1

In The

Court of Appeals

Ninth District of Texas at Beaumont

____________________

NO. 09-15-00354-CV

____________________

21STMORTGAGE CORPORATION, Appellant

V.

BEVERLY HINES, Appellee

__________________________________________________________________

On Appeal from the 60th District Court

Jefferson County, Texas

Trial Cause No. B-194451

__________________________________________________________________ 

MEMORANDUM OPINION 

In five issues on appeal, appellant 21st Mortgage Corporation argues that the 

trial court abused its discretion by awarding sanctions to appellee Beverly Hines.1

21st Mortgage argues that the trial court’s award of sanctions, which included 

attorney’s fees, is unreasonable, arbitrary, violates due process, and is not 

supported by sufficient evidence. 21st Mortgage also argues that the trial court 

 1

In the trial court’s record, Beverly Hines is also referred to as Beverly Rose. 

We shall refer to Beverly Rose as ‘Hines’.
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lacked jurisdiction to award sanctions because it dismissed its claims against Hines

before Hines filed her motion for sanctions. 21st Mortgage maintains that we 

should vacate the sanctions award in its entirety and enter a take-nothing judgment.

We reverse the trial court’s order granting sanctions and render judgment that 

Hines take nothing from 21st Mortgage. 

Background

In June 2013, 21st Mortgage filed suit against Wayne Rose, Robert Rose, 

and Beverly Rose (Hines). In its petition, 21st Mortgage alleged that Wayne Rose 

defaulted in paying a note for a manufactured home in which 21st Mortgage held a 

security interest. As a result of Wayne’s default, 21st Mortgage alleged that Wayne 

was contractually obligated to peacefully turn over the home but had refused to do 

so. 21st Mortgage alleged that while Robert and Hines were not obligors under the 

retail installment contract, they were in wrongful possession of the home. Attached 

to 21st Mortgage’s petition is the affidavit of Phil Price, its custodian of records. In 

his affidavit, Price states that Wayne has defaulted in paying the contract and that 

“[u]pon information and belief, Defendants Robert Rose and [Hines] are in 

wrongful possession of the home and refuse to surrender possession.”

Hines answered, asserting a general denial and claiming that there was no 

such person as Beverly Rose, but that Beverly Hines is a person who has lived in 
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the home as a guest. Hines maintained that she had no documented right of entry, 

possession, ownership, or occupation of the premises and had never claimed any 

rights to the home. Hines also claimed that Robert had never lived in the home and 

had never claimed any interest in the home. Hines specifically denied Price’s 

affidavit and 21st Mortgage’s claim that she was in wrongful possession of the 

home and had refused to surrender possession.

In June 2014, Hines filed a motion for summary judgment. 21st Mortgage 

responded to Hines’s motion for summary judgment and attached the affidavit of 

Chris Caldwell, an attorney who worked in its legal department. In his affidavit, 

Caldwell stated that upon default, Wayne was obligated to surrender the home but 

failed to do so. Caldwell further stated that Wayne admitted that he had allowed 

Hines to acquire possession of the home, and Hines failed to surrender possession 

prior to litigation. Before the trial court conducted a hearing on Hines’s motion for 

summary judgment, 21st Mortgage filed a notice of non-suit of its claims against 

Hines and Robert, and in August 2014, the trial court signed an order dismissing 

21st Mortgage’s claims against Hines and Robert. In September 2014, Hines filed 

a motion for sanctions against 21st Mortgage for filing a groundless lawsuit against 

her in bad faith and for the purpose of harassment. Hines contends that due to 21st 

Mortgage filing a wrongful suit against her, she incurred substantial attorney’s
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fees, expenses, and other damages. Hines requested that the trial court order 

“sanctions, damages, and compensation[,]” including attorney’s fees, expenses, 

general damages, penalties, and an order of contempt.

The trial court heard arguments on Hines’s motion for sanctions in March 

and April 2015. During the hearing, the trial court took judicial notice of the

court’s file. Hines testified at the hearing that her brother, Wayne, had allowed her 

to stay in the home temporarily to care for their mother, and that she had never 

claimed to own the home. According to Hines, when her mother was alive, she and 

her mother helped Wayne pay the note and utilities. Hines testified that Rachel 

Hilgert, a representative of 21st Mortgage, came to the home in April 2013. When 

Hilgert came, Hines was partially packed and trying to move out because Wayne 

had told her he was not going to keep the home. Hines thought Hilgert was just 

checking the condition of the home and Hines claimed that she did not know 

Wayne was in default. Hines testified that her encounter with Hilgert was the only 

contact she had with 21st Mortgage. Hines stated that Hilgert was not “ugly” or 

harassing. Hines did not move out until November 2013. The mobile home was 

surrendered in January 2014.

Hines’s attorney offered testimony concerning the attorney’s fees and 

expenses that Hines had incurred due to 21st Mortgage’s lawsuit against her, and 
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he also testified about the cost of defending Hines on appeal. No representatives 

from 21st Mortgage testified during the sanctions hearing.

In August 2015, the trial court entered an order granting Hines’s motion for 

sanctions and ordered that Hines recover attorney’s fees and expenses in the 

amount of $92,616.04, plus post-judgment interest and attorney’s fees and 

expenses for post-judgment proceedings, from 21st Mortgage, its attorney, and the 

Brady Law Firm, PLLC. Brady requested that the trial court remove him and his 

firm from the sanctions order, arguing that the motion for sanctions was only 

directed against 21st Mortgage. Hines opposed Brady’s request. The trial court 

entered an amended order, ordering sanctions only against 21st Mortgage. The trial 

court’s amended order contains eighty-four findings of fact and eighty-six 

conclusions of law. 21st Mortgage appeals the trial court’s amended order 

awarding sanctions.

Analysis 

In issue one, 21st Mortgage argues that the trial court abused its discretion in 

awarding sanctions to Hines, because there is no evidence to support the trial 

court’s findings or conclusions in its amended order awarding sanctions. In issue 

two, 21st Mortgage argues that we should vacate the trial court’s sanctions award,

because there is no evidence of any misconduct by 21st Mortgage that would 
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justify sanctions under any of the legal theories utilized by Hines. According to 

21st Mortgage, Hines failed to demonstrate that 21st Mortgage’s lawsuit was 

legally groundless and that 21st Mortgage had sued Hines in bad faith or for the 

purpose of causing her annoyance, harm, or anguish. Hines maintains that the 

evidence is sufficient to support the trial court’s findings of sanctionable conduct 

by 21st Mortgage and to support the type and amount of sanctions imposed. 

“We review a trial court’s imposition of sanctions for an abuse of 

discretion.” Am. Flood Research, Inc. v. Jones, 192 S.W.3d 581, 583 (Tex. 2006).

The test for abuse of discretion is whether the trial court acted without reference to 

any guiding rules or principles or whether, under the circumstances, the trial 

court’s action was arbitrary or unreasonable. Low v. Henry, 221 S.W.3d 609, 614 

(Tex. 2007). To determine if sanctions are appropriate, the appellate court must 

ensure there is a direct nexus between the improper conduct and the sanction 

imposed. Id. The sanction must not be excessive. TransAmerican Nat. Gas Corp. v. 

Powell, 811 S.W.2d 913, 917 (Tex. 1991). 

Although the trial court did not specify any single legal basis for its 

sanctions order, in its findings of fact and conclusions of law, the trial court found 

that sanctions were authorized against 21st Mortgage under each and all of the 

following: Rule 13 of the Texas Rules of Civil Procedure; Chapter 10 of the Texas 
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Civil Practice and Remedies Code; the inherent power of the Court; Chapter 21 of 

the Texas Government Code; and the contempt power of the Court. Findings of 

fact in a case tried to the court have the same force and dignity as a jury’s verdict.

Anderson v. City of Seven Points, 806 S.W.2d 791, 794 (Tex. 1991). The trial 

court’s findings of fact are reviewable for legal and factual sufficiency of the 

evidence by the same standards applied in reviewing the legal and factual 

sufficiency of the evidence supporting a jury’s answer to a jury question. Id.

When the appellate record contains a reporter’s record, the trial court’s 

findings are binding only if supported by the evidence. Aldine Indep. Sch. Dist. v. 

Ogg, 122 S.W.3d 257, 265 (Tex. App.—Houston [1st Dist.] 2003, no pet.). “In 

reviewing a ‘no evidence’ point of error, a reviewing court may consider only the 

evidence and inferences that tend to support challenged findings and will disregard 

all evidence and inferences to the contrary.” Catalina v. Blasdel, 881 S.W.2d 295, 

297 (Tex. 1994). If there is more than a scintilla of evidence to support the trial 

court’s findings, a no evidence challenge cannot be sustained. Id. We review the 

trial court’s conclusions of law de novo as a question of law. Heritage Res., Inc. v. 

Hill, 104 S.W.3d 612, 621 (Tex. App.—El Paso 2003, no pet.). We begin by 

analyzing whether the evidence supports the trial court’s imposition of sanctions 
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against 21st Mortgage under any of the legal bases specified in its findings of fact

and conclusions of law.

First, we consider whether sanctions were proper pursuant to Rule 13 of the 

Texas Rules of Civil Procedure. Imposing Rule 13 sanctions is within the trial 

court’s discretion. Monroe v. Grider, 884 S.W.2d 811, 816 (Tex. App.—Dallas 

1994, writ. denied). Rule 13 states that trial courts “shall presume that pleadings, 

motions, and other papers are filed in good faith.” Tex. R. Civ. P. 13; see G.T.E. 

Commc’ns Sys. v. Tanner, 856 S.W.2d 725, 731 (Tex. 1993) (orig. proceeding). 

Rule 13 authorizes a trial court to impose sanctions against an attorney, a 

represented party, or both, who files a pleading or motion that is groundless and 

either brought in bad faith, or brought for the purpose of harassment. Tex. R. Civ. 

P. 13. Under Rule 13, when a trial court imposes sanctions, it must state the 

“particulars” of good cause for the sanctions in its order. Id. The party seeking 

sanctions bears the burden of overcoming the good faith presumption under Rule 

13 and must (1) demonstrate that the opposing party’s filings are groundless, and 

(2) show that the pleadings were filed either in bad faith or for the purpose of 

harassment. Tanner, 856 S.W.2d at 730-31; R.M. Dudley Constr. Co. v. Dawson, 

258 S.W.3d 694, 707 (Tex. App.—Waco 2008, pet. denied). 
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When determining whether Rule 13 sanctions are proper, the trial court must 

examine the facts available to the litigant and the circumstances existing when the 

litigant filed the pleading. Harrison v. Harrison, 363 S.W.3d 859, 863-64 (Tex. 

App.—Houston [14th Dist.] 2012, no pet.). Rule 13 requires that the trial court 

base sanctions on the acts or omissions of the represented party or counsel, and not 

on the legal merit of a pleading or motion. Elkins v. Stotts-Brown, 103 S.W.3d 664, 

668 (Tex. App.—Dallas 2003, no pet.). An act or omission is done in bad faith 

when discovery puts the party on notice that his understanding of the facts may be 

incorrect, and he fails to make reasonable inquiry into the facts before filing the 

pleading. Id. at 668-69. “Improper motive is an essential element of bad faith.” Id.

at 669. Bad faith means the “conscious doing of a wrong for dishonest, 

discriminatory, or malicious purpose.” Id.

Rule 13 requires that the trial court hold an evidentiary hearing to make the 

necessary factual determinations about the motives and credibility of the person 

signing the groundless pleading. Karlock v. Schattman, 894 S.W.2d 517, 523 (Tex. 

App.—Fort Worth 1995, no writ.). Without hearing evidence on the circumstances 

surrounding the filing and of the pleading signer’s credibility and motives, a trial 

court has no evidence to determine that a pleading was filed in bad faith or to 

harass. Id. (holding that the trial court abused its discretion by finding bad faith 
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without the required evidence). The only testimony presented at the sanctions 

hearing was the testimony of Hines and Hines’s attorney, who testified concerning 

the costs and attorney’s fees incurred by Hines in defending against 21st 

Mortgage’s allegedly groundless conversion claim. Hines testified that prior to 21st 

Mortgage filing a claim against her, the only contact she had with 21st Mortgage 

was in April 2013, when Hilgert came to the home and asked Hines to have Wayne 

contact 21st Mortgage. Hines testified that Hilgert was not mean to her and did not 

harass her in any way. Brady, the attorney who signed 21st Mortgage’s petition,

did not testify at the sanctions hearing, nor did any other representative of 21st 

Mortgage.

Even if we were to assume that 21st Mortgage’s claim for conversion

against Hines was groundless, no evidence was presented on 21st Mortgage’s 

motive or credibility in June 2013, when it filed the allegedly groundless claim.

Nor was there any evidence showing that 21st Mortgage, as opposed to its 

attorney, made the decision to pursue the conversion claim. The trial court had no 

evidence before it to find that 21st Mortgage had filed its claim in bad faith or to 

harass Hines. See Karlock, 894 S.W.2d at 523. Additionally, although the trial 

court took judicial notice of the case file, nothing in the file proved that 21st 

Mortgage filed the petition or any other pleadings or motions in bad faith or for the 
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purpose of harassment. See Dawson, 258 S.W.3d at 710. Because no evidence 

exists establishing that any pleadings or motions filed by 21st Mortgage were filed 

in bad faith or for the purpose of harassment, the trial court abused its discretion to 

the extent it awarded sanctions pursuant to Rule 13. See Elkins, 103 S.W.3d at 668-

69.

Next, we consider whether chapter 10 of the Texas Civil Practice and 

Remedies Code supports sanctions against 21st Mortgage. We review sanctions 

under chapter 10 for an abuse of discretion. See Low, 221 S.W.3d at 614. Section 

10.001 provides that the signing of a pleading or motion constitutes a certificate by 

the signatory that to the signatory’s best knowledge, information, and belief, 

formed after reasonable inquiry:

(1) the pleading or motion is not being presented for any improper 

purpose, including to harass or to cause unnecessary delay or needless 

increase in the cost of litigation;

(2) each claim, defense, or other legal contention in the pleading or 

motion is warranted by existing law or by a nonfrivolous argument for 

the extension, modification, or reversal of existing law or the 

establishment of new law;

(3) each allegation or other factual contention in the pleading or 

motion has evidentiary support or, for a specifically identified 

allegation or factual contention, is likely to have evidentiary support 

after a reasonable opportunity for further investigation or discovery; 

and
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(4) each denial in the pleading or motion of a factual contention is 

warranted on the evidence or, for a specifically identified denial, is 

reasonably based on a lack of information or belief. 

Tex. Civ. Prac. & Rem. Code Ann. § 10.001 (West 2002).

Because each allegation and factual contention in a pleading must have 

evidentiary support, or be likely to have evidentiary support after a reasonable 

opportunity for further investigation, the trial court must examine the facts and 

evidence available to the party at the time the pleading or motion was filed. See

Low, 221 S.W.3d at 615; Dawson, 258 S.W.3d at 711. If the trial court determines 

that a person has signed a pleading or motion in violation of section 10.001, the 

trial court may impose a sanction on the person, a party represented by the person,

or both. Tex. Civ. Prac. & Rem. Code Ann. § 10.004(a) (West 2002). However, a 

represented party should not be punished for its attorney’s conduct unless the party 

is implicated apart from having entrusted its legal representation. Loeffler v. Lytle 

Indep. Sch. Dist., 211 S.W.3d 331, 349 (Tex. App.—San Antonio 2006, pet. 

denied). Chapter 10 states that one of the aims of imposing sanctions for the filing 

of frivolous or groundless pleadings is to “deter repetition of the conduct or 

comparable conduct by others similarly situated.” Tex. Civ. Prac. & Rem. Code 

Ann. § 10.004(b) (West 2002). When imposing sanctions under chapter 10, the 
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trial court must describe the conduct it has determined violated section 10.001 and 

explain the basis for the sanction imposed. Id. § 10.005 (West 2002).

Hines sought sanctions based on her belief that 21st Mortgage knowingly 

filed factually and legally groundless pleadings containing false allegations.

Specifically, Hines argued that 21st Mortgage’s claim for conversion and its 

motion to compel arbitration were groundless. In its amended sanctions order, the 

trial court found that 21st Mortgage (1) produced no evidence, information, (2) 

failed to conduct a reasonable inquiry into its allegations against Hines, (3) pursued 

its motion to compel for an improper purpose, (4) failed to produce any evidence to 

support the factual and legal statements in affidavits submitted by employees of 

21st Mortgage, and (5) failed to state a legal basis for any claim for attorney’s fees 

against Hines. The trial court concluded that two of 21st Mortgage’s employees

submitted false affidavits and that 21st Mortgage’s conversion lawsuit and motion 

to compel were groundless. The trial court specifically concluded that “Chapter 10 

of the Texas Civil Practice and Remedies Code was violated by Phil Price signing 

his affidavit in support of Plaintiff’s Original Petition and by Chris Caldwell 

signing his affidavit in Plaintiff’s Response to Defendant Beverly Hines’ Motion 

for Summary Judgment.”
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Hines had the burden of proving violations of one of the four subsections of 

section 10.001. See Dawson, 258 S.W.3d at 709; see also Tex. Civ. Prac. & Rem. 

Code Ann. § 10.001. Because the trial did not identify which subsection of section 

10.001 it determined that 21st Mortgage had violated, we will consider each 

subsection. However, we first note that Chapter 10 is limited to the signing of 

frivolous pleadings and motions, and the affidavits submitted by 21st Mortgage’s 

employees are not pleadings or motions. See Low, 221 S.W.3d at 614-15; Dawson,

258 S.W.3d at 709. Therefore, to the extent that the trial court found that 21st 

Mortgage violated Chapter 10 of the Civil Practice and Remedies Code because its 

employees submitted affidavits containing allegedly groundless or false statements, 

the trial court abused its discretion by not correctly applying the law. See Dawson,

258 S.W.3d at 709.

As with sanctions under Rule 13, to impose a sanction under section 

10.001(1), the trial court must hold an evidentiary hearing to make the necessary 

factual determinations about the motives and credibility of the represented party or 

the attorney. Gomer v. Davis, 419 S.W.3d 470, 480 (Tex. App.—Houston [1st 

Dist.] 2013, no pet.). In our Rule 13 analysis above, we concluded that Hines 

presented no evidence at the evidentiary hearing establishing that 21st Mortgage 

had filed any pleading or motion in bad faith or for the purpose of harassment. 
15

Likewise, we conclude that insufficient evidence supports a finding that 21st 

Mortgage violated section 10.001(1), because there was no evidence that 21st 

Mortgage presented any pleading or motion for any improper purpose. See Tex. 

Civ. Prac. & Rem. Code Ann. § 10.001(1). 

Section 10.001(2) provides that a signatory to a pleading certifies that each 

claim, defense, or other legal contention in a pleading or motion is warranted by 

existing law or by a nonfrivolous argument for the extension, modification, or 

reversal of existing law or the establishment of new law. Id. § 10.001(2). The trial 

court’s amended order only imposed sanctions against 21st Mortgage, a 

represented party. Section 10.004(d) provides that the trial court “may not award 

monetary sanctions against a represented party for a violation of Section 

10.001(2).” Id. § 10.004(d) (West 2002). Because 21st Mortgage was represented 

by counsel, the trial court could not have properly assessed a monetary sanction 

against 21st Mortgage for groundless legal contentions under section 10.001(2). 

See id.; Nath v. Tex. Children’s Hosp., 446 S.W.3d 355, 369 (Tex. 2014). 

Section 10.001(3) provides that to the signatory’s best knowledge, 

information, and belief, formed after reasonable inquiry, each allegation or other 

factual contention in the pleading or motion has evidentiary support or is likely to 

have evidentiary support after a reasonable opportunity for further investigation or 
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discovery. Tex. Civ. Prac. & Rem. Code Ann. § 10.001(3). Under Chapter 10, 

Hines was only required to show that the signatory certified that he made a 

reasonable inquiry into each allegation when he did not, and that he certified that 

each allegation had evidentiary support, or would likely have evidentiary support, 

when some allegations did not. See Low, 221 S.W.3d at 617. The trial court must 

examine the facts and evidence available to the party and the circumstances that 

existed when the party filed the pleading to determine whether a party conducted a 

reasonable inquiry. Dawson, 258 S.W.3d at 711. “Sanctions for frivolous or 

groundless pleadings do not apply to the pursuit of an action later determined to be 

groundless after pleadings were filed.” Id. 

In its original petition filed in June 2013, 21st Mortgage alleged a claim of 

conversion against Hines, claiming that Hines was in “wrongful possession” of the 

home. 21st Mortgage’s petition was signed by its attorney, Brady. Attached to 21st 

Mortgage’s petition was the affidavit of Price, its custodian of records. Price 

executed the affidavit on April 29, 2013, and stated that upon information and 

belief, Hines was in wrongful possession of the home and refused to surrender 

possession.

The trial court found that 21st Mortgage presented no evidence that (1) 

Hines converted the manufactured home; (2) Hines intended to assert a right or 
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claim in the manufactured home; (3) Price had a justified belief that Hines was in 

wrongful possession of the home; (4) 21st Mortgage had communicated to Hines 

any request or demand to leave, vacate, or surrender the home; and (5) Price had a 

justified belief that Hines had refused to surrender possession. The trial court 

further found that nothing in Hilgert’s Collections History Field Note gives the 

impression that Hines was in possession of the home or that 21st Mortgage 

demanded that Hines leave the home. The trial court concluded that Chapter 10 

was violated by Price signing his affidavit in support of the petition, by 21st 

Mortgage failing to conduct a reasonable inquiry into its allegation against Hines 

before filing suit, and by 21st Mortgage filing a groundless suit against Hines 

despite having information in its records showing that Hines was innocent of 

conversion. The trial court concluded that the only information available to 21st 

Mortgage prior to filing suit came from its own investigation and from Hilgert’s 

field note, which indicates that Hines intended to leave and that 21st Mortgage 

never requested that Hines leave before filing suit against her. The trial court 

further concluded that Price’s affidavit in support of 21st Mortgage’s petition 

contained groundless statements that were not supported by 21st Mortgage’s own 

investigation concerning Hines. 
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At the sanctions hearing, Hines had the burden of proving that 21st 

Mortgage violated section 10.001(3) by signing a frivolous pleading or motion. See

Tex. Civ. Prac. & Rem. Code Ann. § 10.001; Low, 221 S.W.3d at 614. To the 

extent that the trial court found that 21st Mortgage violated section 10.001(3) by 

Price signing an affidavit in support of the petition, the trial court abused its 

discretion because Price’s affidavit is not a pleading or motion. See Dawson, 258 

S.W.3d at 709; cf. Metzger v. Sebek, 892 S.W.2d 20, 52-53 (Tex. App.—Houston 

[1st Dist.] 1994, writ denied) (trial court assessed sanctions against a represented 

party who submitted a supporting affidavit and subsequently admitted that he 

lacked personal knowledge of the facts in the affidavit). To determine whether 21st 

Mortgage conducted a reasonable inquiry, the trial court must have evidence 

concerning the facts and evidence available to 21st Mortgage at the time Brady 

filed the petition. See Dawson, 258 S.W.3d at 711. Evidence must be admitted 

under the rules of evidence at the sanctions hearing for the trial court to consider it 

in a sanctions context. Id. at 710. The motions and arguments of counsel are not 

evidence. McCain v. NME Hosps., Inc., 856 S.W.2d 751, 757 (Tex. App.—Dallas 

1993, no writ.).

The evidence that Hines presented at the sanctions hearing does not support 

sanctions under 10.001(3). Hines failed to present evidence concerning the facts 
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and evidence available to 21st Mortgage and the circumstances that existed when 

Brady filed the petition in June 2013. Neither Brady nor any representative of 21st 

Mortgage testified at the sanctions hearing, and without such testimony, the trial 

court could not have determined that Brady certified that he made a reasonable 

inquiry into each allegation when he did not and that he certified that each 

allegation had evidentiary support, or would likely have evidentiary support, when 

some allegations did not. See Low, 221 S.W.3d at 617. The trial court’s findings 

rely on Hilgert’s field note and Price’s affidavit, both of which are dated April 

2013, in determining that 21st Mortgage failed to conduct a reasonable inquiry 

prior to filing suit and that 21st Mortgage filed a groundless suit. However, the 

record is silent concerning any facts and evidence available when Brady filed 21st

Mortgage’s original petition in June 2013. Additionally, the fact that a claim may 

prove to be unsuccessful does not mean a party should be sanctioned. See Davis, 

419 S.W.3d at 481; Dawson, 258 S.W.3d at 711. 

The trial court also concluded that 21st Mortgage violated chapter 10 when 

Caldwell signed his affidavit in support of Plaintiff’s Response to Defendant’s 

Motion for Summary Judgment. The trial court found that Caldwell’s sworn 

statement that Hines had possession of the home prior to the initiation of litigation

and that she refused to surrender possession was false and that 21st Mortgage 
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failed to produce evidence supporting Caldwell’s statements. The trial court further 

found that Hilgert’s field note does not provide any support for Caldwell’s 

allegations. 

Caldwell executed the affidavit in August 2014, and Brady filed 21st

Mortgage’s Response to Hines’s Motion for Summary Judgment that same month.

As discussed above, Caldwell’s affidavit is not a pleading or a motion, and to the 

extent that the trial court found that 21st Mortgage violated section 10.001(3) by 

Caldwell signing an affidavit in support of 21st Mortgage’s Response to Hines’s 

Motion for Summary Judgment, the trial court abused its discretion. See Dawson, 

258 S.W.3d at 709. Additionally, Hines failed to present evidence concerning the 

facts and evidence available to 21st Mortgage and the circumstances that existed 

when Brady filed the Response in August 2014. Without such evidence, the trial 

court could not have determined that Brady’s certification that he made a 

reasonable inquiry into each allegation and that each allegation either had 

evidentiary support, or would likely have evidentiary support, was false. See Low, 

221 S.W.3d at 617. We conclude that because insufficient evidence supports the 

trial court’s findings that 21st Mortgage violated section 10.001(3), the trial court 

abused its discretion to the extent it awarded sanctions under that section.
21

Section 10.001(4) refers to denials of a factual contention made in a pleading 

or motion. See Tex. Civ. Prac. & Rem. Code Ann. § 10.001(4). In its findings, the 

trial court found that in Hines’s Request for Admissions, 21st Mortgage denied that 

its allegations against Hines were not warranted by existing law, that it did not 

conduct a reasonable inquiry into its allegations against Hines, and that Hines was 

an improper party to the suit. The trial court further found that when 21st Mortgage 

denied the admissions at issue, it had no factual information or legitimate legal 

argument contrary to the statements that it had denied. However, the trial court did 

not conclude that 21st Mortgage violated Chapter 10 by denying any request for 

admissions. During the sanctions hearing, the only evidence Hines introduced 

concerning 21st Mortgage’s denial of a factual contention was 21st Mortgage’s 

responses to the request for admissions. Based on our review of the record, the 

evidence is insufficient to support a finding that 21st Mortgage violated section 

10.001(4). Therefore, we conclude that the trial court abused its discretion to the 

extent it imposed sanctions under section 10.001(4).

Next, we consider whether the sanctions award is sustainable based on the

trial court’s inherent power. “A trial court has inherent power to sanction bad faith 

conduct during the course of litigation that interferes with administration of justice 

or the preservation of the court’s dignity and integrity.” Onwuteaka v. Gill, 908 
22

S.W.2d 276, 280 (Tex. App.—Houston [1st Dist.] 1995, no writ) (citing Metzger, 

892 S.W.2d at 51). The trial court should use its inherent power to sanction 

sparingly and only to the extent necessary to deter, alleviate, and counteract bad 

faith abuse of the judicial process. See id. Thus, the best practice is for the trial 

court to rely upon the rules and statutes expressly authorizing sanctions whenever 

possible. Id. While a trial court may exercise its inherent power to sanction conduct 

that may not be covered by any specific rule or statute, there must be some 

evidence and factual findings that the conduct complained of significantly 

interfered with one of the trial court’s core functions. Island Entm’t, Inc. v. 

Castaneda, 882 S.W.2d 2, 5 (Tex. App.—Houston [1st Dist.] 1994, writ denied).

Our review of the record shows no evidence that 21st Mortgage’s conduct 

significantly interfered with the trial court’s core functions or impugned the trial 

court’s dignity or integrity. See Onwuteaka, 908 S.W.2d at 280. Nor did Hines 

present any evidence showing a bad faith abuse of the judicial process. See id. We 

note that several courts have held that a trial court abuses its discretion by 

exercising its inherent power to assess sanctions in the absence of evidence of bad 

faith conduct. See Phillips & Akers, P.C. v. Cornwell, 927 S.W.2d 276, 280 (Tex. 

App.—Houston [1st Dist.] 1996, no writ); Onwuteaka, 908 S.W.2d at 280-81; 

Castaneda, 882 S.W.2d at 5. Based on this record, we conclude that to the extent 
23

the trial court awarded sanctions based on its inherent power, it abused its 

discretion. 

Next, we consider whether the sanctions award is sustainable based on the 

trial court’s contempt power, which is an “‘essential element of judicial 

independence and authority.’” Metzger, 892 S.W.2d at 54 (quoting Ex parte Pryor, 

800 S.W.2d 511, 512 (Tex. 1990)). For the trial court’s inherent power to punish 

for contempt to apply, there must be some support in the record that the conduct 

complained of significantly interfered with the court’s exercise of its core 

functions. See Kutch v. Del Mar College, 831 S.W.2d 506, 510 (Tex. App.—

Corpus Christi 1992, no writ). Having already concluded that there is no evidence 

in the record that 21st Mortgage’s conduct significantly interfered with the trial 

court’s core functions, we find the trial court abused its discretion to the extent it 

awarded sanctions based on its inherent power to punish for contempt. 

The inherent power to punish for contempt has been codified in the Texas 

Government Code. See Tex. Gov’t Code Ann. §§ 21.001, 21.002 (West 2004). A 

district court possesses all powers necessary for the exercise of its jurisdiction and 

the enforcement of its lawful orders, including the power to punish for contempt. 

Id. §§ 21.001(a), 21.002(a). Upon a finding of contempt, a district court may 

impose a fine of not more than $500, confinement in the county jail for up to six 
24

months, or both. Id. § 21.002(b). While section 21.001 provides the trial court with 

broad power, for a court to punish for contempt, an act must impede, embarrass, or 

obstruct the court in the discharge of its duties. In re Reece, 341 S.W.3d 360, 366 

(Tex. 2011) (orig. proceeding).

In Hines’s motion for sanctions, she requested that the trial court issue an order 

declaring 21st Mortgage’s filing of the conversion action against her to be in contempt of 

court. In its sanctions order, the trial court invoked the court’s contempt power, 

both inherent and statutory, in support of the findings of sanctionable conduct. As 

discussed above, the trial court found that 21st Mortgage had denied requests for 

admissions when it had no factual information or legitimate legal argument 

contrary to the statements that it denied. The trial court also found that instead of 

responding to discovery, 21st Mortgage filed a Motion for Protective Order 

claiming that each and every interrogatory was “overly broad, vague, ambiguous, 

seeks irrelevant information, seeks information protected by the attorney-client and 

work product privileges, calls for speculation and conjecture, and not the proper 

subject for an interrogatory.” The trial court further found that 21st Mortgage 

judicially admitted that if its objection were treated as a discovery response, the 

exclusion of the information requested by Hines would amount to a death penalty 

sanction and preclude 21st Mortgage from presenting any claim against Hines, and 
25

that these admissions showed that 21st Mortgage had abused the discovery 

process. During the sanctions hearing, Hines’s counsel argued that 21st Mortgage’s 

lawsuit was groundless and that the trial court should hold 21st Mortgage in 

contempt of court. However, there is no evidence in the record before us that the 

trial court held 21st Mortgage in contempt. Accordingly, the trial court’s power to 

sanction for contempt could not serve as the basis for the sanctions award. See 

Owens-Corning Fiberglas Corp. v. Caldwell, 807 S.W.2d 413, 415-16 (Tex. 

App.—Houston [1st Dist.] 1991, no writ). We conclude that to the extent the trial 

court awarded sanctions based on its statutory contempt power, it abused its 

discretion. 

Having concluded that the evidence does not support the trial court’s 

imposition of sanctions against 21st Mortgage under any of the legal bases 

specified in its findings of fact, we further conclude that the trial court abused its 

discretion in awarding sanctions. We sustain issues one and two. Because our 

disposition of 21st Mortgage’s no-evidence arguments in issue one requires us to 

reverse and render judgment in favor of 21st Mortgage, we need not consider 

issues three and four, in which 21st Mortgage complains about the trial court’s

award of attorney’s fees as sanctions. See Tex. R. App. P. 47.1; see generally 

Elkins, 103 S.W.3d at 669.
26

In issue five, 21st Mortgage argues that the trial court lacked jurisdiction to 

award sanctions because 21st Mortgage dismissed its claim against Hines prior to 

Hines filing her motion for sanctions. In a previous petition for mandamus filed by 

21st Mortgage, this Court concluded that the trial court had plenary jurisdiction 

when it signed the order imposing sanctions. In re 21st Mortgage Corp., No. 09-

15-00435-CV, 2015 WL 8475645, at *1 (Tex. App.—Beaumont Dec. 10, 2015, 

orig. proceeding [mand. denied]) (mem. op.). We overrule issue five.

Having concluded that the evidence does not support the trial court’s 

imposition of sanctions against 21st Mortgage under any of the legal bases 

specified in its findings of fact and conclusions of law, we reverse the trial court’s 

order granting sanctions and render judgment that Hines take nothing from 21st 

Mortgage. 

REVERSED AND RENDERED.

 

______________________________

 STEVE McKEITHEN

 Chief Justice

Submitted on September 29, 2016

Opinion Delivered December 8, 2016

Before McKeithen, C.J., Kreger and Johnson, JJ.