BBX Operating, LLC v. American Fluorite, Inc., GeoSouthern Energy Partners, LP, GeoSouthern Energy Corp., and Compass Bank D/B/A BBVA Compass ( 2021 )

In The
Court of Appeals
Ninth District of Texas at Beaumont
________________
NO. 09-19-00279-CV
________________
BBX OPERATING, LLC, Appellant
V.
AMERICAN FLUORITE, INC., GEOSOUTHERN ENERGY PARTNERS,
LP, GEOSOUTHERN ENERGY CORP., and COMPASS BANK D/B/A
BBVA COMPASS, Appellees
________________________________________________________________________
On Appeal from the 1st District Court
Jasper County, Texas
Trial Cause No. 36735
________________________________________________________________________
MEMORANDUM OPINION
BBX Operating, LLC appeals the trial court’s Final Judgment in favor of
American Fluorite, Inc., GeoSouthern Energy Partners, LP, and GeoSouthern
Energy Corp. (collectively, “GeoSouthern”) garnishing the total amount of
$2,436,547.65 from a BBX Compass Bank account. In one issue BBX asks whether
the trial court erred by issuing final judgment for garnishment along with underlying
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writs and orders where GeoSouthern failed to show entitlement to garnishment under
Texas Law. For the following reasons, we will affirm.
Background
The litigation giving rise to this appeal involves a protracted dispute over the
payment of oil and gas revenues by former operator, BBX, to working interest
owner, GeoSouthern. In companion case number 09-19-00278-CV, GeoSouthern
sued BBX for payment of these revenues asserting a claim for breach of contract, a
Texas Natural Resource Code claim, and seeking declaratory judgment for
enforcement of a Rule 11 Agreement and interpretation of the parties’ various joint
development agreements. In that case, the trial court granted two partial motions for
summary judgment, followed by a third and final summary judgment, which
incorporated its prior partial summary judgment orders. Before final resolution of
the companion case, GeoSouthern filed two verified prejudgment applications for
writs of garnishment pursuant to Texas Civil Practice and Remedies Code section
63.001 against a BBX Compass Bank account holding the oil and gas revenues.
First Verified Application for Pre-Judgment Writ of Garnishment
On October 5, 2017, prior to entry of a final judgment in the companion case,
GeoSouthern filed its first “Verified Application for Pre-Judgment Writ of
Garnishment of Revenue Funds Held by BBX as Former Operator in BBVA
Compass Revenue Account” seeking to garnish $1,714,547 in collected but unpaid
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oil and gas revenues from certain oil and gas wells in which GeoSouthern owned a
working interest. In that application, GeoSouthern asserted that the amount was (1)
“liquidated, just, due, and unpaid[,]” (2) that within GeoSouthern’s “knowledge and
after reasonable inquiry, [BBX] possesses property in Texas, but does not possess
such property in Texas subject to execution that is sufficient to satisfy the liquidated
amount owed[,]” and (3) GeoSouthern was “not seeking to injure or harass
[Compass Bank] or [BBX] by applying for a writ of garnishment.” GeoSouthern
supported its first application with an affidavit of GeoSouthern’s General Land
Manager Doug Dahmann and deposition testimony from BBX Corporate
Representative John Gaines. Specifically, Gaines testified that through July 2017,
after netting GeoSouthern’s joint-interest billing amounts owed to BBX by
GeoSouthern, BBX owed to and withheld from GeoSouthern revenue amounts
totaling $1,714,547. Additionally, GeoSouthern included the trial court’s first partial
summary judgment order declaring that BBX was indebted to GeoSouthern for that
amount for revenues collected by BBX but withheld from payment to GeoSouthern
for the time period from October 2016 through July 2017. The trial court signed the
first “Order for Issuance of Prejudgment Writ of Garnishment” for the requested
amount in the Compass Bank account.
In response, BBX moved to dissolve the prejudgment writ of garnishment. In
its motion to dissolve, BBX argued that: (1) Texas law prohibited the issuance of
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writs of garnishment on judgments that are not final, and the partial summary
judgment order made the basis of the application was not final; and (2) GeoSouthern
failed to meet its burden for providing specific grounds and facts justifying the writ.
GeoSouthern countered the motion to dissolve, asserting that a “prejudgment writ of
garnishment” by its very name does not require a final judgment and that it followed
the procedures outlined by Texas Rule of Civil Procedure 658. Ultimately, the trial
court denied BBX’s motion to dissolve.
Second Application for Pre-Judgment Writ of Garnishment
On April 25, 2018, GeoSouthern filed its “Verified Application for Second
Pre-Judgment Writ of Garnishment of Revenue Funds Held by BBX as Former
Operator in BBVA Compass Revenue Account,” pursuant to Texas Civil Practice
and Remedies Code section 63.001. GeoSouthern sought to garnish an additional
$722,000 based on testimony John Gaines provided in a bankruptcy hearing
pertaining to a BBX-related entity, Trinity River Resources. GeoSouthern again
asserted the amount was (1) “liquidated, just, due, and unpaid[,]” (2) that “[w]ithin
[GeoSouthern’s] knowledge, [BBX] does not possess property in Texas subject to
execution sufficient to satisfy the debt[,]” and (3) it is “not seeking to injure or harass
[Compass Bank] or [BBX] by applying for a [second and additional] writ of
garnishment.”
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In support of its second application, GeoSouthern included BBX Corporate
Representative John Gaines’s testimony from a bankruptcy hearing, the deposition
testimony of BBX Accountant Laurel Vance, the first partial summary judgment
order, and Doug Dahmann’s affidavit. Gaines testified in the bankruptcy proceeding
that since the first garnishment proceeding, it was his opinion that BBX owed
GeoSouthern an additional $722,000 in revenues after GeoSouthern’s joint-interest
billings were netted. Gaines also testified he believed there were sufficient funds in
the revenue account to cover GeoSouthern’s revenues and that of another working
interest owner.
The trial court granted GeoSouthern’s second application and entered its
“Second and Additional Order for Issuance of Prejudgment Writ of Garnishment,”
which garnished the additional $722,000 from the BBX Compass Bank revenue
account. BBX did not move to dissolve the second writ of garnishment. Thereafter,
GeoSouthern moved for entry of final judgment. BBX responded to the motion for
entry of final judgment, contending the trial court improperly issued the writs of
garnishment in the absence of a final judgment and that GeoSouthern “failed to meet
[its] burden to ‘state the grounds for issuing the writ and the specific facts relied’ on
‘to warrant the required findings by the court’” pursuant to Texas Civil Procedure
Rule 658. The trial court entered a final judgment that BBX owes GeoSouthern not
less than $2,436,547.65 pursuant to the court’s final summary judgment order in the
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companion case. The final judgment stated that “[a]t the time Compass Bank was
served with the Writs, Compass Bank was indebted to BBX in the total amount of
not less than $2,436,547.65[.]”
Standard of Review
We review a trial court’s decision on a motion to dissolve a garnishment for
an abuse of discretion. See Gen. Elec. Capital Corp. v. ICO, Inc., 230 S.W.3d 702,
705 (Tex. App.—Houston [14th Dist.] 2007, pet. denied) (outlining standard of
review); see also Pallida, LLC v. Uballe, No. 03-18-00365-CV, 2018 WL 6816680,
at *2 (Tex. App.—Austin Dec. 28, 2018, no pet.) (mem. op.). A trial court “abuses
its discretion if its decision is arbitrary, unreasonable, or without reference to guiding
principles.” In re Gen. Elec. Co., 271 S.W.3d 681, 685 (Tex. 2008) (citation
omitted).
Analysis
BBX challenges the validity of the trial court’s prejudgment writs of
garnishment and subsequent final judgment based on those writs. Specifically, BBX
contends that GeoSouthern failed to meet the statutory requirements by failing to
show: (1) the garnishment was for a debt; (2) that it was due, just, and unpaid; (3)
BBX does not possess property in Texas sufficient to satisfy the debt; and (4) the
garnishment is not sought to injure or harass BBX.
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A plaintiff may file an application for writ of garnishment at the
commencement of suit or any time during its pendency. See Tex. R. Civ. P. 658; see
also In re ATW Invs., Inc., No. 04-17-00045-CV, 2017 WL 1066803, at *2 (Tex.
App.—San Antonio Mar. 22, 2017, orig. proceeding) (mem. op.) (noting “[a]
plaintiff may file an application for writ of garnishment while his lawsuit is
pending[]”). The application shall be supported by affidavits, comply with all
statutory grounds, state the grounds for issuing the writ, and all facts the plaintiff
relied upon to warrant the court’s findings. See Tex. R. Civ. P. 658. Texas Civil
Practice and Remedies Code section 63.001(2) provides one method whereby a party
can obtain a writ of garnishment. See Tex. Civ. Prac. & Rem. Code Ann. § 63.001(2).
A writ of garnishment is available if
(2) a plaintiff sues for a debt and makes an affidavit stating that:
(A) the debt is just, due, and unpaid;
(B) within the plaintiff’s knowledge, the defendant does not
possess property in Texas subject to execution sufficient to
satisfy the debt; and
(C) the garnishment is not sought to injure the defendant or the
garnishee[.]
Id. “Section 63.001 of the Civil Practice and Remedies Code states what the
plaintiff must show to the court in order to obtain a pre-judgment writ, and Rule
658 guides the plaintiff in how it can show the statutory requirements of section
63.001 based on a belief.” Almanza Bus. Grp., LLC v. CBI Logistic Servs., L.L.C.,
No. 04-18-00321-CV, 2019 WL 2110120, at *2 (Tex. App.—San Antonio May 15,
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2019, pet. denied) (mem. op.) (emphasis original). “No writ shall issue before final
judgment except upon written order of the court after a hearing, which may be ex
parte.” Tex. R. Civ. P. 658.
Garnishment is considered summary and harsh, because a debtor’s property
may be impounded before a judgment is taken against him. Beggs v. Fite, 106
S.W.2d 1039, 1042 (Tex. 1937). Accordingly, a garnishment order must strictly
comply with the statute. See id.; Harper v. Spencer & Assocs., P.C., 446 S.W.3d 53,
56 (Tex. App.—Houston [1st Dist.) 2014, pet. denied) (explaining “[t]hrough strict
compliance with garnishment statutes” garnishment plaintiff steps into debtor’s
shoes as to garnishee). When a plaintiff’s suit arises out of contract and the demand
is liquidated, garnishment may issue. See Cleveland v. San Antonio Bldg. & Loan
Ass’n, 223 S.W.2d 226, 228 (Tex. 1949). Liquidated means “the claim is not
contingent, is capable of being definitely ascertained by the usual means of evidence
and does not rest in the discretion of the jury.” In re ATW Invs., Inc., 2017 WL
1066803, at *2 (citing Cleveland, 223 S.W.2d at 228).
Debt
During the pendency of the underlying lawsuit on its breach of contract cause
of action for non-payment of revenues, GeoSouthern filed two applications for
prejudgment writs of garnishment. These revenue amounts were readily
ascertainable, with BBX’s records and own representatives testifying to the amounts
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owed through specific time periods, and their determination did not rest within the
jury’s discretion. Accordingly, the revenue amounts were not contingent.
Just, Due, and Unpaid
Section 63.001(2) requires that a plaintiff make an affidavit that the debt is
“just, due, and unpaid.” Tex. Civ. Prac. & Rem. Code Ann. § 63.001(2)(A). In the
first application, GeoSouthern alleged its claims were “liquidated, just, due, and
unpaid.” As support for the existence of this debt, in its first application,
GeoSouthern cited to (1) the first partial summary judgment award of $1,714,547
for the sale of hydrocarbons between October 2016 and July 2017 that remained
unpaid and (2) the deposition testimony of BBX Corporate Representative John
Gaines that the revenue owed to GeoSouthern was $1,714,547.65. GeoSouthern
attached exhibits to its application including the trial court’s partial summary
judgment order, GeoSouthern General Land Manager Doug Dahmann’s affidavit,
and BBX Corporate Representative Gaines’s deposition testimony confirming the
amount of revenues owed to GeoSouthern after netting. Dahmann averred that BBX
was indebted to GeoSouthern in the liquidated amount of $1,714,547.65 through
July 2017, which has not been satisfied. He further specifically averred that
GeoSouthern’s claim was “just, due, and unpaid.” Dahmann also averred that in his
capacity as GeoSouthern’s “General Manager – Land[,]” he had personal knowledge
of the facts set out in his affidavit. There was no dispute over title to the unpaid oil
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and gas revenues. BBX withheld such revenues after a dispute arose over other
predevelopment expenses were incurred by BBX and GeoSouthern refused to pay
BBX. The facts pleaded in the first prejudgment application and Dahmann’s
affidavit met the requirements of 163.001(2). See id.In its second application for prejudgment writ of garnishment, GeoSouthern
sought to garnish an additional $722,000 in revenues BBX owed from August 2017
to and including January 2018. GeoSouthern likewise pleaded in its verified second
application that the amount was “liquidated, just, due, and unpaid.” GeoSouthern
pointed to facts supporting this request, such as the first prejudgment writ of
garnishment and additional testimony from BBX employees. GeoSouthern noted
that Gaines provided testimony in a bankruptcy hearing for a related BBX entity that
BBX owed GeoSouthern an additional $722,000 and that BBX’s accountant, Laurel
Vance, likewise testified that all GeoSouthern’s joint-interest billings had been
netted and were current, and that its remaining revenues had been deposited in
BBX’s revenue account. The exhibits GeoSouthern attached to its second
application included the trial court’s partial summary judgment order, Laurel
Vance’s deposition testimony regarding the revenues owed to GeoSouthern after
netting and where they were deposited, BBX Corporate Representative Gaines’s
bankruptcy hearing testimony, and another affidavit from GeoSouthern General
Land Manager Doug Dahmann. Dahmann averred that BBX was indebted to
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GeoSouthern in the additional liquidated amount of $722,000 from August 2017
through January 2018, which had not been satisfied. In support of the second
prejudgment application for writ of garnishment, Dahmann again averred that
GeoSouthern’s claim was “just, due, and unpaid.” He also attested that in his
capacity as GeoSouthern’s “General Manager – Land[,]” he had personal knowledge
of the facts set forth. The facts pleaded in the second prejudgment application and
Dahmann’s affidavit also met the first of 163.001(2)’s requirements. See id.Both applications for prejudgment writ of garnishment and supporting
affidavits satisfy the “just, due, and unpaid” requirement of section 163.001(2)(A).
Property in Texas Subject to Execution Sufficient to Satisfy Debt
BBX contends that GeoSouthern had to prove that BBX did not possess
sufficient property in Texas to satisfy the debt, and GeoSouthern must provide
specific facts it relied on. We disagree with BBX’s contention. The statute expressly
provides that the plaintiff must file an affidavit that avers that “within the plaintiff’s
knowledge, the defendant does not possess property in Texas subject to execution
sufficient to satisfy the debt[.]” Tex. Civ. Prac. & Rem. Code Ann. § 63.001(2)(B).
In both applications, GeoSouthern pleaded that to its “knowledge and after
reasonable inquiry, [BBX] possesses property in Texas, but does not possess such
property in Texas subject to execution that is sufficient to satisfy the liquidated
amount owed.” Likewise, GeoSouthern supported both applications with affidavits
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from Dahmann averring that “[b]ased upon information . . . GeoSouthern believes
BBX possesses property in Texas, but does not possess such property in Texas
subject to execution that is sufficient to satisfy the liquidated amount” owed. Each
of those affidavits described the information GeoSouthern relied upon to support this
averment, including discovery responses, BBX bank records, and testimony of
specific BBX witnesses.
The pleadings and affidavit filed by GeoSouthern in support of the
garnishment met the requirements of establishing that it did not have knowledge that
BBX possessed property in Texas subject to execution sufficient to satisfy the debt
and the information relied upon in reaching that conclusion. See id.; Tex. R. Civ. P.
658. In its motion to dissolve, BBX failed to present any evidence that it possessed
property in Texas subject to execution sufficient to satisfy the debt that would
counter GeoSouthern’s affidavits.
Garnishment Not Sought to Injure
BBX asserts GeoSouthern failed to show that the garnishment was not sought
to injure or harass. However, GeoSouthern stated in both applications that the writ
was not sought to injure or harass BBX and again provided affidavit testimony from
Dahmann that GeoSouthern “is not seeking to injure or harass [Compass Bank] or
BBX by applying for a writ of garnishment Section 63.001(2)(C) requires an
affidavit supporting the application that states “the garnishment is not sought to
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injure the defendant or garnishee[.]” Tex. Civ. Prac. & Rem. Code Ann. §
63.001(2)(C). Accordingly, GeoSouthern complied with this statutory requirement.
GeoSouthern strictly complied with the three statutory requirements when it
sought these prejudgment writs of garnishment. See id. § 63.001(2); Tex. R. Civ. P.
658. The trial court did not abuse its discretion in denying BBX’s motion to dissolve
and challenge to the motion for entry of judgment on the prejudgment writs of
garnishment. We overrule BBX’s sole issue.
Conclusion
We conclude that the trial court did not err by issuing pre-judgment writs of
garnishment pursuant to Texas Civil Practice and Remedies Code section 63.001(2)
when GeoSouthern followed the statutory requirements by averring BBX owed it an
unpaid debt that was just and due in an amount certain, it had no knowledge of other
property BBX possessed in Texas subject to execution that could satisfy the debt,
and the garnishment applications were not filed to injure or harass BBX.
Accordingly, we affirm the trial court’s judgment garnishing the total amount of
$2,436,547.65 owed to GeoSouthern in unpaid revenues from BBX’s Compass Bank
account.
AFFIRMED.
________________________________
CHARLES KREGER
Justice
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Submitted on June 10, 2021
Opinion Delivered July 29, 2021
Before Kreger, Horton and Johnson, JJ.
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