Court Opinion

ID: 3102911
Source: CourtListenerOpinion
Date Created: 2015-10-16 05:25:58.569688+00
Date Added: 2024-06-11T09:46:00.823616
License: Public Domain

Opinion issued June 12, 2014.

                                     In The

                              Court of Appeals
                                    For The

                         First District of Texas
                           ————————————
                             NO. 01-12-01011-CV
                           ———————————
         GORDON WESTERGREN & MARK SPARKS, Appellants
                                       V.
                JOHNNIE GLENN JENNINGS, JR., Appellee

                   On Appeal from the 253rd District Court
                         Chambers County, Texas
                       Trial Court Case No. CV26353

                                 OPINION

      In this appeal, we consider whether the trial court erred in imposing

sanctions against appellant and his attorney pursuant to Chapter 10 of the Civil

Practices and Remedies Code. We vacate the trial court’s order.
                                  BACKGROUND

The Real Estate Contracts

      Sometime before April 2006, plaintiff, Gordon Westergren, conceived an

idea to develop a rail-served warehouse development named “Smart Crossing” in

Baytown, Texas.      In furtherance of this planned development, Westergren

contracted with Johnny Glenn Jennings, Jr. to purchase two tracts of land in

Chambers County. One contract was for the sale of a 603-acre tract at a purchase

price of $4,522,500.00. William C. Rozelle acted as Jennings’s trustee for the sale

of this tract. The other contract was for the sale of a 120-acre tract at a purchase

price of $1,950.000.00. This contract was contingent on Westergren’s closing the

603-acre contract, for which Westergren had placed $25,000.00 with a title

company as earnest money.

      On August 30, 2007, Westergren, Jennings, and Rozelle, as Jennings’s

trustee, executed an amendment to the earnest-money contract, which required

Westergren to pay an additional $75,000.00 in earnest money to either Jennings or

Rozelle on the date that Westergren or his lawyer received amended title

commitments from Rozelle. Upon receiving the additional title commitments,

Westergren would have an additional sixty days to close on the 723 acres. It is

undisputed that Westergren did not pay the additional earnest money when he

received the title commitments.    In this lawsuit, Westergren alleged that Rozelle

                                         2
granted him an oral extension to pay the remaining earnest money, which Rozelle

and Jennings subsequently refused to honor.

      On December 19, 2007, Rozelle sent Westergren a letter stating that

Westergren’s contracts had terminated. Thereafter, Jennings sold the properties to

NPH Ameriport, L.L.C., an entity in which Russell Plank and Michael Plank

owned interests.

The Harris County Lawsuit

      On November 23, 2010, Westergren filed a lawsuit in Harris County against

the Planks, Ameriport, and related entities.         Jennings and Rozelle were not

defendants in this litigation. The case was assigned to the 269th District Court

because Westergren and the Planks had been involved in earlier litigation in 20081

in that court. Westergren nonsuited the Harris County litigation shortly thereafter.

The Lunch Meeting Between Westergren and Jennings

      On February 21, 2011, while the Harris County litigation was still pending,

Westergren met Jennings for lunch. Jennings recorded the meeting, during which

Westergren stated:

1
      In the 2008 litigation, Westergren sued the Planks and others for claims arising out
      of another land deal. A jury returned a verdict for Westergren, but the trial court
      granted a JNOV. On appeal, the appellate court reversed the JNOV, reinstated the
      jury’s verdict, and remanded for a new trial on attorney’s fees and court costs. The
      court also affirmed the take-nothing judgment by the Planks on their
      counterclaims against Westergren. See Westergren v. Nat’l Prop. Holdings, L.P.,
      409 S.W.3d 110 (Tex. App.—Houston [14th Dist.] June 28, 2013, pet. filed).
                                           3
      You know, over there on the 723 acres, I’m suing the [expletive] out
      of the [Planks]. And I need you to know, my lawyer said you got to
      sue Jennings. . . . I said I’m not going to sue Johnnie Jennings . . .
      because when he [Westergren’s lawyer] ramped up the suit and it’s a
      real estate deal, typically everyone gets sued . . . I said Johnnie didn’t
      do nothing . . . Johnnie hadn’t done nothing [expletive] wrong. Okay.
      Period. So I’m not doing it.

The Underlying Chambers County Lawsuit

      Six weeks later, on April 7, 2011, Westergren filed another suit, this time in

Chambers County. Unlike the Harris County suit, in this suit Westergren named

Jennings and Rozelle as defendants. Westergren sued Jennings for breach of

fiduciary duty and civil conspiracy. Westergren alleged that he had a joint venture

to develop the property with the Planks, during which he revealed confidential

information to them regarding his plans for the Smart Crossing project, which they,

after professing to have no interest in the project, discussed with Jennings and

Rozelle. Westergren also alleged that he told Jennings about his plans for the

Smart Crossing project, which Jennings in turn discussed with the Planks.

According to Westergren, after the Planks revealed these discussions with him to

Jennings, Jennings then breached an oral agreement to further extend Westergren’s

time for closing, declared his contract with Westergren to be terminated, and then

later sold the properties to the Planks, cutting Jennings out of the transaction. The

Planks then, with Jennings and Rozelle as partners, began developing the property

themselves in a manner consistent with his Smart Crossing plans.

                                          4
The Nonsuit and Subsequent Sanctions Motion

         After the Planks moved for summary judgment based on limitations,

Westergren nonsuited the Chambers County lawsuit. Jennings then moved for

sanctions against both Westergren and his attorney, Mark Sparks, under Rule 13

and Chapter 10 of the Civil Practices and Remedies Code.2                 The trial court

conducted a full evidentiary hearing. At the close of the hearing, the trial court

stated:

         The Courts finds that under Chapter 10, that there’s no legal basis---
         there was no legal basis for the filing of the lawsuit against Mr.
         Jennings, no reasonable, legal basis. However, I agree with Joe,
         although Joe got damn close to proving the attorney’s fees, that
         there’s no sworn or admitted testimony of the reasonable or necessary
         attorney’s fees in this case on behalf of Mr. Jennings.

         So you have your finding that it was a baseless lawsuit, but I award no
         damages. That’s the ruling of the Court. Y’all prepare an order and
         present it to me for signature.

    Sparks and Westergren appeal the trial court’s finding that they violated Chapter

10.

                                    JURISDICTION

         The trial court found that Westergren and Sparks had violated Section

10.001 of the Civil Practices and Remedies Code, but nevertheless the court did

not impose any monetary sanctions. Because the trial court awarded no relief, we

2
         A nonsuit does not affect a motion for sanctions made after or pending at the time
         of dismissal as long as the trial court’s plenary power has not expired. Crites v.
         Collins, 284 S.W.3d 839, 842–43 (Tex. 2009).
                                             5
consider whether the appeal presents a justiciable controversy, without which we

have no jurisdiction. See Bonham State Bank v. Beadle, 907 S.W.2d 465, 467

(Tex. 1995) (“To constitute a justiciable controversy, there must exist a real and

substantial controversy involving genuine conflict of tangible interest and not

merely a theoretical dispute.”). The issue presented is whether sanctions findings

are reviewable even in the absence of actual sanctions.

      This issue has not been addressed by Texas courts, but the federal courts

provide guidance. In Butler v. Biocore Medical Technologies, Inc., the Tenth

Circuit described the various approaches taken by the federal courts—never

appealable, always appealable, and appealable only if order is identified as a

reprimand—as follows:

      The Seventh Circuit is the only circuit falling into the first category
      and considers an order only damaging an attorney’s professional
      reputation as never appealable. Clark Equip. Co. v. Lift Parts Mfg.
      Co., Inc., 972 F.2d 817, 820 (7th Cir. 1992) (“[A]n attorney may not
      appeal from an order that finds misconduct but does not result in
      monetary liability, despite the potential reputational effects.”). In
      reaching its conclusion, the Seventh Circuit balanced the severity of
      the harm of damage to an attorney’s professional reputation-
      characterizing it as a “speculative contingency” rather than a concrete
      injury, id.,-against the practical considerations of “congested appellate
      dockets and . . . the difficulty of assuring an adversary contest in most
      such appeals.” Id. The result of this balancing test, the Seventh Circuit
      concluded, is that an order damaging only an attorney’s professional
      reputation, while potentially a significant enough injury to satisfy the
      case or controversy requirements of Article III, is not a “final
      decision” for the purposes of § 1291 and, therefore, not appealable.
      Id.; Bolte v. Home Ins. Co., 744 F.2d 572, 573 (7th Cir. 1984). The
      Seventh Circuit did, however, leave open the possibility that an
                                         6
attorney damaged by an order finding misconduct alone could seek
relief by a writ of mandamus. Clark, 972 F.2d at 820.

The Fifth and District of Columbia Circuits fall into the second
category and both allow attorneys to appeal orders that find
misconduct alone. Walker v. City of Mesquite, 129 F.3d 831, 832-33
(5th Cir. 1997) (holding that “the importance of an attorney’s
professional reputation, and the imperative to defend it when
necessary, obviates the need for a finding of monetary liability or
other punishment as a requisite for the appeal of a court order finding
professional misconduct”); Sullivan v. Committee on Admissions and
Grievances, 395 F.2d 954, 956 (D.C. Cir. 1967) (holding that a
finding of professional misconduct not accompanied by other
sanctions is analogous to a defendant found guilty but given a
suspended sentence and is appealable). The Ninth Circuit also falls
into this category, though through a slightly different approach. It
allows attorneys to appeal orders that are “inordinately injurious to a
lawyer’s reputation” but does not allow appeals from orders that are
properly considered “routine judicial commentary.” United States v.
Talao, 222 F.3d 1133, 1137 (9th Cir. 2000). The Ninth Circuit,
however, considers an order finding a knowing and willful violation
of an ethical rule as, per se, “inordinately injurious” and, therefore,
appealable. Id. at 1337–38. These circuits base their decisions
primarily on how severe they consider an injury to an attorney’s
reputation. The Fifth Circuit, for example, held “beyond peradventure
that one’s professional reputation is a lawyer’s most important and
valuable asset.” Walker, 129 F.3d at 832 (citing Cooter & Gell v.
Hartmarx Corp., 496 U.S. 384, 412, 110 S. Ct. 2447, 110 L. Ed. 2d 359
(1990) (Stevens, J., concurring)). Similarly, the Ninth Circuit noted
that a finding of misconduct is “likely to stigmatize [the attorney]
among her colleagues and potentially could have a serious detrimental
effect on her career.” Talao, 222 F.3d at 1138.

The First Circuit is the only circuit falling into the third category and
is alone in adopting a formalistic approach that allows attorneys to
appeal orders damaging their professional reputations only where the
challenged order is “expressly identified as a reprimand.” In re
Williams, 156 F.3d 86, 92 (1st Cir. 1998). In reaching this conclusion,
the First Circuit acknowledged that “a lawyer’s professional
reputation is his stock in trade, and blemishes may prove harmful in a
                                   7
      myriad of ways.” Id. at 90. Nonetheless, the First Circuit limited the
      appealability of orders finding misconduct because of the difficulty in
      securing a “balanced adversarial presentation that is so helpful to the
      proper functioning of the appellate process” in such appeals, id. at 91,
      and the need for district courts to “retain the power to comment,
      sternly when necessary, on a lawyer’s performance without
      wondering whether those comments will provoke an appeal.” Id. at
      92. The First Circuit made clear, however, that words alone could be
      sufficient if labeled as a reprimand. Id. Finally, like the Seventh
      Circuit, the First Circuit left open the possibility of relief through a
      writ of mandamus. Id. at 92–93.

348 F.3d 1163, 1167–68 (10th Cir. 2003). In following the Fifth, Ninth, and D.C.

Circuits, the Tenth Circuit allowed an appeal of an order finding attorney

misconduct, but not imposing sanctions nor labeled as a reprimand, holding that

(1) “damage to an attorney’s professional reputation is a cognizable and legally

sufficient injury[,]” (2) the adversarial concerns are “assuaged by the fact that, on

appeal, we review the district court’s order—detailing the reasons for any finding

of attorney misconduct—in addition to the appellant’s brief[,]” and (3) a

deferential standard of review would address concerns of excessive appellate

supervision of the trial courts. Id. at 1169. In Walker, the Fifth Circuit held that

“the importance of an attorney’s professional reputation, and the imperative to

defend it when necessary, obviates the need for a finding of monetary liability of

other punishment as a requisite for the appeal of a court order finding professional

misconduct.” 129 F.3d at 832–33; see also In re Fema Trailer Formaldehyde

Prods. Liability, 401 F. App’x 877, 880 n.3 (5th Cir. 2010) (holding that, like
                                         8
finding of misconduct by attorney, trial court’s finding of misconduct by expert

witness appealable because court was “persuaded beyond peradventure that one’s

professional reputation is a lawyer’s most important and valuable asset.”) (quoting

Walker, 129 F.3d at 832–33); In re ProEducation Intern., Inc., 587 F.3d 296, 299

(5th Cir. 2009) (“[A]n attorney’s right to defend his or her professional reputation

confers Article III jurisdiction for purposes of appeal.”).

      We follow the majority of the federal courts addressing the issue and hold

that an order finding attorney misconduct, even without the imposition of

sanctions, sufficiently presents a justiciable controversy to be addressed when

challenged by the aggrieved attorney. Because Sparks and Westergren were found

to have committed the same sanctionable conduct, we consider the order as it

applies to both.

                    PROPRIETY OF SANCTIONS ORDER

      In their sole issue on appeal, Westergren and Sparks contend the trial court

“abused its discretion in entering a[] sanctions order stating that Appellants

Westergren and Sparks violated Chapter 10 of the Civil Practice & Remedies

Code.”

Standard of Review

      We review a trial court’s ruling on a motion for sanctions for an abuse of

discretion. Cire v. Cummings, 134 S.W.3d 835, 838 (Tex. 2004); Taylor v. Taylor,

                                           9
254 S.W.3d 527, 532 (Tex. App.—Houston [1st Dist.] 2008, no pet.). A trial court

abuses its discretion when it acts without reference to any guiding rules and

principles, and we reverse a trial court’s ruling only if its action is arbitrary or

unreasonable. Cire, 134 S.W.3d at 838–39 (citing Downer v. Aquamarine

Operators, Inc., 701 S.W.2d 238, 241–42 (Tex. 1985)). A trial court does not

abuse its discretion if it bases its decision on conflicting evidence and some

evidence supports its decision.” In re Barber, 982 S.W.2d 364, 366 (Tex. 1998)

(orig. proceeding); Glattly v. Air Starter Components, Inc., 332 S.W.3d 620, 642

(Tex. App.—Houston [1st Dist.] 2010, pet. denied). We make an independent

inquiry of the entire record to determine whether the trial court abused its

discretion in imposing the particular sanctions. Scott Bader, Inc. v. Sandstone

Prods., Inc., 248 S.W.3d 802, 812 (Tex. App.—Houston [1st Dist.] 2008, no pet.)

(citing Daniel v. Kelley Oil Corp., 981 S.W.2d 230, 234 (Tex. App.—Houston [1st

Dist.] 1998, pet. denied)).

Sanctions Under Chapter 10

      Section 10.001 of the Civil Practice and Remedies Code provides that the

signing of a pleading constitutes a certification by the signatory that to the

signatory’s best knowledge, information, and belief, formed after reasonable

inquiry:

                                        10
      (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

      (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 (Vernon 2002); see also Mattox v.

Grimes Cnty. Comm’rs Court, 305 S.W.3d 375, 386 (Tex. App.—Houston [14th

Dist.] 2010, pet. denied) (“Sanctions under chapter 10 of the Civil Practice and

Remedies Code are authorized if the evidence establishes that (1) a pleading or

motion was brought for an improper purpose, (2) there were no grounds for legal

arguments advanced, or (3) a factual allegation or denial lacked evidentiary

support.”). The trial court may impose sanctions on a person who has signed a

pleading in violation of section 10.001. See TEX. CIV. PRAC. & REM. CODE ANN. §

10.004(a). Chapter 10 authorizes sanctions if the suit was filed for an improper

purpose, even if it was not frivolous. See Alpert v. Grain, Caton & James, P.C.,

178 S.W.3d 398, 412 (Tex. App.—Houston [1st Dist.] 2005, pet. denied) (“[T]here
                                        11
are two requirements under Chapter 10: (1) that the claims made in pleadings not

be frivolous; and (2) that the pleadings not be made for an improper purpose. A

finding of either requirement supports the imposition of sanctions.”). “Generally,

courts presume that pleadings and other papers are filed in good faith.” Low v.

Henry, 221 S.W.3d 609, 614 (Tex. 2007). “The party seeking sanctions bears the

burden of overcoming this presumption of good faith.” Id.

Section 10.001(1)—Improper Purpose

      The trial court’s sanctions order contained the following finding against

Sparks:

      The Court further find that Sparks violated Section 10.001(1) of the
      Texas Civil Practice and Remedies Code by filing the instant lawsuit
      against Jennings for an improper purpose insofar as the suit was filed
      against Jennings solely to obtain venue in Chambers County without
      regard to the merits of the claims asserted against Jennings and to
      avoid what Sparks and his client perceived to be a less favorable
      forum in Harris County, Texas. . . . The Court finds that Jennings was
      included as a Defendant in the instant lawsuit solely to obtain venue in
      Chambers County by virtue of Jennings’ residency in Chambers
      County and to avoid what Plaintiff perceived to be a less favorable
      forum in Harris County. Bringing a suit against Jennings solely to
      establish venue and without regard to the merits of the claim being
      asserted against Jennings is an improper motive for bringing suit.
      (Emphasis added).

The sanctions order contained an identical finding against Westergren.

      However, Westergren’s Original Petition, which included claims against

Jennings, did not purport to establish venue based on Jennings’ status as a resident

of Chambers County. Rather, Westergren alleged that “all or a substantial part of
                                        12
the events or omissions giving rise to the Plaintiff’s claim occurred in Chambers

County, Texas.” He further alleged that the property in dispute was located in

Chambers County, Texas. It was not until Westergren filed his Second Amended

Original Petition on July 1, 2011, three months after the suit was initially filed, that

he added a second ground for establishing venue in Chambers County, i.e., that

“Defendant Johnnie Glen Jennings, Jr. is a resident of Chambers County, Texas

and was a resident of Chambers County, Texas at the time the cause of action

accrued.” Therefore, at the time the suit was filed, venue was not based on

Jennings’s residency, and thus, the trial court could not have reasonably

determined that Jennings was sued for the sole purpose of establishing venue in

Chambers County.

Section 10.001(2)—No Basis in Law

      The trial court’s sanctions order contained the following finding against

Sparks, but not Westergren.

      Plaintiff’s Original Petition, First Amended Petition, Second
      Amended Petition and Third Amended Petition asserted claims
      against Defendant Jennings for breach of fiduciary duty and civil
      conspiracy that were not warranted by existing law or by a
      nonfrivolous argument for the extension, modification, or reversal of
      existing law or the establishment of new law. In particular, Plaintiff
      alleged that a fiduciary and/or confidential relationship existed
      between Plaintiff and Jennings based on Plaintiff’s alleged disclosure
      of confidential information to Jennings. Plaintiff’s civil conspiracy
      claim against Jennings was based on an alleged oral promise to extend
      the above-mentioned amendment to the earnest money contracts and
      therefore set up the doctrine of promissory estoppel. The Court finds
                                          13
      that there is no basis in law for a civil conspiracy claim based on
      promissory estoppel nor is there a nonfrivolous argument for the
      extension, modification, or reversal of existing law or the
      establishment of new law under this theory. The Court further finds
      that there is no basis in law for the existence of a fiduciary and/or
      confidential relationship based on the disclosure of confidential
      information from one party to another nor is there a nonfrivolous
      argument for the extension, modification, or reversal of existing law
      or the establishment of new law under this theory. . . . The existing
      law with regard to breach of fiduciary duty and civil conspiracy is
      well-settled and would have been apparent to Sparks had he
      conducted a reasonable inquiry prior to filing suit against Jennings.
      Accordingly, the Court finds that Sparks failed to conduct a
      reasonable inquiry into the legal basis of Plaintiff’s claims against
      Jennings before filing suit against Jennings.

      A. Fiduciary Duty

      At the sanctions hearing and on appeal, Jennings argued that there was no

basis in law for Westergren’s breach of fiduciary duty claim against him.

Specifically, Jennings argues that there was no relationship between him and

Westergren apart from earnest-money contract. A contractual relationship between

two parties, without more, cannot give rise to a fiduciary relationship between the

contracting parties. See Manges v. Guerra, 673 S.W.2d 180, 183 (Tex. 1984)

(holding that fiduciary duty arises from relationship of parties, not contract

between parties).

      However, Westergren’s live pleading at the time of the hearing provided the

following in its section on breach of fiduciary duties:

      Plaintiff and the Planks became partners in a partnership and/or joint
      venturers in a joint venture during the summer or early fall of 2004.
                                          14
      The partnership and/or joint venture was formed for the purpose of
      operating businesses for profit, with the partners as co-owners, and the
      principal business of the partnership and/or joint venture is developing
      and funding the purchase of various tracts of land for a rail-served
      warehouse parks [sic].

      Defendants breached the duty of loyalty owed to Plaintiff under the
      law. Specifically, Plaintiff will show that Defendants diverted the
      partnership and/or joint venture in favor of their own personal interest
      or the interests of the various Ameriport Defendants, the limited
      liability companies named above, in which they have personal and/or
      fiduciary interests. The Ameriport Defendants also breached the duty
      of loyalty owed to Plaintiff by failing to disclose to Plaintiff facts that
      were material to the partnership’s affairs, that is that they were going
      forward to develop the 723 acre rail served warehouse park in
      Chambers County, to the exclusion of Plaintiff who conceived it,
      designed it and contracted to acquire it.

      In addition and/or alternatively, a confidential and fiduciary
      relationship existed between Plaintiff and Ameriport Defendants and
      the Conspiring Defendants, in that Plaintiff had revealed confidential
      and proprietary information to all of them, who breached the trust
      placed in them by disavowing any interest in the proposed project
      when in fact they intended to acquire and develop the project to the
      exclusion of Plaintiff.

While not a model of clarity, the petition sues Jennings as a “conspiring defendant”

with the Planks and their related entities, who, according to the petition, were the

parties with the fiduciary relationship to Westergren.        Sparks testified at the

sanctions hearing that, “The allegation is that Mr. Plank, the Planks were joint

venturers with Mr. Westergren and that your client civilly conspired with him[.]”

Partners in a partnership may owe particular duties to one another, as determined

by their partnership agreement.      See TEX. BUS. ORGS. CODE ANN. § 152.002

                                          15
(Vernon 2012) (providing that partnership agreement governs the relations of

partners); see also id. §152.205 (defining duty of loyalty owed by partners);

§152.206 (defining duty of care owed by partners); id. §152.204(b) (providing for

obligation of good faith by partners).

      In Texas, some case authority exists to support the proposition that a party

who knowingly participates in another’s breach of fiduciary duty may be liable for

the breach as a joint tortfeasor. See Kinzbach Tool Co. v. Corbett-Wallace

Corp., 138 Tex. 565, 574, 160 S.W.2d 509, 514 (1942); Herider Farms-El Paso,

Inc. v. Criswell, 519 S.W.2d 473, 477 (Tex. Civ. App.—El Paso 1975, writ ref’d

n.r.e.). Here, the duties alleged are those that partners in a partnership may owe to

one another. Because there is some basis to assert the application of existing law

to the alleged facts, Spark’s claim, even if without merit, was a nonfrivolous

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

establishment of new law. See TEX. CIV. PRAC. & REM. CODE ANN. § 10.001(2).

Accordingly, the trial court erred in sanctioning Sparks based on his filing of the

breach of fiduciary duty claim.

      B. Civil Conspiracy

      At the sanctions hearing and on appeal, Jennings argued that there was no

basis in law for Westergren’s civil conspiracy claim against him. Specifically,

Jennings argues “Sparks fails to base his civil conspiracy claim against Jennings on

                                         16
an intentional tort[,]” and that promissory estoppel will not support a civil

conspiracy claim. Westergren’s pleadings alleged more than promissory estoppel:

      Pleading in the alternative, Plaintiff would show a conspiracy to
      commit an unlawful act between the Ameriport Defendants and the
      Conspiring Defendants (Rozelle and Jennings). All Defendants had a
      meeting of the minds to accomplish their illicit and intentionally
      fraudulent objective, and the intentional actions and omissions of each
      Defendant constitute one more unlawful, overt acts. All of these
      Defendants entered into a civil conspiracy and intentionally made
      misrepresentations to Plaintiff. For example, the Conspiring
      Defendants promised verbally to extend the Westergren contracts,
      thereby setting up the doctrine of promissory estoppel, when they had
      no intention of fulfilling their promises to Plaintiff.

      At such time as Defendant, Russell Plank (as the authorized agent of
      the Ameriport Defendants), came to the Conspiring Defendants with
      an offer of more money for the acreage in question that was then
      under purchase contracts by Plaintiff, all of the parties Defendant
      conspired to reneg upon and terminate the Westergren contracts,
      rather than extend them—since those contracts were for a
      substantially less purchase price.

As made clear by the pleadings and Sparks’s testimony at the sanctions hearing,

Westergren’s civil conspiracy was not merely founded on promissory estoppel, but

included claims that the Jennings fraudulently misrepresented to Westergren that

he had an extension on the earnest-money contract so that the contract would

expire, thereby giving Jennings an opportunity to then sell the property to the

Planks and to become a partner in their subsequent development. Thus, fraud,

though not alleged as a separate cause of action, is the underlying tort alleged for

Westergren’s civil conspiracy claim. See Crim Truck & Tractor Co. v. Navistar

                                        17
Int’l Transp. Co, 823 S.W.2d 591, 597 (Tex. 1992) (recognizing claim for

fraudulent inducement to enter into an agreement).

      Because Sparks alleged that Jennings was potentially liable for making a

fraudulent misrepresentation to him to induce the expiration of the earnest-money

contract, the civil conspiracy claim asserted an underlying intentional tort, and thus

was a nonfrivolous argument for the extension, modification, or reversal of

existing law or the establishment of new law. See TEX. CIV. PRAC. & REM. CODE

ANN. § 10.001(2).

Section 10.001(3)—No Basis in Fact

      The trial court’s sanctions order contained the following finding against

Sparks;

      The Court further finds that Sparks violated Section 10.001(3) of
      Chapter 10 of the Civil Practice and Remedies Code by making
      allegations and factual contentions that no evidentiary support and
      were never likely to have evidentiary support. Concurrent with the
      filing of his Original Petition, Plaintiff served Jennings with eighteen
      (18) interrogatories and fifty-eight (58) requests for production.
      There was no evidence in Jennings’ responses to Plaintiff’s written
      discovery that supported Plaintiff’s claims against Jennings for
      breach of fiduciary duty and civil conspiracy. Included in Jennings’
      discovery responses was a transcript of a recorded conversation
      between Plaintiff and Jennings that occurred on or about February
      21, 2011—before Plaintiff filed his Original Petition. According to
      the transcript of the recording, Plaintiff stated that Jennings had done
      “nothing wrong” in connection with the 723 acres but that he was
      nevertheless suing Jennings because “in a real estate deal . . .
      typically everyone gets sued.” Based on Jennings’ discovery
      responses, there was no evidentiary support for the following
      allegations and factual contentions pled in Plaintiff’s petitions: (1)
                                         18
      that a partnership and/or joint-venture relationship existed between
      Plaintiff and Jennings with respect to the 723 acres or Plaintiff’s
      alleged development plans for the 723 acres; (2) that Jennings
      verbally agreed to extend Plaintiff’s deadline for closing on the 723
      acres; (3) that Jennings conspired with his Co-Defendants to sell the
      723 acres to Co-Defendants Michael Plank, Russell Plank and
      related entities and not to Westergren; and (4) that Jennings,
      individually and in concert with his Co-Defendants, unlawfully
      obtained and used for his own benefit Plaintiff’s confidential ideas,
      drawings, and land contracts. Sparks persisted in pleading these
      allegations and factual contentions in Plaintiff’s First, Second, and
      Third Amended Petition despite the absence of any evidentiary
      support. The Court further finds that Sparks failed to conduct a
      reasonable inquiry into the factual basis of Plaintiff’s claims against
      Jennings before filing any of Plaintiff’s petitions.

The sanctions order contained an identical finding against Westergren. We address

each of the four topics upon which the trial court found no evidentiary support,

respectively.

      A. No evidence of partnership or joint venture between Westergren and
         Jennings

The trial court found no evidentiary support “that a partnership and/or joint-venture

relationship existed between Plaintiff and Jennings with respect to the 723 acres or

Plaintiff’s alleged development plans for the 723 acres.” Because Westergren

contended, however, that there was a partnership or joint venture between

Westergren and the Planks, and that Jennings allegedly conspired with the Planks

to breach fiduciary duties arising out of that partnership, the factual basis as

pleaded is not wholly refuted by the failure to plead a fiduciary relationship

between Jennings and Westergren.
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      B. Jennings verbally agreed to extend the closing deadline on the 723
         acres

      The trial court found no evidentiary support for the allegation that “Jennings

verbally agreed to extend Plaintiff’s deadline for closing on the 723 acres.”

However, at the sanctions hearing, Westergren testified that “I have verbal

extensions and a whole lot of work put into this, a lot of money into it, in the due

diligence period.” During questioning at the sanctions hearing, Sparks was asked,

“[B]ut you have no evidence other than your clients claim that my client made an

oral promise to support that?” Sparks replied, “That is evidence. My client’s

testimony is evidence.”

      We agree with Spark’s assessment. Westergren’s own testimony provides a

factual basis for his claim that he was granted an oral extension on the closing date.

      C. Jennings conspired with the Planks and unlawfully obtained and used
         Westergren’s ideas and drawings

      The trial court found no evidentiary support for the allegation that “Jennings

conspired with his Co-Defendants to sell the 723 acres to Co-Defendants Michael

Plank, Russell Plank and related entities and not to Westergren”; and “that

Jennings, individually and in concert with his Co-Defendants, unlawfully obtained

and used for his own benefit Plaintiff’s confidential ideas, drawings, and land

contracts.”

                                         20
      Westergren responds that he did not need to provide evidence of an actual

meeting between Jennings and the Planks to show a conspiracy to cut him out of

the real estate deal and use his plans and drawing to proceed without him. Instead,

he argues that he can use circumstantial evidence to show such a conspiracy.

      We agree that a conspiracy may be established by proof of facts and

circumstances from which the natural inference arises that the unlawful, overt acts

were committed in furtherance of the common design, intention, or purpose of the

alleged conspirators. Int’l Bankers Life Ins. Co. v. Holloway, 368 S.W.2d 567, 581

(Tex. 1963). Further, inferences may be drawn from joint participation in the

transactions and from enjoyments of the fruits of the transactions on the part of the

defendants. Id. at 582.

      At the sanctions hearing, Westergren testified that, at first he believed that

Jennings had done nothing wrong, but he later changed his mind when he learned

that Jennings was actually a partner in the development that was planned after he

sold the properties to the Planks. As Westergren testified, “I didn’t have a problem

until I found out that [Jennings] was a partner in the project [with the Planks] and

took all of my work and shared it with the people he sold the land to and partnered

with.” In response to Interrogatories, Westergren stated:

            [P]laintiff responds that even while Plaintiff’s existing contracts
      were in effect, the Seller admitted to Plaintiff and other that Russell
      Plank had contacted them, letting them know of Defendants’ interest
      in the property and of their own superior financial abilities to
                                         21
      conclude a sale.      When the sellers suddenly became very
      uncooperative and refused to communicate, later declaring Plaintiff’s
      contracts void, Defendants had actually purchased the property to
      which they claimed no interest and began a mirror image development
      project.
            ....

            It is patently obvious from the Defendants’ acquisition of the
      land which Plaintiff had under contract, including concept diagrams
      disclosed to them by Plaintiff that the layout and design of the
      Ameriport project mirrors Plaintiff’s drawings that the Defendants
      have converted property and ideas belonging to others for their own
      benefit and enrichment.

And, Westergren testified at the sanctions hearing about sharing his plans for the

“Smart Crossing” project with Jennings as follows:

      So [Jennings], and who I shared in confidence a lot of information, a
      lot of due diligence, wetlands assessments, strategic —the property
      was riddled with pipelines. It was a—it was a strategic nightmare to
      develop. I hired engineers, professional engineers. We worked long
      and hard and spent a lot of money determining how to put the rail into
      this property and make it a viable investment. So spent many hours
      with [Jennings].

Put simply, Westergren relies on the following circumstances to show a factual

basis for his conspiracy claim: (1) he shared his plans for the development with

Jennings, (2) Jennings told Westergren that he had been contacted by the Planks

while the earnest-money contracts were pending, (3) Jennings became

uncooperative and refused to comply with an alleged oral extension, (4) Jennings

declared the earnest-money contracts void, (5) Jennings sold the land to the Planks,

(6) Westergren found out that Jennings was a partner in the Planks’ subsequent

                                        22
development, and (7) the subsequent development was a “mirror image” of the

plans Westergren had shown Jennings.

      While no one piece of this evidence (and indeed perhaps not even the totality

of it) shows a conspiracy to use Westergren’s plans and cut him out of the

development, Westergren argues, and we agree, that these circumstances and the

potential inferences arising therefrom provide a sufficient factual basis for his

allegation of a conspiracy. Whether a factfinder would choose to believe this

evidence is, of course, another matter.

                                  CONCLUSION

      Because we have held that (1) the trial court could not have reasonably

determined that Jennings was sued for the sole purpose of establishing venue in

Chambers County, (2) there is some basis to assert a nonfrivolous argument for the

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

for Westergren’s breach of fiduciary duty and civil conspiracy claims, and (3) there

was a sufficient factual basis to support his claims, we vacate the trial court’s

sanctions order.

                                               Sherry Radack
                                               Chief Justice

Panel consists of Chief Justice Radack and Justices Bland and Huddle.
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