NUMBER 13-06-00598-CV

COURT OF APPEALS

THIRTEENTH DISTRICT OF TEXAS

CORPUS CHRISTI - EDINBURG

 

ABN AMRO MORTGAGE GROUP, INC. 

A/K/A INTERFIRST, Appellant,

v.

MARTIN J. RABALAIS, TINA D. RABALAIS,

AND YELLOWFIN CONSTRUCTION, L.L.C., Appellees.

 

On appeal from the 214th District Court 

of Nueces County, Texas.

 

MEMORANDUM OPINION

Before Justices Yañez, Rodriguez, and Garza

Memorandum Opinion by Justice Rodriguez

Appellant, ABN Amro Mortgage Group, Inc. a/k/a Interfirst (“ABN”), appeals an order

imposing sanctions against it in the amount of $100,000. By one issue, ABN contends that

the trial court erred in imposing this sanction because it is neither fair nor just. We affirm

the order of the trial court.
 Martin J. Rabalais, Tina D. Rabalais, and Yellowfin Construction, L.L.C., are referred to collectively 1

as "the Rabalaises."

2

I. Background

A. The Lawsuit

The underlying dispute concerns loan-servicing and construction problems related

to the building of a residence. Martin J. and Tina D. Rabalais were the homeowners and

borrowers. Yellowfin Construction, L.L.C., of which Martin is a principal, was the general

contractor. ABN was the lender. In 2004, after problems and delays occurred during 1

construction of the home, two subcontractors initiated litigation against Martin and Yellowfin

Construction. In response to the suits, Martin and Yellowfin Construction filed third-party

claims against ABN alleging, inter alia, that it failed to pay the subcontractors as it had

agreed to do and that its breach of agreement and fraudulent conduct proximately caused

damages. ABN denied liability, raised affirmative defenses, and counterclaimed against

Martin J. and Tina D. Rabalais for, among other things, breach of the note and deed of

trust and indemnification under certain agreements. The subcontractor suits were

consolidated and, in June 2005, severed from the underlying lawsuit. 

After this matter was set for trial on more than one occasion, and after lengthy and

protracted discovery hearings, the Rabalaises and ABN settled the lawsuit. The only issue

subject to this appeal is the trial court’s imposition of $100,000 in sanctions against ABN.

B. The Pattern of Misconduct

At issue herein is ABN’s conduct with regard to its responses to discovery requests

propounded to it by the Rabalaises. The bulk of the discovery requests at issue were
 At the April 19 hearing, Fred Dreiling, counsel for the Rabalaises, represented to the trial court that 2

it was his "understanding that [ABN's counsel did] not have any opposition to [the Rabalaises'] motion to

compel, [did not] have any opposition to the court signing an order, but the only issue [was] the amount of

time. [ABN's counsel] want[ed] more time to comply with the order than what [the Rabalaises were] willing to

give." The Rabalaises asked for ten days. ABN responded that "ten days is a challenge for us." At the

hearing, ABN raised no other complaint regarding Dreiling's representations or the order.

On appeal, ABN now objects, without argument, to the representation of the April 19 order as

"agreed." It also complains that the lists of "missing" documents, attached to the order as Exhibits A and B,

were not referred to at the hearing. The record shows, however, that ABN did not raise these objections in

the trial court. By failing to raise the complaints now presented, ABN did not give the trial court the opportunity

to correct the alleged error. Thus, ABN has waived its challenges to the April 19 order. See TEX. R. APP. P.

33.1(a)(1); Scott Bader, Inc. v. Sandstone Prods., 248 S.W .3d 802, 817 (Tex. App.–Houston [1st Dist.] 2008,

no pet.) (citing Valdez v. Valdez, 930 S.W .2d 725, 728 (Tex. App.–Houston [1st Dist.] 1996, no writ) (applying

rule 33.1 to a party's failure to raise objections to sanctions in the trial court and holding appellant waived

objection to sanctions raised for first time on appeal)).

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served in 2004. In response, ABN generally made the promise that it “will supplement”

its discovery answers. 

In March 2005, the Rabalaises filed a motion to compel supplementation of those

discovery answers. In a written agreement filed under the binding authority of Texas Rule

of Civil Procedure 11, ABN negotiated the Rabalaises’ promise to pass the hearing on their

motion to compel in exchange for ABN’s promise to produce the disputed discovery by

April 8, 2005. See TEX. R. CIV. P. 11. 

Later, in April 2005, the Rabalaises filed a second motion to compel, and the trial

setting in July 2005 was passed by agreement. As part of this agreed continuance, the trial

court entered a ruling that the parties should complete all their supplementation of

discovery responses by July 2006.

In February 2006, the Rabalaises filed yet another motion to compel, seeking a firm

date for ABN to answer the long-outstanding discovery, much of which was subject to the

Rule 11 agreement. At the March 2006 hearing on this third motion to compel, the only

issue disputed was how much time ABN wanted to complete supplementation of the

outstanding discovery. 

2
4

After this hearing, the trial court entered an order overruling ABN’s objections to the

outstanding discovery and overruling all of ABN’s claims of privilege except for its attorneyclient privilege assertions. As part of this April 19, 2006 order, the trial court required all

non-attorney-client information to be produced by May 5, 2006, and the alleged privileged

documents to be tendered for in camera review on that same date.

After ABN failed to comply with the trial court’s April 2006 order, despite an agreed

extension of the deadline within that order, the Rabalaises filed a motion for sanctions.

The evidentiary hearings on this motion for sanctions was conducted over seven dates in

June and August 2006.

At the June 1 hearing, the Rabalaises offered documentation that ABN had failed

to comply with the trial court’s April 2006 order and the prior Rule 11 agreement. ABN

affirmatively represented to the trial court that ABN had been looking diligently for the

documents. The trial court found that ABN had failed to comply with the April 2006 order.

After the trial court’s ruling, Daniel McMahan, counsel for ABN’s parent company,

made an appearance by telephone. McMahan admitted that some of the responsive

documents may have been destroyed in 2005, after ABN became a party to the underlying

litigation and after the disputed discovery requests were initially served upon ABN.

McMahan also admitted that the remaining supplementary responses were not sent to

ABN’s counsel for production to the Rabalaises until the very morning of the sanctions

hearing, weeks after the deadline set by the April 2006 order or by the agreed extension

of that deadline. In light of the admission that ABN had supplemented the discovery

responses that morning, the trial court reset the motion for sanctions for June 5. Although
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the trial court found that ABN had failed to comply with the April 2006 order at this June 1

hearing, the trial court did not yet impose a sanction for that violation.

On June 5, minutes before the reset sanctions hearing, ABN tendered another box

of responsive documents for in camera review, notwithstanding the prior representations

by ABN’s representative that all responsive documents, with the exception of email files,

had already been previously produced. At this hearing, ABN’s counsel claimed to have

finally produced all of the responsive documents, but counsel for the Rabalaises disputed

this claim. At this hearing, the trial court held ABN in contempt. The trial court also warned

that he would impose a $100,000 fine plus a $10,000 per day fine until all the responsive

discovery was produced, but the trial court carried imposition of this fine pending one last

effort at compliance by ABN.

At the June 8 continuation of the sanctions hearings, ABN’s former counsel testified

that he had been repeatedly told by ABN that all of the responsive documents had been

produced in April 2005. At this hearing, ABN corporate representatives also testified that

they assisted with the discovery efforts, but these ABN representatives admitted that they

were not contacted to assist with discovery and document production until April 2006, a

year afterABN promised to produce discovery pursuant to the Rule 11 agreement. William

Lisnerski, one of the ABN representatives also admitted that he had never been presented

with a copy of the court’s April 2006 order or presented with the lists of the categories of

documents ordered produced. Lisnerski also testified that some of the information

requested should have been available within a week of the request. But—contradicting

ABN’s numerous representations to the trial court that all or most documents had already
 Attorney's fees in the total amount of $48,050 were awarded against ABN; expenses were not 3

awarded. Appellants do not complain about the award of attorney's fees.

6

been produced—Lisnerski nevertheless confirmed that the discovery search was still

ongoing and not yet completed.

Because the corporate representative testified that ABN’s search for the documents

ordered produced was incomplete, the trial judge continued the hearing until mid-June and

carried the sanction decision until then.

At the June 15 hearing, the trial court summed up the evidence and ordered ABN

to pay the Rabalais’ attorney fees:

Mr. McMahan told me over the phone [at the June 1 hearing] that [ABN] had

provided everything. Today we find out that there are some E-mails out

there, there's some wire transfers, there's some other matters that exist. . . .

[Richter's] testimony tells us today that there are other matters out there, and

due diligence of his work has resulted in those that are going to be produced.

When they're going to be produced, I don't know, but I can tell you they will

be produced. Therefore, the court is going to enforce its sanctions of the

$100,000 for failure to comply, now that I know that there is other material

out there, and that will go into effect immediately. However, the $10,000 a

day sanction will not go into effect until . . . the 16th of June . . . at 3 PM. If

the materials are produced by then, then that $10,000 will not; otherwise, it

will continue until I am satisfied that my order has been complied with. As

far as attorney's fees, I agree with you that there's a lot of work that has been

done, but that work would not have been necessary had Mr. McMahan

and/or his client produced the documents that they have represented. [ABN’s

former counsel] testified last week, if I'm not mistaken, that it was

represented to him that everything was done, and he felt, as most attorneys

would, "My client is telling me that's it, and that's it," but further investigation

has revealed that not everything was done. And so, therefore, the attorney's

fees as requested will be paid out as per the affidavit, and those will be paid

within five days of today's date.[ ]

3

On June 19, 2006, the trial court signed an order granting the Rabalaises' motion

for sanctions. Finding good cause to sanction ABN because it failed to comply with the

April 19, 2006 order, it ordered ABN to pay $100,000 into the registry of the court pending
7

further order of the court. It also ordered a $10,000 per diem sanction to be paid into the

registry of the court beginning at 3:00 p.m. on June 16, 2006, and remaining in effect until

ABN fully complied with the court's April 19, 2006 order.

On August 1, 2006, the trial court held yet another hearing with regard to the

$10,000 daily sanction. At this hearing, ABN admitted that it did not complete producing

responsive discovery in compliance with the trial court’s order until June 30. After these

representations, the trial court agreed to reconsider the daily sanction. At the final sanction

hearing on August 22, ABN offered further testimony admitting that some of the documents

originally agreed to be produced pursuant to the 2005 Rule 11 agreement or ordered

produced under the April 2006 order were not finally produced until June 14 through June

26. 

At the conclusion of these many hearings, the trial court lifted the $10,000 per diem

sanction but left the $100,000 sanction in effect.

II. Analysis

In one issue, ABN contends that the trial court erred in imposing sanctions because

it is neither fair nor just for the following reasons: (1) ABN’s conduct does not constitute

discovery abuse or contempt of court; (2) the sanction was not directly related to conduct

justifying the sanction and was not tailored to remedy the harm, if any, caused by ABN’s

conduct; (3) the fine was excessive and was imposed without consideration of a lesser

sanction; and (4) the fine was based, at least in part, on inadmissible prejudicial evidence.

A. Discovery Abuse Under Rule 215 or Contempt of Court

 ABN contends that the sanction was not fair and just because its conduct did not

constitute discovery abuse or contempt of court. In connection with this argument, ABN
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essentially contends that it produced all requested discovery, even if untimely; that it

produced duplicative documents in violation of the trial court’s April 19 order only because

duplication was “incident to providing the documents as fast as possible;” the plaintiffs’

amended pleadings in March of 2006 changed the scope of ABN’s discovery responses

as compared to its duty to respond in 2005; and the plaintiffs waived their right to complain

about ABN’s failure to produce because they failed to obtain a ruling on ABN’s objections

and assertions of privilege. 

We first consider ABN’s contention that its conduct did not constitute discovery

abuse. A court may impose sanctions for the failure to fully and completely comply with

a request for discovery. See generally TEX. R. CIV. P. 215. If the court finds a party is

abusing the discovery process in seeking, making or resisting discovery, the court may

impose an “appropriate” sanction. See TEX. R. CIV. P. 215.3. The Texas Supreme Court

has stated that this rule gives “trial courts broad authority to curb [discovery] abuse.”

Braden v. Downey, 811 S.W.2d 922, 930 (Tex. 1991). There are three purposes for

discovery sanctions: (1) to secure compliance with discovery rules; (2) to deter other

litigants from similar misconduct; and (3) to punish violators. Chrysler Corp. v. Blackmon,

841 S.W.2d 844, 849 (Tex. 1992).

 The sanctions imposed must be appropriate or just. TransAmerican Natural Gas

Corp. v. Powell, 811 S.W.2d 913, 916 (Tex. 1991). The supreme court has articulated a

two-part inquiry that appellate courts must conduct in making this determination. See id.

at 917. First, we must ensure that there is a direct relationship between the improper

conduct and the sanction imposed. Id. Second, we must make certain that less severe

sanctions would not have been sufficient to promote compliance. Id.
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We recognize that, in assessing sanctions, the trial court is entitled to consider the

entire course of the litigation. Scott Bader, Inc. v. Sandstone Prods., 248 S.W.3d 802, 814

(Tex. App.–Houston [1st Dist.] 2008, no pet.); Broesche v. Jacobson, 218 S.W.3d 267,

(Tex. App.–Houston [14th Dist.] 2007, pet. denied); see Berry-Parks Rental Equip. Co. v.

Sinsheimer, 842 S.W.2d 754, 757 (Tex. App.–Houston [1st Dist.] 1992, no writ). Similarly,

in considering whether sanctions are just, we review the entire record, including the

evidence, arguments of counsel, written discovery on file, and the circumstances

surrounding the parties' discovery abuse. Hill & Griffith Co. v. Bryant, 139 S.W.3d 688, 694

(Tex. App.–Tyler 2004, pet. denied); Daniel v. Kelley Oil Corp., 981 S.W.2d 230, 234 (Tex.

App.–Houston [1st Dist.] 1998, pet. denied).

We review the trial court's ruling on sanctions for discovery abuse under an abuse

of discretion standard. State Farm Fire & Cas. Co. v. Rodriguez, 88 S.W.3d 313, 326 (Tex.

App.–San Antonio 2002, pet. denied). When reviewing a trial court's imposition of

sanctions, any conflicts must be viewed in the light most favorable to the trial court's ruling,

and all inferences must be made in favor of the court's judgment. Herring v. Welborn, 27

S.W.3d 132, 143 (Tex. App.–San Antonio 2000, pet. denied).

The discovery at issue was originally propounded to ABN in December 2004. ABN’s

original responses, which were originally made in January 2005, largely consisted of

affirmations that ABN would “supplement” with its responses. On April 19, 2006, the trial

court ordered ABN to answer discovery by May 5. ABN did not contest this order, and,

based on our review of the record, appeared to agree to the production of the specified

documents. The parties thereafter extended the May 5 deadline by agreement until May
10

12. ABN nevertheless did not meet the deadline imposed by the trial court’s order, and the

plaintiffs filed a motion for sanctions. 

It is undisputed that ABN failed to comply with the trial court’s order of April 19,

2006. It took three motions to compel, a motion for sanctions, and five hearings before

ABN fully responded to the discovery at issue. During the hearing process, the trial court

repeatedly heard from representatives of ABN that its employees had made all efforts to

complete discovery, when they clearly had not, and that all discovery had been produced,

when it clearly had not. At the June 1 hearing, in-house counsel McMahan stated that:

A number of Mr. Dreiling’s requests were kind of broad-based requests,

understandably, with respect to whether such information exists, and to the

best of our knowledge – and we’ve given [counsel for ABN] kind of a

breakdown – there are no other documents in existence with respect to this

request beyond what we’ve produced so far . . . . I believe everything that we

have has been produced . . . . 

Counsel subsequently clarified that the one exception to the discovery which had not been

produced was corporate emails. Nevertheless, ABN subsequently produced additional

documents which were responsive to the original discovery requests. Further, counsel for

ABN testified that ABN’s representatives had told him repeatedly that they had furnished

“everything,” and he was “given to understand that anything that had to do with this case,

if it existed,” would have been in documents ABN had previously produced in 2005.

Moreover, at various stages in the sanction process, it was apparent that some of the

representatives from ABN had never seen the original requests for production or the trial

court’s order requiring production. For instance, on June 15, Frederick Richter, in-house

counsel, who was in charge of production, testified that although he had seen the trial

court’s order requiring production, he had never seen the individual requests for production

at issue.
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We conclude that the rule 215.2 prerequisite to imposing sanctions, that is, a party's

failure to comply with an order to provide discovery, was satisfied. See TEX. R. CIV. P.

215.2(b); Am. Flood Research, Inc. v. Jones, 192 S.W.3d 581, 584 (Tex. 2006). At the

most fundamental level, ABN failed to comply with the trial court’s order of April 19, which

required production by a date certain. At the hearing preceding the entry of this order, ABN

did not argue that the trial court’s order was overly burdensome or otherwise contend that

it should not be required to respond to discovery as ordered. 

Even after ABN failed to meet the required deadline, which was extended by

agreement of the parties, the trial court repeatedly delayed the imposition of sanctions to

allow ABN additional time to further respond to discovery and present witnesses to explain

its continued failure to meet the trial court’s order. 

ABN contends that sanctions are inappropriate because the discovery responses

required a “labor intensive, time-consuming, expensive process,” and “even though [the

discovery] could not be completed by the original court deadline, it was accomplished as

soon as possible.” However, ABN’s difficulty in responding to the discovery was the direct

result of its own discretionary actions and inactions, and accordingly, should not excuse

ABN’s dilatory efforts. Cf. In re Whiteley, 79 S.W.3d 729, 735 (Tex. App.–Corpus Christi

2002, orig. proceeding) (“We also recognize that, “[t]o the extent that a discovery request

is burdensome because of the responding party’s own conscious, discretionary decisions

[for example, the unorganized storage of inactive patient records], that burdensomeness

is not properly laid at the feet of the requesting party, and cannot be said to be ‘undue.’”)
 Many of ABN’s difficulties in producing the ordered discovery resulted from the closing of one its 4

divisions in June 2005. Because ABN had not responded to the Rabalaises’ discovery when it was first

propounded, and did not preserve the requested documentation, software, or email programs following the

closure of its division, ABN had to take the additional steps of retrieving and restoring emails and software

records in order to comply with the trial court’s order. Although ABN characterizes the efforts it made to

recapture electronic documents which were lost after the initial discovery responses were served as

extraordinary, these efforts were consistent with the duties now routinely imposed by the current federal

discovery guidelines applicable to the discovery and disclosure of electronically stored information. See, e.g.,

FED. R. CIV. P. 16(b)(3)(B)(iii), 26(b)(2)(B), 34(a)(1)(A).

12

(quoting ISK Biotech Corp. Lindsay, 933 S.W.2d 565, 569 (Tex. App.–Houston [1st Dist.]

1996, orig. proceeding)).

4

Although the trial court’s sanction order could have been premised on ABN’s failure

to comply with a discovery order under the rules of civil procedure, we further consider

ABN’s contention that its conduct did not constitute contempt of court. We construe this

argument as a challenge to the trial court’s inherent power to sanction. The inherent

powers of a court are those which it may call upon to aid in the exercise of its jurisdiction,

in the administration of justice, in the preservation of its independence and integrity, and

to prevent any significant interference with the traditional core functions of Texas courts.

Public Util. Comm'n v. Cofer, 754 S.W.2d 121, 124 (Tex. 1988); Kutch v. Del Mar College,

831 S.W.2d 506, 510 (Tex. App.–Corpus Christi 1992, no writ). 

 “By rule, statute, and their own inherent power, trial courts have broad authority to

sanction litigants for specific misconduct.” In re Does 1-10, 242 S.W.3d 805, 817 (Tex.

App.–Texarkana 2007, no pet.); In re N.R.C., 94 S.W.3d 799, 807 n.4 (Tex. App.–Houston

[14th Dist.] 2002, pet. denied); see also Onstad v. Wright, 54 S.W.3d 799, 804 (Tex.

App.–Texarkana 2001, pet. denied). A trial court has inherent power to sanction to the

extent necessary to deter, alleviate, and counteract bad faith abuse of the judicial process.

In re Bennett, 960 S.W.2d 35, 40 (Tex. 1997) (per curiam); Dallas County Constable v.
13

Kingvision Pay-Per-View, 219 S.W.3d 602, 610 (Tex. App.–Dallas 2007, no pet.). To

support the entry of sanctions under a court's inherent powers, the trial judge must find

that the party caused significant interference with the legitimate exercise of the traditional

core functions of the court. Eichelberger v. Eichelberger, 582 S.W.2d 395, 398 (Tex. 1979);

IFC Credit Corp. v. Specialty Optical Sys., 252 S.W.3d 761, 772 (Tex. App.–Dallas 2008,

pet. filed). In other words, there must be some evidence that the conduct complained of

significantly interfered with the court's legitimate exercise of one of the enumerated core

functions. Kutch, 832 S.W.2d at 511. The core functions of the judiciary are to hear

evidence, decide issues of fact raised by pleadings, decide questions of law, enter final

judgments, and enforce those judgments. Armadillo Bail Bonds v. State, 802 S.W.2d 237,

239-40 (Tex. Crim. App. 1990); Finlan v. Peavy, 205 S.W.3d 647, 652-53 (Tex.

App.–Waco 2006, no pet.). Additionally, a trial court’s “core functions” have been found

to include “the management of its docket and the issuance and enforcement of its orders.”

See In re K.A.R., 171 S.W.3d 705, 715 (Tex. App.–Houston [14th Dist.] 2005, no pet.). 

We apply an abuse of discretion standard to review the trial court's actions pursuant

to its inherent power. Kutch, 831 S.W.2d at 512. We review the entire record and view

the evidence most favorably to the trial court's ruling. Id.; Vaughn v. Tex. Employment

Comm'n, 792 S.W.2d 139, 143 (Tex. App.–Houston [1st Dist.] 1990, no writ); see also

Lawrence v. Kohl, 853 S.W.2d 697, 700-701 (Tex. App.–Houston [1st Dist.] 1993, no pet.).

However, regardless of the legal authority under which a sanction is imposed, a sanction

cannot be excessive and should not be assessed without appropriate guidelines. See Low

v. Henry, 221 S.W.3d 609, 620 (Tex. 2007) (discussing limitations on sanctions under

Texas Rule of Civil Procedure 215 and chapter 10 of the Texas Civil Practice and
14

Remedies Code); Greiner v. Jameson, 865 S.W.2d 493, 499 (Tex. App.–Dallas 1993, writ

denied) (noting that the rule 215 requirement that sanctions be just also applies to the

court's inherent power to sanction); see also State v. PR Invs., 180 S.W.3d 654, 673 (Tex.

App.–Houston [14th Dist.] 2005), aff’d, 251 S.W.3d 472 (Tex. 2008). 

Reviewing the entire record and considering the evidence most favorably to the trial

court’s ruling, for the reasons previously delineated herein, we conclude that the trial court

did not abuse its discretion in imposing sanctions under its inherent power. Accordingly,

we reject ABN’s arguments otherwise.

B. Sanction Must be Just

In its second subissue, ABN contends that the sanction was not directly related to

conduct justifying the sanction and was not tailored to remedy the harm, if any, caused by

ABN’s conduct. ABN contends that the award of attorney’s fees more than adequately

compensated the plaintiffs for any harm caused by the discovery delay. 

As stated previously, in order for a sanction to be just, there must be a direct

relationship between the offensive conduct and the sanction imposed; and the sanction

imposed must not be excessive. See TransAmerican, 811 S.W.2d at 916. In other words,

the punishment should fit the crime; the sanction must be directed against the abuse and

toward remedying the prejudice caused to the innocent party. See Thompson v. Davis,

901 S.W.2d 939, 940 (Tex. 1995). All of the foregoing requirements also apply to a trial

court's exercise of its inherent power to sanction. Greiner, 865 S.W.2d at 499. 

On June 1, the trial court found that ABN had failed or refused to produce discovery

as previously ordered by the court and reset the hearing to see what ABN would further

produce. At the hearing on June 5, where it was apparent that ABN had just produced a
15

large box of documents, the trial court held ABN in contempt and assessed $100,000 in

sanctions, plus $10,000 per day that it failed to comply with the trial court’s order.

However, the trial court delayed the actual imposition of sanctions and stated that the

sanctions would begin at 5:00 p.m. on June 8. On June 8, after hearing testimony from

representatives of ABN, the court again carried the issue of sanctions until June 16

“without imposing them at this time.” The trial judge stated that, “I’m gonna carry that and

make that decision at that time. That’ll be fair to both sides.” Instead, the trial court

imposed a sanction of $28,050 in attorney’s fees. The court again carried the issues of

sanctions at a hearing on August 8, wherein the parties announced the settlement of the

underlying dispute. The court specifically referenced the possible sanctions of $10,000 per

day, which at that time comprised approximately $530,000 which had not been paid. The

trial court again carried the motion for sanctions until the settlement was complete and

funded. On August 22, after again hearing from representatives from ABN, the trial court

assessed additional attorney’s fees, but otherwise expressly kept the matter of sanctions

under advisement. 

Based on the record before the trial court, we conclude that the sanctions were

directly related to ABN’s misconduct and were tailored to remedy the harm caused by that

misconduct. See TransAmerican, 811 S.W.2d at 916.

C. Excessiveness and Lesser Sanction

In its third subissue, ABN contends that the fine was excessive and was imposed

without consideration of a lesser sanction. In this regard, a discovery sanction “should be

no more severe than necessary to satisfy its legitimate purposes,” and “courts must

consider the availability of less stringent sanctions and whether such lesser sanctions
16

would fully promote compliance.” PR Invs. & Specialty Retailers, Inc. v. State, 251 S.W.3d

472, 480 (Tex. 2008) (quoting TransAmerican, 811 S.W.2d at 917). 

Based on the course of litigation, which indicated a general and continuing pattern

of discovery abuse, a lengthy delay, and attorney’s fees incurred by the Rabalaises in

pursuing the discovery at issue, which are firmly supported by the record, we hold the trial

court did not abuse its discretion in assessing $100,000 in sanctions for discovery abuse

or bad faith abuse of the judicial process. See, e.g., Spohn Hosp. v. Mayer, 104 S.W.3d

878, 882 (Tex. 2003); Vela v. Wagner & Brown, Ltd., 203 S.W.3d 37, 62 (Tex. App.–San

Antonio 2006, no pet.). We note, in this regard, that the trial court refused the Rabalaises’

request for death penalty sanctions. 

In the instant case, the monetary sanction comprised roughly double the amount of

attorney’s fees which were incurred and paid as a result of the discovery problems;

approximately one-fifth of the amount of the loan at issue in the underlying dispute, or

$520,000; and less than one-fifth of the per diem sanctions which were ultimately not

imposed by the trial court, or $560,000. Accordingly, based on the record, the sanction

was not excessive. Moreover, contrary to ABN’s contentions otherwise, the trial court

imposed lesser sanctions before imposing the sanction at issue herein. The trial court first

imposed a sanction of $28,050 in attorney’s fees on June 15, then imposed additional

attorney’s fees of $20,000 on August 22, 2008. The trial court issued an order on August

30, referencing the $100,000 sanction, and the final order in the underlying matter was not

signed until September 19, 2006. The trial court not only considered, but imposed lesser

sanctions before the order at issue herein. We reject ABN’s arguments otherwise.

D. Evidentiary Rulings
17

In its fourth subissue, ABN contends that the fine was based, at least in part, on

inadmissible prejudicial evidence. ABN contends that evidence, which was expressly

admitted for the “limited purpose” of the hearing on sanctions, that ABN had been

sanctioned $41,000,000 by the United States Department of Housing and Urban

Development regarding misrepresentations on HUD issues and $80,000,000 for money

laundering, was both inadmissible and unduly prejudicial.

In order to assess sanctions in this case, the trial court was required to conduct an

evidentiary hearing “to which the rules of evidence necessarily apply.” Kugle v.

DaimlerChrysler Corp., 88 S.W.3d 355, 364 (Tex. App.–San Antonio 2002, pet. denied).

A trial court's rulings in admitting or excluding evidence are reviewed under an abuse of

discretion standard. Nat'l Liab. & Fire Ins. Co. v. Allen, 15 S.W.3d 525, 527 (Tex. 2000).

This rule has been applied in the context of sanction hearings. See, e.g., Trantham v.

Isaacks, 218 S.W.3d 750, 755 (Tex. App.–Fort Worth 2007, pet. denied). 

Assuming, without deciding, that the trial court erroneously allowed the admission

of evidence regarding the unrelated sanctions against ABN, we conclude that the

admission of this evidence was harmless. The erroneous admission of evidence is

harmless unless the error probably, though not necessarily, caused rendition of an

improper judgment. See Reliance Steel & Aluminum Co. v. Sevcik, No. 06-0422, 2008

Tex. LEXIS 861, at *8-9, 51 Tex. Sup. J. 1437 (Sept. 26, 2008). First, the amount of the

sanction at issue in this case was expressly contemplated before the complained-of

evidence was presented to the trial court, and accordingly, could not have influenced the

trial court’s determination regarding the amount of the sanction. Second, given that the

unrelated penalties were anywhere from four hundred to eight hundred times the amount
18

of the fine ultimately imposed in this case, it is reasonable to assume that these unrelated

penalties did not affect the trial court’s decision. And finally, the trial court had before it

sufficient evidence regarding ABN’s misconduct in the underlying proceeding from which

it could have concluded that ABN’s conduct during the course of the litigation merited the

sanction imposed. Accordingly, we reject ABN’s argument that the admission of this

evidence caused the rendition of an improper order.

III. Conclusion

The trial court is entitled to judge the credibility of the witnesses and the weight of

their testimony in the context of a sanctions hearing. Scott Bader, Inc., 248 S.W.3d at 813;

Daniel, 981 S.W.2d at 232. In the instant case, the trial court had before it sufficient

testimony from ABN’s representatives from which it may have concluded that ABN showed

flagrant bad faith or a callous disregard for the responsibilities of discovery. The sanction

imposed in this case was no more severe than necessary to satisfy the legitimate purposes

of securing compliance with the trial court’s orders, deterring similar misconduct by other

litigants, and punishing ABN. Accordingly, we hold that the trial court did not abuse its

discretion in assessing $100,000 in sanctions against ABN.

The order of the trial court is affirmed.

NELDA V. RODRIGUEZ

Justice

Memorandum Opinion delivered and

filed this 18th day of December, 2008.