City National Bank of Sulphur Springs v. John Alexander Smith

Opinion

ACCEPTED 06-15-00013-CV SIXTH COURT OF APPEALS TEXARKANA, TEXAS 9/29/2015 9:24:51 AM DEBBIE AUTREY CLERK

NO. 06-15-00013-CV IN THE COURT OF APPEALS FOR THE SIXTH DISTRICT OF TEXAS September 29, 2015 AT TEXARKANA

CITY NATIONAL BANK OF SULPHUR SPRINGS. . . . . . . . . . . . APPELLANT

V.

JOHN ALEXANDER SMITH. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . APPELLEE

Appeal from the District Court of Hopkins County, Texas 62nd Judicial District Honorable Will Biard Presiding

BRIEF OF APPELLANT

John R. Mercy Coy Johnson Texas State Bar No. 13947200 Texas State Bar No. 10698000 MERCYpCARTER pTIDWELL, L.L.P. Email: coy@clayjohnsonlaw.com 1724 Galleria Oaks Drive Clay Johnson Texarkana, TX 75503 Texas State Bar No. 24007450 Telephone: (903) 794-9419 Email: clay@clayjohnsonlaw.com Facsimile: (903) 794-1268 JOHNSON LAW FIRM, P.C. Email: jmercy@texarkanalawyers.com 609 Gilmer Street Sulphur Springs, TX 75482-4121 Telephone: (903) 885-8866 Facsimile: (903) 584-1313

ATTORNEYS FOR APPELLANT

Oral Argument Requested IDENTITY OF PARTIES AND COUNSEL

Pursuant to Rule 38.1(a) of the Texas Rules of Appellate Procedure, Appellant

lists below the names and addresses of all parties to the trial court’s final judgment

together with their counsel in the trial court. This list is provided so that the justices

of this Court may evaluate possible disqualification and recusal, and so that the Clerk

of the Court of Appeals may notify all parties of this Court’s final judgment.

City National Bank of Sulphur Springs. . . . . . . . . . . . . . . . . . . . . . . . . . . Appellant

Coy Johnson Clay Johnson JOHNSON LAW FIRM, P.C. 609 Gilmer Street Sulphur Springs, TX 75482-4121. . . . . . . . . . . . . . . . . Trial Counsel for Appellant

John R. Mercy MERCY p CARTER p TIDWELL, L.L.P. 1724 Galleria Oaks Drive Texarkana, TX 75503. . . . . . . . . . . . . . . . . . . . . . Appellate Counsel for Appellant

John Alexander Smith. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Appellee

J. Mark Sudderth NOTEBOOM LAW FIRM 669 Airport Freeway, Suite 100 Hurst, TX 76053-3698.. . . . . . . . . . . . . . Trial and Appellate Counsel for Appellee

i TABLE OF CONTENTS Page

Identity of Parties and Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

Table of Contents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

Index of Authorities.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v

Statement of the Case. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Statement of Oral Argument. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Issues Presented.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Statement of Facts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

The Original Suit.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

The Underlying Case.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

The New Note. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Collection Efforts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Filing Charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

The Indictment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

The Trial. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Summary of the Argument. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Argument and Authorities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Issue No. 1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

The Purpose of Chapter 33. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Proper Responsible Third Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Smith’s Original Claim of Legal Malpractice. . . . . . . . . . . . . . . . . . . . . . . 14

ii Clark Claims City National Caused Damages for Malpractice. . . . . . . . . . 15

Smith Then Claims Malicious Prosecution. . . . . . . . . . . . . . . . . . . . . . . . . 15

City National Complained of Improper Joinder. . . . . . . . . . . . . . . . . . . . . . 16

The Claims are Mutually Exclusive. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

The Absurd Result.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Against Public Policy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Issue No. 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

No Original Claim for Exemplary Damages.. . . . . . . . . . . . . . . . . . . . . . . . 19

Chapter 33 Does Not Apply to Exemplary Damages. . . . . . . . . . . . . . . . . . 20

Issue No. 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Elements of Malicious Prosecution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Unfavored Remedy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Standard of Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Legal Insufficiency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Factual Insufficiency.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Initiation or Procurement of the Prosecution. . . . . . . . . . . . . . . . . . . . . . . . 24

Initiating Prosecution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Procuring Prosecution.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Cone’s Involvement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Officer Irving’s Testimony. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

The DA Procures Indictment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Cone’s Belief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

iii “But for” Requirement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

Lack of Probable Cause. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Cone’s Believed Facts Fit Hindering Charge.. . . . . . . . . . . . . . . . . . 29

Cone’s Motives and Beliefs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Smith’s Argument. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Issue No. 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

Standard of Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Question 2a. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Multiple Element Award.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Lack of Evidence of Physical Pain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Lack of Evidence of Mental Anguish. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Prayer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Certificate of Service.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Certificate of Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Appendix: A - General Instructions (CR 535-547) B - Final Judgment (CR 582-583) C - Order on Motion to Modify Judgment (SCR 5) D - §33.004 effective September 1, 2003 to August 31, 2011

iv INDEX OF AUTHORITIES

Cases: Page

Alex Sheshunoff Mgt. Servs. LP v. Johnson, 209 S.W.3d 644, 651 (Tex. 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Baker Hughes, Inc. v. Keco R &D, Inc., 12 S.W.3d 1, 4 (Tex. 1999).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Browning-Farris Industries, Inc. v. Lieck, 881 S.W.2d 288 Tex. (1994). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22, 24

City of Houston v. Livingston, 221 S.W.3d 204, 230 (Tex. App. – Houston [1st Dist] 2006, no pet.). . . . . . . . . . 32

City of Keller v. Wilson, 168 S.W.3d 802 (Tex.2005). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Closs v. Goose Creek Consolidated Independent School District, 874 S.W.2d 859 (Tex. App. – Texarkana 1994, no writ). . . . . . . . . . . . . . . . . . . . 27

Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378 (Tex.2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Gonzales v. Grimm, 2005 WL4137862 (Tex. App. – El Paso, July 8, 2015, no. pet. h.). . . . . . . . . . . . 22

Hasie v. Compass Bank, 2014 WL 5422939 (Tex. App. – Amarillo, October 21, 2014, pet. denied). . . . . 24

Haynes & Boone v. Bowser Bouldin, Ltd., 896 S.W.2d 179 (Tex. 1995). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

In re Bexar Criminal District Attorney Office, 224 S.W.3d 182 (Tex. 2007). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

v Jelinek v. Casas, 328 S.W.3d 526 (Tex.2010). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Katy Springs & Manufacturing, Inc. v. Favalora, 2015 WL 5093232 at p. 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Kindred v. Con/Chem, Inc., 650 S.W.2d 61 (Tex.1983). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

King Ranch, Inc. v. Chapman, 118 S.W.3d 742 (Tex.2003). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

King v. Graham, 126 S.W.3d 75 (Tex. 2003). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25, 27

Kroger Texas Limited Partnership v. Suberu, 216 S.W.3d 788 (Tex. 2006). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21, 28

Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706 (Tex.1997). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Office of Oscar C. Gonzales, Inc. v. Sloan, 447 S.W.3d 98 (Tex. App. – San Antonio 2014). . . . . . . . . . . . . . . . . . . . . . . . . . 14

Parkway Company v. Woodruff, 901 S.W.2d 434 (Tex. 1995). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Petrohawk Properties, L.P. v. Jones, 455 S.W.3d 753 (Tex. App. Texarkana 2015, writ pending). . . . . . . . . . . . . . . . 22

Pool v. Ford Motor Co., 715 S.W.2d 629 (Tex.1986). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Ritchie v. Brookshire Grocery Company, 952 S.W.2d 515 (Tex. 1997). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

River Oaks LM, Inc. v. Vinton Duarte, 2015 WL 3618950 at 15 (Tex. App. – [Houston 14th Dist.], May 28, 2015, no pet.).. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

vi Service Corp. International v. Guerra, 348 S.W.3d 221 (Tex. 2011). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Villarreal v. Wells Fargo Brokerage Services, LLC, 315 S.W.3d 109 (Tex. App. – Houston [1st Dist.] 2010, no pet.). . . . . . . . 13, 18, 20

Statutes:

Tex. Civ. Prac. & Rem. Code § 33.001(e). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 § 33.002(c)(2). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 § 33.003. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 § 33.004. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18, 20 § 33.004(e). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12, 13, 19, 20 § 33.011(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14, 16

Other:

Restatement (Second) of Torts §653(a) cmt. c (1977). . . . . . . . . . . . . . . . . . . . . . 24

vii NO. 06-15-00013-CV IN THE COURT OF APPEALS FOR THE SIXTH DISTRICT OF TEXAS AT TEXARKANA

CITY NATIONAL BANK OF SULPHUR SPRINGS. . . . . . . . . . . . APPELLANT

V.

JOHN ALEXANDER SMITH. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . APPELLEE

BRIEF OF APPELLANT TO THE HONORABLE COURT OF APPEALS:

COMES NOW Appellant, CITY NATIONAL BANK OF SULPHUR

SPRINGS, and appeals the court’s December 15, 2014 judgment, as modified, and

would show unto the Court the following:

Statement of the Case

Nature of the Case This began as a legal malpractice case against an attorney. Through a designation of a responsible third party and subsequent joinder it became a malicious prosecution case against City National.1

Trial Court: The Honorable Will Biard 62nd District Court, Hopkins County Parties: Plaintiff – John Alexander Smith Defendant – City National Bank of Sulphur Springs

Trial: Jury Trial - 3 days

1 Appellant, City National Bank of Sulphur Springs, will be referred to as “City National”; and Appellee, John Alexander Smith, will be referred to as “Smith”. The Clerk’s Record will be cited as “CR __”; the Supplemental Clerk’s Record will be cited as “SCR __; the Reporter’s Record will be cited as “ __ RR __; and Plaintiff’s exhibits will be cited as “P. Ex. __”.

1 Verdict: The jury answered questions finding City National liable for malicious prosecution and exemplary damages. The jury found damages of $150,000.00 for physical pain and mental anguish, $250,000.00 for injury to the reputation, and $500,000.00 in exemplary damages. (CR 535).

Post-Trial Motions: City National filed a Motion for Judgment Notwithstanding the Verdict. (CR 577). It was denied. City National filed a Motion for New Trial. (CR 611). It was denied. (CR 629). City National filed a Motion to Modify the Judgment. (CR 605) It was granted. (SCR 5).The judgment was modified to reduce the pre-judgment interest from $84,542.00 to $54,243.00. (SCR 5).

Judgment: The trial court entered judgment on the verdict. (CR 582). City National filed a motion to modify the judgment which was granted, reducing the pre- judgment interest from $84,542.00 to $54,243.00. (SCR 5).

2 STATEMENT OF ORAL ARGUMENT

The Court should grant oral argument for the following reasons:

a) This case presents a unique fact pattern. Oral argument would give the Court a more complete understanding of the facts presented in this appeal. Tex. R. App. P. 39i(c).

b) This is a unique case of first impression. Oral argument would significantly aid the Court in deciding the case. Tex. R. App. P. 39(d).

3 ISSUES PRESENTED

Issue No. 1

It was error to award a judgment for malicious prosecution in a legal malpractice case because

a.) Chapter 33, Tex. Civ. Prac. & Rem. Code, does not waive the statute of limitations on claims not asserted in the original case.

b.) City National was not a proper responsible third party and should not have been joined as a defendant in the legal malpractice case.

c.) The legal malpractice case and the malicious prosecution case are mutually exclusive which would make joinder improper.

d.) The joinder leads to an absurd result and is against public policy.

Issue No. 2

The trial court erred in awarding exemplary damages because

a.) they were not damages that Smith sought prior to City National’s joinder as a defendant; and

b.) Chapter 33, Tex. Civ. Prac. & Rem. Code, does not apply to exemplary damages.

4 Issue No. 3

There is no evidence or insufficient evidence to support the jury’s finding to Question 1 that City National maliciously prosecuted Smith because evidence supporting two of the required elements for malicious prosecution is absent.

a.) The evidence does not support a finding that City National initiated or procured the prosecution, or

b.) that City National lacked probable cause.

Issue No. 4

There was legally and factually insufficient evidence to support the jury’s answer to Question No. 2a. The court erred by entering judgment for damages for mental anguish.

5 STATEMENT OF FACTS

This is the story of how a legal malpractice case against an attorney

transformed into and supposedly revived a time-barred malicious prosecution case

against a bank.

The Original Suit

In 2008, Smith hired Charles Clark, an attorney in Tyler, Texas, to investigate

whether he had a malicious prosecution case against City National. (CR 13). Clark

took a Rule 202 deposition of City National as part of his investigation. (CR 585). For

whatever reason, Clark did not file the malicious prosecution case within the one-year

statute of limitations for malicious prosecution. (CR 12, 27).

Smith sued Clark for legal malpractice for missing the statute of limitations on

the malicious prosecution case. (CR 12). Clark designated City National as a

responsible third party under § 33.004(e) for the legal malpractice claim. (CR 23, 25).

Smith did not object. Smith then joined City National as a defendant not for the legal

malpractice but malicious prosecution. (CR 24). Smith then settled with Clark and

dismissed the legal malpractice suit against Clark. (4 RR 165; CR 95).

City National filed a motion to strike the designation as responsible third party

and for summary judgment urging the Court to dismiss the case against it on the basis

of limitations and improper joinder. (CR 107, 173, 195, 312). These were all denied.

(CR 487).

6 The Underlying Case

The malpractice claim was based on a claim of malicious prosecution that

began in 2001 when Smith obtained his first loan from City National. (3 RR 36).

Over the course of the next three years Smith received two other loans. Each loan

was secured by “all equipment now owned or hereafter acquired.” (3 RR 169; P. Ex.

2). By 2004 Smith was behind on his payments, overdrawn on his checking account,

and not making payments on his loans. (3 RR 38; P. Ex.2, 20). City National

assigned the loan to Jerry Cone, the bank’s asset manager to try and work out the

loan. (3 RR 38).

The New Note

After reviewing the files Cone sent Smith a series of three letters. (3 RR 39,

41, 44). The letters produced no response from Smith. (3 RR 41, 45)2. Cone went to

Smith’s residence and left a card in the door. (3 RR 163). Only then did Smith call

Cone. (4 RR 79). Smith called Cone, who worked with him on a solution to the past

due notes. (3 RR 46-47). Cone suggested a consolidation note, to which Smith

agreed. (3 RR 48). Cone allowed Smith to determine the amount to be paid, when the

payments would begin, and that the collateral would include all equipment from the

prior loan and a Toshiba embroidery machine. (3 RR 48; 4 RR 127). Smith signed

the new note on August 13, 2004. (3 RR 47; 4 RR 130;P. Ex. 45).

2 Smith claimed to have not received the letters. (4 RR 90-91, 103, 126).

7 Smith intended to sell the Toshiba embroidery machine to pay down the note.

(4 RR 80). Smith had been attempting to sell the Toshiba machine for approximately

18 months without success. (3 RR 48, 172). Cone attempted to help Smith sell the

Toshiba embroidery machine. (3 RR 48; 4 RR 81). But, possible sale to the Stones

fell through when Smith refused to provide instructions on how to use the machine.

(4 RR 21-23). While waiting for instructions, the machine was moved to the Stone’s

house where it has remained for the last eleven years. (4 RR 11, 19).

Smith claimed that the machine didn’t sell. (4 RR 84). But he also claimed that

the bank should apply $9,800.00 to his note as if it did. (4 RR 87). Smith claimed

that when he found out that the machine had not sold for that price or he had not been

credited that amount he stopped the first payment on the new note. (4 RR 86). Smith

did not tender another payment on the note.

Collection Efforts

When Smith did not make any payments on the note, Cone began collection

efforts. (P. Ex. 20). When Cone asked about the other equipment that was collateral

Smith gestured over his shoulder and said, “It’s over there” and that he would return

and show him where it was. (3 RR 183; P. Ex 20). Smith never returned to show

Cone where the equipment was. (3 RR 83, 189; 4 RR 154). Cone contacted storage

units that were in the direction that Smith pointed, attempting to locate the collateral.

(P. Ex. 20). On two occasions he went to Smith’s house but Smith did not answer the

8 door. (3 RR 196). Cone filed suit against Smith to collect. (3 RR 130-133). The

civil suit was dismissed.

Filing Charges

Cone went to the Sulphur Springs police department and filed a report that

Smith was hindering the bank in collection of its security agreement by concealing

the collateral. (3 RR 75). He reported that he had the Toshiba embroidery machine but

it was the other collateral that he was concerned about. (3 RR 79). Cone provided

copies of the security agreements, the financing statement, the petition in the civil

lawsuit, the demand letters and additional information. (P. Ex. 27, 28). Police sent

the information and a narrative to the district attorney’s office. (P. Ex. 26, 29).

The Indictment

The district attorney presented the case to the grand jury. (P. Ex. 33). The

grand jury “determines whether the prosecutors have sufficient evidence to justify a

prosecution.” (P. Ex. 33). The grand jury returned a true bill indicting Smith for

hindering a secured creditor. (P. Ex. 22, 33). Smith was arrested on the charge of

hindering a secured creditor. (4 RR 104). During the prosecution the indictment was

amended by the district attorney’s office. (P. Ex. 23, 24). The prosecution was

subsequently dismissed based on the best interest of justice. (P. Ex. 32).

9 The Trial

The malpractice case was never tried. But the malicious prosecution case was

tried to a jury in November of 2014. At trial no evidence was allowed concerning the

legal malpractice of Clark. (4 RR 165). The jury returned a verdict in favor of Smith

for malicious prosecution awarding $150,000.00 for physical pain and mental

anguish, $250,000.00 for injury to his reputation, and $500,000.00 as exemplary

damages. (CR 535). City National filed a motion notwithstanding the verdict which

was denied. (CR 577). On December 15, 2014 the Court overruled that motion and

entered a final judgment. (CR 582). Thereafter City National filed a motion to modify

the judgment, and a motion for new trial. (CR 605, 611). The Court after hearing

argument denied the motion for new trial and granted the motion to modify the

judgment reducing the pre-judgment interest from $84,542.00 to $54,243.00. (CR

629, SCR 5).

This appeal ensued.

10 SUMMARY OF THE ARGUMENT

The malicious prosecution judgment should not have been entered in what

began as a legal malpractice case.

Chapter 33 of the Texas Civil Practice & Remedies Code did not revive a claim

that was not asserted at the time that the party was designated as a responsible third

party and joined as a defendant for a different cause of action. Limitations still

applied to the malicious prosecution claim. Because the two claims were mutually

exclusive Chapter 33 did not waive the limitations defense as to the new claims.

Chapter 33 does not apply to exemplary damages. Therefore Smith could not

add a new claim for exemplary damages through joinder.

There was no evidentiary support for the malicious prosecution claim. Two

vital elements were missing from Smith’s case. Smith did not prove that City

National initiated or procured the prosecution or that City National lacked probable

cause at the time it filed charges. Both are fatal to the case.

Smith did not show a substantial disruption of his everyday life sufficient to

justify a finding of mental anguish damages.

11 ARGUMENT AND AUTHORITIES

Issue No. 1

It was error to award a judgment for malicious prosecution in a legal malpractice case because

a.) Chapter 33, Tex. Civ. Prac. & Rem. Code, does not waive the statute of limitations on claims not asserted in the original case.

b.) City National was not a proper responsible third party and should not have been joined as a defendant in the legal malpractice case.

c.) The legal malpractice case and the malicious prosecution case are mutually exclusive which would make joinder improper.

d.) The joinder leads to an absurd result and is against public policy.

In 2003 the Texas legislature enacted revisions to Chapter 33 of the Texas Civil

Practice & Remedies Code.3 The revisions allowed the joinder of a proper

responsible third party as a defendant. It also provided a very limited definition of

a proper responsible third party. The purpose of the statute was to allow the joinder

of all parties to whom blame could be affixed for a particular cause of action. It also

provided for the waiver of the statute of limitations for that particular cause of action.

3 Ultimately it failed miserably and in 2011 the legislature repealed Section 33.004(e).

12 This is a case of first impression that illustrates an absurd result by misapplying

§33.004(e) to allow a party to change causes of action by joinder.

The Purpose of Chapter 33

The purpose of the 2003 amendment to the Texas Civil Practice & Remedies

Code was to apportion the damages for which joint tort feasors were liable according

to their percentage of fault. Villarreal v. Wells Fargo Brokerage Services, LLC, 315

S.W.3d 109 (Tex. App. – Houston [1st Dist.] 2010, no pet.). The jury was to

determine the percentage of responsibility with respect to each person’s causing or

contributing to cause in any way “the harm for which recovery of damages is sought,

. . .”. Tex. Civ. Prac. & Rem. Code § 33.003. Once designated as a responsible third

party a time-barred claim could be revived against a party.4 The statute’s purpose in

reviving time-barred claims against a party was so that all parties that were

responsible for the harm from that cause of action would be before the court. The

plain language of the statue only allowed revival of the cause of action originally

sued under. Had the legislature wanted the waiver to apply to any possible cause of

action against a party it could have said so. The legislature expresses its intent by the

words it enacts and declares to be the law. Alex Sheshunoff Mgt. Servs. LP v.

4 (e) If a person is designated under this section as a responsible third party, a claimant is not barred by limitations from seeking to join that person, even though such joinder would otherwise be barred by limitations, if the claimant seeks to join that person not later than 60 days after that person is designated as a responsible third party. Tex. Civ. Prac. & Rem. Code §33.001(e)

13 Johnson, 209 S.W.3d 644, 651 (Tex. 2006). It did not. It limited the joinder to claims

for the same damage.

Proper Responsible Third Parties

To be designated as a responsible third party, and subsequently joined as a

defendant, a party must meet the definition of a responsible third party under

§33.011(6). There a responsible third party is defined as “any person who is alleged

to have caused or contributed to causing in any way the harm for which recovery of

damages is sought. . .”. The statute appears to contemplate that it will be for the

same cause of action.

Smith’s Original Claim of Legal Malpractice

Here Smith’s original petition against Clark was for claims of negligence and

legal malpractice. (CR 12). To prevail on the legal malpractice claim Smith would

have had to prove: (1) that Clark owed Smith a duty, (2) that Clark breached that

duty; (3) the breach proximately caused Smith’s injuries; and (4) Smith suffered

damages. Office of Oscar C. Gonzales, Inc. v. Sloan, 447 S.W.3d 98 (Tex. App. –

San Antonio 2014). It requires a direct causal link between the actions of the

attorney, the injury suffered, and the damages awarded. Haynes & Boone v. Bowser

Bouldin, Ltd., 896 S.W.2d 179, 181 (Tex. 1995).

14 Clark Claims City National Caused Damages for Malpractice

The motion filed to designate City National as a responsible third party merely

alleged that “City National Bank (of Sulphur Springs) meets the statutory definition

of ‘responsible third party’ inasmuch as Defendants allege and contend that City

National Bank (of Sulphur Springs) caused or contributed to the harm for which the

Plaintiff in this matter seeks to recover damages from Defendant.” (CR 23). It

further alleges that the “claim relates to Clark’s handling of an underlying potential

claim against City National Bank for malicious prosecution.” . . . (CR 23). It then

contains the summary conclusion that “as such, the harm for which Plaintiff Smith

seeks to recover damages from Defendants was caused or contributed to by City

National Bank (of Sulphur Springs).” (CR 23). The court granted the motion to

designate without taking any evidence or any more specific pleadings. (CR 25).

Smith Then Claims Malicious Prosecution

Smith amended his petition to join City National as a defendant alleging

malicious prosecution, not legal malpractice. Smith did not allege in any way that

City National “caused or contributed to causing in any way the harm for which the

recovery of damages was sought from the legal malpractice of Clark.” (CR 27). The

Second Amended Original Petition also added a claim of punitive damages against

City National, something that was never alleged against Clark. (CR 27).

15 City National Complained of Improper Joinder

City National tried to raise the impropriety and unfairness of being joined as

a defendant to a different cause of action. It filed a motion to strike its designation

as a responsible third party. (CR 173). It raised the statute of limitations. (CR 173).

It raised the fact that it was not a responsible third party as defined by § 33.011(6) of

the Texas Civil Practice & Remedies Code. (CR 173). It raised the issue that the

harm alleged against City National was distinct from the harm caused by Clark’s

conduct. (CR 173) The court denied the motion.

City National also filed a motion for summary judgment that raised the statute

of limitations and that City National was not a responsible third party as defined by

§ 33.011(6), Texas Civil Practice & Remedies Code. (CR 107). Twice City National

amended the motion for summary judgment to clarify the issue and raised the fact that

the harm alleged by Smith against Clark in the legal malpractice claim was distinct

from the harm alleged against City National in the malicious prosecution case. (CR

195, 312).

The Claims are Mutually Exclusive

The legal malpractice and malicious prosecution cases are mutually exclusive.

In order to prevail on the legal malpractice case, it was necessary that the statute of

limitations have run on the underlying malicious prosecution claim. (The case within

the case.). Otherwise there is no legal malpractice claim. Therefore a necessary

16 element to recover on the legal malpractice claim would be that the malicious claim

was barred by the statute of limitations. To put it another way, to recover on the legal

malpractice claim Smith must show that the statute of limitations has run, whereas to

recover on the malicious prosecution claim he must show that the statute of

limitations has not run. So, while proof of the malicious prosecution claim is

necessary in the legal malpractice claim, it is not a claim for the same damages as the

malicious prosecution case. The legal malpractice claim is for the damages caused

by the breach of the duty by Clark in not bringing suit timely. The measure of that

damage would be the value of the underlying case within the case. The damages

recoverable under the malicious prosecution case would be for physical pain and

mental anguish and injury to the reputation.

The Absurd Result

It is illogical that a party can be designated as a responsible third party to a

legal malpractice case and find that its rights to assert limitations on a malicious

prosecution case have been waived. The Texas Supreme Court has held that a

defendant has a vested right to rely on a limitations defense once a claim has been

barred. Baker Hughes, Inc. v. Keco R & D, Inc., 12 S.W.3d 1, 4 (Tex. 1999).

Villarreal, 315 S.W.3d at 124. As written, 33.004(e) could only revive causes of

action alleged at the time of the designation as a responsible third party. Here any

claim against City National for legal malpractice was revived by its designation. Not

17 other claims. Not conversion. Not negligent misrepresentation. Not malicious

prosecution.5

Against Public Policy

Further, it is a bad public policy to allow designation as a responsible third

party and joinder as a defendant under the facts of this case. While typically it is not

the court’s function to question the wisdom of the statute or measure it for logic, but

to apply the statute as written, if the statute provides an absurd result it requires a

different construction than as written. Villarreal v. Wells Fargo, 315 S.W.3d at 109.

It is clear here that this situation does present such an absurd result.

Therefore, as a matter of law, City National should not have been designated

as a responsible third party or joined in the lawsuit. The claims against Clark for

legal malpractice are mutually exclusive with any claim against City National for

malicious prosecution. In fact, both cannot exist at the same time. Therefore this

Court should reverse the judgment below and render judgment that Smith take

nothing.

5 The trial court almost recognized this logic: “Three, we’re limiting the evidence to the malicious prosecution claim. You’ve also plead unreasonable collection efforts, and I have let you get some of it in because of the background. But at the time your suit was -- his suit was pending against Mr. Clark there was no malpractice claim for missing limitations on unreasonable collection efforts. So I -- you can’t get that in by designating him as an RTP.” (3 RR 109). The court failed to recognize that there was no malicious prosecution claim against Clark.

18 Issue No. 2

The trial court erred in awarding exemplary damages because

a.) they were not damages that Smith sought prior to City National’s joinder as a defendant; and

b.) Chapter 33, Tex. Civ. Prac. & Rem. Code, does not apply to exemplary damages.

City National was joined as a defendant in a legal malpractice case where there

was never any allegation or claim for exemplary damages. Yet the judgment against

City National reflects an award of $500,000.00 for exemplary damages.

No Original Claim for Exemplary Damages

This case originated as a legal malpractice case against Charles Clark with no

claim against Clark for exemplary or punitive damages. (CR 12). At no time did

Smith amend his pleadings to ever claim punitive damages against Clark. As set forth

above, the purpose of § 33.004(e) was to join all joint tort feasors that could be

responsible for damages from the claimed injuries. The damages claimed against

Clark did not include exemplary damages. Therefore Smith should not be permitted

to add additional damage elements that were not pled at the time of designation as a

responsible third party.

19 Chapter 33 Does Not Apply to Exemplary Damages

But even assuming for argument sake that City National was properly a

responsible third party and subsequently a defendant, § 33.004 did not effectuate a

waiver as to City National’s rights under the statute of limitations to not be liable for

exemplary damages. Villarreal, 315 S.W.3d at 124. The legislature could have

provided that a claim for exemplary damages was revived, but it did not. It expressly

forbid it. Section 33.002(c)(2) specifically says that Chapter 33 does not apply to “a

claim for exemplary damages.” That would mean that even joinder under § 33.004(e)

did not revive the claim for exemplary damages.

As a result, even if this Court finds that City National is properly before the

Court for some actual damage claim, the trial court erred in entering a judgment for

exemplary damages because they were barred by the statute of limitations, which was

not waived by § 33.004, Tex. Civ. Prac. & Rem. Code. Therefore, this Court should

reverse the judgment below as to exemplary damages and render judgment that Smith

take nothing on his claim for exemplary damages.

20 Issue No. 3

There is no evidence or insufficient evidence to support the jury’s finding to Question 1 that City National maliciously prosecuted Smith because evidence supporting two of the required elements for malicious prosecution is absent.

a.) The evidence does not support a finding that City National initiated or procured the prosecution, or

b.) that City National lacked probable cause.

If this Court finds that City National was properly joined as a defendant it still

should reverse because the evidence does not support the malicious prosecution

findings.

Elements of Malicious Prosecution

The elements of malicious prosecution are: (1) commencement of a criminal

prosecution against the plaintiff; (2) the defendant’s initiation or procurement of that

prosecution; (3) termination of the prosecution in the plaintiff’s favor; (4) the

plaintiff’s innocence; (5) lack of probable cause to initiate or procure the prosecution;

(6) malice in filing the charge; and (7) damage to the plaintiff. Kroger Texas Limited

Partnership v. Suberu, 216 S.W.3d 788, 793 n. 3 (Tex. 2006). City National

challenges the legal and factual sufficiency of the evidence to support two of the

required elements of malicious prosecution.

21 Unfavored Remedy

The Supreme Court has reminded courts to strictly apply these elements as

they will reflect the delicate balance of societal values. Gonzales v. Grimm, 2005

WL4137862 (Tex. App. – El Paso, July 8, 2015, no. pet. h.) (citing Browning-Ferris

Industries, Inc. v. Lieck, 881 S.W.2d 288, 291 Tex. (1994)). There is little room for

error. Id. Even a small departure from the exact prerequisites for liability may

threaten the delicate balance between protecting against wrongful prosecution and in

encouraging citizens to report criminal conduct. Browning-Ferris Industries, 881

S.W.2d at 288. As a consequence actions for malicious prosecution are not favored

in the law. Id.

Standard of Review

Legal Insufficiency

In determining legal sufficiency, the appellate court determines “whether the

evidence at trial would enable reasonable and fair-minded people to reach the verdict

under review.” City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex.2005); Petrohawk

Properties, L.P. v. Jones, 455 S.W.3d 753, 770 (Tex. App. Texarkana 2015, writ

pending). In looking at the evidence, the court is to credit favorable evidence if a

reasonable jury could and disregard contrary evidence unless a reasonable jury could

not. City of Keller, 168 S.W.3d at 827.

22 The evidence is legally insufficient if (1) there is a complete absence of

evidence of a vital fact; (2) the rules of law or of evidence bar the court from giving

weight to the only evidence offered to prove a vital fact; (3) there is no more than a

mere scintilla of evidence offered to prove a vital fact; or (4) the opposite of the vital

fact is conclusively established by the evidence. Jelinek v. Casas, 328 S.W.3d 526,

532 (Tex.2010). More than a scintilla of evidence exists when the evidence reaches

a level enabling reasonable and fair-minded people to differ in their conclusions.

Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex.1997). “Less than

a scintilla of evidence exists when the evidence is ‘so weak as to do no more than

create a mere surmise or suspicion’ of a fact.” King Ranch, Inc. v. Chapman, 118

S.W.3d 742, 751 (Tex.2003) (quoting Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63

(Tex.1983)).

Factual Insufficiency

In determining factual insufficiency the court must consider and weigh all of

the evidence, and set aside a verdict if the evidence is so weak or if the finding is so

against the great weight and preponderance of the evidence that it is clearly wrong

and unjust. (citing Pool v. Ford Motor Co., 715 S.W.2d 629, 635 (Tex.1986),

overruled on other grounds by Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 388

(Tex.2000).

23 Initiation or Procurement of the Prosecution

Initiating Prosecution

A person initiates a criminal prosecution if he makes a formal charge to law

enforcement authorities. Browning-Ferris v. Lieck, 881 S.W.2d at 292. “Initiating

the action describes executing the charging instrument which goes before the

magistrate who may then issue an arrest warrant.” Gonzales v. Grimm, 2015 WL

4137862 at 5, (citing Restatement (Second) of Torts §653(a) cmt. c (1977)). Here

there is no evidence that Cone did anything other than file a complaint with police.6

Cone did not know what the officer wrote down. (3 RR 199). Cone did not have any

contact with the district attorney’s office. (3 RR 142, 212). Cone did not go before

a magistrate that could issue an arrest warrant.

Procuring Prosecution

A person procures a prosecution when his actions were enough to cause the

prosecution and but for its actions the prosecution would not have occurred. Hasie

v. Compass Bank, 2014 WL 5422939 (Tex. App. – Amarillo, October 21, 2014, pet.

denied). When the decision to prosecute is left to the discretion of another, such as

a law enforcement official or a grand jury, a defendant does not procure criminal

prosecution unless he knowingly provides false material information and the false

information causes the criminal prosecution. Browning-Ferris, 881 S.W.2d at 294.

6 At best, Smith showed that Cone kept up with Smith’s court dates. (P. Ex. 33).

24 Proof is required that but for the false information the decision to prosecute would not

have been made. King v. Graham, 126 S.W.3d 75, 78 (Tex. 2003).

Cone’s Involvement

The evidence is undisputed that the grand jury made the decision to indict

Smith. (P. Ex. 33). (“The grand jury determines whether the prosecutors have

sufficient evidence to justify prosecution.”). The testimony regarding Cone’s

involvement was limited to Cone’s testimony, the police officer’s paperwork, and

letters from the district attorney. Cone testified that all he did was to file the

complaint on behalf of the Bank. (3 RR 75). He told the police officer that he had

the embroidery machine, but it was the other collateral he was worried about. (3 RR

79). He provided the police officer two copies of Security Agreements, a copy of

Financing Statement, a copy of civil paper, a copy of civil petition, copy of Texas LP

Return, and a copy of the demand letter. (3 RR 81; P. Exh. 27). At the time he made

the complaint he thought what he told the police officer was true. (3 RR 90). He

testified that when he filed with the police he was through with it. (3 RR 113). He

did not know what the ramifications of filing were. (3 RR 114). He was not aware

of what the police wrote in the officer’s notes. (3 RR 199-201). He testified that he

didn’t have any contacts with the D.A.’s office or participate in how the indictment

was drawn up. (3 RR 212-213).

25 Officer Irving’s Testimony

Police office Byron Irving testified that he did not have much recollection of

the incident. (4 RR 30). He testified that apparently there was no independent

investigation. (4 RR 36). He further testified that he did not remember anything that

Cone told him. (4 RR 38). Plaintiff’s Exhibit 27, which was the police department’s

incident report, shows the documents that were provided to the police department.

(P. Ex. 27). Officer Irving recorded his Offense Report Narrative based on the

information obtained from Cone. (P. Ex.29). No one disputes that the information

in Plaintiff’s Exhibit 29 is true.

The DA Procures Indictment

The file was forwarded to the district attorney’s office. Officer Russell Sterling

swore out the complaint against Smith based on his investigation and own beliefs.

(P. Ex. 25). Thereafter the district attorney’s office presented its evidence to the

grand jury who issued an indictment. (P. Exhs. 22 and 33). The indictment was later

amended. (P. Ex. 24 and 25). There is no evidence at any time that Cone participated

in any of the decisions after filing his complaint.

Cone’s Belief

Smith’s fall-back argument was that Cone provided information that he knew

to be false which overcame the presumption that he could not be liable because the

decision was left to the grand jury. This requires proof as to Cone’s belief at the time.

26 Or to put it more succinctly, the question is not what the factual facts were but what

the party honestly and reasonably believed the facts to be. Closs v. Goose Creek

Consolidated Independent School District, 874 S.W.2d 859, 877 (Tex. App. –

Texarkana 1994, no writ). Here the testimony concerning what Cone believed the

facts to be is clear in that he thought what he told the police officer was true. (3 RR

90). This is bolstered by the fact that the narrative reported by Officer Irving recites

only facts that are admittedly true.

“But for” Requirement

But assuming arguendo that the reported facts were false and Cone knew it,

Smith still had to prove that but for the false information the criminal prosecution

would not have taken place. King, 126 S.W.3d at 76. As stated by the Supreme

Court, “In other words, there must be proof that the prosecutor acted based on the

false information and that but for such false information the decision would not have

been made. King, 126 S.W.3d at 76. Here there is no evidence concerning this “but

for” element. While it did not require the Hopkins County’s district attorney’s

testimony that it was the cause of Smith’s prosecution there had to be some evidence

to support the causation element. In re Bexar Criminal District Attorney Office, 224

S.W.3d 182, 185-6 (Tex. 2007). This indispensable element is missing. Smith

attempted to elicit expert testimony with regard to the initiation and procurement

from the Lamar County district attorney, Gary Young. Mr. Young could not answer

27 or give an opinion with regard to the initiating and procurement. (5 RR 22-24).

Smith’s expert did not provide any testimony that was helpful on this element.

Therefore the evidence adduced by the plaintiff was not sufficient to show the

initiates or procures prong required to prove malicious prosecution.

Lack of Probable Cause

The lack of probable cause element asks whether a reasonable person would

believe that a crime had been committed given the facts as the complainant honestly

and reasonably believed them to be before the criminal proceedings were instituted.

Kroger Texas Limited Partnership, 216 S.W.3d at 794; Ritchie v. Brookshire Grocery

Company, 952 S.W.2d 515, 517 (Tex. 1997). Courts presume that the defendant

acted reasonably and had probable cause to initiate criminal proceeding. Kroger, 216

S.W.3d at 793. To rebut this presumption the plaintiff must produce evidence that

the motives, grounds, beliefs, or other information upon which the defendant acted

did not constitute probable cause. Kroger, 216 S.W.3d at 793. If the acts or omissions

necessary to constitute a crime reasonably appeared to have been completed, a

complainant’s failure to investigate does not negate probable cause. Ritchie, 952

S.W.2d at 518. Here Smith’s acquittal does not prove lack of a probable cause. See

Kroger, 216 S.W.3d at 795.

28 Cone’s Believed Facts Fit Hindering Charge

A person commits the crime of hindering a secured creditor when a debtor with

intent to hinder enforcement of a lienholder’s interest, destroys, removes, conceals,

encumbers, transfers out of the State of Texas, or otherwise harms or reduces the

value of collateral. (CR 535). Probable cause is looked at from the perspective of the

complaining party. Here the evidence does not negate the fact that as a reasonable

person Cone believed that Smith was concealing the other equipment secured by the

security agreement.

Cone’s Motives and Beliefs

Cone testified that Smith had told him that the other collateral was “over

there.” (3 RR 183; P. Ex 20). Smith said he would be back to tell him where, but

never returned. (3 RR 115). He had a hard time getting in touch with Smith. (3 RR

98). He attempted on his own to locate the collateral. (P. Ex. 20). He went to

Smith’s house where he believed Smith to be home but refusing to answer the door.

(3 RR 198). Smith was supposed to come back and show him the rest of the collateral

but never did. (3 RR 206). Cone testified that his intent in filing charges was not to

get Smith indicted but to get paid. (3 RR 111-112). He had no ill will toward Smith.

(3 RR 203).

29 Smith’s Argument

Smith argued to the jury that the proof of Cone’s lack of probable cause was

that Cone wanted to get the note paid or get the collateral back (3 RR 113), and he

testified that his intent was to get paid. (3 RR 112). This is the only evidence Smith

pointed to in argument as showing lack of probable cause. This is not sufficient to

overcome the presumption and show a lack of probable cause. The evidence at best

invites speculation and does not create a mere surmise or suspicion.

A reasonable person could believe that Smith was concealing the equipment

from City National. Therefore, based on the evidence before it, there is no evidence

or insufficient evidence to show the lack of probable cause.

Issue No. 4

There was legally and factually insufficient evidence to support the jury’s answer to Question No. 2a. The court erred by entering judgment for damages for mental anguish.

With no physical pain, Smith had to rely on mental anguish to support the

jury’s finding for a portion of his damages. But mental anguish requires proof of high

degree of stress and a substantial disruption of daily routine. Smith had no evidence

to support the finding.

30 Standard of Review

The standard of review for legal and factual sufficiency challenges is set out

at pages 22-23 above.

Question 2a

Question 2a asked the jury to find an amount for physical pain and mental

anguish. (CR 535). Mental anguish was not defined. To recover on mental anguish

it requires evidence of a high degree of mental pain and distress that is more than

mere worry, anxiety, vexation, embarrassment, or anger. Parkway Company v.

Woodruff, 901 S.W.2d 434, 444 (Tex. 1995). It is well settled that there must be both

evidence of the existence of compensable mental anguish and evidence to justify the

amount awarded. Service Corp. International v. Guerra, 348 S.W.3d 221, 231 (Tex.

2011). Mental anguish is only compensable if it causes a substantial disruption in

daily routine or a high degree of mental pain and distress. Katy Springs &

Manufacturing, Inc. v. Favalora, 2015 WL 5093232 at p. 7. The jury answered

$150,000.00. (CR 535).

Multiple Element Award

Because the question was submitted in a manner that allows the jury to award

damages for physical pain and mental anguish, it is considered a broad form. When

damage issues are submitted in a broad form it is difficult, if not impossible, to

determine an amount the jury awarded for each element of damages. River Oaks LM,

31 Inc. v. Vinton Duarte, 2015 WL 3618950 at 15 (Tex. App. – [Houston 14th Dist.],

May 28, 2015, no pet.). As a result, to challenge a multi-element award on appeal

successfully a party must address all the elements of damages and show that the

evidence is insufficient to support the entire damage award. City of Houston v.

Livingston, 221 S.W.3d 204, 230 (Tex. App. – Houston [1st Dist] 2006, no pet.).

Here the jury could award damages for physical pain or mental anguish. Thus City

National must show there is no evidentiary support for both the physical pain or the

mental anguish.

Lack of Evidence of Physical Pain

Smith submitted no evidence concerning any physical pain associated with the

malicious prosecution claim. In fact, in closing argument his counsel told the jury

that one of the two categories of damages they are asking for was “the physical pain

and mental anguish. Obviously, we’re talking mental anguish . . .”. (5 RR 111).

Therefore even Smith recognizes there was no evidence of physical pain.

No Evidence of Mental Anguish

Here the evidence concerning Smith’s mental anguish was scant, if any, and

certainly not legally sufficient. Lillian Lake, his long-time live-in girlfriend, testified

that as a result of the malicious prosecution he was angry and embarrassed. (3 RR

62-63). Smith himself stated he was humiliated. (3 RR 112). He testified that he

could not tell the jury what he lost. (3 RR 116). This was all the evidence that was

32 produced on mental anguish. Yet, in closing argument, counsel argued that the award

for mental anguish was for “everything he went through during that two years that he

was prosecuted, including the time that he was in jail, having to lie to his employers

after that about all the settings. The many settings he had to come down here, many

of which the bank was here for, that’s mental anguish.” (5 RR 140). This evidence

certainly does not rise to the level of a high degree of mental pain and distress

required for a recovery of mental anguish.

CONCLUSION

This was a legal malpractice case that Smith has attempted to turn into a

malicious prosecution case through a misapplication of Chapter 33, Texas Civil

Practice & Remedies Code. This should fail because the limitations bar Smith’s

claim and Chapter 33 does not revive the malicious prosecution claim. Even if it did

the evidence is not sufficient to support the malicious prosecution finding or the

damages awarded. This Court should reverse.

PRAYER

WHEREFORE, PREMISES CONSIDERED, Appellant, CITY NATIONAL

BANK OF SULPHUR SPRINGS, prays that the Court reverse the judgment below

and render judgment that Appellee, JOHN ALEXANDER SMITH, take nothing or,

alternatively, that the Court render judgment as is supported by the evidence, or that

33 it reverse and remand the case for a new trial; and for such other and further relief to

which it may show itself to be entitled.

Respectfully submitted,

/s/ John R. Mercy John R. Mercy Texas State Bar No. 13947200 MERCY p CARTER p TIDWELL, L.L.P. 1724 Galleria Oaks Drive Texarkana, TX 75503 Telephone: (903) 794-9419 Facsimile: (903) 794-1268 Email: jmercy@texarkanalawyers.com

Coy Johnson Texas State Bar No. 10698000 Email: coy@clayjohnsonlaw.com Clay Johnson Texas State Bar No. 24007450 Email: clay@clayjohnsonlaw.com JOHNSON LAW FIRM, P.C. 609 Gilmer Street Sulphur Springs, TX 75482-4121 Telephone: (903) 885-8866 Facsimile: (903) 584-1313

ATTORNEYS FOR APPELLANT

34 CERTIFICATE OF SERVICE

I hereby certify that on September 29, 2015, a true and correct copy of the foregoing Brief of Appellant was forwarded to counsel of record for Appellee by the Electronic Service Provider, as follows:

Mr. J. Mark Sudderth NOTEBOOM LAW FIRM 669 Airport Freeway, Suite 100 Hurst, TX 76053-3698 Email: sudderth@noteboom.com

/s/ John R. Mercy John R. Mercy

CERTIFICATE OF COMPLIANCE

Pursuant to Tex. R. App. P. 9.4, I hereby certify that the foregoing Brief of Appellant contains 6322 words. This is a computer-generated document created in WordPerfect using 14-point typeface. In making this certificate I am relying on the word count provided by the software used to prepare the document.

/s/ John R. Mercy John R. Mercy

35 APPENDIX INDEX

A - General Instructions (CR 535-547)

B - Final Judgment (CR 582-583)

C - Order on Motion to Modify Judgment (SCR 5)

D - §33.004 effective September 1, 2003 to August 31, 2011 ' ^mmbkafu=^

CAUSE NO. CV 40681

JOHN ALEXANDER SMITH, § IN THE DISTRICT COURT PLAINTIFF § § vs. § ,...., § = .,,.. CITY NATIONAL BANK OF § z 0 ··ni SULPHUR SPRINGS, § < N """""- ll'-'"'• DEFENDANT § C) ~

GENERAL INSTRUCTIONS -·o ::?:: rn w .;::- LADIES AND GENTLEMEN or THE JURY: U'.l

This case is submitted to you by asking questions about the facts, which you must decide

from the evidence you have heard in this trial. You arc the sole judges of the credibility of the

witnesses and the weight to be given their testimony, but in matters oflaw you must be governed

by the instructions in this Charge. In discharging your responsibility on this jury, you will

observe all the instructions which have previously been given you. I shall now give you

additional instructions which you should carefully and strictly follow during your deliberations.

1. Do not let bias, prejudice or sympathy play any part in your deliberations.

2. In arriving at your answers, consider only the evidence introduced here under oath and

such exhibits, if any, as have been introduced for your consideration under the rulings of the Court;

that is, what you have seen and heard in this courtroom, together with the law as given you by the

Court. In your deliberations, you will not consider or discuss anything that is not represented by

the evidence in this case.

3. Since every answer that is required by the Charge is important, no juror should state or

Page I

535 8. The presiding juror or any other who observes a violation of the Court's instructions shall

immediately warn the juror who is violating the same and caution the juror not to do so again.

When words arc used in this charge in a sense that varies from the meaning commonly understood,

you are given a proper legal definition, which you are bound to accept in place of any other

meaning.

9. Answer "Yes" or "No" to all questions unless otherwise instructed. Unless otherwise

stated, a "Yes" answer must be based on a preponderance of the evidence. If you do not find that

a preponderance of the evidence supports a "Yes" answer, then answer "No". The term

"preponderance of the evidence" means the greater weight and degree of credible testimony or

evidence introduced before you and admitted in this case. Whenever a question requires other

than a "Yes" or "No" answer, your answer must be based on a preponderance of the evidence.

10. A fact may be established by direct evidence or by circumstantial evidence or both. A fact

is established by direct evidence when proved by documentary evidence or by witnesses who saw

the act done or heard the words spoken. A fact is established by circumstantial evidence when it

may be fairly and reasonably inferred from other facts proved.

Pagc3

536 consider that any required answer is not important.

4. You must not decide who you think should win, and then try to answer the questions

accordingly. Simply answer the questions, and do not discuss nor concern yourselves with the

effect of your answers. \ 5. You will not decide the answer to a question by lot or by drawing straws, or by any other

method of chance. Do not return a quotient verdict. A quotient verdict means that the jurors

agree to abide by the result to be reached by adding together each juror's figures and dividing by

the number of jurors to get an average. Do not do any trading on your answers; that is, one juror

should not agree to answer a certain question one way if others will agree to answer another

question another way.

6. You may render your verdict upon the vote of ten or more members of the jury. The same

ten or more of you must agree upon all of the answers made and to the entire verdict. You will

not, therefore, enter into an agn:ernent to be bound by a majority of any other vote of less than ten

jurors. If the verdict and all of the answers therein are reached by unanimous agreement, the

presiding juror shall sign fi.1r the entire jury. If any juror disagrees as to any answer made by the

verdict, those jurors who agree to all findings shall each sign the verdict.

7. These instructions are given you because your conduct is subject to review the same as that

of the witnesses, paiiies, attorneys and judge. I fit should be found that you have disregarded any

of these instructions, it will be jury misconduct and it may require another trial by another jury;

then all of our time will have been wasted.

Page 2

537 QUESTION I:

Did City National Bank of Sulphur Springs maliciously prosecute John Alexander Smith?

"Malicious prosecution" occurs when one person initiates or procures, with malice, and without probable cause at the time the prosecution is commenced, the prosecution of an innocent person.

"Malice" means ill will, bad or evil motive, or such gross indifference to the rights of others as to amount to a will Ii.ii or wanton act.

"Probable cause" means the existence of such facts and circumstances as would excite belief in a person of reasonable mind, acting on the facts or circumstances within his knowledge at the time the prosecution was commenced, that the other person was guilty of a criminal offense. The probable cause determination asks whether a reasonable person would believe that a crime had been committed given the facts as the complainant honestly and reasonably believed them to be before the criminal proceedings were instituted.

A person procures a criminal prosecution if his actions were enough to cause the prosecution, and but for his actions the prosecution would not have occurred. A person does not procure a criminal prosecution when the decision whether to prosecute is lcli to the discretion of another, including a law enforcement official or the grand jury, unless the person fails to fully and fairly disclose all material information known to him or knowingly provides false information. A criminal prosecution may be procured by more than one person.

You are instructed that the criminal offense of Hindering a Secured Creditor occurs when a debtor, with intent to hinder enforcement of a lienholder's interest, destroys, removes, conceals, encumbers, transfers out of the State of Texas, or otherwise harms or reduces the value of collateral.

In addition, the offense of Hindering a Secured Creditor occurs when a debtor who docs not have a right to sell or dispose of the secured property, or who is required to account to the secured party for the proceeds of a permitted sale or disposition, sells or otherwise disposes of the secured property, or does not account to the secured party for the proceeds of a sale or other disposition as required, with intent to appropriate the proceeds or value of the secured property

The law does not outlaw refosal by the debtor to reveal the location of collateral, nor does it outlaw the mere refusal to deliver property upon demand. Nor does it make the debtor's concealment of himscl fan offense.

Answer "Yes" or "No."

ANSWER: _ _ "}~e,.~S~----

rage 4 538 If you have answered "Yes" to Question I, answer Question 2. Otherwise, do not answer Question 2.

QUESTION 2: What some of money, if paid now in cash, would fairly and reasonably compensate John Alexander Smith for his injuries, if any, that resulted from the occurrence in question?

Consider the elements of damages listed below and none other. Consider each element separately. Do not award any sum of money on any element if you have otherwise, under some other element, awarded a sum of money for the same loss. That is, do not compensate twice for the same loss, if any. Do not include interest on any amount of damages you find.

Answer separately, in dollars and cents, for damages, if any.

a. Physical pain and mental anguish.

ANSWER: $ \f{).00() r

b. Injury to reputation.

ANSWER: $ 8-5() ,('ffi

Page 5 539 Answer the following question only if you unanimously answered "Y cs" to Question 1. Otherwise, do not answer the following question.

To answer "Yes" to the following question, your answer must he unanimous. You may answer "No" to the following question only upon a vote of ten or more jurors. Otherwise, you must not answer the following question.

QUESTION 3:

Do you find by clear and convincing evidence that the harm to John Alexander Smith resulted from malice?

"Clear and convincing evidence" means the measure or degree of proof that produces a firm belief or conviction of the truth of the allegations sought to be established.

"Malice" means ill will, bad or evil motive, or such gross indifference to the rights of others as to amount to a willful or wanton act.

Answer 11 Yes 11 or 11 No.' 1

ANSWER: "/es

Page 6 540 Answer the following question only if you unanimously answered "Yes" to Question 3. Otherwise, do not answer the following question.

QUESTION 4:

You are instructed that you must unanimously agree on the amount of any award of exemplary damages.

What sum of money, if any, should be assessed against City National Bank of Sulphur Springs and awarded to John Alexander Smith as exemplary damages for the conduct found in response to Question 3?

"Exemplary damages" means any damages awarded as a penalty or by way of punishment but not for compensatory purposes, Exemplary damages includes punitive damages.

Factors to consider in awarding exemplary damages, if any, are-

a. The nature of the wrong. b. The character of the conduct involved. c. The degree of culpability of the wrongdoer. d. The situation and sensibilities of the parties concerned. e. The extent to which such conduct offends a public sense of justice and propriety. f. The net worth of City National Bank of Sulphur Springs.

Answer in dollars and cents, if any.

ANSWER: ~6;1) i.DDD

Page7 541 SPECIAL INSTRUCTIONS

After you retire to the jury room, you will select your own presiding juror. The first thing the presiding juror will do is to have this complete charge read aloud and then you will deliberate upon your answers to the questions asked.

It is the duly of the presiding juror - -

I. to preside during your deliberations,

2. to see that your deliberations are conducted in an orderly manner and in accordance with the instructions in this charge,

3. lo write and hand to the bailiff any communications concerning the case that you desire to have delivered to the Judge,

4. lo vote on the questions,

5. lo write your answers to the questions in the spaces provided,

6. to certify to your verdict in the space provided for the presiding juror's signature or to obtain the signatures of all the jurors who agree with the verdict if your verdict is less than unammous.

You should not discuss the case with anyone, not even with other members of the jury, unless all of you are present and assembled in the jury room. Should anyone attempt to talk to you about the case before the verdict is returned, whether al the courthouse, at your home, or elsewhere, please inform the judge of this fact.

When you have answered all the questions you are required to answer under the instructions of the judge and your presiding juror has placed your answers in the space provided and signed the verdict as presiding juror or obtained the signatures, you will inform the bailiff at the door of the jury room that you have reached a verdict, and then you will return into the courtroom with your verdict.

542 Page 8 CERTJFICATENO. I

We, the jury, have answered questions number 1 and number 2 as herein indicated, and herewith return same into court as our verdict.

(To be signed by the presiding juror if unanimous.)

s~q_~ PRESIDING JUROR

(To be signed by those rendering the verdict if not unanimous.)

Page9 543 CERTIFICATE NO. 2

We, the jury, have answered question number 3 as herein indicated, and herewith return same into court as our verdict.

(To be signed by the presiding juror if unanimous.)

~~~ PRESIDING JUROR

(To be signed by those rendering the verdict if not unanimous.)

544 Page 10 CERTIFICATE NO. 3

We, the jury, have unanimously answered question number 4 as herein indicated, and herewith return same into court as our verdict.

(To be signed by the presiding juror if unanimous.)

So,,~~ PRESIDING JUROR

Page 11 545 I '. - I(\

- \ ;_\ .J

546 INSTRUCTION 1: 2

A person "initiates" a criminal prosecution by making a formal charge to law enforcement authorities. Evidence that the defendant filed formal charges against the plaintiff is sufficient to show that the defendant initiated the criminal prosecution.

Refused:~

r.n

2 Source:

Browning-Ferris Indus. v. Lieck, 881 S.W.2d 188, 292 (Tex. 1994) ("A person initiates a criminal prosecution if he makes a formal charge to law enforcement authorities.")

All American Telephone, Inc. v. USLD Communications, Inc., 291S.W.3d518, 533 (Tex. App. -Fort Worth 2009, pet. denied) ("A person initiates a criminal prosecution if he makes a formal charge to law enforcement authorities.")

Browning-Ferris, 881 S. W .2d at 293("evidence that defendant filed formal charges against plaintiff" demonstrates '"initiation" of a prosecution.)

Plaintifrs Proposed Jury Charge 547 Page7 [ .. • ^mmbkafu=_ • JOHN ALEXANDER SMITH, § PLAINTIFF § § V. § § CITY NATIONAL BANK OF § SULPHUR SPRINGS, § DEFENDANT § HOPKINS COUNTY, TEXAS

FINAL JUDGMENT

On the l 7"' day of November, 2014, this cause came on to be heard. Plaintiff JOHN

ALEXANDER SMITH appeared in person and by his attorney of record and announced ready for

trial, and Defendant CITY NATIONAL BANK OF SULPHUR SPRINGS appeared by its

attorney of record and announced ready for trial. A jury having previously been demanded, a

jury consisting of twelve (12) qualified jurors was duly empaneled and the case proceeded to

trial.

At the conclusion of the evidence, the court submitted the questions of fact in the case

to the jury. The charge of the court and the verdict of the jury are incorporated herein for all

purposes by reference. Because it appears to the court that the verdict of the jury was for the

Plaintiff against the Defendant, judgment should be rendered on the verdict in favor of the

Plaintiff JOHN ALEXANDER SMITH and against Defendant CITY NATIONAL BANK OF

SULPHUR SPRINGS.

It further appears to the Court that the amount of damages to be recovered by the Plaintiff

should be reduced by $100,000 in accordance with TEX. CIV. PRAC. & REM. CODE§ 33.0l2(b).

IT IS THEREFORE ORDERED, ADJUDGED, and DECREED by the court that

Plaintiff JOHN ALEXANDER SMITH have and recover compensatory damages - including

Final Judgment - Page 1

582 •" • • $400,000 in such damages found by the jury, reduced by $100,000 as referenced above. as

well as pre-judgment interest on $300,000 - from Defendant CITY NATIONAL BANK OF d> J( ..... SULPHUR SPRINGS, in the sum of ~<-j S'{;). 1 )..f,,r 'Tt>~\ c\.,...~., %:?>

JOHN ALEXANDER SMITH have and recover exemplary damages from Defendant CITY

NATIONAL BANK OF SULPHUR SPRINGS in the sum of $500,000.00.

IT IS FURTHER ORDERED that all costs of court spent or incurred in this cause are

adjudged against Defendant CITY NATIONAL BANK OF SULPHUR SPRINGS.

IT IS FURTHER ORDERED that the total amount of the judgment here rendered will

bear interest at the rate of 5.00 percent from 'MJ rr d-<> (G( until paid.

All relief requested in this case and not expressly granted is denied. This judgment

finally disposes of all parties and all claims and is appealable.

All writs and processes for the enforcement and collection of this judgment or the costs

of court may issue as necessary.

SIGNED on p 1), 9...1"'( DING

Final J11dgme11t - Page 2 583 ^mmbkafu=` FL 0. CV406~J lD15FfB I/ AH 10: ~B I

JOH AU:.XA. DER S~11TH fN Ti l E DISTRICT COURT ~·

v Of HOPKI S CO TY. TEXAS

CITY ' ATlO. AL BA~K OF ULPHI.JR SPRJI\G 62" 0 JUDJClAL DlSTRlCT

ORDER 0~ MOT IO~ TO MODI FY J UDG;\I E'IT

On February 5. 2015. the Court consadered Defendant City ~at1onal Bank of ulphur

Spnng · · Motion to Mod at) Judgment. After con adenng the motion and argument of counsel. the

Court i of the opimon that the motion hould be granted.

IT IS. TllEREFORl:.. ORDeRED that Defendant Clly 1allonal Bank of Sulphur ' prmg~o. •

~1ouon to Mo

IT IS HJ RTHER ORDERED that the Court' Judgment entered on Oecemberl5. 2014 1

modJfied to hO\\ that the prop~.:r amount of preJudgment mtere t awarded to Plamuff in tht ca 1

Fifty-four Thow and Two llundrcd l·orty-three Oollar.. ($54.243 .00).

DATED. FJ:,,.,.~ <( (k) 1)- r-''

5 § 33.004. Designation of Responsible Third Party, TX CIV PRAC & REM § 33.004

^mmbkafu=a Vernon's Texas Statutes and Codes Annotated Civil Practice and Remedies Code (Refs & Annos) Title 2. Trial, Judgment, and Appeal Subtitle C. Judgments Chapter 33. Proportionate Responsibility (Refs & Annos) Subchapter A. Proportionate Responsibility

This section has been updated. Click here for the updated version.

V.T.C.A., Civil Practice & Remedies Code § 33.004

§ 33.004. Designation of Responsible Third Party

Effective: September 1, 2003 to August 31, 2011

(a) A defendant may seek to designate a person as a responsible third party by filing a motion for leave to designate that person as a responsible third party. The motion must be filed on or before the 60th day before the trial date unless the court finds good cause to allow the motion to be filed at a later date.

(b) Nothing in this section affects the third-party practice as previously recognized in the rules and statutes of this state with regard to the assertion by a defendant of rights to contribution or indemnity. Nothing in this section affects the filing of cross-claims or counterclaims.

(c), (d) Repealed by Acts 2003, 78th Leg., ch. 204, § 4.10(2).

(e) If a person is designated under this section as a responsible third party, a claimant is not barred by limitations from seeking to join that person, even though such joinder would otherwise be barred by limitations, if the claimant seeks to join that person not later than 60 days after that person is designated as a responsible third party.

(f) A court shall grant leave to designate the named person as a responsible third party unless another party files an objection to the motion for leave on or before the 15th day after the date the motion is served.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1 § 33.004. Designation of Responsible Third Party, TX CIV PRAC & REM § 33.004

(g) If an objection to the motion for leave is timely filed, the court shall grant leave to designate the person as a responsible third party unless the objecting party establishes:

(1) the defendant did not plead sufficient facts concerning the alleged responsibility of the person to satisfy the pleading requirement of the Texas Rules of Civil Procedure; and

(2) after having been granted leave to replead, the defendant failed to plead sufficient facts concerning the alleged responsibility of the person to satisfy the pleading requirements of the Texas Rules of Civil Procedure.

(h) By granting a motion for leave to designate a person as a responsible third party, the person named in the motion is designated as a responsible third party for purposes of this chapter without further action by the court or any party.

(i) The filing or granting of a motion for leave to designate a person as a responsible third party or a finding of fault against the person:

(1) does not by itself impose liability on the person; and

(2) may not be used in any other proceeding, on the basis of res judicata, collateral estoppel, or any other legal theory, to impose liability on the person.

(j) Notwithstanding any other provision of this section, if, not later than 60 days after the filing of the defendant's original answer, the defendant alleges in an answer filed with the court that an unknown person committed a criminal act that was a cause of the loss or injury that is the subject of the lawsuit, the court shall grant a motion for leave to designate the unknown person as a responsible third party if:

(1) the court determines that the defendant has pleaded facts sufficient for the court to determine that there is a reasonable probability that the act of the unknown person was criminal;

(2) the defendant has stated in the answer all identifying characteristics of the unknown person, known at the time of the answer; and

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 2 § 33.004. Designation of Responsible Third Party, TX CIV PRAC & REM § 33.004

(3) the allegation satisfies the pleading requirements of the Texas Rules of Civil Procedure.

(k) An unknown person designated as a responsible third party under Subsection (j) is denominated as “Jane Doe” or “John Doe” until the person's identity is known.

(l) After adequate time for discovery, a party may move to strike the designation of a responsible third party on the ground that there is no evidence that the designated person is responsible for any portion of the claimant's alleged injury or damage. The court shall grant the motion to strike unless a defendant produces sufficient evidence to raise a genuine issue of fact regarding the designated person's responsibility for the claimant's injury or damage.

Credits Added by Acts 1995, 74th Leg., ch. 136, § 1, eff. Sept. 1, 1995. Amended by Acts 2003, 78th Leg., ch. 204, §§ 4.03, 4.04, 4.10(2), eff. Sept. 1, 2003.

V. T. C. A., Civil Practice & Remedies Code § 33.004, TX CIV PRAC & REM § 33.004 Current through the end of the 2015 Regular Session of the 84th Legislature

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 3