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Leslie Wm. Adams & Associates v. Amoco Federal Credit Union

Court of Appeals of Texas, First District

September 7, 2017


         On Appeal from the County Civil Court at Law No. 4 Harris County, Texas Trial Court Case No. 1026220-801

          Panel consists of Chief Justice Radack and Justices Keyes and Massengale.


          Michael Massengale Justice.

         This is an appeal from an order for disbursement of garnished funds. Judgment creditor and appellant Leslie Wm. Adams & Associates obtained a postjudgment writ of garnishment against appellee AMOCO Federal Credit Union, based on an underlying judgment against judgment debtor and appellee Terence Martinez. Martinez moved to dissolve the writ on the basis that the funds in his accounts were exempt from garnishment. After a bench trial in which some funds were determined to be exempt from garnishment, the court issued a final judgment dissolving the writ and ordering AMOCO to disburse a portion of Martinez's funds to satisfy the underlying judgment. Following the garnishment proceedings and prior to execution on the judgment in garnishment, Martinez filed for bankruptcy under Chapter 7 of the Bankruptcy Code.

         Because a judgment in garnishment is not self-executing and the underlying judgment against Martinez was discharged in bankruptcy, we dismiss Adams & Associates's appellate challenges to the extent they implicate the firm's efforts to collect money from Martinez. In all other respects, we affirm the trial court's judgment.


         Appellee Terence Martinez is a U.S. Army veteran who receives outpatient mental-health treatment for a long history of depression, caused in part by chronic pain. He is unemployed and receives various disability payments, as well as benefits from the Department of Veterans Affairs. Martinez regularly deposited these funds into his account with appellee AMOCO Federal Credit Union.

         After Hurricane Ike, Martinez filed a lawsuit which was settled by payments from the Texas Windstorm Insurance Association. Martinez subsequently alleged various claims against a construction company for inferior repairs. For these legal claims, he was represented by appellant Leslie Wm. Adams & Associates, a professional limited liability company. Adams & Associates later sued Martinez to recover legal fees, and it obtained a final judgment against him for $41, 235.20 in actual damages and $2, 858.50 in attorney's fees.

         Adams & Associates then filed for a writ of garnishment against AMOCO Federal Credit Union, alleging that it was indebted to Martinez.[1] The trial court issued a writ against AMOCO. In its original answer to the writ, [2] AMOCO affirmed that it was indebted to Martinez in the amount of $108, 601.56 because he had two accounts at the credit union.

         Martinez filed several motions to dissolve the writ of garnishment, alleging that all of the money in his AMOCO accounts was exempt from garnishment. Eventually, AMOCO filed an amended answer to the writ of garnishment in which it stated that it had "maintained its hold" on the accounts "in the amount of $46, 741.81, " but it allowed Martinez to have access to the excess balance of $60, 699.00, which was withdrawn by him.

          The trial court held a bench trial to determine the amount of exempt and nonexempt funds remaining in the AMOCO accounts. Adams & Associates presented a forensic accountant to testify about the money in the accounts at the time the writ of garnishment was served on AMOCO. She testified that all but $2, 119 of the original $108, 601.56 was nonexempt funds subject to garnishment.

         Martinez also testified at the trial. He asserted that the money in the credit union accounts came from several sources, including VA benefits, disability benefits, and insurance settlement proceeds.

         The trial court determined that of the $46, 741.81 remaining on deposit with AMOCO, $15, 328 constituted nonexempt funds. The court issued a judgment ordering AMOCO to pay Adams & Associates $12, 869.64 out Martinez's funds. The remainder of the balance of nonexempt funds was awarded to AMOCO for attorney's fees.

         Adams & Associates appealed.


         Adams & Associates raised four issues challenging the trial court's order for disbursement of garnished funds and AMOCO's release of garnished funds without a court order.

         I. Procedure for garnishment appeal

         Despite being a party to the garnishment proceeding with a personal interest in its outcome, Martinez was not provided notice of all filings during the initial stages of this appeal consistent with his status as a party. In its docketing statement, [3]Adams & Associates failed to identify Martinez as an appellee.[4]

         A garnishment proceeding necessarily involves three parties: a creditor, a debtor, and a third person who has some obligation to the debtor.[5] "Garnishment is a creditor's action against his debtor's debtor to obtain payment of what is owed the creditor."[6] Accordingly, the deficient docketing statement filed in this court was struck, and Adams & Associates was ordered to file a new docketing statement including Martinez as an appellee. The clerk of the court provided Martinez with a complete copy of the appellate record, and deadlines were extended to permit him to file a brief, which he did not do.

         II.Effect of bankruptcy ...

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