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Hamilton Metals, Inc. v. Global Metal Services, Ltd.

Court of Appeals of Texas, Fourteenth District

August 13, 2019

HAMILTON METALS, INC., Appellant
v.
GLOBAL METAL SERVICES, LTD., Appellee

          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 ...

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