Court Opinion

ID: 8374274
Source: CourtListenerOpinion
Date Created: 2022-10-19 06:09:43.786584+00
Date Added: 2024-06-11T16:46:16.453648
License: Public Domain

AFFIRMED and Opinion Filed October 17, 2022

                                    S  In The
                              Court of Appeals
                       Fifth District of Texas at Dallas
                                No. 05-22-00042-CV

BLUE WINDOW CAPITAL, LLC, 2811 HOLMES STREET, IN REM, 2906
 HOLMES STREET, IN REM, AND 2712 HOLMES STREET, IN REM,
                        Appellants
                           V.
                CITY OF DALLAS, Appellee

                 On Appeal from the 14th Judicial District Court
                             Dallas County, Texas
                      Trial Court Cause No. DC-18-12986

                          MEMORANDUM OPINION
                   Before Justices Schenck, Reichek, and Goldstein
                             Opinion by Justice Reichek
       This is an interlocutory appeal from an order expanding the powers of a

receiver appointed over three multifamily rental properties owned by Blue Window

Capital, LLC.     Blue Window contends the trial court erred in expanding the

receiver’s powers (1) based on alleged reports of crime at the properties, (2) without

holding a hearing on the motion requesting supplemental receivership authority, and

(3) without first ordering a narrower remedy. For reasons that follow, we affirm the

trial court’s order.
                                   BACKGROUND

      Blue Window owns real property located at 2712 Holmes Street, 2811 Holmes

Street, and 2906 Holmes Street in Dallas. Between May 2017 and May 2018, the

City of Dallas notified Blue Window of numerous violations of public health and

safety ordinances at each of the properties. The alleged violations include failure to

maintain building and structural materials in operating condition, failure to maintain

flooring in operating condition, failure to maintain exterior doors so they are

weather-tight and in operating condition, and failure to maintain interior walls and

ceilings in operating condition.

      Because Blue Window did not make necessary repairs to the properties, in

September 2018, the City filed this lawsuit against it and the properties in rem for

enforcement of City health and safety ordinances. The City requested temporary

and permanent injunctions requiring Blue Window to bring the properties into

compliance with the Dallas City Code and also sought civil penalties. The City

asked the trial court to appoint a receiver to take control of the properties.

      The trial court did not initially appoint a receiver. Although the court would

later appoint Dennis Roossien as receiver, it first appointed him to act as a “court

representative.” The court’s November 6, 2019 order appointing Roossien as court

representative was agreed to by the parties. In that role, Roossien was to oversee

and guide Blue Window in its efforts to operate and maintain the properties as

multifamily rental properties. Blue Window was ordered to make repairs to the

                                          –2–
properties and to fully cooperate and meet regularly with Roossien. At least every

two weeks, Roossien was to report to the trial court on the condition of the properties

and any repair and maintenance activity by Blue Window. If Roossien reported that

Blue Window was not making repairs and maintaining the properties in substantial

compliance with City ordinances, a presumption would exist that the appointment

of a receiver was necessary.

      About four months later, on March 2, 2020, the trial court signed an order

appointing Roossien as receiver of the properties. The parties also agreed to this

order. The trial court appointed Roossien as receiver pursuant to Texas Civil

Practice and Remedies Code § 64.001, Texas Local Government Code § 214.003,

and Texas Rule of Civil Procedure 695. See TEX. CIV. PRAC. & REM. CODE ANN.

§ 64.001(a)(6) (permitting court to appoint receiver in any case in which receiver

may be appointed under rules of equity); TEX. LOC. GOV’T CODE ANN. § 214.003(b)

(authorizing court to appoint receiver for property if structures on property are in

violation of ordinances for public health and safety).

      Roossien was granted less than full statutory authority as receiver. He was

authorized and directed to make any reasonable repairs necessary to bring the

properties into substantial compliance with City ordinances and to establish

reasonable measures to reduce criminal activity at the properties. But Blue Window

remained in possession and control of the properties with full authority to collect

rent. Within ten days of the order, Roossien and Blue Window were to coordinate

                                         –3–
to (1) create an estimate of the cost and time needed for repairs, and (2) establish

reasonable measures to reduce criminal activity. Roossien and Blue Window were

also to coordinate to install security cameras on the properties within a reasonable

time. At least quarterly, Roossien was to report his activities as receiver to the Court

and the City.

      In addition, the trial court ordered Blue Window to deposit $200,000 into an

escrow account within ten days. The costs of repairs and materials were to be paid

out of that account upon written agreement of Roossien and Blue Window or at the

trial court’s direction. Blue Window was also required to maintain a certain balance

in the account, as specified in the order.

      Although the City’s original petition did not include a claim under Chapter

125 of the Texas Civil Practice and Remedies Code, such a claim was mentioned in

the agreed order appointing Roossien as receiver with limited powers. Chapter 125

authorizes suits to enjoin and abate a common nuisance. See TEX. CIV. PRAC. &

REM. CODE ANN. § 125.002. A common nuisance exists if a person maintains a place

where people habitually go to commit certain illegal activities, knowingly tolerates

the activity, and fails to make reasonable attempts to abate the activity.           Id.

§ 125.0015. The trial court’s agreed order provided that upon completion of the

repairs, the City “will be deemed to release [Blue Window] and the Properties from

any and all claims for civil penalties and any and all causes of action for nuisance

violations as provided for in Chapter 125 of the Texas Civil Practice and Remedies

                                             –4–
Code.” The order abated any claims for civil penalties or for nuisance violations

during the pendency of the receivership.

        On November 19, 2021, about twenty months after Roossien was appointed

as receiver, the City filed a “Motion for Supplemental Receivership Authority.” The

City claimed the condition of the properties had declined, with Code violations

worsening and a “staggering increase in criminal activity.” The City alleged that the

Code violations cited in its petition still exist and that there were new violations.

The City also listed crimes that allegedly occurred at the properties, including a

murder at 2906 Holmes. The City argued that because the receiver’s power was

limited, he was unable to address the issues on the properties.

        In addition, the City’s motion alleged that Blue Window had failed to comply

with court orders. For example, on May 3, 2021, the trial court ordered Blue

Window to either pay a contractor or prepare a “punch list” of Code violations for

each property and obtain a contractor to abate the violations. According to the City,

Blue Window had not paid the contractor or made substantial progress on the punch

list.

        The City asked the trial court to grant Roossien the authority to take

possession and control of the properties. Attached to the City’s motion was an

affidavit from a Code Inspector for the City who stated that Code violations were

still present at the properties. In her opinion, the condition of the properties posed a

substantial danger for many reasons, including structural instability and violations

                                          –5–
that are adverse to the health and safety of the tenants. Blue Window did not file a

response to the motion.

      The City filed a notice of a December 6, 2021 hearing on the motion, and on

that day, the trial court held a hearing. The cover page of the reporter’s record from

the hearing indicates the proceeding involved a motion to release funds and cross-

motion for show cause order and the motion for supplemental receivership authority.

At the start of the hearing, the trial court asked the City’s attorney the reasons for

the hearing. The City’s attorney indicated the receiver filed the show cause motion

and stated that “depending on how his Show Cause hearing goes, you know, we are

requesting supplemental receivership authority.” The trial court took up the show

cause motion first, reasoning that if it was going to give the receiver additional

authority, it should first establish Blue Window had not done what it should have.

      Roossien identified several ways in which Blue Window failed to comply with

the trial court’s orders. For example, Blue Window had not provided him an

accounting. Blue Window had owed $30,000 to a contractor for nearly a year. It

also had an obligation to restore $70,000 to the escrow account that had been

withdrawn in August. Roossien did not know whether Blue Window had the funds

to make a $70,000 deposit. Another issue was the provision of “realtime-access

functioning security cameras” at the properties. Cameras were supposed to be

operating by April 27, but Roossien had not been given access to any cameras and

did not know if they were functioning. In addition, Blue Window had not paid

                                         –6–
$25,000 in sanctions the court previously ordered for Blue Window’s failure to

install the cameras. Blue Window also failed to complete work that needed to be

done at the properties. Roossien suggested an appropriate sanction would be closing

one of Blue Window’s buildings—“the one that has the most crime going on.”

      Counsel for Blue Window responded that Blue Window provided “P&L

statements for 2020” to show its revenue. Further, counsel stated there had been

technical issues in installing the cameras. Additional parts and an electrician were

needed. Also, the properties needed extensive work, such as sewer line replacement

and foundation work, and the work had been delayed. Blue Window planned to

present two witnesses—a contractor to testify as to the causes for delay and Blue

Window’s principal, Stewart McCray, to testify about efforts to comply with court

orders. Counsel asked the court to continue to allow McCray to operate the

properties.

      The trial court asked McCray why Blue Window was not in compliance with

court orders. McCray testified cameras were installed in February, but were not

strong enough to get the needed footage. Installation of different equipment was in

progress. The court also asked about rental income from the properties. McCray

testified that in the previous 30 days, he collected about $5400 in rent and

consistently received $5000 to $7000 a month in rent. When Roossien questioned

McCray about money received from the State under a Covid rent relief program,

McCray did not want to speculate on the amount received. The court pressed him

                                        –7–
for an answer, and McCray estimated Blue Window received about $40,000.

Roossien then asked if McCray had received $200,000 under the program, and

McCray testified “not that I know of.”

      When McCray testified he deposited $50,000 into the escrow account since

August, Blue Window’s attorney asked the trial court for a recess because she had

“some concerns.” The judge stated it would not be appropriate to stop the

questioning so counsel could talk to her client about his answers. At that point,

counsel stated it might be best for her to withdraw from the case. The judge indicated

he would consider a written motion to withdraw, but was going to proceed with the

hearing. Counsel for Blue Window then informed the trial court that her concerns

were with the veracity of some of McCray’s testimony. The trial court noted

counsel’s concerns. Roossien decided not to ask McCray any more questions. The

judge asked Blue Window’s counsel if she had further testimony for the court and

she responded no.

      The trial judge was “exceedingly troubled” by the status of the case and asked

the receiver what he wanted the court to do. Roossien suggested shutting down 2906

Holmes, the site of most of the crime. The court expressed concern for the tenants

and suggested the tenants pay rent directly to the receiver. In response, Blue Window

asked for more time to complete repairs and to maintain a consulting or cooperative

role with the receiver. Roossien expressed his desire to be able to collect rent. He

                                         –8–
also wanted to deal with the lack of a cash accounting. The court said it would grant

Roossien’s requests, and Roossien planned to send the court an appropriate order.

      The next day, the trial court issued an order granting the City’s motion for

supplemental receivership authority. The court granted Roossien “full powers of a

receiver” pursuant to Chapter 64 of the Texas Civil Practice and Remedies Code and

§ 214.003 of the Texas Local Government Code. Roossien was to receive and take

charge of the properties and all assets, including rent, within 3 days. Among other

things, the court granted the receiver the power to conduct the daily operations of

the property, establish and maintain bank accounts for the deposit of funds collected

in connection with administration of the properties, dispense funds to pay for repairs

and maintenance of the properties, and implement crime prevention measures

necessary to address criminal activity. The court prohibited Blue Window and its

agents from interfering in any manner with the properties or the actions of the

receiver.

      In its order, the trial court found it reasonable and necessary to appoint a

receiver with full power because Blue Window (1) failed to abate Dallas City Code

violations, (2) failed to implement reasonable security measures on the properties,

(3) violated the court’s orders of November 20, 2020, February 3, 2021, May 3,

2021, and June 30, 2021, and (4) lacked sufficient funds to operate the property

legally.

                                         –9–
      Blue Window moved to set aside the order. In January 2022, the court held a

hearing on Blue Window’s motion to set aside, as well as another motion to show

cause filed by the receiver. Blue Window acknowledged the City’s motion seeking

supplemental receivership authority was set for hearing on December 6, but argued

the court did not hear or rule on the motion at the hearing. It asked the court to set

the order aside and give it the opportunity to present argument against the motion.

The City’s response was that the receiver’s show cause motion laid the foundation

the court needed to rule on the City’s motion asking for supplemental receivership

authority.

      The trial court asked Blue Window if it wanted to be heard on the underlying

motion at that time, but Blue Window’s counsel was not prepared to take up the

merits of the motion. The trial court denied the motion to set aside. This appeal

followed. See TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(a)(1) (permitting

interlocutory appeal of order that appoints receiver).

                                 APPLICABLE LAW

      A home-rule municipality such as the City of Dallas may bring an action in

district court against the owner of a property that is not in substantial compliance

with certain municipal ordinances, including ordinances for preservation of public

health and safety. TEX. LOC. GOV’T CODE ANN. § 214.003(a); see id. § 54.012. The

court is authorized to appoint a receiver for the property if it finds that structures on

the property are in violation of such an ordinance. Id. § 214.003(b). A court-

                                         –10–
appointed receiver may exercise all authority that an owner of the property would

have except for the authority to sell the property. TEX. LOC. GOV’T CODE ANN.

§ 214.003(g). This authority includes taking control of the property, collecting rents

due, and making or having made any repairs necessary to bring the property into

compliance with minimum standards in local ordinances. Id. We review a trial

court’s order appointing a receiver for an abuse of discretion. Spiritas v. Davidoff,

459 S.W.3d 224, 231 (Tex. App.—Dallas 2015, no pet.).

      Although not mentioned in the briefing by either side, the appellate record in

this case is incomplete. The clerk’s record includes the City’s original petition and

Blue Window’s answer, the agreed orders appointing Roossien as court

representative and receiver, the City’s motion to supplement receivership authority

and the trial court’s order granting that motion, and the trial court’s docket sheet.

The clerk’s record indicates there were many other filings and orders over the three

years this case was pending prior to this appeal. We do not have the four orders that

Blue Window was found to be in violation of in the order giving Roossien full power

as receiver. We are also missing multiple reports filed by Roossien as both court

representative and receiver, a motion for civil contempt sanctions, the receiver’s

motions to show cause, and several show cause orders, among other things.

      An appellant bears the burden to bring forward a record that enables the

appellate court to determine whether appellant’s complaints constitute reversible

error. Palla v. Bio-One, Inc., 424 S.W.3d 722, 727 (Tex. App.—Dallas 2014, no

                                        –11–
pet.) (citing Christiansen v. Prezelski, 782 S.W.2d 842, 843 (Tex. 1990)). When a

record is incomplete and, as in this case, the rules on partial records do not apply,

we must presume the missing portion of the record supports the factual

determinations made by the factfinder. Id.

                                         ANALYSIS

       In its first issue, Blue Window argues the trial court abused its discretion in

expanding the receiver’s powers due to alleged reports of crime at the properties.

Blue Window bases this argument on the language in the agreed order initially

appointing Roossien as receiver that abated any Chapter 125 claim for nuisance due

to alleged criminal activity.1 At the December 6 hearing, Blue Window stated that

with regard to the attempt to abate crime, there was no Chapter 125 action in this

case. Without citation to legal authority, Blue Window contends the court erred in

granting receivership with full power based on criminal activity when the court was

not asked to decide a Chapter 125 claim.

       The trial court did not identify an increase in crime as a direct reason for giving

Roossien more power as receiver.              Rather, it was Blue Window’s failure to

implement reasonable security measures, such as the court-ordered security cameras,

1
  As stated, the City’s original petition did not include a Chapter 125 claim for common nuisance.
According to the trial court’s docket sheet, the City filed an amended petition that Blue Window
moved to strike. Before a scheduled hearing on the motion to strike, the parties reached an
agreement on the motion and the trial court issued an order on the motion. These documents are
not part of the appellate record.

                                              –12–
that was one of the reasons for the decision to increase Roossien’s authority. To the

extent the trial court considered an increase in crime, however, it did not abuse its

discretion. When the parties agreed for Roossien to be appointed as a receiver

instead of court representative, they agreed he could establish reasonable measures

to reduce criminal activity at the properties. The trial court’s agreed order initially

appointing Roossien as receiver, signed by the parties, required Blue Window to

work with Roossien to reduce crime at its properties. We cannot conclude it was an

abuse of discretion for the trial court to consider an increase in criminal activities at

the properties when later deciding the City’s request for expanding the receiver’s

powers.

      Further, even if the trial court erred in considering increased crime, we cannot

conclude the error was reversible. Blue Window’s failure to implement security

measures was not the only reason the trial court granted Roossien full power. The

trial court also considered Blue Window’s failure to abate Code violations, violation

of multiple court orders, and lack of funds to operate the properties. Blue Window

has not challenged these other reasons supporting the trial court’s decision to

increase the receiver’s power. See TEX. R. APP. P. 44.1(a). We overrule Blue

Window’s first issue.

      In its second issue, Blue Window contends the trial court abused its discretion

by failing to hold a hearing on the City’s motion to expand the receiver’s powers.

Blue Window relies on Texas Rule of Civil Procedure 695, which provides:

                                         –13–
      [N]o receiver shall be appointed without notice to take charge of
      property which is fixed and immovable. When an application for
      appointment of a receiver to take possession of property of this type is
      filed, the judge or court shall set the same down for hearing and notice
      of such hearing shall be given to the adverse party by serving notice
      thereof not less than three days prior to such hearing.

TEX. R. CIV. P. 695; see Independent Am. Sav. Ass’n v. Preston 117 Joint Venture,

753 S.W.2d 749, 750 (Tex. App.—Dallas 1988, no writ). Blue Window contends

the City’s motion was not actually heard at the December 6 hearing.

      The December 6 hearing was apparently scheduled for two motions, one filed

by the receiver and one filed by the City. The City’s motion for supplemental

receivership authority was mentioned at the start of the hearing. But the trial court

first took up the receiver’s show cause motion because there was a connection

between the receiver’s arguments and whether the receiver should be given

additional authority as the City requested in its motion. Neither the court nor the

parties mentioned the City’s motion again at the hearing. The City did not expressly

argue its motion and its counsel spoke only a handful of times. The trial court signed

an order the following day granting the motion.

      A major focus of the December 6 hearing was whether, due to Blue Window’s

conduct, the receiver should be given control of the properties. Blue Window

presented the idea of doing away with the receivership altogether. The City opposed

that idea, citing Blue Window’s violation of court orders and lack of progress on the

properties. Blue Window attempted to counter the receiver’s evidence that Blue

                                        –14–
Window was not in compliance with court orders and not making progress repairing

the properties, but cut its presentation of evidence short due to issues with the

truthfulness of McCray’s testimony. The trial court asked counsel for Blue Window

what the court should do to ensure compliance with court orders. Counsel argued

Blue Window should remain in control of the properties.

      Due to the intertwined nature of the motions before the trial court on

December 6, the court at least implicitly gave Blue Window the opportunity to be

heard, and Blue Window at least implicitly presented evidence and argument, on the

issue of whether Roossien should be given full receivership authority. In addition,

to the extent Blue Window was not heard in opposition to the expansion of the

receiver’s powers on December 6, it had the express opportunity to be heard a month

later. The court gave Blue Window the chance to argue against the merits of the

City’s motion at the hearing on Blue Window’s motion to set aside, but Blue

Window was unprepared to do so. Given these circumstances, the trial court did not

abuse its discretion in how it handled having a hearing on the City’s motion. We

overrule Blue Window’s second issue.

      In its third issue, Blue Window argues the trial court abused its discretion by

failing to provide a narrower remedy before granting the receiver supplemental

authority. Blue Window suggests the trial court should have limited the grant of full

receivership powers to the property with the most criminal activity, 2906 Holmes, a

                                       –15–
position which seems contrary to its argument in issue one that the court should not

have considered reports of crime at the properties.

      This case was pending for over three years before the trial court appointed a

receiver with the full amount of power authorized by Local Government Code

§ 214.003. Prior to that, the trial court considered and implemented less drastic

measures that were ineffective. The trial court first appointed Roossien as a court

representative to work with Blue Window on completing the needed repairs. The

court next appointed Roossien as a receiver over the properties, but limited his

powers. Roossien did not have authority to take control of the properties or collect

rent. Yet under this arrangement, the appellate record shows Blue Window failed to

comply with the trial court’s orders, including failing to complete the necessary

repairs and maintenance, failing to pay for work that was done, and failing to install

security cameras.    In addition, we assume the show cause orders and other

documents that are missing from the appellate record further support the trial court’s

decision to grant the receiver additional authority. The trial court was well within

its discretion in expanding the receiver’s powers when it did. We overrule Blue

Window’s third issue.

                                        –16–
We affirm the trial court’s order.

                                       /Amanda L. Reichek/
                                       AMANDA L. REICHEK
                                       JUSTICE

220042F.P05

                                     –17–
                                   S
                            Court of Appeals
                     Fifth District of Texas at Dallas
                                  JUDGMENT

BLUE WINDOW CAPITAL, LLC,                     On Appeal from the 14th Judicial
2811 HOLMES STREET, IN REM,                   District Court, Dallas County, Texas
2906 HOLMES STREET, IN REM,                   Trial Court Cause No. DC-18-12986.
AND 2712 HOLMES STREET, IN                    Opinion delivered by Justice
REM, Appellants                               Reichek. Justices Schenck and
                                              Goldstein participating.
No. 05-22-00042-CV           V.

CITY OF DALLAS, Appellee

     In accordance with this Court’s opinion of this date, the trial court’s December
7, 2021 Order Granting Motion for Supplemental Receivership Authority is
AFFIRMED.

      It is ORDERED that appellee CITY OF DALLAS recover its costs of this
appeal from appellants BLUE WINDOW CAPITAL, LLC, 2811 HOLMES
STREET, IN REM, 2906 HOLMES STREET, IN REM, AND 2712 HOLMES
STREET, IN REM.

Judgment entered October 17, 2022.

                                       –18–