Opinion
14-23-00173-CV
01-23-2024
FLAMINGO ISLES MARINA, LP; HD FLAMINGO ISLES HOLDINGS, LP; HDFI LAND HOLDINGS, LP; AND FLAMINGO ISLES GP, LLC, Appellants v. HARBORWALK RESORT, L.P., Appellee
On Appeal from the 56th District Court Galveston County, Texas Trial Court Cause No. 19-CV-1046
Panel Consists of Justices Jewell, Spain, and Wilson.
ABATEMENT ORDER
PER CURIAM.
Appellants HD Flamingo Isles Holdings, LP ("Holdings") and HDFI Land Holdings, LP ("HDFI") filed a Motion to Reduce Security requesting review of the trial court's orders setting the bond amount required to supersede the judgment on appeal. See Tex. R. App. P. 24.4. Appellee Harborwalk Resort, L.P. has filed a response, and Holdings and HDFI filed a reply.
The trial court signed a final judgment on December 20, 2022. The judgment awards appellee $1,067,411.44 in actual damages against four defendants, jointly and severally, in association with a statutory fraud claim, plus $50,302.00 in court costs, expert witness fees, and deposition costs, plus post-judgment interest. The trial court also awarded appellee "all rights given to the 'Declarant'" as specified in a May 17, 2018 filing in Galveston County real property records that the judgment describes as a "First Amendment to 2003 Harborwalk Declaration" ("Declarant Rights").
The defendants/appellants in this court are: Holdings, HDFI, Flamingo Isles Marina, LP, and Flamingo Isles GP, LLC.
Appellants appealed the judgment to this court. On May 19, 2023, while this appeal was pending, appellants each filed a $200 deposit in lieu of bond and filed a combined net worth affidavit to supersede the judgment. Tex.R.App.P. 24.2. Appellants asserted that each of them had negative net worth. The affidavit was signed by Susan Crawford, Chief Financial Officer and Controller for Legend Communities, Inc. Legend is the management company for three of the appellants. Crawford's affidavit represented that none of the four appellants owned any real or personal property and with one exception lacked cash or bank accounts. According to Crawford, Holdings has one bank account with a balance of $27,852.30-its only asset; but Holdings also has liabilities of $3,556,040.03.
Appellee filed a motion requesting additional security to supersede the judgment. Appellee argued that Holdings owned 93 parcels of land and HDFI owned two parcels of land. Moreover, appellee subsequently asserted that, contrary to the court's judgment, the Declarant Rights had not been transferred to appellee.
Regarding the real property identified in appellee's motion, Holdings and HDFI presented evidence that they had obtained a loan from Romspen Mortgage Limited Partnership ("Romspen") in 2015 and granted Romspen a security interest in the real property to secure that loan. In 2017, HDFI and Holdings gave deeds in lieu of foreclosure to Romspen. However, Romspen did not file those deeds in Galveston County's real property records until December 16, 2022. The text of the deeds expressly excludes a variety of properties allegedly owned by HDFI and Holdings, though the parties disagree about the extent to which Romspen can have the deeds reformed so as to obtain ownership of those properties. Romspen sued appellee in Galveston County in March 2023 seeking a declaration that it was the rightful owner of declarant rights instead of appellee.
On October 6, 2023, the trial court signed two orders setting the supersedeas bond amounts for HDFI and Holdings. The order addressing HDFI states:
Appellants Flamingo Isles Marina, LP, and Flamingo Isles GP, LLC, did not join the Motion to Reduce Security currently under review. Accordingly, this order is limited to Holdings and HDFI.
ORDER SETTING BOND
ON THIS DAY, the Court held a hearing to determine the net worth of Judgment Debtor HDFI Land Holdings, LP. After considering the pleadings, evidence, arguments of other counsel and other matters, the Court:
FINDS that HDFI Land Holding, LP has no debts and owns 46 acres of property worth at least $1,680,000 and 27 acres of property (known as "The Point") worth at least $2,750,000.00.
ORDERS that the appeal bond required by HDFI Land Holdings, LP is set at the amount of compensatory damages, anticipated interest for 2 years of an appeal, and costs in the amount of $1,229,847.32.
The order regarding Holdings states:
ORDER SETTING BOND FOR HD FLAMINGO ISLES HOLDINGS, L.P.
ON THIS DAY, the Court held a hearing to determine the net worth of Judgment Debtor HD Flamingo Isles Holdings, L.P. After considering the pleadings, evidence, arguments of other counsel and other matters, the Court:
FINDS that HD Flamingo Isles Holdings, L.P. has assets including real property and declarant rights.
ORDERS that the appeal bond required by HD Flamingo Isles Holdings, L.P. is set at the amount of compensatory damages, anticipated interest for 2 years of an appeal, and costs in the amount of $1,229,847.32.
A judgment debtor may supersede the judgment by: (1) filing with the trial court clerk a written agreement with the judgment creditor for suspending enforcement of the judgment; (2) filing with the trial court clerk a good and sufficient bond; (3) making a deposit with the trial court clerk in lieu of a bond; or (4) providing alternate security ordered by the court. Tex.R.App.P. 24.1(a). The amount of security necessary to supersede a money judgment 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.R.App.P. 24.2(a)(1); Tex. Civ. Prac. & Rem. Code Ann. § 52.006(a). The amount of security may not, however, exceed the lesser of (1) fifty percent of the judgment debtor's net worth or (2) $25 million. Tex.R.App.P. 24.2(a)(1)(A), (B); Tex. Civ. Prac. & Rem. Code Ann. § 52.006(b)(1), (2).
A judgment debtor who provides a bond or deposit based on net worth must file an affidavit that states the debtor's net worth and states complete, detailed information concerning the debtor's assets and liabilities from which net worth can be ascertained. Tex.R.App.P. 24.2(c)(1). A judgment creditor may file a contest to the debtor's claimed net worth and may conduct reasonable discovery concerning net worth. Tex.R.App.P. 24.2(c)(2). Following discovery, the trial court must hold a hearing on the contest. Tex.R.App.P. 24.2(c)(3). The judgment debtor bears the burden to prove net worth. Id.
The trial court must issue an order that states each judgment debtor's net worth and states with particularity the factual basis for that determination. Id.; In re Smith, 192 S.W.3d 564, 566 (Tex. 2006) (orig. proceeding) (per curiam). For supersedeas purposes, net worth is the difference between total assets and total liabilities as determined by generally accepted accounting principles. Texas Black Iron, Inc. v. N. Am. Interpipe, Inc., No. 14-20-00068-CV, 2020 WL 10231117, at *2 (Tex. App.-Houston [14th Dist.] July 28, 2020, mem. op. on motion), dismissed on motion, 2022 WL 97662 (Tex. App.-Houston [14th Dist.] Jan. 11, 2022); O.C.T.G., L.L.P. v. Laguna Tubular Prods. Corp., 525 S.W.3d 822, 830 (Tex. App.-Houston [14th Dist.] 2017, op. on motion); LMC Complete Auto., Inc. v. Burke, 229 S.W.3d 469, 482 (Tex. App.-Houston [1st Dist.] 2007, pet. denied); Ramco Oil & Gas, Ltd. v. Anglo Dutch (Tenge) L.L.C., 171 S.W.3d 905, 914 (Tex. App.-Houston [14th Dist.] 2005, no pet.).
The two challenged orders fail to find Holdings' or HDFI's net worth and also fail to state with particularity the factual basis for the court's determinations, as required by Rule 24.2(c)(3). Tex.R.App.P. 24.2(c)(3). The court's failure to make these findings constitutes an abuse of discretion and prevents an appellate court from conducting the necessary evidentiary sufficiency review called for by a motion to review a supersedeas order under Rule 24.4. See Smith, 192 S.W.3d at 569-70. Accordingly, it is necessary to remand this portion of the appeal to the trial court for entry of findings of fact or, as needed, the taking of further evidence. See Tex. R. App. P. 24.4(d) ("The appellate court may remand to the trial court for entry of findings of fact or for the taking of evidence.").
For the reasons discussed above, we remand this matter to the trial court to state findings regarding the judgment debtors' respective net worths and to state with particularity the factual bases for those determinations. Tex.R.App.P. 24.2(c)(3); 24.4(d). A supplemental clerk's record containing the trial court's findings shall be filed with this court within 45 days of the date of this order. We note that the trial court has continuing jurisdiction to handle these matters during the pendency of this appeal. See Tex. R. App. P. 24.3(a). This court otherwise retains jurisdiction over this appeal. Appellants' Motion to Reduce Security will remain pending while this court awaits the trial court's findings.
Our stay order of October 23, 2023 remains effective pending further order of this court.
The appeal is abated, treated as a closed case, and removed from this court's active docket. The appeal will be reinstated on this court's active docket when the supplemental clerk's record is filed in this court. The court will also consider an appropriate motion to reinstate the appeal filed by any party, or the court may reinstate the appeal on its own motion. It is the responsibility of any party seeking reinstatement to request a hearing date from the trial court and to schedule a hearing, if a hearing is required, in compliance with this court's order. If the parties do not request a hearing, the court coordinator of the trial court shall set a hearing date and notify the parties of such date.