First State Bank of Mesquite v. H. Lynn Musgrove, Jr., Glen Bellinger and Bellinger & Dewolf, LLP

Court of Appeals of Texas·Decided March 30, 2011·No. 08-09-00032-CV·Published

Opinion

COURT OF APPEALS

EIGHTH DISTRICT OF TEXAS

EL PASO, TEXAS

FIRST STATE BANK OF MESQUITE, § No. 08-09-00032-CV

Appellant, § Appeal from the

v. § 193rd District Court

BELLINGER & DEWOLF, LLP, H. § LYNN MUSGROVE, JR. AND GLEN of Dallas County, Texas BELLINGER, § (TC# 08-13950-L)

Appellees. §

OPINION

First State Bank of Mesquite appeals from a summary judgment granted in favor of Bellinger & Dewolf, LLP, H. Lynn Musgrove, Jr., and Glen Bellinger.1 In 2004, First State Bank of Mesquite (the “Bank”) loaned approximately $1.7 million to Fradette Brothers Enterprises, Inc. (“FBE”) for the purchase of H2O Fire Sprinkler Corporation (“H2O”) from Robert Hawley. FBE executed a promissory note and pledged the assets of H2O Fire Sprinkler Corporation as collateral for the loan. John Fradette and Mike Fradette executed personal guaranties in connection with the loan. According to the pleadings, John Fradette had worked for H2O since 2001 and he had been president of the company since September of 2003.

FBE subsequently filed suit against Hawley alleging he had misrepresented the financial condition of H2O (cause number 04-10234-L filed in the 193rd District Court of Dallas County).

1 This case was transferred from the Fifth Court of Appeals to this Court pursuant to a docket equalization order entered by the Texas Supreme Court. See TEX .GOV ’T CODE ANN . § 73.001 (West 2005).

FBE amended its petition to join the Bank as a defendant based on allegations that the Bank had fraudulently induced it to purchase H2O and enter into the loan transactions. The Bank filed suit in the 192nd District Court against FBE and the Fradettes seeking to recover on the note and guaranties (cause number 05-4539-K). The 193rd District Court granted FBE’s motion to consolidate the two cases and cause number 05-4539-K was transferred to the 193rd District Court.

The Bank amended its petition to include third party claims against the Fradettes’

attorneys, Bellinger & DeWolf, LLP, H. Len Musgrove and Glen Bellinger (collectively referred to as “Bellinger & DeWolf”). The second amended petition alleged that FBE and the Fradettes, with the assistance of Bellinger & DeWolf, devised a scheme to transfer the pledged assets into a new company in violation of the security agreements and with the intent to harm the bank. This pleading further alleged that Bellinger & DeWolf engaged in this scheme or conspired to engage in the scheme to facilitate Mike and John Fradette’s ability to approach other financial institutions, including Sterling Bank, Sovereign Bank, Fidelity Bank, Jefferson Bank, and Frost Bank, and obtain new loans by pledging the same assets. These allegations form the basis of the fraud (Count 4), conspiracy to breach fiduciary duty (Count 6), and conspiracy to commit fraud causes of action (Count 7).

On December 17, 2007, the trial court heard Bellinger and DeWolf’s special exceptions to the second amended petition. According to the docket sheet, the trial court granted the special exceptions in part and ordered the Bank to re-plead Counts 4, 5, and 6 to provide a complete factual basis of these claims as to Bellinger & DeWolf. The trial court did not immediately enter a written order reflecting its ruling. On December 20, 2007, the trial court entered a standing

scheduling order which set the case for jury trial on July 22, 2008 and established the deadline for filing amended pleadings asserting new claims or defenses. Under the order, the deadline was 120 days before the trial setting, or March 24, 2008. On that date, the trial court signed an order reflecting its ruling on the special exceptions and ordering the Bank to re-plead within seven days from the date of the order. Inexplicably, the order also required the Bank to re-plead no later than March 24, 2008, the date the order was signed.

On April 8, 2008, the Bank filed its third amended petition and counterclaim which asserted new claims against Bellinger and DeWolf for RICO violations and RICO conspiracy (Counts 8 and 9). These claims were based on allegations that FBE and the Fradettes, with the assistance of Bellinger & DeWolf, executed false loan documents and pledged the same collateral over and over for the purpose of defrauding the banks in a “modern day bank heist.” The pleadings also alleged that FBE, the Fradettes, and Bellinger & DeWolf engaged in mail fraud in violation of 18 U.S.C. §1341 and wire fraud in violation of 18 U.S.C. §1343. On April 10, 2008, the Bank filed a motion requesting leave to file additional claims or alternatively requesting that the court modify the scheduling order. That same day, Bellinger & DeWolf filed a motion to strike the third amended petition and counterclaim because it did not comply with the trial court’s order on special exceptions and it was untimely filed. Bellinger & DeWolf attached to its motion three letters addressed to counsel for the Bank asking whether the Bank intended to file an amended petition in compliance with the trial court’s order on the special exceptions. The letters also reflect that counsel for Bellinger & DeWolf had been led to believe that the Bank intended to file an amended petition in March 2008 prior to the deadline. On May 7, 2008, the trial court struck the Bank’s RICO claims because they had not been filed by the deadline

established by the scheduling order.

After Bellinger & DeWolf filed a motion for no evidence and traditional summary judgment, the Bank sought leave to file a fourth amended petition and counterclaim. Alternatively, the Bank requested that the court reconsider the ruling on the Bank’s motion for leave to file its third amended petition. The trial court denied the Bank’s motion. The Bank filed its response to the summary judgment motion. Bellinger & DeWolf filed written objections to the Bank’s summary judgment evidence which included the affidavit of Mariano Hernandez. The trial court sustained Bellinger & DeWolf’s objections and struck portions of the affidavit of Mariano Hernandez. The trial court granted the motion for summary judgment as to all of the Bank’s claims against Bellinger & DeWolf. The Bank timely filed notice of appeal.

THE RICO CLAIMS

The Bank’s first two issues pertain to the trial court’s order striking the RICO claims asserted against Bellinger & DeWolf in the third amended petition and refusing to allow amendment of the Bank’s pleadings to assert these claims. The Bank asserts that the trial court’s decision amounts to an abuse of discretion.

A trial court is given wide discretion in managing its docket, and we will not interfere with the exercise of that discretion absent a showing of clear abuse. Clanton v. Clark, 639 S.W.2d 929, 931 (Tex. 1982); Roskey v. Continental Casualty Company, 190 S.W.3d 875, 879 (Tex.App.--Dallas 2006, pet. denied). Entry of a scheduling order is one type of docket management. Accordingly, we review a trial court’s enforcement of a scheduling order for an abuse of discretion. In re Estate of Henry, 250 S.W.3d 518, 526 (Tex.App.--Dallas 2008, no pet.). A trial court abuses its discretion when its ruling is arbitrary, unreasonable, or without

reference to any guiding rules or legal principles. K-Mart Corp. v. Honeycutt, 24 S.W.3d 357, 360 (Tex. 2000).

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First State Bank of Mesquite v. H. Lynn Musgrove, Jr., Glen Bellinger and Bellinger & Dewolf, LLP, (Tex. Ct. App. 2011).

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