boston and Mr. Day Rents. The trial court rendered a take-nothing judgment on Sherman's claims against appellees Boston and Mr. Day Rents. The trial court also rendered a take-nothing judgment on appellees' counterclaim for breach of contract. Finally, the trial court found in favor of appellees on their conversion counterclaim and awarded them the $11,410.04 that had previously been placed into the registry of the court. This appeal followed.

Analysis

Appellants Sherman and Find It raise four issues on appeal, none of which challenge the take-nothing judgment rendered on Sherman's causes of action. Appellants' issues instead focus on the judgment against them.

I. The judgment against Find It is void because the trial court did not re-acquire personal jurisdiction over Find It.

In their first issue, appellants argue that because Find It was never served with process and did not waive service of process or otherwise make an appearance in the trial court after it was dropped from the petition, the trial court did not reacquire personal jurisdiction over Find It. We agree.

A trial court lacks personal jurisdiction over a defendant to whom citation has not been issued and served in a manner prescribed by law unless the defendant waives service or enters an appearance. See Tex. R. Civ. P. 124 ; Wilson v. Dunn, 800 S.W.2d 833, 836 (Tex.1990) ; Menon v. Water Splash, Inc., 472 S.W.3d 28, 31 (Tex.App.–Houston [14th Dist.] 2015, pet. filed) ; In re D.A.P., 267 S.W.3d 485, 489 (Tex.App.–Houston [14th Dist.] 2008, no pet.). Whether a trial court has personal jurisdiction over a defendant is a question of law, which we review de novo. Haaksman v. Diamond Offshore (Bermuda), Ltd., 260 S.W.3d 476, 479 (Tex.App.–Houston [14th Dist.] 2008, pet. denied).

In the original petition initiating this litigation, the plaintiff was identified as Edward J. Sherman Inc. d/b/a Find It Apartment Locators, “an individual whose address is 6800 Bintliff Drive, Houston, Texas 77074.” Once he was served with the lawsuit, Boston filed a verified denial asserting that the plaintiff did not have the legal capacity to sue in the case. In response, Sherman filed an amended petition deleting Find It as the plaintiff and inserting himself as the sole plaintiff. Because Boston had no claim for affirmative relief pending against Find It at the time of the amendment, Find It ceased to be a party to the litigation at that time. See Tex. R. Civ. P. 162 ; In re Greater Houston Orthopaedic Specialists, Inc., 295 S.W.3d 323, 324 (Tex.2009) (stating that plaintiff has unqualified and absolute right to nonsuit as long as defendant has not made claim for affirmative relief); Sixth RMA Partners, L.P. v. Sibley, 111 S.W.3d 46, 53–54 (Tex.2003) (stating that amended petition is designed to add something to or withdraw something from the amending party's own pleading to cure...