TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN
NO. 03-24-00282-CV
New Braunfels Stewardship Properties, LLC and Harold T. Ray, III, Appellants
v.
Circle F Investments, LP and Original DFI, LLC, Appellees
FROM THE 207TH DISTRICT COURT OF COMAL COUNTY, NO. C2021-0208D, THE HONORABLE DIB WALDRIP, JUDGE PRESIDING
ORDER AND MEMORANDUM OPINION
PER CURIAM
Appellants New Braunfels Stewardship Properties, LLC (NBSP) and Harold T.
Ray III appealed the trial court’s final judgment on May 1, 2024. Appellants have filed a motion
challenging the trial court’s order setting supersedeas bond that was signed July 10, 2024. The
Court granted a temporary stay of that order, see Tex. R. App. P. 24.4(c), on July 29, 2024,
pending full review. After review of the parties’ briefing on the motion, we lift our temporary
stay and affirm the trial court’s order setting supersedeas bond. See id. at R. 24.2.
APPLICABLE LAW
A judgment debtor is entitled to supersede and defer payment of the judgment
while pursuing an appeal. Miga v. Jensen, 299 S.W.3d 98, 100 (Tex. 2009); Crowder v. Sanger,
No. 03-21-00291-CV, 2022 WL 2291213, at *2 (Tex. App.—Austin June 24, 2022, op. on
1 motion) (per curiam) (mem. op.); see also Tex. Civ. Prac. & Rem. Code § 52.006; Tex. R. App.
P. 24. The amount of security required to supersede a judgment pending appeal depends on the
type of judgment at issue. Tex. R. App. P. 24.2 (a)(1)-(3). Generally, when the judgment is for
the recovery of money, as is applicable here, the amount of the security must equal the sum 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); Tex. R.
App. P. 24.2(a)(1). However, the bond amount may not exceed the lesser of twenty-five million
dollars or fifty percent of the judgment debtor’s current net worth. Tex. Civ. Prac. & Rem. Code
§ 52.006(b); Tex. R. App. P. 24.2(a)(1).
The judgment debtors, here appellants, have the burden of proving their net
worth. G.M. Houser, Inc. v. Rodgers, 204 S.W.3d 836, 840 (Tex. App.—Dallas 2006, op. on
motion). This requires the judgment debtor to file an affidavit in the trial court that states its net
worth and complete information detailing its assets and liabilities. See Tex. R. App. P.
24.2(c)(1). “Net worth is calculated as the difference between total assets and total liabilities as
determined by generally accepted accounting principles [(GAAP)].” G.M. Houser, Inc.,
204 S.W.3d at 840. “In setting the amount of supersedeas security pending appeal, the trial court
is required to consider the separate financial condition of each judgment debtor.” Id. (citing
Tex. R. App. P. 24.2(c)(3)).
BACKGROUND
Appellant NBSP is a single-purpose entity whose ownership of a commercial
mixed-use property in New Braunfels (“the property”) makes up an overwhelming majority of its
assets. It leases commercial real estate space to commercial tenants. Appellant Ray is a
2 co-owner of a business entity that owns a majority interest in NBSP. Appellees sued appellants
for acts of fraud and tortious interference involving a commercial lease, and the case was tried to
a jury. The jury found in favor of appellees, including finding that appellants had committed
fraud. On February 6, 2024, the trial court signed a final judgment in favor of appellees in the
amount of $7,000,002 to be paid by NBSP, with appellant Ray jointly and severally liable for
$1,000,001 of the total amount.
On April 2, 2024, the trial court signed an injunction against appellants. This
order included a finding that the injunction order was being made based on discovery that
appellants, through their accountant Jim Hickman, had “executed a deed of trust granting R&H
Properties, LLC, Harold T. Ray, Jr., and the E.J. Hickman Family Trust a security interest in the
NBSP property for $1,147,159.31 in purported loans to NBSP” on the business day prior to the
first day of trial. Hickman is the trustee for the E.J. Hickman Family Trust, which is a co-owner
with Ray of R&H Properties. R&H owns 55% of NBSP. Based on that execution of the deed of
trust “on the eve of trial, the court conclude[d] that the judgment debtors are likely to dissipate or
transfer their assets to avoid satisfaction of the judgment,” and it ordered that appellants are
enjoined from “further dissipating, transferring, or otherwise encumbering assets in their
possession which may otherwise be available to satisfy the judgment entered in this cause except
as may be necessary in the normal course of their business” and from “foreclosing on, or taking
any affirmative steps to foreclose on, or exercising any purported security interest the lenders
claim to have to the NBSP property based on the alleged debt evidenced by the deed of trust.”
On April 5, appellants filed motions to set supersedeas bonds based on their net
worth and filed accompanying net worth affidavits. NBSP claimed that its total assets, including
the property, are worth $4,432,048.64 and that its liabilities are $4,342,161.43, including the
3 $1,143,714.81 in loans that were the subject of the April 2nd injunction. Based on those figures,
NBSP calculated its net worth at $89,910.56, and filed a $44,955.28 supersedeas bond. NBSP’s
affidavit included the following financial documents: a February 2024 balance sheet, a February
2024 profit-and-loss statement, and appraisals for the property from the Comal County Appraisal
District. Ray claimed $3,209,903 in assets and $3,910,941 in liabilities, which results in a
negative net-worth calculation. NBSP’s affidavit was prepared by Hickman, who also assisted
Ray in preparing his affidavit.
On April 9, appellees filed objections in the trial court to appellants’ net-worth
affidavits. Appellants appealed the final judgment to this Court on May 1, 2024.
On July 9, 2024, the trial court held an evidentiary hearing on the supersedeas
bonds, specifically on appellees’ objections to the adequacy of appellants’ net-worth showing to
support their posted bond amounts. Prior to the hearing, appellees deposed NBSP’s accountant
Hickman about the net-worth affidavits and his calculations. Appellees’ evidence presented at
the hearing included appellants’ April 2024 net worth affidavits, appellants’ amended net-worth
affidavits signed July 2, 2024, an appraisal report on the property, a 2018 financial statement for
Ray, and a bank memorandum with a financial statement for Ray. Appellees called Hickman
and Ray as witnesses. Appellants’ evidence included the following documents: NBSP’s 2023
balance sheet; NBSP’s February 2024 balance sheet and profit-and-loss statement; two guaranty
agreements signed by Ray as guarantor; an opinion letter and resume from Caroline Craig, a
certified public accountant that reviewed NBSP and Ray’s net-worth affidavits; and NBSP’s
income-tax forms from 2016 to 2023. Appellants called Craig as a witness.
At the bond hearing, Hickman testified that he is a certified public accountant
who prepared NBSP’s net-worth affidavits. The April 2024 affidavit is the one that the posted
4 bond was based on, but Hickman also filed an amended one after being deposed by appellees
regarding the first affidavit. The amended affidavit calculated a negative net worth for NBSP.
Hickman confirmed that he had appeared as the corporate representative for NBSP at
a deposition.
Hickman testified that he calculated NBSP’s net worth by disregarding the
appraisals and using the “cost basis.” He testified that the property’s cost basis is the amount
NBSP paid for the property. He testified that the total asset cost basis is the total fixed assets
with accumulated depreciation subtracted. However, Hickman testified that at the time he
prepared his affidavit and when he was deposed, he did not know how much NBSP paid for the
property. He also testified that he did not know the details of the purchase but based his
calculations solely on NBSP’s books, which he testified was “normally what you do in
accounting.” He admitted that when he first took over the books, he had found errors. He also
admitted that the property included three buildings, but the accounting statement had separate
entries for buildings one and two but had no entry for building three. He explained that he
thought it was likely that the third building’s value was included with the value of the second.
Hickman was asked about inconsistencies between his deposition testimony and
his hearing testimony regarding whether the loans totaling $1,147,159.31 made to R&H
Properties, LLC; Harold T. Ray, Jr.; and the E.J. Hickman Family Trust were contingent
liabilities. At his deposition he had testified that he did consider them contingent and that
contingent liabilities should not be included, and at the hearing he testified they were not
contingent. Hickman explained that his blood sugar was low during the deposition, and he was
confused when asked about the loans and thought he was being asked about tenant balances. He
testified that under GAAP, contingent liabilities should not be included in net-worth calculations.
5 Hickman testified that although he was still using February as the time frame for
calculating net worth in his amended affidavit, he decreased the total asset value and increased
liabilities by approximately $12,000, which made NBSP’s net worth negative. He explained that
when preparing NBSP’s tax return he discovered that the calculations from his April net-worth
affidavit were not correct. He agreed that the new affidavit did not correct the error in the
missing line for building three. However, he testified that he had “no doubt” that all three
buildings were included as assets in the report.
He also testified that cost-basis calculations are used in accounting and that using
market value would be “chaos.” He explained that to “measure the ability to pay, cost basis”
should be used.
Ray testified next. He confirmed that he owns 50% of R&H Properties along
with the Hickman Family Trust, and that the R&H Properties owns 55% of NBSP. He testified
that Hickman assisted him with preparing his April net-worth affidavit, but not his 2023 personal
financial statements. He explained that he prepares one annually for the bank for lending
purposes for his businesses. He admitted that in his financial statement, he used the market value
for the property in calculating his assets rather than cost basis. He also admitted that during
depositions in preparation for the hearing, neither Hickman nor he could remember the purchase
price of the property, which is used to calculate cost basis. He admitted that he did not provide
any other years’ financial statements to appellees because he does not keep them and agreed that
appellees had obtained his 2018 statement directly from his bank. He also admitted that he
claims only his ownership percentage of the property value but claims the entire debt as a
liability. He explained that is because he personally guaranteed the debt. He agreed that
guarantor liabilities are contingent liabilities. Ray admitted that he filed an amended affidavit
6 based on errors that were discussed during his deposition but that he did not remove the
contingent liabilities. He testified that one of the errors he had to amend was caused by him
being incorrect about how much of NBSP he owned and explained that he was not trying to
hide anything.
Ray was then asked about differences between his 2018 financial statement and
his April 2024 net-worth affidavit. He agreed that he listed the purchase price of the property at
$2.1 million in 2018 but listed it as $1.5 million in his 2024 affidavit. He also admitted that in
2018 he claimed a net worth of $2.1 million and in 2024 was claiming a negative net worth. He
explained that the 2018 statement was a joint statement and included some of his wife’s assets.
Ray was also asked about a personal financial statement he submitted to his bank
in 2023, during the pendency of trial, to obtain a loan for NBSP. He admitted that he did not
include the contingent guarantor liabilities on that statement. He agreed that he claimed a net
worth of $3,976,700. He testified that although he was the only individual listed on that
statement that it was still a joint statement. He explained that the difference was caused by
selling properties and taking on new liabilities.
Appellees then rested and appellants called Craig, a certified public accountant
with fifty years’ experience. She explained that she did not know Ray and was not familiar with
NBSP prior to being asked to review the financial documents about two weeks prior to the
hearing. She testified that she prepared a letter after reviewing the financial files for NBSP and
Ray. She explained that she also submitted an amended letter after realizing that one of the
financial records she relied on for the first letter was from the wrong year. She testified that
“worth” is “the going rate for a willing buyer and a willing seller,” and that “net worth” is “what
is left after everything else has been satisfied.” When asked whether the trial court should base
7 the value of the property off the appraisal value or the cost basis, she answered that she could not
tell the court what to do but that whichever value it uses, it would need to subtract “certain
items” to get a net value. She testified that she uses cost basis when reporting to the IRS. She
also responded in the affirmative when asked if cost basis would be used every time when
following “GAAP rules.”
She explained that personal financial statements are form documents prepared by
individuals to obtain loans from banks. She testified that Ray’s personal financial statement,
correctly included the contingent guarantor liability because to not include it would “be
defrauding the bank.” She also testified that if she was doing a personal statement, she would
include the contingent guarantor liability as “a footnote.” She admitted however that she did not
have personal information about Ray’s financials and was basing her opinion of the correctness
of his personal financial statement on her own experience filling out the same form for herself to
obtain a bank loan. She admitted that she had no knowledge of how contingent liabilities should
be treated under Texas law and was not stating an opinion on whether the trial court should
consider them, but rather was only opining that they were properly included in Ray’s statement
to the bank. She testified that her report was a “calculation of things that should be considered in
arriving at net worth,” which include appraisal values for the property.
When asked if her calculations conformed with GAAP, she replied that “GAAP
has nothing to do with this.” She explained that GAAP applies when doing an audit but not to
the personal financial statement that Ray provided. She also admitted that her calculations relied
on the balance sheets she was supplied and that she did not independently confirm the validity of
the numbers she was provided. She agreed that “the information provided by Mr. Hickman for
the valuation of the company” used GAAP.
8 The day after the hearing, the trial court signed an order granting appellees’
contest to appellants’ net-worth affidavits and set bond at $2,099,500 for NBSP and at $853,500
for Ray. The trial court made the following findings and conclusions:
• Appellants failed to present credible, reliable evidence for the Court to determine Appellants’ net worth and the bonds posted by Appellants are insufficient to secure the Appellees’ judgment pending appeal.
• NBSP has assets worth $7,404,000, liabilities totaling $3,205,000, and a net worth of $4,199,000.
• Ray has assets worth $2,947,000, liabilities totaling $1,240,00, and a net worth of $1,707,000.
The trial court noted that it considered all the evidence and that any “values reflected in evidence
but not included in Exhibit A and B attached hereto were disregarded as not appropriate for
[Rule] 24.2 calculation.” The trial court attached two pieces of paper that contained the detailed
assets and liabilities that the trial court considered in completing each calculation.
On July 29, 2024, appellants filed their Rule 24.4 motion requesting that we
review the trial court’s order setting supersedeas security. 1 Appellees filed a response and
appellants filed a reply.
STANDARD OF REVIEW
On any party’s motion, we review the sufficiency or excessiveness of the amount
of security and the trial court’s exercise of discretion in setting the amount of security. See Tex.
Civ. Prac. & Rem. Code § 52.006(d); Tex. R. App. P. 24.4. We review a trial court’s
1 Appellants attached to their motion affidavits from experts in supersedeas bonds and banking professionals that were acquired after the trial court’s order set the bond amount. The affidavits reflect that the appellants have been unable to secure supersedeas bonds in the amounts set. 9 determination of the amount of security for an abuse of discretion. See G.M. Houser,
204 S.W.3d at 840. However, we review questions of law de novo because a trial court has no
discretion in determining what the law is or applying the law to the facts and therefore abuses its
discretion if it misinterprets or misapplies the law. See Perry Homes v. Cull, 258 S.W.3d 580,
598 (Tex. 2008); Walker v. Packer, 827 S.W.2d 833, 840 (Tex. 1992) (orig. proceeding). A
court abuses its discretion when it acts without reference to any guiding rules or principles.
E.I. du Pont de Nemours & Co. v. Robinson, 923 S.W.2d 549, 558 (Tex. 1995). In assessing a
bond, the trial court abuses its discretion if the evidence is legally or factually insufficient to
support its findings. G.M. Houser, 204 S.W.3d at 840.
To show the trial court abused its discretion by basing its findings on legally
insufficient evidence, judgment debtors must show the evidence conclusively establishes, as a
matter of law, all vital facts in support of their position. Id. at 840-41. In determining whether
the evidence is legally sufficient to support the trial court’s determination of net worth, we
consider all of the evidence in the light most favorable to the challenged finding and indulge
every reasonable inference that would support it. City of Keller v. Wilson, 168 S.W.3d 802, 822
(Tex. 2005); Ramco Oil & Gas, Ltd. v. Anglo Dutch (Tenge) L.L.C., 171 S.W.3d 905, 910 (Tex.
App.—Houston [14th Dist.] 2005, order). We must credit favorable evidence if a reasonable fact
finder could and disregard contrary evidence unless a reasonable fact finder could not. See
Ramco, 171 S.W.3d at 910. We must determine whether the evidence before the court would
allow reasonable and fair-minded people to find the facts at issue. See id.
In reviewing the factual sufficiency of the evidence to support the trial court’s
finding of net worth, we examine the entire record, considering the evidence both in favor of and
contrary to the challenged finding. See Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986) (per
10 curiam); Ramco, 171 S.W.3d at 910. We set aside the fact finding only if it is so contrary to the
overwhelming weight of the evidence as to be clearly wrong and unjust. Id.
The trial court, as factfinder, is the sole judge of the credibility of the witnesses
and the weight to be given their testimony. See Ramco, 171 S.W.3d at 910. We may not
substitute our judgment for the fact finder’s even if we would reach a different answer on the
evidence. See Maritime Overseas Corp. v. Ellis, 971 S.W.2d 402, 407 (Tex. 1998). Further, trial
courts are “afforded broad discretion in determining the amount and type of security and the
sufficiency of the sureties and may make ‘any order necessary to adequately protect the
judgment creditor against loss or damage that the appeal might cause.’” Miller v. Kennedy &
Minshew, Pro. Corp., 80 S.W.3d 161, 164 (Tex. App.—Fort Worth 2002, op. on motion) (citing
Tex. R. App. P. 24.1(e), 24.3(a)(1)).
DISCUSSION
NBSP’s net worth
NBSP contends that the trial court erred by not calculating its net worth in accordance
with GAAP. Specifically, it contends that the trial court abused its discretion by (1) using fair
market value instead of cost basis to calculate its total fixed assets; and (2) not including its total
liabilities in the calculation. Appellees contend that it was within the trial court’s discretion to
discredit the witness testimony regarding cost basis, and thus, it was within the trial court’s
discretion to use the market values to set bond at a lower level than it otherwise could, which
would have been the full amount of the $7,000,002 judgment. See Tex. Civ. Prac. & Rem. Code
§ 52.006(a); Tex. R. App. P. 24.2(a)(1).
11 “Testimony from interested witnesses may establish a fact as a matter of law only
if the testimony could be readily contradicted if untrue, and is clear, direct, and positive, and
there are no circumstances tending to discredit or impeach it.” Ramco, 171 S.W.3d at 911.
While a factfinder cannot ignore undisputed testimony that is clear, positive, direct, otherwise
credible, free from contradictions and inconsistencies, and could have been readily controverted,
the factfinder is the sole judge of credibility and “may disregard even uncontradicted and
unimpeached testimony from disinterested witnesses.” City of Keller, 168 S.W.3d at 819–20.
Here, we cannot conclude that the trial court’s implicit credibility determinations regarding the
debtor’s evidence were unreasonable or an abuse of discretion. Appellants contend that their
evidence was uncontroverted. We disagree. The evidence included six different valuations of
the property, which all came from appellants or their witness. The witnesses were unsure and
inconsistent about the purchase price of the property to support the cost-basis analysis. There
was testimony that the net-worth affidavits had to be amended after appellees pointed out errors
to appellants during their depositions. Additionally, the underlying case involves a finding of
fraud committed by appellants against appellees, and the trial court had already issued a
protective order against appellants based on concerns that arose upon discovery of business loans
either made or recorded days before trial.
The evidence is sufficient to support the trial court’s finding that it was unable to
determine NBSP’s net worth based on the lack of sufficient credible evidence establishing total
assets. 2 See Crowder, 2022 WL 2291213, at *7 (holding that trial court did not abuse its
discretion by striking net worth affidavit based on “discrepancies and uncertainties regarding the
2 Because we conclude the evidence supports that the trial court could not determine NBSP’s net worth because it could not determine total assets based on NBSP’s evidence, we do not reach NBSP’s contention regarding the trial court’s finding regarding liabilities. 12 accuracy of the items on the net-worth statement”). Thus, the trial court did not abuse its
discretion by raising NBSP’s bond. Indeed, “when the trial court is unable to determine a
specific net-worth amount from the evidence, it is not an abuse of discretion to set the bond in
the default amount dictated by Rule 24.2(a)(1).” Id. Here, the default amount would have been
the full amount of the “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).
Notably, the trial court did not set the bond at the default amount, which we have
concluded it could have. Instead, it set it lower based on a market value estimate provided by
appellants. In a sub-issue, NBSP contends that it was error for the trial court to use market value
to calculate the bond amount. Assuming without deciding that it was error to use market value,
in the absence of sufficient evidence to establish the parties’ net worth, the proper calculation
would have been the significantly higher statutory default amount of the total compensatory
damages, costs, and estimated interest. See Tex. R. App. P. 24.2(a)(1). Accordingly, any error
that occurred from the trial court setting the bond amount lower than the amount supported by
the record would be harmless. See Tex. R. App. P. 44.1(a) (prohibiting reversal of trial court
judgment absent showing that trial court error “probably caused the rendition of an improper
judgment” or “probably prevented the appellant from properly presenting the case to the court of
appeals”); Crowder, 2022 WL 2291213, at *7 (concluding that “when the trial court is unable to
determine a specific net-worth amount from the evidence, it is not an abuse of discretion to set
the bond in the default amount dictated by Rule 24.2(a)(1)”).
We overrule appellants’ issue as it relates to the trial court’s order raising the
amount of the supersedeas bond that NBSP is required to post.
13 Ray’s net worth
Ray contends that the trial court abused its discretion by failing to include his total
liabilities to determine his net worth. For the same reasons discussed above, we conclude that
the trial court did not abuse its discretion in concluding that it did not have sufficient credible
evidence to determine Ray’s net worth. The trial court was presented with six different
valuations for the property. Further, the evidence showed that Ray had valued the cost basis of
the property differently over the years and that at his deposition he did not know the purchase
price of the property. Additionally, there were inconsistencies between Ray’s financial
statements. Although Ray did offer explanations for the inconsistencies, the evidence was
sufficient to support the trial court’s credibility determinations as factfinder. See Ramco,
171 S.W.3d at 910. We will not substitute our judgment for that of the fact finder.
See Maritime, 971 S.W.2d at 407. Thus, we conclude the trial court did not abuse its discretion
by raising his bond amount when it was unable to determine net worth based on his provided
evidence. See Crowder, 2022 WL 2291213, at *7.
Ray raises the same sub-issue as NBSP regarding the trial court’s decision to set
his bond based on a market value estimate after determining it could not determine his net worth.
Assuming without deciding that the trial court erred by using a market-value estimate, we again
conclude that any error from the trial court’s setting the bond amount lower than the statutory
default would be harmless. See Tex. R. App. P. 44.1(a); Crowder, 2022 WL 2291213, at *7.
We overrule appellants’ issue as it relates to the trial court’s order raising the
amount of the supersedeas bond that Ray is required to post.
14 CONCLUSION
Having overruled appellants’ issue in its entirety, we deny their motion, affirm the
trial court’s July 10, 2024 order setting supersedeas bond, and lift our July 29, 2024 temporary
stay of that order.
It is ordered on November 14, 2024.
Before Chief Justice Byrne, Justices Triana and Kelly