TURN OVER PROCEEDINGS- PRACTICE AND PROCEDURE-TEXAS

02 Dec TURN OVER PROCEEDINGS- PRACTICE AND PROCEDURE-TEXAS

1)  Meaning– S.31.002 Texas Civil Practice and Remedies Code 

  A judgment creditor is entitled to aid from a court of appropriate jurisdiction through injunction  or other means in order to reach property to obtain satisfaction on the judgment if the judgment debtor owns property, including present or future rights to property

2)  Prerequisites–

a) the property  cannot be readily attached or levied by ordinary legal process.  Hennigan v. Hennigan, 677 S.W.2d   495, 496 Tex (1984) — Plaintiff must explain why the property rights cannot be attached or levied .  It may be an abuse of discretion by ordering a turnover without the necessary showing. Main Place Custom Homes, Inc. v. Honaker, 192 S.W.2d 604, 627-628 (Tex.App. __Fort  Worth 2006, [ no pet. h]  

b)  There must be a showing that there is an imminent danger that the judgment debtor will secrete or waste property subject to seizure for payment. 

3)  How, where and when to File

 (a)   Must be initiated by a written motion filed by the judgment creditor in the same court that rendered the judgment or a separate and independent lawsuit provided the court has subject matter  jurisdiction and the venue is proper. A separate suit is usually proper where the creditor intends to bring in a third party who holds property into the matter. Always advisable to file and obtain a temporary restraining Order, subject to renewal against defendant regarding property.      

(b)  Creditor can file any time after attempting to collect the judgment by other means, (need not exhaust other means) even if debtor has perfected an appeal ( unless accomplished by a superseding bond .)      

4)  Allegations – Describe the judgment, the extent to which the judgment is unsatisfied, general description of the property rights believed to be held by debtor; and explanation of why the properties cannot be levied or attached by regular process ( e.g. refusal of judgment debtor to answer post judgment discover or attend deposition)  and relief(s) sought.

5)   LIMITATIONS

    a)  A turn over order cannot require action by a stranger to the judgment being enforced.  Beaumont Bank, N.A. V. Buller, 806 S.W.2d 233, 227 (Tex. 1991).  Decedent’s estate was judgment debtor, turnover order  could not be directed to estate representative in individual capacity. 

b)  Alter ego issues— Very thorny and reoccurring issue is whether a corporation is a judgment debtor’s alter ego – Beaumont Bank, N.A. v. Buller, 806 S.W.2d 233, 227 (Tex. 1991). -“Texas courts do not apply the turnover statute to non-judgment debtors”. 

  Plaza Court ltd v. West, 879 S.W.2d 271, 276-277 (Tex. App___ Houston [14th District.] 1994 Orig, Proceeding)-  a receiver can be authorized to seize property claimed by a corporation once it is determined that the corporation is the alter ego of the judgment debtor. Further, unless there is a finding that  a creditor has pierced the corporate veil, a turnover order is improper. There must be a finding by the court that the corporation is a sham or debtor’s alter ego. The receiver cannot arrogate to him/herself the fact finding function of the court.

6)   Powers of the RECEIVER 

        1) To take possession of and sell all leviable property of Defendants through a private or public sale; 

2) collect all accounts receivables of the Defendant, including rents

   3) to change locks to all premises at which any property is located;

4) direct the delivery of Defendant’s mail and the mail of any business of the Defendants to the Receiver’s address and open all mails directed to Defendants and any business of the Defendants;

5) endorse and cash all checks and negotiable instruments payable to defendants, except payroll checks for current wages;

6) to insure any property belonging to the defendant ( but not for obligation)

7) obtain documents from any financial institution, bank, credit union, credit bureau, saving plans and loans, title company etc

8) obtain documents from landlord, building owner or building manager where Defendants’ business is a tenant;

9) hire any person or company to accomplish any right or power under the turnover  Order ;  

10) take all action to gain access to all storage facilities, safety deposit boxes, real property and leased premises wherein any property of Defendant may situated; 

11) power to compel utilities, phone companies, internet providers, etc to produce documents relating to history of payment.

All Sheriffs or constable are ordered to assist receiver in carrying out duties. 

Compensation of Receiver: Court set the fees-e.g. 25% of all proceeds coming into the possession of receiver.         Oath:  Receiver must take an oath with or without bond. 

  7)  Reliefs

a)  Contempt — 

b) S. 31.002 cc) CPRC- the receiver may also enforce a turnover order “by other appropriate means.” The term has not been further defined. e.g. declaring the judgment-debtor trustee of  property to be received in the future; receiver can become the sole signatory to debtor’s bank account. 

Limitations:   does not include the power to impose a fine either in lump sum or  otherwise– Grainer v. Jameson , 865 S.W.2d 493, 500 (Tex. App.__Dallas 1993, den).

8).   Defenses    

(a)  Texas Constitution  Article 1. Section 18- no person can be imprisoned “for debt” – Ex Parte Britton, 127 Tex. 85, 92 S.W2w 224, 227 (1936). 

 (b)  The prohibition extends to barring contempt for failure to turn over cash to pay the judgment –

Ex Parte Prado, 911 S.W.2d 849, 850 (Tex. App___Austin 1995, Orig. Proceeding) 

c) Inability to pay – Ex Parte Chambers, 898 S,W,2d 257, 261-262 (Tex. 1995)

d) Exemptions 

  (a)   Tex. Consti. art 16, Section 49- The legislature is required to protect  a certain portion of the personal property of families and single adults from forced sale.  

(b)  Tex. Prop. Code Section 42.001(a) 

1) Family property up to $60,000.00 and $30,000.00 for a single individual

2) 42.001(b)  current wages for personal services

3) 42.0021(a)– self-employment retirement plan  

Burden is on debtor to prove exemption- Goodman v. Compass Bank, 2016 Tex. App. LEXIS 8338 at 15 (Tex. App__Dallas Aug. 3, 2016)

Exemptions to Exemption

a) Child support lien b) landlord’s lien on certain personal property items c) a security interest established according to law e.g. a PMSI  on a car.