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Jennifer Mitchell and TCSM LLC v. Turbine Resources Unlimited Inc.

Court of Appeals of Texas, Fourteenth District

March 30, 2017


         On Appeal from the 61st District Court Harris County, Texas Trial Court Cause No. 2004-41286


          Panel consists of Justices Jamison, Busby, and Wise.


          J. Brett Busby Justice.

          In this consolidated appeal and petition for writ of mandamus, Jennifer Mitchell and Turbine Component Super Market, LLC (TCSM) challenge four trial court orders signed in a post-judgment receivership proceeding. The underlying judgment was rendered in favor of Turbine Resources Unlimited (Turbine) against Tom George and International A., Inc. Appellants Mitchell and TCSM were not parties to the original judgment, but intervened post-judgment to protect their interest in property included in the court's turnover order and receivership. The first challenged order, signed on September 24, 2014, authorized the receiver to sell assets that appellants contend belonged to TCSM and two vehicles that Mitchell claimed she owned. Following an evidentiary hearing, in which Mitchell testified, the trial court signed two additional orders: the April 14, 2015 order denying Mitchell's fourth motion to modify the court orders authorizing sale, and the June 2, 2015 order approving the sale of property that appellants contend belonged to TCSM. Appellants later filed a motion to set aside the master's reports as void, which the trial court denied.

         Mitchell and TCSM ask this Court to vacate these orders as well as the January 2, 2014 order adopting the first master's report and the September 5, 2014 order adopting the second master's report, upon which the orders of sale are based. We conclude that: this Court lacks jurisdiction over appellants' challenge to the trial court's September 24, 2014 order of sale; the trial court did not err in denying the motion to modify court orders and signing the June 2, 2015 order of sale; and the trial court did not clearly abuse its discretion in denying the motion to set aside the master's reports. We therefore overrule appellants' issues, affirm the April 14 and June 2, 2015 orders, and deny the petition for writ of mandamus.


         A. Initial judgment and appointment of master and receiver

         This dispute arose from a suit Turbine filed in 2004 against International A, Inc. and Tom George for breach of contract and failure to make payment on a sale of equipment. The trial court granted summary judgment in Turbine's favor in 2006, and Turbine served a writ of execution on George and International A. On December 8, 2006, the trial court signed a turnover order, appointing a receiver. That same day, George filed for chapter 13 bankruptcy protection. George listed his employer as TCSM and his salary as $2, 000 per month. The bankruptcy petition was later dismissed because George did not appear for the creditors' meeting.

         In October 2007, the trial court signed a supplemental turnover order, appointing a receiver and master in chancery to collect the unpaid final judgment of $188, 246.94 plus $10, 000 in attorney's fees. The supplemental order placed Tom George and International A under the receivership and appointed Riecke Baumann as master and receiver.[1] See Tex. R. Civ. P. 171; Tex. Civ. Prac. & Rem. Code Ann. § 31.002 (West 2015). The court gave the receiver "full power and authority to take possession of all non-exempt property of every defendant that is in any defendant's actual or constructive possession or control." The order also authorized the receiver to order "from all defendants and third parties" the production and turnover of assets, evidence, and documents upon all matters he believed pertain to compliance with the order.

         The trial court found George in contempt for knowingly and intentionally violating multiple turnover orders, [2] a compulsion order, and a Rule 11 agreement in which George had promised to make payments to the receiver. The court also found George in contempt for interfering with the receiver's performance of his duties, thwarting the sale of certain property, failing to notify the receiver of the existence of other property, failing to turn over property, and delivering property to other individuals in an effort to hide the property from the receiver.

         B. Master's Reports

         The receivership has had a convoluted procedural history, which we explain in some detail to provide context for the parties' arguments. The receiver, acting in his capacity as master, filed multiple master's reports containing his findings. In November 2013, the receiver filed the first master's report, which the trial court adopted and signed on January 2, 2014. The report made the following findings:

• George is the sole owner of the defendant company, International A, Inc., and another company, TCSM. International A, Inc., is defunct (if it ever existed) and TCSM has a forfeited corporate status. According to the records from the Texas Secretary of State, TCSM was formed on January 26, 2005. The franchise was involuntary ended, but was re-formed on November 16, 2007, eleven months after George's non-exempt assets were placed into receivership, including the assets that were used to create TCSM. George's transfer of assets to TCSM was, therefore, void. The corporation was formed for the purpose of hiding assets from the receivership. George has refused to provide proof that anyone else owns TCSM. As there is no proof that TCSM is a corporation, George is its sole proprietor.
• George has used TCSM to fund personal expenses, has co-mingled personal and company funds, and has made TCSM a device by which he has hidden assets from receiver's collection.
• TCSM is George's alter ego. International A, Inc. and TCSM have never existed as corporations and George has always operated them as sole proprietorships to hide assets and pay his personal expenses.
• George is a convicted felon, having pled guilty to fraud in January 2009 in the United States District Court for the Southern District of Texas. To satisfy the plea deal he made with the United States, George paid $250, 000 to the United States during the receivership, without advising Receiver.
• George has never accounted for the source of the $250, 000, except to claim that $100, 000 was lent to him by TCSM and the remainder were loans from family members. No proof or documentation has been provided to prove these loans; the undocumented $100, 000 loan from the business is further proof that TCSM is George's alter ego and sole proprietorship.
• On January 6, 2012, the trial court found George to be in contempt of court for not advising the receiver of the sources of the $250, 000 George paid the Government to satisfy the plea deal. The contempt order found George knowingly and intentionally violated every order issued by the trial court, including the turnover orders.
• George represented to the court that he lived with his wife, Dorothy George, at 12445 Memorial Drive, Houston, Texas 77024. However, on September 15, 2009, George began leasing an apartment at One Park Place, 1400 McKinney Street, Unit 808, Houston, Texas 77010. The residents of the apartment are George and his girlfriend, Jennifer Mitchell.
• The lease for the apartment is in the name of TCSM, LLC. Included in George's lease application is his business card, which lists his title as President of TCSM, LLC. His application also states that he is self-employed, affirming that TCSM, LLC is his d/b/a and that TCSM is not an LLC.

         On March 7, 2014, Mitchell appeared before the trial court pursuant to a subpoena served on her by the receiver. Because Mitchell did not bring documents to show where George could be served with process, as the subpoena requested, the court ordered Mitchell to re-appear on March 28 with either George or proof of where he could be served. The court also ordered Mitchell to appear for a deposition on March 24. When Mitchell failed to appear, the receiver filed a request for sanctions. The trial court signed an order on May 8, 2014, setting a status conference and ordering Mitchell to personally appear at the status conference with proof that she complied with the order to appear for deposition. The court also ordered Mitchell to "bring with her proof of ownership, and the location of every vehicle that she has owned, possessed, or controlled, in the last five years."

         Mitchell did not appear at the status conference despite the court's May 8 order. On June 6, 2014, the trial court signed an order requiring Mitchell and George to appear for deposition, bringing with them "proof of the whereabouts and their ownership, or rights to possession, of all vehicles and equipment that they owned, possessed, managed, or held for others during the receivership." Mitchell and George were later deposed but did not provide the requested documentary evidence of ownership.

         The receiver supplemented his findings in the second master's report, which found that George repeatedly violated the court's turnover orders by failing to tender numerous luxury vehicles to the receiver, purchasing several Corvettes with non-exempt funds, and hiding other vehicles from the receiver by delivering them to mechanics, who placed liens on the vehicles. The receiver also found that Mitchell claimed sole ownership of two vehicles: a 2009 Bentley and 2011 Ford Expedition. According to the receiver's findings, however, Mitchell admitted that payments on the cars' notes were regularly made by TCSM, which the Court had previously found was solely owned and controlled by George. The receiver concluded that the two vehicles were subject to the receivership and not owned by Mitchell because Mitchell showed no proof of income apart from TCSM and all car loan payments had been made by TCSM. The report also recounted Mitchell's admission at her deposition that she and George broke into George's Brittmoore office location after the receiver had changed the locks. Upon entering the building, Mitchell and George removed a 2002 Bentley and TCSM inventory subject to the receivership.

         The receiver further found that Mitchell and George were common-law spouses and that all property owned by Mitchell was community property subject to the receivership.[3] He cited Mitchell's medical records (which listed her as married), the loan application for the 2011 Expedition (which identified her as "Mrs. Jennifer Mitchell"), and Mitchell's testimony that she divorced her previous husband before she and George moved into an apartment together in 2009. The receiver concluded that the Bentley and the Expedition, which were purchased after 2009, were therefore community property subject to the receivership. Baumann's second master's report was adopted by the trial court in September 2014.

         Following its adoption of the second master's report, the trial court signed the challenged September 24, 2014 order, which authorized the receiver to sell, "subject to third parties' rights, " various items, including the 2009 Bentley Continental, 2011 Ford Expedition, and inventory located at a Conroe, Texas warehouse "belonging to George or TCSM." The order also sanctioned George for his non-compliance with the court's turnover orders and set an October 10, 2014 compliance hearing.

         C. Mitchell's challenge to the receiver's authority

         Although Mitchell was not a party to the initial lawsuit or receivership proceeding, she filed several motions as an "interested third party" to protect her interest in property subject to the receivership. In October 2014, Mitchell filed a motion to modify court orders, asking the court to modify its orders to withdraw authority from the receiver to sell the 2011 Ford Expedition and 2009 Bentley Continental purportedly owned by Mitchell. The motion also attacked several findings in the first and second master's reports regarding George's relationship with Mitchell, their use of TCSM assets to pay for the Expedition and Bentley, and TCSM's status as George's "alter ego."

         In January 2015, Baumann filed his third master's report.[4] The report included additional findings that George had violated the court's turnover and contempt orders and findings regarding Mitchell's involvement in George's actions. That same month, counsel for Mitchell appeared on her behalf at a status conference. Following the status conference, the court signed an order acknowledging receipt of the third master's report, but the language adopting the report was crossed out by the trial court.

         Mitchell filed a motion objecting to all three master's reports followed by a "Fourth Motion to Modify Court Orders, " in which she further argued that the Expedition and Bentley were improperly included in the court's turnover order. Mitchell disputed the receiver's findings that she and George were common-law spouses and that the vehicles were subject to the turnover order. Mitchell filed a "First Supplemental Fourth Motion to Modify Court Order" on ...

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