On
Appeal from the 11th District Court Harris County, Texas,
Trial Court Cause No. 2016-32078
Panel
consists of Chief Justice Frost and Justices Wise and
Zimmerer.
OPINION ON REHEARING [1]
Kem
Thompson Frost Chief Justice.
In this
appeal a judgment debtor challenges the trial court's
order appointing a receiver under section 31.002(b) of the
Texas Civil Practice and Remedies Code. Because evidence in
the record shows that the judgment debtor had certain assets,
we conclude that the trial court did not err in granting the
receivership order as to these assets. Likewise, because the
evidence does not show that the judgment debtor owned any
other property, we conclude the trial court abused its
discretion in granting the receivership order as to any other
assets. We reverse and remand.
I.
Factual and Procedural Background
The
trial court rendered a final money judgment on October 2,
2016, in favor of appellee/plaintiff Global Metal Services,
Ltd. and against appellant/defendant Hamilton Metals, Inc.
("Judgment"). Global initiated a garnishment
proceeding against PNC Bank, N.A., a financial institution
holding three accounts in the name of Hamilton Metals, Inc.
("Hamilton").
Global
filed an "Amended Ex Parte Application for Turnover
After Judgment and for Appointment of Receiver,"
asserting that it held and owned the Judgment. According to
Global, before seeking turnover relief Global made several
attempts to contact Hamilton, and Global recorded various
abstracts of judgment in the real property records of various
Texas counties. Global also noted that it had initiated the
garnishment proceeding against PNC Bank. Global asserted that
none of these actions resulted in the collection of any money
to be credited against the Judgment. Global noted that it had
come to Global's attention that some of Hamilton's
assets were pledged in connection with a Revolving Credit and
Security Agreement with PNC Bank. Global stated that this
line of credit "was subsequently foreclosed upon [by PNC
Bank] under UCC Article 9 and [Hamilton's] tangible and
intangible assets . . . were made available to third parties
for purchase via private sale and were subsequently
sold." Global asserted that at the time of the
application, these assets were "not believed to be
within the scope of this Application," but Global stated
that it reserved the right to ask the trial court for
additional relief as to these assets. The record does not
reflect that Global ever sought such relief.
In its application, Global alleged that, upon information and
belief, Hamilton continues to exist. Global claimed to have
made a good faith effort to collect the Judgment but had been
unsuccessful in doing so. Global asserted that Hamilton's
failure to make any attempt to resolve the matter made it
necessary for Global to seek appointment of a receiver to
facilitate the collection of the Judgment. Global alleged
that it had reason to believe that Hamilton, either directly
or indirectly through its Chief Executive Officer, owned
property not exempt from attachment, execution, or seizure
for the satisfaction of liabilities and asked the trial court
to appoint a receiver under the Texas turnover statute.
See Tex. Civ. Prac. & Rem. Code Ann. §
31.002 (West, Westlaw through 2017 1st C.S.).
The
trial court signed an order appointing a receiver. In the
order the trial court gave the receiver the power to take
possession of "any non-exempt property . . . of
[Hamilton] necessary to pay judgments outstanding against
[Hamilton], including, but not limited to" the
following:
(1) all documents or records, including financial records,
related to such property that is in the actual or
constructive possession or control of [Hamilton]; (2) all
financial accounts (bank accounts), certificates of deposit,
money market accounts, accounts held by any third-party; (3)
all securities; (4) all real property, equipment, vehicles,
boats and, planes; (5) all safety deposit boxes, private
storage spaces and vaults; (6) all cash; (7) all negotiable
instruments, including promissory notes, drafts and checks;
(8) causes of action or choices [sic] of action; (9) contract
rights whether present or future; and (10) accounts
receivable.
The
trial court gave the receiver the discretion to liquidate any
of Hamilton's non-exempt property necessary to pay
judgments outstanding against Hamilton. The trial court also
ordered Hamilton to turn over to the receiver within five
days of receiving a copy of the order "all checks, cash,
securities (stocks and bonds), interest in any business
and/or partnerships, promissory notes, documents of title and
contracts owned by or in the name of [Hamilton]."
On
appeal from the trial court's order, Hamilton asserts
various appellate arguments in an attempt to show that the
trial court abused its discretion in issuing the receivership
order.
II.
Issue and Analysis
A.
Did the judgment creditor have to prove that the judgment
debtor owned property that could not readily be attached or
levied on by ordinary legal process?
Hamilton
asserts that even if Global submitted evidence that Hamilton
owned property, Global did not present evidence that Hamilton
owned any property that could not readily be attached or
levied on by ordinary legal process. Hamilton argues that
Global had to make this showing to be entitled to appointment
of a receiver under section 31.002(b).
When
Global filed its amended application on May 11, 2017, the
turnover statute provided in pertinent part as follows:
(a) 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, that:
(1) cannot readily be attached or levied on by ordinary legal
process; and
(2) is not exempt from attachment, execution, or seizure for
the satisfaction of liabilities.
(b) The court may:
(1) order the judgment debtor to turn over nonexempt property
that is in the debtor's possession or is subject to the
debtor's control, together with all documents or records
related to the property, to a designated sheriff or constable
for execution;
(2) otherwise apply the property to the satisfaction of the
judgment; or
(3) appoint a receiver with the authority to take possession
of the nonexempt property, sell it, and pay the proceeds to
the judgment creditor to the extent ...