Court Opinion

ID: 3075235
Source: CourtListenerOpinion
Date Created: 2015-10-16 01:07:44.707707+00
Date Added: 2024-06-11T11:50:14.771155
License: Public Domain

In The
                             Court of Appeals
                    Seventh District of Texas at Amarillo

                                  No. 07-13-00130-CV

    JACKSON WALKER, LLP AND M. KEITH BRANYON AND JANE O. LINDSEY,
  INDIVIDUALLY AND AS THE FORMER CO-TRUSTEE OF THE LESEY B. KINSEL
              TRUST, AND ROBERT N. OLIVER, APPELLANTS

                                           V.

   VIRGINIA O. KINSEL, AS ATTORNEY-IN-FACT FOR J. FRANK KINSEL, FRANK
    KINSEL, JR. , INDIVIDUALLY, CAROLE K. EDWARDS, INDIVIDUALLY, AND
              CATHERINE K. COLLINS, INDIVIDUALLY, APPELLEES

                         On Appeal from the 153rd District Court
                                 Tarrant County, Texas
                   Trial Court No. 153-232668-08, Ken Curry, Presiding

                                    February 14, 2014

        MEMORANDUM OPINION ON MOTION FOR REVIEW OF
                   SUPERSEDEAS BOND
                Before QUINN, C.J., and CAMPBELL and HANCOCK, JJ.

      Pending before the court is the motion of Virginia O. Kinsel as attorney-in-fact for

J. Frank Kinsel, J. Frank Kinsel Jr., Carole K. Edwards, and Catherine K. Collins

(collectively the Kinsel Family) to review the supersedeas bonds filed by Keith Branyon,

Jackson Walker, L.L.P., Jane Lindsey (Lindsey), and Bob Oliver (Oliver).            Final
judgment was entered against Branyon, Jackson Walker, Lindsey and Oliver (the

judgment debtors) in favor of the Kinsel Family. The latter were awarded compensatory

damages of $3,709,600.92, and the judgment debtors were and are jointly and severally

liable for its payment, according to the decree.

        In effort to supersede the judgment's enforcement, the judgment debtors moved

the trial court to designate the amount of supersedeas bond or like security each would

need to post. Via order signed on October 4, 2013, that court set their respective

amounts at 1) $100,000 for Lindsey, 2) $250,000 for Oliver, and 3) $2,359,600.92 for

Jackson Walker and Branyon, jointly. It then ordered that $1,000,000 of the Lesey B.

Kinsel Trust "shall be used towards the supersedeas bonds."1 Combined, the amounts

equaled $3,709,600.92. Bonds in such amounts were posted, but the Kinsel Family

believes them to be deficient. We are asked to review their adequacy as well as the

propriety of the order providing for them. We reverse and remand, in part, for an

evidentiary hearing.

        Standard of Review

        The pertinent standard of review is one of abused discretion. TransAmerican

Nat. Gas Corp. v. Finkelstein, 905 S.W.2d 412, 414 (Tex. App.—San Antonio 1995, pet.

dism'd); see TEX. R. APP. P. 24.4(a)(5) (authorizing the appellate court to review the trial

court's exercise of discretion under Texas Rule of Appellate Procedure 24.3(a)). A trial

court abuses its discretion when its decision fails to comport with guiding principles or

        1
           No one disputes that Lindsey is a residuary beneficiary of the Lesey B. Kinsel Trust. It appears
that the value of her interest in the trust exceeds $3,000,000.00. Via its final judgment, the trial court
imposed a constructive trust on Lindsey's interest ordering that it "be held by the Trustee of the Trust to
satisfy, in whole or in part, Plaintiffs' judgment in this lawsuit."

                                                    2
rules or is otherwise arbitrary. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238,

241-42 (Tex. 1985).

        Amount Superseded

        The Kinsel Family initially complains that the trial court erred in simply ordering

that the judgment debtors post bonds superseding only the compensatory damages

awarded in the judgment.2 We agree.

        Statute provides that when a judgment is for money, the amount of security must

equal the sum of 1) the amount of compensatory damages awarded in the judgment, 2)

interest for the estimated duration of the appeal, and 3) costs awarded in the judgment.

TEX. CIV. PRAC. & REM. CODE ANN. § 52.006(a) (West 2008); accord, TEX. R. APP. P.

24.2(a) (stating that when the judgment is for money, the amount of the "bond, deposit,

or security must equal the sum of compensatory damages awarded . . . , interest for the

estimated duration of the appeal, and costs awarded. . . ."); see also In re Nalle Plastics

Family L.P., 406 S.W.3d 168, 170 (Tex. 2013). Yet, it cannot exceed the lesser of “50

percent of the judgment debtor's net worth . . . or $25 million." TEX. CIV. PRAC. & REM.

CODE ANN. § 52.006(b); TEX. R. APP. P. 24.2(a)(1)(A), (B). In providing that the amount

of bonds or other security to post equal only $3,709,600.92, the trial court excluded from

its calculation amounts covering the interest accruing during the duration of the appeal

        2
           All litigants agreed below that both post-judgment interest accruing while the appeal pended and
court costs should be added in the amount subject to being superseded. Why they were not included by
the trial court is unknown. The parties further agreed that the court costs in question equaled $20,250
and that the applicable rate at which post-judgment interest was to accrue was five percent. They could
not agree on the estimated time period of the appeal's duration, however. The judgment debtors
suggested one year while the judgment creditors suggested one and a half years. Judgment was entered
in December of 2012. More than a year has lapsed since that date. Furthermore, there have been
delays in the filing of the appellate record and briefs. Given this, estimating the appeal‟s duration to be
one year is unrealistic. This is especially so in view of counsel for some of the judgment debtors having
represented to the trial court that irrespective of who wins before us, attempt will be made to appeal the
matter to the Texas Supreme Court. Two years from the date of judgment is a more reasonable
estimation.

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and court costs.    Omitting those items constitutes an abuse of discretion.          See

Fairways Offshore Exploration, Inc. v. Patterson Servs., Inc., 355 S.W.3d 296, 304 (Tex.

App.—Houston [1st Dist.] 2011, pet. denied) criticized on other grounds by In re Nalle

Plastics Family L.P., 406 S.W.3d 168 (Tex. 2013) (stating that "a supersedeas bond that

does not include in its sum the amount of prejudgment interest is 'patently ineffective' to

secure a money judgment awarding such interest."); National Convenience Stores, Inc.

v. Martinez, 763 S.W.2d 960 (Tex. App.—Houston [1st Dist.] 1989, no writ) (stating the

same).

      Obligation of Each Judgment Debtor to Supersede the Entire Amount

      The Kinsel Family next contends that the trial court erred in permitting the

judgment debtors to collectively post bonds totaling the amount of money damages

awarded. Each allegedly was obligated to provide a bond or security equal to the

compensatory damages awarded in the judgment plus interest and costs, unless statute

or rule allowed for a lesser amount. We agree.

      A like question was addressed in Fortune v. McElhenney, 645 S.W.2d 934 (Tex.

App.—Austin 1983, no writ). There, the trial court entered judgment against the two

defendants for $135,000 plus attorney's fees and interest. It also ordered that they were

"'jointly and severally'" liable for payment of the sums.         In effort to supersede

enforcement of the decree pending appeal, each defendant filed one or more bonds

approximating $112,000. The judgment creditors argued, however, that each judgment

debtor was required to file supersedeas bonds equaling “the sum of the amount of the

judgment, the estimated amount of interest which will probably accrue during the appeal

and costs.” Id. at 935. The reviewing court agreed. Id.

                                            4
      The judgment debtors at bar attempt to distinguish Fortune by contending that it

was rendered before the 2003 changes wrought by the legislature in the way judgments

are superseded. In recently considering those changes, the Texas Supreme Court

viewed them as reflecting “„a new balance between the judgment creditor's right in the

judgment and the dissipation of the judgment debtor's assets during the appeal against

the judgment debtor's right to meaningful and easier access to appellate review.‟” In re

Nalle Plastics Family L.P., 406 S.W.3d at 170, quoting, Elaine A. Carlson, Reshuffling

the Deck: Enforcing and Superseding Civil Judgments on Appeal after House Bill 4, 46

S. TEX. L. REV. 1035, 1038 (2005). According to the judgment debtors at bar, this "new

balance" somehow authorized the trial court here to relieve them of the obligation

imposed in Fortune. Instead, the trial court allegedly had the discretion to order that

each post bonds that in their aggregate could total the compensatory damages awarded

in the judgment, interest pending appeal, and court costs. We do not interpret Nalle to

afford such leeway.

      In discussing the effect of the 2003 amendment, the Nalle court first noted that "a

party [was historically required] to post security covering the entire judgment, regardless

of amount, plus costs and interest for the estimated duration of the appeal." In re Nalle

Plastics Family L.P., 406 S.W.3d at 169-70 (emphasis added). The observation was

taken from Elaine Carlson's law review article. Then, the court said:

      Judgment debtors must now post appeal bonds 'equal [to] the sum of . . .
      the amount of compensatory damages awarded in the judgment [,] . . .
      interest for the estimated duration of the appeal [,] and . . . costs
      awarded in the judgment.' TEX. CIV. PRAC. & REM. CODE § 52.006(a). The
      amendment also capped security at the lesser of fifty percent of the
      judgment debtor's net worth, or $25 million. Id. § 52.006(b)(2). A trial court
      must reduce the amount of security if a judgment debtor shows he is likely
      to suffer substantial economic harm—a less onerous burden than the

                                            5
       previous standard, which required a showing both of irreparable harm to
       the debtor and that a lesser amount would not substantially impair a
       judgment creditor's ability to recover under the judgment after appellate
       remedies were exhausted.

Id. at 170. This verbiage indicates that the legislative changes in question involved 1)

the character of the damages that an appellant need only supersede (“compensatory”

as opposed to “the entire judgment”), 2) capping the amount of security a judgment

debtor was obligated to provide (the lesser of $25 million or half the debtor's net worth),

and 3) providing further relief to those who would suffer economic harm despite the

caps. So, to some extent, the argument proffered by the judgment debtors here has

conceptual support; judgment debtors were afforded more relief in 2003. However, the

measure afforded was specific, as noted above. More importantly, it said nothing about

vesting the trial court with unfettered discretion to do whatever it chose.

       Additionally, we must presume that “the Legislature enacts a statute with

knowledge of existing law.” Dugger v. Arredondo, 408 S.W.3d 825, 835 (Tex. 2013).

Pertinent case law existing before 2003 included the rule expressed in Fortune.

"Consequently, we must presume that the legislature was aware of [that] holding . . . .”

John M. O'Quinn, PC v. Wood, No. 12-08-00011-CV, 2009 WL 2367133, 2009 Tex.

App. LEXIS 10081, at *19-20 (Tex. App.—Tyler June 10, 2009, pet. dism‟d). And, the

Legislature having said nothing about permitting judgment debtors to aggregate or

combine their security, we must conclude that it left Fortune intact. See id. (applying

Fortune and obligating each judgment debtor to be responsible for posting security or a

bond up to the maximum of $25 million).

       This result is appropriate given the nature of the liability imposed on judgment

debtors held to be jointly and severally responsible via the decree.           In such a

                                             6
circumstance, each is saddled with the obligation of paying all the damages awarded.

Hardy v. Gulf Oil Corp., 949 F.2d 826, 829-30 (5th Cir. 1992) (discussing the theory of

joint and several liability and stating that under it “each and every one of several

tortfeasors is liable for the full amount of an injured plaintiff's damages. In its purest

application, this rule of 'joint and several liability' permits a plaintiff to obtain full legal

redress from any defendant, even if that defendant's actions were not solely responsible

for the plaintiff's injuries”). Moreover, the judgment creditor is free to seek its payment

from whichever judgment debtor it chooses. See Lone Star Salt Water Disposal Co. v.

Railroad Comm'n of Texas, 800 S.W.2d 924, 930 (Tex. App.--Austin 1990, no writ)

(stating that where a party has suffered an indivisible harm caused by two or more joint

tortfeasors, he may choose to proceed against only one of them). Logically then, each

judgment debtor should be obligated to supersede the judgment by providing security in

an amount equal to his respective liability imposed by the decree.                  Fortune v.

McElhenney, 645 S.W.2d at 935 (involving a judgment wherein the defendants were

found jointly and severally liable and stating that "[i]f judgment were reversed with

respect to one appellant, or if appellees should be unable to collect one-half of the

judgment from one appellant, the other appellant would nevertheless be liable for the

entire judgment, interest, and costs").

       In sum, the trial court abused its discretion in allowing the judgment debtors to

aggregate or combine their bonds or security to satisfy the demands of Texas Rule of

Appellate Procedure 24.2(a)(1) and § 52.006(a) of the Civil Practices and Remedies

Code. However, this does not necessarily mean that multiple bonds must be posted

with each securing the requisite amount. For instance, in John M. O'Quinn, P.C., a joint

                                               7
bond was used by the judgment debtors. John M. O’Quinn, P.C. v. Wood, 2009 WL
2367133, 2009 Tex. App. LEXIS 10081, at *20-21. Through it, each was obligated to

pay the total amount of the bond.

      Sufficiency of the Evidence

      The Kinsel Family also questions the sufficiency of the evidence underlying the

trial court's finding that Lindsey had a net worth of $578,365 while Oliver's net worth

was $1,007,947.75.     So too do they complain about the trial court's apparent, yet

unstated, finding that both Lindsey and Oliver would suffer substantial economic harm if

required to provide security equal to half their respective net worth. We agree in part.

      As previously stated, the amount of security needed to supersede the

enforcement of a judgment cannot exceed the lesser of $25 million or half the judgment

debtor's net worth. TEX. R. APP. P. 24.2(a)(1)(A), (B). Net worth is defined as the

difference between the judgment debtor's total assets and liabilities, as determined by

generally accepted accounting principles. G.M. Houser, Inc. v. Rodgers, 204 S.W.3d
836, 840 (Tex. App.—Dallas 2006, pet. denied). And, the burden to prove net worth lies

with the judgment debtor.     Id. 24.2(c)(3).   The very same rules of procedure also

contemplate that the judgment debtor tender to the trial court clerk an affidavit both

illustrating net worth and consisting of “detailed information concerning the debtor's

assets and liabilities from which net worth can be ascertained.”            Id. 24.2(c)(1).

Furthermore, that affidavit is considered prima facie evidence of net worth for purposes

of establishing the amount of bond or security required to supersede the judgment's

enforcement. Id. The judgment creditor may contest the debtor's claim and conduct

discovery on the matter, though. Id. 24.2(c)(2). Should a contest be levied, then the

                                            8
trial court must promptly hear it upon completion of discovery. Id. So too must the court

“issue an order that states the debtor's net worth and states with particularity the factual

basis for that determination.” Id. 24.2(c)(3).

        Here, the foregoing procedure was not followed. Instead of filing affidavits with

the trial court clerk and permitting the Kinsel Family to contest them, the judgment

debtors simply moved the trial court to fix a supersedeas bond amount. This apparently

occurred in response to effort by the Kinsel Family to initiate a garnishment proceeding

and conduct post-judgment discovery needed to enforce the judgment.3

        Thereafter, the trial court convened a hearing whereat no one testified. Instead,

the judgment debtors proffered argument consisting of various alternative ways for the

court to determine the extent of their obligation under appellate Rule 24.2 and § 52.006

of the Civil Practice and Remedies Code. The Kinsel Family questioned the viability of

those suggestions and informed the trial court that discovery from their opponents was

outstanding.     At that point, the trial court took the matter under advisement after

informing the Kinsel Family that an evidentiary hearing was needed, “we'll make

absolutely sure that you are provided the documents [sought via subpoena by the

Kinsel Family] before the hearing.”

        No action was taken on the various alternatives offered by the judgment debtors.

Instead, the trial court convened an evidentiary hearing whereat four witnesses

appeared.4 The first, a CPA named William T. Robinson, testified about the purported

        3
         According to the argument of counsel for the judgment creditors, their opponents objected to the
discovery served on them.
        4
             Though the Kinsel Family again broached the matter of discovery at this hearing, they
nevertheless participated in it. Additionally, we found nothing of record indicating that the trial court
fulfilled its prior representation about having the judgment debtors provide the discovery sought by the
judgment creditors.

                                                   9
net worth of both Oliver and Lindsey.                 He opined that Oliver had a net worth

approximating $1,007,000. That sum purportedly represented half of Oliver's interest in

the community estate belonging to him and his wife. So, dividing the community estate

when calculating net worth was usual procedure, according to the witness, and the

judgment creditors proffered no evidence contradicting that.

        The same witness also opined that Lindsey's net worth was $578,365. Under

cross-examination, though, Robinson admitted that his opinion was based upon a

document provided him by Lindsey‟s daughter. The latter, also a CPA, testified, as well.

She too testified that her mother's net worth was $578,365 and acknowledged that she

was the one who calculated it. Also acknowledged was that she failed to include in her

calculations the value of her mother's jewelry, if any, and of her mineral interests and of

residual interest in the Lesey Kinsel trust.5

        Another witness spoke about the cost of attorney‟s fees related to pursuing the

appeal, while the fourth witness testified about supersedeas bonds and their cost. The

latter individual who allegedly had some relationship with the insurance industry

admitted that he had never written a supersedeas bond.

        Of note, neither Branyon nor Jackson Walker proffered any evidence regarding

their respective net worth. Nor did either suggest that the amount of compensatory

damages, post judgment interest, and court costs at issue exceeded 50% of their

respective net worth.

        5
           Interestingly, Lindsey‟s legal counsel informed the trial court that it could be worth up to $1.9
million dollars. Others suggested, such as Branyon and Jackson Walker that the value of Lindsey‟s
residual interest in the trust exceeded $3 million dollars. However, unsworn comments of legal counsel
are not competent evidence. See Goode v. Shoukfeh, 915 S.W.2d 666, 671 (Tex. App.—Amarillo 1996),
affirmed, 943 S.W.2d 441 (Tex.1997) (stating that counsel's unsworn comments are not evidence).

                                                    10
       Thereafter, the trial court issued its order containing the following paragraph:

       The Court further finds that: (1) pursuant to TEX. R. APP. P. 24.2(c)(3) and
       based on Exhibits 2 and 3 admitted into evidence at the hearing, the net
       worth of Jane O. Lindsey is $578,365 net of the amount in the constructive
       trust and the net worth of Robert N. Oliver is $1,007,947.75; (2) under
       TEX. CIV. PRAC. & REM. CODE § 52.006 and TEX. R. APP. P. 24.2(a)(1), a
       judgment debtor cannot be required to post more than fifty percent of his
       or her net worth to secure the judgment pending appeal; and (3) under
       TEX. R. APP. P. 24.2(b), the Court must lower the amount of security to be
       provided to an amount that will not cause the judgment debtor substantial
       economic harm.

It also specified each of the judgment debtors‟ supersedeas obligations. Again, those

obligations were 1) $100,000 for Jane O. Lindsey, 2) $250,000 for Robert N. Oliver, and

3) $2,359,600.92 for Branyon and Jackson Walker, jointly. Why the trial court reduced

the obligations of Lindsey and Oliver to less than half their respective net worths went

unmentioned. Nor did the trial court explain how it derived the reduced amounts.

       As previously mentioned, the trial court must “„issue an order that states the

debtor's net worth and states with particularity the factual basis for that determination.‟”

In re Smith, 192 S.W.3d 564, 568 (Tex. 2006). The order at bar fails in that regard. It

includes no commentary on the factual basis underlying any of its findings, much less

those pertaining to the net worth of either Lindsey or Oliver.           In omitting such

information, the trial court abused its discretion. Id.

       Also problematic is the conclusion that Lindsey‟s net worth was only $578,365. It

is true that there appears of record evidence illustrating that the amount represented her

net worth. So, it is questionable whether the finding lacks sufficient evidentiary support.

Yet, it is also clear that the person who calculated or derived the number did so while

failing to value various, and rather substantial, assets owned by Lindsey.     Again, such

assets included her residual interest in the Lesey Kinsel Trust and mineral interests.

                                              11
       That the residual interest in the Lesey Kinsel Trust had substantial value is

manifested by the trial court's own decision. To reiterate, it ordered that $1 million from

the trust be used as security to supersede the judgment's enforcement.       Given that all

seemed to agree that Lindsey's interest in the trust was much larger than that of any

other trust beneficiary, one can only deduce that the difference between Lindsey‟s total

assets and total liabilities was the amount found by the trial court. Simply put, the trial

court did not consider the totality of Lindsey's assets as mandated by the law. That too

evinces an instance of abused discretion.

       The same cannot be said of Oliver‟s net worth, however. The testimony of his

accountant was sufficient to support the valuation selected by the trial court.

Furthermore, no evidence was presented to contradict the accountant‟s insinuation that

it was a general practice to include only half the value of the marital estate when

calculating the net worth of a spouse.      And, that the entire marital estate may be

subjected to payment of Oliver‟s obligation under the judgment, as the Kinsel Family

suggests, the focus lies on the evaluation of net worth, not the extent of assets subject

to levy.

       Yet, our inquiry is not at an end. We must also comment upon the trial court‟s

reduction of the supersedeas amount payable by Oliver. As previously mentioned, the

amount due from him could be reduced if warranted by the risk of him suffering

substantial economic harm. Indicia pertinent to assessing the presence of such harm

include 1) the cost of acquiring the requisite supersedeas bond, 2) the availability of

sufficient unencumbered assets to cover that cost, 3) the existence of other sources

from which the judgment debtor could secure funds to acquire the bond, 4) the

                                            12
judgment debtor's ability to borrow the requisite funds, 5) the impact upon the judgment

debtor arising from the sale of assets sufficient to acquire the bond, and 6) the likelihood

of the judgment debtor's insolvency or bankruptcy should assets be sold to acquire the

bond.   Ramco Oil & Gas, Ltd. v. Anglo Dutch (Tenge) L.L.C., 171 S.W.3d 905, 917

(Tex. App.—Houston [14th Dist.] 2005, no pet.). The ability of the judgment debtor to

service other debt, to maintain the daily operation of his household or business, to

maintain his own existence, and to prosecute the appeal are also circumstances

meriting consideration. Oliver made little effort to tender evidence touching upon these

circumstances. Rather, it was suggested that he would incur taxes if required to sell his

stocks. Yet, the amount of that supposed tax liability went uncalculated.          So, that

instance of purported harm hardly constituted evidence justifying a reduction in the bond

amount. The same is true of the evidence about the cost of posting a bond. The

witness who testified about it suggested that cash in the full amount of the bond would

be required; later he acknowledged that assets such as realty could be used in lieu of

posting cash. The evidence illustrates that Oliver owned an interest in a vacation home,

which interest had a value exceeding half his net worth. And, the potential impact

arising from the use of that interest to obtain a bond went undeveloped. Nor did Oliver

proffer evidence illustrating that he was unable to liquidate sufficient assets to derive a

cash sum equal to half his net worth. Again, it was simply suggested that doing so

would incur some unknown tax liability.    And, while evidence was presented about the

cost of prosecuting the appeal through the Supreme Court, that sum ($100,000) alone

does not equate to the $250,000 reduction made by the trial court. Thus, even if we

view the evidence of record in a light most favorable to the trial court‟s decision, see

                                            13
Aquaduct, L.L.C. v. McElhenie, 116 S.W.3d 438, 444 (Tex. App.—Houston [14th Dist.]

2003, no pet.) (describing this to be an aspect of the standard of review pertinent to

assessing the sufficiency of the evidence underlying the trial court‟s findings), it fails to

support the rather extensive reduction derived by the trial court.

       In sum, we reverse the trial court‟s supersedeas order. We also order that to

supersede enforcement of the judgment, Branyon must post a bond or provide a cash

deposit or other security equal to $3,709,600.92, court costs of $20,250, and post-

judgment interest on those sums at the rate of five percent per annum for two years.

We also order that to supersede enforcement of the judgment, Jackson Walker must

post a bond or provide a cash deposit or other security equal to $3,709,600.92, court

costs of $20,250, and post-judgment interest on those sums at the rate of five percent

per annum for two years. Branyon and Jackson Walker may satisfy this obligation by

posting a joint bond under which each is obligated to pay the aforementioned amounts.

Except to the extent it relates to Branyon and Jackson Walker, the matter of

superseding the judgment's enforcement is remanded to the trial court for the taking of

evidence and the entry of findings of fact per Texas Rule of Appellate Procedure

24.4(d).   We further order the trial court to permit the Kinsel Family to engage in

relevant discovery as permitted by Texas Rule of Appellate Procedure 24.2(c)(2). Our

resolution of this dispute relieves us from having to address the request for injunctive

relief prohibiting the disposition of assets; proper supersedeas bond provides adequate

protection.

                                                         Per Curiam

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