In Re Natin Paul v. the State of Texas

Court of Appeals of Texas·Decided March 31, 2023·No. 03-23-00160-CV·Published

Opinion

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-23-00160-CV

In re Natin Paul

ORIGINAL PROCEEDING FROM TRAVIS COUNTY

MEMORANDUM OPINION

Relator Natin Paul has filed an emergency petition for writs of habeas corpus and mandamus challenging a contempt order issued against him by the district court. For reasons explained below, we will modify the contempt order but will otherwise deny relief.

BACKGROUND 1

Paul and several corporate entities that he controls are defendants in ongoing litigation with the Roy F. and JoAnn Cole Mitte Foundation, the Real Party in Interest in this case (Mitte). In that litigation, Paul and his corporate entities have been found to be jointly and severally liable to Mitte for $1,909,125.20.

On May 13, 2022, the district court issued a temporary restraining order (TRO)

against Paul and his corporate entities. In the TRO, the district court noted that Paul had posted a

1 Because the parties are familiar with the underlying facts of the case and its procedural history, and because those facts are recited in greater detail in this Court’s earlier opinions, see, e.g., Paul v. Roy F. & JoAnn Cole Mitte Foundation, No. 03-21-00502-CV, 2023 WL 1806101 (Tex. App.—Austin Feb. 8, 2023, no pet. h.) (mem. op.); WC 1st & Trinity, LP v. Roy F. & JoAnn Cole Mitte Found., No. 03-19-00799-CV, 2021 WL 4465995 (Tex. App.—Austin Sept. 30, 2021, pet. denied) (mem. op.), we do not recite them here except as necessary to advise the parties of the Court’s decision and the basic reasons for it, see Tex. R. App. P. 47.1, 47.4.

cash deposit in the amount of $329,652.66, superseding the judgment in part, but that the corporate entities had not posted a supersedeas bond or equivalent cash deposit. The court found “that if not restrained, the judgment debtors [were] likely to dissipate or transfer assets to avoid satisfaction of the Judgment.” To prevent that, the TRO prohibited Paul and his corporate entities “from dissipating or transferring any of their assets for less than fair value . . . until further order from this Court.” The TRO also provided that “on the fourteenth day from entry of this Order, Defendants must each notify Ray Chester, counsel for Plaintiff, of each transfer, conveyance, or dissipation of assets in excess of $25,000 made since the entry of this Order.” The TRO further specified that “[t]his injunction does not prohibit Defendants’ use, transfer, conveyance, or dissipation of assets for fair value in the normal course of business,” and it specifically defined “assets” to “include any property or thing of value, including tangible personal property, intangible personal property (including, but not limited to cash, cryptocurrency, accounts receivable, notes receivable, stocks, bonds, and other securities, and partnership ownership interests), and real property.”

On June 10, 2022, the district court issued a “Post-Judgment Injunction Under TRAP 24.2(d)” (Injunction), which contained similar terms to those of the TRO but also specified that

[O]n the 1st day of each month from entry of this Order, Defendants must each file a sworn report to the Court, with notice to all parties, listing each transfer, conveyance, or dissipation of assets in excess of $25,000 made over the course of the prior month, or, if applicable, that no such transfers or conveyances were made.

The Injunction provided that it “shall continue until either the Judgment is paid in full or until further order of this Court.”

On September 2, 2022, Mitte filed a motion for show-cause order, asking that Paul “be held in civil contempt” for disobeying the Injunction. Specifically, Mitte alleged that “[n]o Defendant has filed a sworn report . . . on July 1, 2022 when the first such report under this injunction was due, or on August 1, 2022, when the second such report under this injunction was due, or on any other date.” Mitte added that “[i]t stands to reason that given Mr. Paul’s demonstrated failure to comply with this injunction, he is likely to dissipate or transfer assets in violation of the injunction as well. In fact, his failure to report transactions may be an effort to cover up such dissipation.” Mitte concluded that “[t]o purge himself of contempt,” Paul must “file sworn reports on his own personal behalf, [and] on behalf of [his corporate entities] covering the following periods: June 10, 2022-June 30, 2022; July 1, 2022-July 31, 2022, and any future calendar month period between now and the date he purges himself of contempt.”

On October 4, 2022, the district court, after considering the motion, issued a show-cause order. In its order, the court noted that the motion was directed “at the disobedience of the portion of the Injunction that commands” Paul and his corporate entities to “file a sworn report to the Court, with notice to all parties, listing each transfer, conveyance, or dissipation of assets in excess of $25,000 made over the course of the prior month, or, if applicable, that no such transfers or conveyances were made.” Finding that the motion was “proper, and states probable grounds for contempt,” the court ordered Paul to appear before the court on November 9, 2022, “to show cause why he should not be held in contempt of Court for disobedience of the Injunction as stated above.”

On November 4, 2022, Paul filed the sworn reports required by the Injunction, and he stated therein that he did not transfer, convey, or dissipate any assets in excess of $25,000 for the time periods specified in each monthly report. Paul then appeared at the November 9

hearing and testified as to his understanding of the Injunction’s requirements and whether he had made any transfers in violation of the Injunction. Among other topics discussed at the hearing, Mitte asked Paul questions relating to a $100,000 transfer that Paul had allegedly made to a professional basketball player on June 22, 2022. Paul’s counsel objected to this line of questioning, arguing that it was not relevant to the purpose of the hearing and that Paul was “entitled to see the information on which [counsel for Mitte] is relying.” The district court overruled the objection, and Paul continued testifying about this and other matters.

At the conclusion of the hearing, Mitte argued that Paul should be held in civil contempt for failing to file the sworn reports. Mitte also argued that Paul should be held in criminal contempt for perjury and making the $100,000 transfer, if it was “not for fair value” in violation of the Injunction. However, Mitte added, “Our research indicates that Mr. Paul is entitled to an opportunity to have another day in court on that and present any defenses he has to that criminal contempt.” To that end, Mitte had drafted a second show-cause order for the district court to sign, along with a second motion for show-cause order.

The district court announced that it was going to recess the hearing until the following week and that it would sign the show-cause order. At Mitte’s request, the district court also ordered that by noon on the Wednesday before the next hearing, Paul provide Mitte with all of Paul’s personal bank statements from June onward, “for the purpose of determining whether or not Mr. Paul is in contempt of court . . . . both civil and criminal, as to whether or not he has filed false statements under oath or made false statements under oath in court,” and to determine “whether the reports are incorrect in stating that there [has] been no transfer, conveyance, or dissipation of assets . . . in excess of $25,000 . . . for less than fair value, which we’ll require Mr. Paul to be able to determine the purpose of the transfer and the value he received in response.”

Counsel for Mitte then produced his proposed show-cause order and revised the order in consultation with counsel for Paul. The court then made its own revisions to the order, signed and dated the order, handed the signed order to both Paul and Paul’s counsel, and recessed the proceedings.

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In Re Natin Paul v. the State of Texas, (Tex. Ct. App. 2023).

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