in Re Richard W. Jackson and Lisa C. Jackson

Opinion

ACCEPTED

03-17-00849-CV

03-17-00849-CV

21307607

THIRD COURT OF APPEALS

AUSTIN, TEXAS

12/14/2017 4:59 PM

JEFFREY D. KYLE

CLERK

No. 03-17-________-CV

FILED IN

3rd COURT OF APPEALS

In The Court of Appeals for the Third AUSTIN, TEXAS District of Texas at Austin 12/14/2017 4:59:41 PM JEFFREY D. KYLE

Clerk

In re Richard W. Jackson and Lisa C. Jackson, Relators.

From the County Court at Law No. 1, Travis County, Texas Trial Court Cause No. C-1-CV-17-001833

Petition for Writ of Mandamus

J. Patrick Sutton

SBOT 24058143

1706 W. 10th Street

Austin Texas 78703

Tel. (512) 417-5903

Fax. (512) 355-4155

jpatricksutton@

jpatricksuttonlaw.com

Counsel for Relators

Oral Argument Not Requested

IDENTITY OF PARTIES AND COUNSEL

Relators: Richard W. Jackson and Lisa C. Jackson Respondent: The Honorable Todd Wong, 1000 Guadalupe Street, Room 206, Austin, Texas 78701. Ph. (512) 854-

9241.

Real Parties Janice Cox and Helen Ramsey In interest:

Counsel for Relator in the appeals court: J. Patrick Sutton SBOT 24058143 1706 W. 10th Street Austin Texas 78703 Tel. (512) 417-5903 / Fax (512) 355-4155 jpatricksutton@ jpatricksuttonlaw.com

Counsel for Relator in the trial court:

J. Patrick Sutton David M. Gottfried SBOT 24058143 State Bar of Texas No. 08231200 1706 W. 10th Street 1505 West Sixth Street Austin Texas 78703 Austin, Texas 78703 Tel. (512) 417-5903 Tel. (512) 494-1481 Fax (512) 355-4155 Fax (512) 472-4013 jpatricksutton@ david@davidgottfriedlaw.com jpatricksuttonlaw.com

Counsel for Real Party in Interest: Michael L. Navarre Beatty Bangle Strama P.C. 400 West 15th Street, Suite 1450 Austin, Texas 78701 Phone: 512.879.5050 / Fax: 512.879.5040 mnavarre@bbsfirm.com

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TABLE OF CONTENTS

INDEX OF AUTHORITIES ..................................................................... iii STATEMENT OF THE CASE .................................................................... 1 STATEMENT OF JURISDICTION ........................................................... 1 ISSUE PRESENTED .................................................................................. 1 STATEMENT OF FACTS .......................................................................... 2 ARGUMENT ............................................................................................... 3 I. Standard of Review .......................................................................... 3 II. The Trial Court Abused Its Discretion .............................................. 4 III. The Jacksons Lack an Adequate Remedy by Appeal ...................... 5 IV. Remedies Appropriate by Mandamus .............................................. 6 PRAYER FOR RELIEF .............................................................................. 7 RULE 52.7(a)(2) STATEMENT AS TO EVIDENCE ................................ 8 RULE 52.3(j) CERTIFICATION ................................................................ 8 CERTIFICATE OF SERVICE .................................................................... 8 CERTIFICATE OF COMPLIANCE ........................................................... 8 APPENDIX TO PETITION FOR WRIT OF MANDAMUS ...................... 9

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INDEX OF AUTHORITIES

CASES In re Olshan Found. Repair Co., 328 S.W.3d 883 (Tex. 2010) .......... 3 In re Prudential Ins. Co. of Am., 148 S.W.3d 124 (Tex. 2004) .......... 4 In re Reece, 341 S.W.3d 360 (Tex. 2011) (orig. proceeding) ............... 3 In re Team Rocket, L.P., 256 S.W.3d 257 (Tex. 2008) ......................... 4 In re United Scaffolding, Inc., 301 S.W.3d 661 (Tex. 2010) .............. 3

Murphy v. McDaniel, 20 S.W.3d 873 (Tex. App. – Dallas 2000, no pet.) .......................................................................................................... 4

State v. Walker, 679 S.W.2d 484 (Tex. 1984) (orig. proceeding) ... 5, 6 STATUTES Tex. Civ. Prac. & Rem. Code § 51.014 ................................................... 5

iii

STATEMENT OF THE CASE

Nature of the case: In a suit to construe the meaning of restrictive covenants, the relators obtained a temporary injunction barring the real parties in interest from recording an amendment to the restrictive covenants. Months after the time for an interlocutory appeal of the injunction expired, the real parties in interest sought an order dissolving the temporary injunction.

Respondent: The Honorable Todd Wong, County Court at Law No. 1, Travis County, Texas.

Ruling Assailed: On December 8, 2017, the trial court granted the motion to dissolve the injunction despite the movants’ failure to offer any evidence of a change in circumstances.

STATEMENT OF JURISDICTION Texas Government Code § 22.221(b)(1) provides jurisdiction.

ISSUE PRESENTED

If a party seeking to dissolve a validly-obtained temporary injunction did not timely appeal the temporary injunction yet offers no evidence of a change of circumstances after the injunction was issued, is it a clear abuse of discretion for the trial court to dissolve the injunction?

2

STATEMENT OF FACTS

The Jacksons sued to stop Ramsey and Cox from recording any amendments to subdivision restrictive covenants1 unless Ramsey and Cox (1) sent prior notice of the proposed amendment to all owners and (2) obtained a recommendation from the subdivision’s architectural committee. Following an evidentiary hearing, the trial court granted the Jacksons’ motion for a temporary injunction on March 3, 2017. 2 Ramsey and Cox did not appeal the order granting the temporary injunction.

On December 4, 2017, four days before the pretrial conference ahead of the December 11 trial, Ramsey and Cox filed a motion to dissolve the injunction. 3 The sole basis for their motion was that the trial court reversed its interpretation of the restrictive covenants in an interlocutory summary judgment order. At the hearing on the motion to dissolve the injunction on December 8, Ramsey and Cox offered no evidence in support of their motion. The trial court granted the motion. 4 The trial setting was then passed by the parties owing to the unlikelihood of the case being reached.

1 App. E (Plaintiffs’ Exhibit 1 thereto). 2 App. A. 3 App. B. 4 App. C.

3

On December 11, 2017, Ramsey and Cox recorded in the Official Records of Travis County an amendment to the restrictive covenants. 5 They had not notified all owners of the voting on the amendment in early 2017 and never obtained any recommendation from the subdivision’s architectural committee.6 On December 13, 2017, the Jacksons noticed an interlocutory accelerated appeal of the order dissolving the temporary injunction. No. 03-17-00846-CV.

ARGUMENT

I. Standard of Review

Mandamus relief is appropriate when a trial court clearly

abuses its discretion and there is no adequate remedy at law. . A trial court clearly abuses its discretion when it reaches a decision that is arbitrary and unreasonable such that it amounts to a clear and prejudicial error of law or when it fails to correctly analyze or apply the law. In re Olshan Found. Repair Co., 328 S.W.3d 883, 888 (Tex. 2010) (orig. proceeding). An erroneous legal conclusion, even in an unsettled area of law, is an abuse of discretion. In re United Scaffolding, Inc., 301 S.W.3d 661, 663 (Tex. 2010) (orig.

5 Tab D. 6 Tab C (containing findings of fact); Tab E (transcript of injunction hearing).

4

proceeding).

Whether there is an adequate appellate remedy is determined by balancing the benefits of mandamus review against the detriments. In re Team Rocket, L.P., 256 S.W.3d 257, 262 (Tex. 2008) (orig. proceeding). In that balancing, the court considers whether mandamus will “preserve important substantive and procedural rights from impairment or loss, allow the appellate courts to give needed and helpful direction to the law that would otherwise prove elusive in appeals from final judgments, and spare private parties and the public the time and money utterly wasted enduring eventual reversal of improperly conducted proceedings.” In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 136 (Tex. 2004) (orig. proceeding).

II. The Trial Court Abused Its Discretion As the authority relied upon by Ramsey and Cox in their motion to dissolve the temporary injunction holds, the movant must prove that a change in circumstances arose after the injunction was entered. See Murphy v. McDaniel, 20 S.W.3d 873, 877 (Tex. App. – Dallas 2000, no pet.). However, an interlocutory

5

ruling on the merits of a case is not, in and of itself, a “change in circumstances” authorizing dissolution of an otherwise properly obtained temporary injunction. Id. at 878. This legal framework prevents a party who failed to appeal an order granting a temporary injunction from doing so belatedly, and from getting an advance ruling from the court of appeals on the merits of a claim prior to final judgment. Id. at 877-879.

The sole basis for Ramsey and Cox’s motion to dissolve the temporary injunction was their obtaining of an interlocutory summary judgment order favorable to them on the merits. They presented no evidence at all of any change in circumstances. Accordingly, the trial court clearly abused its discretion in granting the motion to dissolve the temporary injunction.

III. The Jacksons Lack an Adequate Remedy by Appeal Where a party has already established the validity of a temporary injunction, it is improper to force that party to re- establish the injunction’s validity prior to final judgment in the case. State v. Walker, 679 S.W.2d 484, 485 (Tex. 1984) (orig. proceeding).

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Ramsey and Cox could have appealed the temporary injunction order but did not. See Tex. Civ. Prac. & Rem. Code § 51.014(a)(4). Instead, they waited many months and, on the eve of trial, sought to force the Jacksons’ to relitigate the early 2017 evidentiary injunction hearing. The Jacksons cannot seek an appeal of the validity of the original injunction, so mandamus is the appropriate remedy.

In addition, the Jacksons engage in leasing that Ramsey and Cox’s recorded amendment would ban, and they have leases in force. The amendment is a direct threat to their property rights and contracts. It provides a basis for Ramsey and Cox to seek legal and equitable relief in the trial court that they should not have been entitled to seek at all had the injunction not been wrongfully procured. Expensive, wasteful new proceedings directly stemming from a clear abuse of discretion by the trial judge will be the result.

IV. Remedies Appropriate by Mandamus The order dissolving the injunction must be vacated and the injunction reinstated. See State v. Walker, 679 S.W.2d at 486. The

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Jacksons are simultaneously seeking emergency relief to stay the trial court’s order in both their interlocutory accelerated appeal and in this original proceeding.

PRAYER FOR RELIEF

This Court should grant Relators the Jacksons’ petition for a writ of mandamus and direct the trial court to vacate its December 8, 2017 order dissolving the temporary injunction and to reinstate the injunction. The Court should remand the case consistent with the above and grant any other relief to which the relator may be justly and in fairness entitled.

Respectfully submitted,

/s/ J. Patrick Sutton

J. Patrick Sutton

Texas Bar No. 24058143

1706 W. 10th Street

Austin Texas 78703

Tel. (512) 417-5903

Fax. (512) 355-4155

jpatricksutton@

jpatricksuttonlaw.com

Attorney for Relator

8

RULE 52.7(a)(2) STATEMENT AS TO EVIDENCE In the trial court, the real party in interest put it no evidence in support of its motion to dissolve the temporary injunction. A record was made of the arguments of counsel at the hearing.

RULE 52.3(j) CERTIFICATION I have reviewed the petition and concluded that every factual statement in the petition is supported by competent evidence included in the appendix or record.

/s/ J. Patrick Sutton

J. Patrick Sutton

CERTIFICATE OF SERVICE

I certify that on December 14, a true and correct copy of this petition was served by efiling on:

Michael L. Navarre Beatty Bangle Strama P.C. 400 West 15th Street, Suite 1450 Austin, Texas 78701 Phone: 512.879.5050 / Fax: 512.879.5040 mnavarre@bbsfirm.com /s/ J. Patrick Sutton

Attorney for Relator

CERTIFICATE OF COMPLIANCE This document complies with the typeface requirements of Tex. R. App. P. 9.4(e) because it has been prepared in Century Schoolbook 14-point for text and 12-point for footnotes. Spacing is expanded by .6 point for clarity. This document also complies with the wordcount limitations of Tex. R. App. P. 9.4(i), if applicable, because it contains 983 words, excluding any parts exempted by Tex. R. App. P. 9.4(i)(1).

/s/ J. Patrick Sutton

Attorney for Relator

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No. 03-17-________-CV

In The Court of Appeals for the Third District of Texas at Austin

In re Richard W. Jackson and Lisa C. Jackson, Relators.

From the County Court at Law No. 1, Travis County, Texas Trial Court Cause No. C-1-CV-17-001833

APPENDIX TO PETITION FOR WRIT OF MANDAMUS

Order granting Defendants’ motion to dissolve TI Tab A Defendants’ Motion to Dissolve TI Tab B Order granting temporary injunction Tab C Recorded Amendment (without signature pages) Tab D Transcript of March 9, 2017 injunction hearing Tab E

Tab A

Tab B

Filed: 12/4/2017 10:48 PM Dana DeBeauvoir

Travis County Clerk

CAUSE NO. C-1-CV-17-001833 C-1-CV-17-001833 Kylie Uhlaender

RICHARD W. JACKSON, § IN THE COUNTY COURT LISA C. JACKSON, and § KATHLEEN WOODALL, § Plaintiffs, § AT LAW NUMBER TWO OF vs. § §

JANICE COX and HELEN RAMSEY, § Defendants. § TRAVIS COUNTY, TEXAS

DEFENDANTS’ MOTION TO DISSOLVE THE TEMPORARY INJUNCTION Defendants and Counter-Plaintiffs file their Motion To Dissolve The Temporary Injunction, and would respectfully show the court the following:

I. EXECUTIVE SUMMARY

Background: On February 24, 2017, Plaintiffs sued Ms. Cox and Ms. Ramsey to prevent them from following Section 4 of Article I of the 1972 Deed Restrictions to prohibit rentals for less than ninety (90) days. Plaintiffs’ claims were for (1) a declaratory judgment that a notice and ACC approval requirement in Article IX of the 1972 Deed Restrictions could be copied/pasted into Section 4 of Article I of the 1972 Deed Restrictions and (2) breach of contract based on this same rewriting of the 1972 Deed Restrictions. Plaintiffs moved for a temporary restraining order and a subsequent temporary injunction, which the Court granted. Problem: On November 17, the Court ruled against Plaintiffs on their sole basis for the temporary injunction. The Court rejected Plaintiffs’ interpretation of the 1972 Deed Restrictions and granted Defendants’ Motion for Partial Summary Judgment As To Claims And Counterclaims Concerning Section 4 Of Article I Of The Restrictive Covenants. Furthermore, Plaintiffs previously dropped their breach of contract claim that was based on their same faulty contract interpretation. Relief: Defendants respectfully request that the Court grant this Motion, dissolve the temporary injunction, award Defendants the bond, and grant further relief.

II. ARGUMENT AND AUTHORITIES A. The Sole Basis For Plaintiffs’ Temporary Injunction Was Their Faulty Contract Interpretation.

On February 24, 2017, Plaintiffs sued Ms. Cox and Ms. Ramsey. Their sole claim for declaratory judgment was the following: 1

“Plaintiffs seek a declaration that 30 days’ notice to all owners of proposed amendments and the prior recommendation of the ACC are required before any amendment may be adopted and recorded.”

As set forth in Plaintiffs’ lawsuit, these requirements are in Article IX of the 1972 Deed Restrictions. 2 These requirements are not in Section 4 of Article I of the 1972 Deed Restrictions. Plaintiffs’ breach of contract claim was based on Plaintiffs’ same faulty interpretation of the 1972 Deed Restrictions. 3 Although Plaintiffs amended their claim twice before the temporary injunction hearing, these claims remained the same and Plaintiffs did not add any new claims. 4 In his opening argument, Plaintiffs’ counsel made it clear that the sole basis for Plaintiffs’

request for a temporary injunction was their faulty interpretation of the 1972 Deed Restrictions: 5

“We will show and will also argue that there are certain deeds restrictions in a subdivision from 1972 and that those deed restrictions do not allow any amendment to those restrictions without two specific things occurring.

One, written notice to all owners 30 days in advance of the adoption of the amendment. Two, a quote “recommendation” by an entity called the architectural control authority.”

Subsequently, the parties filed competing motions for partial summary judgment concerning the

proper interpretation of the 1972 Restrictions. The Court recently ruled in favor of Defendants and granted partial summary judgment against Plaintiffs’ claims.

1 Plaintiffs’ Original Petition at ¶ 25.

2 Id. at ¶ 13.

3 Id. at ¶ 26-29.

4 Plaintiffs’ First Amended Petition at ¶ 25; 26-29; Plaintiffs’ Second Amended Petition at ¶ 25; 26-29.

5 Transcript of March 9, 2017 Temporary Injunction Hearing at 6-7.

B. The Court Rejected The Sole Basis For Plaintiffs’ Temporary Injunction And Granted Defendants’ Motion For Partial Summary Judgment Against Plaintiffs’

Claims.

On October 12, 2017, Defendants filed their Motion For Partial Summary Judgment As To Claims And Counterclaims Concerning Section 4 Of Article I Of The Restrictive Covenants (“Defendants’ MPSJ”). As set forth in the Motion, Defendants sought a partial summary judgment as to the claims that were the basis for Plaintiffs’ temporary injunction: 6

This Motion for Partial Summary Judgment covers Plaintiffs’ claims for (1)

declaratory judgment that “30 days’ notice to all owners of proposed amendments and the prior recommendation of the ACC are required before any amendment may be adopted and recorded” and (2) breach or attempted breach of the Restrictive Covenants. Defendants also move for summary judgment on their declaratory judgment claim that the requirements of notice and prior recommendation of the Architectural Control Authority in Article IX are not copied/pasted into Section 4 of Article I of the Restrictive Covenants.

On the other hand, Plaintiffs filed their Renewed Cross-Motion for Partial Summary Judgment Concerning Procedure for Amending Restrictive Covenants (“Plaintiffs’ Cross-MPSJ”). Plaintiffs’ Cross-MPSJ was a mirror-image of Defendants’ MPSJ and sought the opposite interpretation of the 1972 Deed Restrictions.

On November 17, 2017, the Court issued its rulings. Importantly, the Court granted Defendants’ MPSJ as to this contract interpretation issue: 7

“ORDERED, ADJUDGED, AND DECREED that Defendants’ Motion for Partial Summary Judgment as to Claims and Counterclaims Concerning Section 4 of Article I of the Restrictive Covenants is GRANTED.”

The Court similarly denied Plaintiffs’ Cross-MPSJ. By its orders, the Court disposed of Plaintiffs’ claims in favor of Defendants.

6 Defendants’ MPSJ at 3 (emphasis added).

7 Order on Defendants’ Motions for Summary Judgment at 2 (emphasis in original).

C. The Court Should Dissolve The Injunction And Grant Relief To Defendants.

By its Orders, the Court also eliminated the sole basis of Plaintiffs’ temporary injunction.

There is no basis for Plaintiffs’ temporary injunction. Therefore, pursuant to Texas law, the Court should dissolve the temporary injunction. Murphy v. McDaniel, 20 S.W.3d 873, 878 (Tex. App.— Dallas 2000, no pet.) (explaining the circumstance that result in the dissolution of a temporary injunction). Furthermore, the Court should award the $10,000 bond to Defendants. Energy Transfer Fuel, L.P. v. Bryan, 322 S.W.3d 409, 413-14 (Tex. App.—Tyler 2010, no pet.) (citing DeSantis v. Wackenhut Corp. 793 S.W.2d 670, 685 (Tex. 1990)). Finally, if the Court deems it necessary, Defendants request equitable or other relief in the form of time to file the change to the 1972 Restrictions or some other form to cure any harm caused to Defendants.

III. CONCLUSION

WHEREFORE, PREMISES CONSIDERED, Defendants respectfully request that the Court grant this Motion, dissolve the temporary injunction, award Defendants the bond, and if the Court deems it necessary, Defendants request equitable or other relief in the form of time to file the change to the 1972 Restrictions or some other form to cure any harm caused to Defendants grant further relief. Defendants also request such other relief as the Court deems proper.

Respectfully submitted,

/s/ Michael L. Navarre

Michael L. Navarre

State Bar No. 00792711

BEATTY BANGLE STRAMA, PC

400 West 15th Street, Suite 1450 Austin, Texas 78701

(512) 879-5050 Telephone

(512) 879-5040 Facsimile

mnavarre@bbsfirm.com

ATTORNEYS FOR DEFENDANTS

CERTIFICATE OF SERVICE

I hereby certify that a true and correct copy of the foregoing instrument was electronically served on counsel of record by electronic transmission on this 4th day of December, 2017:

James Patrick Sutton – via jpatricksutton@jpatricksuttonlaw.com The Law Office of J. Patrick Sutton 1706 W. 10th St. Austin, Texas 78701

Mr. David M. Gottfried – via david.gottfried@thegottfriedfirm.com The Gottfried Firm West Sixth Place 1505 West Sixth Street Austin, Texas 78703

/s/ Michael L. Navarre

Michael L. Navarre

Tab C

Tab D

Tab E

1

1 REPORTER'S RECORD 2 VOLUME 1 OF 1 VOLUMES 3 TRIAL COURT CAUSE NO. C-1-CV-17-001833

4 RICHARD W. JACKSON, ) IN THE COUNTY COURT LISA C. JACKSON, AND )

5 KATHLEEN A. KOLB )

WOODALL )

6 )

)

7 VS. ) AT LAW NO. 1 )

8 )

JANICE COX, HELEN )

9 RAMSEY, POINT VENTURE )

NEIGHBORS FOR STR )

10 REFORM ) TRAVIS COUNTY, TEXAS

11 12 ******************************************************** 13 TEMPORARY INJUNCTION 14 ******************************************************** 15 16 On the 9th day of March, 2017, the following 17 proceedings came on to be heard in the above-entitled 18 and numbered cause before the Honorable Todd T. Wong, 19 Judge presiding, held in Austin, Travis County, Texas: 20 Proceedings reported by machine shorthand.

1 A P P E A R A N C E S 2 3 ATTORNEYS FOR THE PLAINTIFFS:

4 Mr. James Patrick Sutton SBOT NO. 24058143

5 THE LAW OFFICE OF J. PATRICK SUTTON 1706 West 10th Street

6 Austin, Texas 78703 Phone: 512-417-5903

7 - AND -

Mr. David M. Gottfried

8 THE GOTTFRIED FIRM SBOT NO. 08231200

9 West Sixth Place 1505 West Sixth Street

10 Austin, Texas 78703 Phone: 512-494-1481

11

12 13 ATTORNEY FOR THE DEFENDANTS:

14 Mr. William E. 'Bill' Sterling SBOT NO. 19175200

15 WILSON, STERLING & RUSSELL 9951 Anderson Mill Road, Suite 200 16 Austin, Texas 78750 Phone: 512-258-2244

3

1 INDEX 2 VOLUME 1 3 Temporary Injunction 4 March 9, 2017 5 PAGE VOL. 6 Announcements . . . . . . . . . . . . . . . . .5 1 7 Opening Statement by Mr. Sutton . . . . . . . .6 1 8 Opening Statement by Mr. Sterling . . . . . . .7 1

9 Plaintiff's Witnesses Direct Cross Voir Dire Vol.

10 Janice Cox 11 By Mr. Gottfried 16 1 By Mr. Sterling 23 1 12 By Mr. Gottfried 29 1 By Mr. Sterling 29 1 13 Helen Ramsey 14 By Mr. Gottfried 30 1 By Mr. Sterling 33 1 15 Kathleen Woodall 16 By Mr. Gottfried 34 1 By Mr. Sterling 38 1 17 By Mr. Gottfried 41 1

18 19 Closing Argument by Mr. Sutton . . . . . . . . 44 1 20 Closing Argument by Mr. Sterling . . . . . . . 52 1 21 Closing Argument by Mr. Sutton . . . . . . . . 59 1 22 Closing Argument by Mr. Sterling . . . . . . . 61 1 23 Court's Ruling . . . . . . . . . . . . . . . . 67 1 24 Adjournment . . . . . . . . . . . . . . . . . .69 1 25 Court Reporter's Certificate . . . . . . . . . 70 1

4

1 ALPHABETICAL INDEX OF WITNESSES 2 Direct Cross Voir Dire Vol.

3 COX, JANICE By Mr. Gottfried 16 1 4 By Mr. Sterling 23 1 By Mr. Gottfried 29 1 5 By Mr. Sterling 29 1

6 INDEX - VOLUME 1 CONT. 7 ALPHABETICAL INDEX OF WITNESSES 8 Direct Cross Voir Dire Vol.

9 RAMSEY, HELEN By Mr. Gottfried 30 1 10 By Mr. Sterling 33 1

11 WOODALL, KATHLEEN By Mr. Gottfried 34 1 12 By Mr. Sterling 38 1 By Mr. Gottfried 41 1 13

14 15 EXHIBITS OFFERED BY THE PLAINTIFF 16 EXHIBIT DESCRIPTION OFFER ADMIT VOL.

17 1 Point Venture Section Three-1 13 14 1 Plat Record

18 2 General Provisions 14 14 1 19 3 Amendment to Restrictions 15 15 1 20 4 Notes 21 21 1 21

22 EXHIBITS OFFERED BY THE PLAINTIFF 23 EXHIBIT DESCRIPTION OFFER ADMIT VOL. 24 1 VRBO web listing 27 28 1

5

1 P R O C E E D I N G S 2 March 9, 2017 3 THE COURT: C-1-CV-17-001833, Richard 4 Jackson and Lisa Jackson versus Janice Cox, Helen 5 Ramsey, Point Venture Neighbors. 6 Counsel, if you would go ahead and make 7 your appearances for record. 8 MR. SUTTON: Judge, Patrick Sutton and 9 David M. Gottfried for all plaintiffs. 10 THE COURT: All right. Thank you. 11 MR. STERLING: William Sterling, Jr. for 12 defendants, Janice Cox and Helen Ramsey. In reality, 13 there is no incorporated or association. 14 THE COURT: Okay. Very good. All right. 15 Thank you very much. 16 All right. I read the original -- well, I 17 guess the third amended petition that was filed. I read 18 the TRO. Pulled some cases. 19 You-all have anything you want me to look 20 at? 21 MR. STERLING: Your Honor, I did file an 22 answer, and I sent a copy to Court 2's staff attorney 23 and I don't know whether that's... 24 MR. GOTTFRIED: If I may approach, Your 25 Honor?

1 THE COURT: Sure. All right. 2 So we're here just on the temporary 3 injunction. This is not a permanent injunction. It's 4 no final hearing on anything. So just to remind 5 counsel, you keep that in mind as you proceed today. 6 All right. Well, plaintiffs, may proceed. 7 MR. SUTTON: Judge, what I'd like to do is 8 just preview for you what the evidence will show. 9 THE COURT: That would be great. If you 10 could do that, then I'll let the defendant do the same. 11 OPENING BY PLAINTIFF 12 MR. SUTTON: Thank you, Judge. 13 First, we will show and will also argue 14 that there are certain deeds restrictions in a 15 subdivision from 1972 and that those deed restrictions 16 do not allow any amendment to those restrictions without 17 two specific things occurring. 18 One, written notice to all owners 30 days 19 in advance of the adoption of the amendment. Two, a, 20 quote, "recommendation" by an entity called the 21 architectural control authority. 22 We will then show, one, that the 23 defendants failed to meet those two requirements, that 24 there is an architectural control authority, and that 25 the defendants have circulated an amendment which would

7

1 restrict the rights of property owners, actually bar 2 property owner's right to rent for short terms. 3 We will have seven witnesses who will talk 4 about the lack of notice, the existence of an 5 architectural control authority, and then, finally, 6 Judge, we'll show that all that deed restrictions 7 provide that all that is required for a temporary 8 injunction in this case is a showing of a breach or 9 attempted breach, and that the deed restrictions 10 specifically remove the requirement of irreparable 11 injury or that money damages are not an adequate remedy. 12 Thank you, Judge. 13 THE COURT: Thank you. 14 Counsel. 15 OPENING BY DEFENDANT 16 MR. STERLING: Your Honor, we -- they're 17 going to be introducing a certified copy of 1972 18 restrictions, and we don't have any quarrel with that 19 particular document as it's going to be presented. 20 We do disagree with counsel as to whether 21 or not there is a requirement for 30 days notice or a 22 requirement for having ACA approval when it comes to an 23 attempted change of the restrictive covenants under a 24 particular portion of the restrictive covenants 25 themselves.

1 And we'll call Your Honor's attention to 2 Section -- I believe it's Section 1. 3 THE COURT: It's 1.4, isn't it? 4 MR. STERLING: 1.4, yes. 5 And that particular section allows for a 6 majority of the lot owners to change the 1972 7 restrictions by getting a document signed by them, 8 proper manner of recording it in the deed records, and 9 then so recording. And that's the only real 10 requirements that are there. 11 We're going to be arguing that, in 12 essence, the provision that the other side has been 13 referred to is not applicable to that particular 14 provision. It may be under a section having to do with 15 label amendments. But right on that same page is going 16 to be a section -- I think it's Section 11 of the 17 document that basically says that -- it's on Section 11 18 -- talk about captions. And captions basically say 19 forget the captions. They don't mean anything. You can 20 look at it as if they were never there in terms of doing 21 that. 22 THE COURT: But you just told me -- you 23 referred to me 9 which says Amendments, but in the body 24 of that provision, it talks about any covenants that may 25 be annulled, amended, or modified. So it's not just

9

1 amendments either, right? 2 MR. STERLING: Well, it's -- I think it's 3 referring only to the particular form by which they go 4 about doing it using this particular provision. If you 5 want to change any time during the year, at any time you 6 have to go through the ACA and give your 30 days notice. 7 But if you're going through this other provision, the 8 provision that allows you to change it but it doesn't 9 become effective until the next period of duration, if 10 you do it that way, it's a totally different system. 11 In other words, the changes where you're 12 using the ACA, you're going to be having -- having to 13 have notice who's going to go voting and all that kind 14 of stuff. There's no voting when it comes to the actual 15 use of this majority getting a changing instrument and 16 signing it and recording it. You're voting by signing 17 on the instrument or not signing the instrument. 18 THE COURT: I see your argument. 19 MR. STERLING: So basically that's what 20 I'm saying, it's a whole different thing. 21 And so what I wanted to state is that 22 that's the crux of what the problem is between my 23 client -- my clients and theirs is the interpretation of 24 those two particular provisions. They want to basically 25 say that their provision overrides and makes mine

10

1 meaningless, essentially. 2 THE COURT: They're not saying they can 3 coalesce together. 4 MR. STERLING: Well, they may be trying to 5 say that, but I don't see how they can really coalesce 6 together. How do you do a 30 days in advance of when 7 you're picking up individual signatures, you know, as 8 you go, and it may take you the whole 10-year period to 9 get them all signed up? 10 It's just not the same thing. You're not 11 doing a vote-type situation. 12 But in any case, what I was getting at is 13 that that's the crux of it. And what they're trying to 14 do is add a temporary injunction to kill our current 15 effort to try to change the restrictive covenants to 16 disallow, you, know, these short-term rentals. And 17 they're trying to, basically, use that -- use this 18 temporary injunction in order to try to prevent us from 19 getting there. Essentially getting there during this 20 period. 21 THE COURT: Let me stop you there. From 22 my reading, they're enjoining you from going through the 23 process from not engaging in the process that's set up 24 under the restriction, under this document. And I 25 understand what you're saying is that they're preventing

11

1 you from doing the -- using provision or paragraph 4. 2 You're trying to go through paragraph 4. 3 MR. STERLING: Right. 4 THE COURT: And they're saying, no, you've 5 got to go through 9. 6 MR. STERLING: Right. 7 THE COURT: Is that about it? 8 MR. STERLING: That's about it. 9 THE COURT: Okay. All right. 10 MR. STERLING: But the one thing I wanted 11 to get across is that if we don't make -- essentially 12 the way this -- our method works is that the successive 13 periods essentially provides for duration of these 14 original restrictive covenants starting out with a 15 35-year period then it goes succeeding 10-year period, 16 et cetera. We're at the end of a 10-year period. 17 THE COURT: You're at the end of the 18 second 10-year period. 19 MR. STERLING: Right. And if we are not 20 successful in getting signed up a majority and recorded 21 all those done by March 15th, we will be prevented from 22 this taking effect until the next period beyond that. 23 Not, you know -- 24 THE COURT: It's not March 27th? It's 25 March 15th?

12

1 MR. STERLING: Well, March 27th. That's a 2 good question because March 15th is when it was signed, 3 the original. 4 THE COURT: Oh, I see. 5 MR. STERLING: But it wasn't recorded 6 until 19 or till March 27th. Whichever date, the point 7 is if we don't get it done certainly within one of those 8 two days, we could end up in a situation where it would 9 not take effect during the next 10-year period but the 10 one after that is what would happen. So, in effect, 11 we'll be stopping this thing from being effective for a 12 full 10 years using this method. 13 THE COURT: All right. 14 MR. STERLING: And that will cause it to 15 happen by just doing a temporary injunction. 16 THE COURT: I see. You could read it that 17 way. You might read it another way too. 18 MR. STERLING: Well, I think if you can 19 figure out a way for us to get it effective otherwise, I 20 would be happy to do that. 21 THE COURT: I'm not going to engage in 22 that with you, but I think there may be a creative way 23 to do something there but, all right. Very good. 24 MR. STERLING: All right. I think that 25 basically --

13

1 THE COURT: Is that it? 2 MR. STERLING: -- gives us an idea what 3 our situation and our position is. 4 THE COURT: Fair enough. All right. 5 Thank you both. 6 Counsel for plaintiff, you-all may 7 proceed. 8 MR. GOTTFRIED: Good morning, Your Honor. 9 Being mindful of the fact this is a 10 temporary injunction hearing not a permanent injunction 11 hearing, I think we may be able to cut through some of 12 the formalities by stipulating as to a couple of 13 documents. 14 THE COURT: Fantastic. 15 MR. GOTTFRIED: I visited with 16 Mr. Sterling and he's graciously agreed that we can mark 17 this plat as Plaintiff's Exhibit 1. 18 MR. STERLING: I have no objection. 19 THE COURT: So he has no objection you 20 admitting it into evidence. 21 MR. Gottfried: May I approach? 22 THE COURT: Yes, of course. Thank you. 23 MR. GOTTFRIED: Your Honor, we would move 24 for the admission of Plaintiff's Exhibit Number 1. 25 (Plaintiff's Exhibit No. 1 offered.)

14

1 THE COURT: All right. Thank you. 2 Plaintiff's Exhibit 1 admitted. 3 (Plaintiff's Exhibit No. 1 admitted.) 4 MR. GOTTFRIED: Your Honor, that's just to 5 give you some perspective of where this subdivision is. 6 It's on Lake Travis. And the folks that are in the 7 courtroom today are the waterfront section of Lake 8 Travis. 9 THE COURT: Okay. 10 MR. GOTTFRIED: May I approach, Your 11 Honor? 12 THE COURT: Yes. Thank you. 13 MR. GOTTFRIED: Mr. Sterling and I have 14 also stipulated to the deed restrictions, which I've 15 just provided the Court as Plaintiff's Exhibit Number 2 16 and move for the admission of Plaintiff's 2. 17 (Plaintiff's Exhibit No. 2 offered.) 18 THE COURT: All right. Thank you. 19 MR. STERLING: I have no objection, Your 20 Honor. 21 THE COURT: All right. Thank you. 22 Plaintiff's Exhibit 2 is admitted. 23 You-all don't need to ask permission to 24 come up and show me stuff. It's fine. 25 (Plaintiff's Exhibit No. 2 admitted.)

15

1 MR. GOTTFRIED: Your Honor, I have handed 2 the Court Plaintiff's Exhibit Number 3, which is the 3 proposed amendment. And we move for the admission of 4 Plaintiff's Exhibit 3. 5 (Plaintiff's Exhibit No. 3 offered.) 6 MR. STERLING: May I see it? 7 MR. GOTTFRIED: Yes. 8 MR. STERLING: I just want to make sure. 9 I have no objection, Your Honor. 10 THE COURT: All right. Thank you. 11 Plaintiff's Exhibit 3 is admitted. 12 (Plaintiff's Exhibit No. 3 admitted.) 13 MR. GOTTFRIED: And, Your Honor, I'm also 14 hoping that we can stipulate that notice to all of the 15 residents of the proposed amendment was not given. It's 16 actually a judicial admission in paragraph 12 of 17 defendant's answer and counter-claim where they state, 18 defendants admit that the facts set forth in paragraph 19 20 of the plaintiff's petition are true and correct, 20 same and except all lot owners but six were given at 21 least 30 days notice in writing of the proposed 22 amendment and the web sites were up for at least 30 days 23 in writing showing the proposed amendment. 24 And they say, on information and belief, 25 those six received 30 days notice in writing by reading

16

1 from the web sites, which is not the provision of 2 written notice as required under the deed restriction. 3 MR. STERLING: Your Honor, I'll stand by 4 what he read. 5 THE COURT: Okay. Well, then, the Court 6 will note and make part of the record that provision 12 7 in defendant's original answer is admitted to by the 8 defendant's counsel. 9 MR. STERLING: With those exceptions. 10 THE COURT: With the exceptions that are 11 noted. 12 MR. Gottfried: Your Honor, we would call 13 Janice Cox. 14 THE COURT: Ms. Cox. 15 JANICE COX, 16 having been first duly sworn, testified as follows: 17 DIRECT EXAMINATION 18 BY MR. GOTTFRIED: 19 Q. Good morning, Ms. Cox. 20 A. Good morning. 21 Q. Could you please state your full name for the 22 record? 23 A. Janice K. Cox. 24 Q. And what is your home address? 25 A. 18940 Peckham Drive.

17

1 Q. And are you a resident of Point Venture Section 2 Three-1? 3 A. Yes, sir. 4 Q. And you oppose short-term rentals in your 5 subdivision; is that correct? 6 A. Yes. 7 Q. And you've authored a web site that you put up 8 entitled Point Venture Neighbors; is that correct? 9 A. No. 10 Q. Have you put together a web site as part of 11 your effort to ban short-term rentals in the 12 subdivision? 13 A. Yes. 14 Q. What is the name of that web site? 15 A. There's two web sites. SaveSection3-1.org. 16 There's -- it's sort of a joint web site, 17 pvstrreform.com. 18 Q. And are you the owner of both of those web 19 sites? 20 A. Yes. 21 Q. Who were the other neighbors that are part of 22 that organization that is trying to ban short-term 23 rentals in the subdivision? 24 A. I can't go through the entire list. I don't 25 have it in front of me. Pepper would be one.

18

1 Q. I'm sorry? 2 A. Helen Ramsey would be one. 3 Q. Who is Helen Ramsey? 4 A. She lives with me. 5 Q. Are there more than three people that are part 6 of the, quote, neighbors -- 7 A. No. 8 Q. No? 9 A. No. 10 Q. So you can only name yourself and Ms. Ramsey? 11 A. Correct. Yes. 12 Q. And I'd like to refer you to Plaintiff's 13 Exhibit Number 3, which I believe -- is that the 14 amendment to the deed restrictions that you've been 15 circulating within the subdivision? 16 A. The back page is blank but, yes. Page 1 and 2, 17 yes. 18 Q. What do you mean by "the back page is blank"? 19 A. If it was for a specific lot, the lot would be 20 filled in and the name would be filled in. 21 Q. Oh, okay. What I'm really asking, is this the 22 form of the amendment that you're asking your neighbors 23 to sign? 24 A. Yes. 25 Q. Okay. And under this proposed amendment,

19

1 short-term rentals of less than 90 days would be 2 forbidden in the subdivision; is that correct? 3 A. Yes. 4 Q. Who is the developer of the subdivision 5 currently? Is there one? 6 A. I would believe the -- I guess it was the 7 Mitchell Group originally, and then that passes down to 8 the ACC or POA. Don't know. 9 Q. To your knowledge, do any -- does any developer 10 still own any lots within the subdivision? 11 A. I can't answer that yes or no. 12 Q. You simply don't know? 13 A. I don't know. 14 Q. Did you provide 30 days written notice to all 15 of the members of the subdivision of your proposed 16 amendment to the deed restrictions, which are 17 Plaintiff's Exhibit Number 3? 18 A. All but -- all but seven. 19 Q. And how did you pick the seven that you were 20 not going to provide notice to? 21 A. They own short-term rentals. 22 Q. So is it fair to say that that was a concerted 23 effort by you to exclude them from the dialogue 24 regarding the amendment that you were proposing for the 25 subdivision?

20

1 A. One, we didn't think they would sign it. Two, 2 we had some elderly people in the subdivision, and we 3 were afraid they -- we were afraid of harassment. 4 Q. And so based on those reasons, you specifically 5 excluded, what was it, six or seven of the residents? 6 A. Seven. 7 MR. GOTTFRIED: May I approach the 8 witness? 9 THE COURT: Yes. Thank you. 10 Q. (BY MR. GOTTFRIED) Ms. Cox, I've handed you 11 what's been marked as Plaintiff's Exhibit Number 4 and 12 ask you if you can identify it? 13 A. What do you want? 14 Q. Can you identify Plaintiff's Exhibit Number 4? 15 A. Yes. 16 Q. What is Plaintiff's Exhibit Number 4? 17 A. The number of mailouts when they were done. 18 Q. Is Exhibit Number 4 a document that you 19 created? 20 A. I believe, yes. I didn't, but I believe Helen 21 Ramsey did. 22 Q. And you were subpoenaed to be here today as a 23 witness, correct? 24 A. Yes. 25 Q. And you produced certain documents pursuant to

21

1 that subpoena; is that correct? 2 A. This was not one of them. This document, I 3 don't believe was on the subpoena. 4 Q. Would you agree with me that that was a 5 document that was produced to me today by your lawyer? 6 A. Yes. 7 MR. GOTTFRIED: Your Honor, we move for 8 the admission of Plaintiff's Exhibit Number 4. 9 (Plaintiff's Exhibit No. 4 offered.) 10 MR. STERLING: I don't really have an 11 objection to it, Your Honor. I would say my client 12 produced certain documents in relationship to the 13 subpoena that was given, and there has been some 14 confusion with her about what that entailed. But I 15 think that qualifies as one of the documents -- as a 16 document that they requested. 17 THE COURT: All right. So no objection. 18 So Plaintiff's Exhibit 4 is admitted. 19 (Plaintiff's Exhibit No. 4 admitted.) 20 Q. (BY MR. GOTTFRIED) And Ms. Cox, there are two 21 Post-it notes on Plaintiff's Exhibit Number 4. Do you 22 see them? 23 A. Uh-huh. 24 Q. Are those your handwriting? 25 A. No, sir.

22

1 Q. Do you recognize the handwriting? 2 A. Yes. 3 Q. Whose handwriting is it? 4 A. Helen Ramsey's. 5 Q. Are you aware -- do you have any personal 6 knowledge of the existence of an architectural control 7 authority within your subdivision? 8 A. Yes. I believe it's a committee. 9 Q. And who are the members of that committee? 10 A. Two that I know of are Stan Retriman (ph) and 11 Cindy Clemmons. 12 Q. What about Eugene Glass, would he be a member? 13 A. I don't know if he is currently, but he has 14 been in the past. 15 Q. Marvin Ruthridge? Are you familiar with -- 16 A. I know the name. Don't know if he certainly 17 sits on the ACC. 18 Q. And Greg McConnel? 19 A. Don't recognize the name. 20 Q. But you do have personal knowledge that an 21 architectural control authority does exist and is 22 operating or committee is operating within your 23 subdivision? 24 A. Yes. 25 Q. Did you submit your proposed amendment to that

23

1 architectural control authority before you started 2 circulating it for signatures? 3 A. No. 4 Q. So you would agree with me that since you never 5 submitted it, there was never a recommendation by the 6 architectural control authority that the amendment be 7 adopted by the members; is that correct? 8 A. Yes. 9 MR. Gottfried: We'll pass the witness, 10 Your Honor. 11 THE COURT: All right. Thank you. 12 Counsel. 13 CROSS-EXAMINATION 14 BY MR. STERLING: 15 Q. Ms. Cox, in connection with your living at the 16 -- on the lot, are you the owner of the lot? 17 A. Yes. 18 Q. Is Ms. Ramsey also an owner? 19 A. Yes. 20 Q. So you own it jointly together; is that 21 correct? 22 A. Yes. 23 Q. And in the course of -- how long have you owned 24 it or how long have you actually lived on the lot? 25 A. I believe it's three years.

24

1 Q. And during that period of time -- well, scratch 2 that. 3 Do the Jacksons, the plaintiffs, own any 4 lots nearby? 5 A. Yes. 6 Q. They own one near you? 7 A. Yes. 8 Q. Is it a next door neighbor-type situation? 9 A. Yes. 10 Q. And have you or -- to your personal knowledge, 11 do you know whether they're renting out or leasing the 12 improvements on their lot? 13 A. Yes. 14 Q. Have you seen the renters on the lot? 15 A. Yes. 16 Q. Have the Jacksons used, at least in the past, a 17 manager for the lot or for that lot? 18 A. Yes and no. They use the BRBO at current 19 times. 20 Q. Okay. But did they use this individual in the 21 past? 22 A. Can you clarify "for"? 23 Q. Well, was there -- did they have someone other 24 than Mr. and Mrs. Jackson themselves act as their 25 manager of the rental?

25

1 A. I believe very early on they did. They used 2 the company in Lago. 3 Q. Do they have any on-site managers now? 4 A. They did. I think the neighbor was actually 5 part of the caretaker -- 6 Q. Arrangement? 7 A. -- arrangement. 8 Q. And did you ever have any problems with the 9 renters or the managers? 10 A. Yes. 11 MR. GOTTFRIED: Objection, Your Honor. 12 I'm going to object to the relevance. We're here about 13 notice. 14 MR. STERLING: Your Honor, we're not just 15 here about notice. I have an affirmative defense that 16 goes to the invitation of clean hands doctrine which 17 replies to this temporary injunction, and I filed an 18 answer that actually has that in writing. I'm entitled 19 to go into that. 20 THE COURT: I'm going to allow a little 21 bit of leeway here, not a whole lot, just enough to 22 handle this injunction. So you may proceed. 23 Q. (MR. STERLING) Have you had any problems with 24 the use or -- problem with the renters or the managers 25 in connection with the short-term rental being used on

26

1 the lot? 2 A. Yes. 3 Q. Could you describe for us what kind of problems 4 you've had? 5 A. We've had disorderly conduct. We've had lewd 6 profanity. We've had people dancing on the roofs. 7 We've had people trespassing. We've had vandalism. 8 We've had continuing loss of sleep. We've had bongo 9 drums. We've had karaoke music. We've had -- I mean, 10 it's endless. 11 We have people parking in our driveway. 12 We have people turning around in our driveway. We have 13 people trespassing. Just Christmas I was out of town, 14 we have people standing there and drinking beer in our 15 driveway. Their kids are in our -- we can see from our 16 cameras we're being notified. They come over in 10s or 17 15s at a time asking questions. It's been a basic 18 nightmare. 19 Q. Have you had to call the police? 20 A. Yes, sir. 21 Q. And have there been -- have your other 22 neighbors complained about the same activities? 23 A. Yes, sir. 24 Q. Would it be fair to say that the existence of 25 the short-term rental business on the lot has become an

27

1 annoyance or a nuisance in the neighborhood? 2 A. Yes, sir. 3 Q. I'm going to show you what's been marked as 4 Defendant's Exhibit 1. 5 THE COURT: Why don't you go ahead and 6 show it to opposing counsel first. Thank you. 7 Q. (BY MR. STERLING) Let me show you what's been 8 marked as Defendant's Exhibit 1 and ask you is that a 9 printout from a web site service that allows for 10 advertising short-term vacation rentals? 11 A. Yes, sir. 12 Q. And is that -- if you looked at it completely 13 and fairly, is that describing pictures and all the 14 Jackson's property? 15 A. Yes, sir. 16 Q. And does it have a picture of the two of them 17 as the owners? 18 A. Yes, sir. 19 MR. STERLING: We offer Defendant's 20 Exhibit 1. 21 (Defendant's Exhibit No. 1 offered.) 22 MR. GOTTFRIED: Your Honor, we object on 23 the grounds of relevancy. Leasing, even short-term 24 leasing, is permitted under the current restrictions. 25 It's not really an issue in this case what they're using

28

1 their property for. 2 MR. STERLING: Actually, Your Honor, it's 3 not. One of the things that I brought up in my pleading 4 is that there is a section of the restrictive covenants, 5 which is Article or Roman Numeral 4, Section -- or 6 Paragraph 5, which basically prohibits the renting of 7 any improvements on a lot without the prior consent of 8 the architectural control authority. 9 MR. GOTTFRIED: Your Honor, I don't think 10 that that's what it says. I think it says without the 11 authority of the developer and there currently is no 12 developer. And if the defendants are taking the 13 position that the deed restrictions prevent all leasing 14 of any kind for any duration in this subdivision, that's 15 something I'd love to get on the record. 16 THE COURT: Okay. I'm going to allow 17 Defendant's Exhibit 1. It's admitted. 18 (Defendant's Exhibit No. 1 admitted.) 19 THE COURT: I'm going to remind you, 20 gentlemen, that we are here simply on a temporary 21 injunction. I'm not going into the leads of your final 22 hearing on this. 23 I understand you-all wanting to go ahead 24 and get it out. If you-all want free discovery and you 25 want to have a reporter type everything out now, that's

29

1 absolutely fine with me and I'm sure for her. But I'm 2 going to allow Defendant's Exhibit 1. But I'm going to 3 remind you why we're here. All right. Please proceed. 4 MR. STERLING: I'll pass the witness. 5 THE COURT: All right. Thank you. 6 Anything else? 7 REDIRECT EXAMINATION 8 Q. (BY MR. GOTTFRIED) Ms. Cox, is it your 9 position that all leasing of any kind within the 10 subdivision is prohibited by the deed restrictions? 11 A. Yes. 12 MR. GOTTFRIED: We'll pass the witness. 13 RECROSS-EXAMINATION 14 Q. (BY MR. STERLING) Ms. Cox, would it also be 15 your understanding that prohibiting of the renting 16 within the subdivision is subject to the exception by 17 approval of the architectural control authority? 18 A. Yes. 19 MR. GOTTFRIED: Your Honor, I'm going to 20 object to the leading and, actually, it's not what the 21 document says. 22 THE COURT: That's sustained. 23 Q. (BY MR. STERLIING) Ms. Cox, the individual 24 restrictive covenants provides for the developer to 25 basically sign away his rights to an architectural

30

1 control authority; is that correct? 2 MR. GOTTFRIED: Objection; leading. 3 THE COURT: Sustained. 4 MR. STERLING: Pass the witness. 5 MR. GOTTFRIED: Nothing further. 6 THE COURT: All right. You may step down. 7 MR. GOTTFRIED: Your Honor, we would call 8 Helen Ramsey. 9 THE COURT: Ms. Ramsey. 10 HELEN RAMSEY, 11 having been first duly sworn, testified as follows: 12 DIRECT EXAMINATION 13 BY MR. GOTTFRIED: 14 Q. Good morning, Ms. Ramsey. 15 A. Good morning. 16 Q. Could you please state your full name for the 17 record? 18 A. Helen Ramsey, Jr. 19 Q. And where do you reside? 20 A. 18940 Peckham. 21 Q. And do you live there with Janice Cox? 22 A. I do. 23 Q. And so you are a resident of Point Venture 24 Section Three-1; is that correct? 25 A. Three-1 is correct.

31

1 Q. Okay. And you oppose short-term rentals in 2 your subdivision? 3 A. In Section Three-1, correct. 4 Q. Okay. And did you, together with Ms. Cox, put 5 together the web site entitled neighbors -- the Point 6 Venture Neighbors -- what's the name of the web site you 7 and Ms. Cox started? 8 A. Ms. Cox started the web site. I did not. It's 9 pvstrreform.com and savesection3-1. 10 Q. Other than two of you, has anyone else joined 11 in that group of neighbors as you define it in your -- 12 in the web site? 13 A. No, sir. 14 Q. So it's just the two of you? 15 A. It's just the two of us. 16 Q. Do you have Plaintiff's Exhibit Number 4 in 17 front of you? 18 A. I do. 19 Q. And the two Post-its on Plaintiff's Exhibit 20 Number 4, are those your handwriting? 21 A. Yes, sir. 22 Q. Could you please read them both loud for the 23 Court? 24 A. I can. Kathy is a member at the Point Venture 25 Renters Association and so are -- as are other STR

32

1 owners in Section Three-1. They obviously were aware of 2 the amendment by 2-3-17. That's the first one. 3 Second one says, didn't send mailout to 4 STR and friends because of history of harassment we have 5 endured and didn't want to waste a stamp. 6 Q. So you were present in the courtroom for 7 Ms. Cox's testimony, correct? 8 A. Correct. 9 Q. And you agree that neither you nor Ms. Cox sent 10 notice to all the members of the subdivision that you 11 were seeking the amendment that is Plaintiff's Exhibit 12 Number 3? 13 A. Correct. Seven were excluded. 14 Q. And those seven that were excluded, that wasn't 15 just inadvertence. They were purposely left off the 16 list of who got the notice, correct? 17 A. That's true. We decided that we did not want 18 to endure -- we wanted to hold off the harassment that 19 -- we didn't want to it escalate. 20 Q. Is it your position that all leasing within the 21 subdivision of any duration is prohibited under the deed 22 restrictions? 23 A. I don't know how to interpret that really. I 24 think the Court needs to interpret that. I don't know. 25 Q. I'm asking for your position.

33

1 A. I don't have a position on it. I don't have a 2 position on it. I'm not sure I can interpret that in 3 the reading of the deed restrictions. I'll leave that 4 to the lawyers and the... 5 Q. Do you oppose leasing of any duration in the 6 subdivision? 7 A. No, sir. 8 MR. GOTTFRIED: Pass the witness, Your 9 Honor. 10 THE COURT: Thank you. 11 CROSS-EXAMINATION 12 BY MR. STERLING: 13 Q. Ms. Ramsey, did you check the controller's 14 office as to whether or not hotel tax is being paid by 15 the Jacksons? 16 MR. GOTTFRIED: Objection, Your Honor. 17 Calls for hearsay. And objection on the grounds of 18 relevance. 19 THE COURT: That's sustained. 20 Q. (BY MR. STERLING) Do you agree with Ms. Cox's 21 characterization of the problems that the short-term 22 rental caused in the neighborhood? 23 A. Yes, sir. 24 Q. Is there any doubt in your mind that this would 25 all end the Jacksons are running a short-term rental

34

1 business on their lot? 2 MR. GOTTFRIED: Your Honor, I object to 3 the relevancy. 4 THE COURT: Overruled. 5 THE WITNESS: No, there's -- no, sir. 6 MR. STERLING: Pass the witness. 7 MR. GOTTFRIED: Nothing further, Your 8 Honor. 9 THE COURT: Thank you, ma'am. You may 10 step down. 11 MR. GOTTFRIED: Your Honor, we would call 12 Kathleen Woodall. 13 THE COURT: Ms. Woodall, come around and 14 let me swear you in. 15 KATHLEEN WOODALL, 16 having been first duly sworn, testified as follows: 17 DIRECT EXAMINATION 18 BY MR. GOTTFRIED: 19 Q. Good morning, Ms. Woodall. 20 A. Hello. 21 Q. Can you please state your full name for the 22 Court? 23 A. Kathleen Kolb Woodall. 24 Q. And what is your address? 25 A. 18920 Peckham Drive.

35

1 Q. And is that a property within Point Venture 2 Section Three-1? 3 A. Yes. 4 Q. And how long have you owned that property? 5 A. Since late October, I think, 2004. 6 Q. And are you a full-time or part-time resident 7 there? 8 A. I split my time, but it's my primary residence. 9 Q. When you are not residing there, do you rent 10 out that property? 11 A. Yes. 12 Q. And for what periods of time do you typically 13 rent it out? 14 A. Between two and 21 days. 15 Q. And how many years have you been renting it 16 out? 17 A. I began renting it last year -- mid-year of 18 2016. 19 Q. Were you provided with written notice of the 20 proposed amendment that is Plaintiff's Exhibit Number 3? 21 A. No. 22 Q. How did you learn about the proposed amount? 23 A. I received an e-mail from another resident 24 notifying me saying -- with a link to the web site. 25 Q. And did you know at that time who was proposing

36

1 the amendment? 2 A. No. 3 Q. Was -- have you ever been given an opportunity 4 to speak at a meeting regarding the proposed amendment? 5 A. No. 6 Q. Are you aware of the existence of an 7 architectural control authority within the subdivision? 8 A. Yes. 9 Q. And explain for the Court what your familiarity 10 is with that architectural control committee, what do 11 they do, and if you know any of the members. 12 A. I know that Stan Retriman is a member, and I 13 know that it is a committee created by way of the 14 owners' association, and that they have some broad 15 duties that include the review of development of plans 16 and building plans and administration of that. 17 Q. Are you aware of any architectural control 18 authority recommendation one way or the other related to 19 the proposed amendment that's Plaintiff's Exhibit Number 20 3? 21 A. There was none. 22 Q. Do you oppose the proposed amendment that is 23 Plaintiff's Exhibit Number 3? 24 A. I would not sign it. 25 Q. Are you familiar with the history -- with the

37

1 developer history out there in Point Venture? 2 A. Yes. 3 Q. Explain for the Court what your understanding 4 is of the developer history out there. 5 A. My understanding is that there were several 6 developers over time from the inception of the community 7 that experienced financial difficulties and some 8 bankruptcies with the final group of lots being vested 9 with the Point Venture POA which they disposed of to 10 private owners over time and they do not own anymore. 11 Q. So your understanding is that there are no -- 12 that there is currently no developer as that term is 13 defined within the deed restrictions currently? 14 A. Correct. 15 Q. How would the proposed amendment, Plaintiff's 16 Exhibit Number 3, affect your property rights? 17 A. Well, I would be restricted from not only 18 short-term rentals, but it would restrict me from the 19 potential of renting on a longer term because I would 20 not be able to maintain a tenant in a holdover status on 21 a lease for month to month. And my property is 22 currently for sale which would impact the value because 23 it sets my title separate and different from others in 24 the neighborhood impacting the way it would be viewed by 25 the open market.

38

1 MR. GOTTFRIED: I'll pass the witness. 2 CROSS-EXAMINATION 3 BY MR. STERLING: 4 Q. Ms. Woodall, do you pay hotel tax? 5 A. Yes. 6 Q. In relationship to your short-term rental? 7 A. Yes. 8 Q. And have you been, in the past, an advocate for 9 regulation of short-term rentals? 10 A. I have advocated for the Village of Point 11 Venture to enforce ordnances for everyone and to 12 potentially permit STRs in the neighborhood through the 13 Village of Point Venture. 14 Q. And isn't it true that you said in a Point 15 Venture meeting, October 7, 2015, that you felt that 16 VRBOs are causing property values to decrease? 17 A. I don't recall if that was the total of my 18 statement. It may have been a part of a statement I 19 made which was lengthy. 20 Q. Okay. Would it surprise you that it's part of 21 a Point Venture minutes of that meeting? 22 A. The minutes of the meeting do not include my 23 full statement, which was submitted to the board and 24 asked to be appended to the minutes. 25 Q. But that is substantially something you said

39

1 during that meeting; is that correct? 2 A. They were the minutes approved by the board. 3 It's was not my full statement. 4 Q. Okay. Did you say that VRBOs would -- what 5 does VRBO mean? 6 A. Vacation rental by owner. 7 Q. Okay. 8 -- was causing property values to 9 decrease? 10 MR. GOTTFRIED: Objection, Your Honor, 11 asked and answered. 12 THE COURT: Sustained. 13 Q. (BY MR. STERLING) Were you aware of a 14 provision in the 1972 restrictions, Article -- Roman 15 Numeral 4 of 5 where it says, the renting or leasing of 16 any improvement thereon or a portion thereof without the 17 prior consent of the developer is prohibited? 18 A. I was provided with a copy of the deed 19 restrictions when I bought my first house in Point 20 Venture in 2002 and my second in 2004. I had not read 21 them until after the amendment was submitted. I had not 22 read them in sometime. 23 Q. And when you read them at the time that you 24 were called upon to think about what it actually says, 25 because of the existence of amendment being floated

40

1 around for signature, did you read that in the 2 restrictive covenants? 3 A. That paragraph was not the object of my focus. 4 Q. Okay. Were you aware that no lot of the 5 subdivision shall be used for commercial, business or 6 professional purpose nor for church purpose? 7 A. I have been aware -- 8 MR. GOTTFRIED: Objection, Your Honor, 9 relevancy. 10 THE COURT: Overruled. 11 Q. (BY MR. STERLING) Were you aware that all lots 12 in the subdivision were to be used for single-family 13 residences purposes only? 14 A. Yes. 15 Q. Were you aware that no noxious or offensive 16 activity of any sort shall be permitted, nor shall 17 anything be done on any lot which may be or become an 18 annoyance or nuisance to the neighborhood? 19 A. Yes. 20 Q. Did you have a conversation with Janice Cox on 21 or about April 30, 2016, in which you indicated you were 22 going to join the other side, you were going to become a 23 joint short-term renter -- short-term business? 24 A. I don't consider it us or them. 25 MR. GOTTFRIED: Your Honor, I'm going

41

1 object to relevancy. 2 THE COURT: Overruled. 3 Q. (BY MR. STERLING) You can answer. 4 A. I do not consider it joining the other side. I 5 recall a conversation where I informed Janice that I was 6 going to begin using my house as a short-term rental. 7 Q. Was that the day of the -- of a man who was 8 dancing on a roof? 9 A. No. I really don't know. 10 MR. STERLING: Pass the witness. 11 THE COURT: Thank you. 12 REDIRECT EXAMINATION 13 Q. (BY MR. GOTTFRIED) Ms. Woodall, could I direct 14 your attention to Plaintiff's Exhibit Number 1? 15 MR. GOTTFRIED: Which is the plat, Your 16 Honor. 17 Q. (BY MR. GOTTFRIED) Can you point out to the 18 Court the section of that plat which is Point Venture, 19 Section Three-1? 20 A. Sure. 21 MR. STERLING: Could we approach, Your 22 Honor? 23 THE COURT: Yes, of course. Thank you. 24 THE WITNESS: It roughly is -- this is not 25 a complete plat because there are homes down here, but

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1 it goes roughly down lake front and then it comes around 2 and comes back up here. And along this side all the way 3 up here through Kelly and along Venture Drive and back 4 down here. And my home is here. This is the defendant, 5 the Jacksons. 6 Q. (BY MR. GOTTFRIED) And where is the lake? 7 A. The lake is here. These are waterfront homes, 8 and the lake is here. This is very -- it's vertical. 9 MR. STERLING: Could I ask just one 10 question for clarity? 11 This is the whole of Section Three-1, 12 isn't it? Doesn't show anything else? 13 THE WITNESS: I believe that's correct. I 14 don't know where the Three-1 stops here on lake front, 15 you know, right along this road so I assume this to be 16 correct. 17 MR. GOTTFRIED: We'll pass the witness, 18 Your Honor. 19 MR. STERLING: I pass the witness. 20 THE COURT: All right. Thank you. 21 MR. GOTTFRIED: Your Honor, we have six 22 other witnesses, but I think we're going to rest. 23 THE COURT: All right. Let me let her get 24 off. 25 You may step down.

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1 MR. GOTTFRIED: In light of the testimony 2 so far, I think we can dispense with the other 3 witnesses. 4 THE COURT: Yeah, but they paid for 5 parking down here and tried to find a spot. 6 MR. GOTTFRIED: If they really want to get 7 their time on the stand, I could do it. 8 THE COURT: It's entirely up to you. 9 MR. GOTTFRIED: We'll rest, Your Honor. 10 THE COURT: All right. Thank you. 11 Counsel. 12 MR. STERLING: Your Honor, I don't know 13 that we have anything further to put on because he 14 called our witnesses. I got what I wanted out of them. 15 THE COURT: Okay. Very good. 16 If you-all want to give me a closing 17 argument for this particular phase of this matter, I can 18 take it if you-all want to give it. 19 MR. SUTTON: Judge, I'd like to make a 20 brief closing. I need about five minutes. 21 THE COURT: All right. You're going to 22 need five minutes to do it or you need a five-minute 23 break? 24 MR. SUTTON: If you'd like to take a 25 break, I'm fine.

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1 THE COURT: No, I'm good. 2 CLOSING ARGUMENT BY PLAINTIFF 3 MR. SUTTON: Okay. Judge, I'd like to 4 direction your attention to Plaintiff's Exhibit 2, which 5 is the deed restrictions. 6 What I'd like to do is orient you to the 7 two or three key provisions, and then I'm going to offer 8 you some cases that will guide you in your 9 interpretation this morning. 10 On page 2, number page 2 of the deed 11 restrictions is one of the clauses implicated today. 12 It's called the Duration clause. And I agree the title 13 of these provisions are not controlling. 14 And I will summarize that what the 15 Duration clause says is, first, for a 35-year period and 16 then on 10-year anniversaries thereafter, a majority of 17 owners -- not two-thirds, but just over 50 percent -- 18 are empowered to change the provisions hereof in whole 19 or part. 20 So we know that there are circumstances 21 under which the percentage required is, I'm going to 22 say, 51 percent instead of 67 percent. 23 Now, I'm going to skip over a clause 24 that's on the next page and come back to it because I 25 want to stick to the subject matter of amendment.

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1 If you go to the second to the last page 2 there is Article 9, IX, called Amendments. This is a 3 stand-alone clause which says that any or all of the 4 amendments may be annulled, amended, or modified at any 5 time at the recommendation of the architectural control 6 authority by a vote of two-thirds. 7 That is one sentence. Irrespective of the 8 35- and 10-year anniversaries, there is a separate 9 procedure involving architectural control authority 10 where a two-thirds vote suffices. 11 Now, we get into the difficulty which is 12 the next two sentences, which are stand-alone sentences. 13 All such lot owners shall be given 30 days 14 notice in writing of any proposed amendment before it is 15 adopted. 16 Then, finally, there shall be no 17 annulment, amendment, or modification of these covenants 18 without the prior recommendation of the architectural 19 control authority. 20 So we have two clauses which have -- I 21 will call complimentary provisions, but there is a 22 conflict as to the percentage required if you want to 23 call it a conflict. 24 This presents a problem for the Court 25 because you've got two clauses that deal with some of

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1 the same subject matter. One of which imposes some 2 additional requirements. It is very easy, Judge, to 3 harmonize these provisions without resorting to any 4 tiebreaker rule. The harmonization is that there are 5 circumstances under which a lower voting threshold is 6 possible, and that's on these anniversary dates. 7 However, nothing in that first clause says, and you can 8 do that without notice or you can do that without the 9 recommendation of the architectural control authority. 10 To harmonize the two, you simply add those procedural 11 due process requirements to the first clause and, 12 thereby, you have given effect to every word in this 13 document. 14 I will cite to the Court the broad 15 principles announced in two cases as to how you 16 interpret deed restrictions. One is a case from -- 17 And if I may, I'll give the Court copies 18 of these. 19 One is a case relating to deed 20 restrictions, particularly from 2015. It's called 21 Zgabay, Z-G-A-B-A-Y. And the other case called Forbau, 22 F-O-R-B-A-U. 23 And I will give opposing counsel copies of 24 these. 25 Summarized briefly, these two cases hold

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1 as follows: Forbau, the older case, is a general 2 contract interpretation case. And it says that the 3 court needs to give effect to every provision in a 4 contract and specific clauses control over general. The 5 Zagbay case, a 2015 case, relates specifically to deed 6 restrictions. And this is an important case for the 7 third appellant district. 8 It says as follows: If the court finds 9 there is any ambiguity between two deed restrictions or 10 any ambiguity in deed restrictions, there is a 11 tiebreaker rule. The deed restricts are interpreted to 12 favor the free and unrestricted use of property. 13 Judge, you, therefore, have two ways to 14 answer the -- to interpret this conflict or this 15 harmonization in our favor. One, without resort to a 16 tiebreaker rule that you can harmonize the two 17 provisions. Second, that under the rule in Zgabay if 18 you have any doubt what to do, what you have to do is 19 favor the free and unrestricted use of property. 20 There is one narrow sense in which whether 21 leasing is allowed in this subdivision is relevant. And 22 the only sense in which it's relevant is as follows: 23 Does the amendment that has been put into evidence seek 24 to restrict property rights? 25 The reason that it does, Judge, is because

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1 it expressly bans, without exception, rentals by 2 duration. A minimum duration of 90 days is required for 3 rentals. 4 And what I'll do is point to the Court to 5 another page of the deed restrictions, page 6, at the 6 bottom of the page. 7 Paragraph 5, the renting or leasing of any 8 improvements without the prior written consent of 9 developer is prohibited. 10 Well, let's state that another way. 11 Renting is allowed with the prior consent of the 12 developer. We don't have to address today whether 13 renting is, in fact, allowed. All the Court has to 14 address is whether the proposed amendment would restrict 15 renting to the extent it is allowed. And the answer is 16 plainly yes. The whole point of the amendment to the 17 deed restrictions is to restrict property rights. 18 Judge, if you have any doubt at all what 19 these two different provisions mean, if you find there's 20 an ambiguity or any doubt, you're going to interpret the 21 deed restrictions in favor of my clients, the rent for 22 short terms and who oppose the amendment. 23 Finally, Judge, I'd like to address a 24 procedural issue of what we have to show today for this 25 injunction.

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1 This is on page 3, the Enforcement clause. 2 I believe that this is the broadest 3 enforcement clause I've ever encountered in 10 years of 4 HOA litigation. Probably explained by this being a 5 fairly old deed restrictions. 6 It says as follows, and I'll summarize: 7 Any attempted -- any violation or attempted violation is 8 subject to legal or equitable action. And it doesn't 9 say by an owner, but the implication is that someone 10 with standing can bring a case for damages or an 11 injunction. 12 And then it says, you can see either a 13 mandatory or prohibitory injunction for any violation or 14 attempted violation, and it is not a prerequisite to the 15 granting of an injunction to show inadequacy of the 16 legal remedy or irreparable harm. 17 The only thing my clients have to show 18 today to get an injunction is that the defendants have 19 violated or attempted to violate the restrictive 20 covenants by going out and getting an amendment -- 21 seeking an amendment without written notice or 22 architectural control recommendation. Both of those 23 facts were established in the testimony. 24 The common law of Texas already provides 25 that irreparable injury need not be shown in any deed

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1 restriction case in any event. 2 And I'll give the Court the authority for 3 that. What I've done is provided the Court with a newer 4 case, Reed versus Reed, which summarizes the state of 5 law as of 2016 on that. 6 The defendants are going to argue that the 7 rest -- the other requirement -- or the other allowance 8 of the deed restriction is that you can seek an 9 injunction without a showing of an inadequacy of legal 10 remedy. They're going to argue that that contract 11 clause is not enforceable. So to address that, I have a 12 case for the Court -- 13 Excuse me just one minute, Judge. 14 I should say the defendants cite a case 15 from 1870 which has nothing to do with that issue. I 16 have two cases for the Court, more modern cases. One is 17 called Doyle and the other is called Inwood. 18 Judge, the Doyle and Inwood cases do as 19 follows: The Doyle case says that parties can agree by 20 contract to any remedy and if it doesn't violate public 21 policy, the courts will enforce it. 22 The Inwood case is really a watershed case 23 relating to just how much power homeowners associations 24 have under deed restrictions. And I will offer the 25 Court by analogy the following: The Texas Constitution

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1 forbids foreclosures of homesteads. There are eight 2 enumerated exceptions. 3 There is no exception allowing a 4 homeowners association to foreclose a homestead and yet 5 the Texas Constitution is overridden by deed 6 restrictions because, as the Inwood case says, if a deed 7 restriction says that a homeowners association can take 8 your house away, the deed restrictions remedy controls. 9 I can't think of a stronger statement as 10 to how much power there is in recorded deed restrictions 11 as having your house taken away for not paying your 12 monthly assessment. 13 Defendants are going to argue that we 14 don't get the benefit of this enforcement clause, that 15 it's not enforceable because it somehow conflicts with 16 state law. That's simply not the case. This 17 enforcement clause should be enforced as written. The 18 only thing we have to prove today is that there is a 19 breach -- attempted breach of the deed restrictions. 20 Finally, Judge, the defendants have made 21 too much of the potential harm that they would suffer. 22 The injunction asks that any deed restriction -- that 23 any amendment that they may get a 51 percent vote for 24 not be recorded until final judgment. They may well get 25 their 51 percent vote, Judge. All we're saying is it

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1 can't be recorded until this lawsuit has been decided so 2 that there won't be limitations on my client's rights, 3 clouds on their title, and most importantly, they won't 4 be subject to lawsuits by 20 or 30 or 40 or 50 owners 5 while they're renting to short terms. 6 Thank you, Judge. 7 THE COURT: Thank you. 8 Counsel. 9 CLOSING ARGUMENT BY DEFENDANT 10 MR. STERLING: Your Honor, I'm going to 11 kind of go -- work backwards of what counsel talked 12 about. 13 Last thing he said was about how 14 structuring the temporary injunction and that it's not 15 going to be that inconvenient, they can go on and get 16 their majority but that somehow just being prevented 17 from going ahead and filing it, recording it, is not 18 going to cause or cause any damage to my client. Well, 19 it will cause damage because it won't be effective. 20 It's going to change the effective date of it without 21 even getting an actual hearing on the merits. 22 It was going to be a situation -- if 23 they're ordered not to record it that they will end up 24 in a situation where they just want -- if they get it -- 25 get the final amount of signatures they need, they'll

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1 end up recording it in the next 10-year period and that 2 means it would be effective until the 10-year period 3 after that. And it seems to me that's a wrong way about 4 going about doing any kind of -- keeping and maintaining 5 the status quo. It's not doing that at all. At the 6 very least, it should have allowed us to go ahead with 7 it. You record it if you want to. You can even have an 8 injunction prohibiting people from enforcing it after 9 it's been recorded just so we could go ahead and get it 10 done. 11 They have a legal remedy, which is the 12 Declaratory Judgment Act, they can invoke. They do have 13 a legal remedy. And I think they ought to be compelled 14 to use that legal remedy itself. They can clearly get a 15 declaration that is void if that's what they want to do. 16 Now, there's been a lot of talk about not 17 having a chance to read everything counsel has given me. 18 But the way he structured his argument makes me think 19 that there is still not a direct case that says, gee 20 whiz, you can get rid of or you do not have to have a -- 21 that fourth point of proof in a temporary injunction 22 situation involving restrictive covenants. That is, 23 showing of an inadequacy of your legal remedy. I think 24 that you do. 25 One of the things that I think that is --

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1 I know I cited a case that's fairly old, but I like the 2 language in it and the language in it is basically that 3 your state is not really a party to the contract. The 4 case I cited was Moore versus Letchford. It's 19- or 5 1871. 6 But it basically is saying that while it's 7 required to give adequate process for the enforcement of 8 rights, you can't tie the state's hands on how they're 9 going to go about proving it. 10 And that's the point I'm trying to 11 basically say. They're basically changing the 12 evidentiary rules of the court, and I don't think they 13 get away with doing that by putting it in their contract 14 in the restrictive covenants. 15 Now, let's go, I think, to the situation 16 that I tried to raise, and I think there's evidence of 17 it in what you've heard. And that is, essentially, 18 you've got to come into the court with clean hands. And 19 they haven't come into court with clean hands. They 20 have shown and they have admitted that they're violating 21 certain restrictive covenants themselves. And it's 22 pretty clear that if they're saying, you know, gee whiz, 23 the only exception can be a developer and that 24 developer's rights aren't moving on to the HOA, then 25 they can't change it at all and renting at all.

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1 And there are other things that they're 2 violating in terms of running a business on the lot. 3 They're running what amounts to annoyance or nuisance 4 activity on the lots. All of that is happening, and 5 they're violating all those things. 6 And the reason I brought them up in this 7 temporary injunction hearing is because these are all 8 centered around the issue about short-term rentals. And 9 in the situation where you're talking about the same 10 subject matter -- that's what we're talking about -- the 11 ultimate goal on both sides is fighting over the 12 existence or nonexistence and the continued existence of 13 short-term rental rights. And I think that you cannot 14 permit them to get a temporary injunction when their 15 hands are as dirty as they are in this situation. 16 So let's go, I think, now to actually 17 talking about the restrictive covenants. 18 Now, one of the things that counsel 19 referred to was a case. And one of the cases it cited 20 was Coker versus Coker, which is a Supreme Court case. 21 And it's cited by one of his references. 22 And that particular case is talking about 23 how you use contract interpretation rules on any 24 contract, not just a restrictive covenants contract. 25 And it's clear that the usual principles of contract

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1 principles are supposed to be done by or applied by the 2 court to any contract which includes restrictive 3 covenants, which is just another form of a contract. 4 But one of the things it says, basically, 5 is that in harmonizing contract provisions, terms stated 6 earlier in an agreement must be favored over subsequent 7 terms. And our term is way in front of this contract. 8 The term they're pushing is way in the back of the 9 contract. It's possible to harmonize that without any 10 real problem at all, and harmonizing it is the developer 11 providing two separate methods of initiating and 12 providing for amendments or changes to the restrictive 13 covenants. 14 One is a grassroots method that's done 15 without voting where you have a majority of people 16 running around collecting signatures. Usually that's 17 going to be somebody like my clients pushing to get an 18 amendment of some sort. Essentially petitioning to get 19 their actual amendment. And there are -- if you read 20 the rules of the statutes about restrictive covenants, 21 there are provisions in there for doing exactly that. 22 Similar to what is being done -- provided for in the 23 1972 restrictions themselves. 24 And the 1972 restrictions were done before 25 those statutes probably even went into effect. So it's

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1 showing that there's one way of doing it and then 2 there's going to be another way of doing it. And the 3 other way of doing it is doing it using the HOA or the 4 architectural control authority, essentially, which is a 5 committee, apparently, of the current HOA. 6 But you see the difference. One, it's got 7 -- one has bare majority. The other one has two-thirds. 8 One require as vote. The other one just requires 9 signatures. One requires notice. The other one doesn't 10 require notice. One requires -- and it would be 11 superfluous to have notice when you're running around 12 going to each person door to door trying to get them to 13 sign on to the actual instrument that you want to sign 14 or want to record. 15 And it doesn't require the architectural 16 control authority to give us permission or a 17 recommendation. 18 So it's just two separate things that work 19 separately, and you can harmonize it as being that. 20 Now, the thing that I'm concerned with is 21 one of the things that counsel said was because of the 22 type of amendment that we requested, which would 23 supposedly restrict the -- what is currently in the 24 restrictive covenants, which may not be exactly true. 25 It may actually be opening up if you ban all leasing and

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1 we now have another thing that allows leasing or only 2 bans a portion of leasing. It seems to me that that is 3 opening up. But in any case, they're characterizing as 4 being restrictive. 5 But you're not supposed to be looking at 6 the amendment. You're supposed to be looking at -- 7 because what they're fighting about is the amendment 8 processes. And it seems to me the one, if you're going 9 to look at it past trying to harmonize it, you're trying 10 to sit there and say which is the most restrictive. 11 Their's is the most restrictive. Their's 12 the one who ends up having everything go at two-thirds 13 majority, requiring the actual architectural control 14 authority to do a recommendation prior to getting on a 15 ballot of some sort. That's essentially much more 16 restrictive than what's allowed in the one allowing from 17 a majority of people and lot owners rising up as a group 18 and going ahead and signing off on an instrument that 19 changes and is recorded. 20 So either way you want to look at it, and 21 I think the proper way is to say that it's not really 22 ambiguous. I think it's pretty straightforward on 23 service. And if you use the normal contract principles, 24 look at the entire four corners of the document, and 25 apply the tiebreaker that I'm talking about, it's pretty

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1 obvious that the one at the head of the line should be 2 given more favor. And we're not doing anything against 3 the other process. All it's doing is being allowed both 4 processes to work together. 5 So we urge the Court to deny the 6 injunction -- the temporary injunction for all the 7 reasons I've stated. 8 THE COURT: Thank you. 9 MR. SUTTON: May I have a brief minute 10 rebuttal, Judge? 11 THE COURT: Sure. 12 FURTHER ARGUMENT BY PLAINTIFF 13 MR. SUTTON: Regarding the defense of 14 unclean hands, here is why that argument is erroneous. 15 There is a confusion in the short-term 16 rental cases by people who oppose them, between an 17 owner's right to rent for any duration versus an owner's 18 breaches of restrictive covenants. And often you have 19 owners who have a right to rent for short terms who have 20 breached the restrictive covenants because they have 21 either caused nuisances or they have had over occupancy 22 violations. Any number of other actionable wrongs for 23 which there are damages and injunction as a remedy. 24 So the fact that an owner may have 25 violated a restrictive covenant would not mean that the

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1 owner does haven't a property right. And so the error 2 in the analysis here by the defendants is to say that 3 unclean hands would prevent owners from having 4 procedural due process when it comes to amending the 5 deed restrictions. 6 I can't think of anything that would take 7 that right away from a homeowner unless they -- unless 8 that homeowner had actually themselves sabotaged the 9 amendment process. That's where the unclean hands 10 argument come in. 11 Second, the evidence was that the 12 defendants actually blocked us from having a voice in 13 this vote, and it's quite apparent why. If you believe 14 that deed restrictions are local, local government, that 15 they are constitutions for subdivisions, then the spirit 16 of this document is that everyone has a voice. 17 There is a process for them to be involved 18 when deed restrictions are being proposed. I suspect 19 that the architectural control authority will have some 20 words to say if a group of owners, without the 21 architectural control authority's recommendation, have 22 gone and recorded something. I guess we'll see if the 23 injunction is denied. 24 Finally, the Zgabay opinion relates not to 25 -- not merely to enforcement of a deed restriction in

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1 favor of an owner, but specifically the free and 2 unrestricted use of property. And that's what has to be 3 born in mine. 4 Another aspect of Zgabay that applies here 5 is that my client's property right is partly bound up 6 with the procedural due process rights they have. They 7 have spent money on land, Judge. That land came with a 8 bundle of rights that are important to these people. 9 They are making rents on their property. The defendants 10 want to take that away without procedural due process. 11 I would ask the Court to keep that in mind for a group 12 of homeowners. 13 Thank you, Judge. 14 THE COURT: All right. Thank you. 15 FURTHER ARGUMENT BY DEFENDANT 16 MR. STERLING: Only thing I would add is 17 it's one thing to talk about procedural due process in a 18 situation about taking away, let's say, a home -- or a 19 HOA has accused you of violating something and you're 20 entitled to a hearing and that kind of stuff. But it's 21 another thing to be talking about procedural due process 22 in the sense of changing the amendments. That's not a 23 matter of due process in a judicial or semi-judicial 24 method. 25 It's basically, we're talking about two

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1 different methods of changing a particular process. 2 They were aware of it when they bought their property. 3 They should have been aware of it. They are plain to 4 see to read both those two provisions. And the first 5 conclusion any reasonable personal would come to is both 6 those apply. One way -- I can do it this way, or I can 7 do it that way. 8 THE COURT: All right. Thank you. 9 All right. I always hate it when judges 10 kind of went off on a tangent when I was practicing law, 11 so I'm going to do that anyway. 12 I want to ask both attorneys this: Let's 13 say, hypothetically, provision comes up. Petition or a 14 request of the architectural control authority -- I know 15 you guys aren't saying ACA because you don't want to be 16 called the Affordable Care Act -- but anyway, the 17 architectural control committee looks at something, has 18 a proposal, has something but then it has to go through 19 two-thirds to be approved. That's about right. 20 But before they do that, they've got to 21 give a 30-day notice to those -- to everyone. Is that 22 about right? 23 Okay. So let's say they do that. And 24 that's approved. What next -- who files the instrument 25 with the property records? Is it signed under the ACA

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1 or is it signed by -- how does that work procedurally? 2 MR. SUTTON: Judge, I believe I can 3 address that. 4 THE COURT: Okay. 5 MR. SUTTON: In this particular set of 6 deed restrictions, we don't have a mandatory HOA in 7 here. But there is this ACC. And the only thing that 8 it says about the ACC in that amendment process is that 9 it makes a recommendation. And that could be 10 recommendation for or against. 11 The recordation would be a list of 12 signatures attached to an amendment. And that signature 13 would be either 51 percent or two-thirds. And they 14 would be on the back of the recorded instrument. 15 THE COURT: All right. So is it your 16 argument, then, that after it's approved -- let's say 17 two-thirds agree and they bless the architectural 18 committee's or whatever, ACA, then those two-thirds have 19 to sign the document to get it filed, or does it revert 20 back to Provision 1-4 -- Section 1-4 where you then have 21 to go ahead and just get one-half of everyone to sign 22 off on it? 23 MR. SUTTON: Our position is that at the 24 stated tenure intervals of the first provision that a 25 relaxed majority requirement is required, and you would

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1 only need 51 percent on that instrument. But outside of 2 those unusual periods, then it's two-thirds and attached 3 -- their signatures attached. 4 THE COURT: Okay. So that's you-all's 5 position. 6 What is your view on that? 7 MR. STERLING: My view is that I really 8 think that when it says recommendation, it means 9 favorable recommendation. Because I think most people 10 when they talk about you're recommending something, it's 11 favorable. If you're not recommending something, it's 12 unfair. 13 THE COURT: Okay. 14 MR. STERLING: So I disagree with him on 15 that. 16 And I think that, practically speaking, 17 that if you had a HOA run a vote on this thing and -- or 18 I should say the architectural control authority, I 19 would think the right thing to do would be to then to 20 file a document that had the amendment on it; cite that 21 it got, you know, 30 days notice; that they had the 22 vote; it was over two-thirds; and they certify to it 23 that the architectural control authority, and only the 24 architectural control authority, have to sign it and 25 record it. A lot simpler.

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1 THE COURT: Do you think that under 2 Section 1, Paragraph 4 that you have to give notice to 3 all of the property owners? 4 MR. STERLING: No, I don't think so. I 5 think the reason why is that the whole process works 6 differently. You're taking your petition in your hand, 7 or whatever you're calling it, and you're going out and 8 essentially lobbying to get a signature lot by lot. And 9 once you reach your majority, you stop. You don't need 10 to go any further. So I don't think there's a question 11 about having any kind of a need for notice. You're 12 having to lobby each single time you do it. 13 THE COURT: Okay. 14 MR. STERLING: That's how you do regular 15 petitions. 16 THE COURT: All right. Thank you. 17 All right. I'm going take a 10-minute 18 break, and I'll be back at 10:45 and let you know. 19 Thank you. 20 MR. SUTTON: Judge, should I give you our 21 proposed order now? 22 THE COURT: Yeah, let me see. 23 Do you have one too? 24 MR. STERLING: I haven't seen it, and our 25 order would be denied.

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1 THE COURT: Okay. That's fine. Thank 2 you. 3 (Court in recess.) 4 THE COURT: By the way, when do you guys 5 want to have this case set for trial? You have to do it 6 in 60 days. 7 MR. SUTTON: 60 days. I was thinking the 8 end of June. Does that fit with the window? 9 MR. STERLING: Yeah, probably can be done. 10 I would think somewhere end of June. 11 MR. SUTTON: I have vacation beginning 12 July 13th. 13 THE COURT: Okay. 14 MR. SUTTON: That third week in June, if 15 that's the square on the calendar. 16 THE COURT: That's a jury week. 17 MR. SUTTON: I have not pled for a jury. 18 MR. STERLING: No, I don't see any point 19 in a jury. 20 MR. SUTTON: We'll do bench. 21 THE COURT: So the third week of June is 22 actually a jury week. 23 MR. SUTTON: Forth week in June, then. 24 THE COURT: June 26th through the 30th. 25 MR. SUTTON: Agree.

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1 MR. STERLING: I'm sorry, what was it? 2 THE COURT: June 26th through the 30th is 3 there -- you guys probably don't have your calendars 4 with you. 5 MR. STERLING: I don't have it with me. 6 COURT'S RULING 7 THE COURT: All right. 8 All right. I thought you-all did a fine 9 job. I always appreciate good lawyering. So let me 10 tell all of you that you did fantastic. The 11 clientsshould be pleased no matter what the judge does. 12 I am concerned in the taking of property 13 rights without due process and without following 14 procedures that are set forth in governing documents for 15 a neighborhood or community. I spent quite a bit of 16 time on this yesterday reading the cases, reading what 17 have been submitted -- or, actually, I looked at yours 18 and then I just saw yours today. But to harmonize the 19 provisions, I think at this point the document -- the 20 deed restrictions, as they're written, provide a 21 process. And I don't think that's been followed. 22 And so, therefore, I'm granting the 23 temporary injunction as proposed by the plaintiff. 24 We're going to maintain the status quo. 25 MR. STERLING: Your Honor --

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1 THE COURT: Hold on. 2 A $10,000 bond that's been previously 3 filed will remain in effect. This will, essentially, 4 require -- will enjoin the defendants from going against 5 what I believe is required, giving 30 days notice, going 6 through the architectural control authority. 7 We're going to set the case for trial 8 during the week of June 26th through the 30th, 2017, on 9 agreement of counsel. 10 So, yes, this is prohibiting any further 11 -- well, it actually kind of speaks for itself as to 12 what can and can't be done. I've signed this. You-all 13 can get it filed. 14 And now, I'm sorry. 15 MR. SUTTON: Judge, Mr. Sterling has 16 raised an issue that I may not have written clearly that 17 the prior bond cash remain in effect. I wonder if you 18 would like to interline them. 19 MR. STERLING: Before you do, Your Honor, 20 I wanted an opportunity to at least say that I think 21 that a separate bond should be placed for this 22 particular temporary injunction. I think it ought to be 23 at least $10,000. 24 THE COURT: You want a separate bond, a 25 different bond? Any particular reason why?

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1 MR. STERLING: I think that the stakes are 2 pretty high in this particular situation. And, 3 effectively, what the Court is doing is going to prevent 4 my client from ever getting this particular amendment in 5 effect for at least 10 years. 6 MR. SUTTON: Judge, I believe he should 7 have elicited testimony as to the dollar issues relating 8 to the bond and that was not done. 9 THE COURT: All right. I'm just going to 10 go ahead and interline this prior cash bond. 11 And if you-all will get together as to a 12 date in that week of June 26th through 30th, I can 13 actually sign a separate order if you-all want that. 14 Okay. 15 MR. SUTTON: Thank you, Judge. 16 THE COURT: All right. Thank you very 17 much. 18 (The proceedings were concluded.)

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1 STATE OF TEXAS ) 2 COUNTY OF TRAVIS ) 3 I, Cathy Mata, Official Court Reporter in and for 4 the County Court at Law No. 1 of Travis County, State of 5 Texas, do hereby certify that the foregoing contains a 6 true and correct transcription of all portions of 7 evidence and other proceedings requested in writing by 8 counsel for the parties to be included in this volume of 9 the Reporter's Record, in the above-styled and numbered 10 cause, all of which occurred in open court or in 11 chambers and were reported by me. 12 I further certify that this Reporter's Record of 13 the proceedings truly and correctly reflects the 14 exhibits, if any, admitted, tendered in an offer of 15 proof or offered into evidence. 16 I further certify that the total cost for the 17 preparation of this Reporter's Record is $651.20 and was 18 paid/will be paid by Mr. James Patrick Sutton. 19 WITNESS MY OFFICIAL HAND this the 3rd day of May, 20 2017. 21

22 /s/ Cathy Mata Cathy Mata, Texas CSR No. 6126 23 Expiration Date: 12/31/17 Official Court Reporter, County Court at Law No. 1 24 Travis County, Texas P.O. Box 1748, Austin, Texas 78767 25 Telephone (512) 854-9252