Southwestern States General Corp. v. McKenzie, 05-83-00698-CV

• Decision Date: 22 September 1983
• Docket Number: No. 05-83-00698-CV,05-83-00698-CV
• Citation: 658 S.W.2d 850
• Parties: SOUTHWESTERN STATES GENERAL CORPORATION, Presently Keystone Financial Corporation, Keystone Life Insurance Company of Texas, John P. Gutschlag, Ellison Miles, and E.K. Norton, Jr., Appellants, v. Billy E. McKENZIE, Appellee.
• Court: Texas Court of Appeals

Page 850

658 S.W.2d 850

SOUTHWESTERN STATES GENERAL CORPORATION, Presently Keystone Financial Corporation, Keystone Life Insurance Company of Texas, John P. Gutschlag Ellison Miles, and E.K Norton, Jr., Appellants, v. Billy E. McKENZIE, Appellee.

No. 05-83-00698-CV.

Court of Appeals of Texas Dallas.

Sept. 22, 1983.

Emil Lippe, Jr., David C. Musslewhite, Ruth Abboud Cross, G. Leroy Street, Dallas, for appellants.

O. Glenn Weaver, Deathrage & Weaver, Dallas, for appellee.

Before STOREY, WHITHAM and ROWE, JJ.

ROWE, Justice.

By original motion filed in this court, appellee seeks to review the sufficiency of certain arrangements authorized by the trial judge in lieu of a supersedeas bond. These arrangements were designed to permit appellants to supersede under Tex.R.Civ.P. 364(a), a money judgment against them by an alternate method specified in Tex.R.Civ.P. 14c, that is, by deposit of a negotiable obligation of a bank. With the exception of one independent feature, likely correctable, we hold these arrangements to be sufficient. We, therefore, allow appellants twenty days to correct the deficiency before our order striking the arrangement and permitting the execution of the judgment becomes effective.

Appellee, McKenzie, recovered judgment jointly and severally against appellants, Southwestern States General Corporation (now Keystone Financial Corporation), John P. Gutschlag, Ellison Miles, and E.K. Norton, Jr. for: (a) the sum of $800,000; plus (b) the sum of $62,273.22, as interest on $800,000 at the rate of 7% per annum from January 31, 1979 to March 12, 1980; plus (c) interest on the total of $862,273.22 at the rate of 10% per annum from March 12, 1980 until paid; plus (d) attorneys fees of $200,000; plus (e) interest on the $200,000 attorneys fees at the legal rate of 9% per annum from the date of judgment until paid; plus (f) court costs.

As of May 26, 1983, while a motion by all appellants for "Leave to File Negotiable Obligation in Lieu of Supersedeas Bond" was under consideration by the trial court, the money damages owed (including interest) amounted to $1,142,511.90, and the attorneys fees owed (including interest) amounted to $213,152.37. The face amounts of two certificates of deposit appearing in the record are for such sums. Also, on their face these CD's show their type to be "Negotiable", the issuer to be Mercantile National Bank at Dallas, the purchaser to be Keystone Financial Corporation, the original payee to be Billy E. McKenzie, the original term to be thirty days, and the rate of interest to be 10% on the larger amount and 9% on the smaller amount. The trial judge, pursuant to Rules 14c and 364, granted leave to all appellants to file the originals of these CD's with the district clerk of Dallas County, and ordered the CD's to be renewed automatically every 30 days, with earned interest to be paid to the district clerk at the end of each 30 day period. The district clerk acknowledged receipt of these CD's. The trial judge's order further provided:

3) pending further order of this court following final disposition of the appeal of this case, the district clerk of Dallas County, Texas shall receive and hold both certificates of deposit, and shall receive the interest paid on both certificates of deposit and deposit and hold such interest in an interest bearing account.

4) Upon compliance with this order plaintiffs will have satisfied the requirements of rule 14c and 364, Texas Rules of Civil Procedure.

In opposition to the trial court's order, which was entered over thirty days after the overruling of appellant's new trial motion, McKenzie contends that the trial court was then without jurisdiction. We disagree. The motion was filed and brought to the trial court's attention within thirty days from the overruling of the motion for new trial; so the trial court was required to act on it. Sams v. Coker, 514 S.W.2d 351 (Tex.Civ.App.--Houston [1st Dist.] 1974, no writ). The fact that this court had acquired jurisdiction of the appeal did not diminish the trial court's continuing jurisdiction to fix a supersedeas bond. Cashion v. Cashion, 239 S.W.2d 742 (Tex.Civ.App.--Waco 1951, no writ). See also Hughes v. Thornton, 320 S.W.2d 191 (Tex.Civ.App.--Dallas 1958, no writ). Indeed, this court recently indicated that, at least in a Rule 14c case such as this, an applicant must properly first seek leave of the trial court. Heritage Housing Corporation v. Ferguson, 651 S.W.2d 272 (Tex.App.--Dallas 1983, no writ). The trial court's order was properly entered.

McKenzie further complains that the trial court's order fails to provide for joint and several liability of all appellants as required by Fortune v. McElhenney, 645 S.W.2d 934 (Tex.App.--Austin 1983, no writ), and fails to adequately provide for post judgment interest as required by such cases as Kennesaw Life and Accident Ins. Co. v. Streetman, 644 S.W.2d 915 (Tex.App.--Austin 1983, no writ). Again, we disagree, finding that the trial court's order effectively incorporates all the pertinent provisions of Rules 14c and 364 required by these cases. Because the motion acted on by the trial court was presented in the behalf of and was granted in favor of all appellants, the liability is made thereby joint and several. To the extent the CD's are renewed periodically as provided in the order, the interest payable on them will exactly parallel the amount required by the judgment. To the extent the district clerk receives the interest and reinvests it in an interest bearing account, the amount in his hands at any time will actually exceed what is required. Any potential forfeiture of interest can easily be avoided (and presumably will be avoided) by appropriate action of the trial court in its final order of distribution after the appeal is concluded.

Because we read Rule 14c as requiring no more than that the issuing bank will be one whose deposits are insured by an agency of the United States government, and because we can take judicial notice that Mercantile Bank at Dallas is so insured, we hold McKenzie's complaints about the adequacy of insurance to be without merit. The one complaint of McKenzie which does have merit is the matter concerning the nonparty status of the issuing bank. To bring the trial court's arrangement into compliance with applicable rules, the issuing bank must: (1) automatically renew each 30-day CD at its original interest rate; (2) remit the earned interest promptly to the district clerk; and (3) continue doing both (1) and (2) pending further order of the trial court following final disposition of the appeal. (Of course, the bank must also honor the CD's when they are properly endorsed and presented for payment, but we foresee no greater difficulty in their collection than would obtain otherwise as to a surety company under a surety bond. Having issued its negotiable obligation in form payable to the judgment creditor and having delivered it with knowledge of the use intended, the bank would be liable thereon to the judgment creditor despite any third party defenses.) Recognizing the need for commitments such as these by the issuing bank, the trial court accepted a letter from that bank. While we agree that for Rule 14c to have any practical utility these commitments must be evidenced in some fashion such as a written collateral undertaking by the issuing bank, the letter in question falls short of being acceptable. A proper letter should be addressed to the trial court, as well as to the appellee, and should refer to the style and number of the cause, referenced to the "Order of June 3, 1983, Approving the Deposit of Negotiable Obligations in Lieu of a Supersedeas Bond." Each of the above recited three components must be specifically incorporated as contractual undertakings by the bank, and the letter must be executed by an authorized bank official (without ambiguous references to nonbanking functions such as appear in this record through inclusion of the words "Metroplex Insurance" after the officer's title). Further, to avoid ambiguity, the bank's letter should specify it supersedes all agreements previously made in the matter.

Unless this court within twenty days from date of issuance of this opinion receives a certificate from the trial judge that a letter from Mercantile National Bank at Dallas of the calibre specified above has been filed in the cause, the motion to declare the deposit in lieu of supersedeas bond insufficient is granted, and appellee may proceed with execution of his judgment.

WHITHAM, Justice, dissenting.

I respectfully dissent. I would grant McKenzie's motion to determine sufficiency of deposit in lieu of supersedeas bond.

Tex.R.Civ.P. 14c provides:

Wherever these rules provide for the filing of a surety bond, the party may in lieu of filing the bond deposit cash or other negotiable obligation of the government of the United States of America or any agency thereof, or with leave of court, deposit a negotiable obligation of any bank or savings and loan association chartered by the government of the United States of America or any state thereof that is insured by the government of the United States of America or any agency thereof, in the amount fixed for the surety bond, conditioned in the same manner as would be a surety bond for the protection of other parties. Any interest thereon shall constitute a part of the deposit.

I cannot agree that under the facts of the present case the two certificates of deposit constitute a "negotiable obligation of any bank ... chartered by the government of the United States ... that is insured by the government of the United States ... or any agency thereof" within the meaning and provisions of Rule 14c. I reach this conclusion for two reasons. First, under the facts of the present case, the majority relies on form over substance and thereby denies McKenzie protection from the insolvency of the appellants. Second, only $100,000.00 of the...