Richard A. Myers v. HCB Real Holdings, LLC

• Court: Court of Appeals of Texas
• Decided: September 19, 2022
• Docket: 05-20-00419-CV
• Status: Published

Opinion

Affirmed and Opinion Filed September 19, 2022

In The Court of Appeals Fifth District of Texas at Dallas No. 05-20-00419-CV No. 05-20-01046-CV

RICHARD A. MYERS, Appellant V. HCB REAL HOLDINGS, LLC, Appellee

On Appeal from the 68th Judicial District Court Dallas County, Texas Trial Court Cause No. DC-11-02904

MEMORANDUM OPINION Before Justices Pedersen, III, Goldstein, and Smith Opinion by Justice Pedersen, III In 2016, judgment was rendered against appellant Richard Myers in the 68th

Judicial District Court in a suit on a guaranty. Myers has filed two appeals from post-

judgment orders signed in that court. His first appeal, our case number 05-20-00419-

CV, challenges two turnover orders; his second appeal, our case number 05-20-

01046-CV, challenges a charging order. In the interest of judicial efficiency, we

address the appeals together in this opinion. Myers raises four issues concerning the

turnover orders, contending that (i) the trial court did not consider any competent

evidence that he had any non-exempt property subject to turnover; (ii) the orders may compel the transfer of interests in limited liability companies and partnerships

that are not subject to a turnover order; (iii) the orders contain vague, ambiguous, or

contradictory language; and (iv) the orders are overbroad. Myers raises two issues

in this Court concerning the trial court’s charging order. He argues that the order (v)

was an inappropriate amendment to the turnover orders—which were already on

appeal—that granted more relief than requested, and (vi) ignores and therefore

subordinates a prior security interest. We affirm the orders of the trial court.

BACKGROUND

The Turnover Orders

On May 17, 2016, the trial court signed a final judgment, which awarded HCB

Real Holdings, LLC (HCB) a judgment in the amount of $873,786.50 against Myers

and Thomas J. Wouters, jointly and severally. To collect on this judgment, HCB

applied for a turnover order, and the trial court granted the application on

February 26, 2020. The order named a receiver, identified assets and records subject

the receiver’s control, and ordered Myers to cooperate with the receiver and to

deliver to him all the assets and records identified in the order that were in Myers’s

possession or control.

HCB subsequently moved to amend the initial order to address a service issue

raised by Myers. On June 26, 2020, the trial court granted this amendment in its

Amended Order Appointing Receiver, which otherwise contained provisions

–2– identical to the first order. Myers timely noticed his appeal of the orders (together,

the Turnover Orders).

The Charging Order

On September 24, 2020, HCB filed an application in the trial court for a

charging order against Myers’s interest in S/R Myers Family, L.P. in the amount of

the unsatisfied final judgment. Myers filed no response to the application.

The trial court heard the application virtually on October 26, 2020. During the

hearing, Myers’s counsel explained he had emailed evidence to the trial court’s court

reporter for presentation during the hearing. The trial court did not locate the

documents during the hearing, and HCB objected to entry of those documents,

asserting that they were neither filed with the court nor otherwise provided to HCB.

The trial court stated that it would “go ahead and grant the Charging Order and grant

the objection to any exhibits that were submitted.”

The trial court’s order provided that Myers’s membership interest in S/R

Myers Family, L.P. was subject to the order and that distributions due to Myers based

on that membership interest were to be paid directly to HCB, up to the amount of

$1,163,745.48 (the “Charging Order”). Myers appealed.

STANDARD OF REVIEW

We review a trial court’s decision to grant or deny a turnover order for an

abuse of discretion. HSM Dev., Inc. v. Barclay Props., Ltd., 392 S.W.3d 749, 751

(Tex. App.—Dallas 2012, no pet.). We may reverse that ruling only if the trial court

–3– acted in an unreasonable or arbitrary manner or acted without reference to any

guiding rules or principles. Id. Similarly, we review post-judgment charging orders

for an abuse of discretion. In re M.W.M., No. 05-19-00757-CV, 2020 WL 6054337,

at *2 (Tex. App.—Dallas Oct. 14, 2020, no pet.) (mem. op.). We consider whether

evidence supports post-judgment orders as a factor in determining whether the trial

court abused its discretion in issuing them. Beaumont Bank, N.A. v. Buller, 806

S.W.2d 223, 226 (Tex. 1991). A trial court abuses its discretion if there is no

evidence of a substantive and probative character to support its decision. HSM Dev.,

Inc., 392 S.W.3d at 751. When, as in this case, findings of fact and conclusions of

law are not requested or filed, we will imply all findings necessary to support the

trial court’s rulings that are supported by the record. In re M.W.M., 2020 WL

6054337, at *2.

DISCUSSION – TURNOVER ORDERS

Courts with the jurisdiction to render judgments have the inherent authority

to enforce their judgments. Alexander Dubose Jefferson & Townsend LLP v.

Chevron Phillips Chem. Co., L.P., 540 S.W.3d 577, 581 (Tex. 2018) (per curiam).

The Texas turnover statute provides judgment creditors with a procedural device to

assist them in satisfying their judgment debts. Id. The purpose of a turnover

proceeding is to ascertain whether or not an asset is in the possession of the judgment

debtor or is subject to the debtor’s control. Beaumont Bank, N.A., 806 S.W.2d at 227.

–4– Evidence of Property Subject to Turnover

In his first issue, Myers argues that the trial court erroneously signed the

Turnover Orders because HCB failed to submit any competent evidence that he

owned any non-exempt property subject to turnover. HCB’s application was

supported by the Affidavit of Michael Balsbaugh, the Executive Vice President and

managing member of HCB, as well as the Defendant Richard A. Myers’s Responses

to Plaintiff’s First Amended Set of [Post-Judgment] Interrogatories to Richard A.

Myers (the Interrogatory Responses).

Myers challenges the reliability of his own Interrogatory Responses, which

were made in June 2016, some four years before the turnover proceedings. He also

challenges the evidentiary competency of the Interrogatory Responses, because they

were not verified. But Myers cites no authority supporting his argument that

unverified interrogatory responses “cannot be considered competent evidence of

anything.”

HCB responds that Myers’s 2016 unverified Interrogatory Responses are

competent evidence of non-exempt assets. HCB relies upon a comment to the 1999

change in Texas Rule of Civil Procedure 197.3, which provides:

The failure to sign or verify answers is only a formal defect that does not otherwise impair the answers unless the party refuses to sign or verify the answers after the defect is pointed out.

TEX. R. CIV. P. 197.3 cmt. 2. There is no evidence of such a refusal in our record.

Thus, Myers’s failure to verify his interrogatory responses remains merely a “formal

–5– defect that does not otherwise impair” his answers. See id. We conclude that Myers’s

Interrogatory Responses could properly serve as evidence supporting HCB’s

application and could, specifically, identify non-exempt assets within his possession

or control. See Henderson v. Chrisman, No. 05-14-01507-CV, 2016 WL 1702221,

at *4 (Tex. App.—Dallas Apr. 27, 2016, no pet.) (mem. op.).

Myers’s Interrogatory Responses describe his ownership or control over

numerous assets including: (i) a 2009 BMW 750 series; (ii) checking accounts at JP

Morgan Chase Bank, N.A. and Barclays Bank; (iii) a safety deposit box at a Chase

Bank; (iv) various ownership interests in Realty Capital Corporation, RCC Capital

Corporation, RCC Highpoint Oaks Genpar, Inc., RCC Venture Group, LLC, RCC

Development Company, Realty Capital Partners I, Inc., RCC Belmont Genpar, Inc.,

and S/R Myers Family, L.P. We conclude that Myers’s Interrogatory Responses

represent some evidence of a substantive and probative character to support the trial

court’s decision to grant the Turnover Orders. See HSM Dev., Inc., 392 S.W.3d at

751.

Myers also challenges the Balsbaugh Affidavit, arguing it is unclear, far-

fetched, attenuated, and confusing. But our review of the record has not identified

an objection by Myers in the trial court to any portion of the Balsbaugh Affidavit.

Thus, he has failed to preserve any complaints concerning the evidence it offers.

TEX. R. APP. P. 33.1(a)(1).

–6– The Balsbaugh Affidavit provides evidence based on the personal knowledge

of an HCB executive and manager on behalf of the entity. Balsbaugh testifies that

Myers reported his ownership in certain entities in the Interrogatory Responses. He

testifies further that Myers had not (as of the date of the affidavit) updated any of his

answers or responses to those original post-judgment discovery requests propounded

by HCB. And Balsbaugh states that Myers “has proven to be extremely evasive in

providing any information regarding his financials.”

We conclude that HCB presented some evidence of a substantive and

probative character to support its application for a turnover order. Accordingly, the

trial court did not abuse its discretion when it relied on that evidence to grant HCB’s

application. We overrule Myers’s first issue.

Interests Not Subject To Turnover

In his second issue, Myers argues that the trial court abused its discretion by

ordering him to turn over certain assets that are not properly subject to turnover

orders. Specifically, he argues that a charging order is the exclusive remedy by which

(a) a judgment creditor of a partner or of any other owner of a partnership interest

may satisfy a judgment out of the judgment debtor’s partnership interest, and (b) a

judgment creditor of a member or of any other owner of a membership interest in a

limited liability company may satisfy a judgment out of the judgment debtor’s

membership interest.

–7– Myers complains specifically that the Turnover Orders define his “interest in

all entities [he] owns or controls, including but not limited to trusts, limited liability

companies, corporations, Subchapter S corporations, partnerships, or joint ventures”

as “Receivership Interests.” He contends that the powers granted to the receiver

related to these Receivership Assets would subject Myers’s businesses to disruption

by the receiver and would “directly circumvent both settled case law and legislative

intent.” He relies on Business Organizations Code sections related to charging orders

and ownership interests, which provide mechanisms for a judgment creditor to

access the debtor’s interest directly from the business. See TEX. BUS. ORGS. CODE

ANN. §§ 153.256(d) (regarding partnership interests), 101.112(d) (regarding

membership interests in limited liability companies).

Myers’s reading of the Turnover Orders is too limited in its scope. Settled law

requires the effect of a court’s order to be interpreted with reference to

the entire order. Lone Star Cement Corp. v. Fair, 467 S.W.2d 402, 405 (Tex. 1971).

Thus, Myers points to the inclusion of his business “interests” in the list of

Receivership Assets, but he overlooks the fact that the entire list is modified by the

adjective “non-exempt.” The receiver must view all listed assets through that “non-

exempt” filter.

Moreover, after defining the non-exempt items subject to the Turnover Orders

as Receivership Assets, the orders go on to require Myers: “to fully cooperate with

the Receiver and [he] shall deliver to the Receiver . . . all Receivership Assets in the

–8– possession or control of the Defendant.” Myers acknowledges that this Court has

held that the Business Organizations Code provisions he cites do not preclude

turnover of a judgment debtor’s distributions from a partnership or limited liability

company after they are made. See Stanley v. Reef Secs., Inc., 314 S.W.3d 659, 669

(Tex. App.—Dallas 2010, no pet.); Henderson, 2016 WL 1702221, at *2. Thus—as

Stanley and Henderson permit and as Myers concedes—he is bound by the Turnover

Orders to deliver to the receiver only what is in his possession and control, i.e., the

distributions he has already received from his business entities. See Stanley, 314

S.W.3d at 669; Henderson, 2016 WL 1702221, at *2.

We conclude the Turnover Orders do not address direct access to a judgment

debtor’s business interests. We overrule Myers’s second issue.

Myers’s Objections to the Turnover Orders

In his third and fourth issues, Myers contends the trial court abused its

discretion by signing the Turnover Orders because their provisions are ambiguous,

contradictory, or overbroad. Myers included some of these objections to the

Turnover Orders in his Motion to Modify and Clarify Amended Order Appointing

Receiver, filed with the trial court on July 8, 2020. The clerk’s record indicates a

hearing on the motion was scheduled, later cancelled, and then re-scheduled. But

before the re-scheduled hearing was to take place, Myers appealed. Our record

contains no indication that the hearing occurred: we have no reporter’s record or

order ruling on the motion generally or any objections individually. In the absence

–9– of a ruling, Myers presents nothing for our review. TEX. R. APP. P. 33.1(a)(2).

We overrule Myers’s third and fourth issues.

DISCUSSION – CHARGING ORDER

At the outset, HCB contends we lack jurisdiction to hear the appeal of the

Charging Order. “Post-judgment orders are appealable only if the appeal is

statutorily authorized or if the trial court’s order operates as a mandatory injunction

resolving property rights and imposing obligations on the judgment debtor or third

party to transfer property to the judgment creditor.” Transcon. Realty Inv’rs, Inc. v.

Orix Capital Mkts. LLC, 470 S.W.3d 844, 846–47 (Tex. App.—Dallas 2015, no

pet.). We conclude that the Charging Order before us does act as a mandatory

injunction within that understanding of the term. The order requires that “any and

all distributions, of any kind in any amount whatsoever, that are due to or become

due to Myers by reason of his ownership interests in the S/R Myers Family, L.P. be

paid directly to HCB up to the amount of $1,163,745.48.” Thus, the Charging Order

is a final, appealable judgment, and we possess jurisdiction to determine this appeal.1

Purported Flaws in the Charging Order

In his fifth issue, Myers argues that the Charging Order (1) represented an

impermissible attempt to amend the Turnover Order, which was already on appeal,

and (2) granted HCB more relief than it originally requested in its application, by

1 For purposes of clarity, we refer to Myers’s issues concerning the Charging Order as his fifth and sixth issues. –10– including language requiring Myers “to turn over to HCB all proceeds from his

[partnership] interest.” Myers filed no response to HCB’s Application for Charging

Order. And the single objection counsel for Myers raised at the hearing on the

application was to the subordination of his firm’s security interest in Myers’s

partnership interest (discussed below). These purported flaws in the Charging Order

were not raised in the trial court and, therefore, present nothing for our review. TEX.

R. APP. P. 33.1(a). We overrule Myers’s fifth issue.

Myers’s Attorneys’ Security Interest

In Myers’s sixth and final issue, he complains that the trial court signed the

Charging Order without taking account of the security interest his attorneys hold in

his partnership interest in S/R Myers Family, LP. He argues that the Charging Order

impermissibly subordinates that security interest to HCB’s right of recovery under

the Charging Order. As we noted above, this was the single objection raised during

the hearing on the Charging Order. With the trial court’s permission, counsel for

Myers, William Wolf, filed his declaration, asserting that Wolf & Henderson, P.C.

“currently holds a security interest in [Myers’s] interest in [S/R Myers Family, L.P.]

that any Charging Order would be subordinate to.”

However, by raising this issue Myers asserts a security interest that he does

not hold; according to Wolf’s declaration, Wolf & Henderson, P.C. (the Firm) holds

the interest. Myers has not identified any authority giving him the legal capacity to

raise the Firm’s security interest in this appeal.

–11– Nor has the Firm taken any action that would give it the legal capacity to raise

the security interest in this appeal: it has not intervened in the underlying suit; it has

filed no pleading and requested no relief other than making an objection to the

Charging Order. Stated simply, the Firm is not a party to this case. We conclude that

any issue raised by its security interest in Myers’s partnership interest is not properly

before us in this appeal.

We overrule Myers’s sixth issue.

Conclusion

We affirm the trial court’s Turnover Orders and Charging Order.

200419f.p05 /Bill Pedersen, III// 201046f.p05 BILL PEDERSEN, III JUSTICE

–12– Court of Appeals Fifth District of Texas at Dallas JUDGMENT

RICHARD A. MYERS, Appellant On Appeal from the 68th Judicial District Court, Dallas County, Texas No. 05-20-00419-CV V. Trial Court Cause No. DC-11-02904. Opinion delivered by Justice HCB REAL HOLDINGS, LLC, Pedersen, III. Justices Goldstein and Appellee Smith participating.

In accordance with this Court’s opinion of this date, the Turnover Orders of the trial court are AFFIRMED.

It is ORDERED that appellee HCB Real Holdings, LLC recover its costs of this appeal from appellant Richard A. Myers.

Judgment entered this 19th day of September, 2022.

–13– Court of Appeals Fifth District of Texas at Dallas JUDGMENT

RICHARD A. MYERS, Appellant On Appeal from the 68th Judicial District Court, Dallas County, Texas No. 05-20-01046-CV V. Trial Court Cause No. DC-11-02904. Opinion delivered by Justice HCB REAL HOLDINGS, LLC, Pedersen, III. Justices Goldstein and Appellee Smith participating.

In accordance with this Court’s opinion of this date, the Charging Order of the trial court is AFFIRMED.

It is ORDERED that appellee HCB Real Holdings, LLC recover its costs of this appeal from appellant Richard A. Myers.

–14–