Nicholas Lind v. M3 Fort Worth Developer, LLC and the YoungESTone, LLC

Court of Appeals
                  Tenth Appellate District of Texas

                              10-24-00064-CV


                               Nicholas Lind,
                                 Appellant

                                      v.

     M3 Fort Worth Developer, LLC and The YoungESTone, LLC,
                            Appellees



                           On appeal from the
                40th District Court of Ellis County, Texas
                      Judge Bob Carroll, presiding
                     Trial Court Cause No. 107204

CHIEF JUSTICE JOHNSON delivered the opinion of the Court.

                      MEMORANDUM OPINION

      M3 Fort Worth Developer, LLC (M3) and The YoungESTone, LLC (YO)

invested in several residential real property development projects operated by

Serene Country Homes (Serene) and its affiliate or subsidiary, Windridge A2A

Developments, LLC (Windridge). Each development project proposed that M3

and YO would purchase vacant lots, fund the building of homes on those lots,

and then Serene would sell them to potential buyers. M3 and YO signed a
number of agreements with Serene, including but not limited to Property

Developer Program Management Agreements (PDM) and Construction

Management Agreements (CM) for three specific lots purchased by M3 and five

purchased by YO. M3 and YO paid Serene and/or Windridge a total of $280,000

for management fees under the PDM agreements and $753,480.20 for

construction fees under the CM agreements. Construction on one project was

started but left incomplete, and six were never even started. After progress on

the projects ceased, Serene and/or Windridge failed to repay M3 or YO.

       M3 and YO filed suit against a number of entities and four individuals

involved in the residential real property developments. Nicholas Lind (Lind)

was named as one of the individual defendants. M3 and YO claimed Lind was

involved in a scheme to induce them to sign the contracts related to the

investment in and development of real residential property. In the original

petition, M3 and YO alleged claims against Lind, and other defendants, for

fraud, conspiracy, and violation of the Texas Securities Act. 1 M3 and YO

sought actual and exemplary damages along with attorney’s fees.

       On February 8, 2022, Lind was served with the original petition but

never filed an answer. M3 and YO filed their first amended petition on August

9, 2022. The first amended petition modified allegations regarding the method


1 Additional claims were made against Serene for breach of contract, misappropriation of funds and

fraudulent transfer, and breach of fiduciary duty.

Lind v. M3 Fort Worth Dev., LLC and The YoungESTone, LLC                                 Page 2
of service for some defendants, corrected the spelling of YO’s name in

paragraph 27, and corrected the firm name of M3 and YO’s counsel. The

original petition and the first amended petition otherwise contained the same

factual allegations, asserted identical causes of action, and prayed for the same

relief. Lind was never served with the first amended petition. M3 and YO filed

a motion for default judgment against Lind on September 8, 2022. The motion

was as to Lind only, not the other defendants, and sought a default judgment

based on “the claims in Plaintiff’s Original Petition.”

      On September 21, 2022, the trial court granted M3 and YO’s motion for

default judgment against Lind.          Even though the motion had specifically

referenced only the original petition, the trial court’s order found that Lind had

admitted to the allegations against him in the first amended petition. On July

3, 2023, the trial court granted M3 and YO’s motion for default judgment

against the remaining defendants that had been served and had not answered.

      On August 21, 2023, the trial court conducted a hearing to determine

damages payable by the defendants, including Lind.           At the time of the

damages hearing, Lind still had not filed an answer or entered an appearance,

nor did he appear in person or by attorney. Following the hearing, the trial

court entered its final judgment awarding actual damages of $529,275.80 to




Lind v. M3 Fort Worth Dev., LLC and The YoungESTone, LLC                  Page 3
M3 and $504,204.80 to YO. The trial court awarded exemplary damages of

$1,058,551.60 to M3 and YO, along with $47,940.92 in attorney’s fees to M3.

      Lind filed a notice of restricted appeal on February 28, 2024, seeking to

appeal the September 2022 order granting the motion for default judgment and

the August 2023 final judgment.

      Lind challenges whether (1) the default judgment is proper because he

was never served with a copy of the live petition upon which the default

judgment was based, and (2) sufficient evidence was admitted at the default

judgment hearing to establish a causal nexus between Lind’s conduct and the

requested damages.

                                       Issue One

1. Authority

      A party can prevail in a restricted appeal only if “(1) it filed notice of the

restricted appeal within six months after the judgment was signed; (2) it was

a party to the underlying lawsuit; (3) it did not participate in the hearing that

resulted in the judgment complained of and did not timely file any post-

judgment motions or requests for findings of fact and conclusions of law; and

(4) error is apparent on the face of the record.” Ins. Co. of State of Pa. v.

Lejeune, 297 S.W.3d 254, 255 (Tex. 2009) (citing Alexander v. Lynda’s Boutique,

134 S.W.3d 845, 848 (Tex. 2004)).


Lind v. M3 Fort Worth Dev., LLC and The YoungESTone, LLC                    Page 4
2. Discussion

      Here, the only condition to prevail on a restricted appeal that is in

contention is whether the error Lind complains of is apparent on the face of

the record. See Ex parte E.H., 602 S.W.3d 486, 495 (Tex. 2020). The “face of

the record” in restricted appeal cases consists of the “papers on file in the

appeal.” Norman Commc'ns v. Tex. Eastman Co., 955 S.W.2d 269, 270 (Tex.

1997). Appellants in restricted appeals are afforded the same scope of review

as those in ordinary appeals. Ex parte E.H., 602 S.W.3d 486, 495 (Tex. 2020)

(citing Norman Commc'ns, 955 S.W.2d at 270).

      M3 and YO’s choice not to serve Lind with the first amended petition

does not constitute error because they were not required to re-serve Lind.

“Service of an amended petition on a party that has not appeared is necessary

only when a plaintiff seeks a more onerous judgment than prayed for in the

original pleading.” Fidelity Guar. Ins. Co. v. Drewery Const. Co., Inc., 186

S.W.3d 571, 574 (Tex. 2006) (quoting Weaver v. Hartford Accident & Indem.

Co., 570 S.W.2d 367, 370 (Tex. 1978)). M3 and YO’s first amended petition

only amended previously pleaded matters to perfect deficiencies or correct

error and did not plead new matters constituting additional claims or defenses.

See TEX. R. CIV. P. 62. Therefore, because M3 and YO did not seek more

onerous relief than the original petition that Lind had been served with, they


Lind v. M3 Fort Worth Dev., LLC and The YoungESTone, LLC               Page 5
were not required to serve Lind with the amended petition before taking a

default judgment against him. Error because of lack of service is not reflected

on the face of the record.

      We overrule Lind’s first issue.

                                       Issue Two

1. Authority

      When an attack is made upon the legal or factual sufficiency of the

evidence to support the trial court’s determination of damages in a default

judgment, the appellant is entitled to a review of the evidence produced.

Dawson v. Briggs, 107 S.W.3d 739, 748 (Tex. App.—Houston [1st Dist.] 2003,

no pet.). A restricted appeal affords a review of the entire case, as in an

ordinary appeal, however the face of the record must reveal the claimed error.

Norman Commc’ns, 955 S.W.2d at 270. The face of the record consists of all

the papers on file in the appeal, including the reporter’s record, as they existed

in the trial court when the default judgment was entered. In re E.K.N., 24

S.W.3d 586, 590 (Tex. App.—Fort Worth 2000, no pet.). In addition, error that

is merely inferred will not suffice. See Ginn v. Forrester, 282 S.W.3d 430, 431

(Tex. 2009).

      In reviewing a record to determine if legally insufficient evidence is

apparent from the face of that record, an appellate court may make that finding


Lind v. M3 Fort Worth Dev., LLC and The YoungESTone, LLC                  Page 6
only when (a) there is a complete absence of evidence of a vital fact, (b) the

court is barred by rules of law or of evidence from giving weight to the only

evidence offered to prove a vital fact, (c) the evidence offered to prove a vital

fact is no more than a mere scintilla of evidence, or (d) the evidence conclusively

establishes the opposite of the vital fact in question. King Ranch, Inc. v.

Chapman, 118 S.W.3d 742, 751 (Tex. 2003). We consider the evidence in the

light most favorable to the verdict and indulge every reasonable inference that

supports it. City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex. 2005). The

evidence is legally sufficient if it would enable reasonable and fair-minded

people to reach the verdict under review. Id. at 827. We credit favorable

evidence if reasonable jurors could, and disregard contrary evidence unless

reasonable jurors could not. See id.

      In reviewing factual sufficiency, we review all the evidence and reverse

only if the challenged finding is so against the great weight and preponderance

of the evidence as to be manifestly unjust. Pool v. Ford Motor Co., 715 S.W.2d

629, 635 (Tex. 1986).

2. Discussion

      Lind does not challenge liability, but argues that there is insufficient

evidence to establish a causal nexus between Lind’s conduct and the requested

actual and exemplary damages.


Lind v. M3 Fort Worth Dev., LLC and The YoungESTone, LLC                   Page 7
      The trial court’s order granting the default judgment against Lind stated

that “Lind has therefore admitted all the allegations against him in Plaintiffs’

First Amended Petition, and judgment is entered against him on all of

Plaintiffs’ causes of action.” In the same order the trial court ordered “that a

hearing be held on [M3 and YO’s] damages claim on a date to be determined,

at which time the Court may receive evidence via affidavit or live testimony.”

      Fraud and Conspiracy

      At the hearing, M3 and YO had the burden of presenting competent

evidence of a causal nexus between the material misrepresentation and their

alleged injuries. See Morgan v. Compugraphic Corp., 675 S.W.2d 729, 732

(Tex. 1984) (citing TEX. R. CIV. P. 243). While a default judgment conclusively

establishes the “causal nexus between the conduct of the defendant and the

event sued upon,” the default does not result in an admission “that the event

sued upon caused any of the plaintiff's alleged injuries.” Morgan, 675 S.W.2d

at 732. The allegations in the plaintiff’s petition alone do not establish the

necessary link between the event sued upon and injuries in a default judgment

review. See Morgan, 675 S.W.2d at 732–33, see also TEX. R. CIV. P. 243; Alvarez

v. Agyemang, No. 02-19-00301-CV, 2020 WL 719440, at *3 (Tex. App.—Fort

Worth Feb. 13, 2020, no pet.). Proving the causal nexus, that the event sued

upon actually caused the plaintiff's alleged injuries, “is part and parcel of


Lind v. M3 Fort Worth Dev., LLC and The YoungESTone, LLC                Page 8
proving the amount of damages to which the plaintiff is entitled.” Morgan, 675

S.W.2d at 732.

      A trial court may award unliquidated damages in a no-answer default

judgment case based on affidavits. Tex. Commerce Bank, Nat. Ass'n v. New, 3

S.W.3d 515, 516–17 (Tex. 1999). M3 and YO included affidavits from their

attorney and the managing member of M3 and YO as exhibits to their motion

for default judgment. Each managing member stated that they were familiar

with the payments made to “[d]efendants” through the property developer

program.     The affidavits stated that M3’s payments to Serene totaled

$529,275.80 and YO’s payments to Serene totaled $504,204.40. The affidavits

had supporting documents attached. Each affidavit stated that “Defendants

never began construction on” five properties for YO and two properties for M3

even though initial payments by YO and M3 had been made for the properties.

M3’s managing member’s affidavit stated that for the third property M3 had

paid $217,401.80, “the house was only 40% completed and then abandoned by

Defendants.” Each affidavit stated, with regard to the payments and homes,

that “Defendants have neither returned any of these payments, nor have they

completed and sold the homes that these payments were intended to fund.”

      The limited evidence contained in the two affidavits provided by M3’s

and YO’s managers do not contain any factual assertions that the payments


Lind v. M3 Fort Worth Dev., LLC and The YoungESTone, LLC              Page 9
were caused by anything said or done by Lind and never mention Lind by

name. The affidavits do not contain any factual assertions the payments were

caused by anything said or done by any members of the conspiracy.

      We acknowledge that liability for participating in a conspiracy has been

established by default.        And, once a conspiracy is established the co-

conspirators are responsible for all acts done by any of the conspirators in

furtherance of the unlawful combination. See Carroll v. Timmers Chevrolet,

Inc., 592 S.W.2d 922, 926 (Tex. 1979). A “conspiracy depends entirely on the

injury caused by the underlying tort; the injury is the damage from the

underlying wrong, not the conspiracy itself.”              Agar Corp., Inc. v. Electro

Circuits Int’l, LLC, 580 S.W.3d 136, 141 (Tex. 2019) (citing Schlumberger Well

Surveying Corp. v. Nortex Oil & Gas Corp., 435 S.W.2d 854, 856 (Tex. 1968)).

Notably, it does not automatically follow that the damages that were caused

by the underlying wrong are attributable to the conspiracy. See THPD, Inc. v.

Cont’l Imports, Inc., 260 S.W.3d 593, 605 (Tex. App.—Austin 2008, no pet.).

      We conclude that the affidavit testimony of the managing members is

legally insufficient to establish a causal connection between the fraudulent

acts and M3’s and YO’s alleged actual damages.

      Texas Securities Act




Lind v. M3 Fort Worth Dev., LLC and The YoungESTone, LLC                       Page 10
        The Texas Securities Act (TSA) 2 creates “a cause of action for

misrepresentations or omissions made in connection with a securities

transaction.” Kubbernus v. ECAL Partners, Ltd., 574 S.W.3d 444, 480 (Tex.

App.—Houston [1st Dist.] 2018, pet. denied) (citing TEX. REV. CIV. STAT. ANN.

art. 581-33(A)(2)). Because the fraud provision of article 581-33 of the TSA is

remedial in nature it should be given the widest possible scope and construed

to protect the investor. See Kubbernus v. ECAL Partners, Ltd., 574 S.W.3d

444, 480 (Tex. App.—Houston [1st Dist.] 2018, pet. denied); Anheuser-Busch

Companies, Inc. v. Summit Coffee Co., 934 S.W.2d 705 (1996). Article 581-

33(A)(2) of the TSA provides:

              A person who offers or sells a security . . . by means of an
        untrue statement of a material fact or an omission to state a
        material fact necessary in order to make the statements made, in
        the light of the circumstances under which they are made, not
        misleading, is liable to the person buying the security from him,
        who may sue either at law or in equity for rescission, or for
        damages if the buyer no longer owns the security.

TEX. REV. CIV. STAT. ANN. art. 581-33(A)(2)

        Article 581-33(A)(2) defines the elements and defenses of a cause of

action for misrepresentations or omissions made in connection with a

securities transaction. Kubbernus v. ECAL Partners, Ltd., 574 S.W.3d 444,

2
  In 2019, the Legislature codified the Texas Securities Act and, without making substantive changes to the Act,
transferred its provisions to the Texas Government Code effective January 1, 2022. See Act of May 21, 2019, 86th
Leg., R.S., ch. 491 (H.B. 4171), §§ 3.01, 4.01–.02, 2019 Tex. Gen. Laws 1238, 1316 (codified at TEX. GOV’T CODE
§§ 4001.001–4008.105). Because it was in effect when suit was filed by M3 and YO, we will cite the former version
of the statute.

Lind v. M3 Fort Worth Dev., LLC and The YoungESTone, LLC                                              Page 11
485 (Tex. App.—Houston [1st Dist.] 2018, pet. denied) (citing TEX. REV. CIV.

STAT. ANN. art. 581-33(A)(2); Duperier v. Tex. State Bank, 28 S.W.3d 740, 753

(Tex. App.—Corpus Christi 2000, pet. dism’d by agr.)).                                      While monetary

damages are available for a buyer only when the buyer no longer owns the

investment, rescission is available to the buyer when the buyer still owns the

investment. See Summers v. WellTech, Inc., 935 S.W.2d 228, 231 (Tex. App.—

Houston [1st Dist.] 1996, no writ); see also TEX. REV. CIV. STAT. ANN. art. 581-

33(A)(2); Life Partners, Inc. v. Arnold, 464 S.W.3d 660, 666 fn. 7 (Tex. 2015).

         M3 and YO pled for “full recission of their investment” in their petition

and in the concluding prayer requested damages arising from violations of the

TSA.       The trial court did not order recission of the transactions in its

September 21, 2022, default judgment against Lind or in its August 31, 2023,

final judgment. The trial court did award economic and exemplary damages

to M3 and YO in its final judgment 3. Proof of a causal nexus between the event

sued upon and the resulting injury is not required to award damages for a

claim under article 581-33(A)(2) of the TSA because loss causation is not an

element. See Kubbernus v. ECAL Partners, Ltd., 574 S.W.3d 444, 485 (Tex.

App.—Houston [1st Dist.] 2018, pet. denied).


3
  Lind does not challenge the nature of the relief granted by the trial court, only that there is no evidence, or
alternatively insufficient evidence, to establish a causal nexus between Lind’s conduct (i.e. the event sued upon) and
the resulting injuries. We express no opinion on whether or not the award of economic or exemplary damages to M3
and YO was the appropriate form of relief.

Lind v. M3 Fort Worth Dev., LLC and The YoungESTone, LLC                                                   Page 12
      Although causal nexus was not established by the evidence for the fraud

and conspiracy causes of action, we conclude that M3 and YO were not required

to prove loss causation as an element of their claims for securities violations

under the TSA. See TEX. REV. CIV. STAT. ANN. art. 581-33(A)(2).

      We overrule Lind’s second issue.

                                      Conclusion

      We affirm the trial court’s judgment.



                                                 MATT JOHNSON
                                                 Chief Justice

OPINION DELIVERED and FILED: April 16, 2026
Before Chief Justice Johnson,
       Justice Smith, and
       Justice Harris
Affirmed
CV06




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