Opinion
14-24-00266-CV
12-10-2024
TAYLOR MOSS, INDIVIDUALLY, AND AS TRUSTEE OF THE TCM TRUST, Appellants v. DEBRA M. HOLZWORTH, KATHRYN S. MARCOTTE, AND CAROL BUMSTEAD MOSS, Appellees
On Appeal from the Probate Court No. 1 Harris County, Texas Trial Court Cause No. 484673
Panel Consists of Justices Wise, Hassan, and Poissant.
MEMORANDUM OPINION ON MOTION
PER CURIAM
Appellants, Taylor Moss, individually, and as trustee of the TCM Trust, move for review of the trial court's net worth determination in connection with a supersedes of the judgment. See Tex. R. App. P. 24.4. This court issued an order staying execution of the judgment pending disposition of that motion. Appellees, Debra M. Holzworth, Kathryn S. Marcotte, and Carol Bumstead Moss, filed a response. We deny the motion, affirm the order of the trial court, and lift our stay.
Background
The underlying dispute is between Taylor Moss and Taylor's mother, Carol Bumstead Moss, and Taylor's aunts, Debra M. Holzworth and Kathryn S. Marcotte. A background of the family's five-year legal battle can be found in In the Matter of Bumstead Family Irrevocable Trust, No. 13-20-00350-CV, 2022 WL 710159 (Tex. App.-Corpus Christi-Edinburgh, Mar. 10, 2022, pet. denied).
The Texas Supreme Court transferred that appeal from this court to the Thirteenth Court of Appeals in Corpus Christi pursuant to a docket equalization order. See Tex. Gov't. Code Ann. § 22.220(a) (delineating the jurisdiction of appellate courts); id. § 73.001 (granting the supreme court the authority to transfer cases from one court of appeals to another at any time that there is "good cause" for the transfer).
On January 12, 2024, the trial court signed a final judgment awarding appellees over $9 million in damages. Appellant Moss filed an affidavit claiming an individual negative net worth and a negative net worth on behalf of the TCM Trust. Appellees contested appellants' claimed negative net worth. The trial court held a hearing on the contest. See Tex. R. App. P. 24.2(c).
After the hearing, the trial court signed an order sustaining the contest (the Order). The Order (1) struck Moss's affidavit on the basis that it was without merit, lacking in credibility, contained discrepancies and uncertainties regarding the accuracy of the items contained therein, which were "designed to mislead the court and work an injustice on the judgment creditors by inappropriately staying execution;" (2) set the supersedeas bond in the amount of $9,748,892, which comprises the compensatory damages awarded in the judgment, interest on that amount for the estimated duration of the appeal, and costs awarded in the judgment; (3) suspended enforcement of the judgment for 20 days; and (4) enjoined appellant Moss from dissipating or transferring assets, including the assets of any business entity, partnership, in which Taylor C. Moss, individually, or as Trustee of the TCM Trust, owns or holds an interest, to avoid satisfaction of the final judgment.
Appellants filed a motion to review the trial court's ruling on the net worth contest. Appellees responded.
Applicable Law and Standard of Review
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 estimated duration of the appeal; and (3) costs awarded in the judgment. Tex.R.App.P. 24.2(a)(1). The amount of security may not, however, exceed the lesser of (1) 50 percent of the judgment debtor's net worth or (2) $25 million. Tex.R.App.P. 24.2(a)(1)(A), (B).
A judgment debtor who provides a bond or deposit based on net worth simultaneously 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 an 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. Net worth is calculated as the difference between total assets and total liability as determined by generally accepted accounting principles. 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.).
On the motion of a party, an appellate court may review the sufficiency or excessiveness of the amount of security. See Tex. R. App. P. 24.4(a). We review the trial court's determination of the amount of security under an abuse of discretion standard. Hunter Bldgs. & Mfg., L.P. v. MBI Global, L.L.C., 514 S.W.3d 233, 236 (Tex. App.-Houston [14th Dist.] 2013, no pet.). Generally, the test for abuse of discretion is whether the trial court acted without references to any guiding rules and principles or whether the trial court acted arbitrarily and unreasonably. Id. The trial court abuses its discretion if the evidence is legally or factually insufficient to support its findings. See In re Smith, 192 S.W.3d 564, 570 (Tex. 2006) (orig. proceeding). The appellate standards of review for evidentiary sufficiency are as follows:
Legal Sufficiency. We consider all of the evidence in the light most favorable to the challenged finding and indulge every reasonable inference that would support it. We must credit favorable evidence if a reasonable fact finder could, and disregard contrary evidence unless a reasonable fact finder could not. Finally, we must determine whether the evidence before the court would allow reasonable and fair-minded people to find the facts at issue. Ramco, 171 S.W.3d at 910.
Factual Sufficiency. We examine the entire record, considering the evidence both in favor of and contrary to the challenged finding. Id. We set aside the fact finding only if it so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. Id.
In conducting our review of both the legal and factual sufficiency of the evidence, we are mindful that the trial court, as fact finder, is the sole judge of the credibility of the witnesses and the weight to be given their testimony. Id. We may not substitute our judgment for the fact finder's, even if we would reach a different answer on the evidence. Maritime Overseas Corp. v. Ellis, 971 S.W.2d 402, 407 (Tex. 1998). To show the trial court abused its discretion due to insufficient evidence, the judgment debtor must show the evidence conclusively establishes, as a matter of law, all vital facts in support of the debtor's position. Ramco, 171 S.W.3d at 910.
Evidence
At the net worth hearing, appellants presented the testimony of a certified public accountant named Robert Norris who prepared Moss's personal balance sheet and TCM Trust's balance sheet. Moss attached these balance sheets to his negative net worth affidavit. Moss also testified at the hearing.
Norris testified that he prepared the balance sheets using only the information Moss provided him. He explained that he prepared the personal balance sheet in accordance with "Financial Accounting Standards Board 274," which, according to Norris, dictates using the present market values of all assets and liabilities. Norris testified that the market values he used were based on Moss's representation to him of what the current market values were. The personal balance sheet listed Moss's net worth as $-9,533,962. That calculation included the underlying judgment in this case. Moss's total assets were listed as $536,826, which included a 50% interest in his homestead valued at $754,846; cash in the amount of $45,148; non-marketable securities (a certificate of deposit) in the amount of $4,256; personal property valued at $60,000; and an automobile valued at $50,000. Attached to the personal balance sheet were schedules with more specific items that the personal balance sheet relied upon. Schedule 2, "Marketable Securities," listed a bitcoin account with a market value of $290,000, but "less accessibility restrictions (loss of all passcodes)" valued at zero. During his own testimony, Moss confirmed that he could not access this account because he lost his passcode and his seed phrases. Schedule 4, "Investments in Partnerships" listed an interest in 2120 Post Oak Blvd partnership with a market value of $20,000,000, but a debt of $20,000,000. The schedule listed the percent owned as ".045." Norris testified that this was either 45 percent or 4.5 percent. Moss later testified that this was 4.5 percent.
Norris testified that Moss's liabilities, as provided by Moss, included a car note in the amount of $16,054; taxes of $300,000; credit card debt of $5,842; and the judgment in the amount of $9,748,892. Norris confirmed that according to Generally Accepted Accounting Principles, Moss's net worth was $-9,533,962.
Next, Norris testified regarding the balance sheet he prepared for TCM Trust. The only asset listed for the trust was a Porsche GT3RS 2019 valued at $300,000. The balance sheet for the trust listed the judgment as its only liability. According to Norris's balance sheet, the TCM Trust's net worth was $-9,448,892.
Upon cross-examination, Norris confirmed that he was hired by Moss for the sole purpose of preparing the balance sheets. Norris confirmed he had never been Moss's tax preparer, had never had access to Moss's tax returns, did not review any of the source documents to confirm the numbers provided by Moss. Norris conceded that he could not testify under oath that the values placed on the assets in the balance sheets were accurate. Norris testified that he did not audit Moss and only relied on the documents provided to him by Moss to prepare the balance sheets. Norris stated he could not testify that the balance sheets he prepared were accurate.
Moss testified that both of the balance sheets were true and accurate and that he actually has less cash than reflected on the balance sheet. During cross-examination, Moss testified as to having an interest in multiple entities that he did not list on his personal balance sheet because, according to him, they had no value and held no assets. However, he later admitted to having a 100% ownership interest owning in DM 2 Labs Woodson, LLC, an entity which owned a property called Woodson's Reserve. He confirmed that Woodson's reserve had been sold between September 2023 and the date of the hearing for "probably" over a million dollars. Moss testified that he only received $350,000 from that sale and was unsure where the rest of the proceeds went, but stated that they may have been used to service debt for the 2120 Post Oak Blvd investment. Moss further testified that funds from Woodson Reserve had been used to purchase the bitcoin which he could no longer access. Moss confirmed that during a deposition three months earlier, he testified that his net worth was possibly over $2 million. That June 2024 deposition was entered into evidence. Moss's J.P. Morgan Chase account from January 2024 reflecting a balance of $2,394,207.29 was also entered into evidence.
Both sides presented closing arguments and the trial court sustained appellees' contest on the record. Specifically, the trial court stated:
"I find the affidavit is insufficient to adequately ascertain Mr. Moss's net worth. As a matter of fact, the only thing, the only thing that can be verified on this entire affidavit is the amount of the judgment. Nothing else is verified. It's all from Mr. Moss. The affidavit therefore is struck in its entirety. . ."
After the hearing, the trial court signed a detailed order listing 18 reasons why Moss's evidence was insufficient and lacked credibility. Moreover, it held that the discrepancies and uncertainties regarding the accuracy of the items contained in the affidavit made it impossible to determine Moss's net worth. The court found that the affidavit was designed to mislead the court and work an injustice on the judgment creditors by inappropriately staying execution of the final judgment. Ultimately, the trial court concluded that appellants failed to meet their burden under Rule 24.2(c)(1) and set the bond amount at $9,748,892 in accordance with Rule 24.1(a)(1). See Tex. R. App. P. 24.2(c)(1), (a)(1). The trial court struck Moss's affidavit, enjoined Moss from dissipating his assets or those of the trust, and ordered the judgment suspended for 20 days.
Application
We must determine whether appellants have shown the evidence conclusively establishes, as a matter of law, all vital facts in support of their contention that they met their burden of proof to show their net worth. Tex. Black Iron, Inc. v. N. Am. Interpipe, Inc., No. 14-20-00068-CV, 2020 WL 10231117 at *7 (Tex. App.-Houston [14th Dist.] July 28, 2020, no pet.). We conclude they have not made that showing.
Considered in the light most favorable to the trial court's findings, the evidence shows that the personal balance sheet was prepared based on unreliable and incomplete data provided by Moss for the sole purpose of creating the appearance of a negative net worth in order to avoid fully securing the judgment. Moss's own testimony evidenced that he has interests in entities and bank accounts beyond those he provided Norris. Rule 24.2 requires that the debtor's affidavit must provide "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). Because the balance sheets and net worth affidavit were based on incomplete and unreliable information, the evidence is legally sufficient to support the trial court's decision to strike the affidavit and find that appellants' net worth was not ascertainable based on the evidence provided. See Tex Black Iron, Inc., 2020 WL 10231117 at *7.
Next, we examine the entire record, considering the evidence both in favor of and contrary to the trial court's findings that appellants did not satisfy their burden. Id. at *8. On the face of Moss's affidavit and attached balance sheets, it appears that the net worths of Moss and the Trust were negative in roughly the amount of the judgment. However, Norris's testimony undermined the reliability and completeness of the balance sheets. Moreover, Moss's own testimony provided evidence that there was more to his financial picture than portrayed in his affidavit and balance sheets. Although Moss testified that the balance sheets and affidavit were true and accurate, he also confirmed that he failed to provide Mr. Norris with information pertaining to his ownership interests in various entities and left out information regarding additional bank accounts. Moss was unable to account for over 2 million dollars that had been in his account months before the hearing. Even taking into account the evidence in appellants favor, we hold that the evidence is factually sufficient to support the trial court's determination that appellants failed to meet their burden. See id.
Conclusion
We deny appellants' motion for review of probate court's ruling on net worth contest and affirm the trial court's September 16, 2024 order. We lift our November 1, 2024 stay of enforcement of the judgment.