Opinion
01-21-00602-CV
05-02-2023
SENIOR CARE LIVING VI, LLC AND MARK BOULDIN, Appellants v. PRESTON HOLLOW CAPITAL, LLC, UMB BANK, N.A., AND TMI TRUST COMPANY, Appellees
On Appeal from the 458th District Court Fort Bend County, Texas Trial Court Case No. 19-DCV-265897
Panel consists of Justices Hightower, Rivas-Molloy, and Farris.
MEMORANDUM ORDER
April L. Farris Justice
In the underlying litigation, the trial court issued a final judgment awarding damages of over $50 million in favor of Appellees, Preston Hollow Capital, LLC; UMB Bank, N.A.; and TMI Trust Company. Appellants Senior Care Living VI, LLC and Mark Bouldin filed a notice of appeal from the final judgment and Order Appointing Post-Judgment Receiver. Several months later Senior Care and Bouldin, separately, filed a notice of deposit in lieu of bond. See Tex. R. App. P. 24.1(a)(3). Bouldin alleged a "negative net worth of $104,690,000" and filed a cash deposit of $10.00 to supersede the trial court's judgment pending appeal. See Tex. R. App. P. 24.1(c).
Preston Hollow filed a contest of Bouldin's alleged negative net worth, and the trial court held a hearing. See Tex. R. App. P. 24.2(c)(2)-(3). On November 15, 2022, the trial court entered an order concluding that "in accordance with Generally Accepted Accounting Principles, Mark Bouldin's net worth was $488,138.00." The trial court then ordered Bouldin "to post additional security in accordance with the Texas Rules of Appellate Procedure, in the amount of $244,069.00, which is half of his net worth as is found above." See Tex. R. App. P. 24.2(a)(1)(A), (c)(3).
Appellees have filed a Texas Rule of Appellate Procedure 24.4 "Motion for Review of Supersedeas Ruling as to Appellant Mark C. Bouldin" challenging the trial court's finding that Bouldin had a net worth of $488,138.00, "allowing him to post a $244,069[.00] deposit to supersede the $50 million judgment in this case." Appellees request that the Court vacate the trial court's order and further "order (or instruct the trial court to order) Bouldin to post a bond or deposit in compliance with Rule 24.2(a)."
We conclude the trial court did not abuse its discretion. Accordingly, we deny Appellees' "Rule 24.4 Motion for Review of Supersedeas Ruling as to Appellant Mark C. Bouldin."
Background
In 2017, Senior Care obtained $45 million in bond financing to construct a senior living facility in Fort Bend County, Texas (the "Property"). Appellees were the bondholders. Preston Hollow owned the largest portion of the senior debt and was the "Noteholder Representative." Bouldin personally guaranteed Senior Care's financing obligations. The Senior Care facility and its related assets were pledged as collateral to the bondholders.
After Senior Care purportedly defaulted on its bond obligations, Appellees sought to accelerate the bond debt in May 2019. On August 26, 2019, Senior Care initiated the underlying litigation against appellees UMB Bank and TMI Trust Company. In its original petition, Senior Care sought a declaratory judgment that it was not in default of the bond financing agreements and that Appellees had wrongfully accelerated the debt. UMB Bank and TMI Trust Company asserted counterclaims against Senior Care for breach of contract, sought a declaratory judgment, and requested the appointment of a bond trustee and master trustee. Preston Hollow then filed a petition in intervention, adopting UMB Bank and TMI Trust Company's counterclaims and requests for relief.
Separately, Preston Hollow initiated a lawsuit against Bouldin regarding his guaranty on the bond indebtedness. On July 27, 2020, Preston Hollow filed a motion to consolidate its lawsuit against Bouldin, individually, into the underlying litigation. The trial court granted the motion on August 19, 2020.
The trial court held a bench trial in June 2021. On August 4, 2021, the trial court entered a final judgment against Senior Care and Bouldin and in favor of Appellees. In the final judgment, the trial court found that Bouldin "shall take nothing" with respect to any of his claims or causes of action. The trial court further found, with respect to Appellees' causes of action, that they "shall be granted judgment against Senior Care for 'Breach of Contract' . . . for the amounts due and owing pursuant to the Bonds and Notes made the subject of this case." The trial court also found that Appellees "shall be granted judgment against Bouldin for 'Guaranty Obligations' . . ., jointly and severally with Senior Care, for the amounts due and owing pursuant to the Bonds and Notes made the subject of this case."
The trial court therefore ordered that "Preston Hollow, as Representative . . . is awarded judgment against Senior Care and Bouldin, jointly and severally, in the amount of $52,597,040.06." The amount of the money judgment awarded by the trial court included the principal balance of the bonds and notes and pre-judgment interest.
For several months after entry of the judgment, Appellants made no efforts to supersede the judgment. Then, on May 12, 2022, Bouldin filed a "Notice of Deposit Payable to the [Trial Court] Clerk in Lieu of Bond Under [Texas Rule of Appellate Procedure] 24.1." In his notice to the trial court, Bouldin asserted that he "ha[d] a negative net worth," which allowed him to supersede the final judgment pending appeal by making a "deposit payable to the [trial court] clerk in the amount of $10.00." See Tex. R. App. P. 24.2(c)(1).
Bouldin filed a declaration with his notice of deposit in lieu of bond. In his declaration, Bouldin testified that he had non-exempt assets with a "total maximum value" of $410,000. However, he further testified that he had liabilities "exceed[ing] $105,100,000." He alleged that those liabilities included the judgment in the underlying litigation, which exceeded $53,000,00; a "separate summary judgment in Texas in favor of [appellee] UMB [B]ank in a separate lawsuit in an amount exceeding $52,000,000"; and "[v]arious merchant accounts totaling under $100,000." Bouldin further testified that he therefore had "a negative net worth in the amount of $104,690,000." Accordingly, at that time, the final judgment was superseded pending appeal. See Tex. R. App. P. 24.1(a).
Days later, Preston Hollow filed a "Contest Regarding Mark C. Bouldin's Supersedeas Bond and Net Worth," challenging Bouldin's assertion of a negative net worth. See Tex. R. App. P. 24.2(c)(2). Preston Hollow argued that "Bouldin's declaration d[id] not comply with [Texas Rule of Appellate Procedure] 24.2(c)(1) and is not prima facie evidence of his alleged negative net worth." Preston Hollow further argued that Bouldin improperly included the two judgments, which "must be disregarded-as a matter of law-in determining Rule 24.2 net worth." Preston Hollow also requested "discovery on Bouldin's current net worth" and a "prompt hearing on this contest . . . after the discovery is concluded." See Tex. R. App. P. 24.2(c)(3).
On November 9, 2022, the trial court held a hearing regarding Preston Hollow's contest to Bouldin's alleged negative net worth. During the hearing, Bouldin testified on his own behalf and also presented John Thayer, a certified public accountant. Thayer testified that he was retained to "prepare a compilation report on Mr. Bouldin's net worth, a personal financial statement." Notably, Thayer testified that a compilation report, including his report regarding Bouldin's finances, is not drafted with the intent to "express[] an opinion as to [Bouldin's] net worth." To this end, Thayer testified that a compilation report is "not [an] audited financial statement[]." Instead, in preparing a compilation report, Thayer relied on the client- Bouldin-to gather information regarding his financial condition, including assets and liabilities, and provide that information to Thayer. Thayer then compiled that information and presents it "in a way that looks like a balance sheet."
Here, in creating the report regarding Bouldin's net worth, Thayer gathered information from Bouldin on his "[b]ank accounts, loan information, list of assets, [and] list of liabilities." After obtaining the information from Bouldin, Thayer organized the financial information "in a proper format prescribed by the [Association of International Certified Professional Accountants]," and in accordance with Generally Accepted Accounting Principles ("GAAP"). Thayer testified that he determined that, as of May 12, 2022, "Mr. Bouldin ha[d] a negative net worth of $104,977,936."
This net worth number was calculated by subtracting Bouldin's total liabilities from his total assets. According to Thayer's compilation report, as of May 12, 2022, Bouldin had total assets in the amount of $6,273,104. This amount included: (1) $3,320 in cash; (2) retirement accounts with a value of $2,296,520; (3) a 50% interest in a homestead residence, shared with his wife, valued at $2,207,115; (4) an investment in membership interest valued at $35,819; and (5) the cash value of a life insurance policy of $1,730,330.
Bouldin's total liabilities, according to the compilation report, amounted to $111,251,040. This amount included: (1) accounts payable of $80,524; (2) professional services debt of $110,298; (3) debt on a note payable, and interest, in the amount of $5,074,444; (4) "accrual for Legal Judgment[s]" in the amount of $105,466,074; and (5) estimated income taxes of $519,700. The "accrual for Legal Judgment[s]" included in the compilation report consists of the judgment in the underlying litigation, which is for more than $52 million, and a judgment in connection with a separate Senior Care project, known as Senior Care VII, LLC, in which is also for more than $52 million.
Preston Hollow cross-examined Bouldin and Thayer, but it did not present any witnesses or offer any other evidence at the hearing.
On November 15, 2022, the trial court entered an order concluding that Bouldin's net worth, for the purposes of determining the appropriate supersedeas bond amount, was $488,138.00. The trial court therefore ordered Bouldin to "post additional security in accordance with the Texas Rules of Appellate Procedure, in the amount of $244,069.00, which is half of his net worth as is found above."
In the supersedeas order, the trial court noted that Thayer testified that the judgments should "be listed as liabilities under GAAP." Despite that testimony, while acknowledging that Thayer was "a certified public accountant . . . with over 40 years of experience," the trial court concluded that "neither [judgment] should be included in a net worth determination in this proceeding." Pursuant to this conclusion, the trial court discounted the judgments from the amount of total liabilities in Thayer's compilation report and found that Bouldin's total liabilities amounted to only $5,784,966. The trial court further found that Bouldin had total assets of $6,273,104, the same amount reached by Thayer's compilation report. Accordingly, the trial court found that, as of May 12, 2022, Bouldin's net worth, "in accordance with Generally Accepted Accounting Principles," was $488,138.00.
The trial court concluded that the "net worth of Mark Bouldin is determined by reference to the assets as presented at the [c]ontest hearing less the established liabilities. The assets and liabilities were presented in a form compliant with GAAP." Based on these findings and conclusions, the trial court ordered that Bouldin was "required to post additional security . . . in the amount of $244,069.00" within twenty days of the order to continue suspension of enforcement of the judgment pending appeal.
On January 11, 2023, Appellees filed their "Rule 24.4 Motion for Review of Supersedeas Ruling as to Appellant Mark C. Bouldin." Bouldin filed a response to Appellees' motion on January 23, 2023.
Standard of Review
"A judgment debtor is entitled to supersede the judgment while pursuing an appeal." Miga v. Jensen, 299 S.W.3d 98, 100 (Tex. 2009); see also In re Longview Energy Co., 464 S.W.3d 353, 359 (Tex. 2015) (observing that supersedeas rules "respect[] the importance of the right to a meaningful appeal"). "Supersedeas preserves the status quo of the matters in litigation as they existed before the issuance of the order or judgment from which an appeal is taken." Smith v. Tex. Farmers Ins. Co., 82 S.W.3d 580, 585 (Tex. App.-San Antonio 2002, pet. denied).
"Enforcement of a judgment must be suspended if the judgment is superseded." Tex.R.App.P. 24.1(f). "Enforcement begun before the judgment is superseded must cease when the judgment is superseded." Id.
Texas Rule of Appellate Procedure 24 sets out the requirements for suspending enforcement of a judgment pending appeal in civil cases. See Tex. R. App. P. 24.1-.4. Unless the law or the appellate rules provide otherwise, the 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 required to supersede a judgment pending appeal depends on the type of judgment. See Tex. R. App. P. 24.2(a). A money judgment, such as the judgment here, may be superseded by a bond, deposit, or security equal to "the sum of compensatory damages awarded in the judgment, interest for the estimated duration of the appeal, and costs awarded in the judgment." Tex.R.App.P. 24.2(a)(1). This amount, however, is limited and must not exceed the lesser of 50% of the judgment debtor's current net worth, or $25 million. Tex.R.App.P. 24.2(a)(1)(A)-(B).
Where the deposit or bond amount is based on the judgment debtor's net worth, the judgment debtor must "file with the trial court clerk 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." See Tex. R. App. P. 24.2(c)(1). An affidavit meeting the requirements of Rule 24.2(c)(1) is "prima facie evidence of the debtor's net worth," and the judgment is superseded upon payment of the bond or deposit. Id.
However, a "judgment creditor may file a contest to the debtor's claimed net worth." Tex.R.App.P. 24.2(c)(2). When a contest is filed, the trial court must hold a hearing on the contest and "issue an order that states the [judgment] debtor's net worth." Tex.R.App.P. 24.2(c)(3).
On motion of a party, an appellate court may engage in a limited review of a trial court's supersedeas ruling. See Tex. R. App. P. 24.4. Specifically, the Rules of Appellate Procedure provide that an appellate court may review: (1) the sufficiency or excessiveness of the amount of security; (2) the sureties on a bond; (3) the type of security; (4) the decision whether to permit suspension of enforcement; and (5) the trial court's exercise of discretion in ordering the amount and type of security. Tex.R.App.P. 24.4(a). The appellate court may require that the amount of the "bond, deposit, or other security be increased or decreased" and that "another bond, deposit, or security be provided and approved by the trial court clerk." Tex. R. App. P. 24.4(d). The appellate court may also require other changes in the trial court's order and remand for entry of findings of fact or the taking of evidence. Id.
We generally review the trial court's supersedeas rulings for an abuse of discretion. See EnviroPower, L.L.C. v. Bear, Stearns & Co., 265 S.W.3d 1, 2 (Tex. App.-Houston [1st Dist.] 2008, pet. denied). The test for abuse of discretion is whether the trial court acted arbitrarily or unreasonably considering all the circumstances of the case. See Samlowski v. Wooten, 332 S.W.3d 404, 410 (Tex. 2011); EnviroPower, 265 S.W.3d at 2. The trial court is the sole judge of credibility of witnesses and the weight to be given to their testimony. G.M. Houser, Inc. v. Rodgers, 204 S.W.3d 836, 840 (Tex. App.-Dallas 2006, no pet.).
Analysis
In their motion for review of the trial court's November 15, 2022 order on supersedeas, Appellees argue that the trial court erred in "allowing [Bouldin] to post a $244,069 deposit to supersede the $50 million judgment in this case," because "[n]o witness provided evidence of Bouldin's net worth under GAAP," the trial court "understate[d] Bouldin's net worth by at least $9,578,079, as a matter of law," and the trial court's order on supersedeas "also improperly granted injunctive-type relief to Bouldin."
A. Evidence of Net Worth Under GAAP
In their first issue, Appellees argue that the trial court abused its discretion by making any net worth determination "because there was no evidence of Bouldin's net worth under GAAP." According to Appellees, "[c]ompetent evidence of an individual's GAAP-based net worth is more complicated that simply providing factual evidence of each asset's or liability's book value," and "requires assets and liabilities to be reflected at their estimated current value-a matter of expert opinion."
For purposes of establishing net worth to set a supersedeas bond, "[n]et worth is calculated as the difference between total assets and total liabilities as determined by generally accepted accounting principles." G.M. Houser, Inc., 204 S.W.3d at 840. In support of his notice of deposit in lieu of bond, Bouldin presented evidence and testimony including a sworn declaration of Bouldin regarding his assets and liabilities; a compilation report prepared by Thayer, a certified public accountant; and testimony from Bouldin and Thayer regarding the compilation report. Appellees suggest that this evidence was insufficient to establish net worth "as determined by generally accepted accounting principles," noting that Thayer "offered no opinions" regarding the "accuracy of the financial statement." Accordingly, Appellees argue that the trial court "could only have found that Bouldin failed to present competent evidence and was therefore required to post a $25 million supersedeas bond."
Notably, "[n]o prior case has determined what 'in compliance with generally accepted accounting principles' means in the definition of 'net worth'" for purposes of setting a supersedeas bond. Hunter Bldgs. & Mfg., L.P. v. MBI Global, L.L.C., 514 S.W.3d 233, 238 (Tex. App.-Houston [14th Dist.] 2013, order on motion). Appellees suggest that calculation of net worth under this rubric is "a matter of expert opinion." However, Texas law does not require an expert opinion in this context. The Fourteenth Court of Appeals has concluded that "a judgment debtor does not have to present audited net worth evidence with a certification from a CPA that all requirements of GAAP have been met." Id. Instead, an "individual can prepare his own balance sheet and swear to his own net worth." Id.
Here, Bouldin submitted a sworn declaration in support of his notice of deposit in lieu of bond, testifying to his assets and liabilities, and concluding that he had a negative net worth. The trial court further received evidence from Thayer, a certified public accountant, who testified that the compilation report of Bouldin's net worth as of May 2022 was prepared in accordance with GAAP principles. The trial court considered the evidence presented and made findings and conclusions regarding Bouldin's net worth. See Tex. R. App. P. 24.2(c)(3) ("The trial court must issue an order that states the debtor's net worth and states with particularity the factual basis for that determination."). Specifically, the trial court concluded that Bouldin "had total assets of $6,273,104," and "total liabilities of $5,784,966."
Accordingly, after considering the evidence presented, the trial court found that "in accordance with Generally Accepted Accounting Principles, Mark Bouldin's net worth was $488,138.00" as of May 12, 2022. See Am. Akaushi Ass'n, Inc. v. Twinwood Cattle Co., Inc., No. 14-21-00701-CV, 2022 WL 2678851, at *4 (Tex. App.-Houston [14th Dist.] July 12, 2022, op. on motions) (noting that trial court "is the sole judge of the credibility of witnesses and the weight to be given their testimony").
We conclude that the trial court did not abuse its discretion in finding Bouldin had a positive net worth of $488,138.00 and requiring him "to post additional security" in the amount of $244,069.00. See Hunter Bldgs. & Mfg., L.P., 514 S.W.3d at 238 ("We hold that a judgment debtor does not have to present audited net worth evidence with a certification from a CPA that all requirements of GAAP have been met in order to meet its burden of proving its net worth.").
B. Trial Court's Net Worth Finding
Appellees next argue in the alternative that even if Bouldin presented sufficient evidence for the trial court to make a net worth determination, that the trial court's findings as to Bouldin's net worth "are wrong." Specifically, Appellees argue that the trial court understated Bouldin's assets and overstated his liabilities. Appellees argue that "as a matter of law, Bouldin's net worth is more than $9.578 million."
According to Appellees, the trial court erred by accepting the valuation of two of Bouldin's assets as set forth in the compilation report, including a retirement account and a homestead residence in Florida. Thayer testified that the consolidation report included only 50% of the value of these assets, which were owned by Bouldin and his wife, because there was a "2019 written agreement" between Bouldin and his wife, Cassie Bouldin, in which they agreed to co-own these assets "50/50." Thayer testified that he recalled reviewing this written agreement in preparing the compilation report. Thayer further testified that, pursuant to this agreement, GAAP permits Bouldin to only claim 50% of the value of the asset.
Appellees assert that, during his testimony at the bond hearing, "Bouldin denied any such written marital property agreement" exists. However, there is some evidence to support the trial court's finding regarding the value of each of these assets for the purposes of calculating Bouldin's net worth. Specifically, Bouldin's sworn declaration and the compilation report set forth the value of these assets. The trial court further heard testimony from Thayer that the compilation report complied with generally accepted accounting principles. Despite the potentially conflicting testimony of Bouldin, the trial court acted within its discretion in judging the weight of the evidence and testimony. See Ramco Oil & Gas, Ltd. v. Anglo Dutch (Tenge) L.L.C., 171 S.W.3d 905, 910 (Tex. App.-Houston [14th Dist.] 2005, order) ("The factfinder is the sole judge of the credibility of the witnesses and the weight to give their testimony.").
Appellees further argue that the trial court overstated Bouldin's liabilities by including "$5,074,444 in notes payable" in connection with a Truist Bank Guaranty Obligation. Appellees suggest that this obligation is not a liability but is instead a "guaranty of Savvy Buzz's $5 million loan from Truist Bank taken out around the time of the trial and judgment in this case." According to Appellees, Thayer testified that this guaranty amount was properly designated as a liability for Bouldin because there was a "court order establishing Bouldin's liability." Appellees note that Bouldin testified that no such order existed, and therefore, the trial court erred in including it as a liability.
However, the trial court also heard testimony from Bouldin that, even if a "court order" did not exist, the lender had accelerated the debt, making Bouldin jointly and severally liable for the full amount of the debt, $5,074,044, as a guarantor of the note. To this end, Thayer testified that pursuant to GAAP, once an obligation was accelerated by a lender, the borrow must disclose it as a liability. Based on the evidence presented to the trial court, we cannot conclude that that the trial court abused its discretion by including this amount as a liability for the purposes of calculating Bouldin's net worth.
C. Enforcement of the Judgment Pending Appeal
Appellees further argue that the trial court erred by enjoining judgment creditors "from pursuing remedies under a domesticated judgment in other states and from relying on the findings upon which the judgment is based." In its November 15, 2022 order, the trial court ordered that "should Mark Bouldin post the security above within the time provided, then enforcement of the judgment against Mark Bouldin, his assets, or any third-party remains SUPERSEDED and SUSPENDED, and Preston Hollow Capital, LLC, UMB Bank N.A., TMI Trust Company, and anyone acting in concert with them are prohibited from enforcing the judgment (or the findings in which the judgment rests) in any manner."
Appellees suggest that this language "purports to do more than the trial court was allowed to do" pursuant to Texas Rule of Appellate Procedure 24.2. Specifically, Appellees complain that Bouldin has attempted to use this language to urge a trial court in Florida to take certain actions.
"A judgment debtor is entitled to supersede the judgment while pursuing an appeal." Miga v. Jensen, 299 S.W.3d 98, 100 (Tex. 2009); see also In re Longview Energy Co., 464 S.W.3d 353, 359 (Tex. 2015) (observing that supersedeas rules "respect[] the importance of the right to a meaningful appeal"). The purpose of supersedeas is to "preserve[] the status quo of the matters in litigation as they existed before the issuance of the order or judgment from which an appeal is taken." Smith v. Tex. Farmers Ins. Co., 82 S.W.3d 580, 585 (Tex. App.-San Antonio 2002, pet. denied). "Enforcement of a judgment must be suspended if the judgment is superseded." Tex.R.App.P. 24.1(f).
We conclude that the trial court's November 15, 2022 order does not act as injunctive relief in contradiction to what is permitted by the Texas Rules of Appellate Procedure. The trial court ordered that, if Bouldin paid the additional security as required by the order, enforcement of the judgment would continue to be superseded and suspended pending appeal. This is the precise purpose of Texas Rule of Appellate Procedure 24, and we conclude that the trial court acted within its discretion to suspend enforcement of the judgment pending appeal.
Conclusion
For the reasons discussed above, we conclude that the trial court's November 15, 2022 "Order Regarding Preston Hollow Capital LLC's Rule 24.2 Contest Regarding Mark Bouldin's Supersedeas Bond and Net Worth" did not amount to an abuse of its discretion, and therefore deny Appellees' Motion for Review.