Michael J. DeLitta v. Nancy Schaefer

ACCEPTED

03-15-00280-CV

6142048

THIRD COURT OF APPEALS

AUSTIN, TEXAS

7/20/2015 3:53:59 PM

No. 03-15-00280-CV

JEFFREY D. KYLE

CLERK

_______________________________________

FILED IN

In the Third Court of Appeals 3rd COURT OF APPEALS

AUSTIN, TEXAS

Austin, Texas 7/20/2015 3:53:59 PM

_______________________________________JEFFREY D. KYLE

Clerk

Michael J. DeLitta,

Appellant,

v.

Nancy Schaefer,

Appellee.

_______________________________________

BRIEF OF APPELLEE

_______________________________________

Donald R. Taylor Lisa Bowlin Hobbs

State Bar No. 19688800 State Bar No. 24026905

dtaylor@taylordunham.com Lisa@KuhnHobbs.com

Stacey Reese (Of Counsel) Kurt Kuhn

State Bar No. 24056188 State Bar No. 24002433

stacey@reeselawpractice.com Kurt@KuhnHobbs.com

TAYLOR DUNHAM & RODRIGUEZ LLP KUHN HOBBS PLLC

301 Congress Avenue, Suite 1050 3307 Northland Drive, Suite 310

Austin, Texas 78701 Austin, Texas 78731

(512) 473-2257 (512) 476-6003

(512) 478-4409 (fax) (512) 476-6002 (fax)

Howard F. Carter, Jr.,

State Bar No. 03916500

sam@scarterlawfirm.com

HOWARD F. CARTER, JR., P.C.

5600 Tennyson Parkway, Suite 160

Plano, Texas 75024

(972) 455-2001

(972) 455-2015 (fax)

COUNSEL FOR APPELLEE

July 20, 2015

IDENTITY OF PARTIES AND COUNSEL

In addition to the parties and counsel listed by Appellant in his brief, pursuant

to TRAP 38.1, Appellee lists the following:

Trial Counsel for Appellant: Timothy J. Herman1

State Bar No. 09513700

HOWRY BREEN & HERMAN LLP

1900 Pearl Street

Austin, Texas 78705

(512) 474-7300

(512) 474-8557 (fax)

1

Mr. Herman appeared at the hearing on the temporary injunction and remains trial counsel for

DeLitta. Yet he did not appear as counsel in this interlocutory appeal.

ii

TABLE OF CONTENTS

Identity of Parties and Counsel............................................................................................. ii

Table of Contents .................................................................................................................. iii

Index of Authorities ............................................................................................................... v

Statement of the Case .......................................................................................................... vii

Statement Regarding Oral Argument................................................................................ viii

Issues Presented..................................................................................................................... ix

Statement of Facts .................................................................................................................. 1

A. In this business dispute over the ownership of Axiom, Schaefer

asserts claims against her co-owner DeLitta for breach of fiduciary

duty for DeLitta’s repeated and ongoing self-dealing and

usurpation of corporate assets. ...................................................................... 1

B. Schaefer has already successfully sought temporary relief enjoining

DeLitta’s malfeasance, enforcing those prohibitions, and placing

the company in a partial receivership............................................................ 2

C. Axiom is a medical consulting company that provides injury

management and medical advice concerning work-related

accidents. .......................................................................................................... 3

D. DeLitta, Axiom’s “Medical Director,” is not a medical doctor. ................ 3

E. Yet DeLitta unabashedly portrays himself, professionally and

personally, as “Dr. DeLitta.”.......................................................................... 4

F. DeLitta’s fake persona is effective: clients and employees believe

he is a medical doctor. .................................................................................... 7

G. DeLitta justifies the title because he obtained a “Ph.D.” in

psychology from a diploma mill. ................................................................... 8

H. The trial court correctly determined that use of the title “Dr.

DeLitta” is highly misleading when used by a “medical director” of

a company in a medical-related industry and that enjoining DeLitta

from doing so was necessary to protect Axiom’s corporate assets

pending final resolution of this lawsuit......................................................... 8

iii

Standard of Review .............................................................................................................. 10

Summary of Argument ........................................................................................................ 11

Argument ............................................................................................................................... 11

I. DeLitta misleads the Court by suggesting Schaefer asserts a statutory cause of

action under the Occupation Code......................................................................... 11

A. The trial court’s injunction is based on Schaefer’s probable right to

recover on her breach of fiduciary claims—a claim DeLitta does

not even challenge. ........................................................................................ 12

B. Violations of the Occupations and Penal Codes are the conduct

enjoined, not the cause of action asserted, and prohibiting that

misconduct is necessary to preserve the status quo of Axiom as a

reputable entity free from civil and criminal liability. ............................... 13

C. There is ample evidence to support the trial court’s determination

that DeLitta was fraudulently holding himself out as a medical

doctor. ............................................................................................................. 16

II. The trial court did not abuse its discretion in determining that DeLitta’s

fraudulent conduct threatened Axiom with imminent harm............................... 19

Conclusion............................................................................................................................. 23

Certificate of Compliance .................................................................................................... 25

Certificate of Service ............................................................................................................ 25

iv

INDEX OF AUTHORITIES

Cases

Butnaru v. Ford Moter Co.,

84 S.W.3d 198 (Tex. 2002) ...........................................................................10, 19, 23

Canteen Corp. v. Republic of Tex. Props., Inc.,

773 S.W.2d 398 (Tex. App.—Dallas 1989, no writ) ............................................. 11

City of Houston v. Mem’l Bend Util. Co.,

331 S.W.2d 418 (Tex. Civ. App.—Houston 1960, writ ref’d n.r.e.) ................... 20

Davis v. Huey,

571 S.W.2d 859 (Tex.1978) ................................................................................ 10, 23

Downer v. Aquamarine Operators, Inc.,

701 S.W.2d 238 (Tex. 1985)..................................................................................... 10

Ebony Lake Healthcare Ctr. v. Texas Dep’t of Human Servs.,

62 S.W.3d 867 (Tex. App.—Austin 2001, no pet.) ............................................... 22

ERI Consulting Eng’rs, Inc. v. Swinnea,

318 S.W.3d 867 (Tex. 2010)..................................................................................... 23

Featherstone v. Indep. Serv. Stations Ass’n,

10 S.W.2d 124 (Tex. App.—Dallas 1928, writ denied) ........................................ 13

Franklin Sav. Ass’n v. Reese,

756 S.W.2d 14 (Tex. App.—Austin 1988, no writ) .............................................. 12

Frequent Flyer Depot, Inc. v. Am. Airlines, Inc.,

281 S.W.3d 215 (Tex. App.—Fort Worth 2009, pet. denied) ............................. 19

Jenkins v. Transdel Corp.,

No. 03-04-00033-CV, 2004 WL 1404364 (Tex. App.—Austin June 24,

2004, no pet.) ............................................................................................................. 18

Jim Rutherford Inv., Inc. v. Terramar Beach Cmty. Ass’n,

25 S.W.3d 845 (Tex. App.—Houston [14th Dist.] 2000, pet. denied) ............... 20

Keightley v. Republic Ins. Co.,

946 S.W.2d 124 (Tex. App.—Austin 1997, no writ) ............................................ 23

Operation Rescue Nat’l v. Planned Parenthood of Houston,

937 S.W.2d 60 (Tex. App.—Houston [14th Dist.] 1996, writ denied)............... 22

v

Pydia, Inc. v. State,

212 S.W.3d 513 (Tex. App.—Austin 2006, no pet.) ............................................. 10

R & R Res. Corp. v. Echelon Oil & Gas, L.L.C.,

No. 03-05-00479-CV, 2006 WL 66458 (Tex. App.—Austin Jan. 10,

2006, no pet.) ............................................................................................................. 22

Rattikin Title Co. v. Grievance Committee,

272 S.W.2d 948 (Tex. Civ. App.—Fort Worth 1954, no writ)............................ 20

T&R Assocs., Inc. v. City of Amarillo,

601 S.W.2d 178 (Tex. Civ. App.—Amarillo 1980, no writ)................................. 21

T–N–T Motorsports, Inc. v. Hennessey Motorsports, Inc.,

965 S.W.2d 18 (Tex. App.—Houston [1st Dist.] 1998, pet. dism’d) .................. 11

Universal Health Servs. v. Thompson,

24 S.W.3d 570 (Tex. App.—Austin 2000, no pet.) ............................................... 13

Statutes

TEX. OCC. CODE §101.201 .................................................................................................. 14

TEX. OCC. CODE §204.201 .................................................................................................... 4

TEX. OCC. CODE §204.202 .................................................................................................... 4

TEX. OCC. CODE §204.204 .................................................................................................... 4

TEX. OCC. CODE §204.302 .............................................................................................. 4, 14

TEX. PENAL CODE §32.52 ................................................................................................... 15

vi

STATEMENT OF THE CASE

Nature of the Case: The underlying suit is a business dispute between business

partners Michael DeLitta and Nancy Schaefer over the

ownership and management of Axiom Medical Consulting,

LLC (“Axiom”). On December 12, 2014, Appellee filed a

Verified Application for Temporary Injunction seeking to

prohibit Appellant from representing himself as a medical

doctor. 2

Trial Court: The Honorable Orlinda Naranjo, 201st District Court,

Travis County, Texas.

Trial Court Disposition: After an evidentiary hearing, Judge Naranjo entered a

Temporary Injunction Order,3 which was amended by

agreement (and without substantive change) on April 29,

2015. 4

2

CR323–59.

3

CR624–31.

4

CR632–38.

vii

STATEMENT REGARDING ORAL ARGUMENT

Appellant has waived his right to oral argument in this appeal. Appellee agrees

that oral argument is not necessary for the Court to fully understand and properly

resolve this interlocutory appeal.

viii

ISSUES PRESENTED

1. In a business dispute about the ownership and mismanagement of a medical

consulting company, does a trial court abuse its discretion by enjoining the CEO from

misleading others into falsely believing he is a medical doctor to prevent harm to the

company’s reputation and to protect the company from potential civil and criminal

liability?

ix

STATEMENT OF FACTS

A. In this business dispute over the ownership of Axiom, Schaefer asserts

claims against her co-owner DeLitta for breach of fiduciary duty for

DeLitta’s repeated and ongoing self-dealing and usurpation of corporate

assets.

This is a business dispute over the ownership and management of Axiom

Medical Consulting, LLC. 5 DeLitta and Schaefer partnered to form the company in

1999. 6 Over a decade later, the relationship between the two owners deteriorated and,

in September 2013, DeLitta started taking drastic measures to unilaterally push Schaefer

out of the company and undermine her goodwill within the company.7

Schaefer sued.8 Schaefer claims, among other things, that DeLitta breached oral

and written contracts, committed fraud, and breached his fiduciary duties to her and to

the company.9 Her fiduciary claims include allegations that Delitta is depriving her of

her 50% ownership in Axiom and her rights as a member and manager of Axiom, and

that DeLitta is engaging in self-dealing to the detriment of Axiom, including unilaterally

refusing to implement the resolutions of the Board and misusing corporate assets for

his personal benefit.10 Schaefer also asserts a claim for negligent misrepresentation

because DeLitta provided false information for the guidance of others.11

5

CR125–27.

6

CR400.

7

CR403–04.

8

CR3.

9

CR409–17.

10

CR413–14.

11

CR414.

1

B. Schaefer has already successfully sought temporary relief enjoining

DeLitta’s malfeasance, enforcing those prohibitions, and placing the

company in a partial receivership.

Upon filing suit, Schaefer immediately sought and received a temporary

restraining order enjoining DeLitta from interfering with her access to and position in

the company.12 Eventually, the parties entered into an Agreed Temporary Injunction.

The Agreed Injunction prohibited the parties from undertaking certain acts, similar to

the TRO, and also obligated the parties to file a joint motion for appointment of a

provisional member to break deadlock between Schaefer and DeLitta.13

Unfortunately, the Court is intimately familiar with this litigation from this point.

This is the fifth appeal that DeLitta has filed. Four of those appeals were attempted

interlocutory appeals.14 One was a mandamus proceeding. 15 None have been

successful.16 And, in addition to this appeal, one other remains pending before the

Court.17

DeLitta’s intentional, willful, and repeated self-dealing and violations of the

injunction—which harm both Schaefer and Axiom—have gotten so bad that the trial

12

CR405.

13

Id.

14

See No. 03-15-00280-CV (this appeal); No. 03-14-000425-CV (appeal of order appointing receiver);

No. 03-14-00426-CV (appeal of an order enforcing the terms of agreed temporary injunction); No.

03-15-00085-CV (appeal of order refusing to dissolve agreed temporary injunction).

15

No. 03-14-00423-CV (original proceeding seeking to declare agreed temporary injunction void).

16

No. 03-14-00423-CV (original proceeding seeking to declare injunction void, denied on July 11,

2014); No. 03-14-00426-CV (appeal of an order enforcing the terms of the injunction dismissed for

lack of jurisdiction on November 6, 2014); No. 03-14-000425-CV (appeal of order appointing a

receiver over Axiom dismissed for failure to prosecute on October 17, 2014).

17

No. 03-15-00085-CV (appeal of order refusing to dissolve agreed temporary injunction).

2

court was forced to appoint a receiver over Axiom’s finances and books and to

disqualify DeLitta’s attorneys from jointly representing Axiom and DeLitta to

adequately protect Axiom’s interests.18 The case is set for trial on October 26, 2015.19

C. Axiom is a medical consulting company that provides injury management

and medical advice concerning work-related accidents.

Axiom is a medical consulting company.20 The company provides injury

management for work-related and personal injuries for oil and gas companies.21 Axiom

advertises that it “employs Doctors, Physician Assistants, Registered Nurses, and a

specially trained support staff to provide a full suite of medical management services,

ranging from work-related injury case management to a multitude of customizable exam

programs.”22 It allows employees and employers “immediate access to [a] medical

professional 24/7 for [employment-related] injuries.”23

D. DeLitta, Axiom’s “Medical Director,” is not a medical doctor.

DeLitta serves as both CEO and “Medical Director” of Axiom. DeLitta,

however, is not a medical doctor. He is a physician’s assistant. As a condition to his

licensure, DeLitta must be continuously supervised by a supervising physician and is

18

CR410.

19

CR635.

20

2RR56.

21

CR400.

22

CR324.

23

3RRPX2.

3

prohibited from providing any medical services unless his supervising physician

delegates services for him to perform.24

A physician’s assistant is expressly prohibited from “falsely represent[ing] that

the person is a physician” or from acting “in a unprofessional or dishonorable manner

that is likely to deceive, defraud, or injure the public.”25 These prohibitions are stated

in a section entitled “Conduct Related to Fraud or Misrepresentation.”26

E. Yet DeLitta unabashedly portrays himself, professionally and personally,

as “Dr. DeLitta.”

Despite these statutory prohibitions against a physician’s assistant misleading

others into believing he is a medical doctor, until recently, Axiom’s marketing materials

stated that it “is a privately owned company established in 1999 by its CEO Dr. Michael

J. DeLitta” and whose “mission” is “to transform Occupational Medicine.”27

28

24

TEX. OCC. CODE §§204.201, 204.202, 204.204.

25

Id. §204.302(3), (4).

26

Id.

27

3RRPX3.

28

3RRPX2.

4

DeLitta maintains business cards that incorporate caduceus, the modern symbol

of medicine, and refer to “Dr. Michael J. DeLitta.”

29

DeLitta has opened a credit card account as “Michael J. DeLitta MD.”

30

29

3RRPX5.

30

3RRPX1.

5

DeLitta has posed as a “doctor” for so long that he has become self-delusional.

His vanity license plates say it all:

31

These plates are undoubtedly shorthand for “Occupational Doctor,”32 as the

court found,33 since DeLitta has worked in the occupational medicine field for

multiple decades. He maintains a similar email address: occdoc66@hotmail.com.34

31

3RRPX7.

32

2RR50, 56.

33

CR625.

34

2RR56, 58, 59-60 (occupational medicine field); 2RR50 (email).

6

F. DeLitta’s fake persona is effective: clients and employees believe he is a

medical doctor.

These public representations by DeLitta have left the impression to those in his

work environment that DeLitta is a medical doctor. Schaefer alerted DeLitta of the

false impression he was creating as early as 2010. 35 Since then, several former Axiom

employees have also sounded warnings about DeLitta’s misleading conduct. Ashley

Santoro, a registered nurse who was employed by Axiom for over two years, expressed

concern about the issue in her resignation letter:

I am also concerned over the fact we also are told to lie to our clients

about Dr. Mike DeLitta. Although, he has a doctorate degree - it is not in

medicine. He is not a medical physician but a Physician’s Assistant. I was

told to never tell this to our clients and we are always to say “Dr. DeLitta”

when speaking about him to keep up the image. Axiom does not want

anyone to know he is not a medical physician as he solicits himself to our

clients as. 36

Former Axiom employee Shane Enochs, also a registered nurse, offered similar

testimony at the hearing on the temporary injunction. He testified that DeLitta used

the title “Doctor” both orally and in writing in connection with his employment with

Axiom. 37 Staff members regularly introduced him, both in staff meetings and in

presentations to clients, as “Dr. Michael DeLitta.”38 He never corrected or clarified that

his title as “doctor” referenced a psychology degree and not a medical degree.39 Mr.

35

3RRDX21.

36

CR351–52.

37

2RR29.

38

2RR29.

39

2RR30, 34.

7

Enochs was convinced, based on his observations of how people reacted to DeLitta,

that using the title “doctor” was misleading people into falsely believing DeLitta was a

medical doctor. 40 Even Enochs was misled. He testified that he himself thought

DeLitta was a medical physician his first year at Axiom.41

G. DeLitta justifies the title because he obtained a “Ph.D.” in psychology

from a diploma mill.

Although he is not a medical doctor, DeLitta does have a “Ph.D.” from Newport

University, a web-based “education institution.” 42 Now defunct, “Newport University

was not accredited by any higher education accreditation organization by the United

State Department of Education or the Council for Higher Education Accreditation.” 43

The Texas Higher Education Coordinating Board lists Newport University as an

institution that issues “fraudulent or substandard degrees.”44

H. The trial court correctly determined that use of the title “Dr. DeLitta” is

highly misleading when used by a “medical director” of a company in a

medical-related industry and that enjoining DeLitta from doing so was

necessary to protect Axiom’s corporate assets pending final resolution of

this lawsuit.

Deeply concerned that DeLitta was holding himself out as a medical doctor and

misleading others as to his qualifications, Schaefer filed a verified application for a

40

2RR30.

41

2RR34.

42

3RRDX1.

43

3RRDX1. Newport University appears on numerous lists of institutions known informally as

“diploma mills.” CR347–48.

44

CR349–50. DeLitta tried to convince the trial court that the “Newport University” listed here is

not the same institution that issued his “Ph.D.,” but this Court must view the evidence most favorably

in support of the judgment.

8

temporary injunction on December 12, 2014.45 The application was heard on April 15,

2015. 46 The Honorable Orlinda Naranjo presided over the evidentiary hearing.47

On April 22, 2015, the trial court signed a temporary injunction enjoining

DeLitta from using the title “Doctor,” “Dr.,” or M.D. in any context and removing any

reference to the term Dr. or M.D. from Axiom marketing materials.48 The trial court

emphasized that “[b]ecause Axiom is a medical consulting company and provides

medical advice, there is a substantial likelihood that DeLitta’s use of the ‘Dr.’ title could

mislead others into believing that he is a medical doctor.” 49 As to harm, the trial court

found that DeLitta’s fraudulent conduct “is causing immediate and irreparable harm to

Axiom’s reputation and may subject Axiom to civil and criminal liability thereby

diminishing its value and causing damages that are not quantifiable.”50 This harm, the

trial court found, harms Axiom’s reputation, not only with its customers and employees

but also within the medical industry, and makes Axiom a party to false advertising and

complicit in DeLitta’s wrongful conduct.”51

The temporary injunction was later amended, by agreement, to correct the trial

date.52 This appeal followed.53

45

CR323–59.

46

2RR1.

47

Id.

48

CR624–28.

49

CR625.

50

CR625.

51

CR626.

52

CR632.

53

CR642–45.

9

STANDARD OF REVIEW

Whether to grant or deny an injunction is within a trial court’s discretion. Butnaru

v. Ford Moter Co., 84 S.W.3d 198, 204 (Tex. 2002). The test for abuse of discretion is

not whether, in the reviewing court’s opinion, the trial court’s action was appropriate.

Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241 (Tex. 1985). Instead, the

reviewing court must determine whether the trial court acted without reference to any

guiding rules and principles, or in an arbitrary or unreasonable manner. Id. That a trial

judge decided the matter in a different manner than an appellate judge would does not

demonstrate an abuse of discretion. Id.

An abuse of discretion does not occur where the trial court bases its decision on

conflicting evidence. Davis v. Huey, 571 S.W.2d 859, 862 (Tex.1978). An appellate court

must view the evidence in the manner most favorable to the trial court’s decision,

indulging every reasonable inference in its favor. Pydia, Inc. v. State, 212 S.W.3d 513,

516–17 (Tex. App.—Austin 2006, no pet.). The trial court does not abuse its discretion

if some evidence reasonably supports its decision. Butnaru, 84 S.W.3d at 211.

To obtain a temporary injunction, the applicant must plead and prove three

specific elements: (1) a cause of action against the defendant; (2) a probable right to the

relief sought; and (3) a probable, imminent, and irreparable injury in the interim. Id. at

204. A probable right of success on the merits is shown by alleging a cause of action

and introducing evidence that tends to sustain it. T–N–T Motorsports, Inc. v. Hennessey

Motorsports, Inc., 965 S.W.2d 18, 23–24 (Tex. App.—Houston [1st Dist.] 1998, pet.

10

dism’d). An injury is irreparable if the injured party cannot be adequately compensated

in damages or if the damages cannot be measured by any certain pecuniary standard.

Canteen Corp. v. Republic of Tex. Props., Inc., 773 S.W.2d 398, 401 (Tex. App.—Dallas 1989,

no writ).

SUMMARY OF ARGUMENT

DeLitta is not a medical doctor, but he uses the title “doctor” in a way that leads

the employees and customers of his medical consulting company to falsely believe that

he is. Materials that market the company’s occupational medical services refer to him

as “Dr. Michael J. DeLitta.” So do his business cards. He opened a credit card as

“Michael J. DeLitta, MD” and even owns a car with “OCC DOC” vanity plates.

DeLitta’s conduct is not just misleading; it is against the law. The trial court was

reasonable to conclude that DeLitta’s fraudulent conduct is causing irreparable harm to

the Axiom Companies’ reputation and subjecting Axiom to civil and criminal liability,

thereby diminishing the companies’ value and thus Schaefer’s financial interest.

ARGUMENT

I. DeLitta misleads the Court by suggesting Schaefer asserts a statutory

cause of action under the Occupation Code.

The entire premise of DeLitta’s appeal is a conjured issue with no basis in this

record. All but two pages of DeLitta’s argument is spent attempting to convince the

Court that Schaefer has “no standing” to seek an injunction because “no private civil

cause of action exists” under the Occupations and Penal Code provisions that the trial

11

court found DeLitta was violating.54 As such, he argues, Schaefer cannot show two

necessary elements for obtaining an injunction: (1) a cause of action against the

defendant, and (2) a probable right to the relief sought.55

A. The trial court’s injunction is based on Schaefer’s probable right to recover

on her breach of fiduciary claims—a claim DeLitta does not even

challenge.

Schaefer did not (and need not) plead and prove a statutory “cause of action”

under the Occupations and Penal Codes. The cause of action on which Schaefer will

probably obtain relief is her claims that DeLitta breached his fiduciary duties to Axiom,

committed fraud, and provided false information for the guidance of others. This is

the wrongful conduct that forms the basis of the trial court’s injunction. Franklin Sav.

Ass’n v. Reese, 756 S.W.2d 14, 16 (Tex. App.—Austin 1988, no writ) (temporary

injunction applicant need only establish probable recovery on one cause of action).

Importantly, DeLitta never challenged the assertion that Schafer will probably

recover on these claims. On appeal, too, his brief is silent as to these causes of action.

DeLitta was forced to conjure up a cause of action because Schaefer so easily

met her burden to show viable claims against him. In fact, Schaefer has already

successfully sought temporary relief enjoining DeLitta’s malfeasance, enforcing those

prohibitions, and placing the company in a partial receivership.56 The trial court was

54

Appellant’s Br. at 17.

55

Appellant’s Br at 16–18 (Section 1, no cause of action under Occupations Code), 18–21 (Section 2,

no probable recovery under Occupations and Penal Codes).

56

See supra at 2 (Statement of Facts, Section B).

12

reasonable to conclude that Schaefer met her burden of showing a viable cause of action

for breach of fiduciary duty. See Universal Health Servs. v. Thompson, 24 S.W.3d 570, 576

(Tex. App.—Austin 2000, no pet.) (applicant need not prove that she will ultimately

prevail in the litigation, only that she has a cause of action for which relief may be

granted). And a civil court maintains jurisdiction to enjoin a statutory offense incident

to a proper injunction. See, e.g., Featherstone v. Indep. Serv. Stations Ass’n, 10 S.W.2d 124

(Tex. App.—Dallas 1928, writ denied).

B. Violations of the Occupations and Penal Codes are the conduct enjoined,

not the cause of action asserted, and prohibiting that misconduct is

necessary to preserve the status quo of Axiom as a reputable entity free

from civil and criminal liability.

Although the injunction was not based on a statutory cause of action, the

Occupations Code and Penal Code did play a role in the trial court’s decision to enter

the injunction. Texas law does prohibit an individual from holding himself out as a

medical doctor. As a PA, DeLitta also faces regulatory action, including forfeiture of

his license. If DeLitta’s conduct continued, Axiom faced civil penalties and third-party

liability. At the time the injunction was sought, Axiom had not been cited or sued for

DeLitta’s egregious conduct. Thus, the injunction preserved the status quo by ensuring

that Axiom would remain free from civil and criminal liability for DeLitta’s misconduct.

DeLitta’s conduct threatened both him and Axiom of civil penalties. DeLitta is

a Texas-licensed physician’s assistant (“PA”). As such, he is governed by the Texas

Physician Assistant Board and Chapter 204 of the Texas Occupations Code. His license

13

imposes a specific obligation for him to avoid confusion over this training. A PA that

commits any of the following acts can face civil and criminal liability:

• falsely represents that the person is a physician;

• acts in an unprofessional or dishonorable manner that is likely to deceive,

defraud, or

• injure the public; -unlawfully advertises in a false, misleading, or deceptive

manner, as described by Section 101.201.

TEX. OCC. CODE §§204.302(3), 302(4), and 302(8) (“Conduct Related to Fraud or

Misrepresentation”).

The Occupations Code also prohibits false, misleading, or deceptive advertising

by certain professionals, including PAs:

(a) A person may not use advertising that is false, misleading, deceptive, or

not readily subject to verification.

(b) False, misleading, or deceptive advertising or advertising not readily

subject to verification includes advertising that:

(1) makes a material misrepresentation of fact or omits a fact necessary

to make the statement as a whole not materially misleading;

(5) causes confusion or misunderstanding as to the credentials,

education, or licensing of a health care professional;

or

(9) represents in the use of a professional name a title or professional

identification that is expressly or commonly reserved to or used by

another profession or professional.

TEX. OCC. CODE §101.201.

14

Finally, Texas makes it a crime for DeLitta to use his claimed Ph.D. (i.e., to refer

to himself as a “doctor”) to promote a business or to obtain employment, compensation

or other benefit in employment or in the practice of a trade. TEX. PENAL CODE §32.52.

These statutes were clearly designed to prevent the type of confusion that

DeLitta is causing by calling himself a “doctor” (based on a phony Ph.D. in psychology)

while he is engaged in a medical consulting business where he allegedly supervises

nurses. But, more to the point, DeLitta’s flagrant violations of these statutes has serious

potential consequences to Axiom. The consequences range from revocation of

DeLitta’s physician’s assistant license to civil penalties, enforcement actions by the

Texas Attorney General, and remedies under Chapter 17 of the Texas Deceptive Trade

Practices Act. Given DeLitta’s role as CEO and co-founder of Axiom, his conduct

makes the company itself a party to false advertising and complicit in DeLitta’s crime.

Enjoining DeLitta from continuing to violate these provisions was necessary to

maintain the status quo and to protect the rights and interests of Schaefer in the

business and the property of the Axiom Companies. The injunction prevents any

dissipation or diminution of the business and the property of the Axiom Companies,

which is the very heart of this lawsuit. It also protects the devastation to Axiom’s

reputation should the industry learn that the company’s CEO and Medical Director was

investigated, fined, or stripped of his PA license for fraud and false advertising.

15

C. There is ample evidence to support the trial court’s determination that

DeLitta was fraudulently holding himself out as a medical doctor.

DeLitta also implies that the trial court erred in finding that his conduct does not

violate the Occupations and Penal Code provisions. 57 The trial court was not required

to do so. In fact, the injunction does not even reference those statutes. And rightly so.

Even if there was no statutory prohibition against an individual holding himself out to

be a medical doctor when he is not one, a trial court would be reasonable in enjoining

that misconduct as fraudulent and misleading and likely to subject a company to

reputational harm and third-party liability. The fact that the Legislature has expressly

labeled this misconduct as fraudulent and misleading simply amplifies the impropriety

of DeLitta’s actions.

And the evidence is overwhelming that DeLitta is misleading others into

believing he is a medical doctor when he is not. The first sentence of the company’s

online brochure refers to DeLitta as “Dr. Michael J. DeLitta.” The brochure does not

include the initials “Ph.D.” DeLitta maintains business cards as “Dr. Michael J.

DeLitta.” Again, the cards do not include the initials “Ph.D.” But they do incorporate

caduceus, the modern symbol of medicine.

Several former Axiom employees have sounded warnings about DeLitta’s

misleading conduct. Ashley Santoro, a registered nurse who was employed by Axiom

for over two years, cited DeLitta’s fraudulent conduct in a scathing resignation letter:

57

Appellant’s Br. at 17–18.

16

I am also concerned over the tact we also are told to lie to our clients

about Dr. Mike DeLitta. Although, he has a doctorate degree - it is not in

medicine. He is not a medical physician but a Physician’s Assistant. I was

told to never tell this to our clients and we are always to say “Dr. DeLitta”

when speaking about him to keep up the image. Axiom does not want

anyone to know he [isl not a medical physician as he solicits himself to our

clients as. 58

Former Axiom employee Shane Enochs, who is also a registered nurse, testified

before the trial court that he witnessed similar conduct from DeLitta. He testified that

DeLitta used the title “Doctor” both orally and in writing in connection with his

employment with Axiom. 59 Staff members regularly introduced him, both in staff

meetings and in presentations to clients, as “Dr. Michael DeLitta.”60 He never corrected

or clarified that his title as “doctor” referenced a psychology degree and not a medical

degree.61 Mr. Enochs was convinced, based on his observations of how people reacted

to DeLitta, that using the title “doctor” was misleading people into falsely believing

DeLitta was a medical doctor. 62 Enochs himself was misled. He testified that he worked

at Axiom for over a year before he learned that DeLitta was not a medical physician. 63

Enochs’ testimony supports Schaefer’s belief that Axiom’s employees and customers

are unaware that DeLitta is not a medical doctor.64

58

CR351–52.

59

2RR29.

60

2RR29.

61

2RR30, 34.

62

2RR30.

63

2RR34.

64

2RR86.

17

DeLitta has convinced himself that because he does not use the initials “M.D.”

that he is not holding himself out as a medical doctor. 65 But the record evidence shows

DeLitta opened a credit card account as “Michael J. DeLitta MD.” He claims now that

this is a “personal” credit card, not a business card, issued by “mistake.”66 But the trial

court was reasonable to dismiss this attempt to explain away damning evidence as not

credible and to infer from these credit card records that DeLitta intended to falsely

portray himself as a medical doctor. DeLitta’s “OCC DOC” vanity license plates make

this inference all the more reasonable.

In any event, DeLitta’s technical distinction between a Ph.D. and M.D. might be

more persuasive if DeLitta worked in a non-medical field. But DeLitta is the CEO and

“Medical Director” of medical consulting company that provides injury management

for work-related injuries in the oilfield. The company provides direct access to medical

professionals. In this context, it was reasonable for the trial court to determine that

DeLitta’s use of the title “Dr.” could mislead others into believing that he is a medical

doctor. 67 Jenkins v. Transdel Corp., No. 03-04-00033-CV, 2004 WL 1404364, at *5 (Tex.

App.—Austin June 24, 2004, no pet.) (restraints must be viewed in broader context of

the parties’ dispute). Because there is some evidence to support that finding, the trial

65

Appellant’s Br. at 19 (arguing that none of the misleading marketing materials “state that DeLitta is

a medical doctor or M.D.”).

66

Appellant’s Br. at 21.

67

CR633 (injunction concluding that “[b]ecause Axiom is a medical consulting company and provides

medical advice, there is a substantial likelihood that DeLitta’s use of the “Dr.” title could mislead

others into believing that he is a medical doctor.”).

18

court did not abuse its discretion in making this factual determination. Butnaru, 84

S.W.3d at 211.

II. The trial court did not abuse its discretion in determining that DeLitta’s

fraudulent conduct threatened Axiom with imminent harm.

DeLitta also challenges the trial court’s determination that DeLitta must be

enjoined from falsely representing himself as a medical doctor to protect the Axiom

Companies from imminent harm. Importantly, DeLitta does not dispute the fact that

harm to an entity’s business reputation and goodwill is the type of harm that cannot be

easily measured and thus is “irreparable” at law. See, e.g., Frequent Flyer Depot, Inc. v. Am.

Airlines, Inc., 281 S.W.3d 215 (Tex. App.—Fort Worth 2009, pet. denied). He asserts

only that the threat to the Axiom Companies was nothing more than “fear and

apprehension of injury” that is too “speculative” to support a temporary injunction.68

The threat to Schaefer’s interest in the Axiom Companies is more than just “fear

and apprehension of injury.” DeLitta himself testified that this kind of misconduct

poses a real threat to a company like Axiom:

Q. Okay. And by the way, you would agree that if the company is—

and this is a hypothetical—if it’s using false or misleading designations

and they are doing something false or misleading or against the law, that

that can harm the company, correct?

A. Let me see if I understand your question. If the company is doing

something that’s illegal, would it harm the company?

Q. Yes.

68

Appellant’s Br. at 22–23.

19

A. Of course, it would . 69

Yet DeLitta defiantly testified that he will not stop his fraudulent conduct:

Q. Are you willing to just agree that you will not use the Doctor

designation in front of your name anymore?

A. No, I won’t agree with that.70

A trial court must be given broad discretion to find imminent harm sufficient

when the evidence shows the party to be enjoined intends to do an act that is illegal and

fraudulent. Cf. Jim Rutherford Inv., Inc. v. Terramar Beach Cmty. Ass’n, 25 S.W.3d 845, 849

(Tex. App.—Houston [14th Dist.] 2000, pet. denied) (explaining that a movant seeking

a temporary injunction to enforce a restrictive covenant need only prove that the

defendant intends to do an act that would breach the restrictive covenant). In fact,

Texas courts have held that a trial court has a duty to enjoin illegal conduct. City of

Houston v. Mem’l Bend Util. Co., 331 S.W.2d 418, 422 (Tex. Civ. App.—Houston 1960,

writ ref’d n.r.e.) (emphasizing that where “a party is violating the substantive law, it

becomes the duty of the court to enjoin the violation. In such case there is no discretion

to be exercised.”); Rattikin Title Co. v. Grievance Committee, 272 S.W.2d 948, 955 (Tex. Civ.

App.—Fort Worth 1954, no writ) (“[W]hen it is determined that the law is being

violated it is the province and the duty of the court to restrain it . . ., for no man may

69

2RR77 (emphasis added).

70

2RR78.

20

engage in actions in violation of the statutory law.”); T&R Assocs., Inc. v. City of Amarillo,

601 S.W.2d 178, 180 (Tex. Civ. App.—Amarillo 1980, no writ) (holding that if the law

is being violated, it is the duty of the court to restrain it, and a temporary injunction is

an appropriate remedy).

In any event, the trial court was presented with evidence of imminent harm.

Already, DeLitta’s flagrantly misleading conduct has harmed the Axiom Companies.

The record evidence shows that a nurse resigned, in part, because DeLitta misleads

others into believing he is a medical physician as a means of soliciting clients. 71

Moreover, former employee Enochs’ testimony painted a picture of DeLitta who

flagrantly violated licensing rules and regulations.72 He testified that DeLitta encouraged

him to violate the law by using his medical nursing training in states where he was not

licensed.73 Enochs was terminated for refusing to violate the law in this way. 74

The trial court was reasonable to conclude that this evidence suggests a course

of conduct that supports the likelihood of injury. “In making its determination of

imminent harm, the trial court may determine that, when violations are shown up to or

near the date of trial, the defendant has engaged in a course of conduct and the court

may assume that it will continue, absent clear proof to the contrary.” See Operation Rescue

71

CR351–52.

72

2RR31 (testifying that DeLitta encouraged Enochs to practice nursing in states where he was not

licensed).

73

2RR31.

74

2RR36.

21

Nat’l v. Planned Parenthood of Houston, 937 S.W.2d 60, 77 (Tex. App.—Houston [14th

Dist.] 1996, writ denied). “The probability of the continuation of the prohibited

practices is not subject to direct proof, and injunctive relief is proper when the trial

court finds it justified under the rules of equity, notwithstanding a defendant’s cessation

of the activity or promise to cease the activity.” Id. Moreover, a trial court may allow

less stringent proof of harm when a party offers strong evidence of her probable right

to relief. See Ebony Lake Healthcare Ctr. v. Texas Dep’t of Human Servs., 62 S.W.3d 867,

874 (Tex. App.—Austin 2001, no pet.) (“In weighing these two elements, we apply a

‘sliding scale’ under which clear evidence establishing one of the elements will result in

a less stringent requirement of proof of the other element.”).

DeLitta’s fraudulent conduct goes to the very core of Axiom’s reputation,

competence and standing in the occupational medical field. The seriousness of these

former employees’ allegations (criminal and illegal conduct) evidence an immediate

threat to the Axiom Companies and its reputation within the medical community. The

trial court did not abuse its discretion in ordering it stopped. See R & R Res. Corp. v.

Echelon Oil & Gas, L.L.C., No. 03-05-00479-CV, 2006 WL 66458, at *7 (Tex. App.—

Austin Jan. 10, 2006, no pet.) (evidence of exposure to liability supported trial court

finding of harm).

Nor did the trial court abuse its discretion in rejecting DeLitta’s argument that

Schaefer’s alleged delay in seeking an injunction is evidence that there is no threat of

22

injury.75 Nurse Santoro’s scathing resignation letter, which was important evidence

supporting Schaefer’s petition for injunction, was dated June 201476—a mere six

months before this injunction was sought—and not immediately produced. 77 The trial

court could weigh this evidence against DeLitta’s accusations of delay to decide that the

injunction was timely sought and the harm imminent. It is not this Court’s role to

reweigh the evidence presented below. Davis, 571 S.W.2d at 862. As long as some

evidence supports the trial court’s decision, the Court must affirm. Butnaru, 84 S.W.3d

at 211.

CONCLUSION

For these reasons, Appellee asks that the Court to affirm the trial court’s order.

Appellee seeks any other relief to which she may be entitled.

75

Appellant’s Br. at 22. DeLitta suggests, in a single line with no authority, that Schaefer waived her

right to seek injunctive relief. Id. at 23 (“The delay . . . shows acquiescence and works as a waiver.”).

But DeLitta never raised this equitable defense below. See Keightley v. Republic Ins. Co., 946 S.W.2d 124,

126 (Tex. App.—Austin 1997, no writ) (waiver must be raised in trial court). And, in any event, this

Court should reject the argument as not properly briefed. See ERI Consulting Eng’rs, Inc. v. Swinnea, 318

S.W.3d 867, 880 (Tex. 2010) (party waives points not adequately briefed).

76

CR351.

77

2RR91.

23

Dated: July 20, 2015 Respectfully submitted,

/s/Lisa Bowlin Hobbs

Donald R. Taylor Lisa Bowlin Hobbs

State Bar No. 19688800 State Bar No. 24026905

dtaylor@taylordunham.com Lisa@KuhnHobbs.com

Stacey Reese (Of Counsel) Kurt Kuhn

State Bar No. 24056188 State Bar No. 24002433

stacey@reeselawpractice.com Kurt@KuhnHobbs.com

TAYLOR DUNHAM & RODRIGUEZ LLP KUHN HOBBS PLLC

301 Congress Avenue, Suite 1050 3307 Northland Drive, Suite 310

Austin, Texas 78701 Austin, Texas 78731

(512) 473-2257 (512) 476-6003

(512) 478-4409 (fax) (512) 476-6002 (fax)

Howard F. Carter, Jr.,

State Bar No. 03916500

sam@scarterlawfirm.com

HOWARD F. CARTER, JR., P.C.

5600 Tennyson Parkway, Suite 160

Plano, Texas 75024

(972) 455-2001

(972) 455-2015 (fax)

COUNSEL FOR APPELLEE

24

CERTIFICATE OF COMPLIANCE

Pursuant to TEX. R. APP. P. 9.4, I hereby certify that this brief contains 5,181

words. This is a computer-generated document created in Microsoft Word, using 14-

point typeface for all text, except for footnotes which are in 12-point typeface. In

making this certificate of compliance, I am relying on the word count provided by the

software used to prepare the document.

/s/ Lisa Bowlin Hobbs

Lisa Bowlin Hobbs

CERTIFICATE OF SERVICE

I hereby certify that on July 20, 2015, I served a copy of this Brief of Appellee

on counsel of record electronically, in accordance with the Court’s rules on electronic

filing, as listed below:

Douglas R. Drucker via e-Service

Kirby D. Hopkins

DRUCKER | HOPKINS LLP

21 Watery Avenue, Suite 300

The Woodlands, TX 77380

Counsel for Appellant Michael J. DeLitta

Eric J. Taube via e-Service

HOHMANN, TAUBE & SUMMERS LLP

100 Congress Avenue, 18th Floor

Austin, Texas 78701

Counsel for the Axiom entities and Receiver/Provisional Member Jeff Compton

/s/ Lisa Bowlin Hobbs

Lisa Bowlin Hobbs

25

Butnaru v. Ford Motor Co., 84 S.W.3d 198 (2002)

45 Tex. Sup. Ct. J. 916

84 S.W.3d 198

Supreme Court of Texas.

Hanan BUTNARU and Gil Butnaru, Petitioners,

v.

FORD MOTOR COMPANY, Respondent.

No. 00–0513. | Argued Feb. 14, 2001. | Decided June 27, 2002.

Potential buyers of automobile dealership filed action asserting claims against dealership, its shareholder, and another potential

buyer for breach of purchase and sale agreements and claims against manufacturer for tortious interference. The 63rd Judicial

District Court, Val Verde County, George M. Thurmond, J., granted temporary injunction to prevent manufacturer from

exercising right of first refusal to buy dealership. Manufacturer appealed. The Court of Appeals, 18 S.W.3d 762, dismissed

appeal in part, dissolved temporary injunction, and remanded case. Potential buyers filed petition for review. The Supreme

Court, James A. Baker, J., held that: (1) amended provision of Motor Vehicle Commission Code granting Motor Vehicle Board

exclusive, original jurisdiction to regulate aspects of distribution, sale, and leasing of motor vehicles as governed by Code

constitutionally applied retroactively; (2) potential buyers' tortious interference and declaratory judgment claims fell outside

purview of Board's exclusive jurisdiction, but Board had primary jurisdiction over claims; and (3) trial court did not abuse its

discretion in issuing a temporary injunction.

Reversed and remanded.

West Headnotes (21)

[1] Injunction Preservation of status quo

A temporary injunction's purpose is to preserve the status quo of the litigation's subject matter pending a trial on the

merits.

144 Cases that cite this headnote

[2] Injunction Extraordinary or unusual nature of remedy

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

40 Cases that cite this headnote

[3] Injunction Issues, proof, and variance

To obtain a temporary injunction, the applicant must plead and prove three specific elements: (1) a cause of action

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

in the interim.

265 Cases that cite this headnote

[4] Injunction Irreparable injury

Injunction Adequacy of remedy at law

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1

Butnaru v. Ford Motor Co., 84 S.W.3d 198 (2002)

45 Tex. Sup. Ct. J. 916

Injunction Recovery of damages

An injury is irreparable, for purposes of a temporary injunction, if the injured party cannot be adequately compensated

in damages or if the damages cannot be measured by any certain pecuniary standard.

123 Cases that cite this headnote

[5] Injunction Discretionary Nature of Remedy

Whether to grant or deny a temporary injunction is within the trial court's sound discretion.

91 Cases that cite this headnote

[6] Appeal and Error Injunction

A reviewing court should reverse an order granting injunctive relief only if the trial court abused that discretion.

50 Cases that cite this headnote

[7] Appeal and Error Abuse of discretion

A reviewing court must not substitute its judgment for the trial court's judgment unless the trial court's action was so

arbitrary that it exceeded the bounds of reasonable discretion.

42 Cases that cite this headnote

[8] Antitrust and Trade Regulation Retroactive operation

Statutes Administrative agencies and proceedings

Statutes Trade or business

Amended provision of Motor Vehicle Commission Code granting Motor Vehicle Board exclusive, original

jurisdiction to regulate those aspects of the distribution, sale, and leasing of motor vehicles as governed by

Code constitutionally applied retroactively in action brought by potential buyers of automobile dealership against

dealership, its shareholder, and another potential buyer; amended provision was jurisdictional statute that did not alter

parties' rights or obligations or remove any available remedies, and parties did not have vested right in choosing what

tribunal would initially resolve all issues and claims governed by Code. Vernon's Ann.Texas Civ.St. art. 4413(36),

§ 3.01(a).

4 Cases that cite this headnote

[9] Antitrust and Trade Regulation Exclusive and Concurrent Remedies or Laws

Antitrust and Trade Regulation Exhaustion

Although amended provision of Motor Vehicle Commission Code granted Motor Vehicle Board exclusive, original

jurisdiction to regulate those aspects of the distribution, sale, and leasing of motor vehicles as governed by Code,

tortious interference and declaratory judgment claims asserted by potential buyers of automobile dealership against

dealership, its shareholder, and another potential buyer were not governed by Code and, thus, fell outside the purview

of the Board's exclusive jurisdiction, such that potential buyers did not have to exhaust any administrative remedies

before raising claims in trial court. Vernon's Ann.Texas Civ.St. art. 4413(36), § 3.01(a).

5 Cases that cite this headnote

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 2

Butnaru v. Ford Motor Co., 84 S.W.3d 198 (2002)

45 Tex. Sup. Ct. J. 916

[10] Torts Contracts in general

To establish their tortious interference claim, potential buyers of automobile dealership had to show: (1) a contract

for sale of dealership existed between them and dealership, its sole shareholder, and property owners; (2) dealership

willfully and intentionally interfered with that contract; (3) the interference proximately caused potential buyers

damage; and (4) buyers suffered actual damage or loss.

50 Cases that cite this headnote

[11] Torts Defense, justification or privilege in general

Defendant could defeat liability for tortious interference claim by proving the affirmative defense that its conduct was

privileged or justified, so long as that conduct was not illegal or tortious.

13 Cases that cite this headnote

[12] Antitrust and Trade Regulation Judicial remedies prior to or pending administrative proceedings

Motor Vehicle Board had primary jurisdiction over tortious interference and declaratory judgment claims asserted

by potential buyers of automobile dealership against dealership, its shareholder, and another potential buyer, which

claims raised Motor Vehicle Commission Code construction issue that was within Board's special competence and

expertise; thus, trial court should abate lawsuit and suspend finally adjudicating tortious interference and declaratory

judgment claims until Board had a reasonable opportunity to act on the matter. Vernon's Ann.Texas Civ.St. art.

4413(36), § 5.01B(d).

16 Cases that cite this headnote

[13] Constitutional Law Abrogation, modification, or recognition of remedies

State Constitution's open courts provision prohibits the Legislature from abrogating well-established, common-law

claims unless the reason for doing so outweighs a litigant's constitutional right of redress. Vernon's Ann.Texas Const.

Art. 1, § 13.

4 Cases that cite this headnote

[14] Antitrust and Trade Regulation Exclusive and Concurrent Remedies or Laws

Motor Vehicle Commission Code did not abrogate any previously existing common-law rights and, thus, trial court

had immediate jurisdiction to adjudicate common-law claims for breach of the purchase and sale agreements asserted

by potential buyers of automobile dealership against dealership, its shareholder, and another potential buyer. Vernon's

Ann.Texas Civ.St. art. 4413(36).

Cases that cite this headnote

[15] Antitrust and Trade Regulation Particular cases

Reliance by potential buyers of automobile dealership on general equitable principles did not relieve buyers of their

burden to show an inadequate legal remedy, in seeking temporary injunction against manufacturer's exercising its

right of first refusal to purchase dealership on the same terms and conditions as proposed buyers.

7 Cases that cite this headnote

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 3

Butnaru v. Ford Motor Co., 84 S.W.3d 198 (2002)

45 Tex. Sup. Ct. J. 916

[16] Antitrust and Trade Regulation Particular cases

Evidence that potential buyers of automobile dealership would lose not only their right to purchase real property, in

addition to the dealership, if manufacturer exercised its right of first refusal was sufficient to establish that potential

buyers had a probable right to recovery and that injunctive relief was necessary to preserve the status quo.

31 Cases that cite this headnote

[17] Injunction Contracts

Injunction Breaches in general

Generally, a court will not enforce contractual rights by injunction, because a party can rarely establish an irreparable

injury and an inadequate legal remedy when damages for breach of contract are available.

25 Cases that cite this headnote

[18] Appeal and Error Injunction

Under an abuse of discretion standard for reviewing an injunction, the court of appeals cannot overrule the trial court's

decision unless the trial court acted unreasonably or in an arbitrary manner, without reference to guiding rules or

principles.

91 Cases that cite this headnote

[19] Appeal and Error Substituting reviewing court's judgment

The court of appeals cannot substitute its judgment for the trial court's reasonable judgment even if it would have

reached a contrary conclusion.

8 Cases that cite this headnote

[20] Appeal and Error Reasonably supported findings

A trial court does not abuse its discretion if some evidence reasonably supports the trial court's decision.

157 Cases that cite this headnote

[21] Equity Property and rights therein in general

A trial court may grant equitable relief when a dispute involves real property.

1 Cases that cite this headnote

Attorneys and Law Firms

*200 Jonathan Scott Miles, Andrew L. Kerr, Holland & Knight LLP, San Antonio, Byron W. Hodge, Lowry Foster & Hodge,

Del Rio, Larry G. Berkman, Jenkens & Gilchrist, San Antonio, for Petitioner.

Paul S. Francis, Jon David Ivey, Baker & Hostetler, Alfred V. Sumpter, Oritz & Sumpter, Del Rio, for Respondent.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 4

Butnaru v. Ford Motor Co., 84 S.W.3d 198 (2002)

45 Tex. Sup. Ct. J. 916

Opinion

Justice BAKER delivered the opinion of the Court.

On December 6, 2001, we granted Ford's motion for rehearing. We withdraw our opinion dated July 7, 2001, and substitute

the following in its place.

In this case, we determine whether the Texas Motor Vehicle Board has exclusive jurisdiction over a prospective car dealership

transferees' claims that raise an issue about how to construe the Texas Motor Vehicle Commission Code. 1 We conclude

the Board has exclusive jurisdiction to resolve only those claims and issues the Code governs. Moreover, we conclude that

this exclusive jurisdiction does not extend to the prospective transferees' claims here, and thus, they do not have to exhaust

administrative remedies before bringing their claims in the trial court. Instead, because of the Board's special expertise in

interpreting the Code, the trial court should abate the prospective transferees' tortious interference and declaratory judgment

claims so the Board may exercise its primary jurisdiction to *201 determine the Code construction issue raised with those

claims. We further conclude that the trial court did not abuse its discretion by entering a temporary injunction. Accordingly, we

reverse the court of appeals' judgment and remand the cause to the trial court for further proceedings consistent with this opinion.

I. BACKGROUND

Martin Graf is the sole shareholder of Graf Ford, Lincoln, Mercury, Inc., a dealership in Del Rio, Texas. The dealership's

agreement with Ford provides that if Graf Ford proposes to transfer the dealership, Ford shall have a right of first refusal

to purchase the dealership on the same terms and conditions that the proposed buyer agreed to, “regardless of whether the

proposed buyer is qualified to be a dealer.” A Ford representative testified that this provision's purpose, and the purpose of

similar provisions in other standard Ford dealership agreements, is “to be able to put into business dealers who [Ford feels] are

qualified whenever [Ford has] the opportunity.”

In 1999, Hanan and Gil Butnaru contracted with Graf to buy the Graf dealership. They also contracted separately to buy the

real property upon which the dealership was located. Graf and J.M. Barton owned the property and executed that contract. Graf

told the Butnarus about Ford's right of first refusal. Additionally, both agreements were “expressly conditioned upon approval

by Ford of Hanan Butnaru as a[sic] authorized sales and service dealer” and warranted that neither agreement conflicted with

any prior agreement to which Graf or Barton were parties.

In September 1999, Graf told Ford that he intended to sell the dealership to the Butnarus. The Butnarus then filed a Prospective

Dealer Application with Ford, seeking approval as an authorized dealer. A month later, Ford informed Graf that it intended

to exercise its right of first refusal and offered to pay the Butnarus' reasonable expenses incurred in negotiating the purchase

and sale agreements. On the same day, Ford assigned its right of first refusal to an existing Ford dealer. Ford and Graf agreed

that Ford would indemnify Graf against damages arising from Ford's exercising its right of first refusal and that Graf would

cooperate with Ford in defending any action challenging the right.

Anticipating their breaching the purchase and sale agreements, the Butnarus sued Graf, Graf Ford, and Barton for breach of

those agreements. The Butnarus also sued Ford for tortiously interfering with the agreements. They alleged Ford tortiously

interfered because Ford's right of first refusal violates a Code provision that prohibits a manufacturer from denying or preventing

a dealership transfer to a qualified applicant. See TEX.REV.CIV. STAT. art. 4413(36), §§ 5.01B(c), 5.02(b)(8). Thus, the

Butnarus sought a declaration that Ford's right of first refusal was unenforceable and a declaration about the parties' rights and

obligations under the agreements. Finally, the Butnarus requested a temporary injunction to prevent Ford or its assignees from

exercising its right of first refusal during the suit. Ford opposed this request and filed a plea to the jurisdiction. Ford argued that

the Board has exclusive jurisdiction to determine whether a manufacturer has violated the Code's provisions. The trial court

denied Ford's plea and granted the injunction.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 5

Butnaru v. Ford Motor Co., 84 S.W.3d 198 (2002)

45 Tex. Sup. Ct. J. 916

Ford sought interlocutory review of the trial court's temporary injunction. See 18 S.W.3d at 762. The court of appeals first

noted that the Legislature did not confer any rights on prospective transferees under *202 the Code to seek relief for the

Code violation the Butnarus allege. Then, the court of appeals held that the trial court did not have jurisdiction over the

Butnarus' claims, “to the extent their claims are based on violations of the [Code],” because the Code grants the Board exclusive

jurisdiction over alleged Code violations. 18 S.W.3d at 767. The court also held that the Code does not violate the Texas

Constitution's open courts provision, which prohibits the Legislature from unreasonably abrogating well-established common-

law claims. The court explained that the Code merely confers new statutory rights on motor vehicle dealers and leaves “all

others in the same position they previously occupied.” 18 S.W.3d at 768. Therefore, the court concluded that “the Butnarus can

sue Ford ... for tortious interference with contract, breach of contract, and declaratory relief. They simply cannot base those

causes of action on [Code] violations....” 18 S.W.3d at 768. The court of appeals then remanded the claims not based on Code

violations and, holding that the Butnarus did not establish an inadequate legal remedy, dissolved the trial court's temporary

injunction. 18 S.W.3d at 769–70.

The Butnarus petitioned this Court to review the court of appeals' opinion. Typically, jurisdiction over an order granting or

denying a temporary injunction is final in the courts of appeals. See TEX. GOV'T CODE § 22.225(b)(4). However, because the

court of appeals' decision here conflicts with another court of appeals' decision, this Court has jurisdiction. See TEX. GOV'T

CODE § 22.225(c). Specifically, the court of appeals' holding that the Code does not violate the Texas Constitution's open

courts provision conflicts with David McDavid Nissan, Inc. v. Subaru, Inc., 10 S.W.3d 56, 68 (Tex.App.-Dallas 1999), affirmed

in part, reversed in part, and remanded on rehearing, 84 S.W.3d 212 (Tex.2002). In David McDavid Nissan, the court of

appeals held that the Code abrogated the plaintiff's common-law claims without reasonably substituting another remedy and

thus contravened the open courts provision. 10 S.W.3d at 67–68. We granted the Butnarus' petition, as well as the petition in

David McDavid Nissan, to resolve this conflict.

At the time the trial courts and courts of appeals here and in David McDavid Nissan determined whether the Board had exclusive

jurisdiction, section 3.01 of the Code provided:

(a) The board has the general and original power and jurisdiction to regulate all aspects of the distribution, sale, and leasing of

motor vehicles and to do all things, whether specifically designated in this Act or implied herein, or necessary or convenient

to the exercise of this power and jurisdiction, including the original jurisdiction to determine questions of its own jurisdiction.

In addition to the other duties placed on the board by this Act, the board shall enforce and administer the terms of Chapter

503, Transportation Code.

(b) Unless otherwise specifically provided by Texas law not in conflict with the terms of this Act, all aspects of the distribution

and sale of motor vehicles shall be governed exclusively by the provisions of this Act.

TEX.REV.CIV. STAT. art. 4413(36), § 3.01 (Vernon Supp.1998), amended by Act of May 18, 2001, 77th Leg., R.S., ch. 155,

§ 5, 2001 Tex. Gen. Laws 313.

In our original opinions in this case and in David McDavid Nissan, we concluded that this provision granted the Board primary

—not exclusive—jurisdiction over Code issues and claims. Moreover, we concluded that section 3.01(b) does not grant the

Board exclusive jurisdiction because, *203 by its plain language, that subsection only establishes that the Code governs this

area of law and trumps other laws if they conflict with the Code.

However, only weeks before we issued our opinions, the Legislature amended section 3.01(a) to provide:

(a) The board has the exclusive, original jurisdiction to regulate those aspects of the distribution, sale,

and leasing of motor vehicles as governed by this Act and to do all things, whether specifically designated

in this Act or implied herein, or necessary or convenient to the exercise of this power and jurisdiction,

including the original jurisdiction to determine questions of its own jurisdiction.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 6

Butnaru v. Ford Motor Co., 84 S.W.3d 198 (2002)

45 Tex. Sup. Ct. J. 916

TEX.REV.CIV. STAT. art. 4413(36), § 3.01(a) (emphasis added). The Legislature made this amendment “effective

immediately” after receiving the necessary votes, which occurred on May 18, 2001. See Act of May 18, 2001, 77th Leg., R.S.,

ch. 155, § 5, 2001 Tex. Gen. Laws 313, 317. The Legislature's amendment did not change section 3.01(b).

Today, we determine (1) whether section 3.01 's current or former version applies, (2) whether the applicable provision grants

the Board exclusive jurisdiction and how this affects the trial court's jurisdiction here, and (3) whether the trial court abused

its discretion by issuing a temporary injunction.

II. APPLICABLE LAW

A. DAVID MCDAVID NISSAN, INC.

1. Retroactive application of Section 3.01

Today, in David McDavid Nissan, we held that section 3.01 's current version constitutionally retroactively applied to the

pending claims a licensed motor vehicle dealer had raised against a manufacturer. David McDavid Nissan, 84 S.W.3d at 218.

We explained that this jurisdictional provision is procedural and remedial and did not affect a vested right. David McDavid

Nissan, 84 S.W.3d at 219 (citing Landgraf v. USI Film Prods., 511 U.S. 244, 273, 114 S.Ct. 1483 (1994); Baker Hughes, Inc.

v. Keco, R & D, Inc., 12 S.W.3d 1, 4 (Tex.1999); City of Tyler v. Likes, 962 S.W.2d 489, 502 (Tex.1997); Ex parte Abell, 613

S.W.2d 255, 260 (Tex.1981); McCain v. Yost, 155 Tex. 174, 284 S.W.2d 898, 900 (1955); Middleton v. Texas Power & Light

Co., 108 Tex. 96, 185 S.W. 556, 560 (1916); Blonstein v. Blonstein, 831 S.W.2d 468, 472 (Tex.App.-Houston [14th Dist.] 1992,

writ denied); Southwestern Bell Tel. Co. v. City of Kountze, 543 S.W.2d 871, 874–75 (Tex.Civ.App.-Beaumont 1976, no writ)).

2. Exclusive Versus Primary Jurisdiction

Furthermore, in David McDavid Nissan, we explained the significant differences between the primary and exclusive jurisdiction

doctrines. David McDavid Nissan, 84 S.W.3d at 218. We held that, unlike its former version, section 3.01(a) 's current version

expressly confers exclusive jurisdiction on the Board to initially determine issues or claims that the Code governs. David

McDavid Nissan, 84 S.W.3d at 218. We based our decision on the provision's plain language, and the Legislature's intent when

it amended the provision to include the express exclusive jurisdiction language. David McDavid Nissan, 84 S.W.3d at 218.

(citing Cash Am. Int'l Inc. v. Bennett, 35 S.W.3d 12, 15 (Tex.2000); Continental Coffee Prods. Co. v. Cazarez, 937 S.W.2d

444, 447 (Tex.1996); SENATE COMM. ON STATE AFFAIRS, BILL ANALYSIS, Tex. H.B. 1665, 77th Leg., R.S. (2001)).

*204 3. Open Courts Challenge

In David McDavid Nissan, we also concluded that, as applied to the motor vehicle dealer in that case, the Code did not violate

the Texas Constitution's open courts provision. David McDavid Nissan, 84 S.W.3d at 227; see also TEX. CONST. art. 1, §

13. We explained that the Board's exclusive jurisdiction over issues and claims the Code governs—all matters derived from

the Code and not the common law—did not abrogate any of the motor vehicle dealer's common-law rights. David McDavid

Nissan, 84 S.W.3d at 227 (citing Texas Ass'n of Bus. v. Texas Air Control Bd., 852 S.W.2d 440, 448 (Tex.1993)).

B. TEMPORARY INJUNCTIONS

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 7

Butnaru v. Ford Motor Co., 84 S.W.3d 198 (2002)

45 Tex. Sup. Ct. J. 916

[1] [2] [3] [4] A temporary injunction's purpose is to preserve the status quo of the litigation's subject matter pending

a trial on the merits. Walling v. Metcalfe, 863 S.W.2d 56, 57 (Tex.1993); Electronic Data Sys. Corp. v. Powell, 508 S.W.2d

137, 139 (Tex.Civ.App.-Dallas 1974, no writ). A temporary injunction is an extraordinary remedy and does not issue as a

matter of right. Walling, 863 S.W.2d at 57. To obtain a temporary injunction, the applicant must plead and prove three specific

elements: (1) a cause of action against the defendant; (2) a probable right to the relief sought; and (3) a probable, imminent,

and irreparable injury in the interim. Walling, 863 S.W.2d at 57; Sun Oil Co. v. Whitaker, 424 S.W.2d 216, 218 (Tex.1968). An

injury is irreparable if the injured party cannot be adequately compensated in damages or if the damages cannot be measured by

any certain pecuniary standard. Canteen Corp. v. Republic of Tex. Props., Inc., 773 S.W.2d 398, 401 (Tex.App.-Dallas 1989,

no writ).

[5] [6] [7] Whether to grant or deny a temporary injunction is within the trial court's sound discretion. Walling, 863 S.W.2d

at 58; State v. Walker, 679 S.W.2d 484, 485 (Tex.1984). A reviewing court should reverse an order granting injunctive relief

only if the trial court abused that discretion. Walling, 863 S.W.2d at 58; Walker, 679 S.W.2d at 485. The reviewing court

must not substitute its judgment for the trial court's judgment unless the trial court's action was so arbitrary that it exceeded

the bounds of reasonable discretion. Johnson v. Fourth Ct. of Appeals, 700 S.W.2d 916, 918 (Tex.1985); Davis v. Huey, 571

S.W.2d 859, 861–62 (Tex.1978).

III. ANALYSIS

A. WHETHER AMENDED SECTION 3.01 RETROACTIVELY APPLIES

[8] In David McDavid Nissan, we concluded that section 3.01(a), a jurisdictional provision, is a procedural and remedial

statute that applied retroactively because it did not affect a vested right in that case. See David McDavid Nissan, 84 S.W.3d

at 219 (citing Landgraf, 511 U.S. at 273, 114 S.Ct. 1483; Likes, 962 S.W.2d at 502; Abell, 613 S.W.2d at 260; Phil H. Pierce

Co. v. Watkins, 114 Tex. 153, 263 S.W. 905, 907 (1924); Middleton, 185 S.W. at 560; Blonstein, 831 S.W.2d at 472; City of

Kountze, 543 S.W.2d at 874–75). However, section 3.01(a) still may not constitutionally retroactively apply in this case if it

affects a vested right. See Baker Hughes, 12 S.W.3d at 4; Middleton, 185 S.W. at 560.

The Butnarus do not allege that section 3.01(a) affects any vested right. Instead, they contend that the Legislature did not

expressly make the amendment to section 3.01(a) retroactive, and therefore, we should apply the Code Construction Act to

conclude section 3.01(a) 's current version does not retroactively apply. See TEX. GOV'T CODE §§ 311.022 (“A statute is

presumed *205 to be prospective in its operation unless expressly made retrospective.”), 311.031 (“[T]he ... amendment ... of

a statute does not affect ... the prior operation of the statute or any prior action taken under it.”).

But the Butnarus misplace their reliance on the Code Construction Act. That statute applies only to “each code enacted by the

60th or subsequent legislature as part of the state's continuing statutory revision program.” TEX. GOV'T CODE § 311.002.

When the Legislature recodifies a statute under Texas's continuing statutory revision program, the statute will indicate this.

See, e.g., TEX. LOCAL GOV'T CODE § 1.001 (“This code is enacted as a part of the state's continuing statutory revision

program....”). And, though we refer to the Motor Vehicle Code as “the Code,” nothing in the Code's language or legislative

history shows that it is part of our State's “continuing statutory revision program.” TEX. GOV'T CODE § 311.002; Robbins

Chevrolet Co. v. Motor Vehicle Bd., 989 S.W.2d 865, 867 (Tex.App.-Austin 1999, pet. denied); see also Knight v. Int'l Harvester

Credit Corp., 627 S.W.2d 382, 385 (Tex.1982).

Section 3.01(a) is a jurisdictional statute that, in this case, does not alter the parties' rights or obligations or remove any remedies

already available. See David McDavid Nissan, 84 S.W.3d at 222; Likes, 962 S.W.2d at 502. This provision merely determines

the tribunal that must initially resolve all issues and claims the Code governs. See Landgraf, 511 U.S. at 273, 114 S.Ct. 1483;

David McDavid Nissan, 84 S.W.3d at 222; City of Kountze, 543 S.W.2d at 874–75. The parties do not have a vested right in

choosing what tribunal will do this. See Landgraf, 511 U.S. at 273, 114 S.Ct. 1483; David McDavid Nissan, 84 S.W.3d at 222;

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 8

Butnaru v. Ford Motor Co., 84 S.W.3d 198 (2002)

45 Tex. Sup. Ct. J. 916

1898454; Middleton, 185 S.W. at 559; City of Kountze, 543 S.W.2d at 874–75. Accordingly, we conclude that amended section

3.01(a) constitutionally applies retroactively in this case.

B. APPLYING SECTION 3.01'S CURRENT VERSION TO THE BUTNARUS' CLAIMS

[9] Ford contends that section 3.01 's current version grants the Board exclusive jurisdiction, and thus, the Board has the sole

authority to make the initial determination about the alleged Code violation here. The Butnarus, on the other hand, argue that

section 3.01 does not oust the trial court's jurisdiction because the Board does not have authority to award damages for their

well-established common-law claims. Therefore, the Butnarus assert that the Board only has primary jurisdiction to decide

whether Ford's right of first refusal violates the Code.

The Butnarus' pleadings currently reflect four claims, the first two of which are based on Ford's allegedly violating the Code.

First, the Butnarus seek a judicial declaration that Ford's right of first refusal violates the Code. Second, the Butnarus allege

that Ford tortiously interfered with the purchase and sale agreements by attempting to exercise its allegedly invalid right of first

refusal. Third, the Butnarus seek a declaration about the parties' rights and obligations under the purchase and sale agreements.

Fourth, the Butnarus claim that Graf and Barton have breached or are about to breach the purchase and sale agreements by

permitting Ford to exercise its right of first refusal rather than requiring Ford to determine the Butnarus' eligibility under the

Code for the dealership transfer.

The court of appeals, after analyzing section 3.01 's former version, concluded that the Board has exclusive jurisdiction; *206

however, it held that the Butnarus do not have standing as prospective car dealership transferees to seek relief from the Board

for the Code violation they allege. The court of appeals further determined that the Butnarus' lack of standing to obtain relief

from the Board did not give them a right to seek damages for the alleged Code violation in the trial court. 18 S.W.3d at 767–

68. Accordingly, the court of appeals held that the Butnarus could maintain their breach of contract and tortious interference

claims; however, the Butnarus could not “base those causes of action on [Code] violations.” 18 S.W.3d at 768.

As discussed above, we disagree that section 3.01 's former version granted the Board exclusive jurisdiction. But we conclude

that section 3.01(a) 's current version, which applies here, grants the Board exclusive jurisdiction over issues and claims the

Code governs. Thus, we must determine if the Butnarus' claims fall within the Board's exclusive jurisdiction.

Because motor vehicle distribution and sales affects our State's economy and citizens' welfare, the Code's primary purpose is “to

insure a sound system of distributing and selling motor vehicles through licensing and regulating manufacturers ... and dealers

of those vehicles.” See TEX.REV.CIV. STAT. art. 4413(36), § 1.02. To accomplish this, the Code strictly regulates conduct by

or between franchise dealers and manufacturers. See TEX.REV.CIV. STAT. art. 4413(36), §§ 4.01–.07, 5.01–.05. For example,

the Code establishes how a dealer must request a transfer, assignment, or sale of its franchise agreement. TEX.REV.CIV.

STAT. art. 4413(36), § 5.01B. Under that process, the Code also determines the circumstances under which a manufacturer

may withhold its consent to the dealer's request. See TEX.REV.CIV. STAT. art. 4413(36), § 5.01B(c).

Specifically, to transfer a dealership the dealer must file a written application with the manufacturer to transfer the dealership.

The application must identify the prospective transferee and any pertinent agreements about the proposed transfer. See

TEX.REV.CIV. STAT. art. 4413(36), § 5.01B(a)(1)-(4). The manufacturer must timely advise the dealer in writing if the

prospective transferee is qualified or if the transferee is not acceptable. TEX.REV.CIV. STAT. art. 4413(36), § 5.01B(b). The

Code prohibits a manufacturer from “unreasonably” withholding its consent to a dealer's transfer application if the prospective

transferee is “of good moral character” and otherwise meets the manufacturer's predetermined, written standards, if any, about

a transferee's business experience and financial qualifications. TEX.REV.CIV. STAT. art. 4413(36), § 5.01B(c). Further, the

Code makes it unlawful for a manufacturer to “fail to give effect to or attempt to prevent any sale or transfer” of a dealership

“except as provided by Section 5.01B.” TEX.REV.CIV. STAT. art. 4413(36), § 5.02(b)(8).

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 9

Butnaru v. Ford Motor Co., 84 S.W.3d 198 (2002)

45 Tex. Sup. Ct. J. 916

Additionally, the Code provides a dealer a remedy if the manufacturer “unreasonably” denies a dealer's application to transfer

its franchise ownership. The Code's definition of “dealer” includes licensed dealers but not prospective transferees. See

TEX.REV.CIV. STAT. art. 4413(36), § 1.03(7). The dealer may file a protest with the Board. TEX.REV.CIV. STAT. art.

4413(36), § 5.01B(d). The issue would be whether the prospective transferee is qualified, and the manufacturer must prove

the prospective transferee's inadequacy. TEX.REV.CIV. STAT. art. 4413(36), §§ 5.01B(d)-(e). If the Board determines the

prospective transferee is qualified, the Board shall enter an order reflecting this, and the manufacturer must accept the transfer.

TEX.REV.CIV. STAT. art. 4413(36), § 5.01B(e).

*207 [10] [11] Here, the court of appeals' analysis presumes that the Butnarus' trial court claims simply seek monetary

damages based on their allegation that Ford's exercising its right of first refusal and denying the dealership transfer violated

section 5.01B. But the Butnarus' trial court claims involve something different. The Butnarus seek relief for Ford's alleged

tortious interference, and this claim, in turn, raises a Code construction issue. To establish their tortious interference claim, the

Butnarus must show: (1) a contract exists between Graf, Graf Ford, Barton and the Butnarus; (2) Ford willfully and intentionally

interfered with that contract; (3) the interference proximately caused the Butnarus damage; and (4) the Butnarus suffered actual

damage or loss. See Texas Beef Cattle Co. v. Green, 921 S.W.2d 203, 210 (Tex.1996); Holloway v. Skinner, 898 S.W.2d 793,

795–96 (Tex.1995). But Ford may defeat liability by proving the affirmative defense that its conduct was privileged or justified

—so long as that conduct was not illegal or tortious. See Prudential Ins. Co. of Am. v. Financial Review Servs., Inc., 29 S.W.3d

74, 80 (Tex.2000); ACS Investors, Inc. v. McLaughlin, 943 S.W.2d 426, 431 (Tex.1997); Texas Beef Cattle, 921 S.W.2d at 210.

It is the Butnarus' position that Ford does not have a justification defense, because rights of first refusal contravene certain Code

provisions and, accordingly, are void and unenforceable. See TEX.REV.CIV. STAT. art. 4413(36), § 5.01B(c) (prohibiting

a manufacturer from unreasonably denying a dealership transfer); TEX.REV.CIV. STAT. art. 4413(36), § 1.04 (making an

agreement to waive the Code's terms void and unenforceable). The Butnarus also request that the trial court enter a declaratory

judgment that rights of first refusal violate the Code.

We conclude that the Butnarus' tortious interference and declaratory judgment claims fall outside the purview of the Board's

exclusive jurisdiction. In David McDavid Nissan, we held that the Board's exclusive jurisdiction under section 3.01(a) required

the dealer in that case to exhaust its administrative remedies to obtain a final Board finding to support its Code-based DTPA, bad

faith, and oral contract claims. David McDavid Nissan, 84 S.W.3d at 226. In concluding that the Board's exclusive jurisdiction

applied to the dealer's Code-based DTPA and bad-faith claims, we explained that the Code provides a hybrid claims-resolution

process by which a dealer or manufacturer may seek damages for certain Code violations. David McDavid Nissan, 84 S.W.3d

at 226 (discussing TEX.REV.CIV. STAT. art. 4413(36), §§ 6.06(a), (e)). Based on this process, we held that the dealer had

to exhaust its administrative remedies under the Code to obtain supporting Board findings before a trial court could finally

adjudicate the dealer's damages request for its Code-based claims. See David McDavid Nissan, 84 S.W.3d at 227. Additionally,

in requiring the dealer to obtain a Board finding before pursuing its oral contract claims, we relied on a Code provision mandating

that a dealer obtain the Board's approval and a license before operating a franchise in a certain area. See David McDavid Nissan,

84 S.W.3d at 227 (discussing TEX.REV.CIV. STAT. art. 4413(36), §§ 4.02(c), 4.06(a)-(e)).

Here, however, no Code provision extends the Board's exclusive jurisdiction to resolving the Butnarus' tortious interference

and declaratory judgment claims so that they must exhaust any administrative remedies before seeking judicial relief. In fact,

the Code's failing to establish any procedure through which the Board may resolve a prospective transferee's claim that a

manufacturer unlawfully refused to *208 accept a dealer's transfer request—coupled with the Board's inability to award

monetary damages—demonstrate the contrary. Thus, this case is analogous to Cash America, in which we held that the plaintiff

did not have to exhaust administrative remedies under the Pawnshop Act because “nothing in the statutory scheme indicate[d]

that the Legislature intended to replace a pledgor's common-law remedies with the like-kind replacement remedy” available

under the statute. Cash Am., 35 S.W.3d at 18. Similarly, because the Code does not indicate the Legislature's intent to replace

the prospective transferees' remedies here, the Butnarus do not have to exhaust any administrative remedies before suing Ford

for tortious interference or declaratory relief.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 10

Butnaru v. Ford Motor Co., 84 S.W.3d 198 (2002)

45 Tex. Sup. Ct. J. 916

[12] But our inquiry does not end here. Though the Legislature did not confer exclusive jurisdiction on the Board to resolve

the Butnarus' claims, we still must decide whether the Board has primary jurisdiction to resolve the Code construction issue that

those claims raise. See, e.g, Cash Am., 35 S.W.3d at 18 (recognizing that, though an agency does not have exclusive jurisdiction,

the policies underlying the primary jurisdiction doctrine may require the agency to initially decide an issue). In David McDavid

Nissan, we explained that the primary jurisdiction doctrine requires trial courts to allow an administrative agency to initially

decide an issue when: (1) an agency is typically staffed with experts trained in handling the complex problems in the agency's

purview; and (2) great benefit is derived from an agency's uniformly interpreting its laws, rules, and regulations, whereas courts

and juries may reach different results under similar fact situations. David McDavid Nissan, 84 S.W.3d at 221 (citing United

States v. Western Pac. R.R. Co., 352 U.S. 59, 64, 77 S.Ct. 161, 1 L.Ed.2d 126 (1956); Cash Am., 35 S.W.3d at 18; Foree v.

Crown Cent. Petroleum Corp., 431 S.W.2d 312, 316 (Tex.1968); Gregg v. Delhi–Taylor Oil Corp., 162 Tex. 26, 344 S.W.2d

411, 413 (1961); Kavanaugh v. Underwriters Life Ins. Co., 231 S.W.2d 753, 755 (Tex.Civ.App.-Waco 1950, writ ref'd); Travis,

Comment, Primary Jurisdiction: A General Theory and Its Application to the Securities Exchange Act, 63 CAL. L.REV. 926,

927 (1975)). We noted that, when the primary jurisdiction doctrine requires a trial court to defer to an agency to make an initial

determination, the court should abate the lawsuit and suspend finally adjudicating the claim until the agency has an opportunity

to act on the matter. David McDavid Nissan, 84 S.W.3d at 221 (citing Central Power & Light Co. v. Public Util. Comm'n,

17 S.W.3d 780, 787 (Tex.App.-Austin 2000, pet. denied); Roberts Express, Inc. v. Expert Transp., Inc., 842 S.W.2d 766, 771

(Tex.App.-Dallas 1992, no writ)).

We conclude that the primary jurisdiction doctrine applies in this case. The Butnarus' tortious interference and declaratory

judgment claims raise a Code construction issue that is within the Board's special competence and expertise. See Cash Am.,

35 S.W.3d at 18. As discussed above, the Legislature has specifically authorized the Board to resolve disputes between a

manufacturer and dealer when the dealer alleges that the manufacturer violated section 5.01B by unreasonably withholding

consent to transfer a dealership. See TEX.REV.CIV. STAT. art. 4413(36), § 5.01B(d). The Board's expertise in construing

section 5.01B in these disputes, and the State's interest in a uniform interpretation of the Code, requires the trial court to abate

the lawsuit and suspend finally adjudicating the tortious interference and declaratory judgment claims until the Board has a

reasonable opportunity to *209 act on the matter. See David McDavid Nissan, 84 S.W.3d at 228; Central Power & Light, 17

S.W.3d at 787; Roberts Express, 842 S.W.2d at 771. Accordingly, the trial court should abate the claims pending the Board

having an opportunity to exercise its primary jurisdiction to determine, at least in the first instance, whether a right of first

refusal violates the Code. In sum, we hold that section 3.01(a) confers exclusive jurisdiction on the Board but only over issues

and claims the Code governs. Here, the Code does not govern the Butnarus'—as prospective transferees—tortious interference

and declaratory judgment claims. Consequently, the Butnarus do not have to exhaust any administrative remedies before raising

these claims in the trial court. However, because these claims raise a Code construction issue, the primary jurisdiction doctrine

requires the trial court to abate the claims pending the Board having a reasonable opportunity to determine whether a right of

first refusal violates the Code.

C. OPEN COURTS CHALLENGE

[13] The Butnarus contend that if the Board has exclusive jurisdiction over all Code issues and claims, this violates our

Constitution's open courts provision. TEX. CONST. art. 1, § 13. This provision prohibits the Legislature from abrogating well-

established, common-law claims unless the reason for doing so outweighs a litigant's constitutional right of redress. See Texas

Ass'n of Bus., 852 S.W.2d at 448.

[14] But we have already concluded that the Board's exclusive jurisdiction does not extend to the claims in this case.

Accordingly, the Code does not abrogate any previously existing common-law rights here. The trial court has immediate

jurisdiction to adjudicate the Butnaru's common-law claims for breach of the purchase and sale agreements. And, after deferring

to the Board so it has an opportunity to decide the Code construction issue, the trial court may finally adjudicate the tortious

interference and related declaratory judgment claim.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 11

Butnaru v. Ford Motor Co., 84 S.W.3d 198 (2002)

45 Tex. Sup. Ct. J. 916

D. TEMPORARY INJUNCTION

The trial court temporarily enjoined Ford or its assignees from exercising its right of first refusal during the suit. The court of

appeals dissolved the temporary injunction, agreeing with Ford's contention that the Butnarus did not establish an inadequate

legal remedy. 18 S.W.3d at 769. In so concluding, the court of appeals noted that generally a court will not enforce contracts by

injunction because a suit for damages is deemed to be an adequate remedy. 18 S.W.3d at 769. The Butnarus respond twofold.

First, they argue that they were not required to show an inadequate legal remedy because an alleged statutory violation relieves

a movant of that burden. See Furr v. Hall, 553 S.W.2d 666, 672 (Tex.Civ.App.-Amarillo 1977, writ ref'd n.r.e.). They assert that

courts have a duty to enjoin statutory violations. See Priest v. Texas Animal Health Comm'n, 780 S.W.2d 874, 876 (Tex.App.-

Dallas 1989, no writ). Second, the Butnarus argue that they have otherwise established the temporary-injunction elements.

On the inadequate legal remedy element, they argue that Ford's exercising its right of first refusal would deprive them of the

opportunity to purchase two unique assets: real property and the dealership located on the property. See, e.g., Home Sav. of Am.

v. Van Cleave Dev. Co., 737 S.W.2d 58, 59 (Tex.App.-San Antonio 1987, no writ) (noting that “each and every piece of real

estate is unique” and that “is certainly an element to be considered in deciding whether there [will be] irreparable damages”).

*210 1. Statutory Violation

[15] The Butnarus' misplace their reliance on Furr. See Furr, 553 S.W.2d at 672. Furr does not generally propose that an

alleged statutory violation relieves the plaintiff's burden to show an inadequate legal remedy. Rather, the party seeking injunctive

relief in Furr relied on a specific statute giving the right to an injunction, and the court of appeals concluded that the statutory

right relieved the party from proving an inadequate legal remedy. Furr, 553 S.W.2d at 672. The court relied on Republic

Insurance Co. v. O'Donnell Motor Co., which explains:

The general rule at equity is that before injunctive relief can be obtained, it must appear that there does

not exist an adequate remedy at law. This limitation, however, has no application where the right to relief

is predicated on a statutory ground other than on the general principles of equity.

289 S.W. 1064, 1066 (Tex.Civ.App.-Dallas 1926, no writ).

Here, the Butnarus rely on general equitable principles, not a statutory injunctive-relief right, to enjoin Ford's conduct. Thus,

Furr does not apply. And the Butnarus had to establish in the trial court, in addition to the other temporary-injunction elements,

an inadequate legal remedy.

2. Temporary Injunction Elements

[16] In the trial court, the Butnarus alleged that Ford's exercising its right of first refusal would tortiously interfere with

the Butnarus' contract to purchase the real property and the contract to purchase the dealership. They further contended that

their right to purchase the real property and dealership would be lost if Ford exercised its right of first refusal, and, therefore,

injunctive relief was necessary to preserve the status quo.

At the temporary injunction hearing, the Butnarus presented the following evidence: (1) their agreement with Graf and Barton

to purchase the real property, (2) their agreement with Graf and Graf Ford to purchase the dealership, (3) Graf Ford's agreement

with Ford containing the right of first refusal that allegedly violates the Code, (4) the Code provisions that allegedly prohibit

Ford's right of first refusal provision, and (5) the Butnarus' dealership application to Ford detailing their business experience

and financial qualifications. Additionally, Hanan Butnaru testified about his agreements with Graf, Graf Ford, and Barton to

purchase dealership and the real property in Del Rio. He stated that in planning to establish a dealership, he was only looking

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 12

Butnaru v. Ford Motor Co., 84 S.W.3d 198 (2002)

45 Tex. Sup. Ct. J. 916

within a 100 mile radius of San Antonio, which includes Del Rio. He also explained, and the agreements entered in evidence

showed, that the Butnarus agreed to pay $1.2 million for the real property and only $500,000 for the dealership.

Based on the Butnarus' allegations and this evidence, the trial court granted the temporary injunction. The trial court stated in

the order that the Butnarus would be irreparably harmed if Ford exercises its right of first refusal “in that the issues and rights

sought to be adjudicated will become moot and [the Butnarus] will have lost the opportunity to purchase the Dealership and

the Real Property.”

The court of appeals, however, dissolved the temporary injunction after concluding that the Butnarus did not establish an

inadequate legal remedy:

The Butnarus are not interested in the real property for its own resources or aesthetics. Their interest in

the property results solely from the fact that the dealership is located on it. Thus, their true complaint

relates to their inability to purchase the dealership. The uniqueness *211 of the real property is therefore

irrelevant to the adequacy of their legal remedy.

18 S.W.3d at 769. The court of appeals' holding is predicated upon its assumptions that the real property is neither unique nor

pertinent to this dispute and that the Butnarus are only interested in purchasing the dealership.

[17] [18] [19] [20] We agree with the court of appeals that, generally, a court will not enforce contractual rights by

injunction, because a party can rarely establish an irreparable injury and an inadequate legal remedy when damages for breach

of contract are available. Canteen Corp., 773 S.W.2d at 401; Chevron U.S.A., Inc. v. Stoker, 666 S.W.2d 379, 382 (Tex.App.-

Eastland 1984, writ dism'd). But under an abuse of discretion standard, the court of appeals cannot overrule the trial court's

decision unless the trial court acted unreasonably or in an arbitrary manner, without reference to guiding rules or principles.

Beaumont Bank v. Buller, 806 S.W.2d 223, 226 (Tex.1991); Davis, 571 S.W.2d at 861–62. Moreover, the court of appeals

cannot substitute its judgment for the trial court's reasonable judgment even if it would have reached a contrary conclusion.

Walker v. Packer, 827 S.W.2d 833, 839–40 (Tex.1992); Beaumont Bank, 806 S.W.2d at 226. The trial court does not abuse its

discretion if some evidence reasonably supports the trial court's decision. Davis, 571 S.W.2d at 862.

[21] The evidence shows this is a case involving two contracts: a contract to purchase land and a contract to purchase a

business. There is some evidence that the Butnarus desired valuable land located at this specific Del Rio location. Thus, the

evidence before the trial court supports its conclusion that this dispute is about the right to purchase real property worth at least

$1.2 million and not just the dealership itself. See Home Sav., 737 S.W.2d at 59 (upholding temporary injunction in dispute

involving land worth $1.5 million). And a trial court may grant equitable relief when a dispute involves real property. See

Bennett v. Copeland, 149 Tex. 474, 235 S.W.2d 605, 609 (1951); E.I. DuPont de Nemours & Co. v. Zale Corp., 462 S.W.2d 355,

359–60 (Tex.Civ.App.-Dallas 1970, writ ref'd n.r.e.); Burnett v. Mitchell, 158 S.W. 800, 801–02 (Tex.Civ.App.-Fort Worth

1913, writ ref'd). Thus, the trial court's conclusion that the Butnarus do not have an adequate legal remedy was not arbitrary and

unreasonable and was not made without reference to guiding rules and principles. And, because the trial court's determination

was not an abuse of discretion, the court of appeals should not have substituted its judgment for that of the trial court. Beaumont

Bank, 806 S.W.2d at 226.

Ford contends that the court of appeals could have also determined that the Butnarus did not establish a probable right to

recovery. We disagree. The trial court could reasonably conclude, based on the Butnarus' allegations and the evidence previously

discussed, that the Butnarus had a probable right to recovery. See Sun Oil, 424 S.W.2d at 218 (stating that the temporary

injunction applicant is not required to establish that it will prevail on final trial and need only plead a cause of action and show

a probable right to the relief sought). Because this conclusion was not “so arbitrary as to exceed the bounds of reasonable

discretion,” CRC–Evans Pipeline Int'l, Inc. v. Myers, 927 S.W.2d 259, 262 (Tex.App.-Houston [1st Dist.] 1996, no writ), the

trial court did not abuse its discretion in finding a probable right to recovery.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 13

Butnaru v. Ford Motor Co., 84 S.W.3d 198 (2002)

45 Tex. Sup. Ct. J. 916

Accordingly, we conclude that there is evidence to support the trial court's decision to issue the temporary injunction. See Davis,

571 S.W.2d at 862. Thus, the *212 trial court did not abuse its discretion, and we reverse the court of appeals' order dissolving

the temporary injunction.

IV. CONCLUSION

Section 3.01(a) grants the Board exclusive jurisdiction but only over the issues and claims the Code governs. Because the

Code does not govern, or expressly authorize the Board to resolve, the Butnarus' tortious interference and declaratory judgment

claims, these prospective transferees need not exhaust any administrative remedies before the trial court has jurisdiction over

these claims. However, under the primary jurisdiction doctrine, the trial court should abate these claims to the extent that may

be necessary to allow the Board a reasonable opportunity to resolve the Code construction issue they raise. Finally, the trial

court did not abuse its discretion in granting the temporary injunction. Thus, we reverse the court of appeals' judgment and

remand the cause to the trial court for further proceedings consistent with this opinion on rehearing.

All Citations

84 S.W.3d 198, 45 Tex. Sup. Ct. J. 916

Footnotes

1 Unless otherwise indicated, “the Code” refers to the Texas Motor Vehicle Commission Code, and “the Board” refers to the Motor

Vehicle Board. See TEX.REV.CIV. STAT. art. 4413(36).

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 14

Canteen Corp. v. Republic of Texas Properties, Inc., 773 S.W.2d 398 (1989)

773 S.W.2d 398

Court of Appeals of Texas,

Dallas.

CANTEEN CORPORATION, d/b/a Gulliver's, Appellant,

v.

REPUBLIC OF TEXAS PROPERTIES, INC., Appellee.

No. 05–88–01397–CV. | June 8, 1989.

Landlord sued tenant for breach of commercial lease. The 298th Judicial District Court, Dallas County, James Fry, J., rendered

judgment in favor of landlord which enjoined tenant from maintaining a vending machine operation and ordered tenant to

reopen and operate restaurant similar to other restaurants operated by tenant in the area. The Court of Appeals, Burnett, J.,

held that: (1) vending machines were not a “restaurant” and therefore installation of the machines was a breach of the lease;

(2) order requiring tenant to open and operate a restaurant on premises was improper; and (3) injunction was proper as far as

enjoining tenant's vending machine operation.

Affirmed in part and reversed in part.

West Headnotes (6)

[1] Contracts Intention of Parties

Contracts Written contracts in general

Primary concern of the courts is to give effect to the intentions of the parties as expressed in the instruments; in the

face of unambiguous provisions, the court must give effect to the contract as written.

1 Cases that cite this headnote

[2] Landlord and Tenant Restrictions in lease

Vending machines were not a “restaurant” as contemplated by the parties and therefore tenant's installation of open

access, unstaffed vending machine operation breached lease under which tenant warranted that premises would be

used and occupied only for the purpose of restaurant use.

Cases that cite this headnote

[3] Specific Performance Defenses or Objections to Relief

Court will generally not decree a party to perform a continuous series of acts which extend through a long period

of time and require constant supervision by the court; parties are left to their remedies at law unless the interest of

the public is involved.

6 Cases that cite this headnote

[4] Specific Performance Performance of Contract in General

Order requiring tenant which breached commercial lease requiring that leased premises be used and occupied only

for restaurant use to open and operate a restaurant in the style of other restaurants operated by tenant in the area was

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1

Canteen Corp. v. Republic of Texas Properties, Inc., 773 S.W.2d 398 (1989)

improper in that present performance was not possible and operation of a delicatessen restaurant was not a matter of

public interest which justified deviation from general rule against ordering ongoing activities.

2 Cases that cite this headnote

[5] Injunction Contracts

Contractual rights are generally not enforced by writs of injunction since inadequate remedy at law and irreparable

injury are rarely shown when a suit for damages for breach of contract is available.

34 Cases that cite this headnote

[6] Injunction Business, commercial, or industrial uses

Injunction was proper insofar as it enjoined tenant from operating vending machines where landlord demonstrated

an inability to compute damages for tenant's breach of commercial lease requiring that premises would be used and

occupied only for purposes of restaurant use; evidence showed that other tenants complained about vending machines

installed by tenant, that some prospective tenants did not lease building space due to fact that there was no restaurant

and that there was no way to prove how many prospective tenants had not approached landlord about leasing due

to lack of restaurant.

Cases that cite this headnote

Attorneys and Law Firms

*399 Larry F. Amerine, Susan Johnson Foster, Dallas, for appellant.

Michael E. Mears, Dallas, for appellee.

Before McCLUNG, ROWE and BURNETT, JJ.

Opinion

BURNETT, Justice.

Canteen Corporation, doing business as Gulliver's, appeals an adverse judgment rendered in favor of Republic of Texas

Properties, Inc. which 1) enjoined Canteen from maintaining a vending machine operation and 2) ordered Canteen to reopen

and operate Gulliver's restaurant in accordance with the lease agreement between Canteen and Republic. In three points of

error, Canteen asserts that 1) the temporary injunctive relief is void ab initio 2) the finding that Canteen breached the lease

was in error and 3) the mandatory injunction was granted in error. Although we disagree with points of error one and two, we

agree with Canteen's third point of error and for the reasons discussed herein, affirm the judgment of the trial court as to the

prohibitory portion of the injunction and reform the judgment to eliminate the portion which decrees specific performance.

In February, 1985, Canteen, as lessee, and Republic as lessor, entered into a commercial lease agreement for the lease of space

in RepublicBank Plano Tower. The lease agreement provided in part that “lessee warrants and represents to lessor that the

leased premises shall be used and occupied only for the purpose of a restaurant.” Approximately three years later, Canteen

ceased to operate Gulliver's as a delicatessen style restaurant and installed vending machines. These machines served hot and

cold beverages and food.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 2

Canteen Corp. v. Republic of Texas Properties, Inc., 773 S.W.2d 398 (1989)

The trial court found that Canteen's vending machine operation did not constitute the operation of the restaurant and, therefore,

was a violation of the lease agreement. The trial court rendered judgment in favor of Republic and granted Republic's request

for injunctive relief. Specifically, the trial court enjoined Canteen from maintaining a vending machine operation in the leased

premises and ordered *400 Canteen to reopen a restaurant in accordance with the lease agreement and in accordance with the

Gulliver's concept as utilized by Canteen at other locations in the Dallas area.

In its first point of error, Canteen maintains that the temporary injunctive relief granted by the trial court is void ab initio. A

review of the record reveals that although Republic requested a temporary injunction in its original petition, the injunction

which issued was not a temporary injunction. Instead, it was a permanent injunction entered after a trial before the court. Thus,

the defects urged by Canteen such as lack of a bond, failure to set a trial date, and failure to state a reason for the temporary

injunction are not fatal to the injunction which was granted by the trial court. Canteen's first point of error is overruled.

In its second point of error, Canteen asserts that the trial court erroneously found that the installation of the vending machines

did not constitute the operation of a restaurant and, thus, was a breach of the lease agreement. In paragraph 5, the lease provides

as follows:

Lessee warrants and represents to lessor that the leased premises shall be used and occupied only for the

purpose of restaurant use ...

The lease at paragraph 5(b) continues:

Lessee shall not at any time leave the leased premises vacant, but shall in good faith continuously

throughout the term of this lease conduct and carry on in the entire leased premises the type of business

for which the leased premises are leased. Lessee shall operate its business in an efficient, high class and

reputable manner so as to produce the maximum amount of sales from the leased premises, and shall,

except during reasonable periods for repairing, cleaning and decorating, keep the leased premises open to

the public for business with adequate personnel in attendance on all days and during all hours established

by lessor from time to time as store hours for the building, and during any other hours when the building

is generally open to the public for business ...

The lease at paragraph 5(c) continues:

Lessee understands that normal operating hours for this building are expected to be Monday through

Friday, 7:30 a.m. to 6:30 p.m.; Saturday, 8:00 a.m. to 1:00 p.m. ...

The lease at paragraph 5(e) continues:

Lessee shall not ... do anything which would tend to injure the reputation of the premises.

Finally, the lease at paragraph 5(f) provides:

Exclusivity clause: Canteen Corporation shall have the exclusive right to provide manual food service in

the building with exception of a white tablecloth restaurant on the premises. Lessee reserves the first right

of refusal to install and maintain public vending machines at a location to be agreed upon in the future.

[1] Under general contract principles, the primary concern of the courts is to give effect to the intentions of the parties as

expressed in the instruments. Ideal Lease Service, Inc. v. Amoco Production Co., 662 S.W.2d 951, 952–53 (Tex.1984). In the

face of unambiguous provisions, the court must give effect to the contract as written. Id.; Sun Oil Co. v. Madeley, 626 S.W.2d

726, 728 (Tex.1981).

[2] It is clear from a reading of the contract that the restaurant contemplated by the parties was not an open access, unstaffed

vending machine operation as was installed by Canteen. In fact, paragraph 5(f) refers to vending machines as a separate type

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 3

Canteen Corp. v. Republic of Texas Properties, Inc., 773 S.W.2d 398 (1989)

of operation than that contemplated by the parties. Thus, the trial judge properly found that the vending machines were not a

restaurant and that the installation of the machines was a breach of the lease. Canteen's second point of error is overruled.

[3] Canteen maintains, in its third point of error, that the trial court improperly granted the mandatory injunction. the injunction

of the trial court consists of two parts: (1) a portion which prohibits Canteen from operating the vending machines *401 in

the lease space; and (2) a portion which orders Canteen to operate a restaurant in the leased premises in accordance with the

Gulliver's concept. It is well established that a court of equity will only order specific performance when present performance is

possible. A court will generally not decree a party to perform a continuous series of acts which extend through a long period of

time and require constant supervision by the court. Texas & Pacific Ry. Co. v. City of Marshall, 136 U.S. 385, 390–91, 10 S.Ct.

846, 847, 34 L.Ed. 385 (1890); American Housing Resources, Inc. v. Slaughter, 597 S.W.2d 13, 15 (Tex.Civ.App.—Dallas 1980,

writ ref'd n.r.e.); United Coin Meter Co., Inc. v. Johnson–Campbell Lumber Co., 493 S.W.2d 882, 888 (Tex.Civ.App.1973); 81

C.J.S. Specific Performance § 75 (1977). Instead, the parties are left to their remedies at law unless the interest of the public is

involved. Beckham v. Munger Oil & Cotton Co., 185 S.W. 991, 992 (Tex.Civ.App.—Dallas 1916, no writ); See Nueces Valley

Townsite Co. v. San Antonio, Uvalde & Gulf R.R. Co., 67 S.W.2d 215, 220–221 (Tex.1933).

[4] In the instant case, the trial court ordered Canteen to open and operate a restaurant in the style of the Gulliver's restaurants

operated in the Dallas area. This is not capable of present performance. Neither is the operation of a delicatessen restaurant a

matter of public interest which justifies deviation from the general rule against ordering ongoing activities. The portion of the

injunction which orders the operation of a Gulliver's is improper. Accordingly, we sustain Canteen's third point of error.

[5] Generally, contractual rights are not enforced by writs of injunction, since inadequate remedy at law and irreparable injury

are rarely shown when a suit for damages for breach of contract is available. Chevron U.S.A., Inc. v. Stoker, 666 S.W.2d 379, 382

(Tex.App.—Eastland 1984, writ dism'd w.o.j.). “Irreparable injury” is stated to be “an injury of such nature that the injured party

cannot be adequately compensated therefore in damages, or that the damages which result therefrom cannot be measured by any

certain pecuniary standard.” Id.; see Minexa Arizona, Inc. v. Staubach, 667 S.W.2d 563, 567 (Tex.App.—Dallas 1984, no writ).

[6] In the instant case, Republic presented evidence that tenants were complaining about the vending machines and that

some prospective tenants did not lease space in the building in part because there was no restaurant. Additionally, Republic

demonstrated that there was no way to prove how many prospective tenants had not approached Republic about leasing and

had not leased in the building because there was no restaurant. Thus, Republic demonstrated an inability to compute damages.

The injunction is proper as far as enjoining Canteen's vending machine operation.

However, the injunction also commands Canteen to reopen and operate a Gulliver's-type restaurant in the nature of a decree of

specific performance. “Whether a court will grant an injunction the effect of which is to compel the specific performance of a

contract, depends, of course, upon the same principles as govern a decree of specific performance.” Beckham v. Munger Oil &

Cotton Co., 185 S.W. 991, 992 (Tex.Civ.App.—Dallas 1916, no writ).

The judgment of the trial court is AFFIRMED in part and REVERSED in part.

All Citations

773 S.W.2d 398

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 4

City of Houston v. Memorial Bend Utility Co., 331 S.W.2d 418 (1960)

32 P.U.R.3d 522

331 S.W.2d 418

Court of Civil Appeals of Texas, Houston.

CITY OF HOUSTON, Appellant,

v.

MEMORIAL BEND UTILITY COMPANY, Appellee.

No. 13555. | Jan. 21, 1960.

Suit for injunction. The District Court, Harris County, John, Snell, Jr., J., refused to grant injunction, and plaintiff appealed.

The Court of Civil Appeals, Bell, C. J., held that city was entitled to temporary injunction restraining private water and sewer

utility from charging more than the rates which had been fixed in ordinance which adopted rates requested by city and which

had not been contested by utility as fixing confiscatory rates until two years after ordinance became effective.

Reversed and rendered.

West Headnotes (11)

[1] Constitutional Law Water, sewer, and irrigation

Municipal Corporations Sewer rates

Water Law Notice

Water Law Hearing, in general

Where private water and sewer utility requested city to pass ordinance approving utility's rates and city passed

ordinance having that effect, the utility was not denied procedural due process because it was given no notice or

hearing in connection with such ordinance, and after the elapse of more than two years without the utility having

contested the ordinance on ground that rates established therein were confiscatory the utility could not change its rates

without approval of city council.

Cases that cite this headnote

[2] Public Utilities Nature and extent in general

Until such time as a regulatory body assumes to exercise its authority to fix rates which a utility may charge, the utility

may fix its own rates, provided they are reasonable.

5 Cases that cite this headnote

[3] Constitutional Law Charges and prices in general

In case the regulatory body proposes to fix the rates to be charged by the utility, due process of law requires that

the utility be given notice and be given a hearing, unless utility in some manner consents to fixing of particular rates

which regulatory body in fact fixes, and if there is such consent no notice of the passage of the order need be given

and no hearing need be accorded the utility.

3 Cases that cite this headnote

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1

City of Houston v. Memorial Bend Utility Co., 331 S.W.2d 418 (1960)

32 P.U.R.3d 522

[4] Municipal Corporations Sewer rates

Water Law Revision, Increase, or Reductions of Charges

Where an ordinance is passed fixing the rates which a private utility may charge for water and sanitary sewer service,

the utility cannot promulgate new rates until the existing rates are set aside and the only way the rates can be changed

is through a hearing before the city council and the courts cannot intervene until the utility first exhausts its remedy

before the city council.

Cases that cite this headnote

[5] Municipal Corporations Charges and prices

If city council denies the utility a hearing and seeks to enforce a rate-fixing ordinance which the utility contends

operates to confiscate its property, the court can intervene to determine whether there is in fact confiscation.

Cases that cite this headnote

[6] Municipal Corporations Sewer rates

Water Law Methodologies; establishment of rate base

A nonrecurring revenue of private utility furnishing water and sanitary sewer service cannot be considered in fixing

a rate operative in the future.

Cases that cite this headnote

[7] Municipal Corporations Judicial proceedings

Water Law Injunction

In suit by city to enjoin private water and sewer utility from charging rates in excess of those fixed by ordinance,

wherein the utility contended that it had been operating at a loss, the court could consider that if revenue from tap

charges was included as income the utility would show a profit, even though such nonrecurring income could not be

considered in fixing a rate operative in the future.

Cases that cite this headnote

[8] Appeal and Error Injunction

The inquiry of the Court of Civil Appeals in a temporary injunction proceeding is whether the trial court has abused

its discretion.

2 Cases that cite this headnote

[9] Injunction Injunctions to enforce laws and regulations in general

Where the facts conclusively show that a party is violating the substantive law it becomes duty of court to enjoin the

violation and in such case there is no discretion to be exercised.

5 Cases that cite this headnote

[10] Injunction Preservation of status quo

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 2

City of Houston v. Memorial Bend Utility Co., 331 S.W.2d 418 (1960)

32 P.U.R.3d 522

It is the office of a temporary injunction to preserve the “status quo”, meaning the last actual, peaceful, noncontested

status of the parties to the controversy, which preceded the suit.

1 Cases that cite this headnote

[11] Municipal Corporations Sewer rates

Water Law Injunction

City was entitled to temporary injunction restraining private water and sewer utility from charging more than the rates

which had been fixed in ordinance which adopted rates requested by city and which had not been contested by utility

as fixing confiscatory rates until two years after ordinance became effective.

Cases that cite this headnote

Attorneys and Law Firms

*420 R. H. Burks, City Atty., John Gano, Senior Asst. City Atty., Charles F. Weaver, Asst. City Atty., Houston, for appellant.

Dow & Dow, Melvin A. Dow, Houston (Howard W. Edmunds, Houston, of counsel), for appellee.

Opinion

BELL, Chief Justice.

The appellee is a private utility furnishing water and sanitary sewer service to residents of a defined area in the City of Houston.

Prior to December 31, 1956, the territory served was outside the limits of the City. As a result of annexation, a part of the area

served by appellee bcame a part of the City of Houston. At the time of annexation appellee was charging rates for services

rendered by it according to a rate schedule promulgated by it. These rates it continued to charge until it raised its rates effective

July 1, 1959.

On January 2, 1957, the City Council of the City of Houston passed general ordinances Nos. 57–1 and 57–3, by which it, without

notice to appellee, fixed the rates that might be charged by a utility situated as was appellee for water and sanitary sewer service.

The rates so fixed were less than the rates prescribed by appellee's schedule of rates. The record here reflects that on February

18, 1957, appellee furnished the City information as to the value of its properties, the appraisal being made by Freese, Nichols

and Turner, the report being dated February 15, 1957. Also it furnished a statement of its income and expenses for the fiscal

year ending November 30, 1956. The furnishing of these statements was in an effort to comply with the above ordinances. At

the same time appellee for various reasons protested the passage of the ordinances and questioned their validity and the rates

fixed thereby. The petition to the City Council contains this prayer:

‘Wherefore, premises considered, petitioner prays that the City Council of the City of Houston pass an ordinance approving the

rates and charges made by the petitioner in the operation of its utilities and in the furnishing of other public services (emphasis

ours) or in the alternative that said City Council conduct a public hearing concerning rates and charges made by the petitioner

and at such hearing that said petitioner be given an opportunity to introduce evidence with reference thereto and further, that

the rates and charges made by petitioner be not changed until the City of Houston has taken final action after such hearing.’

(Emphasis ours.)

On May 1, 1957, the City Council passed ordinance No. 57–531 by which it provided that a private utility operating without

a franchise could charge no greater rate for its service than was being charged by it on December 31, 1956. The effect of the

ordinance was to fix the maximum rate that could be charged, such maximum rate being that being charged by the utility on

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 3

City of Houston v. Memorial Bend Utility Co., 331 S.W.2d 418 (1960)

32 P.U.R.3d 522

December 31, 1956. Appellee had no notice of the passage of the ordinance before its passage. On the same day ordinances

Nos. 57–1 and 57–3 were repealed.

The facts here show that the rates being charged by appellee on May 1, 1957 were the same as those being charged by them

on December 31, 1956.

Nothing was done by appellee until June 3, 1959. It continued to charge the rates it had voluntarily adopted and which it, by

its petition of February 18, 1957, expressly asked the City Council to adopt and which the City Council did effectively adopt

by ordinance No. 57–531. On June 3, appellee wrote the City Council contending it had on February 18, 1957 asked for a

rate hearing and stating the rates in force were not compensatory and stating it did not intend to continue to operate under the

existing rates. *421 They requested a rate hearing. Mr. Puig, the Company president, stated appellee had several times from

early 1957 orally requested a rate hearing. Just what kind of a rate hearing he does not state, nor are the times of the requests

stated. On June 9, 1959, the City Council set a rate hearing for July 23, 1959.

Appellee, without approval of the City Council, promulgated an increase in rates to be charged by it effective July 1, 1959,

and is now charging such rates.

Appellant filed this suit to enjoin appellee from charging rates in excess of those fixed by ordinance No. 57–531. The trial court

refused to grant the injunction.

[1] Appellee contends the ordinance is as to it invalid because it was given no notice or hearing in connection with the ordinance

fixing its rates and it was thus denied procedural due process. Too, it contends the rates established are not compensatory, but

operate to confiscate its property. Further, it says the ordinance recites facts which are contrary to the established fact, that

is, that since Decembr 31, 1956, there has been no increase in prices and expenses, whereas certainly there has been a very

substantial increase in taxes. Appellee says that in any event under all circumstances the trial court did not abuse its discretion

in refusing to grant the injunction.

[2] [3] We have reached the conclusion that ordinance No. 57–531 was as to appellee valid and effective to fix the maximum

rates which appellee could charge for its services. We take it to be established law that until such time as a regulatory body

assumes to exercise its authority to fix rates which a utility may charge, that the utility may fix its own rates, provided they

are reasonable. 73 C.J.S. Public Utilities §§ 14 and 15, p. 1009. Such rates would be binding until such time as the regulatory

body assumes to exercise its authority. United Gas Corp. v. Shepherd Laundries, 144 Tex. 164, 189 S.W.2d 485. As we held on

January 14, 1960, in the case of the City of Houston v. Willow Bend Utilities, Inc., Tex.Civ.App., 331 S.W.2d 333, in case the

regulatory body proposes to fix the rates to be charged by the utility due process of law requires that the utility be given notice

and be given a hearing, unless the utility in some manner consents to the fixing of the particular rates which the regulatory body

in fact fixes. We think there can be no question that if the utility consents to an order by the regulatory body fixing particular

rates, no notice of the passage of the order need be given and no hearing need be accorded the utility. In such case the rate is

that of the utility and the regulatory body. It would be a rate fixed by the regulatory body with the consent of the utility.

In this case, on February 18, 1957, appellee expressly requested the City Council of the City of Houston to pass an ordinance

approving the rates and charges being made by appellee. There was an alternative prayer for a rate hearing, but it was for a

hearing to examine the rates appellee was charging and in this connection it was expressly asked that the rates appellee was

charging be not changed until after a hearing. On May 1, 1957, with the enactment of Ordinance No. 57–531, the City Council

did just what appellee had expressly requested. It adopted the rates the appellee was charging. After the request by appellee

that an ordinance approving these rates be passed, appellee was entitled to no notice that the Council would be as appellee

had requested.

[4] [5] When the ordinance was passed, the rate fixed became the rate promulgated by law and it could not be changed

except in a manner provided by law. The utility could not itself promulgate new rates until the existing rates fixed by law be

set aside. The only way the rates could be changed would be through a hearing before the City Council. The courts could not

intervene until appellee first exhausted its remedy before the City Council. San Antonio Transit Company v. City of San Antonio,

Tex.Civ.App., 323 S.W.2d 272, no writ hist. Of *422 course, if the Council should deny a hearing and seek to continue to

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 4

City of Houston v. Memorial Bend Utility Co., 331 S.W.2d 418 (1960)

32 P.U.R.3d 522

enforce an ordinance that appellee contends operates to confiscate its property, the courts would intervene to determine whether

there was in fact confiscation. Oklahoma Operating Company v. Love, 252 U.S. 331, 40 S.Ct. 338, 64 L.Ed. 596. In the case

before us, a hearing was set to commence July 23, 1959. There has been no denial of a hearing. We do not mean to say that even

though appellee consented to the adoption of a rate that it would be estopped to assert the rate was confiscatory in a suit filed

within the time prescribed by law after the passage of the ordinance adopting the rates. We merely hold procedural due process

has not been denied and that the ordinance not having been contested in court for over two years after it became effective on

the ground that the rates established were noncompensatory, appellee cannot change its rates except with the approval of the

City Council. San Antonio Transit Co. v. City of San Antonio, supra. Of course, even should the City Council not expressly

deny a hearing but should delay or prolong the hearing so its action would be tantamount to a denial of a hearing, the courts

could intervene upon proper proceedings being instituted. We have no such situation here.

[6] [7] Appellee contends continued enforcement of the rates would confiscate its property. What we have said above we

think should adequately dispose of such contention. However, without going into the matter extensively, it should suffice to

say that the proof shows that if revenue from tap charges is included as income, then for the years ending November, 1958,

and May 31, 1959, appellee would show a profit. Appellee argues that since tap charges are nonrecurring, the revenue derived

from this service may not be considered in determining profit. It is true that nonrecurring revenue may not be considered in

fixing a rate operative in the future. However, it seems to us but reasonable to consider such in a situation such as we have here

where appellee is contending it should not be enjoined from raising rates fixed by ordinance because it has been operating at

a loss. Certainly it has been income for the period meterial to our inquiry. In determining what the future rate should be you

have an entirely different problem.

[8] [9] We are not unaware that the inquiry of this court in a temporary injunction proceeding is whether trial court has

abused its discretion. However, we understand the law to be that where the facts conclusively show a party is violating the

substantive law it becomes the duty of the court to enjoin the violation. In such case there is no discretion to be exercised.

It must correctly apply the law to positively established fact. General Drivers, Warehousemen & Helpers, Local 745, et al.

v. Dallas County Construction Employers Ass'n, Tex.Civ.App., 246 S.W.2d 677, writ ref., n. r. e.; Southland Life Ins. Co. v.

Egan, 126 Tex. 160, 86 S.W.2d 722.

[10] [11] Too, it is the office of a temporary injunction to preserve the status quo. The status quo to be preserved is the last

actual, peaceful, noncontested status of the parties to the controversy, which preceded the suit and which should be preserved

until a final determination of the matters in controversy. Transport Company of Texas v. Robertson Transports, Inc., 152 Tex.

551, 261 S.W.2d 549. The last actual, peaceful and noncontested status of the parties to this suit was the status created by

ordinance No. 57–531 adopting rates voluntarily used by appellee which appellee requested the Council to adopt, and the

ordinance adopting them was not contested as fixing confiscatory rates until two years after it became effective.

The judgment of the trial court is reversed and judgment is here rendered enjoining appellee, pending a trial on the merits, from

charging its customers rates in excess of those being charged by it on May 1, 1957.

All Citations

331 S.W.2d 418, 32 P.U.R.3d 522

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 5

Davis v. Huey, 571 S.W.2d 859 (1978)

571 S.W.2d 859

Supreme Court of Texas.

Tom H. DAVIS et ux., Petitioners,

v.

Robert M. HUEY et al., Respondents.

No. B-7182. | Oct. 4, 1978. | Rehearing Denied Nov. 1, 1978.

Action was brought for injunction to arrest construction of dwelling in residential subdivision in claimed violation of covenants

and restrictions imposed upon all lots. The 201st District Court, Travis County, Herman Jones, J., denied temporary injunction

and plaintiffs appealed. The Court of Civil Appeals, 556 S.W.2d 860, reversed and remanded with instructions, and defendants

filed writ of error. The Supreme Court, Johnson, J., held that: (1) the Court of Civil Appeals far exceeded proper scope of

appellate review of temporary injunction and improperly granted premature review of entire case on its merits, and thus denied

defendants their right to trial by jury; (2) the trial court did not abuse its discretion in denying the temporary injunction; (3)

issue of necessity of bond in injunction pendente lite issued by Court of Civil Appeals to protect its jurisdiction was rendered

moot by expiration of the injunction pendente lite upon filing of application for writ of error to the Supreme Court, and (4)

defendants timely filed application for writ of error invoking jurisdiction of the Supreme Court.

Judgment of the Court of Civil Appeals reversed; judgment of the trial court affirmed.

West Headnotes (10)

[1] Appeal and Error Extent of Review Dependent on Nature of Decision Appealed from

Appeal and Error Injunction

Appeal and Error Refusing injunction

Appeal of order granting or denying temporary injunction is appeal from interlocutory order; accordingly, merits

of underlying case are not presented for appellate review; appellate review of such an order is strictly limited to

determination of whether there has been clear abuse of discretion by trial court in granting or denying the interlocutory

order. Vernon's Ann.Civ.St. art. 4662.

164 Cases that cite this headnote

[2] Appeal and Error Nature and Grounds of Decision of Intermediate Court

Where Court of Civil Appeals' opinion contained no indication that it confined its appellate consideration to review

for abuse of discretion, but instead gave full consideration to merits of underlying lawsuit, and where the order which

the Court of Civil Appeals directed the trial court to enter upon remand fully granted the relief sought by plaintiffs,

the Court of Civil Appeals far exceeded proper scope of appellate review of temporary injunction and improperly

granted premature review of entire case on its merits, and thus denied enjoined defendants their right to trial by jury.

101 Cases that cite this headnote

[3] Appeal and Error Interlocutory Orders and Proceedings

The Supreme Court will not assume that evidence taken at preliminary hearing will be same as evidence developed

at full trial on the merits.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1

Davis v. Huey, 571 S.W.2d 859 (1978)

11 Cases that cite this headnote

[4] Appeal and Error Injunction

Injunction Preservation of status quo

At hearing upon request for temporary injunction, only question before trial court is whether applicant is entitled to

preservation of status quo of subject matter of the suit pending trial on merits; on appeal the reviewing court is limited

in its consideration as to whether the trial court abused its discretion in making the foregoing determination.

215 Cases that cite this headnote

[5] Appeal and Error Abuse of discretion

The appellate court may not substitute its judgment for that of the trial court; an abuse of discretion does not exist

where the trial court bases its decisions on conflicting evidence.

236 Cases that cite this headnote

[6] Appeal and Error Matters Appearing Otherwise Than by Record

Letter from trial judge to attorneys in case setting forth basis for his judgment denying temporary injunction, which

was submitted to Supreme Court as attachment to the parties' briefs, was not properly made part of appellate record

and would not be considered on appeal as finding of fact or conclusion of law on appeal.

9 Cases that cite this headnote

[7] Appeal and Error Necessity of finding facts

Where no findings of fact or conclusions of law were filed in connection with denial of temporary injunction, trial

court judgment must be upheld on any legal theory supported by the record.

107 Cases that cite this headnote

[8] Injunction Real property in general

In action by owners of property adjacent to property on which they sought to enjoin building of home, some basis

existed upon which the trial court could have properly held that the owners seeking the injunction were not entitled to

temporary injunction pending final hearing, and thus trial court did not abuse its discretion in denying the temporary

injunction.

39 Cases that cite this headnote

[9] Appeal and Error Scope of Inquiry in General

Where the Supreme Court acquired exclusive jurisdiction of action for injunctive relief upon filing of application for

writ of error, the order of the Court of Civil Appeals granting the injunction pendente lite without requiring bond

expired, and thus the issue of necessity of bond in injunction pendente lite issued by Court of Civil Appeals to protect

its jurisdiction was rendered moot.

3 Cases that cite this headnote

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 2

Davis v. Huey, 571 S.W.2d 859 (1978)

[10] Appeal and Error Order for Appeal or Writ of Error

Where first motion by owners of property, who were enjoined by Court of Civil Appeals' injunction pendente lite from

building home on their property primarily sought setting of bond, and they subsequently filed motion for rehearing,

and where enjoined owners filed writ of error in Supreme Court within 30-day statutory period following second

motion, but not within 30 days of first motion, the first did not preclude enjoined owners' subsequent filing of timely

motion for rehearing, and thus they timely filed application for writ of error invoking jurisdiction of the Supreme

Court. Rules of Civil Procedure, rules 4, 468.

3 Cases that cite this headnote

Attorneys and Law Firms

*860 Graves, Dougherty, Hearon, Moody & Garwood, John T. Anderson and Robert J. Hearon, Jr., Byrd, Davis & Eisenberg,

Tom H. Davis, Austin, for petitioners.

Eskew, Brady, Womack & Muir, Doren R. Eskew, David L. Tisinger, Austin, for respondents.

Opinion

JOHNSON, Justice.

The primary issue presented by this case is the proper scope and standard of review by the court of civil appeals of a trial court's

denial of a temporary injunction.

The respondents, Robert M. Huey and wife, Mary Paige Huey, filed suit to permanently enjoin the petitioners, Tom and Hattie

Davis, from building upon their lot until their plans therefor had been approved by the developer. The Hueys further sought an

immediate temporary restraining order and, after a hearing, a temporary injunction similarly restraining the Davises. After a

hearing the trial court denied the temporary injunction and the Hueys appealed the denial of the temporary injunction. The court

of civil appeals reversed the trial court judgment and rendered judgment that the cause be remanded to the district court, with

instructions to enter judgment enjoining the Davises from continuing with construction until the plans had been approved by

the developer. 556 S.W.2d 860. We reverse the judgment of the court of civil appeals and affirm the judgment of the trial court.

Petitioners Tom and Hattie Davis purchased a lot in Northwest Hills, a subdivision of Austin, Texas, noted for its view of the

surrounding hills. The Davis lot abuts on its west side a lot owned by respondents Robert and Mary Paige Huey. A house was

already constructed on the Huey lot at the time of the Davis purchase. The Davis lot, as are all other lots in the subdivision, is

subject to certain restrictive covenants in its deed, including restrictions 7 and 8, as follows:

“7. Set-Back, Front Line, Side Line and Rear Line

“No structure shall be located or erected on any lot nearer to the front plot line than twenty-five (25) feet, nor nearer than five

(5) feet to any side plot line except that the total combined setback from both sides shall in no event be less *861 than fifteen

(15) feet, nor nearer than fifteen (15) feet to the rear plot line.

“8. Architectural Control and Building Plans

“For the purpose of insuring the development of the subdivision as a residential area of high standards, the Developers . . .

reserve the right to regulate and control the buildings or structures or other improvements placed on each lot. No building, wall

or other structure shall be placed upon such lot until the plan therefor and the plot plan have been approved in writing by the

Developers. Refusal of approval of plans and specifications by the Developers . . . may be based on any ground, including purely

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 3

Davis v. Huey, 571 S.W.2d 859 (1978)

aesthetic grounds, which in the sole and uncontrolled discretion of the Developers . . . shall seem sufficient. No alterations in

the exterior appearance of any building or structure shall be made without like approval. . . . ” 1

The Davises proposed to build a house on their lot to be situated twenty-five feet from the rear plot line. This placement of

the house on the lot will clearly comply with restriction 7. However, the developer, respondent Austin Corporation, acting

through respondent David Barrow, refused to approve the Davises' plans because the proposed placement of the house on the

lot would bar the side view from the Hueys' existing house. In its refusal of the plans the developer purports to exercise its

general authority under restriction 8 to refuse approval of a plan “on any ground, including purely aesthetic grounds, which in

the sole and uncontrolled discretion” of the developer shall seem sufficient.

The Hueys filed the instant lawsuit to permanently enjoin the Davises from building any structure upon their lot until the plans

therefor had been approved in writing by the developer. The Hueys' petition included a prayer that an immediate temporary

restraining order be granted and that after a hearing a temporary injunction be entered, both similarly restraining the Davises.

The trial court granted an immediate and Ex parte temporary restraining order. After a hearing the trial court entered an order

dissolving the temporary restraining order and denying the temporary injunction. No findings of fact or conclusions of law

were requested or filed.

The Hueys appealed the denial of the temporary injunction. The court of civil appeals reversed the trial court judgment and

rendered judgment “that the cause be remanded to the district court, with instructions to enter judgment enjoining Appellees

Davis and wife from continuing with construction until the house and plot plans have been approved by the developer.” In

reaching this result the court of civil appeals opinion concluded that the covenants in question were valid. The opinion discussed

at length the authorities in Texas and other jurisdictions which uphold restrictive covenants implementing a general scheme of

development for the common benefit of all lot owners by providing for approval of building plans by the developer. The court

of civil appeals further examined the issue of the standard governing the developer's conduct in exercising its plan approval

authority and concluded that the developer's conduct is improper only if it is arbitrary or in bad faith.

THE TEMPORARY INJUNCTION REVIEW

[1] The Davises contend that the court of civil appeals far exceeded the proper scope of appellate review of a temporary

injunction and improperly granted premature review of the entire case on its merits. We must agree. The appeal of an order

granting or denying a temporary injunction is an appeal from an interlocutory order, which is expressly authorized by Article

4662, Texas Revised Civil Statutes Annotated. Accordingly, the merits of the underlying case are not presented for appellate

review. Appellate review of an order *862 granting or denying a temporary injunction is strictly limited to determination of

whether there has been a clear abuse of discretion by the trial court in granting or denying the interlocutory order. State v.

Southwestern Bell Tel. Co., 526 S.W.2d 526 (Tex.1975); City of Spring Valley v. Southwestern Bell Tel. Co., 484 S.W.2d 579

(Tex.1972); State v. Cook United, Inc., 469 S.W.2d 709 (Tex.1971); Texas Foundries v. International Moulders & F. Wkrs.,

151 Tex. 239, 248 S.W.2d 460 (1952).

The court of civil appeals opinion contains no indication that it confined its appellate consideration to review for abuse of

discretion. To the contrary, it appears that the court of civil appeals gave full consideration to the merits of the underlying

lawsuit. The opinion itself characterizes the case as an appeal from an order denying an injunction. The opinion makes no

reference to the interlocutory nature of the injunction or to the abuse of discretion standard. Further, the order which the court of

civil appeals directed the trial court to enter upon remand fully grants the relief sought by the Hueys in their lawsuit: injunction

of the construction until the Davises' plans are approved by the developer.

[2] [3] The Hueys argue that the court of civil appeals opinion was clearly limited to review of the temporary injunction

because that was the only issue raised before that court. However, a reading of the court of civil appeals opinion and order will

not support this contention. The effect of premature review of the merits accomplished by the court of civil appeals here is to

deny the Davises their right to trial by jury. This court will not assume that the evidence taken at a preliminary hearing will be

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 4

Davis v. Huey, 571 S.W.2d 859 (1978)

the same as the evidence developed at a full trial on the merits. Houston Belt & T. Ry. Co. v. Texas & New Orleans R. Co.,

155 Tex. 407, 289 S.W.2d 217 (1956); Transport Co. of Texas v. Robertson Transports, 152 Tex. 551, 261 S.W.2d 549 (1953).

[4] [5] [6] [7] At a hearing upon the request for a temporary injunction the only question before the trial court is whether

the applicant is entitled to preservation of the status quo of the subject matter of the suit pending trial on the merits. Houston

Belt & T. Ry. Co. v. Texas & New Orleans R. Co., supra. On appeal the reviewing court is limited in its consideration as to

whether the trial court abused its discretion in making the foregoing determination. The appellate court may not substitute its

judgment for that of the trial court. Texas Foundries v. International Moulders & F. Wkrs., supra. An abuse of discretion does

not exist where the trial court bases its decisions on c

This text is long and has been trimmed here. Open the source document for the complete record.