### T E X A S C O U R T O F A P P E A L S , T H I R D D I S T R I C T , A T A U S T I N

ON MOTION F OR REVIEW OF SURETY ON BOND

NO. 03-12-00661- CV

Noel D. Ischy, Appellant

v. M. P . McC am m on, McCam m on Oil & G as, Inc., Nosivad O il, In c.,Van Davison, Dawn Davison, Tejon Exp loration, Doralex Energy, Inc., M ansefeld t Investm ent Cor p., F red Hare ndt, Debbi e Hare ndt, Lef fel’s, Inc., Will iam R. G uf fey, Jimm y Davison, Annette D avison, T opaz Expl oration Com pany, Philip W. Davison, Becky Davison , Tonop ah En ergy, L.C., O.H.B., Inc., Eileen Pr att, Dustin P ratt , J.W. King and Ge orge A lexander, Appellees

F ROM TH E DISTRI CT COURT O F CO NCHO CO UNTY, 119 TH JUDICI AL DISTRICT

NO. 375 0, H ONO RAB LE B EN WO ODW ARD, JUDGE P RESIDING

M E M O R A N D U M O P I N I O N
Appellant Noel D. I schy has filed a motion seeking revie w of the trial court’s ruling that the s urety on his superse deas bond is insuffic ient. See Tex. R. App. P . 24.4. I n response , the appellee s (collec tively , “the McCammons”) contend that the trial court did not a buse its discretion in ref using to order the district cler k to approve I schy ’s bond beca use t h e u n d isputed evidenc e demonstrates that the surety on the bond fails to provide adequate secur ity

. We ag ree and will deny
I schy ’s motion.BACK GR OUND T h is a p p e a l a r is e s f r o m a d is p u te b e tw e e n th e p a r ti e s c o n c e r

n in g ti tl e to a

n o il a n d g a s le a s e a n d a ju d g me n t p r e v io u s ly r e n d e r e d b y th is Co u r t. I n O c to b e r 2 0 0 6 , th e d is p u te w a s tr ie d b e f o r e

a jury , and in acc ordanc e with the verdic t, the trial court signe d a judgme nt awa rding title to the lease
to I schy

. The McCammons appea led, an d th is Cour t subsequently reve rsed the trial court’s judgme nt and rende red ju d gm en t that I schy take nothing. See McCammon v. Ischy , No. 03-06-00707- CV, 2010 WL 1930149, at *7 (Tex. App.—Austin May 12, 2010, pet. denied) (mem. op.). Ba sed on our decision, the McCammons filed a motion for restitution, aski n g t hat the trial court order I schy to

r e p a y th e m f o r a ll o f th e le a s e p r o c e e d s th a t I s c h y h a d o b ta in e d w

h il e th e c a s e w a s p e n d in g o n a p p e a l.
I n J une 2012, following an evidentiar y hear ing on the McCammons’ motion, t h e trial court rende red judgme nt awa rding the McCammons approximately $1.4 milli on in restitution d am age s . Following post-judgme nt motions, I schy subsequently filed a notice of appea l in thi s Court. Seeking to suspend execution of the judgm ent pending his appea l, I schy also filed a superse deas bond in the a mount of $1,514,629.50, to cover the judgme nt, interest, and c osts. The

s u re t y on the bond was Cherokee Trac e, L P, a Texas limit ed partne rship. After the district cl er k declined to approve his bond, I schy filed a motion to approve superse deas bond with the trial court,
reque sting that the c ourt direc t that the district clerk a pprove the bond. The trial court held a hear ing on I schy ’s motion, at which time the sole issue befor e the court was whether Cherokee Trac e is a sufficie nt surety for purposes of the superse deas bond. At the hear ing, I schy prese nted evidenc e conce rning his leg al rela tionship to Cherokee Trac e. Specifica lly , I schy testified that he is the president and sole share holder in NOW Deve lopment

2Company , I nc. (“N OW”), a Texas Corporation. I schy also testified that NOW is the sole g ener al

partne r of Cherokee Trac e, owning a 1% partne rship interest, and that he and his son are Cherokee
T r a c e ’ s s o le li mi te d p a

r tn e r s . A c c o r d in g to I s c h y , h e h a s a 7 4 % p a r tn e r s h ip in

te r e s t in Ch e r o k e e T r a c e , and his son has a 25% partne rship interest. I schy also prese nted evidenc e conce rning the assets held by Cherokee Trac e, name ly an unencumbere d ranc h proper ty located in Cherokee County , Texas.
I schy testified that the 300-ac re ranc h is worth $1,980,000 and that he, on behalf of NOW as g ener al partne r of Cherokee Trac e, would be willing to allow the McCammons to place a judgme nt lien on the ra nch prope rty

. After cross-e x amining I s ch y , the McCammons arg ued that Cherokee Trac e is insufficient as a bond surety beca use it doe s not pr ovide adequate secur ity in a ddition to the assets of I schy himself. The McCammons also arg ued that I schy had failed to prese nt sufficie nt evidenc e that Cherokee Trac e has the ability to pay the judgme nt, if nece ssary . At the conclusion of the hear ing, the trial court or ally denied I schy ’s motion to approve the bond.

STANDARD OF REVIEW A judgme nt debtor is g ener ally entitled to superse de the judgme nt and thus suspend

en forc ement of the j udg ment while pursuing an appea l. See Miga v. Jensen , 299 S. W

. 3 d 9 8 , 1 0 0 (Tex. 2009). Rule 24 of the Texas Rul es o f Ap p el l at e Procedur e sets out the require ments and
proce dures for superse ding a judgme nt. See Tex. R. App. P. 24. One of the way s a judgme nt debtor
may superse de the judgme nt is by filing with the tr i al court cler k a “g ood and sufficie nt bond.” Id

. 24.1(a) (1)- (4). A “good a nd sufficie nt bond” is a bond of the proper amount, made pay able to the judgme nt cr ed itor, and signe d by the judgme nt debtor and one or more sufficie nt sureties as
3obligor s. Id

. 24.1(b). To be eff ective, the superse deas bond must be app ro v ed b y the trial court cler k, and on the motion of any party , the trial court will revie w the bond. Id

. When reque sted, the trial court must hold an evidentiar y hear ing to de termine the sufficie ncy of the amount and ty pe of

secur ity and the sufficie ncy of the sureti es
. Miller v. Kennedy & Minshew, P.C. , 80 S.W .3d 161, 164-65 (Tex. App.—For

t Worth 2002, no pet.). Rule 24 also authorizes this Court, on either party ’s motion, to conduct a limited review of that ruling

. See Tex. R. App. P . 24.4(a)

. We revie w a trial court’s ruling on the sufficie ncy of a superse deas bond u n d er an abuse- of-discr etion standard. FaulknerUSA , LP v. Alaron Supply C o., Inc. , 301 S.W .3d 345, 347 (Tex. App.—El Paso 2009, no pet.); TransAmerican Natural Gas Corp. v. Finkelstein , 905 S.W .2d 412, 414 (Tex. App.—San Antonio 1995, writ dism’d). A trial cour t abuses its discretion whe n it rules arbitra

rily , unrea sonably , without reg ard to g uiding leg al principles, or wi t h o u t s u pporting evidenc e. Bocque t v. Herring , 972 S.W .2d 19, 21 (Tex. 1998). Wit h reg ard to fac tual matters, we may not substitute our judgme nt f or that of the trial court unless it is clear f rom the re cord tha t the
t ri al co u rt co uld rea ch only one decision. W alker v. Pack

er , 827 S.W .2d 833, 839 (Tex. 1992). Howeve r, a trial court has no discretion in d et er mining what the law is or apply ing the law to the fac ts. Id

. at 840. Thus, a clea r failure by the trial court to analy ze or apply the law corr ectly will also constitute an abuse of discre tion. Id

.
ANALYSIS

At the hear ing to deter

mine the sufficie ncy of his b o nd, I schy had the burden of establishing that Cherokee Trac e is a sufficient surety

. Tran s American Natural Gas , 905 S.W .2d
at 414 (“The p ar t y tender ing the bond bear s the burden of establishing that its surety , whether

4corpor ate or individual, is a ‘suffic ient surety .’”)

. “A surety is a party who promises to answer for

the debt of another .” Id. (citing Crimmins v. Lo w r y , 691 S.W .2d 582, 585 (Tex. 1985)). Thus, a surety under rule 24 serve s to provide “sec urity , in addition to the persona l liability of the appellant, for the pay

ment of t he judgment.” Id

. (citing Cooper v. Bows er , 5 8 3 S.W .2d 805, 807 (Tex. Civ. App.—San Antonio 1970, no writ)); see FaulknerUSA , 301 S.W .3d at 347 (“The intent of the rule is to enable the appellee to collect the judgme nt ag ainst the appellant and his sureties if the judgme nt is aff irmed.”)

. I t nece ssarily follows that a judgme nt debtor cannot serve as his own su re t y . Id

. I nstead, a surety on a superse deas bond must be an entity or individual that is leg ally separ ate from the judgme nt de btor and not a party to the suit, whose solvency and ability to pay the judgme nt are established. Id .; Brown & Root, Inc. v. De Sautell , 554 S.W .2d 764, 771 (Tex. Civ. App.—Houston [1st Dist.] 1977, writ ref

’d n.r.e .). Her e, I schy arg ues that the trial court abused i t s discretion in ruling that his bond is insuffi cient beca

use the evidenc e establishes that Cherokee Trac e “is an exis ting leg al entity

o rga nized under the laws of the State of Texas, that is not the judgme nt debtor, and that it has

m o re than sufficie nt unencumbe red assets to the cover the amount of the bond.” Conversely , th e McCammons contend that Cherokee Trac e is an i n s u ff i ci en t surety beca

use, as a result of I schy ’s leg al rela tionship to Cherokee Trac e, the entity nece ssarily fails to p ro v i d e secur ity in addition to the persona l liability of I schy himself. The McCammons also arg ue that the evidenc e is insufficient to establish that Cherokee Trac e has a ssets sufficient to satisfy the judg ment. I n deter mining whether the trial cour t abused its discretion in ruling that I schy ’s bond is insufficient, we first consider whether I schy established that Cherokee Trac e is sufficie ntly
separ ate from I schy

. That is, we consider whether the assets of Cherokee Trac e provide secur ity for

5the McCammons’ judgme nt, or whether I schy is, in essenc e, simply attempting to serve as a surety

for himself.
T h e c a s e b e f o r e u s is s im i l a

r t o T r a n s A m e r i c a n N

a t u r a l G a s C o r p o r a ti o n v
. F in k e ls te in , in which a judgme nt debtor’s wholly owned subsidiary signe d as a surety on a superse d ea s bond. See 905 S.W .2d at 413-14. I n that case , the t rial court rende red judgment ag ainst TransA merica n Natura l Gas Corporation (“Tr ansAmer ican” ), which then filed a superse deas bond. Id

. at 413. One of t he sureties on the bond was S outhern S tates Ex ploration, I nc., a corpor ati o n wh o lly owned by
T r a n s A me r ic a

n . I d

. O n a p p e a l, o n e o f th e is s u e s p r e s e n te d w a s w h e th e r So u th e r n St a te s E xp lo r a

ti o n

was a sufficie nt sur ety for purposes of Tra nsAmerica

n’s bond. Id . at 415. The San A ntonio court held that it was not, e x plaining that TransA merica n’s assets, including its stock in Southern States
Ex plo ra t i o n and the assets t hat t he st ock represe nted, were already at risk to satisfy the j udg ment. Id

. Acc ording ly , the court conclude d that TransA merica n’s attempt to secur e the ju d g me n t w ith So u th e r n St a te s E xp lo r a

ti o n ’ s a s s e ts “ a d d [e d ] n o th in g to th e [s e c u r it y ] e q u a ti o n . ” I d

. L ik e w is e , h e r e , Ch e r o k e e T r a c e ’ s a s s e ts a d d li tt le to th e s e c u r it y e q u a ti o n . S e e id

. I t is u n d is p u te d th a

t I s c h y o w n s a 7 4 % li mi te d

p a r tn e r s h ip in

te r e s t i n Ch e r o k e e T r a c e a

n d th a t I s c h y is the president and sole share holder of NOW, Cherokee Trac e’s g ener al partne r. Absent superse deas,
t h e McCammons would be fre e to enfor ce their judgme nt ag ainst I schy and execute on I schy ’s
assets. I n that situation, the McCammons could acquir e I schy ’s partne rship intere st in Cherokee Trac e as well as his st o ck i n NO W , eff ectively acquir ing control of Cherokee Trac e and the dispositi on of its a ssets. Thus, reg ardle ss of whether Cherokee Trac e serve s as a surety , Cherokee Trac e’s assets are alre ady signific antly at risk to sa tisfy the McCammons’ judgme nt. When I schy ,

6as president of NOW, pledg ed Cherokee Trac e’s assets as secur ity to pay the judgme nt ag ainst him,

the McCammons acquir ed littl e secur ity on their $1.4 milli on-dollar judgme nt that t h ey did not alre ady have. See id. at 416 (explaining that when corpor ation owned by judgme nt debtor pledg es

1 its assets to pay j u d gm en t against judgme nt debtor, the judgme nt cre ditor obtains “no secur ity he does not alre ad y h av e” ). Under these fac ts, we cannot conclude that the trial court abused its discretion in ruling that the surety on I schy ’s bond is insufficient. Acc ording ly , we aff

irm the trial court’s denial of I schy ’s motion to approve bond, and the motion to revie w s uperse deas bond filed by I schy is denied. See Tex. R. App. P

. 2 4

. 4(d). Enforc eme n t of the judgme nt is suspended for twenty day s afte r the date of this order

. See id

. 24.4(e ). During this time, I schy may corr ect his bond by filing with the district cler k a g ood and sufficie nt bond, in acc ordanc e with this opinion and rule 24, or otherwise supersede the judgme nt pursuant to rule 24. See id

. 24.1(a) (1)- (4). I f I schy fails to take such action, the district cler k shall notify the trial cour

t that execution may

be issued on the judg ment. I t is ordere d Fe bruar

y 28, 2013.

__________________________________________ Scott K. Field, Just ice Be fore Chief J ustice Jones, J ustices Goodwin and F ield

At most, Cherokee Trac e would on l y b e ab l e to provide the equivalent of the remaining 1 limit ed partne r’s 25% part n ership interest as secur ity on the McCammons’ judgme nt. Assuming that Cherokee Trac e has assets fully available to satisfy the judgme nt and t h at t h o s e assets are valued at $1.98 milli on, as I schy contends, the limit ed partne rship is unable to secur e the full amount of the judg ment. 7