Defendants' objections and motion to reconsider ruling on admissibility of restitution order October 03, 2008 (2024)

On September 12, 2000 aParty Discoverywas filedinvolving a dispute betweenArbor Capital Investments Inc,Arbor Holding Company Inc,Clawson, Mary Beth,Clawson, Mary Beth (Trustee For The Mary Beth Clawson 1986 Trust The,Riddle, John,Starwood Development Company,Taylor, Robert (Trustee For The Mary Beth Clawson 1986 Trust The,Beltway Green Partnership Ltd,Black, Mike,andArbor Capital And Investment Company Inc,Arbor Capital Investments Inc,Arbor Holding Company Inc,Clawson, Mary Beth,Riddle, John C,Starwood Holding Company Inc,Taylor, Robert (Trustee For The Mary Beth Clawson 1986 Trust The,Taylor, Robert W,Beltway Green Inc,Coastal Sun Development Corporation,David Hamilton Inc,First Bank & Trust,Goldberg, Barry,Hamilton, David,Houston Title Company,Houston Title Insurance Company,Jab Development Corporation,Pasadena Gateway Venture Ltd,for INJUNCTIONin the District Court of Harris County.

 
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 NO. 2003-51526BELTWAY GREEN IN THE DISTRICT COURT OFPARTNERSHIP, LTD.Vv.MARY BETH CLAWSON, TRUSTEE,ET ALHARRIS COUNTY, TEXASVv.DAVID HAMILTON,JAB DEVELOPMENT CORPORATION,BELTWAY GREEN, INC.,BELTWAY GREEN PARTNERSHIP§§§§§§§§§§§§§§LTD. §164TH JUDICIAL DISTRICTDEFENDANTS’ OBJECTIONS AND MOTION TO RECONSIDER RULING ONADMISSIBILITY OF RESTITUTION ORDERTo the Honorable Judge of said Court, come now defendants and in support hereof would showthe following:FactsThis case was filed in 2003. This case went to trial on September 2, 2008.At the beginning of the trial, the plaintiff sought to offer a restitution order from acriminal judgment entered over ten years ago into evidence.The defendants objected to the offer of the restitution order into evidence because it wasirrelevant, immaterial and because it was unfairly prejudicial, in any event.The court sustained the defendants’ objection to the restitution order. On one or moreadditional occasions during the trial, the plaintiff asked the court to reconsider its ruling on therestitution order. The court sustained the defendants’ objections each time and refused to allowFILEDthe restitution order into evidence. Theresa Changistrict ClerkOCT 03 2008erHarris County, Texas 1"BT a]o ¥TimeThe plaintiff offered no evidence to support its alter ego claim in its case in chief. Theplaintiff rested.On October 1, 2008, near the end of the defendants’ case and after the plaintiff rested itscase, the plaintiff again asked the court to reconsider its ruling on the admissibility of therestitution order. The plaintiff claimed that the restitution order is relevant to an alter ego claim.The defendants made the same objections to the restitution order that the court hadsustained two or more times before.Defendants objected to the restitution order under Texas Rules of Evidence 401, 402 and403.Texas Rules of Evidence 401“Relevant evidence means evidence having any tendency to make the existence of anyfact that is of consequence to the determination of the action more probable or lessprobable than it would be without the evidence.”Texas Rules of Evidence 402“Evidence which is not relevant is inadmissible.”The immediate question is: How is the evidence of a pre-existing judgment relevant toany issue of consequence in this lawsuit.Plaintiff May Not Take Position That Riddle Used Arbor to Avoid Pre-Existing JudgmentDebtThe plaintiff cannot use the restitution order as evidence that Riddle is using Arbor as hisalter ego to avoid paying his pre-existing debt, but that is what the plaintiff seeks to do.Such would merely be some arguable evidence of a motive for using the alter ego toavoid that debt.The restitution order is still not relevant or material to any issue in this case. It is stillunfairly prejudicial. It is clear that the restitution order will be offered to unfairly prejudice thedefendants and the danger of unfair prejudice substantially outweighs the probative value of theorder. The conviction (which is over 10 years old) is in evidence, but the 10 year old restitutionorder should not be.Plaintiff Rested Before Re-Urging Restitution OrderDefendants further object to the restitution order because the plaintiff has rested its caseand because the restitution order is not rebuttal evidence. The restitution order has not yet beenoffered and the defendants ask the court to reconsider for reasons stated herein.Delay, Reliance on Prior RulingsThis lawsuit will go to the jury within one to two days. Arbor has relied on this court’srulings on the restitution order in presenting this lawsuit to the jury for the past month. The factthat Hurricane Ike hit Houston at the end of the second week of trial caused a significant delay ofthe trial. The jury has heard about John Riddle’s conviction but not anything about therestitution order and the defendants will be unfairly prejudiced if the restitution order is nowallowed into evidence with no explanation or limiting instruction.Plaintiff Cannot Use Alter Ego Claim of U.S.Arbor acquired a final judgment in this lawsuit in 2006. The U.S. filed a post judgmentintervention in this lawsuit based on an alter ego claim that Arbor was the alter ego of Riddle.The post judgment intervention did not challenge the underlying judgment or findings thereunder. The U.S.’s intervention claim has been non-suited without prejudice.Without going into all of the considerations of alter ego, the defendants would show thatgenerally, the theory of alter ego allows a jury to determine whether or not one entity isresponsible for the conduct of another with respect to a specific debt.If the restitution order makes the existence of a consequential fact (alter ego) more likely,then it is relevant, then its probative value should be reviewed (a) to determine whether or not itis relevant and then (b) to determine whether or not it is substantially outweighed by the dangerof unfair prejudice. If not, it is inadmissible.When alter ego is at issue, the jury bases its finding on the following considerations:(a) Whether the entity was organized and operated as a mere tool or business conduitof another;(b) whether there was such unity between the entities that their separateness ceasedand holding only one entity responsible would result in injustice; and(c) a party caused an entity to be used for the purpose of perpetrating and didperpetrate a fraud on another party for his direct and personal benefit.The next question is whether or not its probative value is substantially outweighed by thedanger of unfair prejudice, confusion of the issues, undue delay or needless presentation ofcumulative evidence.If it offered to establish an arguable motive for using an alter ego to avoid theenforcement of the restitution order, then its probative value is substantially outweighed by thedanger of unfair prejudice and its probative value is outweighed by the dangers of unfairprejudice, confusion of the issues, undue delay or needless presentation of cumulative evidence.Alter ego is not an issue where the proponent of the alter ego theory fails to prove damages.This is because the alter ego theory shifts the obligation to pay from one entity to another.The plaintiff cannot base its alter ego claim in this lawsuit on an alter ego theory that would berelevant in an unrelated lawsuit where there has been no judicial determination of the alter egoissue in the unrelated lawsuit.“For collateral estoppel to apply, a party must establish (1) the facts sought to be litigated in thesecond action were fully and fairly litigated in the first action; (2) those facts were essential to thejudgment in the first action; and (3) the parties were cast as adversaries in the first action. Richardsvy. Comm'n for Lawyer Discipline, 35 $.W.3d 243, 249 (Tex.App.-Houston[14th Dist.] 2000, no pet.) (citing Sysco Food Servs., Inc. v. Trapnell, 890 S.W.2d 796, 801(Tex.1994)). Strict mutuality of parties is no longer required. Richards, 35 S.W.3d at 249 (citing4Sysco Food Servs. 890 S.W.2d at 801).” Welch v. Hrabar, 110 S.W.3d 601, 606-7 (Civ.App.Houston, [14"] 2003.)ArgumentThe plaintiff has wholly failed to show how the existence of or failure to pay the pre-existing judgment makes the existence of any fact that is of consequence to the determination ofthe action, more probable or less probable than it would be without the evidence.The U.S. is not a party to this lawsuit and is a stranger to the transactions relevant to thislawsuit. The judgment was entered more than 10 years ago. The issues in the present lawsuitrelate to claims for declaratory relief and the question of fraudulent lien.Assuming, arguendo, that a defendant were, in fact, doing business under the name ofanother entity for the purpose of avoiding the payment of a pre-existing debt to a non-party, thisdoes not make that evidence relevant or admissible in the present case.Wherefore, premises considered, defendants pray that the court sustain their objections to therestitution order and that they have all other relief to which they may be entitled.Respectfully submitted,i J. Michael BlackSBN: 023718001415 1415 N. Loop W.Suite 1205713-222-7474Fax: 1-866-433-4542CERTIFICATE OF SERVICEI do hereby certify that the above and foregoing document has been forwarded to the following inaccordance with the Texas Rules of Civil Procedure on October 2, 2008.J. Michael Blacke- ~~Attorneys:Thomas Bousquet: Via hand delivery. 

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