APPOINTMENT OF RECEIVER RENDERED MOOT BY FORECLOSURE SALE OF SUBJECT PROPERTY
Pirate's Lake Ltd. v. Vestin Realty Mortgage I, Inc., No. 14-08-00085-CV
(Tex.App.- Houston [14th Dist.] Aug. 12, 2008)(because the Property was sold at a foreclosure sale after Pirate's
Lake perfected its appeal, Pirate's Lake's appeal is moot) (challenge to appointment of receiver, foreclosure of
property moots issue, promissory note, deed, mootness doctrine)
M E M O R A N D U M O P I N I O N
Appellant Pirate's Lake, Ltd., appeals from the trial court's order granting the application of appellees Vestin
Realty Mortgage I, Inc., Vestin Realty Mortgage II, Inc., Vestin Fund III, L.L.C., and Vestin Mortgage, Inc.
(collectively “Vestin") to appoint a receiver.
Pirate's Lake contends that the trial court erred in appointing a receiver because (1) the receiver was appointed
ex parte and without sufficient notice; and (2) there were no contractual, statutory, or equitable bases for the
appointment of a receiver.
Because the real property that was the sole subject of the receivership was sold by foreclosure sale after Pirate's
Lake perfected its appeal, we dismiss this appeal as moot.
Factual and Procedural Background
On June 23, 2006, Pirate's Lake executed a $10,000,000 promissory note payable to Vestin (“the Note"). The
Note was secured by a deed of trust (“the Deed") covering a parcel of real property located in Galveston County,
Texas (“the Property").
The Note required Pirate's Lake to make monthly payments of interest and stated that if interest payments were
not timely made, Vestin could accelerate the Note, collect the unpaid principal with all accrued interest, and
charge default interest until the default is cured. The Note and the Deed further specified that placing a second
lien on the Property without Vestin's consent constituted an event of default, for which Vestin could accelerate the
Note and “pursue any rights or remedies it may have hereunder or at law, or in equity . . . ." The Deed further
granted Vestin a power of sale over the Property in the event of default.
The Deed also empowered Vestin to seek the appointment of a receiver:
22. Other Available Remedies. If any of the indebtedness hereby secured shall become due and payable,
[Vestin] shall have the right and power, in addition to and without limiting any other rights or remedies contained
herein, to proceed by a suit or suits in equity or at law, whether for the specific performance or any covenant or
agreement herein contained, in aid of the execution of any power herein granted, for any foreclosure hereunder
or for the sale of [the Property] under the order of a court or courts of competent jurisdiction, under executory or
other legal process, or for the enforcement of any other appropriate legal or equitable remedy.
According to Vestin, Pirate's Lake never made a payment on the loan, and never made any attempt to satisfy the
Note. In addition, Vestin alleged that Pirate's Lake placed a second lien on the Property. Consequently, Vestin
accelerated the Note and sought appointment of a receiver to take possession of and sell the Property.
On January 4, 2008, the trial court granted Vestin's “Ex Parte Application For Appointment of a Receiver." In its
order, the trial court empowered the receiver to (1) take possession of the Property; (2) market the Property for
sale, and retain a real estate broker for such purpose; (3) retain surveyors and title companies, and conduct
environmental assessments and/or other engineering and studies, in connection with the marketing and sale of
the Property; (4) employ and pay property managers, accountants, and other professionals as the receiver deems
appropriate; (5) pay the operating expenses of the Property; and (6) make an accounting of all rents and
revenues collected and all expenses paid, and pay to Vestin all remaining receipts.
Pirate's Lake then filed its notice of accelerated appeal. On February 5, 2008, the Property was sold by
foreclosure sale at the Galveston County Courthouse. Vestin then filed a motion to terminate the receivership
and discharge the receiver. The trial court never acted on Vestin's motion.
Issues on Appeal
In two issues, Pirate's Lake contends that the trial court erred in appointing a receiver to take possession of and
sell the Property. In its first issue, Pirate's Lake argues that it was not given the minimum three-day notice of the
hearing on Vestin's application for appointment of a receiver, as required by Rule 695 of the Texas Rules of Civil
Procedure. In its second issue, Pirate's Lake asserts that there were no contractual, statutory, or equitable bases
for the appointment of a receiver.
We conclude that, because the Property was sold at a foreclosure sale after Pirate's Lake perfected its appeal,
Pirate's Lake's appeal is moot.
Analysis
I. The Mootness Doctrine
Neither the Texas Constitution nor the Texas Legislature has vested this Court with the authority to render
advisory opinions. See Tex. Const. art. II, _ I; see also Camarena v. Tex. Employment Comm'n, 754 S.W.2d 149,
151 (Tex. 1988). The mootness doctrine limits courts to deciding cases in which an actual controversy exists
between the parties. Fed. Deposit Ins. Corp. v. Nueces County, 886 S.W.2d 766, 767 (Tex. 1994). When there
ceases to be a controversy between the litigating parties due to events occurring after the trial court has rendered
judgment, the decision of an appellate court would be a mere academic exercise, and the court may not decide
the appeal. See Olson v. Comm'n for Lawyer Discipline, 901 S.W.2d 520, 522 (Tex. App.- El Paso 1995, no writ).
Stated differently, if a judgment cannot have a practical effect on an existing controversy, the case is moot. Id. In
that situation, the appellate court is required to vacate the judgment of the trial court and dismiss the underlying
cause of action. See Speer v. Presbyterian Children's Home & Serv. Agency, 847 S.W.2d 227, 228 (Tex. 1993);
see also Gen. Land Office v. OXY U.S.A., Inc., 789 S.W.2d 569, 570 (Tex. 1990) (if no controversy continues to
exist between the parties, the appeal is moot and the court of appeals must dismiss the cause); Guajardo v. Alamo
Lumber Co., 159 Tex. 225, 317 S.W.2d 725, 726 (1958) (when a case becomes moot on appeal, all previous
orders are set aside by the appellate court, and the case is dismissed).[1]
When a trial court appoints a receiver to sell real property, and the real property is sold after the appellant has
perfected its appeal, the appeal of the appointment of the receiver becomes moot. See Beard v. Beard, 49 S.W.
3d 40, 71- 72 (Tex. App.- Waco 2001, pet. denied) (concluding that appeal of appointment of receiver was moot
when real property that was sole subject of receivership had been foreclosed upon after appellant perfected her
appeal). Therefore, we will examine the record to determine whether the Property - the sole subject of the
receivership - was sold after Pirate's Lake perfected its appeal, thereby rendering its appeal moot.
II. The Sale of the Property Renders This Appeal Moot
The record is clear that the Property was sold by foreclosure sale after Pirate's Lake perfected its appeal. The
receiver was appointed only to take possession of, manage, and sell the Property. When the Property was later
sold by foreclosure sale conducted under terms of the Deed, Pirate's Lake's appeal of the trial court's
appointment of the receiver became moot. See id.
Pirate's Lake argues that its appeal is not moot because (1) an actual controversy remains between the parties
that requires a determination by this Court; and (2) no order has been signed by the trial court terminating the
receivership. These arguments are without merit.
With respect to the first ground, Pirate's Lake asserts that, without a determination by this Court regarding the
appointment of the receiver, it may be unable to prove the second element of a tortious interference claim that it
asserted in the trial court.[2] However, even if we were to conclude that the trial court abused its discretion in
appointing a receiver, this conclusion does nothing to support Pirate's Lake's claim that Vestin committed a
tortious or unlawful act in seeking the receivership.[3] As Vestin correctly notes, this Court's ruling on any alleged
error committed by the trial court in appointing the receiver would have no bearing on whether Vestin's act in
seeking the receivership satisfies the second element of a tortious interference claim. Thus, even if we were to
reach the merits of Pirate's Lake's appeal, our ruling would have no practical effect on an existing controversy
between the parties.[4] See Olson, 901 S.W.2d at 522.
With respect to the second ground, an order terminating a receivership is not expressly required to render the
appeal of the appointment of a receiver moot. See Beard, 49 S.W.3d at 71-72 (appeal of appointment of receiver
was moot without order terminating receivership). Rather, all that is required is that a judgment "[not] have a
practical effect on an existing controversy" between the parties. See Olson, 901 S.W.2d at 522. Pirate's Lake
cites us to no authority to the contrary.[5]
Conclusion
Therefore, because the Property was sold by foreclosure sale after Pirate's Lake perfected its appeal, Pirate's
Lake's appeal is moot. Accordingly, without reference to the merits, we vacate the trial court's order appointing a
receiver to take possession of and sell the Property, and dismiss the underlying cause of action and this appeal.
/s/ Adele Hedges
Chief Justice
Judgment rendered and Memorandum Opinion filed August 12, 2008.
Panel consists of Chief Justice Hedges, Justice Boyce, and Senior Justice Price.**
[1] The Texas Supreme Court has recognized two exceptions to the mootness doctrine, neither of which apply
here: (1) the “capable of repetition yet evading review exception"; and (2) the “collateral consequences
exception." See Gen. Land Office, 789 S.W.2d at 571. The former applies where the challenged act is of such
short duration that the appellant cannot obtain review before the issue becomes moot. Id. This exception has
been used only to challenge unconstitutional acts performed by the government. Id. The latter is invoked only
under narrow circumstances, when vacating the underlying judgment will not cure the adverse consequences
suffered by the party seeking to appeal that judgment. Marshall v. Hous. Auth. of San Antonio, 198 S.W.3d 782,
789 (Tex. 2006). In order to invoke the collateral consequences exception, Pirate's Lake must show (1) a
concrete disadvantage resulted from the judgment; and (2) the disadvantage will persist even if the judgment is
vacated and the case dismissed as moot. Id. Pirate's Lake does not contend that either exception applies to the
present appeal.
[2] According to Pirate's Lake, it asserted a counterclaim in the trial court for “tortious interference with a
prospective contract." This counterclaim is not part of the record on appeal.
[3] The elements of a claim for tortious interference with a prospective business relationship are (1) a reasonable
probability that the plaintiff would have entered into a business relationship; (2) an independently tortious or
unlawful act by the defendant that prevented the relationship from occurring; (3) the defendant did such act with a
conscious desire to prevent the relationship from occurring or the defendant knew the interference was certain or
substantially certain to occur as a result of the conduct; and (4) the plaintiff suffered actual harm or damages as a
result of the defendant's interference. Baty v. ProTech Ins. Agency, 63 S.W.3d 841, 860 (Tex. App.- Houston
[14th Dist.] 2001, pet. denied).
[4] Furthermore, to the extent that this argument can be construed as an attempt to invoke the collateral
consequences exception to the mootness doctrine, we have already explained that Pirate's Lake has failed to
demonstrate that (1) a concrete disadvantage resulted from the trial court's judgment; or (2) it will continue to
suffer any adverse consequences if the judgment below is vacated and the cause dismissed as moot. See
Marshall, 198 S.W.3d at 789. In fact, our vacating the order appointing the receiver and dismissing the underlying
cause of action as moot would have no effect on Pirate's Lake's ability to pursue and succeed on its tortious
interference claim in the trial court.
[5] In its brief, Pirate's Lake cites Grant v. Am. Nat'l Ins. Co., 808 S.W.2d 181, 184 (Tex. App.- Houston [14th Dist.]
1991, no writ), to support its assertion that, “[a]bsent a signed order, the trial court retains jurisdiction over a
disputed issue, and dismissal of the appeal is premature." However, Grant addresses whether the court of
appeals may exercise appellate jurisdiction in the first instance in the absence of a signed, appealable order from
the trial court. See id. at 183 (“Thus, we must determine whether the docket entry is sufficient to constitute a
signed order for purposes of Tex. R. Civ. P. 306a and Tex. R. App. P. 5(b)."). Grant does not address the
question of whether an appeal can be dismissed on mootness grounds in the absence of an order on a motion
filed after the appellant has perfected its appeal. Therefore, Grant is inapposite.
* Senior Justice Frank C. Price sitting by assignment.