In this weekly blog, the Law Offices of Brandy Wingate Voss, PLLC will summarize recent decisions from the Thirteenth Court of Appeals and provide links to decisions on the court’s website.
Burkholder v. Wilkins, No. 13-16-00273-CV (Opinion by Justice Rodriguez; Panel Members: Chief Justice Valdez and Justice Benavides)
In this interlocutory appeal, the Thirteenth Court of Appeals analyzed a temporary injunction prohibiting a condominium association from foreclosing on an owner who refused to pay the association’s fees and special assessment.
Timothy Wilkins owns a unit at the seven-story Laguna Bay Condominium complex on South Padre Island. In 2013, Wilkins’ unit sustained water damage from Hurricane Dolly, and he sued the condominium owners’ association (“COA”). The parties settled the suit in 2013. The terms of the settlement agreement included: (a) the COA would pay for leak repairs to Wilkins’ unit in accordance with an engineer’s assessment of the damage within six months of settlement; (b) within 60 days of the settlement, the COA would specify which sliding glass doors Wilkins could install on his unit; (c) all necessary repairs would be completed within 36 months unless the COA and Wilkins deemed such repairs economically unfeasible; (d) the COA had discretion as to the order and priority of the repairs; and (e) Wilkins would still be liable for his pro-rata share of any special assessments necessary to pay for such repairs.
After signing the settlement, the COA’s engineers advised that the entire complex needed to be overhauled, and prepared a top-down repair plan. The COA thus did not make the promised recommendations or repairs to Wilkins unit in accordance with the timeline agreed upon in the settlement; in fact, the COA had yet to make the repairs at the time of appeal. Instead, the COA completed repairs to the common areas and began the top-down repair plan, sending Wilkins a special assessment of $91,316. Wilkins refused to pay the assessment and stopped paying COA dues, prompting the COA to try to foreclose.
Wilkins sued for breach of contract, breach of fiduciary duty, and fraud based on the COA’s violation of the settlement. Wilkins also applied for a temporary injunction to restrain the COA from collecting the special assessment or foreclosing. The COA responded that, since Wilkin’s unit was on the second floor out of seven, compliance with the settlement was infeasible in light of the engineers’ recommended top-down repair plan.
At the temporary injunction hearing, the COA offered no evidence in support of its arguments. Wilkins, however, submitted numerous items including the settlement agreement, the engineers’ report, discovery from the case, photos of the water damage, and—critically—his own affidavit attesting to the attempted foreclosure and need for an injunction. The trial court granted the temporary injunction.
The COA filed an interlocutory appeal, challenging the sufficiency of the evidence to support the “irreparable harm” and “inadequate remedy” elements of the injunction, as well as the trial court’s balancing of the equities.
Held: The COA failed to object to Wilkins’ key piece of evidence—his affidavit—thus permitting the affidavit to be relied upon as sufficient evidence to support the injunction.
The COA first challenged the sufficiency of the evidence. The COA argued that Wilkins’ affidavit was the only piece of evidence attesting to the irreparable harm that would allegedly result if the injunction were not granted, and the inadequate nature of the legal remedy. The COA claimed that such affidavit could not be relied upon by the court in granting the temporary injunction, pointing to the rule that a temporary injunction cannot be supported by an affidavit without an agreement of the parties. The Thirteenth Court of Appeals acknowledged this rule, but noted that this objection was not raised in the trial court. Thus, the COA’s objection to Wilkins’ affidavit was waived.
The Court of Appeals then held that, in light of Wilkins’ affidavit, there was sufficient evidence to affirm the temporary injunction. Wilkins’ affidavit provided crucial testimony about the threat of foreclosure and the need for an injunction. Such affidavit was further supported by the arguments of the COA’s counsel at the temporary injunction hearing, stating that the COA saw no reason not to move forward with foreclosure if the injunction did not issue. Thus, the injunction was supported by sufficient evidence.
Balance of Equities
Next, the COA challenged the trial court’s determination that equity weighed in favor of granting an injunction. The COA claimed that 29 other condo owners would suffer if the injunction were granted, while Wilkins alone would suffer if the injunction were denied. However, the COA offered no evidence to support its allegation of harm to the other 29 condo owners; it provided only pleadings and the arguments of counsel. Pleadings and arguments are not competent evidence. In contrast, Wilkins provided evidence—most notably his affidavit—that his condo would likely be foreclosed if no injunction issued. Thus, the trial court correctly held that the equities weighed in favor of granting the injunction.
Villarreal v. State, No. 13-15-00037-CR (Opinion by Justice Rodriguez; Panel Members: Chief Justice Valdez and Justice Garza)
In this direct appeal from a criminal conviction for securities fraud and theft by deception, the Thirteenth Court of Appeals examined numerous points of error including the separation of powers, statute of limitations, sufficiency of the evidence, and prosecutorial misconduct.
In 2008, Alberto Alba Villarreal (“Villarreal”) invited Enrique Garrido Cruz (“Garrido”) to start a business with him, and the two formed an insurance company named Nafta Holdings, L.L.C. On November 3, 2008, the men executed a company agreement and each pledged to give two million dollars to the company. Four days after signing the agreement, Garrido deposited one million into the Nafta Holdings account, to which both Villarreal and Garrido had access. Sometime later that month, Villarreal transferred the one million into a separate banking account at First National Bank to which only he had access. First National refused to release the funds to Villarreal, leading Villarreal to file a lawsuit against the bank. Neither party ever contributed additional funds to Nafta Holdings.
When Villarreal’s lawsuit against First National Bank was unsuccessful and he did not return the one million dollars to Nafta Holdings, Garrido hired an attorney. Garrido filed a complaint against Villarreal with the Texas Securities Board (“TSB”) and sued Villarreal for civil damages. In 2013, Villarreal was indicted in the current case for securities fraud and theft by deception. The Cameron County District Attorney’s Office requested the appointment of special prosecutors from the TSB to help handle the case. A jury then convicted Villarreal of both counts in 2015, sentencing him to serve concurrent ten-year and five-year sentences in prison for securities fraud and theft, respectively. Villarreal’s ten-year sentence was suspended and he was placed on community supervision.
Villarreal appealed, challenging his conviction on eighteen points of error.
Held: Villarreal’s charge for securities fraud was barred by the statute of limitations, and is reversed. However, Villarreal’s conviction for theft by deception is affirmed.
1. TSB prosecution does not violate the separation of powers.
Villarreal first challenged the Cameron County District Attorney’s appointment of special TSB prosecutors, arguing that the TSB was limited to the investigation of individuals and appointing members of the TSB as prosecutors was a violation of the separation of powers. The District Attorney’s Office insisted that it retained control of the case, but Villarreal disputed this by pointing out that the special prosecutors testified before the grand jury, drafted the indictment, directed voir dire, and handled many of the pretrial proceedings. The Thirteenth Court of Appeals examined each of these alleged actions in turn.
First, the court noted that there was no evidence that the TSB attorneys testified or talked to the grand jury. Regarding TSB’s involvement in the indictment, the record showed that Villarreal was re-indicted to change the wording in the indictment on the advice of a TSB attorney. Such advice however, only established that TSB was not involved in the initial decision to indict Villarreal, and thus did not violate the separation of powers.
Regarding TSB’s involvement in pretrial matters, Villarreal pointed to a specific statement by Julie Allen—the Cameron County trial attorney—describing her desire to bring TSB attorneys in on the case as “lead prosecutor[s]” due to the complicated and specialized nature of the charges. Yet, the Thirteenth Court of Appeals interpreted Allen’s statements as nothing more than an explanation of her reasoning for the special prosecutors. Furthermore, Allen’s name appeared on the pretrial pleadings, and she was present at all trial proceedings.
Regarding voir dire, Allen led the State’s voir dire and introduced the TSB attorneys as her co-counsel. Although the TSB attorneys helped conduct portions of voir dire and used phrases such as “that’s why we’re here today,” these actions did not indicate a usurpation of Allen’s authority.
Similarly, Allen appeared and participated throughout trial. In sum, Allen’s consistent presence and authority established that the District Attorney’s office maintained authority over the case, and the TSB attorneys’ involvement did not violate the separation of powers.
2. Article 581-29(c)(1) is not unconstitutional.
Next, Villarreal contended that article 581-29(c)(1) of the Texas Securities Act violated his Fifth, Sixth, and Fourteenth Amendment rights because the statute makes ordinary negligence criminal. Article 581-29(c)(1) makes it a felony for a person engaged in the sale or offer of securities to commit fraudulent activity—including the failure to disclose a material fact—if the amount involved is at least $100,000.
Villarreal first claimed that the civil standard used for materiality in the context of fraud was improperly adopted and applied to the criminal setting by the Texas Court of Criminal Appeals in Bridwell v. State, 804 S.W.2d 900 (Tex. Crim. App. 1991) (en banc). The Thirteenth Court however, declined the invitation to ignore this binding precedent from the Court of Criminal Appeals.
Villarreal then argued that the United States Supreme Court’s decision in United States v. Elonis, 135 S. Ct. 2001 (2015)—which overturned a federal criminal statute requiring only ordinary negligence—required reversal of Bridwell. Here however, Article 581-29(c)(1) provides for a mental state, requiring an “intentional” failure to disclose a material fact for liability. Thus, Elonis is inapplicable, and article 581-29(c)(1) is not unconstitutional.
3. Villarreal’s securities fraud charge was barred by the statute of limitations.
Next, Villarreal asserted that the charges were barred by the statute of limitations. Villarreal and Garrido entered into the company agreement on November 3, 2008, and Garrido deposited his money in the account on November 7, 2008. Villarreal was indicted for securities fraud and theft by deception on November 6, 2013 for acts “on or about the 7th Day of November, 2008.” The statute of limitations for each charge was five years.
Regarding the securities fraud charge, the State argued that it not only charged Villarreal with his “offer to sell” a membership in Nafta Holdings—executed in the company agreement on November 3, 2008—but also the actual sale of membership, which did not occur until Garrido deposited his money in the company’s account. The Thirteenth Court of Appeals disagreed, noting that the Texas Securities Act defines “sale” to include a broad swath of dispositions, transfers, and agreements to transfer. Thus, the “sale” occurred when Villarreal and Garrido entered into their agreement on November 3, 2008. As such Villarreal’s indictment on November 6, 2013—five years and three days after the date of the offense—was barred by statute of limitations.
Regarding the theft charge, Villarreal argued that the statute of limitations should run from the date on which he exercised control over the property, i.e., when the contract for such money was signed on November 3, 2008. However, theft requires unlawful appropriation, meaning that the accused must acquire or otherwise exercise control over the property. Texas courts have held that a theft is not complete for purposes of the statute of limitations until the last money is unlawfully received or appropriated. Here, Villarreal’s appropriation did not occur until Garrido deposited his one million dollars in the Nafta Holdings bank account, and Villarreal transferred the money to a separate account at First National Bank. Since Garrido did not even deposit the money until November 7, 2008, the theft charge was not barred by the statute of limitations.
4. There was not a material variance between the theft indictment and evidence produced at trial.
Next, Villarreal claimed that there was a material variance between the indictment for theft and the evidence presented at trial because the indictment charged appropriation of currency while the trial evidence showed appropriation of checks. A variation is material only if it will prejudice the defendant’s substantial rights by surprising him at trial or risking double jeopardy. The Thirteenth Court held that there was no variance; the checks were an “instrumentality” of appropriating currency. However, even if such a variance existed it would not prejudice Villarreal’s substantial rights.
5. Villarreal’s theft conviction is supported by sufficient evidence.
Villarreal next challenged the sufficiency of the evidence to support his theft conviction. A sufficiency challenge is analyzed based on the elements of the offense as charged in a hypothetical, correct jury charge.
First, Villarreal challenged the State’s evidence regarding the specific property alleged in the indictment: U.S. currency. However, the court of appeals already rejected this argument in its rejection of the “material variance” point of error. Furthermore, the court noted that “the type of property appropriated is not a substantive element of the theft offense,” and is thus immaterial to the sufficiency challenge.
Next, Villarreal challenged the absence of the owner’s effective consent and Villarreal’s use of deception. A defendant unlawfully appropriates—or exercises control over—property if he does so without the owner’s effective consent. The owner’s consent is not effective if it is induced by deceit, such as a promise to perform when the defendant does not intend to perform. This unlawful appropriation constitutes theft if it is done with the intent to deprive—i.e., the intent to permanently withhold the property from the rightful owner. Here, Villarreal asked Garrido to invest in Nafta Holdings and misrepresented the minimum amount necessary under Texas law to start an insurance company as four million, rather than two million. Villarreal assured Garrido that he had two million of the (allegedly) necessary four million, and told Garrido that any funds deposited in the Nafta Holdings account would not be removed. Villarreal then transferred the funds without Garrido’s permission. Thus, a jury could conclude that Villarreal appropriated Garrido’s property without Garrido’s consent, using deception. As such, the jury’s verdict was supported by sufficient evidence.
6. There was no prosecutorial misconduct.
Villarreal next asserted that the prosecutors improperly gave advice to Garrido regarding his civil suit. The Thirteenth Court however, held that there was no evidence to support this claim, and overruled it summarily.
7. The TSB’s involvement as witnesses was not erroneous.
Similar to his argument regarding the separation of powers, Villarreal asserted that the TSB special prosecutors improperly served as both prosecutors and witnesses in the case. The first TSB prosecutor, Cole, allegedly had a conflict of interest because she investigated the charge, gave legal advice to Garrido, and established a relationship with Garrido. The Thirteenth Court noted that it had already rejected Villarreal’s separation of powers argument, and it saw no evidence that Cole gave Garrido legal advice or consistently communicated with him. Cole testified at a single pretrial conference in which she submitted an affidavit regarding Garrido’s ability to testify, and she submitted to cross-examination. Thus, Cole’s involvement did not present a conflict of interest or violate Villarreal’s rights.
The second TSB special prosecutor—Lujan—was a financial examiner for the TSB and testified only regarding her investigation; she did not provide opinion testimony. Furthermore, Villarreal did not object to Lujan’s testimony until the day after it was given. Such a delayed objection was not timely and did not preserve the issue for appeal.
8. The trial court did not err in failing to sanction the State for not producing Garrido’s prior video statement.
Villarreal next challenged the trial court’s refusal to strike Garrido’s testimony and declare a mistrial when the State failed to produce a prior statement made by Garrido in compliance with Rule of Evidence 615. Garrido met with a representative from the District Attorney’s office one year before Villarreal’s indictment and made a video statement, which was subsequently lost. Under Rule of Evidence 615, the trial court should have ordered production of any prior statement in the State’s possession related to Garrido’s testimony when Villarreal moved for such production during trial. However, the Thirteenth Court held that the State did not “possess” the statement at the time of the trial, and imposing sanctions for failure to produce something outside the State’s possession would have been improper. Furthermore, Villarreal failed to show that the lost evidence was exculpatory and thus violated his right to due process. There was no evidence that the State intentionally disposed of Garrido’s video statement or otherwise acted in bad faith. Thus, the trial court did not err by failing to sanction the State, strike Garrido’s testimony, or declare a mistrial.
9. The trial court did not comment on the weight of the evidence.
Finally, Villarreal challenged an allegedly-improper comment on the weight of the evidence made by the trial court.
During the State’s cross-examination, Villarreal objected to a “have-you-heard” character question from the State regarding Villarreal’s use of investor funds for personal expenses, asserting that the premise of the question had not yet been proven. The court responded, “It’s what the testimony is so far,” and overruled the objection. Villarreal, however, did not object to the trial court’s comment. Thus, the issue was whether Villarreal could raise the issue for the first time on appeal, as fundamental error.
The court of appeals noted that comments on the weight of the evidence will not be fundamental error unless they influenced the presumption of innocence or impartiality of the jury. The Texas Court of Criminal Appeals has recognized that a trial court’s comments on previously admitted testimony do not rise to the level of a fundamental error. Thus, even if the statement were an improper comment on the weight of the evidence, it would not constitute fundamental error.
Having addressed each of Villarreal’s arguments, the Thirteenth Court of Appeals reversed and rendered a judgment of acquittal on Villarreal’s charge for securities fraud, but affirmed the conviction for theft by deception.