John S. Buttles, Jr. v. Infinite Financial Corporation and Ted L. Ferrier, III

• Court: Court of Appeals of Texas
• Decided: July 30, 2024
• Docket: 05-23-01138-CV
• Status: Published

Opinion

REVERSE and AFFIRM in part; REMAND and Opinion Filed July 30, 2024

S In The Court of Appeals Fifth District of Texas at Dallas No. 05-23-01138-CV

JOHN S. BUTTLES, JR., Appellant V. INFINITE FINANCIAL CORPORATION AND TED L. FERRIER, III, Appellees

On Appeal from the 471st Judicial District Court Collin County, Texas Trial Court Cause No. 471-00809-2023

MEMORANDUM OPINION Before Justices Molberg, Nowell, and Kennedy Opinion by Justice Nowell John S. Buttles, Jr. appeals the trial court’s denial of his motion to dismiss the

counterclaims filed against him by Infinite Financial Corporation and Ted L. Ferrier,

III. In a single issue, Buttles argues the trial court erred by denying his motion to

dismiss asserted pursuant to the Texas Citizens Participation Act. We affirm the trial

court’s order in part, reverse the order in part, and remand the cause for further

proceedings. FACTUAL BACKGROUND

Ferrier is a licensed mortgage originator who was an agent with Infinite

Financial, a licensed mortgage company. Buttles worked with appellees to attempt

to refinance the mortgage on a property he owned. Buttles claims appellees failed to

timely secure a new loan before interest rates rose above the rate of Buttles’s existing

loan.

Buttles filed a complaint about Ferrier with the Texas Department of Savings

and Mortgage Lending (SML) and then sued appellees for violations of the Texas

Finance Code. Appellees counterclaimed for fraud, tortious interference with current

or prospective business relations, business disparagement, negligent

misrepresentation, and breach of contract. In response, Buttles filed a TCPA motion

to dismiss several counterclaims. Buttles attached documents to his motion,

including appellees’ disclosures in which they stated:

Plaintiff represented to Defendants that he did not have a judgment against him when he applied for the loan. With the judgment[,] he could not have even been approved for the loan he was seeking. In addition, he misrepresented the facts of the transaction to [the SML]. Specifically, he failed to disclose to the SML that he had a judgment against him and would not have qualified for the loan he was seeking from Defendants. He further failed to disclose that he lied on a form submitted to the lender stating that he had no judgments. In addition, upon information and belief, he misrepresented to the SML facts to disparage Defendants and to attempt to seek leverage in this lawsuit that he knew he would be filing.

After Buttles filed his TCPA motion to dismiss, appellees amended their

counterclaims to assert claims for fraud, negligent misrepresentation, breach of

–2– contract, and declaratory judgment. Appellees also responded to Buttles’s TCPA

motion and attached documents showing Buttles had an outstanding judgment

against him at the time he applied for the loan but represented there were no

outstanding judgments against him.

Following a hearing, the trial court denied Buttles’s TCPA motion to dismiss.

This interlocutory appeal followed.1

LEGAL STANDARD

The TCPA is designed to protect a defendant’s rights of speech, petition, and

association and a claimant’s right to pursue valid legal claims for injuries the

defendant caused. See TEX. CIV. PRAC. & REM. CODE § 27.002. To accomplish this

objective, the Act provides a three-step process for the dismissal of a “legal action”

to which it applies. Montelongo v. Abrea, 622 S.W.3d 290, 295-96 (Tex. 2021). First,

the moving party must show by a preponderance of the evidence that the TCPA

applies to the legal action against him. McLane Champions, LLC v. Houston

Baseball Partners LLC, 671 S.W.3d 907, 914 (Tex. 2023) (citing TEX. CIV. PRAC.

1 Appellees amended their counterclaims after Buttles filed his TCPA motion to dismiss and before the trial court issued its order denying the motion. The TCPA does not state whether the trial court should consider the pleadings at the time the motion to dismiss is filed or as subsequently amended. The Fourteenth District Court of Appeals has determined the court must consider the claims as pleaded at the time the TCPA motion is filed. See Hart v. Manriquez Holdings, LLC, 661 S.W.3d 432, 438 (Tex. App.—Houston [14th Dist.] 2023, no pet.); Saks & Co., LLC v. Li, 653 S.W.3d 306, 314 (Tex. App.—Houston [14th Dist.] 2022, no pet.). In his appellate brief, Buttles argues the trial court erred by denying his motion to dismiss appellees’ counterclaims for tortious interference with current or prospective business relations, business disparagement, negligent misrepresentation, and breach of contract; Buttles informed the trial court he did not move to dismiss the counterclaim for fraud or the declaratory judgment action. Out of an abundance of caution, we will consider appellees’ pleading at the time appellant filed his motion to dismiss, including considering claims that appellees are no longer pursuing. –3– & REM. CODE §§ 27.003, .005(b)). As is relevant here, Buttles asserts the Act applies

to appellees’ counterclaims because the counterclaims are based on or in response

his exercising his right to petition the SML. See TEX. CIV. PRAC. & REM. CODE

§ 27.005(b)(1)(C) (a party filing a TCPA motion to dismiss must demonstrate the

legal action is based on or in response to his exercise of his right to petition).

The TCPA defines the exercise of the right to petition to mean a

communication in or pertaining to an executive or other proceeding before a

department of the state or federal government or a subdivision of the state or federal

government. See id. § 27.001(4)(A)(iii). The SML is a governmental body of the

state that is overseen by the finance commission. See generally TEX. FIN. CODE

§§ 11.01–11.309, 13.001–13.018. A communication is defined as including “the

making or submitting of a statement or document in any form or medium, including

oral, visual, written, audiovisual, or electronic.” TEX. CIV. PRAC. & REM. CODE

§ 27.001(1). No party argues that Buttles did not exercise his right to petition when

he filed his complaint with the SML.

If the defendant meets his initial burden, then the claimant may avoid

dismissal by establishing “by clear and specific evidence a prima facie case for each

essential element of the claim in question.” McLane Champions, LLC, 671 S.W.3d

at 914 (citing TEX. CIV. PRAC. & REM. CODE § 27.005(c)). “If the nonmoving party

cannot satisfy that burden, the trial court must dismiss the suit.” Id. (citing TEX. CIV.

PRAC. & REM. CODE § 27.005(c)). However, if the nonmoving party meets this

–4– burden, then the court still must dismiss the legal action if the defendant “establishes

an affirmative defense or other grounds on which the moving party is entitled to

judgment as a matter of law.” TEX. CIV. PRAC. & REM. CODE § 27.005(d); Abrea,

622 S.W.3d at 296.

When deciding whether a legal action should be dismissed, the trial court

considers the pleadings and “evidence a court could consider under Rule 166a, Texas

Rules of Civil Procedure, and supporting and opposing affidavits stating the facts on

which the liability or defense is based.” TEX. CIV. PRAC. & REM. CODE § 27.006(a).

ANALYSIS

Buttles argues the trial court erred by denying his motion to dismiss because

appellees’ counterclaims are based on or in response to his complaints submitted to

the SML. Appellees respond that their counterclaims are not based on Buttles’s

communications to the SML but instead are based on his failure to disclose

information to the SML and his alleged misrepresentation to them about the

outstanding judgment.

A. Business Disparagement Claim

In a withdrawn counterclaim, appellees alleged Buttles “published

disparaging words about [their] economic interests to the SML and misstated and/or

omitted relevant facts to the SML in order to disparage [them] and their business.”

–5– They alleged Buttles’s statements and omissions were false and misleading and

made with malice, Buttles’s conduct was wrongful, and they suffered harm.2

“To prevail on a business disparagement claim, a plaintiff must establish that

(1) the defendant published false and disparaging information about it, (2) with

malice, (3) without privilege, (4) that resulted in special damages to the plaintiff.”

Mem’l Hermann Health Sys. v. Gomez, 649 S.W.3d 415, 423 n.13 (Tex. 2022).

Appellees’ pleading, which alleges Buttles published disparaging words and

made other misstatements to the SML, is sufficient to meet Buttles’s initial burden

to show by a preponderance of the evidence that the legal action is based on or in

response to the exercise of his right to petition. See TEX. CIV. PRAC. & REM. CODE

§ 27.005(b)(1)(C). Because Buttles met his initial burden, the burden shifted to

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

essential element of the claim in question.” See id. § 27.005(c). Although damages

are an element of appellees’ business disparagement claim, see Gomez, 649 S.W.3d

at 423 n.13, appellees provided no evidence of damages.

In their appellate brief, appellees set forth the elements of the cause of action

and then state Ferrier “produced sufficient evidence of these elements based on his

pleadings, his declaration testimony specifying Buttles’s misrepresentations, his

2 In their response to Buttles’s TCPA motion to dismiss and on appeal, appellees argue their business disparagement claim does not implicate the TCPA because the counterclaim is based on Buttles withholding information rather than in response to Buttles’s communications. Appellees’ pleadings specifically allege Buttles “published disparaging words” and “misstated” relevant facts to the SML. The face of appellees’ pleadings contradict their arguments. –6– disclosures, and his interrogatory answers regarding Buttles’s fraud and his damages

(which were submitted in evidence by Buttles)” and then provide record citations.

Having reviewed the entire record, including appellees’ record citations, the only

evidence that could show appellees suffered damages is Ferrier’s interrogatory

response in which he states he now has a negative review with the SML, “which will

affect his ability to get new business.” However, Ferrier’s interrogatory response is

conclusory and does not satisfy the TCPA’s requirement of clear and specific

evidence. See Welch v. See, No. 03-22-00037-CV, 2023 WL 6322649, at *8 (Tex.

App.—Austin Sept. 29, 2023, no pet.) (mem. op.). To satisfy the TCPA standard,

the damages “evidence must be sufficient to allow a rational inference that some

damages naturally flowed from the defendant’s conduct.” USA Lending Grp., Inc. v.

Winstead PC, 669 S.W.3d 195, 202 (Tex. 2023). A general averment of loss fails to

satisfy the TCPA’s minimum requirements. In re Lipsky, 460 S.W.3d 579, 592-93

(Tex. 2015) (orig. proceeding). Ferrier’s interrogatory response is, at best, a general

averment of loss. His response is devoid of any specific facts illustrating how

Buttles’s alleged misrepresentations to the SML caused any specific, demonstrable

loss. See Welch, 2023 WL 6322649, at *8; see also Melton v. Hah, No. 09-22-00418-

CV, 2023 WL 5122497, at *9 (Tex. App.—Beaumont Aug. 10, 2023, no pet.) (mem.

op.); Undine Tex. LLC v. Ware, No. 14-19-00777-CV, 2021 WL 5576056, at *5

(Tex. App.—Houston [14th Dist.] Nov. 30, 2021, pet. denied) (mem. op.). Further,

this interrogatory response does not show that Infinite Financial suffered damages,

–7– and Infinite Financial points to no other evidence in the record showing it was

damaged.

Because appellees did not provide any evidence of damages, we conclude

appellees failed to meet their burden to establish all of the requisite elements of their

withdrawn business disparagement counterclaim by clear and specific evidence.

Accordingly, the trial court erred by denying Buttles’s motion to dismiss appellees’

business disparagement counterclaim.

B. Tortious Interference

Ferrier and Infinite Financial also withdrew their tortious interference

counterclaim wherein they alleged they have relationships that “comprised current

and future economic benefit in the form of profitable contracts and transactions,”

Buttles was aware of and intended to disrupt those relationships, Buttles’s conduct

was wrongful and taken without justification or excuse, and appellees suffered

damages.

To prevail on a claim for tortious interference with an existing contract, a

plaintiff must establish “(1) an existing contract subject to interference, (2) a willful

and intentional act of interference with the contract, (3) that proximately caused the

plaintiff’s injury, and (4) caused actual damages or loss.” Zidan v. Zidan, No. 05-

20-00786-CV, 2022 WL 17335693, at *7 (Tex. App.—Dallas Nov. 30, 2022, pet.

denied) (mem. op.) (quoting Prudential Ins. Co. of Am. v. Fin. Review Servs., Inc.,

29 S.W.3d 74, 77 (Tex. 2000)). To prevail on a claim for tortious interference with

–8– prospective business relations, a plaintiff must establish “(1) there was a reasonable

probability that the plaintiff would have entered into a business relationship with a

third party; (2) the defendant either acted with a conscious desire to prevent the

relationship from occurring or knew the interference was certain or substantially

certain to occur as a result of the conduct; (3) the defendant’s conduct was

independently tortious or unlawful; (4) the interference proximately caused the

plaintiff injury; and (5) the plaintiff suffered actual damage or loss as a result.” Id.

(quoting Coinmach Corp. v. Aspenwood Apartment Corp., 417 S.W.3d 909, 923

(Tex. 2013) (citations omitted)).

Appellees argue their tortious interference counterclaim did not implicate the

TCPA because it was based on Buttles withholding of information and did not make

allegations about Buttles’s complaints to the SML. We disagree.

Appellees’ disclosures, which Buttles attached to his motion and describe the

legal theories and factual bases of appellees’ counterclaims, state that Buttles

“misrepresented the facts of the transaction to” the SML and “misrepresented to the

SML facts to disparage Defendants and to attempt to seek leverage in this lawsuit

that he knew he would be filing.” Appellees’ disclosures are consistent with the facts

alleged in their pleading in which they assert their counterclaims. Based on

appellees’ discovery responses and pleading, we conclude Buttles met his initial

burden to show the TCPA applies to their tortious interference counterclaim.

–9– Similar to appellees’ withdrawn business disparagement counterclaim, their

tortious interference counterclaim requires proof of damages. However, as discussed

above, appellees provided no evidence of damages that would satisfy the TCPA’s

requirement for clear and specific evidence. Additionally, the record contains no

evidence that there was a reasonable probability that appellees would have entered

into a business relationship with a third party; Buttles acted with a conscious desire

to prevent the relationship from occurring or knew the interference was certain or

substantially certain to occur as a result of the conduct; Buttles’s conduct was

independently tortious or unlawful; or any interference proximately caused

appellees’ injury. Appellees failed to meet their burden to establish all of the

requisite elements of their withdrawn tortious interference counterclaim by clear and

specific evidence. Accordingly, we conclude the trial court erred by denying

Buttles’s motion to dismiss appellees’ counterclaim for tortious interference with

current or prospective business relations.

C. Breach of Contract

Appellees alleged they entered into valid and enforceable contracts with

Buttles, and Buttles breached the contracts. A breach of contract action requires

proof of four elements: (1) formation of a valid contract, (2) performance by the

plaintiff, (3) breach by the defendant, and (4) damages to the plaintiff resulting from

the breach. S&S Emergency Training Sols., Inc. v. Elliott, 564 S.W.3d 846, 847 (Tex.

2018). Generally, “the benefits and burdens of a contract belong solely to the

–10– contracting parties, and ‘no person can sue upon a contract except he be a party to

or in privity with it.’” 3 First Bank v. Brumitt, 519 S.W.3d 95, 102 (Tex. 2017)

(citation omitted). Appellees argue their breach of contract counterclaim legally

could not have been based on Buttles’s communications to the SML, and,

accordingly, Buttles could not show this counterclaim is based on or in response to

his communications with the SML. We agree.

Applying the general rule, appellees could only pursue a claim for breach of

contract as parties to the contract that forms the basis of their claim. See id. Thus,

the contract that forms the basis of their claim must be the contract they allege exists

with Buttles. No party alleges a contract exists between Buttles and the SML, and,

even if such a contract existed, appellees would have no cause of action for breach

of that contract. See id. Accordingly, based on appellees’ pleading, we conclude

Buttles failed to meet his initial burden to show by a preponderance of the evidence

that appellees’ breach of contract counterclaim is based on or is in response to his

exercise of his right to petition the SML. See McLane Champions, LLC, 671 S.W.3d

at 914; see also TEX. CIV. PRAC. & REM. CODE §§ 27.005(b)(1)(C).

We conclude the trial court did not err by denying Buttles’s motion to dismiss

appellees’ counterclaim for breach of contract.

3 An exception to this rule permits a person who is not a party to the contract to sue for damages caused by its breach if the person qualifies as a third-party beneficiary. See Brummitt, 519 S.W.3d at 102. No allegations of third-party beneficiaries or privity are made, and we assume those concepts are not at issue in this appeal. –11– D. Negligent Misrepresentation

Appellees argue their negligent misrepresentation counterclaim legally could

not have been based on Buttles’s communications to the SML. Appellees allege

Buttles employed a course of conduct and made negligent misrepresentations to

them, Buttles knew the misrepresentations and concealment of facts were false, and

he did so with the intent of gaining his own financial advantage. The elements of a

negligent misrepresentation cause of action are: (1) the representation is made by a

defendant in the course of his business, or in a transaction in which he has a

pecuniary interest; (2) the defendant supplies “false information” for the guidance

of others in their business; (3) the defendant did not exercise reasonable care or

competence in obtaining or communicating the information; and (4) the plaintiff

suffers pecuniary loss by justifiably relying on the representation. Fagin v. Inwood

Nat’l Bank, No. 05-21-00878-CV, 2023 WL 6547936, at *5 (Tex. App.—Dallas Oct.

9, 2023, pet. filed) (mem. op.) (citing AKB Hendrick, LP v. Musgrave Enters., Inc.,

380 S.W.3d 221, 237 (Tex. App.—Dallas 2012, no pet.)).

Appellees’ negligent misrepresentation counterclaim is based on Buttles’s

alleged misrepresentations to them about an outstanding judgment and concealment

of those facts from them rather than on Buttles’s communications with the SML.

Accordingly, we conclude Buttles failed to meet his initial burden to show by a

preponderance of the evidence that appellees’ negligent misrepresentation

counterclaim is based on or in response to the exercise of his right to petition the

–12– SML. See McLane Champions, LLC, 671 S.W.3d at 914; see also TEX. CIV. PRAC.

& REM. CODE §§ 27.005(b)(1)(C).

We conclude the trial court did not err by denying Buttles’s motion to dismiss

appellees’ counterclaim for negligent misrepresentation.

CONCLUSION

We reverse the trial court’s November 2, 2023 Order Denying Plaintiff’s

Motion to Dismiss Defendants’ Counterclaims Pursuant to the TCPA in part and we

affirm in part. The trial court’s order is reversed as to appellees’ claims for business

disparagement and tortious interference with current or prospective business

relations. The trial court’s order is affirmed as to appellees’ claims for negligent

misrepresentation and breach of contract.

We remand the case for further proceedings. On remand, the trial court is

ordered to dismiss with prejudice appellees’ claims for business disparagement and

tortious interference with current or prospective business relations.

/Erin A. Nowell/ ERIN A. NOWELL JUSTICE 231138F.P05

–13– S Court of Appeals Fifth District of Texas at Dallas JUDGMENT

JOHN S. BUTTLES, JR., Appellant On Appeal from the 471st Judicial District Court, Collin County, Texas No. 05-23-01138-CV V. Trial Court Cause No. 471-00809- 2023. INFINITE FINANCIAL Opinion delivered by Justice Nowell. CORPORATION AND TED L. Justices Molberg and Kennedy FERRIER, III, Appellees participating.

In accordance with this Court’s opinion of this date, the trial court’s November 2, 2023 Order Denying Plaintiff’s Motion to Dismiss Defendants’ Counterclaims Pursuant to the TCPA is REVERSED in part and AFFIRMED in part.

The trial court’s order is REVERSED as to the claims for business disparagement and tortious interference with current or prospective business relations asserted by appellees Infinite Financial Corporation and Ted L. Ferrier, III. The trial court’s order is AFFIRMED as to appellees’ claims for negligent misrepresentation and breach of contract.

The case is REMANDED for further proceedings. On remand, the trial court is ORDERED to dismiss with prejudice appellees’ claims for business disparagement and tortious interference with current or prospective business relations.

It is ORDERED that each party bear its own costs of this appeal.

Judgment entered this 30th day of July 2024. –14–