Alma Investments, Inc. v. Bahia Mar Co-Owners Association, Inc., 13-14-00428-CV

Background

Bahia Mar (plaintiff) sued Alma Investments (defendant/former owner and manager) alleging misuse and commingling of condominium maintenance funds, failure to maintain common areas, improper management fees, and violations of the condominium declaration.
Court-ordered audit(s) of BMMA (the maintenance association) were ordered (2004–2008); Alma repeatedly failed to produce records and to deposit funds to pay the court-appointed auditor.
The court also ordered depositions of Alma’s sole owner and officer(s) (the Pakidehs) by alternative means; Alma failed to make them available and did not timely object or comply with multiple deposition orders.
After Alma ignored audit and deposition orders (including orders entered as sanctions), the trial court imposed death-penalty discovery sanctions: Alma’s answer and defenses were struck and default judgment on liability was entered.
A jury trial proceeded on damages; the court awarded actual damages, attorney’s fees under the Declaratory Judgment Act, and prejudgment interest on fees paid through judgment. Alma appealed the sanctions, fee award, and prejudgment interest.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether death-penalty discovery sanctions (striking defenses/default) were an abuse of discretion	Sanctions were justified: Alma repeatedly violated three discovery orders (two deposition orders and an audit/order to deposit funds); lesser sanctions had been tried and proved ineffective; Alma’s conduct justified presuming defenses lacked merit	Alma argued the deposition orders were improper (wrong place/county) and that death-penalty sanctions were excessive and imposed without trying lesser alternatives	Court of appeals brief (Appellee) argues trial court did not abuse discretion: orders were valid or objections waived; trial court considered TransAmerican/Cire factors, tried lesser measures, and the sanction related directly to the misconduct
Whether attorney fees under the Declaratory Judgment Act were proper	Bahia Mar sought independent declaratory relief (voting rights, governance of maintenance association); liability on the DJA was established by the default; attorney fees under DJA are recoverable and the fee claim kept the DJA alive despite property sale	Alma argued DJA claim was duplicative or pretextual to obtain fees and that sale of property mooted the declaration	Appellee contends fees were proper: DJA sought distinct relief; default established liability; fee claim kept controversy live despite sale (citing Hansen reasoning)
Whether prejudgment interest on attorney fees paid through judgment was proper	Prejudgment interest is recoverable on damages that accrued by judgment; appellate decisions have allowed prejudgment interest on attorney fees already paid; trial court awarded interest only on fees paid to date	Alma argued attorney fees are not damages (citing In re Nalle) so prejudgment interest was improper	Appellee argues the issue is unsettled in the Thirteenth COA but existing appellate authority supports awarding prejudgment interest on fees paid before judgment; left as an open question for the court
Whether deposition orders (requiring Pakidehs to appear in Hidalgo County) were invalid and thus infected sanctions	Plaintiff insists deposition orders were proper: court had discretion to set convenient place, found deponents transacted business/control warranted deposition in Texas; Alma waived objections by failing to timely move for protective order	Alma argued venue rules required depositions in county of suit and that orders were improper	Appellee asserts objections were waived and court permissibly directed depositions under the Rules and its discretion; thus deposition orders do not invalidate sanctions

Key Cases Cited

Cire v. Cummings, 134 S.W.3d 835 (Tex. 2004) (standard for appellate review of discovery sanctions and when a court may presume claims/defenses lack merit)
TransAmerican Natural Gas Corp. v. Powell, 811 S.W.2d 913 (Tex. 1991) (factors for imposing severe discovery sanctions)
Cavnar v. Quality Control Parking Inc., 696 S.W.2d 549 (Tex. 1985) (prejudgment interest recoverable on damages that accrued by judgment)
Finley Oilwell Service, Inc. v. Retamco Operating, Inc., 248 S.W.3d 314 (Tex. App.—San Antonio 2007) (appellate deference to trial court on discovery sanctions)
Hansen v. JP Morgan Chase Bank, N.A., 346 S.W.3d 769 (Tex. App.—Dallas 2011) (a pending claim for attorneys’ fees can keep a declaratory-judgment action live despite substantive mootness)
Allstate Ins. Co. v. Hallman, 159 S.W.3d 640 (Tex. 2005) (standing and justiciability principles in declaratory-judgment context)
Berry Property Mgmt., Inc. v. Bliskey, 850 S.W.2d 644 (Tex. App.—Corpus Christi 1993) (discusses prejudgment interest and attorney-fee awards; distinguishing paid-vs-unpaid fee contexts)
First State Bank, Bishop v. Cappell & Handy, P.C., 729 S.W.2d 917 (Tex. App.—Corpus Christi 1987) (trial court’s broad discretion to order depositions and impose sanctions)