The debtor entered into multiple agreements with the creditors regarding the sale of the debtor’s breeding horses and a lease on ranch property owned by the debtor before the debtor filed for bankruptcy. The agreements were in dispute before the bankruptcy filing, and the bankruptcy court addressed three issues. First, the bankruptcy court ruled in favor of the leasing creditor for $1,109,000 as damages arising from the debtor’s violation of a five-year lease agreement for the use of the debtor’s ranch with monthly payments totaling $2.5 million. The leasing creditors made three payments before the debtor locked them out of the leased property. The creditors asserted that having been locked out of the leased property had required them to make necessary improvements, in the amount of $1,109,000, to the creditors’ own ranch to accommodate the creditors’ horses that had been at the property they had leased from the debtor. Second, the bankruptcy court further ruled in favor of the creditors, awarding $61,257.32 in damages under the Texas Theft Liability Act (TTLA). These damages resulted from the debtor asserting a stable keeper’s lien, a lien on another’s animal for the cost of its care, in the amount of $101,948.50. The bankruptcy court ruled that this lien violated the TTLA because only $40,691.18 related to the care of the horses, while the remainder of the claimed amount, $61,257.32, represented unrelated charges. Thus, the debtor had unlawfully appropriated the creditor’s property. Third, the bankruptcy court awarded another creditor $51,200 in damages for the debtor’s failure to provide breeder certificates for two horses that had been sold. That other creditor argued, and the bankruptcy court held, that the absence of the certificates diminished the horses’ value by that amount. On appeal, the district court reversed all three awards. The district court addressed three issues regarding the three respective claims: (1) whether the bankruptcy court had properly calculated and awarded damages for the debtor’s breach of the lease contract; (2) whether the debtor had unlawfully appropriated the creditors’ property when demanding non-care-related charges in the stable keeper’s lien; and (3) whether damages were properly evaluated for the loss of value from the debtor not providing breeder certificates.
In Rose v. Aaron (In re Rose), 156 F.4th 602 (5th Cir. 2025), the Fifth Circuit Court of Appeals affirmed the district court’s holding as to the lease and breeder certificate claims but reversed the district court’s holding as to the TTLA claim. In affirming the first claim, the court applied the standard from Eni US Operating Co. v. Transocean Offshore Deepwater Drilling, Inc., 919 F.3d 931(5th Cir. 2019), which required damages to be calculated using a theory of damages recognized by law. The court determined that the damages awarded to the creditors for necessary improvements to their own property had not been based on restitution, reliance, or expectation. Therefore, the damages had not been calculated in accordance with the law. The court further explained that because the creditors had been relieved from paying rent for the remaining lease term of the debtor’s property, the alleged damages, from the cost of necessary improvements to their own property, did not exceed the benefit they had received from not having to pay rent for the debtor’s property. In reversing the second claim, the court explained that the debtor’s assertion of a stable keeper’s lien for an amount greater than the cost of care for the animals amounted to threatening to commit an offense and unlawfully appropriating the creditor’s property under Texas Penal Code § 31.03. The court further explained that because the debtor had coerced the creditor into paying the full amount of $101,948.50, the debtor had unlawfully appropriated the creditor’s property. However, the court remanded the claim to determine if the debtor acted with the “intent to deprive” required for a TTLA violation under the standard in McCullough v. Scarbrough, Medlin & Assocs., Inc., 435 S.W.3d 871, 906 (Tex. App.—Dallas 2014, pet. denied). Lastly, in affirming the decision on the third claim that had been asserted by the other creditor arising from the failure of the debtor to provide breeder certificates for two horses, the court cited Nat. Gas Pipeline Co. of Am. v. Justiss, 397 S.W.3d 150, 155 (Tex. 2012), to explain that the creditor must prove the amount of alleged damages. Here, the court found that the other creditor did not provide a factual basis to show how it determined the diminished value of the two horses to be $51,200.00. Therefore, the Fifth Circuit affirmed the district court’s holding as to the lease contract but reversed and remanded the district court’s holding as to the TTLA claim and the breeder certificate claims.
By Noah Coggan [email protected]
Edited By Deanna Dulske [email protected]
Edited By Olivia Lewis [email protected]
Edited By Taylor O’Brien [email protected]