Jay Williamson v. William H. Armstrong, II, Trustee of the M. D. Bryant Family Trust, Don Dorsey and James F. Ridge

CV4-311 TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN NO. 03-94-00311-CV Jay Williamson, Appellant v. William H. Armstrong, II, Trustee of the M. D. Bryant Family Trust, Don Dorsey and James F. Ridge, Appellees FROM THE DISTRICT COURT OF TOM GREEN COUNTY, 51ST JUDICIAL DISTRICT NO. CV88-0674-A, HONORABLE DICK ALCALA, JUDGE PRESIDING PER CURIAM Jay Williamson appeals from the order of the district court that, in a post-judgment proceeding, awarded payment to appellees from a guarantee fund, the Real Estate Recovery Fund (the "Fund"). (1) Appellant brings two points of error, contending that the trial court erred in ordering payment from the Fund because no evidence supports the required fact findings; and, even if an award were justified, the court erred in the amount awarded. We will affirm the trial-court judgment. Background This controversy arises out of a partnership formed in February 1987 to invest in Travis County real estate. Jay Williamson and Ben Lacy were general partners. Appellees, William H. Armstrong, II, as trustee of the M.D. Bryant Family Trust, Don Dorsey and James Ridge, were limited partners. Williamson and Lacy made no cash contribution to the partnership; each was to have a twenty percent interest in the partnership as compensation for his efforts. The partnership purchased several properties from October 1986 to March 1987. At some point, the limited partners received documents that convinced them that Williamson and Lacy had improperly collected commissions from the financial institutions selling the properties and improperly collected a management fee. Eventually, appellees sued Williamson and Lacy. The court rendered judgment in favor of the limited partners, awarding rescission of the partnership agreement and monetary damages, for which Williamson and Lacy were jointly and severally liable. Williamson and Lacy each filed for bankruptcy. The bankruptcy court found the debt non-dischargeable; nevertheless, appellees were unsuccessful in collecting on their judgment from either Williamson or Lacy. Appellees then initiated post-judgment proceedings under the provisions of the Real Estate License Act that allow recovery from a special fund established to compensate holders of uncollectible judgments. The Real Estate Recovery Fund The Real Estate License Act (the "Act") established the Real Estate Recovery Fund, which the Real Estate Commission (the "Commission") administers. Tex. Rev. Civ. Stat. Ann. art. 6573a (West Supp. 1995). Under the Act, a person who has an uncollectible judgment against a licensed real estate broker (2) may, after notice to the Commission and the judgment debtor, apply to the trial court that rendered the underlying judgment for an order directing payment out of the Fund. Act, § 8(e); Texas Real Estate Comm'n v. Nagle, 767 S.W.2d 691, 693 (Tex. 1989); Josey v. Texas Real Estate Comm'n, 801 S.W.2d 200, 201 (Tex. App.--Houston [1st Dist.] 1990, no writ). The trial court must hold a hearing on the application for recovery from the Fund. Act, § 8(f); Nagle, 767 S.W.2d at 693. The Commission may attend the hearing to protect the Fund from spurious or unjust claims and to ensure compliance with the requirements for recovery. Nagle, 767 S.W.2d 695. Further, the licensee against whom the judgment was had may participate in the hearing on the application for recovery from the Fund. Gamble v. Norton, 893 S.W.2d 129, 132 (Tex. App.--Houston [1st Dist.] 1995, no writ). At the hearing, the applicant must show: (1) the judgment is based on facts allowing recovery under the Act, that is, the underlying judgment is against a licensee who caused the applicant's damages while acting as a broker or agent by an act that violated Section 15(a)(3) or (6) of the Act; (2) the applicant is not the judgment debtor's spouse, spouse's personal representative, or a real estate broker or agent seeking to recover a commission; (3) the applicant has obtained a judgment that is not subject to a stay or discharge in bankruptcy; (4) based on the best available information, the judgment debtor lacks sufficient attachable assets to satisfy the judgment; and (5) the amount that may be realized from the sale of any assets liable to be sold and applied in satisfaction of the judgment and the balance remaining due after application of the amount that may be realized. Act, § 8(f)(1-5). Preliminary Matters Second of Two Hearings This appeal arises from the second of two post-judgment proceedings based on the underlying judgment against Williamson and Lacy. Recovery from the Fund appears to proceed, or be authorized to proceed, on a licensee-by-licensee basis. Appellees first sought to recover from the Fund based on Lacy's misconduct as a licensee. They recovered $50,000 from the Fund, which still left a balance owing on the judgment. Neither Lacy nor the Commission sought to appeal from the order awarding recovery from the Fund based on Lacy's misconduct as a licensee. Appellees were unable to collect the remaining balance on the judgment from Williamson. Appellees then sought recovery from the Fund for the uncollectible balance on the judgment in a second post-judgment proceeding, now based on Williamson's misconduct as a licensee. Standing At first glance, Williamson's standing to participate in the hearing on the application to recover from the Fund is not clear because that proceeding is to recover money directly from the Fund, not from him as the licensee. A recent case has specifically addressed this issue and held that a licensee had standing. In Gamble v. Norton, 893 S.W.2d 129, 132 (Tex. App.--Houston [1st Dist.] 1995, no writ), the applicant for recovery from the Fund contended that the licensee against whom the underlying judgment was rendered had no legal or equitable interest in the proceeding against the Fund. Id. The court noted that the proceeding to recover from the Fund was not a distinct lawsuit separate from the underlying action against the licensee but rather a post-judgment hearing at which the Commission has the opportunity to appear to defend the Fund against the claim. Id. The court said that the Act presumes that the licensee already is part of the underlying suit and will participate in the post-judgment hearing, relying on the provision for notifying the licensee of the hearing as indicating the Legislature's desire to have the licensee participate. (3) Id. We will follow the Gamble case and hold that Williamson had standing. Judicial Notice On appeal, appellees attempted to supplement the record of the post-judgment hearing involving Williamson's misconduct with the statement of facts and exhibits from the earlier post-judgment hearing involving Lacy's misconduct. (4) They contend that the trial court took judicial notice of these items. The record, however, does not support their contention. Appellees did not request that the trial court take notice of the statement of facts from Lacy's hearing. Appellees asked the court to take judicial notice that the same transactions were at issue in both post-judgment proceedings, which is not the same as asking for the trial court to take judicial notice of the record from the earlier hearing. Further, Williamson did not participate in the post-judgment proceeding involving Lacy, nor did the Commission represent Williamson's interests. If we review the tendered statement of facts, the attorney for the Commission stated that the only purpose of the hearing was to allow Lacy the opportunity to defend against recovery because the Fund did not oppose payment. (5) The effect of taking judicial notice of the statement of facts from Lacy's hearing would in essence be to admit in the current proceeding against Williamson evidence that had not been subject to cross-examination or objection by the party against whom the evidence would be used. Effect of Underlying Judgment The underlying judgment against Williamson has a binding effect on him in the post-judgment hearing. In Nagle, 767 S.W.2d at 694, the court held that the judgment and findings of fact and conclusions of law in the underlying proceeding did not bind the Commission in the post-judgment recovery proceeding because the Commission had not participated in the underlying proceeding. Collateral estoppel could not be applied to preclude the Commission from relitigating any issues because it had never had the opportunity to participate in the underlying proceeding. Id. Nothing in the record established that the broker adequately represented the Commission's interest so as to create privity between them. Id. at 695. In this cause, however, Williamson did participate in the trial of the underlying cause, which resulted in an agreed judgment based on a stipulation of facts. Therefore, in this hearing to recover from the Fund based on his misconduct, he should not be allowed to relitigate issues already decided by that judgment. The Evidence In point of error one, appellant contends that "the trial court erred in granting judgment under article 6573(a) VACS, as no evidence was placed in the record to sustain vital findings of fact as set out in the statute." When an appellant attacks the legal sufficiency of an adverse finding on an issue on which he did not have the burden of proof, he must demonstrate on appeal that there is no evidence to support the adverse finding. See generally W. Wendell Hall, Revisiting Standards of Review in Civil Appeals, 24 St. Mary's L.J. 1045, 1132-1135 (1993). In reviewing a "no evidence" point, the appellate court considers only the evidence and inferences that tend to support the finding, and disregards all evidence and inferences to the contrary. Weirich v. Weirich, 833 S.W.2d 942, 945 (Tex. 1992); Havner v. E-Z Mart Stores, Inc., 825 S.W.2d 456, 459 (Tex. 1992); Garza v. Alviar, 295 S.W.2d 821, 923 (Tex. 1965). If there is any probative evidence to support the finding, the point must be overruled and the finding upheld. Southern States Transp., Inc. v. State, 774 S.W.2d 639, 640 (Tex. 1989); In re King's Estate, 244 S.W.2d 660, 661 (Tex. 1951). A "no evidence" analysis, however, is not completely appropriate in this cause. In part, appellees have satisfied some of the elements set out in the Act, section 8(f)(1-5) through collateral estoppel against Williamson. Further, we must bear in mind that a proceeding to recover from the Fund is not an ordinary adversarial proceeding. Nagle, 767 S.W.2d at 695. The Fund is not concerned with protection against all claims, only "spurious and unjust ones." Id. Elements of Recovery From the Fund Under sub-section 8(f)(1), the applicant must show that the agent or broker involved was licensed under the Act at the time of the transaction in question and committed certain acts as a broker in violation of the Act. Williamson argues that, at best, appellees have established that he was a licensee at the time of the underlying judgment, but not at the time of the transactions in question. As discussed above, the underlying agreed judgment binds Williamson. As part of that judgment, Williamson stipulated that he was a licensed real estate broker. Although that fact stipulation does not use the exact phrase "at the time of the transaction," a fair reading of such a stipulation in connection with a suit over specific transactions occurring during a certain time period is that he was licensed during the time at issue. The judgment also reflects that appellant committed acts, such as taking undisclosed commissions, that violated the Act, satisfying the second prong of this subsection. Williamson cannot re-litigate the issues of his status as a broker or that he violated the Act. Cf. Nagle, 767 S.W.2d at 695. The applicant must establish that the judgment is not subject to a stay or discharge in bankruptcy. Act, § 8(f)(3). The court took judicial notice, based on the bankruptcy court judgment, that the debt was not subject to discharge. Appellant did not object and further stipulated on the record in the statement of facts that the debt was not subject to discharge. Appellees have satisfied this subsection. The applicant must establish that the applicant is not the judgment debtor's spouse, spouse's personal representative, nor a licensee seeking to recover a commission. Act, § 8(f)(2). The court so found. Although appellees introduced no direct evidence on this element at the hearing against Williamson, it is undisputed that Williamson and appellees are males. Texas law does not authorize same-sex marriages. Therefore, Williamson cannot be a spouse of any appellee. Appellees have produced more than a scintilla of evidence to satisfy this subsection. The applicant must also show, based on the "best available information," that no assets are available to satisfy the judgment. Act, § 8(f)(4). Appellees offered a writ of execution returned nulla bona some four years before the hearing. A writ of execution returned nulla bona is a necessary prerequisite to recovery. Act, § 8(e). The statute does not define "best available information." We need not decide the meaning in this cause because the writ serves as more than a scintilla of evidence to support the finding that this subsection is satisfied. Similarly, the applicant must prove the amount that might be realized from any sale of assets that could be sold to recover part of the judgment and the balance remaining after the sale. Act, § 8(f)(5). In this cause, appellees presented more than a scintilla of evidence that there were no assets; that is also more than a scintilla of evidence that the amount that could be realized from the sale would be nothing. In this cause, appellees have presented evidence that shows that their recovery from the Fund is not "spurious or unjust." Nagle, 767 S.W.2d at 695. We overrule point of error one. Amount of Recovery In point of error two, appellant contends that, even if a recovery from the Fund were authorized, the court erred in the amount awarded because the award exceeded the limit on the amount that may be recovered based on one transaction. He contends that no evidence supports the trial court's finding that six transactions occurred. At the time in question, the following limits on recovery from the Fund existed: (1) payments for claims arising out of the same transaction were limited to $20,000.00 regardless of the number of claimants; and (2) payments for claims based on judgments against any one licensed broker were limited to $50,000.00 until the Fund received reimbursement from the licensee for all amounts paid out. Act of May 25, 1979, 66th Leg., R.S., ch. 585, sec. 3, 1979 Tex. Gen. Laws 1207. (6) One limit is based on the transaction itself; i.e., for any one transaction a maximum of $20,000.00 may be paid regardless of the amount of the underlying judgment or how many applicants make a claim based on that transaction. The other limit is based on the licensee; i.e., a maximum of $50,000.00 may be paid based on any one licensee's misconduct regardless of the number of transactions involved. Appellees previously recovered $50,000.00 based on Lacy's misconduct in multiple transactions. That recovery still left a balance of over $50,000.00 owing on the judgment, which resulted in this post-judgment proceeding against appellant. Williamson is bound by the underlying judgment, which established that he was a licensee and violated the Act. Appellees did not need to establish a specific number of transactions; just that more than one occurred. The underlying judgment and fact stipulation consistently use the plural when referring to real estate transactions: various pieces of property, properties, distressed properties and commissions on property. The repeated plural references establish that more than one transaction occurred. We overrule the point of error. Having overruled both of appellant's points of error, we affirm the trial-court judgment. Before Justices Powers, Kidd and B. A. Smith Affirmed Filed: December 6, 1995 Do Not Publish 1. 1 The Real Estate License Act created the Real Estate Recovery Fund to compensate for damage from certain acts of licensed real estate brokers and agents. Tex. Rev. Civ. Stat. Ann. art. 6573a, § 8 (West Supp. 1995). References are to the current version of the Act. The only material difference between the current Act and the version which governs this appeal is the maximum allowable amount of recovery, which will be discussed later. 2. 2 The Act refers to the holder of such a judgment as the "applicant" when recovery from the Fund is sought. 3. 3 Under the Act, a payment from the Fund charged against a licensee is a reason for license revocation. The entire amount of the payment, plus interest, must be repaid to the Fund to restore the license. Act, § 8(i). 4. 4 The statement of facts from the first post-judgment hearing involving Lacy was not transcribed at the time of the second post-judgment hearing involving Williamson. 5. 5 Lacy did not attend the post-judgment hearing involving recovery based on his misconduct. 6. 6 The current limits are $50,000.00 and $100,000.00. Act, § 8(n). s are available to satisfy the judgment. Act, § 8(f)(4). Appellees offered a writ of execution returned nulla bona some four years before the hearing. A writ of execution returned nulla bona is a necessary prerequisite to recovery. Act, § 8(e). The statute does not define "best available information." We need not decide the meaning in this cause because the writ serves as more than a scintilla of evidence to support the finding that this subsection is satisfied. Similarly, the applicant must prove the amount that might be realized from any sale of assets that could be sold to recover part of the judgment and the balance remaining after the sale. Act, § 8(f)(5). In this cause, appellees presented more than a scintilla of evidence that there were no assets; that is also more than a scintilla of evidence that the amount that could be realized from the sale would be nothing. In this cause, appellees have presented evidence that shows that their recovery from the Fund is not "spurious or unjust." Nagle, 767 S.W.2d at 695. We overrule point of error one. Amount of Recovery In point of error two, appellant contends that, even if a recovery from the Fund were authorized, the court erred in the amount awarded because the award exceeded the limit on the amount that may be recovered based on one transaction. He contends that no evidence supports the trial court's finding that six transactions occurred. At the time in question, the following limits on recovery from the Fund existed: (1) payments for claims arising out of the same transaction were limited to $20,000.00 regardless of the number of claimants; and (2) payments for claims based on judgments against any one licensed broker were limited to $50,000.00 until the Fund received reimbursement from the licensee for all amounts paid out. Act of May 25, 1979, 66th Leg., R.S., ch. 585, sec. 3, 1979 Tex. Gen. Laws 1207. (6) One limit is based on the transaction itself; i.e., for any one transaction a maximum of $20,000.00 may be paid regardless of the amount of the underlying judgment or how many applicants make a claim based on that transaction. The other limit is based on the licensee; i.e., a maximum of $50,000.00 may be paid based on any one licensee's misconduct regardless of the number of transactions involved. Appellees previously recovered $50,000.00 based on Lacy's misconduct in multiple transactions. That recovery still left a balance of over $50,000.00 owing on the judgment, which resulted in this post-judgment proceeding against appellant. Williamson is bound by the underlying judgment, which established that he was a licensee and violated the Act. Appellees did not need to establish a specific number of transactions; just that more than one occurred. The underlying judgment and fact stipulation consistently use the plural when referring to real estate transactions: various pieces of property, properties, distressed properties and commissions on property. The repeated plural references establish that more than one transaction occurred. We overrule the point of error. Having overruled both of appellant's points of error, we affirm the trial-court judgment. Before Justices Powers, Kidd and B. A. Smith Affirmed Filed: December 6, 1995 Do Not Publish 1. 1 The Real Estate License Act created the Real Estate Recovery Fund to compensate for damage from certain acts of licensed real estate brokers and agents. Tex. Rev. Civ. Stat. Ann. art. 6573a, § 8 (West Supp. 1995). References are to the current version of the Act. The only material difference between the current Act and the version which governs this appeal is the maximum allowable amount of recovery, which will be discussed later. 2. 2 The Act refers to the holder of such a judgment as the "applicant" when recovery from the Fund