Fite, MD v. Emtel, Inc. (Tex.App.- Houston [1st Dist.] Oct. 2, 2008)(op. on motion for rehearing
by Hanks)(corporate receivership, bond)
AFFIRM TC JUDGMENT: Opinion by Justice Hanks
Before Justices Taft, Hanks and Higley
01-07-00273-CV Diana Fite, M.D. and Intervenor Patrick J. Woods, M.D. v. Emtel, Inc., Joseph
Degioanni, M.D., Individually and on behalf of BEPA
Appeal from 152nd District Court of Harris County
Trial Court Judge: Hon. Kenneth P. Wise
MEMORANDUM OPINION ON REHEARING
We grant appellant’s motion for rehearing. See Tex. R. App. P. 49.3. We withdraw our January 17, 2008
opinion, substitute this opinion in its place, and vacate our prior judgment.
In this interlocutory appeal, Tex. Civ. Prac. & Rem. Code Ann. § 51.014(a)(1) (Vernon 2008).
appellants, Diana Fite, M.D. and Patrick G. Woods, M.D., appeal the trial court’s order reappointing
James Raymond as receiver for Brazos Emergency Physicians Association, P.A. (“BEPA”), arguing that
(1) no valid basis was established for placing BEPA into receivership; (2) James Raymond is disqualified
from serving as receiver; and (3) the bond provisions of the reappointment order rendered the order per
se invalid and the amount of bond ordered was “impermissibly low.” Appellees, however, contend that the
original receivership never expired and that we lack subject matter jurisdiction to consider the appeal of
the trial court’s order of reappointment. We affirm.
The parties to this cause and its numerous related lawsuits, who have spent nearly four years battling
each other in court, all share a connection to BEPA, a professional association formed in 1997 to provide
hospitals with physicians for their emergency care facilities. In 1999, BEPA entered into an agreement for
billing, marketing, and management services with appellee, Emtel, Inc., wherein Emtel would receive 30%
from all fees collected on behalf of BEPA that are not associated with telemedicine contracts. Joseph
Degioanni, M.D., was the sole director of Emtel.
In 2003, appellant, Patrick G. Woods, M.D., a member of BEPA, filed a derivative suit against appellee,
Degioanni, who, at the time, was also BEPA’s president and treasurer. Woods alleged that Degioanni had
misappropriated funds to benefit Emtel. Shortly thereafter, following a “secret board meeting” that was
conducted by cell phone in a parking garage, Degioanni was ousted as president of BEPA, and
Degioanni’s and Emtel’s access to the bank accounts and lock boxes was limited. Degioanni, along with
Emtel, filed individual and derivative actions seeking injunctive relief against two members of the BEPA
board of directors, appellant, Diana Fite, M.D. and Medford Cashion, M.D. The second derivative suit is
the suit before us.
In this second derivative suit, Emtel and Degioanni, individually and on behalf of BEPA, applied for a
temporary restraining order, temporary injunction, and motion to compel arbitration, asserting that “the
harm caused by preventing Emtel from access to BEPA bank accounts and lock boxes is irreparable and
imminent. The recent actions by Dr. Cashion on behalf of BEPA have caused BEPA to be in clear breach
of the Agreement. . . .” Emtel and Degioanni sought a temporary injunction and restraining order
requiring Cashion and Fite to “restore the status quo with regard to BEPA’s bank accounts and lock
boxes.” On December 30, 2003, the trial court issued an ex parte temporary restraining order
to “maintain status quo pending resolution of this case.”
The court referred to the order as “ex parte” because Cashion’s and Fite’s counsel“apparently chose not
to appear” at the hearing.
Almost two weeks later, the trial court heard Emtel and Degioanni’s application for temporary
injunction. On January 20, 2004, the parties agreed to and the trial court appointed a receiver, James
Raymond, to act as BEPA’s sole director and president and to take charge and conduct the affairs of
BEPA. The trial court also ordered that the “receivership  continue in effect until further order of this
The parties continued to litigate. Among other courses of action, Raymond negotiated, through his
counsel, a series of agreements that, subject to the trial court’s approval, would settle some of the
litigation involving BEPA.
These agreements constituted: (1) a settlement agreement to settle BEPA’s
claimsagainst Drs. Fite and Woods; (2) an allocation agreement to settle cross-claimsbetween BEPA and
Emtel, Inc. over potential proceeds from claims against TheMethodist Hospital, Neptune, and the Neptune
physicians (“Allocation Agreement”);and (3) a settlement agreement to settle BEPA’s claims against Drs.
Eric Schroederand Dan Burian.
Close On February 20, 2007, Raymond moved for approval of numerous settlement agreements
releasing BEPA’s claims against Degioanni and several other parties. Fite and Woods contested the
motion and, relying on the Texas Civil Practice and Remedies Code’s (“CPRC”) receivership provisions,
argued that Raymond lacked the power to act on BEPA’s behalf because his status as receiver had
expired on January 20, 2007—three years after his appointment. In response, Degioanni and Emtel
argued that Raymond was appointed pursuant to the Business Corporations Act; therefore, his
appointment did not terminate until “the condition necessitating the appointment of a receiver has been
remedied.” Degioanni and Emtel then enumerated several reasons why the receiver was still necessary.
The trial court again appointed Raymond “under the same terms and conditions as in the  original
order” to continue until “90 days after the completion of the litigation that has been initiated by [Raymond]
including any appeals which may arise from that litigation and the distribution of any funds obtained
thereby.” Fite and Woods, who joined the underlying suit as intervenors, appeal the order appointing
Raymond as receiver.
Expiration of the Original ReceivershipBecause Degioanni and Emtel contend that we have no jurisdiction
to consider this appeal, the first issue we address is whether the original receivership created on January
20, 2004 expired after three years. Citing to the language of Articles 7.05 and 7.06 of the Texas
Business Corporation Act (the “Act”), Degioanni and Emtel argue that (1) the original receivership was
created under the Act and (2) the term of receiverships created under the Act do not expire. Thus, they
argue that it was “unnecessary” for the trial court to issue an order “reappointing” Raymond as the
receiver and that we do not have subject matter jurisdiction to consider the merits of this appeal,
Fite and Woods argue that Degioanni and Emtel cannot assert cross-issues
becausethey did not file a notice of appeal. Although referenced by Degioanni and Emtel asa “cross-
issue,” this issue does not attempt to alter the trial court’s judgment. SeeTex. R. App. P. 25.1 (setting
forth the requirements of a cross appeal). Degioanni andEmtel agree that Raymond should remain as the
receiver either by way of the originalappointment or under the recent re-appointment. Rather this “cross-
issue” attemptsto establish that we do not have subject matter jurisdiction to consider the merits ofDrs.
Fite and Woods’ appeal under Tex. Civ. Prac. & Rem. Code Ann. § 51.014(Vernon 2008) and is, in
effect, a motion to dismiss the appeal for want ofjurisdiction. Accordingly, we address this issue.
Close because no interlocutory appeal will lie from the trial court’s “unnecessary” order. Thus we turn to
the issue of whether the receivership had expired. We note that no interlocutory
appeal will lie from an order appointing a successorreceiver. See Swate v. Johnston, 981 S.W.2d 923,
925 (Tex. App.—Houston [1stDist.] 1998, orig. proceeding). If we determine that the receivership expired,
thiscase would not involve the appointment of a successor receiver, but would involve thecreation of a
new receivership and would be appealable pursuant to CPRC§ 54.014(a)(1).
To determine when a corporate receivership expires, we look to both the Texas Civil Practice and
Remedies Code and the Act. The CPRC expressly provides that corporate receiverships expire three
years after the receiver is appointed. See Tex. Civ. Prac. & Rem. Code Ann. § 64.072 (Vernon 2008).
Section 64.072(a) specifically provides as follows:
(a)Except as provided by this section, a court may not administer a corporation in receivership for more
than three years after the date the receiver is appointed, and the court shall wind up the affairs of the
corporation within that period.
The statute also provides that, under certain circumstances and upon the application of a party and after
a hearing, the receivership may be extended for no more than five years beyond the original three year
term. See Tex. Civ. Prac. & Rem. Code Ann. § 64.072(d) (Vernon 2008).
Articles 7.05 and 7.06 of the Act also address the term of a corporate receivership. They provide that
a receivership created under the Act shall be terminated by the trial court when the condition
necessitating the appointment of a receiver is remedied. See Tex. Bus. Corp. Act Ann. art. 7.05, § B, art.
7.06, § B (Vernon 2003). Both Articles 7.05 and 7.06 contain the following provision:B.In the event that
the condition of the corporation necessitating such an appointment of a receiver is remedied, the
receivership shall be terminated forthwith and the management of the corporation shall be restored to the
directors and officers . . . .
The Bar Committee’s comments accompanying the Act explain the relationship between the Act’s
receivership provisions and the CPRC. The provisions of the Act and CPRC are to be read together
unless they are inconsistent with one another:
Heretofore receiverships for corporations or their assets have not been the subject of separate treatment
in the statutes but have been governed by Articles 2293 et seq., Tex.R.C.S. (1925),
The referenced provisions were the statutory predecessors to Chapter 64 of the
CPRC.Former Article 2317 of the Revised Civil Statutes became § 64.072 in 1985. See Tex.Civ. Prac. &
Rem. Code Ann. § 64.072 historical note (Vernon 2008).
Close relating generally to receiverships. These general provisions will continue to be applicable to
receiverships other than those for corporations subject to the Act or their assets and will also continue to
be applicable to receiverships for corporations or their assets with respect to such matters as
qualifications, powers, duties and administrative procedures of receivers which are not inconsistent with
the specific provisions of the Act.
Tex. Bus. Corp. Act Ann. art. 7.04 cmt. (Vernon Supp. 2003) (emphasis added).
In this case, the original order does not state whether the receivership was created under the Act or
the CPRC. Nevertheless, contrary to the arguments of Degioanni and Emtel, receiverships created under
the Act do not have terms that never expire. The provisions of the Act and the CPRC regarding the
termination of a receiver’s powers are not inconsistent with one another. The CPRC’s provisions sets
forth the maximum term for a corporate receivership and the Act sets forth the circumstances under
which the receivership must be terminated before the term of the receivership expires. Reading the
CPRC and the Act together we hold that, in the absence of a timely motion to extend, a corporate
receivership expires three years after it is created and that when the conditions necessitating the
creation of the receivership have been remedied, the receivership shall be terminated before the term of
the receivership expires. Here, since no motion to extend was granted by the trial court, the original
receivership expired on January 20, 2007—three years after it was created. Accordingly, for a
receivership to exist regarding BEPA after this date, the trial court was required issue a new order
appointing a receiver, and we have jurisdiction over the appeal of this order. See Tex. Civ. Prac. & Rem.
Code Ann. § 54.014(a) (Vernon 2008). APPOINTMENT OF THE RECEIVER
In their first issues on appeal, Fite and Woods argue that the trial court erred in appointing Raymond as
receiver because (1) no valid basis was established for placing BEPA into receivership and (2) Raymond
is disqualified from serving as a receiver of BEPA. We examine each of these issues in turn.
Standard of Review
Because a receivership is an equitable remedy within the sound discretion of the court, an appointment
of a receiver will not be disturbed on appeal unless the record reveals an abuse of discretion. Alert
Synteks, Inc. v. Jerry Spencer, L.P., 151 S.W.3d 246, 251 (Tex. App.—Tyler 2004, no pet.) (citing Abella
v. Knight Oil Tools, 945 S.W.2d 847, 849 (Tex. App.—Houston [1st Dist.] 1997, no writ). We will reverse
for abuse of discretion only when we conclude that the trial court acted in an unreasonable or arbitrary
manner. Id. (citing Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 242 (Tex. 1985)). A trial court
abuses its discretion when it acts without reference to guiding rules and principles. Downer v.
Aquamarine Operators, Inc., 701 S.W.2d 238, 241–42 (Tex. 1985). An abuse of discretion does not
occur if the trial court bases its decision on conflicting evidence. Davis v. Huey, 571 S.W.2d 859, 862
(Tex. 1978). If the decision was within the trial court’s discretionary authority, we may not reverse simply
because we might have reached a different decision. Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223,
226 (Tex. 1991); Downer, 701 S.W.2d at 242.
The remedy of receivership is an extraordinary remedy that must be cautiously applied. It has been
described as a drastic, far-reaching, and harsh remedy. See Balias v. Balias, Inc., 748 S.W.2d 253, 257
(Tex. App.—Houston [14th Dist.] 1988, writ denied). Accordingly, a receiver will not be appointed if
another remedy exists at law or in equity that is adequate and complete. Tex. Bus. Corp. Act Ann. art.
7.05, § A (Vernon Supp. 2003).
Statutory Basis for Receivership
Fite and Woods argue that Degioanni and Emtel have not established any circumstances that could
warrant placing BEPA back into receivership under the
Act. We disagree. Article 7.05 of the Act governs appointment of a rehabilitative receiver “for the assets
and business of a corporation.” Id. The Act provides that the district court of the county where a
corporation’s registered office is located may appoint a receiver to conserve the assets and business of
the corporation and to avoid damage to the parties at interest, if all other requirements of law are
complied with and there are no other legal or equitable remedies available, including the appointment of
a receiver for specific corporate assets. Id. Article 7.05, section A sets forth the preliminary prerequisites
for appointment of the receiver:
A receiver may be appointed for the assets and business of a corporation by the district court for the
county in which the registered office of the corporation is located, whenever circumstances exist deemed
by the court to require the appointment of a receiver to conserve the assets and business of the
corporation and to avoid damage to parties at interest, but only if all other requirements of law are
complied with and if all other remedies available either at law or in equity, including the appointment of a
receiver for specific assets of the corporation, are determined by the court to be inadequate . . . . Id.
Article 7.05, section A then lists the specific circumstances that may warrant the appointment of a
Article 7.05(A) provides for the appointment of a receiver where:
(1) In an action by a shareholder when it is established:
(a) that the corporation is insolvent or in imminent danger of insolvency; or
(b) that the directors are deadlocked in the management of the corporate affairs and theshareholders
are unable to break the deadlock, and that irreparable injury to the corporationis being suffered or is
threatened by reason thereof; or
(c) that the acts of the directors or those in control of the corporation are illegal, oppressiveor fraudulent;
(d) that the corporate assets are being misapplied or wasted; or
(e) that the shareholders are deadlocked in voting power, and have failed, for a period whichincludes at
least two consecutive annual meeting dates, to elect successors to directors whoseterms have expired or
would have expired upon the election and qualification of theirsuccessors.
* * * * * * *
(3) In any other actions where receivers have heretofore been appointed by the usages of thecourt of
equity. See Tex. Bus. Corp. Act Ann. art. 7.05 § (A)(1), (3).
In this case, the evidence in the record supports the trial court’s reappointment of Raymond under Article
7.05, section (A)(1)(b) of the Act.
Because of our disposition on this issue, we need not address Degioanni and Emtel’sadditional
arguments that the receivership was also warranted under Article 7.05 section(A)(1)(c) (illegal,
oppressive, or fraudulent acts of directors or those in control of thecorporation) or Article 7.05 section (A)
(3) (in any other actions where receivers haveheretofore been appointed by the usages of the court of
equity). See Tex. Bus. Corp. ActAnn. art. 7.05 §§ (A)(1)(c), (A)(1)(3).
Under this provision, the trial court may appoint a receiver in an action by a shareholder when it is
established that “the directors are deadlocked in the management of the corporate affairs and the
shareholders are unable to break the deadlock, and that irreparable injury to the corporation is being
suffered or is threatened by reason thereof.” See Tex. Bus. Corp. Act. Ann. art. 7.05 § (A)(1)(b). The
record reflects that the trial court was well aware, through the proceedings, of the level of dysfunction of
BEPA’s Board of Directors that (1) prevented the directors and shareholders from lawfully meeting and
making decisions about BEPA’s affairs and (2) necessitated the creation of the original receivership. The
trial court also heard evidence from which it was reasonable to conclude that, in the absence of a
receivership, the directors and shareholders could not meet to lawfully move forward in the conduct of
BEPA’s business and the lack of a receiver would cause irreparable damage to the corporation.
Raymond testified that, without a receiver in place, the board could not move forward to manage BEPA’s
principal asset, the ongoing litigation in the 334th District Court in Harris County. He testified that issues
as fundamental as the identity and voting authority of the directors and shareholders of BEPA are in
dispute and that under these circumstances any action to move the corporation’s business forward by
the directors and shareholders would spawn even more litigation between the parties.
Appellee’s Counsel:Okay. And the principal asset of BEPA is it or is it not the litigation that is going on in
Appellee’s Counsel: Why can’t—just in your view—just a board of directors just handle that
Raymond: I can’t imagine someone standing in my shoes without the protection of the
receivership code in the middle of this litigation. This is a very—this has become a very hostile litigation. I
don’t know what that make up would be. I think there [are] disputes as to who the shareholders are. I don’
t know how you can have a shareholders’ meeting when there [are] disputes as to that. I think there are
disputes as to who the directors are. I can’t imagine what the outcome would be if the shareholders
elected a BEPA board and the BEPA board appointed Dr. Degioanni as the president of BEPA to carry
forward. I think there would be quite a bit of litigation following that.
Nevertheless, Fite and Woods argue that the trial court erred in placing BEPA into receivership because
a receivership would jeopardize BEPA’s existing business relationships and BEPA’s ongoing efforts to
obtain new emergency room contracts. However, contrary to their argument of the “stigma” attached to a
receivership, the court heard testimony from Raymond that BEPA has not lost any business contracts
and First Community Bank did not consider BEPA’s note in default during the course of the original
receivership. Likewise there is no evidence in the record that the lack of new contracts during term of the
original receivership was a result of the receivership itself rather the contentious and public litigation
involving the parties and BEPA. Accordingly, we hold that the trial court did not err in rejecting this
argument against the appointment of a receiver.
Fite and Woods also argue that a receivership is unnecessary because there is another remedy
available to the court to insure the protection of BEPA’s interest in the ongoing state litigation in 334th
District Court in Harris County. They argue that BEPA can prosecute the litigation at the direction of
management or through shareholder derivative claims and that no basis exists for requiring BEPA to
incur the substantial expense of having a receiver oversee litigation on its behalf. In light of the evidence
presented regarding the past dysfunction of BEPA’s management and the current disputes as to the
identity and voting authority of the directors and shareholders, we hold that the trial court did not err in
rejecting this argument against the appointment of a receiver. Accordingly, we hold that the trial court did
not abuse it discretion in placing BEPA in receivership under Article 7.05, section (A)(1)(b) of the Act.
RAYMOND’S QUALIFICATIONS AS RECEIVERIn their third and fourth issues on appeal, Fite and Woods
argue that even if the trial court did not err in placing BEPA in receivership, Raymond is not qualified to
serve as the receiver of BEPA because (1) he is not a physician, (2) during the original receivership he
“abdicated” his receiver powers to Degioanni, an interested party to this litigation and (3) during the
original receivership he committed acts that reflect that he is not a disinterested person to this lawsuit.
Raymond’s Status as a Non-Physician
Fite and Woods argue that Raymond is not qualified to serve as a receiver of BEPA because he is not a
licensed physician. They argue that the appointment of a non-physician as receiver of BEPA, a
professional association of physicians, violates the corporate practice of medicine doctrine embodied in
the Texas Medical Practice Act and the mandates of the Texas Professional Associations Act (“TPAA”).
Fite and Woods argue these statutes require that only a licensed physician may serve as a receiver for a
professional association of physicians.
Under the “corporate practice of medicine” doctrine codified in the Texas Medical Practice Act, the
practice of medicine is restricted to licensed physicians. See Tex. Occ. Code Ann. § 164.052(a)(17)
(Vernon Supp. 2008). Specifically, the doctrine prohibits a corporation comprised of lay persons, which
employs licensed physicians to treat patients, from receiving a fee. Gupta v. Eastern Idaho Tumor Inst.,
Inc., 140 S.W.3d 747, 752 (Tex. App.—Houston [14th Dist.] 2004, pet. denied). “The purpose of [the
prohibition on the corporate practice of medicine] is to preserve the vitally important doctor-patient
relationship and prevent possible abuses resulting from lay control of corporations employing licensed
physicians to practice medicine.” Gupta, 140 S.W.3d at 752.
The TPAA allows for physicians to practice together through a limited liability entity without violating the
Medical Practice Act’s prohibition against the corporate practice of medicine. Specifically, the TPAA
provides that “all members of an association shall be licensed to perform the type of professional service
for which the association is formed.” See Tex. Rev. Civ. Stat. Ann. art. 1528f, § 2(B) (Vernon Supp.
2008). The TPAA also requires that all officers and members of the Board of Directors or Executive
Committee [of a professional association] shall be members of the professional association.” Id., § 9(c).
Neither the Medical Practice Act or the TPAA provide a blanket prohibition on the appointment of a non-
physician as the receiver of a professional association of physicians. The Medical Practice Act and the
TPAA do not even mention receiverships. While the TPAA provides the requirements for the officers and
members of the board of directors of a functional association, it does not purport to mandate the
qualifications, powers, and duties of a receiver of the association appointed under the Texas Business
Furthermore, we hold that Raymond’s appointment does not violate the corporate practice of medicine
doctrine embodied in the Medical Practices Act or the TPAA. In its appointment order, the trial court
authorized Raymond, as the receiver, to take control of only the business operations of the association.
He is neither directed nor empowered to take any steps involving the dispensing of medical services. The
court has not authorized Raymond to employ personnel to perform medical services or receive an income
for those services. The court heard testimony that Raymond understands that the court’s order only
empowers him to oversee the business operations of BEPA and that matters concerning the practice of
medicine, such as the filing of regulatory statements with the appropriate state medical authorities, are
handled by Degioanni, a licensed physician and the president of BEPA. Accordingly we hold that
the trial court did not err in appointing Raymond, a non-physician, as the receiver of BEPA.
The appointment of a non-physician receiver to handle the business portion of the operations of a professional
association is not contrary to the purposes behind the corporate practice of the medicine doctrine. Under a receivership,
the receiver is specifically empowered by and answerable to the court for all of his actions and thus,there is no danger of
the abuse of the doctor-patient relationship or a non-physician controlling the practice of medical services to the public
that the doctrine is designed to protect against. Gupta v. Eastern Idaho Tumor Inst., Inc., 140 S.W.3d 747, 752(Tex. App.—
Houston [14th Dist.] 2004, pet. denied).
Degioanni’s Role in BEPA under the Original Receivership
Fite and Woods also argue that the court erred in finding that Raymond was qualified to serve as a
receiver because, under the original receivership order, he unlawfully “abdicated his receivership
authority” to Degioanni, who Fite and Woods allege has engaged in “egregious breaches of fiduciary
duty to BEPA.” However, there is evidence in the record contradicting these allegations that the trial court
could have reasonably considered in favor of Raymond’s appointment. The court’s order itself was
evidence that Raymond never “abdicated” his authority to Degioanni. As noted above, the appointment
order empowered Raymond to take charge of only the business operations of BEPA, not matters
pertaining to the provision of medical services. These matters remained subject to the control of
Degioanni as a licensed physician and the president of BEPA. Furthermore, Raymond testified that after
investigation, he concluded that Degioanni had not engaged in the wrongful conduct alleged by Fite and
Woods. Accordingly, we hold that the trial court did not abuse its discretion in appointing Raymond
despite the allegations concerning Raymond’s abdication of his authority to Degioanni.
Raymond’s Conduct under the Original Receivership
Fite and Woods also assert that, under the original receivership, Raymond engaged in the following acts
that establish that he is not a disinterested person to this lawsuit and that disqualify him from serving as
BEPA’s receiver: (1) purporting to redeem Woods’ and Fite’s BEPA stock in an effort to deprive them of
standing to pursue claims on BEPA’s behalf, (2) attempting to settle the derivative claims asserted by Fite
and Woods on inadequate investigation and for inadequate consideration, (3) accepting as part of the
Allocation Agreement, a contingent interest in the claims he has asserted on BEPA’s behalf, thereby
creating an incentive to pursue the litigation of those claims even if it threatens other business or claims
of BEPA, and (4) moving the trial court to extend his own receivership. Nevertheless, there is evidence in
the record contradicting these allegations that the trial court could have reasonably considered as
credible and in favor of Raymond’s appointment.
The record reflects that Raymond has served as a receiver in the Harris County courts for about 17
years. Prior to his appointment in this case, Raymond served as the receiver of a hospital for two and
one-half years. At the time of the hearing for his reappointment, Raymond had spent over 1000 hours
reviewing BEPA’s records and running its business operations as the receiver. During Raymond’s tenure
as receiver, despite the ongoing hostilities between the parties, BEPA has remained an ongoing concern,
has not lost any existing contracts, and the bank has not declared it in default of its loan. Although Fite
and Woods allege that the purported buyback of their stock in BEPA was for wrongful purposes, the court
heard contradictory testimony that the purchase offers were in accordance with BEPA’s bylaws and the
receivership order and there was no evidence before the trial court that the amount offered was not
reasonably supported by Raymond’s research.
With respect to Fite and Woods’ allegations of impropriety regarding the negotiation of various settlement
agreements, Raymond testified as to research he did to satisfy himself that the settlement with Degioanni
and Emtel was reasonable and for adequate consideration, and that Degioanni had not participated in
the wrongful conduct alleged by Fite and Woods. While Fite and Woods fault Raymond for not reviewing
any of Emtel’s corporate records during this process, Raymond testified that it was his understanding that
he did not have the authority under the receivership order to access these records. Raymond also
testified that his review of Emtel’s records was not necessary because his careful inspection of BEPA’s
corporate records was sufficient to allow him to determine if there had been any unlawful transfers
between BEPA and Emtel. Fite and Woods also criticize Raymond for not reading the report of their own
expert, Warren Cole, regarding his investigation into the finances of BEPA and Emtel before entering into
the settlement agreements. However, the trial court heard testimony from Cole that this was only a
preliminary report, subject to revision. The report is not in the record before us on appeal.
Raymond testified that, pursuant to the warranty in the agreement, if Cole’s report ultimately established
any misconduct by Degioanni unknown to Raymond at the time of settlement, Raymond would be entitled
to pursue claims for that conduct against Degioanni.
With respect to Fite’s and Woods’ allegations regarding the Allocation Agreement, Raymond testified
regarding the research that he performed leading up to this agreement. The record reflects that Fite and
Woods simply disagree with Raymond’s conclusions. While Fite and Woods also argue that Raymond’s
fee arrangement from the Allocation Agreement demonstrates his interest in the outcome of this litigation,
the record does not reflect that Raymond’s actions violated the terms of the receivership order, and the
ultimate method of payment and amount of Raymond’s fee is subject to the trial court’s review and
approval. Finally, we hold that it was not unreasonable for the trial court to reject Fite’s and Woods’
argument that a receiver’s actions to extend the receivership so that he could complete the tasks
entrusted to him disqualifies him from continuing to serve as a receiver. In light of the conflicting evidence
before the trial court, we hold that the trial court did not abuse its discretion in finding that Raymond was
qualified to serve as the receiver of BEPA.
THE BOND PROVISIONS OF THE REAPPOINTMENT ORDER
In their fifth issue on appeal, Fite and Woods argue that the receivership order is per se invalid because
the trial court did not require Degioanni and Emtel, the parties requesting appointment of a receiver, to
post an appropriate bond. Additionally, in their sixth issue on appeal, Fite and Woods argue that the
$500 bond posted by the receiver is “impermissibly low.”
A court may not appoint a receiver until two bonds have been filed. Both the party applying for a
receivership and the receiver must file a bond with the clerk of the court payable to the defendant in an
amount fixed by the court. See Tex. R. Civ. P. 695a; Ahmad v. Ahmed, 199 S.W.3d 573, 575 (Tex. App.—
Houston [1st Dist.] 2006, no pet.) (mandating the bond to be filed by the applicant); Tex. Civ. Prac. &
Rem. Code Ann. § 64.023 (Vernon 2008) (mandating the bond to filed by the receiver). The purpose of
these bonds is to ensure that the defendant can be reimbursed for any damages caused by the
appointment of the receiver in the event that the receiver was wrongfully appointed. Id. These bonds are
a prerequisite to the appointment of a receiver, and the trial court’s failure to require that both of the
bonds be filed necessitates reversal of the order appointing the receiver. Ahmad v. Ahmed, 199 S.W.3d
at 575. The filing of a bond by the receiver will not satisfy the bond requirement for the applicant. Id.
Fite and Woods have waived any issue on appeal regarding the trial court’s failure to require an
applicant’s bond. Pursuant to Rule 33.1(a) of the Texas Rules of Appellate Procedure, as a prerequisite
to presenting a complaint for appellate review, the record must show that the complaint was made to the
trial court by a timely request, objection, or motion that “stated the grounds for the ruling that the
complaining party sought from the trial court with sufficient specificity to make the trial court aware of the
complaint, unless the specific grounds were apparent from the context.” Tex. R. App. P. 33.1(a)(1)(A).
Here, upon review of the record, and especially in light of the fact that Fite did not object to absence of
an applicant’s bond in the original receivership order, we hold that Fite’s objection before the trial court to
the entry of the receivership order was not stated with sufficient specificity to put the trial court on notice
that she was complaining of the lack of an applicant’s bond rather than the lack or inadequacy of the
receiver’s bond in the order. Consequently, Fite and Woods have not properly preserved this complaint
for appellate review. Id.
Finally, Fite and Woods argue that that the $500 bond posted by Raymond as the receiver is
impermissibly low and is insufficient “to protect a going concern such as BEPA.” However, this is exactly
the same amount that they agreed was sufficient under the original receivership and they presented no
facts before the trial court as to what circumstances had changed warranting a greater bond.
Accordingly, we hold that the trial court did not abuse its discretion in setting the receiver’s bond amount.
We affirm the order of the trial court.
George C. Hanks, Jr.
Panel consists of Justices Taft, Hanks, and Higley.