Thursday, January 08, 2015

A Cautionary Tale About Injunctions

Many bankruptcies are prompted by foreclosure postings.   Often the debtor must weigh whether to seek an injunction vs. filing bankruptcy.   A recent Texas case makes the point that simply getting the court to grant an injunction is not enough.   Unless the procedures are strictly followed, the injunction may not be valid.   However, that does not mean that the path will be easy as one substitute trustee found out.   The case is In re Chaumette, 2014 Tex. App. LEXIS 13799 (Tex. App.--Houston[1st.Dist.], 2014, orig. proc.).   

Black Sigma, LLC sought a temporary injunction against Michael Robinson to prevent a trustee's sale of its property.   On August 22, 2011, the trial court heard the movant's evidence then cut the hearing short stating that he had a criminal docket to attend to.   The trial court stated that the movant had put on enough evidence.  The creditor protested that he had evidence to put on as well but was not allowed to do so.   The trial court entered a temporary injunction which read as follows:
The Court, having held a hearing and received evidence from Plaintiff requesting injunctive relief and argument of counsel, if any, is of the opinion that Plaintiff's application has merit and an injunction should be and is hereby GRANTED.
The Court finds:
1. Plaintiff has a probable right on final trial to the relief that it seeks;
2. Plaintiff will suffer irreparable injury for which he has no legal remedy if this injunction is not granted.
IT IS, THEREFORE, ORDERED that Michael P. Robinson, Defendant in this cause and any alternate trustee appointed by him, Robinson's agents, servants, employees, and attorneys and all persons in active concert or participation with him be temporarily and/or permanently enjoined from conducting a foreclosure sale as substitute trustees on September 6, 2011 or anytime during the pendency of this case or until further order of the Court[.] 
The trial court then set a hearing on September 19, 2011 to allow the creditor to present evidence to try to persuade the court to dissolve the injunction.    However, the substitute trustee proceeded with the sale anyway.    The creditor came back on September 19 and 22, 2011 and put on its evidence only to have the trial court reaffirm its original ruling.   The creditor then filed an interlocutory appeal.   During the interlocutory appeal, the debtor filed a Motion for Contempt and for Referral to the Trial Court to Enforce Temporary Injunction."

The trial court commenced civil and criminal contempt proceedings against David Chaumette, the substitute trustee.    On November 19, 2012, the trial court found Chaumette guilty of civil contempt.   The trial court ordered him confined in the Brazoria County jail until he "purges himself of contempt by executing and recording a document in form acceptable to the Court, vacating the said substitute trustee's deed, effective September 6, 2011."   Eleven months later, the substitute trustee filed a "Rescission of Foreclosure Sale" in the real property records.   However, the trial court did not find this document to be acceptable.   The court drafted its own document which the substitute trustee did not sign because he felt it was inaccurate.   

On November 8, 2013, the trial court issued a capias for the substitute trustee's arrest based on the November 19, 2012 contempt order.    The substitute trustee filed an application for writ of habeas corpus.   The Court of Appeals granted the writ because the contempt order did not clearly specify what the substitute trustee had to do to purge himself of contempt.

Having failed to sustain a civil contempt order, the trial court held a two day trial which resulted in a criminal contempt order providing for the substitute trustee to be incarcerated for 45 days.   The substitute trustee filed a second application for writ of habeas corpus.    

The Court of Appeals granted the second writ of habeas corpus on the basis that the court's temporary injunction was void and therefore unenforceable.    Under Texas Rule of Civil Procedure 683, an order for temporary injunction must "set forth the reasons for its issuance."   According to the Court:
"'[T]he obvious purpose of [Rule 683] is to adequately inform a party of what he is enjoined from doing and the reason why he is so enjoined.'" (citation omitted)(emphasis in original).
Opinion, p. 12.     The Court of Appeals found that the temporary injunction did not meet this standard.
Here, the only part of the September 1, 2011 temporary-injunction order that can be construed as setting forth the reasons for its issuance reads as follows: "The Court finds . . . Plaintiff will suffer irreparable injury for which he has no legal remedy if this injunction is not granted." A statement indicating only that a plaintiff will "suffer irreparable injury for which he has no legal remedy" if injunctive relief is not granted does not comply with the specificity requirements of Rule 683.
Opinion, pp. 12-13.   

Why did the trial court grant the temporary injunction?   Why didn't the plaintiff's lawyer put this in the order?   Why did the substitute trustee proceed with the foreclosure after the trial court entered a temporary injunction?     The opinion does not say and the reader is left to wonder.   

Thus, because the order did not specifically state the reasons it was being granted, it was void and the substitute trustee could not be held in either civil or criminal contempt.    However, it took the substitute trustee (who is a former president of the Houston Bar Association according to the Texas Lawyer) three years to clear his name.    This case seems to be a tragedy of errors with no clear winner.   However, it provides a good object lesson in why it is important to read the rules carefully and avoid taking shortcuts in drafting.   Just because a judge will sign an order does not make it valid. By the same token, ignoring an order simply because it is void isn't a real good idea either.  

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