I-10 Colony, Inc. v. Chao Kuan Lee, Li Yang Lee, and Li Hsiang Chang

• Court: Court of Appeals of Texas
• Decided: April 23, 2015
• Docket: 01-14-00465-CV
• Status: Published

Opinion

Opinion issued April 23, 2015

In The

Court of Appeals For The

First District of Texas ———————————— NO. 01-14-00465-CV ——————————— I-10 COLONY, INC., Appellant V. CHAO KUAN LEE, LI YANG LEE, AND LI HSIANG CHANG, Appellees

On Appeal from the 151st District Court Harris County, Texas Trial Court Case No. 2014-08459

and

———————————— NO. 01-14-00718-CV ——————————— I-10 COLONY, INC., Appellant V. CHAO KUAN LEE, LI YANG LEE, AND LI HSIANG CHANG, Appellees

On Appeal from the 151st District Court Harris County, Texas Trial Court Case No. 2014-08459

MEMORANDUM OPINION

In this opinion, we resolve two interlocutory appeals arising from a lawsuit

related to the parties’ co-ownership of a hotel property. Chao Kuan Lee, Li Yang

Lee, and Li Hsiang Chang (collectively “Lee”) sued I-10 Colony, Inc. for partition

of the property, fraud, and damages. Both Lee and I-10 requested the appointment

of a receiver to manage the sale of the property, although they disagreed about the

proper scope of the receiver’s authority. The trial court appointed a receiver, and

in the first interlocutory appeal, I-10 challenges the order creating the receivership

on the basis that the order unconstitutionally confers excessive power on the

receiver.

In the second interlocutory appeal, I-10 challenges the trial court’s denial of

I-10’s motion to dismiss Lee’s fraud claim pursuant to the Texas Citizens

Participation Act (TCPA). Lee’s fraud claim was based on allegations that I-10’s

lawyer represented to Lee that I-10 would pay Lee 50% of the income generated

by the hotel as required by the 2010 judgment, when I-10 had no intention of doing

so. I-10 argued that Lee’s fraud claim was based on, related to, or in response to I-

2 10’s exercise of free speech because it was based on communications made by I-

10’s lawyer, and a lawyer’s services are an issue of public concern.

We affirm both the trial court’s order creating the receivership and the order

denying I-10’s motion to dismiss Lee’s fraud claim under the TCPA.

Background

The 1999 lawsuit

In 1999, Lee sued I-10 and Henry Wu, I-10’s owner, seeking a declaration

that Lee and I-10 each owned an undivided 50 percent interest in the hotel

property. See I-10 Colony, Inc. v. Lee, 393 S.W.3d 467, 470 (Tex. App.—Houston

[14th Dist.] 2012, pet. denied). I-10 and Lee each had held notes collateralized by

the property that stated they were of “equal dignity.” See id. at 471. When the

debtor defaulted on the notes, I-10 foreclosed on the property, bought the property

at the foreclosure sale, and claimed that doing so extinguished Lee’s interest in the

property. See id.

In 2010, after a jury trial, the trial court entered a declaratory judgment that

Lee and I-10 each owned an undivided 50 percent interest in the property. See id.

at 472. The trial court’s judgment also awarded Lee $608,000 as his share of the

income from the property through the date of the judgment. See id. The

Fourteenth Court of Appeals modified the award of prejudgment interest but

otherwise affirmed, and the Texas Supreme Court denied review. See id. at 480.

3 The underlying lawsuit

In February 2014, Lee sued I-10 for partition and fraud, alleging that 1-10

had fraudulently represented that it would treat Lee as a 50% owner as required by

the 2010 judgment and wrongfully excluded Lee from the property and withheld

his share of the income from the property since 2010. I-10 counterclaimed for

partition and requested that the trial court appoint a receiver to sell the property.

Later, Lee also moved for appointment of a receiver.

Although the parties agreed that a receiver should be appointed, they

disagreed about the proper scope of the receiver’s authority. Specifically, I-10

argued that the receiver should not have authority over the hotel’s operations or

employees.

The trial court held two oral hearings on the parties’ requests for a receiver,

at which Lee testified that I-10 had failed to provide any accounting of the hotel

operations, had pledged the hotel as collateral without Lee’s consent, had

concealed information about the hotel, and had excluded Lee from the hotel. I-10

cross-examined Lee, but did not present any controverting evidence. After the

hearings, the trial court entered an order appointing a receiver. The receivership

order set forth the “objectives” of the receivership:

• Secure and inventory all assets of the hotel and ascertain the nature and extent of all assets and liabilities,

• Secure the assets and satisfy the liabilities of the hotel,

4 • Assess the assets and report to the trial court periodically on the status of the hotel,

• Manage and operate the hotel and maintain the assets during the receivership’s tenure,

• Obtain an accounting and appraisal, and then oversee the marketing and sale of the hotel, and

• Perform all other matters as necessary to effectuate the “objectives” of the receivership. I-10 then brought the first interlocutory appeal. See TEX. CIV. PRAC. & REM. CODE

ANN. § 51.014(a)(1) (West 2015) (authorizing interlocutory appeal from order

appointing receiver).

Four months later, the trial court entered an agreed “Order Modifying Order

Appointing Receiver” authorizing the receiver to sell the hotel. It stated:

After ascertaining all assets and liabilities of the Hotel and obtaining an appraisal of the Hotel, [the receiver] may hire the appropriate parties to seek to market and sell the Hotel or may use his reasonable discretion to negotiate and enter into a contract to sell the Hotel at a price higher than that of the appraisal without marketing same.

The order also provided that, “with regard to the sale of the Hotel, Court-

Appointed Receiver may at his discretion enter into real estate sales contracts for

the sale of the Property at a price Court-Appointed Receiver deems reasonable

(and higher than the appraisal obtained for the Hotel).”

After the trial court appointed the receiver, I-10 moved to dismiss Lee’s

fraud claim under the TCPA. I-10 argued that Lee’s fraud claim was based on its

5 exercise of the right of free speech because the claim was based on representations

made by I-10’s lawyer after the 2010 judgment, and the “subject” of the

communications was its lawyer’s services, a “matter of public concern” under the

TCPA. See TEX. CIV. PRAC. & REM. CODE ANN. § 27.001(3) (West Supp. 2014)

(exercise of the right of free speech means a communication made in connection

with a matter of public concern), § 27.001(7)(E) (West Supp. 2014) (a “matter of

public concern” includes an issue related to “a good, product, or service in the

marketplace”); § 27.005(b) (West Supp. 2014) (trial court shall dismiss a legal

action if movant shows by preponderance of the evidence that action is based on,

relates to, or is in response to movant’s exercise of the right of free speech). The

trial court denied the motion, and I-10 filed its second interlocutory appeal

challenging that ruling. See TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(a)(12)

(West 2015) (authorizing interlocutory appeal from order denying motion to

dismiss pursuant to TCPA).

Receivership

I-10 contends that the trial court erred in (1) appointing a receiver and (2)

giving the receiver authority over I-10 Colony, its personal property, and

employees. I-10 also contends that the receivership order is unconstitutional.

6 A. Standard of Review and Applicable Law

Under section 64.001 of the Texas Civil Practice and Remedies Code, a

court may appoint a receiver “in an action between partners or others jointly

owning or interested in any property . . . .” on the application of the plaintiff or any

other party. TEX. CIV. PRAC. & REM. CODE ANN. § 64.001(a)(3), (b) (West 2008).

The movant “must have a probable interest in or right to the property or fund, and

the property or fund must be in danger of being lost, removed, or materially

injured.” Id. § 64.001(b).

We review a trial court’s interlocutory order appointing a receiver for an

abuse of discretion. Benefield v. State, 266 S.W.3d 25, 31 (Tex. App.—Houston

[1st Dist.] 2008, no pet.) (citing Mueller v. Beamalloy, Inc., 994 S.W.2d 855, 858

(Tex. App.—Houston [1st Dist.] 1999, no pet); Abella v. Knight Oil Tools, 945

S.W.2d 847, 849 (Tex. App.—Houston [1st Dist.] 1997, no writ)). A trial court

abuses its discretion when it rules arbitrarily, unreasonably, without regard to

guiding legal principles, or without supporting evidence. See Bocquet v. Herring,

972 S.W.2d 19, 21 (Tex. 1998); Pickens v. Pickens, 62 S.W.3d 212, 214 (Tex.

App.—Dallas 2001, pet. denied). Under the abuse-of-discretion standard, the

sufficiency of the evidence is a relevant factor in assessing whether the trial court

abused its discretion. Pickens, 62 S.W.3d at 214. The trial court does not abuse its

discretion when its decision is based on conflicting evidence and some evidence in

7 the record reasonably supports it. Butnaru v. Ford Motor Co., 84 S.W.3d 198, 211

(Tex. 2002). Our review focuses on whether the pleadings and evidence are

sufficient to justify a receivership. Benefield, 266 S.W.3d at 31 (citing Covington

Knox, Inc. v. State, 577 S.W.2d 323, 325 (Tex. Civ. App.—Houston [14th Dist.]

1979, no pet.)).

B. Analysis

I-10 complains about the appointment of a receiver and argues that, even if

the trial court did not err in appointing a receiver, it abused its discretion by

conferring excessive authority upon him. Specifically, I-10 complains that the

receiver should not exercise authority over the personal property, agents, or

employees of I-10.

Under the invited error doctrine, “a party cannot complain on appeal that the

trial court took a specific action that the complaining party requested . . . .” See

Tittizer v. Union Gas Corp., 171 S.W.3d 857, 862 (Tex. 2005). Here, I-10 was the

first party to move for appointment of a receiver over the property. In its original

answer and counterclaim for partition, I-10 requested that the trial court “appoint a

receiver for the purpose of selling the Property.” A month after filing its

counterclaim, I-10 gave notice that a hearing on its application for appointment of

a receiver would be held in two weeks. Lee filed his own application for a receiver

only after I-10 gave notice of the hearing on its own application. Moreover, after

8 I-10 appealed from the receivership order, it requested that the trial court enter the

agreed “Order Modifying Order Appointing Receiver,” which stated that the

receiver would “ascertain[] all assets and liabilities” of the hotel and market and

sell the hotel. Ascertaining all assets and liabilities of the hotel and marketing and

selling the hotel necessarily requires the receiver to have authority over I-10’s

property and employees to the extent that they relate to the hotel operations.

The receivership order gave the receiver authority over I-10 and its property

and employees only to the extent necessary for the proper management of the

property and hotel during the pendency of the receivership. This was necessary in

order for the receiver to achieve the objectives of the receivership—including the

sale of the hotel—which was what I-10 asked for. To the extent that I-10 has

commingled its separately-owned personal property with jointly-owned hotel

assets, I-10 may not complain that the receivership order authorizes the receiver to

exercise de facto control over I-10’s separately-owned personal property.

We conclude that I-10 has waived its complaints, including its constitutional

complaints, regarding the appointment of a receiver and the scope of the receiver’s

authority by requesting the appointment and agreeing to confer upon the receiver

the authority about which it now complains. See Tittizer, 171 S.W.3d at 862 (“a

party cannot complain on appeal that the trial court took a specific action that the

complaining party requested . . . .”); City of San Antonio v. Schautteet, 706 S.W.2d

9 103, 104 (Tex. 1986) (“Even constitutional challenges not expressly presented to

the trial court by written motion, answer or other response to a motion for

summary judgment will not be considered on appeal as grounds for reversal.”);

see, e.g., Sentinel Integrity Sols., Inc. v. Mistras Grp., Inc., 414 S.W.3d 911, 919–

20 (Tex. App.—Houston [1st Dist.] 2013, pet. denied) (invited error doctrine

prevented party who agreed that trial court should enter order from complaining

about order on appeal); Keith v. Keith, 221 S.W.3d 156, 164 (Tex. App.—Houston

[1st Dist.] 2006, no pet.) (party who asked trial court to take certain action could

not complain on appeal that action was wrong).

We overrule I-10’s three issues in appeal number 01-14-00465-CV.

Motion to Dismiss under the TCPA

I-10 contends that the trial court erred in denying its motion to dismiss Lee’s

fraud claim under the TCPA because it showed by a preponderance of the evidence

that the fraud claim is “based on, relate[s] to, or [is] in response to” I-10’s exercise

of the right of free speech, and Lee failed to establish by clear and specific

evidence a prima facie case for each essential element of the claim.

A. Standard of Review and Applicable Law

To obtain dismissal under the TCPA, a defendant must show “by a

preponderance of the evidence that the legal action is based on, relates to, or is in

response to the party’s exercise of the right of free speech; the right to petition; or

10 the right of association.” TEX. CIV. PRAC. & REM. CODE ANN. § 27.005(b). We

review this determination de novo. See Better Bus. Bur. of Metro. Houston, Inc. v.

John Moore Servs., Inc., 441 S.W.3d 345, 353 (Tex. App.—Houston [1st Dist.]

2013, pet. denied); see also Rehak Creative Servs., Inc. v. Witt, 404 S.W.3d 716,

725 (Tex. App.—Houston [14th Dist.] 2013, pet. denied).

Under the TCPA, the exercise of the right of free speech “means a

communication made in connection with a matter of public concern.” TEX. CIV.

PRAC. & REM. CODE ANN. § 27.001(3). A “matter of public concern,” includes,

among other things, “an issue related to a good, product, or service in the

marketplace.” Id. § 27.001(7)(E). If the movant meets its burden to show that a

claim is covered by the TCPA, to avoid dismissal of that claim, a plaintiff must

establish “by clear and specific evidence a prima facie case for each essential

element of the claim in question.” Id. § 27.005(c).

We conclude that I-10 did not show that Lee’s fraud claim is based on,

relates to, or is in response to its exercise of its right of free speech so as to fall

within the scope of the TCPA. Lee’s fraud claim is based on allegations that I-10’s

lawyer fraudulently represented to Lee that I-10 would pay Lee 50% of the income

from the hotel as required by the 2010 judgment, when I-10 had no intention of

doing so. I-10 argues that, because these alleged representations were made by its

11 lawyer, the “subject” of the communications was its lawyer’s services. According

to I-10, because a lawyer’s services are a “service in the marketplace,” and

therefore a “matter of public concern,” the fraud claim is based on its exercise of

the right of free speech. See TEX. CIV. PRAC. & REM. CODE ANN. § 27.001(3),

(7)(E).

In the motion to dismiss and on appeal, I-10 relies upon Avila v. Larrea, 394

S.W.3d 646 (Tex. App.—Dallas 2012, pet. denied). In Avila, Larrea, a lawyer,

sued Univision Television Group, Inc. and its reporter, Avila, for defamation based

on reports concerning Larrea’s former client’s allegations regarding Larrea’s work

on the client’s case. Id. at 658. The reporting included, among other things, the

former client’s wife’s claim that Larrea did not visit the client in jail and did not

utilize available conclusive evidence that would have caused the client’s case to be

dismissed. Id. Larrea also argued that the reporting “suggested” that he was

responsible for his former client’s “nightmare” experience, and misled viewers to

believe that complaints forwarded to the State Bar of Texas confirmed professional

misconduct. Id. The defendants moved to dismiss the case pursuant to the TCPA,

and on appeal, the Dallas Court of Appeals held that the subject of the reporting

was Larrea’s legal services, which was “a matter of public concern” because

Larrea’s services constituted a “service in the marketplace.” Id. at 655; TEX. CIV.

PRAC. & REM. CODE ANN. § 27.001(3), (7)(E). Thus, the lawsuit was “based on,

12 relat[ed] to, or [was] in response to” the movants’ exercise of the right to free

speech, and was subject to the TCPA. Avila, 394 S.W.3d at 655; TEX. CIV. PRAC.

& REM. CODE ANN. § 27.005(b).

Here, by contrast, Lee’s fraud claim is not based on communications about

I-10’s lawyer’s services. Instead, Lee alleges that I-10’s lawyer fraudulently

represented that I-10 would comply with the 2010 judgment on a going-forward

basis, when I-10 had no intention of doing so. Because the subject of this

communication is not I-10’s lawyer’s services, the communication is not related to

a “service in the marketplace,” and the communication therefore was not one made

in connection with a matter of public concern. See TEX. CIV. PRAC. & REM. CODE

ANN. § 27.001(3) (exercise of the right of free speech “means a communication

made in connection with a matter of public concern”), (7)(E) (matter of public

concern includes “an issue related to a good, product, or service in the

marketplace”); cf. John Moore, Inc., 441 S.W.3d at 353 (Better Business Bureau’s

reviews and ratings of plaintiff company’s services “related to” a matter of public

concern because the subject of ratings and reviews was a good, product, or service

in the marketplace); Better Bus. Bur. of Metro. Dallas, Inc. v. BH DFW, Inc., 402

S.W.3d 299, 308 (Tex. App.—Dallas 2013, pet. denied) (same); Avila, 394 S.W.3d

at 655 (communications about lawyer’s handling of former client’s case “related

to” a matter of public concern because the subject of the communications was a

13 “service in the marketplace”—the lawyer’s services). Accordingly, we conclude

that the trial court did not err in denying I-10’s motion to dismiss Lee’s fraud claim

under the TCPA.

We overrule I-10’s sole issue in appeal number 01-14-00718-CV.

Conclusion

We affirm the trial court’s receivership order and the order denying I-10’s

motion to dismiss Lee’s fraud claim under the TCPA.

Rebeca Huddle Justice

Panel consists of Justices Jennings, Higley, and Huddle.