In the case of a judgment for recovery of an interest in real or personal property, the trial judge must determine the amount of security required to suspend enforcement of the judgment during appeal.  Texas Appellate Rule 24.2(a)(2) requires that the amount must be at least

(A) the value of the property interest’s rent or revenue, if the property interest is real property; or
(B) the value of the property interest on the date when the court rendered judgment, if the property interest is personal property.

A recent opinion from the Corpus Christi Court of Appeals highlights a potential flaw or shortcoming with Rule 24.2(a)(2).

The dispute in Port Isabel Logistical Offshore Terminal, Inc. v. Subsea 7 Port Isabel, LLC, Nos. 13-21-00169-CV & 13-21-00368-CV (Tex. App.–Corpus Christi Mar. 10, 2022, orig. proceeding), related to the termination of Subsea’s leasehold interest in property owned by Port Isabel Logistical Offshore Terminal (PILOT) and Subsea’s claimed right to retrieve improvements it made to the property.

Following an initial 2017 judgment, PILOT asked the trial court to set an amount required to suspend a portion of the trial court’s judgment ordering that Subsea be allowed to remove improvements from PILOT’s property.  The trial court set that amount required at $168.000 and PILOT thereafter posted a cash deposit in that amount.

In the initial appeal, the court of appeals largely affirmed the judgment, but remanded the case to the trial court for entry of a new judgment with recalculated prejudgment interest.  While on remand, a further dispute arose as to whether Subsea had waived the right to remove its improvements because of Subsea’s delay in taking action to do so. PILOT expressed its desire to take a further appeal of the trial court’s ruling on the new issue.  The trial court signed an order requiring PILOT to post an additional $38,000 to suspend the new judgment allowing Subsea to remove its improvements.  Subsea then filed a motion to further increase the amount of PILOT’s cash deposit, and the trial court ordered that PILOT must post an additional $150,000 to suspend the judgment, thereby bringing the total amount ordered to $350,000.

PILOT filed a motion with the court of appeals seeking review of the trial court’s supersedeas order.  PILOT argued that the proper amount for the supersedeas was the value of Subsea’s improvements and Subsea had not shown that the value changed between the time of the trial court’s initial November 2, 2017 order and the trial court’s October 26, 2021 order granting Subsea’s motion to increase the supersedeas amount.  The court of appeals rejected PILOT’s challenge to the order, pointing out that Rule 24.2(a)(2) expressly provides that the amount of security must be “at least” the property’s value. The appellate court further observed that the rule does not restrict a trial court from ordering security in excess of the property’s value.  Relying on the trial court’s general discretion in this regard, the court of appeals denied PILOT’s motion challenging the trial court’s order.

The court of appeals’ opinion raises the question as to whether there are limits to a trial court’s discretion.  In the Port Isabel matter, the amount set for supersedeas was 75% greater than the amount the court had set 4 years earlier.  Would the trial court’s discretion have allowed a figure that was 200% greater?  Appellate Rule 24.2(b) might allow for a reduction if the judgment debtor (assuming PILOT is a “judgment debtor”) can establish substantial economic harm as a result of having to post the amount set. But the question remains–is a trial court’s discretion over the amount of supersedeas limited or is the sky the limit?  Perhaps the limiting principle on the trial court’s discretion is the principle that the supersedeas amount should be an amount sufficient to protect the judgment creditor from any potential harm caused by the stay during the course of the appeal.  Clarification of Rule 24.2 may be necessary to avoid inequities and due process problems.

About the Author: Mike Northrup

Mike Northrup is a Shareholder and Section Head of the Cowles and Thompson Appellate Practice Group.