Poppingfun, Inc. v. Integracion De Marcas, S.A. De C v. ( 2020 )

NUMBER 13-19-00143-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
POPPINGFUN, INC., Appellant,
v.
INTEGRACION DE MARCAS, S.A. DE C.V., Appellee.
On appeal from the 131st District Court
of Bexar County, Texas.
ORDER
Before Justices Benavides, Longoria, and Tijerina
Order Per Curiam1
Pending before the Court is a motion filed by appellant, Poppingfun, Inc., to review
the trial court’s order setting the supersedeas bond at $52,561.11. See TEX. R. APP. P.
1 This appeal was transferred to this Court from the Fourth Court of Appeals by order of the Texas
Supreme Court. 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).
24.4. We deny appellant’s motion.
I. FACTUAL AND PROCEDURAL SUMMARY
Appellee, Integracion de Marcas, S.A. de C.V., filed suit against appellant alleging
various causes of action based on appellee’s claim that appellee received damaged
goods from appellant. The trial court granted summary judgment in favor of appellee and
awarded appellee $69,669.87 in damages and $17,545.00 in attorney’s fees, plus court
costs and interest. Appellant filed a notice of appeal and a notice of filing cash deposit in
lieu of supersedeas bond in the amount of $1.00. See Id. 24.1(a)(3). Appellant attached
the affidavit of Lynn A. Hesson, president and chief executive officer of Poppingfun, Inc.,
stating appellant has a negative net worth. In that affidavit, Hesson listed total liabilities
of $2,087,172.99 and assets totaling $239,599.83 for a negative net worth of
$1,847,573.16. Appellee filed a motion to strike appellant’s cash deposit and appellant
responded, attaching additional evidence including, inter alia, excerpts from Hesson’s
post-judgment deposition and appellant’s balance sheets from 2017 and 2018. Appellee
then filed a brief in support of its motion to strike.
The trial court held a hearing on February 28, 2020 and took the matter under
advisement. The trial court ordered appellee to serve appellant with any post-judgment
discovery requests, ordered appellant to respond to said requests, and scheduled a
follow-up hearing for April 29, 2020. The day before the trial court held a follow up hearing,
appellant filed a “Supplement in Support of its Cash Deposit,” attaching a supplemental
affidavit of Hesson and its 2019 federal income tax return, which appellant contends
shows a net worth of “negative $1.726 million.” Appellee responded with a supplemental
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brief the next day, prior to the hearing. The hearing was conducted via Zoom, and the trial
court gave appellant permission to respond to appellee’s supplemental brief and took the
matter under advisement. Appellant filed a response, and subsequently, on July 7, 2020,
the trial court signed an order granting appellee’s motion to strike and ordered appellant
to make a cash deposit of $52,565.11.
Appellant filed a rule 24.4 motion for review of the trial court’s order on
supersedeas bond, asking this Court to vacate the order, among other relief. This Court
stayed the trial court’s July 7, 2020 order and remanded the matter to the trial court for
entry of findings of fact regarding appellant’s net worth and the taking of any additional
evidence necessary. The trial court held a hearing and issued supplemental findings of
fact and conclusions of law, ultimately arriving “at the net worth figure of $503,426.11. . .”
finding that Hesson’s affidavit was not true and correct. Appellant then filed an amended
rule 24.4. motion for review.
II. NET WORTH
In its motion, appellant asserts that the trial court’s order is erroneous because the
trial court: (1) “imposed an erroneous burden of proof”; (2) rejected appellant’s “affidavit
of net worth as incompetent hearsay”; (3) required appellant’s “affidavit of net worth to
prove matters that are not required by rule 24”; (4) failed “to find that [appellant’s] net
worth is negative against the great weight and preponderance of the evidence”; and (5–
6) rewrote appellant’s balance sheet to increase the total assets and to reduce the total
liabilities.
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A. Standard of Review & Applicable Law
We review the trial court’s determination of the amount of security for an abuse of
discretion. Tex. Custom Pools, Inc. v. Clayton, 293 S.W.3d 299, 305 (Tex. App.—El Paso
2009, no pet.); G.M. Houser, Inc. v. Rodgers, 204 S.W.3d 836, 840 (Tex. App.—Dallas
2006, no pet.). If we conclude the trial court abused its discretion, we may order the
amount of the security increased or decreased in an amount not to exceed the lesser of
fifty percent of the judgment debtor’s net worth or $25,000,000. TEX. R. APP. P. 24.4(a);
TEX. CIV. PRAC. & REM. CODE ANN. § 52.006(d).
In conducting this review, we engage in a two-pronged analysis: (1) did the trial
court have sufficient information upon which to exercise its discretion; and (2) did the trial
court err in its application of discretion? Leibman v. Grand, 981 S.W.2d 426, 429 (Tex.
App.—El Paso 1998, no pet.). The traditional standards utilized to review sufficiency of
the evidence come into play when considering the first question. Id. at 429–30. We then
proceed to determine whether, based on the elicited evidence, the trial court made a
reasonable decision, or whether it is arbitrary and unreasonable. Id. at 430. The question
is not whether, in the opinion of the reviewing court, the facts present an appropriate case
for the trial court’s action, but whether the court acted without reference to any guiding
rules and principles. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 242 (Tex.
1985). The mere fact that a trial court may decide a matter within its discretionary authority
in a different manner than an appellate judge in a similar circumstance does not
demonstrate that an abuse of discretion has occurred. Leibman, 981 S.W.2d at 430.
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Under rule 24.1 of the Texas Rules of Appellate Procedure, a judgment debtor may
supersede a 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 trial court. TEX. R. APP. P. 24.1.
When the judgment is for money, the amount of the bond, deposit, or 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. Id. 24.2(a)(1); TEX. CIV. PRAC.
& REM. CODE ANN. § 52.006(a). However, the amount must not exceed the lesser of fifty
percent of the judgment debtor’s current net worth or $25,000,000. TEX. R. APP. P.
24.2(a)(1); TEX. CIV. PRAC. & REM. CODE ANN. § 52.006(b).
Rule 24.2(c) sets forth the procedure for determining net worth. A judgment debtor
who provides a bond, deposit, or security under rule 24.2(a)(1)(A) in an amount based on
the debtor’s net worth must simultaneously 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). The affidavit
is prima facie evidence of the debtor’s net worth. Id. A judgment creditor may file a
contest to the debtor’s affidavit of net worth. Id. 24.2(c)(2). Net worth is calculated as the
difference between total assets and total liabilities as determined by generally accepted
accounting principles. Tex. Custom Pools, Inc., 293 S.W.3d at 305; G.M. Houser,
Inc., 204 S.W.3d at 840. At the hearing on the judgment creditor’s contest, the judgment
debtor has the burden of proving net worth. TEX. R. APP. P. 24.2(c)(3). The trial court is
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required to issue an order that states the debtor’s net worth and states with particularity
the factual basis for that determination. Id. On the motion of a party, an appellate court
may review the sufficiency or excessiveness of the amount of security. Id. 24.4(a); TEX.
CIV. PRAC. & REM. CODE ANN. § 52.006(d); Tex. Custom Pools, Inc., 293 S.W.3d at
305; G.M. Houser, Inc., 204 S.W.3d at 840.
B. Burden of Proof
Because appellant had the burden to prove its net worth, it must show the evidence
conclusively establishes, as a matter of law, all vital facts in support of its position. Sterner
v. Marathon Oil Co., 767 S.W.2d 686, 690 (Tex. 1989); Tex. Custom Pools, Inc., 293
S.W.3d at 306; G.M. Houser, Inc., 204 S.W.3d at 840–41. In reviewing a “matter of law”
challenge, the reviewing court must first examine the record for evidence that supports
the finding, while ignoring all evidence to the contrary. Sterner, 767 S.W.2d at 690. If there
is no evidence to support the finding, the reviewing court will then examine the entire
record to determine if the contrary proposition is established as a matter of law. Id. In
conducting our review, we must consider the evidence in the light most favorable to the
challenged finding and indulge every reasonable inference that would support it. G.M.
Houser, Inc., 204 S.W.3d at 841 (citing City of Keller v. Wilson, 168 S.W.3d 802, 822
(Tex. 2005)). We must credit favorable evidence if a reasonable fact finder could and
disregard contrary evidence unless a reasonable fact finder could not. Id. (citing City of
Keller, 168 S.W.3d at 827; Ramco Oil & Gas, Ltd. v. Anglo Dutch (Tenge) L.L.C., 171
S.W.3d 905, 910 (Tex. App.—Houston [14th Dist.] 2005, no pet.)). Finally, we must
determine whether the evidence before the trial court would enable reasonable and fair-
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minded people to find the facts at issue. G.M. Houser, Inc., 204 S.W.3d at 841. We also
bear in mind that the fact finder is the sole judge of the credibility of the witnesses and
the weight to give their testimony. Id.
Appellant contends that the trial court imposed an erroneous burden of proof by
requiring it to conclusively establish any facts as a matter of law, as opposed to a
preponderance of the evidence burden. However, the trial court’s order specifically stated
that it found appellant’s net worth to be $503,426.11 “based on a preponderance of the
evidence.” While the trial court’s order cites case law that “[t]o be ‘complete’ a Rule 24
affidavit must provide evidence that conclusively establishes, as a matter of law, all vital
facts in support of its position,” the trial court stated that its findings were based on the
appropriate burden of proof, and we see no reason to disbelieve this assertion. Sterner,
767 S.W.2d at 690. Thus, we decline to find that the trial court imposed an erroneous
burden of proof when its order explicitly applied the correct burden of proof. Appellant’s
first issue is overruled.
C. Hesson’s Affidavit
In its second issue appellant complains that the trial court made the following
erroneous finding of fact and conclusion:
Further, the Court finds that [appellant] has failed to establish that its assets
and liabilities as set forth in the 2019 Balance Sheet show its net worth as
determined by generally accepted accounting principles (“GAAP”), as
Texas law requires. See, e.g., Ashmore, 2016 WL 4437009, at *1; Ramco,
171 S.W.3d at 914. Although the Hesson Affidavit states that the 2019
Balance Sheet “was prepared in accordance with [GAAP]” it does not
establish Mr. Hesson’s qualifications to make that assertion and, therefore,
is not competent evidence on the matter and [appellee’s] hearsay objection
to said testimony is sustained.
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Appellant contends that (1) Hesson’s affidavit is prima facie evidence of its net worth, and
not hearsay; and (2) that it was not required to provide testimony from an accountant to
prove its net worth. Further, by its third issue, appellant argues that the trial court required
it to prove matters outside the scope of rule 24, specifically complaining of the trial court’s
finding that
the Hesson Affidavit is not “complete” as Rule 24.2 requires in that it does
not include underlying documents to support each asset and each liability
in the 2019 Balance Sheet, provide appropriate testimony by an accountant
or competent financial person, indicate any efforts by [appellant] to obtain a
supersedeas bond, indicate that there are insufficient unencumbered
assets to cover the cost of a bond, explain the impact on [appellant] of
selling assets to acquire a bond or state the likelihood of insolvency or
bankruptcy should assets be sold to acquire a supersedeas bond.
Appellee responds that the trial court found numerous defects in Hesson’s affidavit
and further, as is within its discretion, found the affidavit to be incomplete under rule
24.2(c)(1). See TEX. R. APP. P. 24.2(c)(1) (“A judgment debtor who provides a bond,
deposit, or security under (a)(1)(A) in an amount based on the debtor’s net worth must
simultaneously 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.”). Appellee argues that even if this Court were
to find that the trial court erred in its hearsay ruling, though appellee does not believe it
did, the rejection of the affidavit would still be appropriate as it was “riddled with so many
defects and shortcomings.”
In his affidavit, Hesson averred in part that
[t]he attached balance sheet was prepared in accordance with generally
accepted accounting principles and provides complete and detailed
information concerning [appellant’s] assets and liabilities, from which its net
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worth can be ascertained. As reflected in the balance sheet, [appellant]
reports the following total amounts:
Total assets = $239,599.83
Total liabilities = $2,087,172.99
Net worth = (negative) $1,847,573.16
The trial court found that the affidavit did “not establish Mr. Hesson’s qualifications to
make that assertion and, therefore, is not competent evidence on the matter and
[appellee’s] hearsay objection to said testimony is sustained.”
Appellee presented the trial court with contradictory evidence to discredit portions
of appellant’s balance sheet and to impeach Hesson’s declaration of appellant’s net
worth. The trial court agreed with appellee, finding the balance sheet to have unsupported
assertions for its assets and liabilities, and thus finding the affidavit incomplete. Also, the
trial court found that while Hesson stated that the balance sheet was prepared in
accordance with generally accepted accounted principles, there was no evidence or
testimony to support his assertion, nor did appellant provide any “underlying documents
to support each asset and each liability.”
Although we agree with appellant that an affidavit meeting the requirements of rule
24.2(c)(1) is prima facie evidence of the debtor’s net worth for the purpose of establishing
the amount of the supersedeas bond, the rule also expressly provides that a judgment
creditor may file a contest to the debtor’s claimed net worth. See TEX. R. APP. P.
24.2(c)(2). And in order to constitute prima facie evidence, the affidavit must state
“complete, detailed information concerning the debtor’s assets and liabilities from which
net worth can be ascertained.” Id. 24.2(c)(1). The record reflects, and the trial court found,
that appellant failed to offer complete and detailed information regarding its assets and
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liabilities from which its net worth could be determined. Appellant’s argument that the trial
court imposed additional requirements that are not considered under rule 24 does not
alter our finding that appellant failed to meet its burden of proof. The trial court, as the fact
finder, found that Hesson’s affidavit was unreliable, incomplete, and contained
unsupported assertions. Again, we bear in mind that the fact finder is the sole judge of
the credibility of the witnesses and the weight to give their testimony, and we defer to the
trial court’s finding of credibility in this matter. G.M. Houser, Inc., 204 S.W.3d at 841.
Therefore, appellant failed to meet his burden of proof. See TEX. R. APP. P. 24.2(c)(3)
(debtor bears burden of proving net worth). Appellant’s second and third issues are
overruled.
D. Against the Great Weight and Preponderance of the Evidence
In its fourth issue, appellant complains that the trial court’s failure to find a negative
net worth was against the great weight and preponderance of the evidence. Having
presented the trial court with Hesson’s affidavits, balance sheets for three consecutive
years, and its 2019 federal income tax return, as well as “tax liability statements issued
by the IRS” and deposition testimony of Hesson, appellant argues that the trial court erred
by not finding it has a net worth of “less than negative $1 million.”
The trial court, however, explicitly found that the affidavit was incomplete, the
balance sheets were inaccurate or heavily contested by appellee, and that the tax return
was insufficient to establish net worth. We find that the trial court’s order specifically
recites the reasons for finding the debtor was not credible. It was reasonable for the trial
court to question appellant’s credibility “given the other evidence available for the court’s
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consideration” as we have discussed above. See Bishop Abbey Homes, Ltd. v. Hale, No.
05-14-01137-CV, 2015 WL 4456209, at *6 (Tex. App.—Dallas July 21, 2015, no pet.)
(mem. op. on motion) (citing Newsome v. North Texas Neuroscience Center, P.A., No.
08–09–00025–CV, 2009 WL 3738504 (Tex. App.—El Paso Nov. 9, 2009, no pet.) (mem.
op. on motion)). The trial court’s order “states with particularity the factual basis” for its
determination, as required by rule 24.2(c)(3). See In re Smith, 192 S.W.3d 564, 568 (Tex.
2006) (explaining that the trial court must state with particularity the factual basis for its
determination of net worth so that an appellate court may “ascertain the basis for that
determination”). The evidence supports the trial court’s ruling. If a party is attacking the
factual sufficiency of an issue upon which it had the burden of proof, it must demonstrate
that the adverse finding is against the great weight and preponderance of the evidence.
Croucher v. Croucher, 660 S.W.2d 55, 58 (Tex. 1983); Marrs and Smith Partnership v.
D.K. Boyd Oil and Gas Co., Inc., 223 S.W.3d 1, 14 (Tex. App.—El Paso 2005, pet.
denied). In reviewing a factual sufficiency issue, we must first examine the record to
determine if there is some evidence to support the finding; if so, then we must determine
whether the failure to find is so contrary to the overwhelming weight and preponderance
of the evidence as to be clearly wrong and manifestly unjust. Cain v. Bain, 709 S.W.2d
175, 176 (Tex. 1986); Tex. Custom Pools, Inc., 293 S.W.3d at 306. Here, appellant has
failed to establish that there is no evidence to support the trial court’s ruling, or that the
ruling was against the great weight and preponderance of the evidence. See Newsome,
2009 WL 3738504, at *5. The trial court did not abuse its discretion in setting the amount
of the bond in accordance with § 52.006(a) and rule 24.2(a)(1). See TEX. CIV. PRAC. &
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REM. CODE ANN. § 52.006(d); TEX. R. APP. P. 24.2(c)(2). We overrule appellant’s fourth
issue.
E. Altering the Balance Sheet
In its fifth and sixth issues, appellant argues that the trial court erred in altering the
balance sheets by increasing appellant’s total assets and reducing appellant’s liabilities.
As mentioned above, pursuant to rule 24.2(c)(3), “[t]he trial court must issue an order that
states the debtor’s net worth and states with particularity the factual basis for that
determination.” TEX. R. APP. P. 24.2(c)(3). While appellee correctly discusses that some
Texas appellate courts have acknowledged the impossibility of this requirement, in this
case, the trial court was ordered to assess appellant’s net worth. The trial court was
presented with multiple balance sheets as well as additional information from appellant.
The same evidence presented by appellant was directly refuted and countered by
appellee, including specific line items in the balance sheets. The trial court had sufficient
information upon which to exercise its discretion and did not err in its application of that
discretion in this case. See Leibman, 981 S.W.2d at 429. Bearing in mind that the fact
finder is the sole judge of the credibility of the witnesses and the weight to be given their
testimony, we conclude that the trial court’s decision was neither arbitrary nor
unreasonable. G.M. Houser, Inc., 204 S.W.3d at 841. We find that the trial court did not
abuse its discretion because the trial court did not act without reference to any guiding
rules or principles. See Downer, 701 S.W.2d at 241–42. We overrule appellant’s fifth and
sixth issues.
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III. CONCLUSION
We DENY appellant’s motion to vacate the trial court’s order.
PER CURIAM
Delivered and filed the
29th day of December, 2020.
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