Martin Kroesche Enterprises, Inc., Coastal Offshore, Inc., Tanning Industries, Inc., F/K/A M-Shea Corporation and Martin Kroesche, Individually v. Gabriele Hilpold, Individually, Padre Island Management Group, Inc., F/K/A Dfi Development, Inc., K-Team USA, Inc., Ocean Park, Inc., Consulting Services, USA, Inc. D/B/A Csusa, Inc.

• Court: Court of Appeals of Texas
• Decided: July 5, 2012
• Docket: 13-11-00404-CV
• Status: Published

Opinion

NUMBER 13-11-00404-CV

COURT OF APPEALS

THIRTEENTH DISTRICT OF TEXAS

CORPUS CHRISTI - EDINBURG

MARTIN KROESCHE ENTERPRISES, INC., COASTAL OFFSHORE, INC., TANNING INDUSTRIES, INC., F/K/A M-SHEA CORPORATION AND MARTIN KROESCHE, INDIVIDUALLY, Appellants,

v.

GABRIELE HILPOLD, INDIVIDUALLY, PADRE ISLAND MANAGEMENT GROUP, INC., F/K/A DFI DEVELOPMENT, INC., K-TEAM USA, INC., OCEAN PARK, INC., CONSULTING SERVICES, USA, INC. D/B/A CSUSA, INC., Appellees.

On appeal from the 28th District Court of Nueces County, Texas.

MEMORANDUM OPINION

Before Chief Justice Valdez and Justices Garza and Vela Memorandum Opinion by Chief Justice Valdez Appellants, Martin Kroesche Enterprises, Inc., Coastal Offshore, Inc., Tanning

Industries, Inc., f/k/a M-Shea Corporation and Martin Kroesche, individually (collectively “Kroesche”), appeal from the trial court’s order modifying a temporary injunction. By two

issues, Kroesche contends that the temporary injunction is void because it does not set

a trial date or bond, and Hilpold has not shown irreparable harm. Appellees, Gabriele

Hilpold, individually, Padre Island Management Group, Inc., f/k/a DFI Development, Inc.,

K-Team USA, Inc., Ocean Park, Inc., and Consulting Services, USA, Inc. d/b/a CSUSA,

Inc. (collectively “Hilpold”), argue that the trial court’s order is not a temporary injunction.

We reverse the order of the trial court, dissolve the temporary injunction, and remand

for proceedings consistent with this opinion.

I. BACKGROUND

After severing their personal relationship in the fall of 2009, Hilpold filed suit

against Kroesche and his entities on December 28, 2009, alleging conversion, fraud,

deceptive trade practices, breach of contract, negligent misrepresentation, tortious

interference with business relations, trespass, breach of fiduciary duty, unjust

enrichment, and intentional infliction of emotional distress. Hilpold sought monetary

damages, a temporary restraining order, and temporary injunction.

The trial court granted a temporary injunction on December 17, 2010 pursuant to

an agreement of the parties. Terms of the injunction included the following: (1) Hilpold

agreed to transfer possession of a 2005 Ford Excursion to Kroesche; (2) Kroesche

agreed to transfer the title of a 2001 Porsche in Hilpold’s possession to Hilpold; (3)

neither party would come within 100 feet of each other or their residences; (4) Hilpold

agreed to return an engagement ring to Kroesche after depositing it at Casa de Oro, a

jeweler, for verification; (5) with regard to personal items in Hilpold’s home, Hilpold

would keep the washer and dryer, dog and cat, a laptop computer, kitchen table, patio

2 table, and television in the master bedroom, while Kroesche would take possession of

the refrigerator in the garage, a living room television, and furniture in the guest

bedroom; (6) the parties agreed not to interfere with the other’s businesses; (7) within

twenty days, Kroesche would notify Hilpold of the names of his lessees at Casa Europa

II, a residential property owned by Hilpold1; (8) within twenty days, Kroesche would

provide Hilpold with proof of insurance coverage on Casa Europa II; (9) with regard to

the property owned by Hilpold in Corpus Christi, Texas, beginning January 1, 2010,

Kroesche would lease the property for $500 per month; (10) the monthly payment of

$3,000 for the American Bank loan would continue to be paid as it was to date; (11) the

parties agreed to continue to make monthly payments totaling seven thousand two

hundred dollars ($7,200) on the IBC line of credit2; (12) neither party would access the

$1.5 million IBC line of credit during the pendency of the litigation; and (13) the parties

would proceed without bond.

On May 6, 2011, Hilpold filed a motion to modify the temporary injunction

claiming “a significant change in circumstance since January 13, 2010.” Hilpold alleged

conditions had changed because Kroesche created confusion regarding what he had

paid towards the $7,200 note payment, as well as regarding the rent paid to Padre

Island Management Group, Inc. (“PIMG”) from Executive Fitness, a gym that Kroesche

has partial interest in, by depositing the money into the IBC line of credit account

instead of paying PIMG directly.3 As a result, Hilpold claims she paid IBC $30,400

1 Kroesche’s employees and a few ex-employees live at Casa Europa II and pay rent to Kroesche. 2 Each party was ordered to pay $3,600 on the IBC line of credit. 3 Executive Fitness pays $4,750 for a lease on one of Hilpold’s properties; however, Hilpold alleges that Kroesche is taking that rent and applying it to the IBC loan.

3 because of Kroesche’s failure to make payments pursuant to the injunction, and to

avoid foreclosure on her property. She also maintained that late fees have accrued on

the IBC loan as a result of Kroesche’s failure to pay. Hilpold claimed conditions had

further changed because Hilpold lent Kroesche $250,000 as a certificate of deposit to

support one of his entities, and Kroesche has not released Hilpold’s $250,000

certificate. Hilpold has been put on notice by American Bank that Kroesche’s payments

are not current.

Hilpold further claimed that she was afraid that Kroesche would sell the mowing

service equipment she bought for Kroesche’s mowing company, and she did not have

sufficient funds to replace them. Hilpold asserted that Kroesche’s failure to mow and

service Hilpold’s lots has led to violations of Corpus Christi city ordinances.

Hilpold also claimed that Kroesche disobeyed the injunction by selling the 2005

Ford Excursion and engagement ring that were supposed to be “held in trust.” Hilpold

stated she is unable to afford the holding cost of the San Antonio property without

Kroesche paying rent.4 She also states that living conditions at the Casa Europa II are

questionable, and she believes that the building is not up to code standards for the City

of Corpus Christi. She asked the trial court to order the new owner of “Electric Tan,”

which was previously owned by Kroesche, to pay rent according to the terms of the

contract.5 Lastly, she alleged that Kroesche is trespassing on a lot adjacent to hers.6

4 The record does not disclose what type of holding costs Hilpold refers to, only that Hilpold has received notices from the City of San Antonio that the property was in violation of the City’s health and safety codes because it was determined to be a “public nuisance,“ as defined by the city ordinance. 5 Terms of the contract were that Kroesche pay $1,800 per month to PIMG. 6 Kroesche owns a boat dealership, Coastal Offshore, Inc., adjacent to Hilpold’s property in Corpus Christi.

4 On May 17, 2011, Kroesche filed a response to the motion to modify the

temporary injunction, claiming that, among other things, Hilpold failed to show

irreparable injury or changed circumstances. Kroesche alleged that Hilpold was

attempting to change the agreed order to cover items not previously addressed.

The trial court held an evidentiary hearing on the motion to modify on May 18,

2011. Thereafter, the trial court signed an “Order on Modification of Temporary

Injunction” on May 24, 2011, modifying some terms, including the return of the mowing

equipment which previously Kroesche was allowed to keep, $2,000 per month rent on

the San Antonio lot which Kroesche did not previously pay, and the release of the

$250,000 certificate of deposit.

Kroesche filed his notice of appeal on June 28, 2011, claiming that the modified

order is void because it does not require Hilpold to post a security bond and does not

set a trial date. Trial in this case was set for March 26, 2012.7

II. DISCUSSION

A. Standard of Review

The granting or denial of a temporary injunction (including the modification of a

temporary injunction) is reviewed for an abuse of discretion. Butnaru v. Ford Motor Co.,

84 S.W.3d 198, 204 (Tex. 2002). A trial court abuses its discretion when it misapplies

the law to established facts or when the evidence does not reasonably support the trial

court’s determinations in support of the temporary injunction. See Tom James of

Dallas, Inc. v. Cobb, 109 S.W.3d 877, 883 (Tex. App—Dallas 2003, no pet.); see also

7 The parties have not filed anything with the Court that indicates that the trial has commenced; we will therefore proceed with our analysis.

5 CMNC Healthcare Prop., LLC v. Medistar Corp., No. 01-06-00182-CV, 2006 WL

3628922, at *4–6 (Tex. App—Houston [1st Dist.] Dec. 14, 2006, no pet.) (mem. op.).

B. Applicable Law

The purpose of a temporary injunction is to preserve the status quo of the subject

matter of the litigation, pending a trial on the merits. Butnaru, 84 S.W.3d at 204. A

temporary injunction is an extraordinary remedy and does not issue as a matter of right.

Id. To obtain a temporary injunction, an applicant must plead and prove: (1) a cause of

action against a defendant; (2) a probable right to the relief sought; and (3) a probable,

imminent, and irreparable injury in the interim. Id. An irreparable injury is shown if there

is no adequate remedy at law, i.e., (1) if the applicant cannot be adequately

compensated in damages or (2) damages cannot be measured by any certain

pecuniary standard. Id.

A party can move to dissolve or modify a temporary injunction on grounds of

changed circumstances. Universal Health Servs. v. Thompson, 24 S.W.3d 570, 580

(Tex. App.—Austin 2000, no pet.). A “change in circumstances” refers to a change in

conditions occurring since the granting of the temporary injunction. Murphy v.

McDaniel, 20 S.W.3d 873, 878 (Tex. App.—Dallas 2000, no pet.). Changed

circumstances may include an agreement of the parties, newly revealed facts, or a

change in the law that makes the temporary injunction unnecessary or improper. Id.

When a trial court modifies a temporary injunction, the second order is a complete

injunction in and of itself, thus superseding the original. Ahmed v. Shimi Ventures, L.P.,

99 S.W.3d 682, 687–88 (Tex. App.—Houston [1st Dist.] 2003, no pet.) (holding that the

6 second temporary injunction order entitled “order modifying temporary injunction,” not

“amended order,” implicitly vacated first order).

Every order granting a temporary injunction shall include an order setting the

cause for trial on the merits with respect to the ultimate relief sought. T EX. R. CIV. P.

683. In the order granting any temporary restraining order or temporary injunction, the

court shall fix the amount of security to be given by the applicant:

Before the issuance of the temporary restraining order or temporary injunction, the applicant shall execute and file with the clerk a bond to the adverse party, with two or more good and sufficient sureties, to be approved by the clerk, in the sum fixed by the judge, conditioned that the applicant will abide by the decision which may be made in the cause, and that he will pay all sums of money and costs that may be adjudged against him if the restraining order or temporary injunction shall be dissolved in whole or in part.

TEX. R. CIV. P. 684.

Procedural requirements imposed by the Texas Rules of Civil Procedure, which

require that an order granting a temporary injunction set the cause for trial on the merits

and fix the amount of security to be given by the applicant, are mandatory, and an order

granting a temporary injunction that does not meet them is subject to being declared

void and dissolved. Qwest Comm. Corp. v. AT&T Corp., 24 S.W.3d 334, 337 (Tex.

2000). The reason for requiring an injunction order to include a trial date is to prevent

the temporary injunction from effectively becoming a permanent injunction without a

trial. EOG Res., Inc. v. Gutierrez, 75 S.W.3d 50, 52 (Tex. App.—San Antonio 2002, no

pet.). If a temporary injunction does not set a matter for trial on the merits, it violates

Texas Rule of Civil Procedure 683, and is therefore void and will be dissolved. See

Qwest Comm. Corp., 24 S.W.3d at 337; see also City of McAllen v. McAllen Police

7 Officers’ Union, No. 13-10-00609-CV, 2011 WL 2175606, at *3 (Tex. App.—Corpus

Christi March 17, 2011, no pet.) (mem. op.).

C. Analysis

It is uncontested that the complained-of order did not set a trial date or bond.

Kroesche argues it is therefore void. Hilpold argues that the order was not an

injunction, but was a sanction that did not require inclusion of a trial date and bond. We

disagree.

Hilpold never filed a motion for sanctions, as asserted on appeal. Instead, the

complained-of order was entered on Hilpold’s motion to modify the temporary injunction

due to changed circumstances, not a motion for sanctions. At the hearing on the

motion, Hilpold presented reasons for “modification of the injunction as stated in the

motion.” Although Hilpold used the word “sanctions” once in the motion, the substance

of the motion deals with a request to modify the original temporary injunction. For

example, in the motion to modify, Hilpold cited case law regarding the modification of an

injunction, claimed circumstances had changed as previously discussed, and requested

that the status quo be preserved until trial.

On appeal, Hilpold also argues that the trial court used its inherent powers to

grant the complained-of order as a sanction. However, to issue a sanction, the trial

court must engage in a two-step process: first, the trial court must rely upon the rules

and statutes expressly authorizing sanctions whenever possible; and second, the trial

court must make factual findings, based on evidence, that the conduct complained of

significantly interfered with the court’s legitimate exercise of its core functions. Union

Carbide Corp. v. Martin, 349 S.W.3d 137, 147 (Tex. App.—Dallas 2011, no pet.); see

8 also Cullum v. White, No. 04-09-00695, 2011 Tex. App. LEXIS 9733, at *34 (Tex.

App.—San Antonio Dec. 14, 2011, pet. denied). In this case, the trial court did not do

so.

Finally, at the May 18, 2011 hearing on Hilpold’s motion to modify the injunction,

the trial court stated that it did not believe it could enter sanctions based on the motion

to modify the injunction. Although Hilpold argues on appeal, as she did before the trial

court, that Kroesche committed sanctionable conduct, the trial court clearly denied any

request for sanctions and granted relief solely through modification of the temporary

injunction.

As noted above, the order modifying the injunction did not set a trial date or

require the posting of a bond. It therefore failed to comply with Texas Rules of Civil

Procedure 683 and 684 and is void. See TEX. R. CIV. P. 683, 684. We sustain

Kroesche’s first issue.8

III. CONCLUSION

We reverse the order of the trial court, dissolve the temporary injunction, and

remand for proceedings consistent with this opinion.

_________________ ROGELIO VALDEZ Chief Justice

Delivered and filed the 5th day of July, 2012.

8 Due to our disposition of issue number one, we need not address Kroesche’s other issue concerning irreparable harm. TEX. R. APP. P. 47.1.