Orix Capital Markets, LLC v. American Realty Trust, Inc.

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State: Texas

Court: Texas Northern District Court

Docket No: 05-10-01005-CV

Case Date: 12/14/2011

Plaintiff: Orix Capital Markets, LLC

Defendant: American Realty Trust, Inc.

Preview:Orix Capital Markets, LLC v. American Realty Trust,
Inc.
AFFIRM; Opinion Filed December 14, 2011.
In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-10-01005-CV
ORIX CAPITAL MARKETS, LLC, Appellant
V.
AMERICAN REALTY TRUST, INC., Appellee
On Appeal from the 298th Judicial District Court
Dallas County, Texas
Trial Court Cause No. 10-01644-M
OPINION
Before Justices FitzGerald, Francis, and Lang-Miers
Opinion By Justice Lang-Miers
Appellant Orix Capital Markets, LLC filed this action seeking to
vacate the amended judgment in a prior lawsuit between it and appellee
American Realty Trust, Inc. The core issue is whether the amended
judgment is void because the trial judge allegedly did not meet the
constitutional requirements to hold the office of district court judge
when he was elected. The parties filed cross-motions for summary
judgment, and the trial court granted American Realty's motion and
denied Orix's motion. Orix appeals. We affirm the trial court's
judgment.
Background
In 2004, Orix sued American Realty over a commercial loan
indemnity agreement. After a bench trial, the district judge awarded
Orix over $6 million in damages. U.S. Bank v. Am. Realty Trust, Inc.,
275 S.W.3d 647, 648-50 (Tex. App.-Dallas 2009, pet. denied).
Subsequently, the district judge lost his re-election bid, and American
Realty's post-judgment motions were heard by the new district judge. See
id. The new judge concluded that Orix had not established causation on
its fraud claim, amended the original judge's findings of fact and
conclusions of law, and amended the judgment to award Orix only nominal
damages. Id. Orix appealed. We reversed the amended judgment on the
fraud claim and rendered judgment in favor of Orix in the amount of
approximately $370,000 plus attorney's fees. Id. at 655. Both parties
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filed motions for rehearing.
While the motions for rehearing in the earlier appeal were
pending, Orix moved for leave to supplement its motion to raise a new
issue. Orix contended for the first time that the amended judgment was
void because the new judge was not constitutionally qualified to hold
the office of district judge. Orix argued that the new judge did not
meet the constitutional requirements of being licensed to practice law
and a practicing lawyer in Texas for the four years preceding his
election because his license had been suspended for about fourteen days
during those four years for failure to pay bar dues and attorney
occupation taxes and failure to comply with continuing legal education
requirements. Orix argued that the amended judgment should be vacated
and the original judgment should be reinstated. We denied leave to
supplement the motion for rehearing and overruled the motion. Orix
appealed to the Texas Supreme Court and raised the issue concerning the
judge's qualifications in its petition for review. The supreme court
denied review.
Orix then filed this lawsuit. In its original petition, Orix
sought a declaration that the amended judgment in the earlier lawsuit is
void. Alternatively, Orix sought a bill of review asking the court to
set aside the amended judgment as void. The parties filed cross-motions
for summary judgment. The district court See Footnote 1 denied Orix's
motion and granted American Realty's motion without stating a basis for
its rulings. Orix appeals both the grant of American Realty's motion and
the denial of its own motion.
Standard of Review
We review a traditional summary judgment de novo to determine
whether a party's right to prevail is established as a matter of law.
Dallas Cnty. Tax Collector v. Andolina, 303 S.W.3d 926, 929 (Tex.
App.-Dallas 2010, no pet.). A party moving for traditional summary
judgment under rule of civil procedure 166a(c) must establish that no
genuine issue of material fact exists and that it is entitled to
judgment as a matter of law. Tex. R. Civ. P. 166a(c); Ysasaga v.
Nationwide Mut. Ins. Co., 279 S.W.3d 858, 864-65 (Tex. App.-Dallas 2009,
pet. denied). When both parties move for traditional summary judgment
and the trial court grants one motion and denies the other, the non-
prevailing party may appeal both of those rulings. See Certain
Underwriters at Lloyd's v. LM Ericsson Telefon, AB, 272 S.W.3d 691, 694
(Tex. App.-Dallas 2008, pet. denied). We review the summary judgment
evidence presented by both parties and determine all questions
presented. Id. When the trial court's order granting summary judgment
does not specify the grounds upon which it was granted, we will affirm
the judgment if any of the theories advanced are meritorious. Carr v.
Brasher, 776 S.W.2d 567, 567 (Tex. 1989).
Discussion
In this lawsuit, Orix seeks to avoid the effects of the amended
judgment in the prior lawsuit by challenging the qualifications of the
district judge who rendered the amended judgment in that earlier
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lawsuit. Orix sought a declaration that the amended judgment in the
earlier case is void and that the final judgment rendered by the
original judge is the controlling judgment. The Parties' Arguments
Orix argued in its motion for summary judgment that the new
judge was not qualified to hold the office of district judge under the
state constitution, which states that a district judge must be “licensed
to practice law in this State” and must have “been a practicing lawyer
or a Judge of a Court in this State, or both combined, for four (4)
years next preceding his election . . .                                                   .” Tex. Const. art. V, § 7. Orix
offered evidence that the new judge's license to practice law was
suspended for fourteen days in the four years before he took office. It
argued that the judge did not satisfy these constitutionally mandated
requirements and that, as a result, the amended judgment in the earlier
case is void because the judge did not have jurisdiction to render the
amended judgment.
American Realty argued in its motion for summary judgment that
Orix does not have standing to challenge the new judge's qualifications
to hold the office of district court judge and, as a result, the trial
court did not have jurisdiction to entertain Orix's claim. American
Realty argued that only the State may challenge a judge's qualifications
to hold office in a proceeding in the nature of quo warranto. It also
argued that even if the new judge was not constitutionally qualified
when he was elected to the district court bench, his judicial acts are
not void because he was the de facto judge of the court having been
elected, sworn into office, and exercising the powers of the office
under color of law. We agree with American Realty.
Orix's Standing to Challenge Judge's Qualifications
Standing is a necessary component of subject matter jurisdiction
and a constitutional prerequisite to maintaining a suit under Texas law.
Douglas v. Delp, 987 S.W.2d 879, 882 (Tex. 1999); OAIC Commercial
Assets, L.L.C. v. Stonegate Vill., L.P., 234 S.W.3d 726, 735 (Tex.
App.-Dallas 2007, pet. denied). The plaintiff has the initial burden to
allege facts demonstrating it has standing to bring the action and the
trial court's jurisdiction to hear the cause. OAIC, 234 S.W.3d at
735-36. If the court does not have subject matter jurisdiction, it may
not consider the merits of the case. Delp, 987 S.W.2d at 882. Whether a
party has standing to pursue a particular remedy is a question of law,
which we review de novo. OAIC, 234 S.W.3d at 735.
The jurisprudence of our state is “settled that the right of a
judge to the office in which he functions may not be attacked
collaterally.” Snow v. State, 114 S.W.2d 898, 900-01 (Tex. Crim. App.
1938) (op. on reh'g) (collecting cases). The mechanism by which to
challenge a public official's right to hold the office is in a
proceeding in the nature of quo warranto. Snow, 114 S.W.2d at 901; see
State ex rel. McKie v. Bullock, 491 S.W.2d 659, 660-61 (Tex. 1973) (per
curiam) (stating only remedy available to challenge elected candidate's
qualifications to hold office is quo warranto proceeding); Walker v.
State, 171 S.W.2d 887, 888 (Tex. Crim. App. 1943) (holding that
defendant could not seek to quash information on ground that county
attorney and his assistants were holding office without authority of law
because “quo warranto proceeding is the exclusive remedy to test the
right of an officer to hold office”); Rosell v. Cent. W. Motor Stages,
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Inc., 89 S.W.3d 643, 650-52 (Tex. App.-Dallas 2002, pet. denied)
(stating “contesting an elected judge's authority to act in a case is a
collateral attack on a judge's ability to hold office that is proper
only in a direct quo warranto proceeding”); Vick v. City of Waco, 614
S.W.2d 861, 864 (Tex. Civ. App.-Waco 1981, writ ref'd n.r.e.) (stating
“[a] quo warranto proceeding is the exclusive remedy to test the right
of an officer to hold office. It may not be done by . . . a litigant
upon the trial of a case”); Toyah Indep. Sch. Dist. v. Pecos-Barstow
Consol. Indep. Sch. Dist., 497 S.W.2d 455, 456-57 (Tex. Civ. App.-El
Paso 1973, writ ref'd n.r.e.), cert. denied, 415 U.S. 991 (1974)
(stating school board member's “qualification to hold office could not
be determined in this collateral proceeding”).
This rule applies regardless of whether “the person acting as
judge is incapable of holding the office, and irrespective of the
question whether he was properly elected.” Snow, 114 S.W.2d at 901.
Proceedings in the nature of quo warranto have been authorized by
statute since 1879. Norville v. Parnell, 118 S.W.3d 503, 505 (Tex.
App.-Dallas 2003, pet. denied). The statute in effect here provides in
relevant part:
§ 66.001. Grounds
An action in the nature of quo warranto is available if:
(1) a person usurps, intrudes into, or unlawfully holds or executes a
franchise or an office . . .
§ 66.002. Initiation of Suit
(a) If grounds for the remedy exist, the attorney general or the county
or district attorney of the proper county may petition the district
court of the proper county or a district judge if the court is in
vacation for leave to file an information in the nature of quo warranto.
(b) The petition must state that the information is sought in the name
of the State of Texas.
(c) The attorney general or county or district attorney may file the
petition on his own motion or at the request of an individual relator.
Tex. Civ. Prac. & Rem. Code Ann. §§ 66.001-.003 (West 2008).
The policy reason for the quo warranto statute is:
Public officers should be free to perform their duties without
having their authority questioned incidentally in litigation between
other parties. They should not be called on to defend their authority
unless a proper legal officer of the State has determined that the
question raised is serious and deserves judicial consideration as
required by [statute]. This settled policy of the State is exemplified
by cases holding that the decision of the Attorney General or the
district or county attorney to present the information under that
statute is a matter of discretion to be exercised for the protection of
the public . . .
Lewis v. Drake, 641 S.W.2d 392, 395 (Tex. App.-Dallas 1982, no writ).
The quo warranto procedure is a direct proceeding to which the
judge is a party. See Snow, 114 S.W.2d at 901; Rosell, 89 S.W.3d at 651.
A direct proceeding against the judge affords the judge the protections
of our federal and state constitutions, such as the right to appear, the
right to due process, and the right to confront one's accusers, whereas
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a collateral proceeding does not. In addition, the requirement that a
judge's qualifications be challenged only in a direct proceeding in the
nature of quo warranto “serves a legitimate purpose: it ensures that a
judge's acts will be recognized regardless of any later challenges to
the judge's authority so that parties and the public will be able to
rely with confidence upon judicial actions. Otherwise 'intolerable
confusion would inevitably result.'” Wilson v. State, 977 S.W.2d 379,
382 (Tex. Crim. App. 1998) (Keller, J., concurring) (quoting Snow, 114
S.W.2d at 901).
The law does not permit Orix to challenge the judgment in a
prior lawsuit by collaterally attacking the qualifications of the judge
who rendered the judgment in the prior lawsuit. And the plain and
unambiguous language of the quo warranto statute confers standing to
lodge such a challenge on the State, not a private litigant such as
Orix. Consequently, we conclude that Orix does not have standing to
challenge the new judge's qualifications in this collateral proceeding.
De facto Judge
Orix contends that a void judgment is always subject to
collateral attack in a new lawsuit. And it contends that if quo warranto
is the exclusive remedy here, then it has no recourse by which to attack
a void judgment.
The Supreme Court of Texas has stated that “a judgment is void
only when it is shown that the court had no jurisdiction of the parties
or property, no jurisdiction of the subject matter, no jurisdiction to
enter the particular judgment, or no capacity to act as a court.”
Browning v. Placke, 698 S.W.2d 362, 363 (Tex. 1985); Travelers Ins. Co.
v. Joachim, 315 S.W.3d 860, 863 (Tex. 2010). Although phrased as a
jurisdictional issue, Orix's actual contention is that the new judge did
not have authority to act because he did not meet the constitutional
requirements to hold the office of district judge. See Davis v. State,
956 S.W.2d 555, 557-60 (Tex. Crim. App. 1997) (explaining difference
between a court's jurisdiction and a judge's authority to act).
But a duly elected judge holding office under color of law and
discharging the duties of that office is considered to be a de facto
judge and his acts are conclusive as to all parties except the State.
See Snow, 114 S.W.2d at 900-01; Rosell, 89 S.W.3d at 651 (citing Snow,
114 S.W.2d at 901). “An official who holds office under color of title
(such as an elected or retired judge) is considered to be a de facto
official, even if all of the legal requirements for holding the office
have not been met.” Wilson, 977 S.W.2d at 382 (Keller, J., concurring).
In a case in which a criminal defendant sought to attack his conviction
because the judge's appointment had not been confirmed by the Senate
when the judge presided over the defendant's case, the Supreme Court of
the United States stated that “where a court has jurisdiction of an
offense and of the accused, and the proceedings are otherwise regular, a
conviction is lawful, although the judge holding the court may be only
an officer de facto . . .                                                                 .” and “the title of a person acting with
color of authority, even if he be not a good officer in point of law,
cannot be collaterally attacked . . .                                                     .” Ex parte Ward, 173 U.S. 452,
454 (1899).
This is true, “irrespective of the question whether he was
properly elected.” Snow, 114 S.W.2d at 901. “In no event can a . . . de
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facto judge . . . be ousted, or his official acts successfully
challenged, except in a direct proceeding to which he is a party.” Snow,
114 S.W.2d at 901 (emphasis added); Toyah Indep. Sch. Dist., 497 S.W.2d
at 457 (“an officer whose election or appointment might be illegal and
invalid is still a de facto official, and such is particularly true
where there is an office to fill and an election had at the time and
place authorized by statute”).
To hold otherwise would subject judges, who hold office by color
of law through either an appointment or an election, to “having their
authority questioned incidentally in litigation between other parties.”
Rosell, 89 S.W.3d at 651 (quoting Lewis, 641 S.W.2d at 395). And it
protects “the public and individuals who have dealings with the official
by ensuring that the official's acts will subsequently be recognized.”
Wilson, 977 S.W.2d at 381. “[A]s long as a duly elected judge is holding
office under color of law, his actions will be binding on the parties
and subject to appeal as in any other lawsuit.” Rosell, 89 S.W.3d at
652.
In this case, the new judge was elected to the office of judge
of a district court, sworn in as the duly elected judge, and discharged
the duties of that office. Because the new judge was occupying the
office of district judge under color of an election, our jurisprudence
holds that he was the de facto judge of that court and that his actions
are conclusive as to all parties except the State.
Conclusion
We conclude that the district court did not err by denying
Orix's motion for summary judgment and granting American Realty's
motion. We affirm the trial court's judgment.
ELIZABETH
LANG-MIERS
JUSTICE
101005F.P05
Footnote 1
The new judge recused himself from the proceedings below and the cause
was transferred to the district court from which this appeal is taken.
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