Chapter 27 

Postjudgment Remedies

I.  Judgment Lien and Abstract of Judgment

§ 27.1Creation of Judgment Lien

A judgment lien is created only when an abstract of judgment is properly filed and indexed in the appropriate county records. The judgment itself creates no lien. C.I.T. Corp. v. Haynie, 135 S.W.2d 618, 622 (Tex. Civ. App.—Eastland 1939, no writ).

§ 27.2Availability of Judgment Lien

§ 27.2:1Judgment Lien Generally

The judgment on which the lien is based must be final; it cannot be interlocutory. Blankenship & Buchanan v. Herring, 132 S.W. 882 (Tex. Civ. App. 1910, no writ). The abstract should be filed immediately after rendition of judgment, to perfect the lien as soon as possible.

§ 27.2:2Pending Appeal

An abstract can be obtained and filed, even if the judgment is being appealed or a supersedeas bond has been filed. If the plaintiff has taken the necessary steps to obtain a lien before the judgment is appealed, the appeal does not impair the judg­ment, and the lien is preserved pending the appeal. Roman v. Goldberg, 7 S.W.2d 899 (Tex. Civ. App.—Waco 1928, writ ref’d).

If the defendant wants to prevent enforcement of the judgment lien pending appeal, he must obtain a finding from the trial court that the creation of the lien would not substantially increase the security of the plaintiff’s recovery when balanced against the cost to the defendant after all appeals have been exhausted. Recording a certified copy of this finding in the judg­ment records in which the abstract of judgment is filed neutralizes the lien pending appeal. The defendant must also post appropriate security. Tex. Prop. Code § 52.0011(a); see also Tex. R. Civ. P. 24. The court may withdraw its finding at any time. If it does so, the filing of a certified copy of the withdrawal reinstates the lien. Tex. Prop. Code § 52.0011(b).

See section 27.25 below regarding enforcement of the judgment itself pending appeal and how the defendant may postpone that enforcement.

§ 27.3Property to Which Lien Attaches

§ 27.3:1Real Property

A properly recorded and indexed abstract of judgment creates a lien on the defendant’s nonexempt real property in the county in which the abstract is recorded, if the judgment itself is not dormant. Tex. Prop. Code § 52.001; see Donley v. Youngstown Sheet & Tube Co., 328 S.W.2d 192, 197 (Tex. Civ. App.—Eastland 1959, writ ref’d n.r.e.). The lien continues for ten years from the date of recording and indexing, as long as the judgment does not become dormant (although a judgment in favor of the state or a state agency is treated differently). Tex. Prop. Code § 52.006. The defendant’s homestead is exempt, as dis­cussed in section 27.3:3 below. The judgment lien also attaches to after-acquired real property of the defendant. Tex. Prop. Code § 52.001. The judgment lien does not attach to the defendant’s personal property. Donley, 328 S.W.2d at 197.

§ 27.3:2Inherited Real Property

When a person dies, whether testate or intestate, his property vests immediately in his legatees or heirs, subject to payment of his debts. Tex. Est. Code §§ 101.001, 101.051. A properly filed and indexed abstract of judgment against such a legatee or heir creates a lien against the inherited real property. An executor or administrator can sell the property free of the lien, how­ever, to satisfy debts of the estate. Woodward v. Jaster, 933 S.W.2d 777, 780–82 (Tex. App.—Austin 1996, no writ).

§ 27.3:3Homestead

A recorded judgment lien against the owner of homestead property will attach to the property when it ceases to be his home­stead, if it is still owned by him. Walton v. Stinson, 140 S.W.2d 497, 499 (Tex. Civ. App.—Dallas 1940, writ ref’d). The homestead is discussed at sections 27.34 through 27.40 below.

Although the abstract does not create a lien on the defendant’s homestead, it can still create a cloud on the title. The defendant may have a claim for damages against a plaintiff who refuses to release the lien as to the homestead when requested to do so by the defendant. Tarrant Bank v. Miller, 833 S.W.2d 666, 667–68 (Tex. App.—Eastland 1992, writ denied).

The Texas Property Code sets out requirements for a release of record of lien on homestead property. See Tex. Prop. Code § 52.0012. For a homestead affidavit as release of judgment lien, see form 27-26 in this chapter.

§ 27.4Burden for Compliance with Abstract of Judgment Statutes

A judgment lien is a statutory creation and therefore must comply with the governing statutes. Day v. Day, 610 S.W.2d 195, 197 (Tex. Civ. App.—Tyler 1980, writ ref’d n.r.e.). The attorney should be absolutely certain that the abstract is properly pre­pared, recorded, and indexed and that all requirements of law are met. The party attempting to establish a judgment lien has the burden of proving that all statutory requirements have been met. See Alkas v. United Savings Ass’n, 672 S.W.2d 852, 859 (Tex. App.—Corpus Christi 1984, writ ref’d n.r.e.); McGlothlin v. Coody, 59 S.W.2d 819, 821 (Tex. Comm’n App. 1933, holding approved). The requirements for preparing and recording the abstract of judgment are discussed at sections 27.5 and 27.6 below.

§ 27.5Contents of Abstract of Judgment

An abstract of judgment must contain—

1.a mailing address for each plaintiff or judgment creditor;

2.the name of each plaintiff and defendant;

3.the date of birth of each defendant, if available to the clerk;

4.the last three numbers of the driver’s license of each defendant, if available;

5.the last three numbers of the Social Security number of each defendant, if available;

6.the cause number of the suit in which the judgment was rendered;

7.the address of each defendant if shown in the suit in which the judgment was rendered or, if not shown in the suit, the nature of the citation and the date and place it was served;

8.the date the judgment was rendered;

9.the amount of the judgment as rendered and the balance due on the judgment;

10.the amount of the balance due, if any, for child support arrearage; and

11.the interest rate specified in the judgment.

Tex. Prop. Code §§ 52.003(a), 52.0041.

In justice or small claims courts, the justice of the peace or the attorney of a person in whose favor a judgment is rendered pre­pares the abstract. In all other state courts, the plaintiff or his agent or attorney may either prepare the abstract himself or have the court clerk prepare it. If someone other than a clerk or justice of the peace prepares the abstract, it must be verified. Tex. Prop. Code § 52.002.

The attorney should review the abstract before recording to make sure it complies with all statutory requirements. Any error may invalidate the abstract and preclude the lien. See, e.g., Bonner v. Grigsby, 19 S.W. 511 (Tex. 1892) (cause number omit­ted); Evans v. Frisbie, 19 S.W. 510 (Tex. 1892) (credits on judgment not shown); Allied First National Bank v. Jones, 766 S.W.2d 800 (Tex. App.—Dallas 1988, no writ) (debtor’s address omitted); Texas American Bank/Fort Worth v. Southern Union Exploration Co., 714 S.W.2d 105 (Tex. App.—Eastland 1986, writ ref’d n.r.e.) (no debtor’s address or nature of cita­tion); Reynolds v. Kessler, 669 S.W.2d 801 (Tex. App.—El Paso 1984, no writ) (no date of judgment or interest rate); Rushing v. Willis, 28 S.W. 921 (Tex. Civ. App. 1894, no writ) (incorrect date).

The standard for meeting the requirements of Tex. Prop. Code § 52.003 is substantial compliance. Citicorp Real Estate, Inc. v. Banque Arabe Internationale D’Investissement, 747 S.W.2d 926, 929 (Tex. App.—Dallas 1988, writ denied); see also Hoff­man, McBryde & Co. v. Heyland, 74 S.W.3d 906, 912–13 (Tex. App.—Dallas 2002, pet. denied) (if abstract reflects balance due when issued, credits to judgment before abstract is filed need not be shown); Smith v. Adams, 333 S.W.2d 892, 895–96 (Tex. Civ. App.—Eastland 1960, writ ref’d n.r.e.) (discrepancy of one day between actual date of judgment and date shown on abstract did not affect lien’s validity). Omission of mandatory information such as the defendant’s address or citation informa­tion is not substantial compliance, however, even if other parties, such as a competing lien claimant, have actual knowledge of the missing information. Citicorp Real Estate, Inc., 747 S.W.2d at 929–30.

The clerk must include the defendant’s date of birth and driver’s license number only if that information is reasonably avail­able. If the information is not available, the clerk is not required to state that fact on the face of the abstract. Fred Rizk Con­struction Co. v. Cousins Mortgage & Equity Investments, 627 S.W.2d 753, 756 (Tex. App.—Houston [1st. Dist.] 1981, writ ref’d n.r.e.). The requirement that the abstract contain the defendant’s address also applies to prevailing counterplaintiffs. Allied First National Bank, 766 S.W.2d at 803.

For an abstract of judgment, see form 27-1 in this chapter. For a letter explaining the judgment lien to the client, see form
27-2.

§ 27.6Recording of Abstract of Judgment

The county clerk must, on request, immediately record a properly authenticated abstract of judgment in the judgment records. The clerk must note the day and hour of recording on the abstract and enter it in an alphabetical index to the judgment records, showing the name of each plaintiff and defendant in the judgment and the volume and number of the page in the records where the abstract is recorded. Tex. Prop. Code § 52.004. Failure to properly index the abstract can destroy the lien. City State Bank v. Bailey, 214 S.W.2d 901, 903–04 (Tex. Civ. App.—Amarillo 1948, writ ref’d) (lien failed because judgment for City State Bank indexed under “B” as “Bank, City State”); but see Houston Investment Bankers Corp. v. First City Bank of High­land Village, 640 S.W.2d 660, 662 (Tex. App.—Houston [14th Dist.] 1982, no writ) (abbreviation of “First City Bank of Highland Village” to “First City Bank HV” did not invalidate lien).

The name of each plaintiff and defendant named in the judgment must be indexed; omission of any name can destroy the lien on the other defendants. Reynolds v. Kessler, 669 S.W.2d 801, 805 (Tex. App.—El Paso 1984, no writ); McGlothlin v. Coody, 59 S.W.2d 819 (Tex. Comm’n App. 1933, holding approved).

Suggested counties in which to record the abstract include those of the defendant’s residence; his principal place of business or employment; his previous residence; his family’s residence (for inheritance possibilities); and a former ownership of prop­erty, because he may reside or invest there again.

The attorney should ascertain the correct filing fee from the county clerk’s office before filing the abstract. After the abstract is recorded, the county clerk will return it to the address indicated at the end of the document.

§ 27.7Discharge and Cancellation of Judgment

If the defendant pays the judgment, the plaintiff or his attorney should execute a release of the judgment lien and send it to the defendant. When doing so, he should advise the defendant of all counties in which the abstract was recorded, so that the defen­dant may record the release in those counties. A release of judgment lien is at form 27-3 in this chapter.

A judgment and judgment lien may also be discharged and canceled if the defendant obtains a discharge in bankruptcy. If the abstract of judgment was recorded before September 1, 1993, the defendant must apply to the court rendering the judgment for an order discharging and canceling the judgment and judgment lien. Tex. Prop. Code §§ 52.021–.025. For judgments for which abstracts were recorded on or after September 1, 1993, the defendant’s discharge in bankruptcy automatically cancels the judgment and the lien, unless the debt was not discharged or the property was not exempted in the bankruptcy and was abandoned during the bankruptcy. Tex. Prop. Code §§ 52.041–.043.

If the judgment creditor refuses to accept payment of the judgment or accepts payment and refuses to execute a release, the judgment debtor has a statutory remedy to obtain a release. Tex. Civ. Prac. & Rem. Code § 31.008(g).

§ 27.8Keeping Judgment and Lien Alive

§ 27.8:1Expiration of Judgment Lien

Once a lien is created, it continues for ten years following the date of recording and indexing the abstract, unless the judgment becomes dormant during that period (although a judgment favoring the state or a state agency is treated differently, as is a judgment for child support under the Family Code). Tex. Prop. Code § 52.006; see also Tex. Civ. Prac. & Rem. Code § 34.001(c). It is essential both to keep the judgment lien alive and to keep its priority in place by recording and indexing a new abstract before the expiration of ten years from the date the last abstract was recorded and executing on the judgment to keep it from becoming dormant. Because each abstract creates a new lien, recording and indexing an abstract more than ten years after the immediately preceding one was recorded and indexed creates a new lien, but the break causes a loss of the pre­ceding lien and its priority in the chain of title. See Burton Lingo Co. v. Warren, 45 S.W.2d 750 (Tex. Civ. App.—Eastland 1931, writ ref’d). Revival of dormant judgments is discussed at section 27.16 below. Note that certain student loans are not subject to state-determined limitations periods. 20 U.S.C. § 1091a. Furthermore, judgment liens for debts owed to the United States are subject to different rules than those described in this section. See, e.g., 28 U.S.C. § 3201.

The following table illustrates how the interaction of the dates of judgment, recording, and execution affect the duration of the lien. Note that judgments favoring the state or a state agency are treated differently. See Tex. Prop. Code § 52.006.

§ 27.8:2Effect of Limitations on Life of Judgment Lien

In Jones v. Harrison, 773 S.W.2d 759 (Tex. App.—San Antonio 1989, writ denied), the plaintiff abstracted his lien. Later, the defendant conveyed real property to third parties. When the plaintiff tried to enforce his judgment lien, the court held that his action was barred by limitations title in the grantees of the defendant. Harrison, 773 S.W.2d at 760. This holding suggests that regular postjudgment discovery may be required in order to ensure the life of the lien, so that a transfer of property can be dis­covered before limitations title is perfected. If the defendant and his transferee seek to remove a judgment lien by claiming limitations title in this manner, the transaction should be scrutinized as a possible fraudulent transfer. See Tex. Bus. & Com. Code § 24.005 and section 14.10 in this manual. Furthermore, Harrison may be subject to challenge because the judgment creditor has no right of possession.

§ 27.8:3Responsibilities of Attorney and Client in Keeping Judgment and Lien Alive

The attorney and his client should agree on who has the responsibility for keeping the judgment and all judgment liens alive. It is the better practice to place these responsibilities with the client. A suggested letter to this effect is at form 27-4 in this chapter. If the attorney undertakes these responsibilities, he must be careful to keep an accurate tickler system and to keep up with the whereabouts of both the defendant and the client. See section 27.16 below for a discussion of dormancy of judgments and expiration of liens.

§ 27.8:4Tolling Limitations on Judgment

Fraud or concealment by the defendant will toll the ten-year dormancy rule under Tex. Civ. Prac. & Rem. Code § 34.001. Limitations will begin to run from the time the fraud is discovered or could have been discovered by the defrauded party using reasonable diligence. Estate of Stonecipher v. Estate of Butts, 591 S.W.2d 806, 809 (Tex. 1979).

§ 27.9Unclaimed Judgment

If the plaintiff cannot be found, the defendant can obtain a release of the judgment by paying the amount of the judgment into the registry of the court. Tex. Civ. Prac. & Rem. Code § 31.008. This procedure allows defendants to clear judgment liens from the title to their real property and to update their credit histories when the plaintiff cannot be located.

 

[Section 27.10 is reserved for expansion.]

II.  Execution

§ 27.11Purpose and Use of Execution

A writ of execution is a judicial writ directing the enforcement of a district, county, or justice court judgment. See Tex. R. Civ. P. 621. The writ typically directs the sheriff or constable to levy on a defendant’s nonexempt property, sell it, and deliver the sale proceeds to the plaintiff to be applied toward satisfaction of the judgment. See Tex. R. Civ. P. 637. Property subject to and exempt from execution is discussed in part III. in this chapter. Garnishment, another judgment collection procedure, is dis­cussed in part IV.

§ 27.12Issuance of Writ of Execution

§ 27.12:1Time for Issuance

A judgment creditor has the right, as a matter of law, to have a writ of execution issued unless and until the defendant files a proper supersedeas bond. Tex. R. Civ. P. 627; see Merrell v. Fanning & Harper, 597 S.W.2d 945, 950 (Tex. Civ. App.—Tyler 1980, no writ). If no supersedeas bond is filed and approved, a writ of execution must be issued if the plaintiff applies for it after the expiration of thirty days from the time final judgment is signed. If a motion for new trial is timely filed but is denied, the clerk must issue the writ after the expiration of thirty days from the time the order overruling the motion is signed or from the time the motion is overruled by operation of law. Tex. R. Civ. P. 627; see also Tex. R. Civ. P. 329b.

The writ may issue before the thirtieth day if the plaintiff files an affidavit that the defendant is about to (1) remove his nonex­empt personal property from the county or (2) transfer or secrete his nonexempt personalty to defraud his creditors. Tex. R. Civ. P. 628. For the first ground, it is not necessary that the defendant be trying to defraud his creditors. Clifford v. Lee, 23 S.W. 843, 844 (Tex. Civ. App. 1893, no writ). If the defendant received a hearing on the sufficiency of the plaintiff’s affidavit, the sufficiency of the affidavit may not be challenged on appeal, even if the hearing was held after execution was granted. See Perfection Casting Corp. v. Aluminum Alloys, Inc., 733 S.W.2d 385, 386 (Tex. App.—San Antonio 1987, no writ) (no state­ment of facts appeared in appellate record; appellate court assumed evidence at hearing was sufficient).

§ 27.12:2Diligence in Issuance

The attorney must make sure that the writ is prepared and issued by the clerk, placed in the officer’s hands, and executed by the officer, all in a timely and proper manner. The burden is on the plaintiff to prove that the writ was issued on his judgment within the statutory period. See Boyd v. Ghent, 64 S.W. 929, 930 (Tex. 1901). Issuance means more than mere clerical prepa­ration; it includes unconditional delivery to an officer for enforcement. See Harrison v. Orr, 296 S.W. 871, 875–76 (Tex. Comm’n App. 1927, judgm’t adopted), modified, 10 S.W.2d 381 (Tex. Comm’n App. 1928). The same diligence must be exercised in obtaining issuance of a writ of execution on a judgment as when obtaining service of citation when a suit is orig­inally brought. Execution is not said to have “issued,” even though the writ has been prepared and attested, if it has not been actually and unconditionally delivered to the officer for enforcement. There must be reasonable diligence in making delivery to the officer. Ross v. American Radiator & Standard Sanitary Corp., 507 S.W.2d 806, 809 (Tex. Civ. App.—Dallas 1974, writ ref’d n.r.e.).

The question of issuance of execution turns on the diligence and good faith of the plaintiff. See Williams v. Short, 730 S.W.2d 98, 99–100 (Tex. App.—Houston [14th Dist.] 1987, writ ref’d n.r.e.); R.B. Spencer & Co. v. Harris, 171 S.W.2d 393, 395 (Tex. Civ. App.—Amarillo 1943, writ ref’d). When the sheriff was instructed to return the writ on the last day for return with­out actually attempting to execute it, there was no valid issuance of execution. Harrison, 296 S.W. at 875. See also Hughes v. Rutherford, 201 F.2d 161, 163 (5th Cir. 1953). But when the writ was delivered to the sheriff with the request that it be returned nulla bona and the sheriff searched the tax rolls, found no property subject to the writ, and returned it nulla bona, there was valid issuance, because there was no want of diligence or lack of good faith. R.B. Spencer & Co., 171 S.W.2d at 395.

§ 27.12:3Presumption That Officer Performed His Duty

Proof of delivery of the writ to the officer creates a presumption that he performed his duty. The absence of a return does not negate issuance. If there is no showing that the officer was in any way thwarted or deterred from performing his duty, issuance is complete on unconditional delivery to the officer for enforcement. Carpenter v. Probst, 247 S.W.2d 460, 461–62 (Tex. Civ. App.—San Antonio 1952, writ ref’d); cf. Cotten v. Stanford, 147 S.W.2d 930, 933 (Tex. Civ. App.—Amarillo 1941, no writ).

§ 27.13Requisites of Writ of Execution

§ 27.13:1Inspection of Writ by Attorney

The writ is usually prepared by the clerk of the court that rendered the judgment. The attorney should request the clerk to send the completed writ of execution to him for review; see form 27-5 in this chapter. Before sending it to the officer, the attorney should check the writ to make sure that the information has been entered correctly, the correct form was used, and all legal requirements have been met.

§ 27.13:2General Requirements

Every writ of execution must—

1.be styled “The State of Texas”;

2.be directed to any sheriff or any constable within the state, not to a particular county (see also Tex. R. Civ. P. 622);

3.describe the judgment, stating—

a.the court in which it was rendered;

b.the time when it was rendered; and

c.the names of the parties in whose favor and against whom it was rendered;

4.contain a correct copy of the bill of costs taxed against the defendant in execution (see also Tex. R. Civ. P. 622);

5.require the officer to execute it according to its terms and to recover the costs adjudged against the defendant in exe­cution and the further costs of executing the writ;

6.require the officer to return it within thirty, sixty, or ninety days as directed by the plaintiff or his attorney (see sec­tion 27.13:7 below);

7.be signed officially by the clerk or justice of the peace; and

8.bear the seal of the court if issued from a district or county court.

Tex. R. Civ. P. 629. Additional requirements for particular kinds of writs are discussed in the following sections.

§ 27.13:3Money Judgment

If an execution is issued on a judgment for an amount of money, or directing the payment simply of an amount of money, the writ must specify the amount of money recovered or directed to be paid, the amount actually due when the writ was issued, and the interest rate on that amount. The writ must order the officer to satisfy the judgment and costs out of the property of the defendant subject to execution. Tex. R. Civ. P. 630.

§ 27.13:4Sale of Particular Property

If the judgment orders the sale of particular property, the writ must particularly describe the property and direct the officer to make the sale by giving the required public notice of sale. Tex. R. Civ. P. 631.

§ 27.13:5Delivery of Certain Personal Property

If the judgment orders the delivery of possession of property, the writ must particularly describe the property and the person entitled to possession and order the officer to deliver the property to that person. Tex. R. Civ. P. 632.

§ 27.13:6Possession or Value of Personal Property

If the judgment is for the recovery of personal property or its value, the writ must order the officer either to recover the prop­erty or, if the property cannot be recovered, to levy on the defendant’s property subject to execution and collect the value of the property. Tex. R. Civ. P. 633.

§ 27.13:7Request for Return of Execution in Less Than Ninety Days

The plaintiff can ask the clerk to make the execution returnable within thirty, sixty, or ninety days. Tex. R. Civ. P. 629. With­out such a request, the full ninety days will be allowed, and many form writs of execution are so printed. The plaintiff’s attor­ney will usually have no need to require a return in less than ninety days. But a shorter period may be desired if, for example—

1.before seeking a writ of garnishment, the attorney wants to establish evidence that there is insufficient property to satisfy the execution, or

2.there is some reason to levy against one defendant before levying against another defendant and a ninety-day execu­tion might unduly delay the second levy.

§ 27.14Suspending Execution

A justice court execution can be stayed for three months from the date of judgment if, within ten days after rendition, the defendant and one or more sureties appear before the justice and acknowledge themselves bound to the plaintiff for the full amount of the judgment plus interest and costs. The acknowledgment must be entered on the docket in writing and signed by the sureties. In addition, the party seeking the stay must file an affidavit that he does not have enough money to pay the judg­ment and that enforcement before three months’ time would be a hardship and would cause a sacrifice of his property that likely would not be caused if the execution were stayed. At the end of three months, execution will issue if the judgment is not paid. See Tex. R. Civ. P. 635.

See also section 27.25 below.

§ 27.15Execution against Estate

If a money judgment is against the personal representative of an estate acting in that capacity, the judgment must state that it is to be paid in the course of administration, and no execution may issue on it. The judgment is to be certified to the probate court or county court sitting in probate and paid in the course of administration. This procedure does not apply if the dece­dent’s will dispenses with the need for court-supervised administration; in that case, the plaintiff may execute on property of the testator held by the executor of the estate. Tex. R. Civ. P. 313. A judgment against a personal representative acting as such must state that it is to be paid in the course of administration. An erroneous recitation in the judgment to “let execution issue” will not render the judgment void, however, nor will it subject the judgment to collateral attack, if the court rendering the judgment had jurisdiction over the subject matter and parties and had the power to adjudicate the extent of liability. Further­more, a personal representative who has full knowledge of the judgment has the duty to present it to the county or probate court for inclusion in the distribution of the estate. See State v. Blair, 629 S.W.2d 148, 150 (Tex. App.—Dallas), aff’d, 640 S.W.2d 867 (Tex. 1982). A judgment against a judgment defendant who later dies is not enforceable as a judgment against the estate. The judgment creditor must pursue it as any other claim against the estate. See generally chapter 29 in this manual regarding claims in probate.

§ 27.16Dormant Judgment

If a writ of execution has not been issued within ten years after rendition of judgment, the judgment will become dormant, and execution may not issue on it unless it is revived. A second writ may issue at any time within ten years after issuance of the first writ. If the writ is issued within ten years after rendition of judgment, but a second writ is not issued within ten years after issuance of the first writ, the judgment then becomes dormant. This, however, does not apply to a judgment for child support under the Family Code. Tex. Civ. Prac. & Rem. Code § 34.001. See section 27.8:1 above regarding how the interaction of the dormancy and abstract of judgment statutes affects the duration of the judgment lien.

A dormant judgment may be revived by scire facias or by an action of debt brought not later than the second anniversary of the date that the judgment becomes dormant. Tex. Civ. Prac. & Rem. Code § 31.006. See forms 27-8 and 27-9 in this chapter for a petition to revive a judgment and a judgment reviving a dormant judgment.

§ 27.17Recovery of Seized Property and Plaintiff’s Liability

A defendant may recover property that has been seized through execution if the judgment on which the execution is issued is later reversed or set aside and the property has not been sold at execution sale. Tex. Civ. Prac. & Rem. Code § 34.021. If the property has been sold, the person is entitled to recover from the plaintiff its market value at the time of sale. Tex. Civ. Prac. & Rem. Code § 34.022.

§ 27.18Court Proceedings to Reach Nonexempt Property

If the defendant owns nonexempt property, the plaintiff may obtain injunctive, turnover, or other relief in reaching the prop­erty. Tex. Civ. Prac. & Rem. Code § 31.002(a). See parts V. and VI. in this chapter for discussion.

§ 27.19Method of Levy on Particular Kinds of Property

§ 27.19:1Real Property

To levy on real property, the officer need not go on the property but can merely endorse the levy on the writ. Tex. R. Civ. P. 639. The sale procedure is discussed at section 27.21:1 below.

§ 27.19:2Personal Property

If the defendant is entitled to possession of personal property, the officer levies on it by taking possession of it. If the defen­dant has an interest in the personal property but is not entitled to possession of it, levy is made by giving notice to the person who is entitled to possession or, if several persons are entitled to possession, to one of them. Tex. R. Civ. P. 639.

§ 27.19:3Immovable or Bulky Property

In the case of immovable or bulky property that is so cumbersome that it may not be moved except at great expense and effort, the levying officer need only go on the premises, point out the property, assume dominion over it, and forbid its removal by the person against whom the writ has issued. Beaurline v. Sinclair Refining Co., 191 S.W.2d 774, 777 (Tex. Civ. App.—San Antonio 1945, writ ref’d n.r.e.). The officer will likely require the judgment creditor to advance the cost of a bonded guard until the property can be sold.

§ 27.19:4Collateral

Property that has been assigned, mortgaged, or pledged as collateral can be levied on and sold at execution sale. If the collat­eral is held by the assignee, mortgagee, or pledgee, the buyer at execution sale can take possession of the property by comply­ing with the terms of the mortgage or security agreement. Tex. R. Civ. P. 643. See section 27.41:6 below regarding property subject to a security interest or mortgage.

§ 27.19:5Corporate Shares

An officer may levy on certificated shares of a corporation or joint-stock company by taking possession of the certificate. Tex. R. Civ. P. 641. See Tex. Bus. & Com. Code § 8.112 regarding particular situations involving certificated and uncertificated securities.

§ 27.19:6Livestock

An officer can levy on livestock that are running at large on the range and cannot be herded and penned without great incon­venience and expense by making a reasonable estimate of the number of animals and describing them by their marks or brands. The levy must be made in the presence of two or more credible persons, and written notice of the levy must be given to the owner, his herder, or his agent, if they reside within the county and are known to the officer. Tex. R. Civ. P. 640.

§ 27.20Defendant’s Right to Designate Property for Levy

Unless the writ of execution orders the sale of specific property, the officer must first call on the defendant to designate the property the defendant prefers to have sold. If the officer believes the designated property will not sell for enough to satisfy the execution and costs of sale, he must require the defendant to designate additional property.

If the defendant does not designate any property, the officer must levy on any of the defendant’s property subject to execution. If the defendant cannot be found to make a designation or if the defendant is absent, the officer may call on any known agent of the defendant in the county to make the designation. Tex. R. Civ. P. 637.

§ 27.21Sale of Property under Writ of Execution

§ 27.21:1Real Property

Realty is sold at public auction held at the courthouse door of the county in which it is located between 10:00 a.m. and 4:00 p.m. on the first Tuesday of the month, although the court may order the sale to be held at the site of the property. Tex. R. Civ. P. 646a. If the property consists of several lots in a city or town, each lot must be offered for sale separately, unless the lots are not susceptible to separate sale because of the character of improvements. Tex. Civ. Prac. & Rem. Code § 34.042. See also Tex. Civ. Prac. & Rem. Code § 34.043 regarding the sale of rural property.

Before sale, the officer must advertise the time and place of sale. The advertisement must be published once a week for three consecutive weeks before the sale in a newspaper published in the county in which the property is located, with the first pub­lication appearing not less than twenty days before the sale. He must also give the defendant or his attorney written notice of the sale, by mail or in person. The notice given to the defendant or his attorney must substantially conform to the requirements of the published advertisement of the sale. Tex. R. Civ. P. 647. For purposes of calculating twenty days before the sale, the date the first notice is published counts as the first day. The twentieth and last day counted is the day before the day of the sale. Concrete, Inc. v. Sprayberry, 691 S.W.2d 771, 772 (Tex. App.—El Paso 1985, no writ).

The advertisement must contain—

1.a statement of the authority by which the sale will be made;

2.the time of levy;

3.the time and place of sale;

4.a brief description of the property;

5.the number of acres, original survey, and location in the county; and

6.the name by which the land is most generally known.

It is not necessary that the advertisement contain field notes. Tex. R. Civ. P. 647. The officer prepares the notice; the plaintiff’s attorney should request a copy. See the letter at form 27-7 in this chapter.

Persons eligible to purchase real property at execution sales must present the officer conducting the sale with a written state­ment from the county tax assessor-collector that they owe no delinquent taxes. See Tex. Tax Code § 34.015 (prescribing the form of the required statement). The deed executed by the officer conducting the sale must recite that this requirement was met by the successful bidder. Tex. Civ. Prac. & Rem. Code § 34.0445(c). In counties with a population of less than 250,000, this requirement applies only if the commissioners court has by order adopted the requirement. Tex. Civ. Prac. & Rem. Code § 34.0445.

Due to the length of time it often takes to advertise an execution sale of real estate, the writ of execution may expire. To con­tinue the life of the writ beyond the usual ninety days, the court clerk can issue a venditioni exponas, referenced in Tex. R. Civ. P. 647 and defined in Black’s Law Dictionary (11th ed. 2019). See form 27-10 for a venditioni exponas.

§ 27.21:2Personal Property

Personalty is to be sold at the premises where it was taken in execution, the courthouse door of the county in which it is located, or some other place if it is more convenient to exhibit it to purchasers at that place because of the nature of the prop­erty. Except for shares of stock, property in which the defendant has only an interest without the right to exclusive possession, and livestock running at large on the range, personal property cannot be sold without being presented for viewing by those attending the sale. Tex. R. Civ. P. 649. Notice of the sale must be given by posting a notice for ten successive days immedi­ately before the sale, at the courthouse door of any county and at the place where the sale is to be made. Tex. R. Civ. P. 650. The officer prepares the notice; the plaintiff’s attorney should request a copy. See the letter at form 27-7 in this chapter.

§ 27.21:3Penalty for Sale of Property without Notice

If the officer sells property without giving the required notice or sells property in a manner other than that prescribed by law, the officer is liable only for actual damages sustained by the injured party, who has the burden to prove that the sale was improper and any actual damages suffered. Tex. Civ. Prac. & Rem. Code § 34.066.

§ 27.21:4Irregularities of Sale

The execution sale can be set aside on a showing that the bid price was grossly inadequate and that there were irregularities involved with the sale. See Collum v. DeLoughter, 535 S.W.2d 390, 392–93 (Tex. Civ. App.—Texarkana 1976, writ ref’d n.r.e.) (failure to notify defendant of sale, failure to allow defendant to designate property to be sold, and misdescription of property were sufficient irregularities); Pantaze v. Slocum, 518 S.W.2d 407, 409 (Tex. Civ. App.—Fort Worth 1974, writ ref’d n.r.e.) (slight irregularities in sale, coupled with gross inadequacy of bid price, justified setting aside sale); but see Brimberry v. First State Bank of Avinger, 500 S.W.2d 675, 676–77 (Tex. Civ. App.—Texarkana 1973, writ ref’d n.r.e.) (slight irregulari­ties not sufficient to set aside sale, because bid price not grossly inadequate).

§ 27.21:5Purchaser’s Failure to Comply with Terms of Sale

If the purchaser at execution sale fails to comply with the terms of sale, he will be liable to the plaintiff for 20 percent of the value of the property bid for, plus costs. The plaintiff must file a motion to recover this amount, and the defaulting purchaser is entitled to at least five days’ notice of a hearing on the motion. Also, if the property sells for less at a later sale than the high bid price at the first sale, the defaulting purchaser is liable for the difference. Tex. R. Civ. P. 652. See also Jackson v. Universal Life Insurance Co., 582 S.W.2d 207, 209 (Tex. Civ. App.—Eastland 1979, writ ref’d n.r.e.); Childress v. Ely & Walker, 489 S.W.2d 628, 631 (Tex. Civ. App.—Texarkana 1973, no writ).

§ 27.22Defendant’s Right to Replevy

§ 27.22:1Return of Property to Defendant

Personal property taken in execution may be returned to the defendant by the officer if the defendant gives the officer a deliv­ery bond payable to the plaintiff, with two or more sureties approved by the officer. The defendant must agree in the bond to pay the officer the fair value of the property, as stated in the bond, or return the property to the officer at the time and place stated in the bond, to be sold. Tex. R. Civ. P. 644. The defendant may dispose of the property and pay the officer the amount stated in the bond. Tex. R. Civ. P. 645.

§ 27.22:2Forfeiture of Delivery Bond

If the defendant does not return the property or pay the stated value under the terms of the delivery bond, the officer is to mark the bond as forfeited and return it to the clerk or justice of the peace who issued it, who will then issue a writ of execution against the principal defendant and his sureties. Tex. R. Civ. P. 646.

§ 27.23Duties and Liabilities of Officer

§ 27.23:1Duty of Officer to Levy

When an officer receives a writ of execution, he is required to proceed without delay to levy on the defendant’s nonexempt property found in his county, unless directed otherwise by the plaintiff or his agent or attorney. Tex. R. Civ. P. 637. The sheriff must execute all process and precepts directed to him by legal authority and must return the process or precept to the proper court on or before the date the process or precept is returnable. Tex. Loc. Gov’t Code § 85.021(a). Constables have a similar duty. See Tex. Loc. Gov’t Code § 86.021(a).

The officer must endorse the writ when he receives it with the day and hour of receipt. If the officer receives more than one execution on the same day against the same person, he must number them as received. Tex. R. Civ. P. 636. Improper or false endorsement renders the officer and the officer’s sureties liable for damages suffered by the plaintiff. Tex. Civ. Prac. & Rem. Code § 34.063(a). The plaintiff has the burden to prove that the officer failed to properly number or endorse the writ, the offi­cer’s failure precluded the levy of executable property owned by the judgment debtor, such property was not exempt from execution or levy, and the plaintiff suffered actual damages. Tex. Civ. Prac. & Rem. Code § 34.063(b).

An officer receiving a writ of execution does not have a duty to (1) search for property belonging to the judgment debtor, (2) determine whether property belongs to a judgment debtor, (3) deter-mine whether property belonging to the judgment debtor is exempt property not subject to levy, (4) determine the priority of liens asserted against property subject to execution, or (5) make multiple levies for cash or multiple levies at the same location. Tex. Civ. Prac. & Rem. Code § 34.071. An officer also does not have a duty to levy on or sell property not within the officer’s county, unless it is real property that is partially in the officer’s county and partially within a contiguous county. Tex. Civ. Prac. & Rem. Code § 34.073(b).

§ 27.23:2Timing of Execution and Return

An officer receiving a writ of execution may return the writ after the first levy or attempted levy if the judgment creditor can­not designate any more executable property currently owned by the judgment debtor at the time of the first levy or first attempted levy. Tex. Civ. Prac. & Rem. Code § 34.072(a). Notwithstanding rule 637 of the Texas Rules of Civil Procedure, an attempt to levy on property may begin any time during the life of the writ, provided that the officer allows enough time for completing the sale of the property.

§ 27.23:3Transfer of Writ

An officer receiving a writ may transfer the writ to another officer in another precinct or to another law enforcement agency authorized to perform executions within the county of the first officer who received the writ. Tex. Civ. Prac. & Rem. Code § 34.073(a).

§ 27.23:4Wrongful Levy

Whenever a distress warrant or a writ of execution, sequestration, attachment, or other like writ is levied on personal property and the property, or any part of the property, is claimed by any claimant who is not a party to the writ, the only remedy against a sheriff or constable for wrongful levy on the property is by trial of right of property under part VI, section 9, of the Texas Rules of Civil Procedure. Tex. Civ. Prac. & Rem. Code § 34.075.

§ 27.23:5Failure to Execute Process Generally

A sheriff who fails to return a process or precept or who makes a false return will be liable to the injured party for all damages sustained, and he can be punished as for contempt by a fine of up to $100 by the court to which the process is returnable. Tex. Loc. Gov’t Code § 85.021(b), (c), (d). A constable may be fined $10 to $100 for contempt and costs for failing to execute and return any process lawfully directed and delivered to him, on motion of the injured party with ten days’ notice to the consta­ble, although this does not apply to actions brought under chapter 34 of the Texas Civil Practice and Remedies Code. Tex. Loc. Gov’t Code § 86.024. An officer also commits an offense if, with intent to obtain a benefit or with intent to harm or defraud another, he intentionally or knowingly violates a law relating to his office or employment. Tex. Penal Code § 39.02(a)(1).

Falsely endorsing the writ renders the officer liable for damages plus 20 percent of the amount of the execution. Tex. Civ. Prac. & Rem. Code § 34.063.

See section 16.15 in this manual for further discussion of the officer’s responsibilities and liability for failure to perform them.

§ 27.23:6Failure to Levy or to Return Writ of Execution

If the officer fails to levy on or sell property subject to execution, if the levy or sale could have taken place, the officer and the officer’s sureties are liable only for actual damages suffered. See Tex. Civ. Prac. & Rem. Code § 34.065(a). The judgment creditor seeking relief has the burden of proof. See Tex. Civ. Prac. & Rem. Code § 34.065(b)–(d). If an officer receives actual notice of an error on a return or of failure to file a return, the officer must amend or file the return no later than thirty days after receiving the notice or the officer may be subject to contempt under section 7.001(b) of the Texas Civil Practice and Remedies Code. Tex. Civ. Prac. & Rem. Code § 34.064.

§ 27.23:7When Defendant Files Bankruptcy

Because bankruptcy operates as an automatic stay of any proceeding against the defendant, an officer will not be held liable for failure to hold an execution sale after a bankruptcy is filed. See 11 U.S.C. § 362(a)(1), (2), (6); Ortiz v. M.&M. Sales Co., 656 S.W.2d 554, 556 (Tex. App.—Corpus Christi 1983, writ ref’d n.r.e.) (defendant filed for bankruptcy between time sheriff first could have levied and date sale could have been held; sheriff not liable).

§ 27.23:8Failure to Deliver Money Collected

The officer must deliver to the plaintiff money collected by execution at the earliest opportunity, and failure to do so is ground for the plaintiff to recover from the officer and the officer’s sureties the amount collected, with damages at a rate of 1 percent per month on that amount if proved by the injured party. Tex. Civ. Prac. & Rem. Code §§ 34.047(a), 34.067.

§ 27.23:9No Indemnity Bond Permitted

An officer may not require that bond be posted for his indemnification before executing a writ. He is not liable for damages resulting from execution of a writ if he executes or attempts to execute the writ in good faith as provided by law. Tex. Civ. Prac. & Rem. Code § 7.003.

§ 27.23:10Officer’s Duty to Keep Seized Property Secure

Once the officer has levied on personal property, he is charged with the duty of keeping it secure unless the defendant has fur­nished a delivery bond. If an interested party is injured or suffers loss as a result of the officer’s negligence toward seized property, the officer and his sureties are liable for the value of the property lost or damaged. The injured party has the burden to prove that the officer took actual possession of the property and the actual value of the lost or damaged property. Tex. Civ. Prac. & Rem. Code § 34.061.

§ 27.23:11Suit against Officer or Officer’s Sureties

Suits must be brought in the form of a lawsuit filed against the officer in the county in which the officer holds office and must be filed no later than the first anniversary of the date on which the injury accrues. Tex. Civ. Prac. & Rem. Code § 34.068(b), (c). An officer or a surety may defend the action by stating and proving any defenses provided by law, including any defense that would mitigate damages. Tex. Civ. Prac. & Rem. Code § 34.068(d).

An officer’s surety may be liable only for the penal sum of the surety bond minus any amounts already paid out under the bond. In no event may an officer’s surety be liable for more than the penal sum of the officer’s surety bond. Tex. Civ. Prac. & Rem. Code § 34.074(a). If the officer and the officer’s surety are both defendants, the surety may deposit in the court’s regis­try the amount unpaid under the surety bond, and the court will determine the proper disposition of this sum or order the return of the deposit to the surety in the court’s final judgment. Tex. Civ. Prac. & Rem. Code § 34.074(b). A prevailing party under these provisions may bring a separate action against a surety failing to pay the amount remaining under the bond on a final judgment. This action must be brought on or before 180 days after the date all appeals are exhausted in the underlying action. Tex. Civ. Prac. & Rem. Code § 34.074(c).

§ 27.23:12Payment of Damages

A county, at the discretion of the commissioners court, may pay any judgment taken against an officer, unless the officer is finally convicted under sections 39.02 or 39.03 of the Texas Penal Code. Tex. Civ. Prac. & Rem. Code § 34.069.

An officer against whom a judgment has been taken or a county that has paid the judgment on behalf of the officer has a right of subrogation against the debtor or person against whom the writ was issued. Tex. Civ. Prac. & Rem. Code § 34.070.

§ 27.23:13Remedies

Subchapter D, chapter 34, of the Texas Civil Practice and Remedies Code is the exclusive remedy for violations of an offi­cer’s duties with regard to the execution and return of writs without regard to the source of the duty prescribed by law. Tex. Civ. Prac. & Rem. Code § 34.076.

§ 27.24Receipt of Proceeds of Execution

When money has been collected from an execution sale, the common procedure is for the officer to send the proceeds and the completed return to the plaintiff’s attorney. The officer may retain from the proceeds reasonable expenses he incurred in mak­ing the levy and keeping the property. If more money is received from the sale than is necessary to satisfy the execution, the officer must immediately pay the excess to the defendant or his attorney. Tex. Civ. Prac. & Rem. Code § 34.047.

When the plaintiff’s attorney receives the net proceeds, he should send them to the client under their agreement and send the completed return to the clerk. If the judgment is completely satisfied, the defendant will probably request a release; see form 27-3 in this chapter.

§ 27.25Suspension of Enforcement Pending Appeal

A defendant may suspend execution of the judgment by filing a bond approved by the clerk. The bond is subject to review by the court on hearing. Tex. R. App. P. 24.1; see also Tex. R. Civ. P. 634, 635. The bond must be payable to the plaintiff and conditioned as set forth in Tex. R. App. P. 24.1. The trial court may make orders that will adequately protect the plaintiff against any loss or damage caused by appeal. Tex. R. App. P. 24.1.

The security required to appeal money judgments is governed by chapter 52 of the Texas Civil Practice and Remedies Code. To the extent these provisions conflict with the Texas Rules of Appellate Procedure, the procedures set out in the Civil Prac­tice and Remedies Code apply. The amount of the bond must be equal to the sum of the compensatory damages awarded in the judgment, interest for the estimated duration of the appeal, and costs awarded in the judgment. Tex. Civ. Prac. & Rem. Code § 52.006(a). The amount of security must not exceed the lesser of 50 percent of the judgment debtor’s net worth or $25 mil­lion. Tex. Civ. Prac. & Rem. Code § 52.006(b). Under certain circumstances, however, the trial court may make an order devi­ating from this rule if it finds that posting the amount of the bond would cause the judgment debtor to suffer substantial economic harm. See Tex. Civ. Prac. & Rem. Code § 52.006(c).

The trial court has continuing jurisdiction during an appeal, even after expiration of its plenary power, to order the amount and type of security and the sufficiency of sureties. It may also modify, in the event of changed circumstances, the amount or the type of security required to continue the suspension of execution. If the security or sufficiency of sureties is ordered or altered by the trial court after the court of appeals obtains jurisdiction, the defendant must notify the court of appeals of the trial court’s determination. Tex. R. App. P. 24.3. The trial court’s exercise of discretion under this rule is subject to review under Tex. R. App. P. 24.4.

§ 27.26Entities Protected from Execution

No attachment, injunction, or execution may be issued against a national banking association or its property before a final judgment in any suit, action, or proceeding, in any state, county, or municipal court. 12 U.S.C. § 91. “Final judgment” means a judgment from which no further appeal can be taken. National banks are therefore exempt from execution until all appellate remedies have been exhausted. United States v. Lemaire, 826 F.2d 387 (5th Cir. 1987), cert. denied, 485 U.S. 960 (1988). Thus a national bank should not have to post a supersedeas bond to prevent execution pending disposition of its appeal. State banks do not enjoy the same protection. Bank of East Texas v. Jones, 758 S.W.2d 293 (Tex. App.—Tyler 1988, orig. proceed­ing [leave denied]).

Public policy exempts political subdivisions of the state performing governmental functions from execution or garnishment proceedings. Delta County Levee Improvement District No. 2 v. Leonard, 516 S.W.2d 911, 912 (Tex. 1974); City of Victoria v. Hoffman, 809 S.W.2d 603, 604 (Tex. App.—Corpus Christi 1991, writ denied); see also Tex. Loc. Gov’t Code §§ 101.021, 101.023 (regarding home-rule municipalities). Also, the real property of the state, including real property held in the name of state agencies and funds as well as the real property of a political subdivision of the state, is exempt from attachment, execu­tion, or forced sale. Tex. Prop. Code § 43.002.

The collection of judgments against political subdivisions is not entirely prohibited, however. A political subdivision can be directed through mandamus to levy and collect sufficient taxes to satisfy judgments outstanding against the entity if there are not sufficient funds available. Delta County Levee Improvement District No. 2, 516 S.W.2d at 912; Salvaggio v. Davis, 727 S.W.2d 329 (Tex. App.—Houston [1st Dist.] 1987, no writ); Hawthorne v. La-Man Constructors, 672 S.W.2d 255 (Tex. App.—Beaumont 1984, no writ).

§ 27.27Wrongful Execution

Damages for wrongful execution are potentially severe, and a plaintiff may be held liable for the conduct of both attorneys and officers who participate in a wrongful execution.

A cause of action for wrongful execution will arise for the benefit of parties injured by the execution in a number of instances including but not limited to a levy—

1.to enforce a judgment that has been satisfied;

2.on exempt property;

3.that is excessive;

4.on property not owned by the defendant; or

5.to enforce a judgment that has been superseded by an appeal.

The action inures to the benefit of the party injured and will lie against those causing the injury. Damages are recoverable from—

1.a plaintiff who directs or participates in the wrongful execution;

2.the plaintiff’s attorney who advises and directs the wrongful execution; or

3.the officer conducting the levy if the officer did not act in good faith. See Tex. Civ. Prac. & Rem. Code §§ 7.003(a), 34.061(b) regarding officer liability.

For cases discussing wrongful execution, see Vackar v. Patterson, Boyd, Lowery, Anderholt & Peterson, P.C., 866 S.W.2d 817 (Tex. App.—Beaumont 1993, no writ), and Southwestern Bell Telephone Co. v. Wilson, 768 S.W.2d 755 (Tex. App.—Corpus Christi 1988, writ denied). Before attempting to execute on property, the attorney should be familiar with federal and state laws governing debt collection practices. For a discussion of these statutes, see parts II. and III. in chapter 2 of this manual.

§ 27.28Plaintiff’s Purchase at Execution Sale

The purchaser at an execution sale receives only the right, title, interest, and claim that the defendant in execution had in the property. Tex. Civ. Prac. & Rem. Code § 34.045. The purchaser therefore takes subject to any and all liens attaching to the property at sale. If the plaintiff is considering purchasing the property at execution he should run a lien search, including tax liens, to determine exactly what he is getting.

Plaintiffs who purchase at execution sale are not required to pay cash but can merely credit their bid to the judgment. Blum v. Rogers, 9 S.W. 595 (Tex. 1888). This allows the plaintiff to obtain what may be the defendant’s only property available to sat­isfy the judgment and also avoid additional out-of-pocket expenses, except for the constable’s costs and commissions.

To be eligible to purchase real property at an execution sale, a purchaser must present the officer conducting the sale with a written statement from the county tax assessor-collector that he owes no delinquent taxes or a written registration statement showing the person is a registered bidder. Tex. Civ. Prac. & Rem. Code § 34.0445(a). These provisions apply only in counties of 250,000 or more or in which the commissioners court has adopted the provision. Tex. Civ. Prac. & Rem. Code § 34.0445(g).

 

 

[Sections 27.29 and 27.30 are reserved for expansion.]

III.  Property Subject to and Exempt from Execution

§ 27.31Property Subject to Execution

§ 27.31:1Property Generally

The judgment debtor’s property is subject to levy and execution if it is not exempted by constitution, statute, or other rule of law. See Tex. Const. art. XVI, §§ 49–51; Tex. Prop. Code §§ 41.001–.006; Tex. R. Civ. P. 637. Categories of exempt property are listed in section 27.32 below and discussed in subsequent sections.

§ 27.31:2Child Support Obligations

There are a number of exceptions to the general exemption statutes, if the debt being collected is based on a child support obli­gation. For example, see Tex. Prop. Code § 42.001(b)(1). Attorneys seeking to collect such an obligation should check the applicable exemption statute before assuming that the property sought is exempt.

§ 27.32Property Exempt from Execution

Property exempt from execution, whether for a family or for a single adult, includes—

1.the homestead (see section 27.35 below);

2.personal property of various categories specified by statute, up to the aggregate fair market value, exclusive of any charges encumbering the property, of $100,000 for a family or $50,000 for a single adult who is not a member of a family (Tex. Prop. Code §§ 42.001, 42.002; see section 27.41:1 below);

3.current wages for personal services, except for the enforcement of court-ordered child support (Tex. Prop. Code § 42.001(b)(1));

4.professionally prescribed health aids of a debtor or his dependent (Tex. Prop. Code § 42.001(b)(2));

5.certain retirement benefits and funds (see section 27.41:3 below);

6.workers’ compensation payments (Tex. Lab. Code § 408.201);

7.cemetery lots held for purposes of sepulchre (Tex. Prop. Code § 41.001);

8.property that the judgment debtor sold, mortgaged, or conveyed in trust if the purchaser, mortgagee, or trustee points out other property of the debtor sufficient to satisfy the execution (see section 27.41:6 below);

9.assets in the hands of the trustee of a spendthrift trust for the benefit of the judgment debtor (Tex. Prop. Code § 112.035; see also Hines v. Sands, 312 S.W.2d 275, 278 (Tex. Civ. App.—Fort Worth 1958, no writ));

10.insurance benefits (Tex. Ins. Code §§ 1108.051–.053);

11.alimony, support, or separate maintenance payments received or to be received by the debtor for his support or the support of his dependents (Tex. Prop. Code § 42.001(b)(3));

12.a religious bible or other book containing sacred writings of a religion seized by a creditor other than a lessor of real property who is exercising the lessor’s contractual or statutory right to seize personal property after a tenant breaches a lease agreement for or abandons the real property (Tex. Prop. Code § 42.001(b)(4)); and

13.judgments of Texas courts. See Visage v. Marshall, 763 S.W.2d 17, 18 (Tex. App.—Tyler 1988, no writ). Turnover may be an effective remedy to reach a judgment owned by the debtor (see part V. in this chapter regarding turnover).

This nonexclusive list of exemptions covers only those most likely to be encountered when levying against an individual.

§ 27.33Community and Separate Property

§ 27.33:1Availability of Community and Separate Property to Satisfy Judgment

A spouse’s separate property cannot be seized to satisfy a judgment against the other spouse unless both spouses are liable under other rule of law. Tex. Fam. Code § 3.202(a). Community property that is subject to one spouse’s sole management, control, and disposition is not subject to liabilities that the other spouse incurred before marriage or to a nontortious liability that the other spouse incurred during marriage, unless both spouses are personally liable under Code sections 3.201, 3.202, and 3.203. See Tex. Fam. Code § 3.202(b). A person is personally liable for the acts of the person’s spouse only if the spouse acts as agent for the person or the spouse incurs a debt for necessaries under section 2.501. See Tex. Fam. Code § 3.201(a).

Except under Tex. Fam. Code § 3.202, community property is not subject to a liability that arises from an act of a spouse. A marriage relationship does not in and of itself create an agency relationship between spouses. Tex. Fam. Code § 3.201(b), (c). Sole-management community property is subject to liabilities incurred by that spouse before or during marriage, and joint-management community property is subject to the liabilities incurred by either spouse before or during marriage. Tex. Fam. Code § 3.202(b); Carlton v. Estate of Estes, 664 S.W.2d 322, 323 (Tex. 1983) (wife’s interest in joint-management commu­nity property was liable for debts of husband). But see Nelson v. Citizens Bank & Trust Co., 881 S.W.2d 128, 130–31 (Tex. App.—Beaumont 1994, no writ) (nonsigning spouse not personally liable for corporate debt guaranteed by other spouse). The plaintiff with a judgment against one spouse should therefore try to locate, in this order—

1.that spouse’s separate property;

2.community property subject to that spouse’s sole management, control, and disposition;

3.community property subject to the other spouse’s control, if the conditions of Tex. Fam. Code § 3.201(a)(1) or (a)(2) are met; and

4.joint-management community property.

If the judgment is against both spouses for joint liability, all community property and both spouses’ separate property can be reached. A specific item of property might be exempt under some other rule of law, such as the general personal property exemption statute. See Tex. Prop. Code § 42.002. See section 27.41:1 below. Money and other various assets in the public retirement system accounts of Texas that are community property subject to the participating spouse’s sole management, con­trol, and disposition are not subject to any claim for payment of a criminal restitution judgment entered against the nonpartic­ipant spouse (except to the extent of any interest as determined in a qualified domestic relations order). Tex. Fam. Code § 3.202(d). Tex. Fam. Code § 3.203 provides for judicial determination of the order in which property is subject to execution.

§ 27.33:2“Community Debts”

The rules of marital property liability as set out in the Texas Family Code say nothing about “community debts” or any similar term. Nonetheless, courts and commentators have continued to refer to “community debts.” The concept is no longer valid. See Tedder v. Gardner Aldrich, LLP, 421 S.W.3d 651, 654–55 (Tex. 2013); Carr v. Houston Business Forms, Inc., 794 S.W.2d 849 (Tex. App.—Houston [14th Dist.] 1990, no writ).

§ 27.33:3Effect of Divorce on Creditors’ Rights

Community property reachable by creditors for debts incurred during marriage remains liable after divorce and partition of the community estate. Blake v. Amoco Federal Credit Union, 900 S.W.2d 108, 111 (Tex. App.—Houston [14th Dist.] 1995, no writ); Wileman v. Wade, 665 S.W.2d 519, 520 (Tex. App.—Dallas 1983, no writ).

§ 27.33:4Classification of Property as Community or Separate

Property possessed by either spouse during or on dissolution of marriage is presumed to be community property. Tex. Fam. Code § 3.003(a); see Panozzo v. Panozzo, 904 S.W.2d 780, 786 (Tex. App.—Corpus Christi 1995, no writ); Celso v. Celso, 864 S.W.2d 652, 654 (Tex. App.—Tyler 1993, no writ); Brooks v. Sherry Lane National Bank, 788 S.W.2d 874, 876 (Tex. App.—Dallas 1990, no writ). The degree of proof necessary to establish that property is separate property is clear and con­vincing evidence. Tex. Fam. Code § 3.003(b). Sole-management community property is that community property that the spouse would have owned if single, including but not limited to—

1.personal earnings;

2.separate-property revenues;

3.personal injury recoveries; and

4.increases of, mutations of, and revenues from his or her sole-management property.

Tex. Fam. Code § 3.102(a). The spouses can agree in writing or by other agreement that other community property will be sole-management community property. Tex. Fam. Code § 3.102(c). An oral agreement falls within this provision. LeBlanc v. Waller, 603 S.W.2d 265, 267–68 (Tex. Civ. App.—Houston [14th Dist.] 1980, no writ). Unless otherwise provided, mixed community property is joint-management community property. Tex. Fam. Code § 3.102(b). Community property not included in one of these exceptions is joint-management community property. Tex. Fam. Code § 3.102(c).

The Texas Family Code discusses the classification of certain employee benefits and certain insurance proceeds. See Tex. Fam. Code §§ 3.007–.008.

§ 27.34Basis for Debtor’s Homestead Exemption

The debtor’s homestead is exempt from forced sale to satisfy a debt, except for (1) a purchase-money obligation, (2) taxes due, (3) an owelty of partition imposed against the property either by court order or by written agreement of all the owners of the property, (4) the refinancing of a lien against the homestead, (5) labor and material used to construct improvements under a written contract signed by both spouses if held as a family homestead, (6) certain approved home equity loans, (7) a reverse mortgage, or (8) the conversion and refinance of a personal property lien secured by a manufactured home to a lien on real property. Tex. Const. art. XVI, § 50. Additionally, a lien already existing against the property at the time the homestead claim­ant took title, such as a homeowners association maintenance lien, will not be defeated by a homestead claim. Inwood North Homeowners’ Ass’n v. Harris, 736 S.W.2d 632, 635–36 (Tex. 1987).

§ 27.35Property That Constitutes Homestead

§ 27.35:1Homestead Generally

The Texas Constitution distinguishes a rural from an urban homestead by describing it as “not in a town or city.” See Tex. Const. art. XVI, § 51. One cannot simultaneously claim both a rural homestead and an urban one. Ran v. City National Bank, 272 S.W. 510, 515 (Tex. Civ. App.—Fort Worth 1925, writ dism’d). The homestead must be used as a home or for the claim­ant’s business; temporarily renting out the homestead does not affect its status if another homestead has not been acquired. Tex. Const. art. XVI, § 51; Tex. Prop. Code § 41.003. The definitions of “homestead” found in Tex. Prop. Code § 41.002 apply to all Texas homesteads, whenever they were created. Tex. Prop. Code § 41.002(d).

§ 27.35:2Rural Homestead

The rural homestead includes improvements and may be in one or more parcels. A family’s rural homestead cannot exceed two hundred acres; the rural homestead of a single adult who is not a member of a family cannot exceed one hundred acres. Tex. Const. art. XVI, § 51; Tex. Prop. Code § 41.002(b).

Although actual residence on the property is required, one need not reside on all the parcels of the property claimed under the homestead exemption as long as the other tracts are used for the support of the family. Fajkus v. First National Bank, 735 S.W.2d 882, 884 (Tex. App.—Austin 1987, writ denied). Whether all rural tracts will be impressed with the homestead char­acter will be determined by whether they are used for the purposes of a home. PaineWebber, Inc. v. Murray, 260 B.R. 815, 822–23 (Bankr. E.D. Tex. 2001); In re Webb, 263 B.R. 788, 791 (Bankr. W.D. Tex. 2001). Tex. Prop. Code § 41.002, which provides a different acreage limit for family homesteads than for the homesteads of single adults, has withstood a challenge that it impermissibly modifies the requirements of Tex. Const. art. XVI, § 51, that a rural homestead consists of not more than two hundred acres. In response to a challenge that Code section 41.002 is unconstitutional on equal protection grounds, the district court refused to intervene in state legislation without evidence of violations that reach constitutional magnitude. In re Moody, 77 B.R. 580 (S.D. Tex. 1987), aff’d, 862 F.2d 1194, 1201 (5th Cir. 1989), cert. denied, 503 U.S. 960 (1992).

§ 27.35:3Urban Homestead

The urban homestead consists of one or more contiguous lots amounting to not more than ten acres of land, together with any improvements on the land, regardless of whether it is a family homestead or one of a single adult not a constituent of a family. Tex. Const. art. XVI, § 51; Tex. Prop. Code § 41.002(a). A homestead is considered to be urban if at the time the designation is made the property is located within the limits of a municipality or its extraterritorial jurisdiction or a platted subdivision. Tex. Prop. Code § 41.002(c)(1). The property must also be served by police and fire protection and at least three of the follow­ing services provided by a municipality or under contract to a municipality: electric, natural gas, sewer, storm sewer, and water. Tex. Prop. Code § 41.002(c)(2).

§ 27.35:4Business Homestead

A business homestead is a place in a city, town, or village at which a single adult or the head of a family exercises his calling or business. Tex. Const. art. XVI, § 51; see also Exall v. Security Mortgage & Trust Co., 39 S.W. 959 (Tex. Civ. App. 1897, writ ref’d). A person cannot reside in a rural homestead and also claim a business homestead. Williams v. Willis, 19 S.W. 683, 684 (Tex. 1892). The business homestead must be located in a city, town, or village; it cannot be rural. Also, the business homestead must be in the same city, town, or village in which the claimant has his residential homestead. Clem Lumber Co. v. Elliott Lumber Co., 254 S.W. 935 (Tex. Comm’n App. 1923, judgm’t adopted). Claiming both an urban residential and an urban business homestead may be difficult because the lots must be contiguous. See Tex. Const. art. XVI, § 51; Tex. Prop. Code § 41.002(a).

The extent that one can claim an urban business homestead is limited to that necessary for the operations of the business. In re Kang, 243 B.R. 666 (Bankr. N.D. Tex. 1999).

§ 27.35:5Homestead in Qualifying Trust

Tex. Prop. Code § 41.0021 discusses homesteads in qualifying trusts.

§ 27.36Designation of Homestead

The statutory provisions for the voluntary designation of homestead are as follows:

1.The designation must be by an instrument “signed and acknowledged or proved in the manner required for the recording of other instruments.” Tex. Prop. Code § 41.005(c).

2.The designation must be filed in the county in which all or part of the property is located. There are specific require­ments for the instrument’s contents. Tex. Prop. Code § 41.005(c).

3.Boundaries set forth in the voluntary designation may be changed by filing and recording an instrument in the man­ner provided for a voluntary designation. Tex. Prop. Code § 41.005(d).

4.If at the time a writ of execution is issued the defendant has not made a voluntary designation, then any designation must be made in accordance with Tex. Prop. Code §§ 41.021–.024, portions of which are discussed below in this section. Tex. Prop. Code § 41.005(f).

5.If a voluntary designation was made by instrument on file under prior law, it is considered a voluntary designation under Tex. Prop. Code § 41.005. Tex. Prop. Code § 41.005(g).

6.If a person has not made a designation as set out in items 1. through 5. above but receives a homestead exemption for tax purposes on the property in question, that property is considered to be designated as his homestead if it is listed as his residence homestead on the most recent tax appraisal roll. Tex. Prop. Code § 41.005(e).

If an execution is issued against a holder of an interest in land of which a homestead may be a part and the defendant has not made a voluntary designation as discussed above, the plaintiff may give the defendant notice to designate his homestead. Tex. Prop. Code § 41.021. The notice must state that if the defendant fails to make the designation within the time permitted by statute, the court will appoint a commissioner to do so at the defendant’s expense. Tex. Prop. Code § 41.021. The defendant has until 10:00 a.m. on the first Monday after the expiration of twenty days from the date he is served with notice to file his written designation with the court. Tex. Prop. Code § 41.022.

If the defendant fails to designate, the plaintiff may, within ninety days after issuance of the writ of execution, move the court to appoint the commissioner to designate the homestead. Tex. Prop. Code § 41.023(a). On such a motion, the court must appoint a commissioner and may appoint a surveyor and others to assist the commissioner. The commissioner must designate the homestead in a written report, with a plat of the designated area, and file it with the court no more than sixty days after the appointment order is signed or within such time as the court may allow. Tex. Prop. Code § 41.023(a). Within ten days after the commissioner files his report, the defendant or the plaintiff may request a hearing to confirm, reject, or modify the report. Exceptions to all or part of the report must be filed before the hearing; otherwise, evidence may not be submitted to contradict the report. After the hearing, or if no hearing is requested, the court must designate the homestead and order sale of the excess. Tex. Prop. Code § 41.023(b).

A homestead claimant is not estopped from asserting homestead rights in residential property on the basis of contrary declara­tions if, at the time of the declarations, the claimant was in actual use and possession of the property. In re Niland, 825 F.2d 801, 807 (5th Cir. 1987).

§ 27.37Creation and Abandonment of Homestead

To create the homestead right, there must be both overt acts of homestead occupancy and the intent to dedicate the property to homestead usage. Gregory v. Sunbelt Savings, F.S.B., 835 S.W.2d 155, 158 (Tex. App.—Dallas 1992, writ denied); Lifemark Corp. v. Merritt, 655 S.W.2d 310, 314 (Tex. App.—Houston [14th Dist.] 1983, writ ref’d n.r.e.). No specific writing is neces­sary. Dodd v. Harper, 670 S.W.2d 646, 649 (Tex. App.—Houston [1st Dist.] 1983, no writ). See also Farrington v. First National Bank, 753 S.W.2d 248, 251 (Tex. App.—Houston [1st Dist.] 1988, writ denied) (summary judgment affidavit stating appellant’s intent to occupy rural property and stating certain actions short of actually building home was sufficient to create fact questions on intent to create homestead even though appellant lived on urban property claimed as homestead).

Once the homestead right vests, it is presumed to continue until there is affirmative proof of abandonment. The evidence relied on to establish abandonment must be undeniably clear that there has been a total abandonment with an intention not to return and claim the exemption before a homestead, once occupied as such, can be subjected to a forced sale. McFarland v. Rousseau, 667 S.W.2d 929, 931 (Tex. App.—Corpus Christi 1984, no writ) (citing West v. Austin National Bank, 427 S.W.2d 906, 912 (Tex. Civ. App.—San Antonio 1968, writ ref’d n.r.e.)). Abandonment is an affirmative defense. Denmon v. Atlas Leasing, 285 S.W.3d 591, 596 (Tex. App.—Dallas 2009, no pet.). The burden of proof of abandonment is on the plaintiff. Exocet, Inc. v. Cordes, 815 S.W.2d 350, 355 (Tex. App.—Austin 1991, no writ), abrogated on other grounds by Fairfield Financial Group, Inc. v. Synnott, 300 S.W.3d 316, 320 (Tex. App.—Austin 2009, no pet.). In order to prove abandonment, the practitioner must prove (1) the debtor discontinued use of the tract by overt acts and (2) the debtor intended to permanently abandon the tract as the homestead. Driver v. Conley, 320 S.W.3d 516, 519 (Tex. App.—Texarkana 2010, cert denied, 131 S. Ct. 1685 (U.S. 2011)). If a homestead claimant is married, the homestead cannot be abandoned without consent of the claim­ant’s spouse. Tex. Const. art. XVI, § 50(b); Tex. Prop. Code § 41.004.

§ 27.38Effect of Death on Homestead Rights

Death of a party protected by homestead rights extinguishes those rights. Homestead rights cannot be inherited or transferred by will. The court, however, will set apart the homestead for the use and benefit of the surviving spouse and minor children if no affidavit is filed under Tex. Est. Code § 353.051(a)(1), (b). Exempt property of a decedent’s estate other than the home­stead will be set apart for the use and benefit of the surviving spouse, minor children, unmarried adult children remaining with the family, and any adult child who is incapacitated. Tex. Est. Code § 353.051(a)(2); National Union Fire Insurance Co. of Pittsburgh v. Olson, 920 S.W.2d 458, 461 (Tex. App.—Austin 1996, no writ). See also section 29.10 in this manual regarding exempt property in probate.

§ 27.39Sale and Leaseback of Homestead

See section 17.48 in this manual regarding the consequences of making a purchase of the debtor’s homestead for less than fair market value, followed by a leaseback of the property.

§ 27.40Fraudulent Transfer of Homestead

The homestead exemption may be lost only by death, abandonment, or alienation. A fraudulent transfer of the homestead by the debtor to his own holding company to avoid creditors will not result in forfeiture of the homestead exemption. Also, because creditors have no right of recovery against a debtor’s homestead, such a conveyance of the homestead cannot be in fraud of their rights as creditors. In re Moody, 862 F.2d 1194 (5th Cir. 1989), cert. denied, 503 U.S. 960 (1992). See section 14.30 in this manual regarding fraudulent transfer generally.

§ 27.41Exempt Personal Property

§ 27.41:1List of Exemptions

Except for properly fixed encumbrances, personal property exempt from forced sale up to an aggregate fair market value of $100,000 for a family or $50,000 for a single adult person who is not a member of a family includes—

1.home furnishings, including family heirlooms;

2.provisions for consumption;

3.farming or ranching vehicles and implements;

4.tools, equipment, books, and apparatus, including boats and motor vehicles, used in a trade or profession;

5.wearing apparel;

6.jewelry, not to exceed 25 percent of the $100,000/$50,000 limit;

7.two firearms;

8.athletic and sporting equipment, including bicycles;

9.a two-wheeled, three-wheeled, or four-wheeled motor vehicle for each member of the family who holds a driver’s license or who is not licensed but relies on another person to drive the vehicle for him;

10.the following animals and forage on hand for their consumption:

a.two horses, mules, or donkeys, and a saddle, blanket, and bridle for each;

b.twelve head of cattle;

c.sixty head of other livestock;

d.120 fowl; and

11.household pets.

Tex. Prop. Code §§ 42.001, 42.002. Also exempt and not included in the aggregate limitations are current wages for personal services; professionally prescribed health aids; alimony, support, or separate maintenance; and certain religious books. Tex. Prop. Code § 42.001(b). Unpaid commissions for personal services not exceeding 25 percent of the aggregate limitation are also exempt. Tex. Prop. Code § 42.001(d).

§ 27.41:2Tools of Trade

Texas courts have held that, in order to qualify as a tool of the debtor’s trade or profession, a tool or apparatus must be pecu­liarly essential to the practice of that trade. Segraves v. Weitzel, 734 S.W.2d 773, 775–76 (Tex. App.—Fort Worth 1987, no writ) (citing Simmang v. Pennsylvania Fire Insurance Co., 112 S.W. 1044 (Tex. 1908), and McMillan v. Dean, 174 S.W.2d 737 (Tex. Civ. App.—Austin 1943, writ ref’d w.o.m.)). Holdings of the Texas bankruptcy courts, however, have interpreted the statute differently, holding that the tool must merely be useful in the debtor’s trade, not peculiarly adapted to it. In re Erwin, 199 B.R. 628 (Bankr. S.D. Tex. 1996); In re Legg, 164 B.R. 69 (Bankr. N.D. Tex. 1994).

§ 27.41:3Certain Savings Plans and Government Benefits

A person’s right to the assets held in or to receive payments from a “qualified savings plan” is exempt from attachment, exe­cution, and seizure to the extent the plan is exempt from federal income taxation under the Internal Revenue Code of 1986 or to the extent federal income tax on a person’s interest in the plan is deferred until actual payment of benefits to the person. Tex. Prop. Code § 42.0021. Section 42.0021(a) contains a list of the types of pension, retirement, health or education savings, or ABLE accounts included as qualified savings plans. The exemption, however, does not apply to voluntary contributions to the plan by the beneficiary in excess of section 473 of the Internal Revenue Code of 1986 or to the accrued earnings on such excess contributions. Tex. Prop. Code § 42.0021(d). Amounts distributed from a qualified savings plan are exempt from attachment, execution, and seizure for a creditor’s claim for sixty days after the date of distribution and will continue to be exempt if the debtor makes a qualified rollover contribution of the distributed amount. Tex. Prop. Code § 42.0021(e).

Federally based retirement or pension benefits are also exempt under various federal statutes. These include—

1.Social Security benefits, 42 U.S.C. § 407(a);

2.veterans benefits, 38 U.S.C. § 5301; and

3.civil service retirement benefits, 5 U.S.C. § 8346.

In addition, a number of federally created pension or retirement benefits are also exempt, such as those for longshoremen and railroad workers.

§ 27.41:4Insurance Benefits

The cash value and proceeds of an insurance policy or annuity contract issued by a life, health, or accident insurance company, including a mutual company or fraternal benefit society or an annuity or benefit plan used by an employer or individual, are exempt from execution, attachment, garnishment or other seizure. Tex. Ins. Code § 1108.051. The exemption is unlimited and is in addition to the exemptions listed in chapter 42 of the Texas Property Code. Tex. Ins. Code § 1108.001. Exceptions to this exemption are for premium payments made in fraud of creditors, for debt secured by the policy or proceeds, or for child sup­port liens under chapter 157 of the Texas Family Code. Tex. Ins. Code § 1108.053.

§ 27.41:5Designation of Exempt Property

If the number or amount of a type of personal property exceeds the exemption allowed by Tex. Prop. Code § 42.002 or if the aggregate value of a debtor’s personal property exceeds the limitation set out at Tex. Prop. Code § 42.001(a), the defendant may, under certain circumstances, specify the property to be levied on. Under other circumstances, the levying officer or the court may make the designation. Tex. Prop. Code § 42.003.

§ 27.41:6Property Subject to Security Interest or Mortgage

When the defendant points out property on which the officer is to levy, he cannot point out property that he has sold, mort­gaged, or conveyed in trust or that is exempt from forced sale. Tex. R. Civ. P. 638. Property that has been pledged, assigned, or mortgaged as security for a debt or contract, however, can be levied on and sold under execution against the person making the pledge, assignment, or mortgage. Tex. R. Civ. P. 643. If the purchaser, mortgagee, or trustee of property that the defendant has sold, mortgaged, or conveyed in trust points out other property of the defendant in the county that is sufficient to satisfy the execution, the property sold, mortgaged, or conveyed in trust may not be seized in execution. Tex. Civ. Prac. & Rem. Code § 34.004. Only that interest owned by the defendant can be sold. See Tex. Civ. Prac. & Rem. Code § 34.045. Before the revi­sion of chapter 9 of the Texas Business and Commerce Code that took effect in 2001, section 9.311 of the Code provided that the defendant’s rights in the collateral could be sold under execution even if the security agreement prohibited transfer by the defendant. Mortgaged property could therefore be sold, but the buyer purchased it subject to the mortgage debt or security interest. Liquid Carbonic Co. v. Logan, 79 S.W.2d 632 (Tex. Civ. App.—Austin 1935, no writ). The secured party may try to stop the sale. The value of the defendant’s equity, reduced by expenses of sale, may not be worth the trouble of a levy. The sales value will typically be reduced further when the buyer must consider satisfying or continuing to carry the security inter­est.

Although Tex. R. Civ. P. 643 provides for the execution sale of property subject to a security interest, and former section 9.311 provided for involuntary transfer of the defendant’s property through levy, the court in Grocers Supply v. Intercity Investment Properties, Inc., 795 S.W.2d 225 (Tex. App.—Houston [14th Dist.] 1990, no writ), nonetheless held that a prior perfected security interest holder who had a right to possession of the property had superior rights over a “mere” judgment creditor. The security agreement at issue provided that a judgment against the debtor or the levy, seizure, or attachment of the collateral would constitute a default, making the entire obligation immediately due and payable to the secured creditor. The court ordered possession for the secured party and recovery of all of its costs. Grocers Supply, 795 S.W.2d at 227. Revised chapter 9 of the Texas Business and Commerce Code, which took effect July 1, 2001, does not have a similar provision to former sec­tion 9.311, which provided that collateral could be sold under execution even if a security agreement prohibited transfer by the debtor. Instead, revised chapter 9 simply provides that “whether a debtor’s rights in collateral may be voluntarily or involun­tarily transferred is governed by law other than this chapter.” Tex. Bus. & Com. Code § 9.401(a). The comments explain that—

[d]ifficult problems may arise with respect to attachment, levy, and other judicial procedures under which a debtor’s creditors may reach collateral subject to a security interest. For example, an obligation may be secured by collateral worth many times the amount of the obligation. If a lien creditor has caused all or a portion of the collat­eral to be seized under judicial process, it may be difficult to determine the amount of the debtor’s “equity” in the collateral that has been seized. The section leaves resolution of this problem to the courts. The doctrine of marshal­ing may be appropriate.

Tex. Bus. & Com. Code § 9.401 cmt. 6. The comments appear to leave open the possibility of seizure of property subject to security interests, with resolution in the courts. Caution should therefore be exercised if seized property is subject to a prior perfected security interest and the secured party demands possession of the property.

§ 27.42Fraudulent Conveyance to Avoid Judgment Lien or Execution

If the debtor has used nonexempt property to acquire, obtain any interest in, improve, or pay indebtedness on property that would be exempt under Texas Property Code sections 42.001–.002 with the intent to defraud, delay, or hinder an interested person, the property or interest so acquired and the improvements so made will not be exempt from seizure for the satisfaction of liabilities. Tex. Prop. Code § 42.004(a). If any property, interest, or improvement is acquired by the discharge of an encum­brance held by another, any person who is defrauded, delayed, or hindered by the acquisition is subrogated to the rights of the prior encumbrancer. Tex. Prop. Code § 42.004(a). The plaintiff must assert this claim within two years after the transaction. A person with a claim that is unliquidated or contingent at the time of the transaction must assert a claim under this section within one year after the claim is reduced to judgment. Tex. Prop. Code § 42.004(b). It is a defense to a claim under Tex. Prop. Code § 42.004 that the transfer was made in the ordinary course of business by the person making the transfer. Tex. Prop. Code § 42.004(c).

See section 14.30 in this manual for a discussion of the Texas Uniform Fraudulent Transfer Act, Tex. Bus. & Com. Code §§ 24.001–.013.

 

 

 

 

 

 

 

 

[Sections 27.43 through 27.50 are reserved for expansion.]

IV.  Postjudgment Garnishment

§ 27.51Purpose and Use

Garnishment is a remedy allowing a judgment creditor (garnisher) either to recover property of the judgment debtor in the hands of a third party (garnishee) or to collect a debt owed by the garnishee to the debtor. See Tex. Civ. Prac. & Rem. Code §§ 63.001–.005; Orange County v. Ware, 819 S.W.2d 472, 474 (Tex. 1991).

The creditor should not use garnishment as a discovery device but should proceed in garnishment only if he cannot satisfy his judgment by execution and is confident that the garnishment action will return more than it will cost. If the creditor brings a garnishment action and the garnishee establishes that he neither has the judgment debtor’s property nor is indebted to the judgment debtor, the costs of the proceeding, including a reasonable compensation to the garnishee, will be taxed against the creditor. Tex. R. Civ. P. 677. For a discussion of wrongful garnishment, see section 27.71 below.

§ 27.52Applicable Statutes and Rules

Postjudgment garnishment is governed by Tex. Civ. Prac. & Rem. Code §§ 63.001–.008 and by Tex. R. Civ. P. 657–679. The attorney may find some of the material discussing prejudgment garnishment in sections 8.11 through 8.15 in this manual to be useful when considering postjudgment garnishment.

Caveat:      Many of the cases cited in this part of this chapter were decided under former Texas Revised Civil Statutes articles 4076, 4084, 4096, and 4099, which have been codified at Tex. Civ. Prac. & Rem. Code §§ 63.001–.005.

§ 27.53Strict Compliance Required

Garnishment is a harsh remedy, and strict compliance with all requirements is necessary. El Periodico, Inc. v. Parks Oil Co., 917 S.W.2d 777, 779 (Tex. 1996); Walnut Equipment Leasing Co. v. J-V Dirt & Loam, 907 S.W.2d 912, 915 (Tex. App.—Austin 1995, writ denied). Clerical errors in the garnishment documents may be corrected and amended as the court directs. Tex. R. Civ. P. 679. Certain defects in the garnishment procedure that are neither fundamental nor jurisdictional are waived if the garnishee fails to answer the writ. Failure to substantially comply with the statutes and rules will, however, void the gar­nishment judgment. Merrill, Lynch, Pierce, Fenner & Smith, Inc. v. Allied Bank of Texas, 704 S.W.2d 919, 920 (Tex. App.—Houston [14th Dist.] 1986, writ ref’d n.r.e.).

§ 27.54Availability of Postjudgment Garnishment

§ 27.54:1Availability Generally

A writ of garnishment is available after judgment only in the following circumstances:

1.The plaintiff has a valid, final, and subsisting judgment against the defendant. Tex. Civ. Prac. & Rem. Code § 63.001(3). The garnisher must establish ownership of the underlying judgment. See, e.g., Merrill, Lynch, Pierce, Fenner & Smith, Inc. v. Allied Bank of Texas, 704 S.W.2d 919 (Tex. App.—Houston [14th Dist.] 1986, writ ref’d n.r.e.). See section 27.54:2 below regarding when a judgment is final for garnishment purposes.

2.The defendant has not filed an approved supersedeas bond to suspend execution on the judgment. Tex. R. Civ. P. 657.

3.The plaintiff swears that, to his knowledge, the defendant does not possess in Texas sufficient property subject to execution to satisfy the judgment. Tex. Civ. Prac. & Rem. Code § 63.001(3). It is not necessary, however, for the plaintiff to prove that the defendant lacks sufficient property in the state to satisfy the judgment. Black Coral Invest­ments v. Bank of the Southwest, 650 S.W.2d 135, 136 (Tex. App.—Houston [14th Dist.] 1983, writ ref’d n.r.e.). See also section 8.12:6 in this manual for a discussion of the corresponding affidavit requirement for prejudgment gar­nishment. It is not necessary to have had a writ of execution returned nulla bona to use garnishment. Cantwell v. Wilson, 241 S.W.2d 366, 368 (Tex. Civ. App.—Austin 1951, no writ).

§ 27.54:2Finality of Judgment

A judgment is final and subsisting for garnishment purposes from and after the date it is signed. Tex. R. Civ. P. 657. Therefore, a postjudgment action is available as soon as the underlying judgment is signed, if all other bases for the garnishment are met.

§ 27.55Jurisdiction and Parties

Although garnishment is brought as a separate action, it is ancillary to the underlying suit and should be brought in the court that rendered the judgment to be enforced. King & King v. Porter, 252 S.W. 1022 (Tex. 1923). A garnishment action is brought against the garnishee as defendant. Tex. R. Civ. P. 659. In some counties the garnishment action will be numbered as an “a” case, such as “97-1010a,” whereas in other counties it will be given a new number. The judgment debtor is not a party to the suit but must be served with notice along with a copy of the writ of garnishment, the application and accompanying affi­davits, and the orders of the court as soon as practicable after service of the writ on the garnishee. Tex. R. Civ. P. 663a.

The fact that the judgment debtor is not a party to the garnishment action is particularly relevant if the garnisher and garnishee enter into an agreed judgment. Because the debtor is not a party, his assent is not necessary to the enforceability of the agreed judgment.

§ 27.56Property Subject to and Exempt from Garnishment

§ 27.56:1Property and Debts Subject to Garnishment

Generally, all debts and all nonexempt personal property of the defendant held by the garnishee may be reached by the judg­ment plaintiff through postjudgment garnishment. Nonexempt property is discussed in part III. in this chapter. To be subject to garnishment, a debt must be absolute and not subject to any contingency. Clapper v. Petrucci, 497 S.W.2d 120, 122 (Tex. Civ. App.—Austin 1973, writ ref’d n.r.e.). For a discussion of property subject to garnishment, see George Ann Miller, The Gar­nishment Process, in Student Symposium, Creditor’s Post-Judgment Remedies in Texas, 5 St. Mary’s L.J. 719, 722 (1974).

Some commonly sought debts subject to garnishment are as follows:

1.Bank account. A bank account is the most commonly garnished debt. Bank deposits can be reached regardless of the account name if the funds are owed to the judgment debtor. Frankfurt’s Texas Investment Corp. v. Trinity Savings & Loan Ass’n, 414 S.W.2d 190, 195 (Tex. Civ. App.—Dallas 1967, writ ref’d n.r.e.). Community funds can also be reached. Tatum State Bank v. Gibson, 24 S.W.2d 506, 507 (Tex. Civ. App.—Texarkana 1930, no writ); Brooks v. Sherry Lane National Bank, 788 S.W.2d 874, 876 (Tex. App.—Dallas 1990, no writ).

2.Safe-deposit box. A bank can be sued in garnishment to reach the contents of a safe-deposit box holding the judg­ment debtor’s property, even if the bank does not know what the box contains. Blanks v. Radford, 188 S.W.2d 879, 886 (Tex. Civ. App.—Eastland 1945, writ ref’d w.o.m.).

3.Stock. Stock is expressly subject to garnishment under Tex. R. Civ. P. 669.

4.Promissory note. A past-due note can be garnished. Thompson v. Gainesville National Bank, 18 S.W. 350 (Tex. 1886); Davis v. First National Bank, 135 S.W.2d 259, 261 (Tex. Civ. App.—Waco 1939, no writ). A nonnegotiable note can also be garnished. Saenger v. Proske, 232 S.W.2d 106 (Tex. Civ. App.—Austin 1950, writ ref’d). A nego­tiable instrument cannot be garnished before its maturity. Iglehart v. Moore, 21 Tex. 501 (1858).

5.Trust fund in which debtor is beneficiary. Assets in and revenue from trusts other than spendthrift trusts can be gar­nished. Nunn v. Titche-Goettinger Co., 245 S.W. 421, 422–23 (Tex. Comm’n App. 1922, judgm’t adopted); Bank of Dallas v. Republic National Bank of Dallas, 540 S.W.2d 499, 501–02 (Tex. Civ. App.—Waco 1976, writ ref’d n.r.e.).

6.Judgments. Judgments can be garnished. Industrial Indemnity Co. v. Texas American Bank—Riverside, 784 S.W.2d 114, 119–120 (Tex. App.—Fort Worth 1990, no writ).

§ 27.56:2Property Exempt from Garnishment

Exempt property is discussed generally in part III. in this chapter. Some of the more important exemptions are as follows:

1.Real property. Only effects of the debtor are subject to garnishment; “effects” do not include real property. See Fitz­gerald v. Brown, Smith & Marsh Bros., 283 S.W. 576, 578 (Tex. Civ. App.—Texarkana 1926, writ dism’d). Also, the proceeds of a sale of a homestead are exempt from seizure for six months. Tex. Prop. Code § 41.001(c).

2.Wages. Current wages are exempt, except for the enforcement of court-ordered child support payments. Tex. Const. art. XVI, § 28; Tex. Civ. Prac. & Rem. Code § 63.004; Tex. Prop. Code § 42.001(b)(1); see also 42 U.S.C. § 659 (garnishment of wages due from or payable by United States, including wages of military, for child support obliga­tions).

3.Workers’ compensation benefits. Death and personal injury benefits paid under workers’ compensation laws are exempt. Tex. Lab. Code § 408.201.

4.Government employees’ retirement benefits. Pensions, annuities, and retirement benefits of government employees are usually exempt; check the applicable statute. See, e.g., 5 U.S.C. § 8346; Tex. Gov’t Code § 811.005 (retirement annuities and certain other benefits of state employees), § 821.005 (payments by Teacher Retirement System). But see Perkins v. Perkins, 690 S.W.2d 706, 708 (Tex. App.—El Paso 1985, writ ref’d n.r.e.) (military and civil service retirement benefits not exempt in some circumstances).

5.Welfare and Social Security benefits. Most state welfare benefits paid or payable are exempt. See, e.g., Tex. Hum. Res. Code § 31.040 (aid to families with dependent children), § 32.036(b) (medical assistance). Federal Social Security benefits are likewise exempt. 42 U.S.C. § 407(a).

6.Trust or other funds in debtor’s name belonging to third party. Neither trust funds nor funds of another deposited in a defendant’s name are subject to garnishment by the defendant’s creditors. Failure of the garnishee to raise this defense may subject the garnishee to liability to the defendant. Southwest Bank & Trust Co. v. Calmark Asset Man­agement, 694 S.W.2d 199, 200–01 (Tex. App.—Dallas 1985, writ ref’d n.r.e.).

7.Insurance benefits. Certain life, health, and accident insurance benefits are exempt. Tex. Ins. Code §§ 1108.051–.053.

8.Pensions, profit-sharing, retirement, and similar plans. With some exceptions, property designated under Tex. Prop. Code § 42.0021 is exempt from attachment, execution, and seizure for the satisfaction of debts. Property exempt under this statute is discussed at section 27.41:3 above.

9.Unliquidated demands. Unliquidated demands are exempt from garnishment. Houston Drywall, Inc. v. Construction Systems, Inc., 541 S.W.2d 220, 222 (Tex. Civ. App.—Houston [1st Dist.] 1976, no writ).

10.Property held by state. Property held by the state is exempt from garnishment as a matter of public policy and under the doctrine of sovereign immunity. Morris v. Texas Department of Corrections, 762 S.W.2d 667, 669–70 (Tex. App.—Tyler 1988, no writ) (sovereign immunity); Addison v. Addison, 530 S.W.2d 920, 921 (Tex. Civ. App.—Houston [1st Dist.] 1975, no writ) (public policy); but see Tex. Civ. Prac. & Rem. Code § 63.007 (waiving sover­eign immunity for inmate trust funds). Sovereign immunity should be determined on a case-by-case basis.

11.Property held in custodia legis. Property held in custodia legis may not be garnished. However, when the court enters a decree of distribution or when nothing more remains for the custodian to do but make delivery of the prop­erty or payment of the money, the reason for custodia legis is satisfied, and the property becomes subject to levy. Gonzales v. Daniel, 854 S.W.2d 253, 256–57 (Tex. App.—Corpus Christi 1993, no writ).

12.Money due original contractors and subcontractors. Creditors of original contractors may not garnish money due the original contractor or the contractor’s surety; also, a creditor of a subcontractor may not garnish money due the sub­contractor, to the prejudice of the subcontractors, mechanics, laborers, materialmen, or their sureties. Tex. Prop. Code § 53.151.

§ 27.56:3Alter Ego

A garnishment proceeding may be used to reach the defendant’s property when it is found in the possession of another entity that is the alter ego of the defendant. Valley Mechanical Contractors v. Gonzales, 894 S.W.2d 832, 834–35 (Tex. App.—Corpus Christi 1995, no writ).

§ 27.56:4Fraudulent Transfer

If the plaintiff specifically pleads and proves a fraudulent transfer, he can garnish property found to have been transferred improperly from the defendant to the garnishee. Englert v. Englert, 881 S.W.2d 517, 519–20 (Tex. App.—Amarillo 1994, no writ); see Tex. Bus. & Com. Code § 24.005(a)(1). See section 14.30 in this manual regarding fraudulent transfer.

§ 27.56:5Debtor’s Property Held by Third Party

If the plaintiff wants to challenge title to property held by a third party (for example, if the defendant’s funds have been placed in a bank account held by a nominal owner on behalf of the defendant), the plaintiff should seek a writ of garnishment naming the nominal owner, not the true owner. Bank One Texas, N.A. v. Sunbelt Savings, F.S.B., 824 S.W.2d 557, 558 (Tex. 1992). The court did not make it clear how to “name” the third party. If the applicant for the writ of garnishment alleges that the defendant’s funds are in a third party’s account, the garnishee typically will freeze the account and interplead. See also New­some v. Charter Bank Colonial, 940 S.W.2d 157 (Tex. App.—Houston [14th Dist.] 1996, writ denied); Overton Bank & Trust, N.A. v. PaineWebber, Inc., 922 S.W.2d 311 (Tex. App.—Fort Worth 1996, no writ).

§ 27.57Application for Writ of Garnishment

Form 27-11 in this chapter is an application for writ of garnishment after judgment. Form 27-12 is the affidavit in support of the application. No hearing is required on a postjudgment application. The clerk will issue a writ when the application is filed. Tex. R. Civ. P. 658.

§ 27.58No Bond for Postjudgment Garnishment

Unlike prejudgment garnishment, no bond is required for postjudgment garnishment. See Tex. R. Civ. P. 658–658a.

§ 27.59Service of Writ of Garnishment

§ 27.59:1Service on Garnishee

The writ of garnishment is to be served on the garnishee. Tex. R. Civ. P. 659. Service must be by a sheriff or constable, not by a private process server. Lawyers Civil Process, Inc. v. State, 690 S.W.2d 939, 942–43 (Tex. App.—Dallas 1985, no writ).

§ 27.59:2Service on Financial Institutions

Service of a writ of garnishment on a financial institution is governed by section 59.008 of the Texas Finance Code. Tex. Civ. Prac. & Rem. Code § 63.008. A claim against a customer—defined in Finance Code section 59.001(2) to include writs of gar­nishment and notices of receivership, among other actions—must be delivered to the address designated as the address of the registered agent of the financial institution in its registration statement filed with the secretary of state pursuant to section 201.102 or 201.103 of the Finance Code. Tex. Fin. Code § 59.008(a). Out-of-state financial institutions must file an applica­tion for registration with the secretary of state by complying with the laws of Texas for foreign corporations doing business in Texas, that is, designating an agent for process. Tex. Fin. Code § 201.102. Texas financial institutions may file a statement with the secretary of state appointing an agent for process. Tex. Fin. Code § 201.103. The Texas secretary of state’s office may be called at 512-463-5555 to ascertain the name of the agent for process. This information may also be available online through SOSDirect, the secretary of state’s web access system, at www.sos.state.tx.us/corp/sosda/index.shtml.

If a financial institution complies with section 201.102 or 201.103, a claim against a customer of the financial institution (for example, a writ of garnishment) is not effective if served or delivered to an address other than the address designated. Tex. Fin. Code § 59.008(b). The financial institution’s customer bears the burden of preventing or limiting a financial institution’s compliance with or response to a claim subject to section 59.008. Tex. Fin. Code § 59.008(c). It appears then that a financial institution complying with the provisions regarding designation of a registered agent can elect to declare the claim against its customer ineffective if the claimant fails to properly serve the financial institution. Further, if the financial institution inadver­tently honors a claim against its customer that is incorrectly served, it appears to have no exposure to its customer, who has the burden to prevent or suspend the financial institution’s response to the claim.

If the financial institution does not comply with section 201.102 or 201.103, the financial institution is subject to service of claims against its customers as otherwise provided by law. Tex. Fin. Code § 59.008(d).

Citation may be served on a financial institution (as defined in section 201.101 of the Texas Finance Code) by serving the reg­istered agent of the financial institution or, if there is no registered agent, serving the president or a branch manager at any office located in Texas. Tex. Civ. Prac. & Rem. Code § 17.028(a), (b). If citation has not been properly served, a financial institution may maintain an action to set aside the default judgment or any sanctions entered against it. Tex. Civ. Prac. & Rem. Code § 17.028(d).

For credit unions, citation may be served by serving the registered agent of the credit union or, if the credit union does not have a registered agent, serving the president or vice president. Tex. Civ. Prac. & Rem. Code § 17.028(c). However, a citation served on a credit union that is located in a place of worship may not be served during a worship service. Tex. Civ. Prac. & Rem. Code § 17.028(e).

Most financial institutions will tell who their designated agent for service of process is, especially if it is explained that the institution is being sued only as garnishee.

§ 27.59:3Service on Defendant

The judgment defendant must be served with copies of the writ of garnishment, the application, the accompanying affidavits, and the orders of the court as soon as practical after service of the writ on the garnishee. This service can be in any manner prescribed for service of citation or as provided in Tex. R. Civ. P. 21a. Tex. R. Civ. P. 663a. It is recommended that, instead of serving the defendant personally, his copy of the application and affidavit be served by certified mail, return receipt requested, and by regular mail. The copy of the writ served on the defendant must include, in ten-point type and in a manner calculated to advise a reasonably attentive person of its contents, the following statement:

To ________________, Defendant:

You are hereby notified that certain properties alleged to be owned by you have been garnished. If you claim any rights in such property, you are advised:

You have a right to regain possession of the property by filing a replevy bond. You have a right to seek to regain possession of the property by filing with the Court a motion to dissolve this writ.

Tex. R. Civ. P. 663a. Some court clerks provide additional copies of the writs with the notice language. Others do not; in that case, it is necessary to photocopy the writ and type the notice language on the face of the copy before serving it on the defen­dant.

Failure of the garnisher to properly serve the defendant is fatal to the plaintiff’s garnishment action, even though the defendant may have actual notice of the garnishment action. Walnut Equipment Leasing Co. v. J-V Dirt & Loam, 907 S.W.2d 912, 915 (Tex. App.—Austin 1995, writ denied); Hering v. Norbanco Austin I, Ltd., 735 S.W.2d 638, 641–42 (Tex. App.—Austin 1987, writ denied); Small Business Investment Co. of Houston v. Champion International Corp., 619 S.W.2d 28, 30 (Tex. Civ. App.—Houston [1st Dist.] 1981, no writ); but see Del-Phi Engineering Associates v. Texas Commerce Bank-Conroe, N.A., 771 S.W.2d 589, 591 (Tex. App.—Beaumont 1989, no writ) (defendant waived lack of service by setting agreed hearing).

Although the defendant must be served with notice of the garnishment proceedings, the garnishee does not have standing to sue or appeal based on failure to serve the defendant. Sherry Lane National Bank v. Bank of Evergreen, 715 S.W.2d 148, 151–52 (Tex. App.—Dallas 1986, writ ref’d n.r.e.); see also Tex. R. Civ. P. 663a.

The forms of the writ and notice are prescribed in Tex. R. Civ. P. 661, 663a. For a writ to be served on the garnishee, see form 8-5 in this manual; for a notice to the defendant, see form 27-13 in this chapter. The notice at form 27-13 is to be used as a cover sheet only and not as a substitute for the writ with notice language included on it. The writ of garnishment is usually prepared by the clerk of the court.

§ 27.60Officer’s Return

The officer who executes a writ of garnishment must make his return as with any other citation. Tex. R. Civ. P. 663. Texas Civil Practices and Remedies Code section 17.030 requires the Supreme Court of Texas to adopt rules of civil procedure requiring a person who serves process to complete a return of service. See Tex. Civ. Prac. & Rem. Code § 17.030(a). The offi­cer or authorized person executing the citation must complete a return of service, and the return may be endorsed on or attached to the citation. Tex. R. Civ. P. 107(a). The return, along with any document to which it is attached, must be filed with the court. Tex. R. Civ. P. 107(g).

The attorney should inspect the return before obtaining a garnishment judgment, especially a default judgment. Returns in garnishment proceedings are governed by the rules for citations generally. Curry Motor Freight v. Ralston Purina Co., 565 S.W.2d 105, 106 (Tex. Civ. App.—Amarillo 1978, no writ). Returns have been held fatally defective for failing to show the manner of service on a corporate garnishee and for failing to show the place of service. See Jacksboro National Bank v. Signal Oil & Gas Co., 482 S.W.2d 339, 341–42 (Tex. Civ. App.—Tyler 1972, no writ). But see Hudler-Tye Construction, Inc. v. Pet­tijohn & Pettijohn Plumbing, Inc., 632 S.W.2d 219, 221 (Tex. App.—Fort Worth 1982, no writ) (return that does not show place of service presumed served in county in which officer is authorized to act “until the contrary appears”). For a discussion of service of process, see chapter 16 in this manual, especially section 16.8 (list for officer’s return). See form 27-14 in this chapter for the officer’s return.

§ 27.61Garnishee’s Answer

§ 27.61:1Form of Garnishee’s Answer

The garnishee’s answer must be under oath, in writing, and signed by him. Tex. R. Civ. P. 665.

§ 27.61:2Garnishee Indebted to Defendant or Possesses Defendant’s Property

If the garnishee answers that he is now indebted to the judgment debtor (or was so indebted when served) or now has effects of the debtor (or had the debtor’s effects when served), the court will enter a judgment for the plaintiff in the amount so admit­ted. Tex. R. Civ. P. 668, 669. For a discussion of the steps the plaintiff can take if dissatisfied with the garnishee’s answer, see section 27.63 below.

§ 27.61:3Garnishee Not Indebted to Defendant

If the garnishee answers that (1) he is not now indebted to the debtor and was not when served (or, as applicable, does not have any of the debtor’s effects and did not have them when served) and (2) does not know of anyone who does have the debtor’s effects, and the plaintiff does not dispute these allegations, the garnishee will be discharged. Tex. R. Civ. P. 666. The plaintiff may controvert the garnishee’s answer; see section 27.63 below.

§ 27.61:4No Answer

If the garnishee does not file an answer to the writ of garnishment by the answer date stated in the writ, the court can render a default judgment for the plaintiff against the garnishee. For garnishees that are not financial institutions, the default judgment is for the full amount of the judgment in the original cause plus all interest and costs in both the original cause and the garnish­ment action. Tex. R. Civ. P. 667. Before obtaining the default judgment, the attorney should make certain that the officer’s return will support a default judgment if later attacked. See United National Bank v. Travel Music of San Antonio, 737 S.W.2d 30 (Tex. App.—San Antonio 1987, writ ref’d n.r.e.); see also section 27.60 above.

A default judgment against a financial institution can be rendered “solely as to the existence of liability and not as to the amount of damages.” Tex. Fin. Code § 276.002(a). The garnisher has the burden to prove “the amount of actual damages proximately caused by the financial institution’s default.” Tex. Fin. Code § 276.002(c). For good cause shown, the garnisher can also recover reasonable attorney’s fees incurred in establishing damages. Tex. Fin. Code § 276.002(d).

§ 27.62Funds Trapped by Writ

The writ, once served on the garnishee, impounds or “traps” funds owed or held by the garnishee on the date of service, as well as funds owed or held from the time the garnishee is served through the date of answer. Newsome v. Charter Bank Colo­nial, 940 S.W.2d 157, 162–63 (Tex. App.—Houston [14th Dist.] 1996, writ denied); First National Bank in Dallas v. Banco Longoria, S.A., 356 S.W.2d 192, 195–96 (Tex. Civ. App.—San Antonio 1962, writ ref’d n.r.e.); Cooper v. Cocke, 145 S.W.2d 275, 279 (Tex. Civ. App.—Amarillo 1940, no writ); Consolidated Gasoline Co. v. Jarecki Manufacturing Co., 72 S.W.2d 351, 352 (Tex. Civ. App.—Eastland 1934), aff’d, 105 S.W.2d 663 (Tex. 1937). The garnishee pays trapped monies to the debtor at his peril. Westridge Villa Apartments v. Lakewood Bank & Trust Co., 438 S.W.2d 891, 894 (Tex. Civ. App.—Fort Worth 1969, writ ref’d n.r.e.).

The garnishee may file an answer before answer day, but the garnisher may controvert the garnishee’s answer, requesting that the court require the garnishee to disclose what funds were held or owed on answer day. Banco Longoria, 356 S.W.2d at 196. If the garnishee files an answer after answer day but before the garnisher obtains a default judgment, the garnishee need only disclose what monies were held or owed from date of service through answer day; the writ does not trap funds held or owed after that day. Jarecki Manufacturing Co., 72 S.W.2d at 353.

§ 27.63Plaintiff’s Controverting Plea to Garnishee’s Answer

A plaintiff or defendant who is dissatisfied with the garnishee’s answer can file an affidavit stating why he believes for good reason that the answer is incorrect. Tex. R. Civ. P. 673. The issues raised will be tried as in other cases. Tex. Civ. Prac. & Rem. Code § 63.005(a); Tex. R. Civ. P. 674, 676. If the plaintiff controverts the answer of a garnishee who does not reside in the county in which the garnishment action is pending, jurisdiction is removed from the court in which the action is pending, and that court cannot proceed further except to transfer the garnishment proceeding to the county of the garnishee’s residence. First National Bank v. Steves Sash & Door Co., 468 S.W.2d 133, 138 (Tex. Civ. App.—San Antonio 1971, writ ref’d n.r.e.); see Tex. Civ. Prac. & Rem. Code § 63.005.

If the garnishee’s answer raises doubt about the ownership of the funds, the garnisher must then affirmatively establish that the debtor owns the funds. Any other person claiming ownership of or an interest in the funds must intervene and overcome the presumption that the funds belong to the debtor. The fact that a garnisher may have failed to establish that the debtor is the owner of the funds will not benefit the intervening party. It will simply show that ownership of the funds is in doubt. The inter­venor must himself affirmatively prove his ownership of the funds in order to recover. Putman & Putman, Inc. v. Capitol Warehouse, Inc., 775 S.W.2d 460, 463 (Tex. App.—Austin 1989, writ denied). See also section 27.70 below regarding the garnishee’s right of offset.

§ 27.64Defendant’s Right to Replevy

A defendant may replevy garnished property if it has not yet been sold. If it has been sold, he may replevy the proceeds of the sale. The defendant will be required to post bond in order to replevy. Tex. R. Civ. P. 664.

§ 27.65Dissolution or Modification of Writ of Garnishment

A defendant may also seek dissolution or modification of the writ of garnishment. Tex. R. Civ. P. 664a. At the hearing on a motion to dissolve or modify, the plaintiff must prove the grounds relied on for the writ’s issuance. These grounds are set forth in Tex. Civ. Prac. & Rem. Code § 63.001(3) and are discussed at section 27.54:1 above. Otherwise, the party seeking to mod­ify or dissolve the writ bears the burden of proof. Walnut Equipment Leasing Co. v. J-V Dirt & Loam, 907 S.W.2d 912, 915 (Tex. App.—Austin 1995, writ denied). The plaintiff need not prove that the garnishee is indebted to the defendant. Swiderski v. Victoria Bank & Trust Co., 706 S.W.2d 676, 678 (Tex. App.—Corpus Christi 1986, writ ref’d n.r.e.).

§ 27.66Costs and Attorney’s Fees

If the garnishee’s answer is not controverted and the plaintiff obtains a garnishment judgment against him, costs will be taxed against the judgment debtor and included in the execution in garnishment. Tex. R. Civ. P. 677. The garnishee’s costs will be taken from the amount the garnishee owes the defendant, and the remainder will be applied to the plaintiff’s judgment. Pan American National Bank v. Ridgway, 475 S.W.2d 808 (Tex. Civ. App.—San Antonio 1972, writ ref’d n.r.e.). If the answer is contested, “the costs shall abide the issue.” Tex. R. Civ. P. 677. If the garnishee is discharged on his answer, costs of the gar­nishment proceeding, including a reasonable compensation to the garnishee, will be taxed against the plaintiff. Tex. R. Civ. P. 677.

The successful plaintiff is not entitled to recover attorney’s fees for prosecuting a postjudgment garnishment action. Henry v. Insurance Co. of North America, 879 S.W.2d 366, 368–69 (Tex. App.—Houston [14th Dist.] 1994, no writ). The garnishee, however, can recover costs, which include attorney’s fees. If the garnishee answers that he is indebted to the judgment debtor, the garnishee’s costs, including attorney’s fees, will be deducted from the amount paid the garnisher and charged to the defen­dant. Pan American National Bank, 475 S.W.2d at 809. If the garnishee is discharged on his answer, his costs will be taxed against the plaintiff. Tex. R. Civ. P. 677. Those costs include attorney’s fees. J.C. Hadsell & Co. v. Allstate Insurance Co., 516 S.W.2d 211, 213 (Tex. Civ. App.—Texarkana 1974, writ dism’d).

§ 27.67Garnishment Judgment

If the garnishee answers that he is indebted to the defendant in any amount or was so indebted when the writ of garnishment was served on him, or if the court so finds, the garnishment judgment will be for the amount the garnishee admits he owes the defendant or the amount found by the court to be due the defendant from the garnishee. The garnishment judgment may not, however, exceed the amount of the plaintiff’s judgment in the original suit against the defendant with interest and costs in both the original suit and in the garnishment proceedings. Tex. R. Civ. P. 668. If the answer or verdict was that the garnishee has in his possession, or had when the writ was served, any of the defendant’s effects liable to execution, the decree will order the sale of the effects under execution to satisfy the plaintiff’s original judgment and will direct the garnishee to deliver to the officer for sale as much of the effects as necessary to satisfy the judgment. Tex. R. Civ. P. 669. The garnishee will probably want the garnishment judgment to order his debt to the defendant discharged. See form 27-15 in this chapter for a garnishment judgment.

The officer making a sale of personal property must execute a transfer of the property to the purchaser, with a brief recital of the judgment of the court under which the property was sold. Tex. R. Civ. P. 672.

§ 27.68Enforcement of Garnishment Judgment

The garnishee adjudged to be indebted to the defendant will usually pay the garnishment judgment on request. If the garnishee will not pay the judgment, execution can be used as in the case of other judgments. Tex. R. Civ. P. 668. If the garnishee has any of the defendant’s effects, the judgment should order them sold under execution and should order the garnishee to deliver the appropriate amount of effects to the officer to be sold in satisfaction of the judgment. Tex. R. Civ. P. 669, 672. If the gar­nishee does not deliver the effects to the officer on demand, the garnishee can be cited to show cause why he should not be attached for contempt of court and, failing to show cause, can be fined for contempt and imprisoned until he delivers the prop­erty. Tex. R. Civ. P. 670.

Because this default situation rarely occurs, forms for contempt proceedings in a garnishment action are not included in this chapter. For a general discussion of contempt of court, see section 26.7 in this manual.

§ 27.69Garnishee as Stakeholder

If the garnishee is served with a writ and is unsure whether the funds sought are owned by the defendant or a third party, he can file a bill of interpleader and place the funds into the registry of the court. If this action is justified, the garnishee avoids liability to the garnisher for releasing the funds and avoids liability to the account holder for wrongfully freezing the funds. See Thompson v. Fulton Bag & Cotton Mills, 286 S.W.2d 411, 414 (Tex. 1956) (scope of inquiry in writ of garnishment is broad enough to impound funds of defendant held by garnishee even though title thereto stands in name of third party); First Realty Bank v. Ehrle, 521 S.W.2d 295, 298–99 (Tex. Civ. App.—Dallas 1975, no writ) (bank’s fear of exposure to multiple liability was reasonable and bank was entitled to protect itself by interpleader). If the garnishee’s answer puts into doubt the defendant’s ownership of the funds, the garnisher then has the burden of proof to show that the defendant owns the funds. Put­man & Putman, Inc. v. Capitol Warehouse, Inc., 775 S.W.2d 460, 463 (Tex. App.—Austin 1989, writ denied).

§ 27.70Garnishee’s Offset Rights

Locating a defendant’s account for garnishment may be only half the plaintiff’s battle. In addition to the timing of withdraw­als by the defendant, the plaintiff is faced with the prospect of offset by the defendant’s bank if the defendant is indebted to his bank, both before and in some instances after service of the writ of garnishment.

Accounts can be offset after service of a writ of garnishment if the debt is matured or the debtor is insolvent. But what if the debt has not been matured at the time of service? See Susan Soussan & Jane Cooper-Hill, A Bank’s Right to Offset after Ser­vice of Writ of Garnishment, 48 Tex. B.J. 638 (1985), discussing San Felipe National Bank v. Caton, 668 S.W.2d 804 (Tex. Civ. App.—Houston [14th Dist.] 1984, no writ). In Caton the court approved an offset after garnishment when the obligation was not in default, based on a contractual provision giving the bank a lien on the depositor’s account. Contra Andrew Messer, A Bank’s Right to Offset after Service of Writ of Garnishment—A Reconciliation of San Felipe National Bank v. Caton, 54 Tex. B.J. 368 (1991).

If the bank has a right to mature the indebtedness at the time the writ is served, it may take steps to accelerate and offset after service of the writ. This right may be due to a default in the installment payment, events of default defined in the note separate from nonpayment (for example, attachment of the account), or even an insecurity clause. The attorney should use discovery before garnishment to learn whether the debtor is indebted to the garnishee and, if indebted, the terms of the indebtedness. See also Holt’s Sporting Goods Co. of Lubbock v. American National Bank, 400 S.W.2d 943 (Tex. Civ. App.—Amarillo 1966, writ dism’d); Home National Bank v. Barnes-Piazzek Co., 278 S.W. 299 (Tex. Civ. App.—Fort Worth 1925, writ ref’d).

§ 27.71Liability for Wrongful Postjudgment Garnishment

The plaintiff can be liable for wrongful garnishment if in his affidavit he makes an untrue allegation of a statutory ground for garnishment, possibly even though he had probable cause to believe the ground was true and he did not act maliciously. Peer­less Oil & Gas Co. v. Teas, 138 S.W.2d 637, 640 (Tex. Civ. App.—San Antonio 1940), aff’d, 158 S.W.2d 758 (Tex. 1942). If the plaintiff knows that the defendant actually has property within the state subject to execution sufficient to satisfy the debt, wrongful garnishment can occur if the plaintiff alleges otherwise in his affidavit. See King v. Tom, 352 S.W.2d 910, 913 (Tex. Civ. App.—El Paso 1961, no writ); Griffin v. Cawthon, 77 S.W.2d 700, 702 (Tex. Civ. App.—Fort Worth 1934, writ ref’d). The plaintiff has a duty to make a reasonable inquiry whether any such property exists. Massachusetts v. Davis, 160 S.W.2d 543, 554 (Tex. Civ. App.—Austin), aff’d in part and rev’d in part on other grounds, 168 S.W.2d 216 (Tex. 1942), cert. denied, 320 U.S. 210 (1943).

A valid, subsisting judgment that is not suspended supports a garnishment. The fact that it is later set aside does not in itself support an action for wrongful garnishment. Biering v. First National Bank, 7 S.W. 90 (Tex. 1888); Hobson & Associates v. First Print, Inc., 798 S.W.2d 617 (Tex. App.—Amarillo 1990, no writ). Failure of the plaintiff to state in his application that he was not aware of property owned by the defendant subject to execution sufficient to satisfy the judgment did not support a wrongful garnishment action. Canyon Lake Bank v. Townsend, 649 S.W.2d 809, 810–11 (Tex. App.—Austin 1983, writ ref’d n.r.e.). See generally Glenn Jarvis, Comment, Creditor’s Liability in Texas for Wrongful Attachment, Garnishment, or Execu­tion, 41 Texas L. Rev. 692, 704–07, 711–16 (1963).

§ 27.72Locating Bank Accounts

Bank account location services should be utilized with extreme caution. If the information has been gained by false pretenses, criminal penalties apply pursuant to subchapter II of the Gramm-Leach-Bliley Act, 15 U.S.C. §§ 6821–6827. See generally chapter 3 in this manual for further information on locating a debtor’s assets.

 

 

 

 

 

 

 

 

[Sections 27.73 through 27.80 are reserved for expansion.]

V.  Turnover

§ 27.81Origin of Turnover Statutes

The Texas turnover statutes are found at Tex. Civ. Prac. & Rem. Code §§ 31.002–.0025, 31.010. These statutes, with the post­judgment discovery devices under Tex. R. Civ. P. 621a, give creditors the statutory equivalent of what was previously known in equity as a creditor’s bill. Ex parte Johnson, 654 S.W.2d 415, 417 (Tex. 1983). Section 31.002(a) was amended effective 2017, eliminating the need to show that the debtor owns property that cannot be readily levied upon by ordinary legal process. Acts 2017, 85th Leg., R.S., ch. 996, § 1 (H.B. 1066), eff. Sept. 1, 2017.

§ 27.82Purpose, Function, and Effect of Turnover

Turnover is a procedural device by which judgment creditors may reach nonexempt assets of a debtor. Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223, 224 (Tex. 1991). The purpose of the turnover statutes is to aid the diligent judgment creditor in reach­ing the judgment debtor’s property. Cross, Kieschnick & Co. v. Johnston, 892 S.W.2d 435, 438 (Tex. App.—San Antonio 1994, no writ). See section 27.89 below regarding property subject to and exempt from turnover.

The turnover statutes place the burden on the defendant to produce documents or property used to satisfy a judgment. They are deliberately open-ended to aid the diligent plaintiff. See House Comm. on Judicial Affairs, Bill Analysis, Tex. S.B. 965, 66th Leg., R.S. (1979).

§ 27.83When to Seek Turnover Relief

Seeking turnover relief is appropriate if the judgment debtor owns nonexempt property or property rights. Tex. Civ. Prac. & Rem. Code § 31.002(a). The court may order the judgment debtor to turn over realty located outside the state of Texas. Reeves v. Federal Savings & Loan Insurance Corp., 732 S.W.2d 380 (Tex. App.—Dallas 1987, no writ). By extension, personal prop­erty outside the state may also be subject to turnover.

There is no requirement that a judgment creditor first exhaust other legal remedies, such as attachment, execution, or garnish­ment, before seeking turnover relief. Universe Life Insurance Co. v. Giles, 982 S.W.2d 488, 492–93 (Tex. App.—Texarkana 1998, pet. denied); Hennigan, 666 S.W.2d at 323; see also Childre v. Great Southwest Life Insurance Co., 700 S.W.2d 284, 288 (Tex. App.—Dallas 1985, no writ) (no requirement for return of writ of execution before turnover relief granted).

Turnover is cumulative of other lawful remedies available to a judgment creditor for collection of a judgment. Matrix, Inc. v. Provident American Insurance Co., 658 S.W.2d 665, 668 (Tex. App.—Dallas 1983, no writ). Because Tex. Civ. Prac. & Rem. Code § 31.002(b) states that the court may grant the relief stated in section 31.002(b)(1), (2), or (3), the statute is viewed as discretionary. Therefore, a court may set additional requirements before granting turnover relief, such as showing that discov­ery has been ignored or that the creditor obtain a writ of execution and have it returned nulla bona before granting turnover relief.

A waiting period of thirty days after entry of judgment or overruling of a motion for new trial is not required as it is before levy and execution. Childre, 700 S.W.2d at 286–87. Also, the court can consider a turnover application even if the judgment is on appeal, as long as a supersedeas bond has not been filed. Anderson v. Lykes, 761 S.W.2d 831, 833–34 (Tex. App.—Dallas 1988, no writ), overruled on other grounds as recognized in In re Crow-Billingsley Air Park, Ltd., 98 S.W.3d 178, 180 (Tex. 2003).

§ 27.84Jurisdiction and Choice of Forum

A judgment creditor may bring a turnover action in a court of competent jurisdiction, including a justice court, either in the same suit in which the judgment against the debtor is rendered or in a new and independent proceeding. Tex. Civ. Prac. & Rem. Code § 31.002(a), (d). If the creditor moves for turnover relief in the same suit in which the judgment was rendered, the trial court must conduct a hearing on the application, even if an appeal is pending. Anderson v. Lykes, 761 S.W.2d 831 (Tex. App.—Dallas 1988, no writ), overruled on other grounds as recognized in In re Crow-Billingsley Air Park, Ltd., 98 S.W.3d 178, 180 (Tex. 2003). See section 27.94 below for a discussion of the trial court’s discretion to grant or deny turnover relief.

If the creditor brings a turnover action as a new and independent proceeding, the creditor may choose any court of competent jurisdiction that is best able to handle the particular relief sought, such as the appointment of a receiver or the issuance of an injunction. For more extensive discussions of jurisdiction and venue in collections cases, see chapter 15 in this manual.

Practice Note:      Since turnover orders are enforceable by contempt, an independent action filed in the debtor’s county of res­idence may facilitate enforcement if attachment of the debtor becomes necessary. Transferring debtors in custody across county lines can be problematic, and law enforcement is not readily cooperative in transferring civil contemners.

§ 27.85Pleadings

§ 27.85:1Creditor’s Pleadings

The application should generally—

1.recite that the judgment remains unsatisfied;

2.state that the defendant owns property (or property rights) that is not exempt;

3.if injunctive relief is requested, follow the requirements for obtaining an injunction or temporary restraining order (pleadings such as no adequate remedy at law, and verifying petition);

4.request that the property, along with related documents and records, be turned over to the sheriff or constable for execution or to a receiver or provide that it otherwise be applied to the satisfaction of the judgment;

5.request the appointment of a receiver, if one is being sought; and

6.request attorney’s fees.

Tex. Civ. Prac. & Rem. Code § 31.002.

See form 27-16 in this chapter for an application for turnover relief.

§ 27.85:2Debtor’s Pleadings

The defendant may challenge an order for turnover by motion or on appeal. See Ex parte Johnson, 654 S.W.2d 415, 418 (Tex. 1983) (orig. proceeding) (motion to modify); Scheel v. Alfaro, 406 S.W.3d 216, 222 (Tex. App.—San Antonio 2013, pet. denied) (motion to set aside); Lozano v. Lozano, 975 S.W.2d 63, 69 (Tex. App.—Houston [14th Dist.] 1998, pet. denied) (appeal). An affirmative defense such as payment must be pleaded and proved by the defendant. If the defendant has neither responded to an application for turnover nor pleaded payment as an affirmative defense, he is precluded on appeal from con­tending that the plaintiff failed to prove that the judgment was unsatisfied. Ross v. 3D Tower Ltd., 824 S.W.2d 270, 273 (Tex. App.—Houston [14th Dist.] 1992, writ denied); Matrix, Inc. v. Provident American Insurance Co., 658 S.W.2d 665, 667 (Tex. App.—Dallas 1983, no writ); Tex. R. Civ. P. 94.

§ 27.86Notice and Hearing

§ 27.86:1Notice

Notice to the defendant and opportunity to be heard are not required by the turnover statute. Ross v. 3D Tower Ltd., 824 S.W.2d 270 (Tex. App.—Houston [14th Dist.] 1992, writ denied). Courts routinely grant ex parte orders for turnover but, in the court’s discretion, may first require that notice be given to the defendant. One factor the court may consider in proceeding ex parte is the likelihood that the debtor will dispose of nonexempt property, or convert nonexempt property to exempt prop­erty, if notice is given.

An ex parte turnover order does not unfairly surprise a judgment debtor because the judgment puts the debtor on notice that postjudgment collection proceedings will follow. See Ex parte Johnson, 654 S.W.2d 415, 418 n.1 (Tex. 1983) (orig. proceed­ing); Thomas v. Thomas, 917 S.W.2d 425, 433–34 (Tex. App.—Waco 1996, no writ); Scheel v. Alfaro, 406 S.W.3d 216, 223–24 (Tex. App.—San Antonio 2013, pet. denied). A good review of the constitutional issues is found in Sivley v. Sivley & Siv­ley, 972 S.W.2d 850, 861–62 (Tex. App.—Tyler 1998, no pet.).

§ 27.86:2Hearing

A judgment creditor is entitled to a hearing for turnover relief. Anderson v. Lykes, 761 S.W.2d 831, 834 (Tex. App.—Dallas 1988, no writ), overruled on other grounds as recognized in In re Crow-Billingsley Air Park, Ltd., 98 S.W.3d 178, 180 (Tex. 2003). The statute requires a factual showing that the judgment debtor has nonexempt property. Schultz v. Fifth Judicial Dis­trict Court of Appeals at Dallas, 810 S.W.2d 738, 740 (Tex. 1991) (orig. proceeding), abrogated on other grounds by In re Sheshtawy, 154 S.W.3d 114 (Tex. 2004) (examining whether contempt motion based on turnover order was appealable; turn­over statute (Tex. Civ. Prac. & Rem. Code § 31.002) no longer requires showing that property is not readily subject to ordi­nary execution). It is reversible error for a court to grant turnover relief without the showing required by the statute. Tanner v. McCarthy, 274 S.W.3d 311 (Tex. App.—Houston [1st Dist.] 2008, no pet.); Clayton v. Wisener, 169 S.W.3d 682, 683–84 (Tex. App.—Tyler 2005, no pet.); Sivley v. Sivley & Sivley, 972 S.W.2d 850 (Tex. App.—Tyler 1998, no pet.). A record of the hearing should be made to preserve issues if an appeal is taken. Tanner, 274 S.W.3d 311.

There is a split in authority over whether the defendant has the burden to prove that particular property is exempt from turn­over. Burns v. Miller, Hiersche, Martens & Hayward, P.C., 948 S.W.2d 317, 324 (Tex. App.—Dallas 1997, writ denied) (not­ing that Tex. Civ. Prac. & Rem. Code § 31.002 does not specify who has burden and that courts were split, but citing Roosth v. Roosth, 889 S.W.2d 445, 459 (Tex. App.—Houston [14th Dist.] 1994, writ denied), to place burden on beneficiary of spend­thrift trust to prove distributions were exempt); Jacobs v. Adams, 874 S.W.2d 166, 167–68 (Tex. App.—Houston [14th Dist.] 1994, no writ) (burden on party claiming property is exempt); Rucker v. Rucker, 810 S.W.2d 793, 795–96 (Tex. App.—Hous­ton [14th Dist.] 1991, writ denied) (burden on party claiming property is exempt); Sloan v. Douglass, 713 S.W.2d 436, 441 (Tex. App.—Fort Worth 1986, writ ref’d n.r.e.) (burden on party seeking turnover).

§ 27.87Turnover Orders Generally

Texas Civil Practice and Remedies Code section 31.002(b) provides for the three types of turnover orders available under the statute. While the provision for appointment of a receiver is often used, the practitioner should not overlook the provisions for turnover of property to a sheriff or constable or for otherwise applying the property to the satisfaction of the judgment.

A turnover proceeding can and should be used to determine whether the defendant’s particular property is subject to turnover. See, e.g., Owen v. Porter, 796 S.W.2d 265 (Tex. App.—San Antonio 1990, no writ) (whether community property was joint management or sole management); Sloan v. Douglass, 713 S.W.2d 436 (Tex. App.—Fort Worth 1986, writ ref’d n.r.e.); Pace v. McEwen, 617 S.W.2d 816, 819 (Tex. Civ. App.—Houston [14th Dist.] 1981, no writ) (homestead); but see Republic Insur­ance Co. v. Millard, 825 S.W.2d 780 (Tex. App.—Houston [14th Dist.] 1992, no writ); Steenland v. Texas Commerce Bank, N.A., 648 S.W.2d 387 (Tex. App.—Tyler 1983, writ ref’d n.r.e.) (court could not determine excess nonexempt value of home­stead; creditor must seek separate trial and finding).

A turnover order should not provide for delivery of the debtor’s property directly into the hands of the judgment creditor or his attorney. Ex parte Johnson, 654 S.W.2d 415, 418 (Tex. 1983) (orig. proceeding). The same rule applies for cash as for tan­gible personal property. Copher v. First State Bank of Pittsburg, 852 S.W.2d 738, 739 (Tex. App.—Fort Worth 1993, no writ) (relying on Ex parte Johnson and legislative history).

The Code allows a court to enter or enforce an order without identifying specifically the property subject to turnover. See Tex. Civ. Prac. & Rem. Code § 31.001(h). This keeps the attorney from having to give the defendant notice of which assets to hide, and it allows the attorney to avoid the problem of having to identify specific assets to be turned over to the receiver. The prop­erty to be turned over may be stated in the form of a category, for example, “all accounts receivable.”

The court may appoint a receiver to “take possession of” nonexempt property belonging to the judgment debtor, “sell it and pay the proceeds to the judgment creditor to the extent required to satisfy the judgment.” Tex. Civ. Prac. & Rem. Code § 31.002(b)(3).

Practice Note:      An order to turn over specific property by itself does not enable a constable or sheriff’s deputy to take pos­session of the property or to sell it; a writ of execution should therefore accompany the turnover order. The writ also provides a way for the officer to report to the court the outcome of serving the order. Providing the officer with both documents should not result in being charged two fees, as each document assists the officer in handling the other. See forms 27-5 through 27-7 regarding writs of execution. See form 27-17 in this chapter for an order for turnover relief.

§ 27.88Receiverships in Turnover Actions

§ 27.88:1Authority of Receiver under Turnover Statutes

The court may appoint a receiver of the judgment debtor’s property with the authority to take possession of and sell the non­exempt property and pay the proceeds to the judgment creditor to the extent required to satisfy the judgment. Tex. Civ. Prac. & Rem. Code § 31.002(b)(3). Chapter 64 of the Civil Practice and Remedies Code does not apply to a receivership under sec­tion 31.002.

§ 27.88:2Appointment of Receiver

The requirements for the appointment of a receiver under Tex. Civ. Prac. & Rem. Code § 64.001 are inapplicable to turnover proceedings. Schultz v. Cadle Co., 825 S.W.2d 151, 154–55 (Tex. App.—Dallas 1992), writ denied per curiam, 852 S.W.2d 499 (Tex. 1993); Childre v. Great Southwest Life Insurance Co., 700 S.W.2d 284, 288 (Tex. App.—Dallas 1985, no writ). The decision to appoint a receiver is within the discretion of the court. Schultz, 825 S.W.2d at 155. The court is not required to appoint a receiver. Ross v. 3D Tower Ltd., 824 S.W.2d 270, 272 (Tex. App.—Houston [14th Dist.] 1992, writ denied).

§ 27.88:3Qualifications of Receiver

Although neither the turnover statute nor the case law interpreting the statute establishes requirements for who can serve as a receiver, it is suggested that the receiver (1) be a citizen and qualified voter of the state of Texas at the time of appointment; (2) maintain actual residence in the state during the receivership; and (3) not be a party, attorney, or other person interested in the underlying cause of action; Swate v. Johnston, 981 S.W.2d 923, 925 (Tex. App.—Houston [1st Dist.] 1998, orig. proceed­ing). Earning fees payable from the estate of the receivership does not disqualify the receiver as an interested person. Swate, 981 S.W.2d at 926 n.1. If the applicant seeks to give the receiver the powers of a master, the person to be appointed should also not be related to any party. Tex. R. Civ. P. 171.

§ 27.88:4Application of Appointment of Receiver

In addition to requesting that a receiver be appointed as discussed herein, the attorney should make sure the application is pleaded in accordance with section 31.002(a) of the Texas Civil Practices and Remedies Code. The court may appoint a receiver only if the judgment creditor meets the requirements of section 31.002(a) of the Code. For a discussion of what the pleadings should contain, see section 27.85:1 above. See form 27-18 in this chapter for a motion for postjudgment receiver­ship.

§ 27.88:5Receivership Provision in Turnover Order

The order appointing a receiver determines what powers are available to a receiver. Ex parte Hodges, 625 S.W.2d 304, 306 (Tex. 1981). The order should be “definite, clear and concise in order to give the person to whom it is directed sufficient infor­mation as to his duties and should not be such as would call on him for interpretations, inferences or conclusions.” Thomas v. Thomas, 917 S.W.2d 425, 434 (Tex. App.—Waco 1996, no writ). Great care should be taken in drafting the order appointing the receiver to ensure that all the powers necessary for the receiver to perform his duties are included.

A comprehensive order not only turns over property belonging to the judgment debtor to the receiver but also empowers the receiver to take possession of the property and sell it to be applied for satisfaction of the judgment. The order should be spe­cific enough to support a contempt action against the judgment debtor in case the debtor fails to comply with the order.

The order appointing a receiver should tax the receiver’s fees and reasonable expenses against the judgment debtor as a cost. Furthermore, the court must approve payment of a receiver’s fee by separate written order. Texas Supreme Court, Second Amended Order Regarding Mandatory Reports of Judicial Appointments and Fees, Misc. Docket No. 07-9188 (Oct. 30, 2007); Moyer v. Moyer, 183 S.W.3d 48 (Tex. App.—Austin 2005, no pet.).

In drafting the order, consider that third parties will look to the order in determining whether the receiver is authorized to make demand on them.

See form 27-19 in this chapter for an order appointing a receiver.

§ 27.88:6Bond and Oath for Appointment of Receiver

The turnover statute does not require a bond. Although Tex. R. Civ. P. 695a provides that a bond must be filed before a receiver can be appointed, rule 695a did not envision a turnover receiver. Courts have held that no receiver’s bond is required in a turnover receivership. Schultz v. Cadle Co., 825 S.W.2d 151 (Tex. App.—Dallas 1992), writ denied per curiam, 852 S.W.2d 499 (Tex. 1993) (bond requirements of rule 695a do not apply to postjudgment receiver appointed under turnover stat­ute, and decision whether to require bond is in court’s discretion); In re Estate of Herring, 983 S.W.2d 61, 64 (Tex. App.—Corpus Christi 1998, no pet.); Childre v. Great Southwest Life Insurance Co., 700 S.W.2d 284, 285 (Tex. App.—Dallas 1985, no writ). “Any bond which may be required should be carefully framed so as not to indemnify the judgment debtor in the tra­ditional sense, as the righteousness of the appointment should have been fully litigated in any hearing pursuant to the new stat­utes.” Childre, 700 S.W.2d at 289 (citing David Hittner, Texas Post-Judgment Turnover and Receivership Statutes, 45 Tex. B.J. 417 (1982)). The judgment debtor bears the burden of showing any extraordinary circumstances requiring the bond to be increased. Childre, 700 S.W.2d at 289. If the application for turnover seeks both a receiver and an injunction, one bond may serve both purposes. Childre, 700 S.W.2d at 288–89. See form 27-20 for a bond.

The turnover statute does not provide that an oath be taken or filed by a receiver. However, practice has evolved to include the taking of an oath. See form 27-21 for an oath.

§ 27.88:7Effect of Order Appointing Receiver on Prior Existing Liens

Receivership property is held in custodia legis as of the date the turnover order is signed. Any transfer or encumbrance after the turnover order is signed, including a trustee’s sale under a deed of trust, is void. First Southern Properties, Inc. v. Vallone, 533 S.W.2d 339, 341 (Tex. 1976) (citing Ellis v. Vernon Ice, Light & Water Co., 23 S.W. 858 (Tex. 1893), and Texas Trunk Railway Co. v. Lewis, 16 S.W. 647 (Tex. 1891)); Pratt v. Amrex, Inc., 354 S.W.3d 502, 506 (Tex. App.—San Antonio 2011, pet. denied). However, custodia legis does not destroy any prior vested rights. First Southern Properties, 533 S.W.2d at 343.

§ 27.88:8Receiver’s Fees and Expenses

Tex. Civ. Prac. & Rem. Code § 31.002(e) provides that the judgment creditor is entitled to costs. The receiver’s fee is typi­cally taxed against the judgment debtor as a cost in the order appointing the receiver. See, e.g., Sheikh v. Sheikh, 248 S.W.3d 381, 386 (Tex. App.—Houston [14th Dist.] 2007, no pet.).

Practice Note:      For receivers serving on a contingent fee basis, the order appointing the receiver should state the fee calcula­tion (typically 25 percent of recovery) and that the rate is usual and customary. A finding that the fee is reasonable would be made in a later order. See Evans v. Frost National Bank, No. 05-12-01491-CV, 2015 WL 4736543, at *4–5 (Tex. App.—Dal­las Aug. 11, 2015 (mem. op.) (no pet.). The court must approve payment of an hourly receiver’s fee by separate written order because it is not proper to approve an hourly fee before any work has been done.

A problem occurs with an hourly fee receivership when the receivership estate does not possess any assets or has insufficient assets to satisfy a judgment or the receiver’s fees and expenses. In such cases, a conflict may occur between the receiver and the judgment creditor. The attorney should make it very clear to the judgment creditor that if the receiver is unable to locate any assets or sufficient assets to satisfy the judgment, the judgment creditor may be responsible for the receiver’s fees and expenses. The practitioner is encouraged to reach an agreement with the proposed receiver before the receiver is appointed. If the order is silent about fees and expenses, the court may be petitioned to make a ruling through the use of an application.

See form 27-22 in this chapter for an order approving the receiver’s fees.

§ 27.88:9Immunity of Receiver

Texas uses the “functional approach.” “Once an individual is cloaked with derived judicial immunity because of a particular function being performed for a court, every action taken with regard to that function—whether good or bad, honest or dishon­est, well-intentioned or not—is immune from suit. Once applied to the function, the cloak of immunity covers all acts, both good and bad.” Davis v. West, 317 S.W.3d 301, 307 (Tex. App.—Houston [1st Dist.] 2009, no pet.) (quoting Spigener v. Wal­lis, 80 S.W.3d 174, 183 (Tex. App.—Waco 2002, no pet.)).

Some cases hold that judicial immunity is an immunity from suit, not just from the ultimate assessment of damages. Bradt v. West, 892 S.W.2d 56, 71 (Tex. App.—Houston [1st Dist.] 1994, writ denied).

Practice Note:      The receiver’s immunity does not extend to the creditor or the creditor’s attorney. The practitioner should let the receiver make his own decision about taking a particular course of action.

§ 27.89Property Subject to and Exempt from Turnover

§ 27.89:1Property Generally

The turnover statutes apply to nonexempt property owned by the judgment debtor, including present or future rights to prop­erty. Tex. Civ. Prac. & Rem. Code § 31.002(a); see Hennigan v. Hennigan, 666 S.W.2d 322, 323 (Tex. App.—Houston [14th Dist.]), writ ref’d n.r.e. per curiam, 677 S.W.2d 495 (Tex. 1984); Matrix, Inc. v. Provident American Insurance Co., 658 S.W.2d 665, 668 (Tex. App.—Dallas 1983, no writ). It is proper to determine whether property is exempt in a turnover pro­ceeding. Stanley v. Reef Securities, Inc., 314 S.W.3d 659, 667 n.4 (Tex. App.—Dallas 2010, no pet.); Pace v. McEwen, 617 S.W.2d 816, 819 (Tex. Civ. App.—Houston [14th Dist.] 1981, no writ).

Proceeds of exempt property are exempt under the turnover statute, except when collecting child support. Tex. Civ. Prac. & Rem. Code § 31.002(f). But see Schultz v. Cadle Co., 825 S.W.2d 151, 153–54 (Tex. App.—Dallas 1992), writ denied per curiam, 852 S.W.2d 499 (Tex. 1993) (wages were no longer exempt when paid to company owned by debtor).

The burden is on the defendant to show that property is exempt. Goodman v. Compass Bank, No. 05-15-00812-CV, 2016 WL 4142243, at *5 (Tex. App.—Dallas Aug. 3, 2016, no pet.) (mem. op.); Stanley, 314 S.W.3d at 667; Burns v. Miller, Hiersche, Martens & Hayward, P.C., 948 S.W.2d 317, 324 (Tex. App.—Dallas 1997, writ denied); Jacobs v. Adams, 874 S.W.2d 166, 167–68 (Tex. App.—Houston [14th Dist.] 1994, no writ); Rucker v. Rucker, 810 S.W.2d 793, 795–96 (Tex. App.—Houston [14th Dist.] 1991, writ denied).

For a discussion of property subject to and exempt from execution, see part III. in this chapter.

§ 27.89:2Property Subject to Turnover

Tex. Civ. Prac. & Rem. Code § 31.002(b)(1) provides for the turnover of the debtor’s nonexempt property to either a consta­ble or sheriff; Tex. Civ. Prac. & Rem. Code § 31.002(b)(3) provides for a receiver to take possession of it.

Practice Note:      The practitioner should not confuse what has to be proved up in order to obtain relief (that the debtor has at least one piece of nonexempt property) with what property may be ordered to be turned over (any nonexempt property). See Tex. Civ. Prac. & Rem. Code § 31.002(h).

The following list of property subject to turnover is illustrative, not exclusive. The court may also order that all documents or records related to the property be delivered. Tex. Civ. Prac. & Rem. Code § 31.002(b)(1).

1.Income from business. Nonexempt income from the judgment debtor’s business (for example, income from a sole proprietorship or funds due an independent contractor) is subject to turnover. Thomas v. Thomas, 917 S.W.2d 425, 434–35 (Tex. App.—Waco 1996, no writ) (law practice income); DeVore v. Central Bank & Trust, 908 S.W.2d 605, 610 (Tex. App.—Fort Worth 1995, no writ) (attorney’s nonwage income); Brink v. Ayre, 855 S.W.2d 44, 45 (Tex. App.—Houston [14th Dist.] 1993, no writ) (attorney’s fees earned); Ross v. 3D Tower Ltd., 824 S.W.2d 270, 272 (Tex. App.—Houston [14th Dist.] 1992, writ denied) (attorney’s accounts receivable).

2.Commissions earned by an independent contractor. Campbell v. Stucki, 220 S.W.3d 562 (Tex. App.—Tyler 2007, no pet.).

3.Property located outside Texas. Reeves v. Federal Savings & Loan Insurance Corp., 732 S.W.2d 380, 381–82 (Tex. App.—Dallas 1987, no writ).

4.Causes of action. Renger Memorial Hospital v. State, 674 S.W.2d 828, 830 (Tex. App.—Austin 1984, no writ); but see section 27.89:3 below.

5.Promissory notes. Matrix, Inc. v. Provident American Insurance Co., 658 S.W.2d 665, 668 (Tex. App.—Dallas 1983, no writ).

6.Nonexempt property held by a third party, but subject to the debtor’s control. Tex. Civ. Prac. & Rem. Code § 31.002(b)(1); Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223, 227 (Tex. 1991); Norsul Oil & Mining Ltd. v. Com­mercial Equipment Leasing Co., 703 S.W.2d 345, 349 (Tex. App.—San Antonio 1985, no writ). See section 27.91 below.

7.Accounts receivable. Ross, 824 S.W.2d at 272; Arndt v. National Supply Co., 650 S.W.2d 547, 549 (Tex. App.—Houston [14th Dist.] 1983, writ ref’d n.r.e.).

8.Shares of stock. Newman v. Toy, 926 S.W.2d 629 (Tex. App.—Austin 1996, writ denied); Childre v. Great South­west Life Insurance Co., 700 S.W.2d 284, 289 (Tex. App.—Dallas 1985, no writ).

§ 27.89:3Property Not Subject to Turnover

The following property is not subject to turnover.

1.Current wages. Tex. Civ. Prac. & Rem. Code § 31.0025; Tex. Prop. Code § 42.001(b)(1); GE Capital v. ICO, 230 S.W.3d 702, 705 (Tex. App.—Houston [14th Dist.] 2007, pet. denied); Brink v. Ayre, 855 S.W.2d 44, 45 (Tex. App.—Houston [14th Dist.] 1993, no writ); see also Caulley v. Caulley, 806 S.W.2d 795, 797–98 (Tex. 1991). The exemption may be lost when the employee voluntarily leaves the wages with the employer or deposits the wages with someone else. GE Capital v. ICO, 230 S.W.3d 702, 707 (Tex. App.—Houston [14th Dist.] 2007, pet. denied). Caveat: A number of cases decided before Caulley discussed, and some approved, turnover of paychecks or pro­ceeds of them, reasoning that the funds were no longer “current wages” once received by the debtor. See, e.g., Bar­low v. Lane, 745 S.W.2d 451, 453 (Tex. App.—Waco 1988, writ denied); Salem v. American Bank of Commerce, 717 S.W.2d 948 (Tex. App.—El Paso 1986, no writ).

Practice Note:      The practitioner should bear in mind the “current” in the “current wages” exemption. “Current” has been interpreted as wages for the current pay period. Courts focus on whether the debtor controls when the wages are paid. Money that was paid to a bankruptcy trustee by the debtor’s employer pursuant to a wage order remained exempt when the Chapter 13 bankruptcy was dismissed, because the debtor never had control of the money. See Marrs v. Marrs, 401 S.W.3d 122, 127 (Tex. App.—Houston [14th Dist.] no pet.).

2.Homestead. Pace v. McEwen, 617 S.W.2d 816 (Tex. Civ. App.—Houston [14th Dist.] 1981, no writ).

3.Retirement plan funds, unless they do not qualify under applicable provisions of the Internal Revenue Code. The defendant has the burden to prove that they qualify. Rucker v. Rucker, 810 S.W.2d 793, 795–96 (Tex. App.—Houston [14th Dist.] 1991, writ denied).

4.Periodic payments unless there is a finding that payments are from a nonexempt source, such as business income. Ex parte Prado, 911 S.W.2d 849, 850 (Tex. App.—Austin 1995, orig. proceeding) (defendant ordered to turn over $500 per month, without court’s first identifying specific source of nonexempt property or right); see Ross v. 3D Tower Ltd., 824 S.W.2d 270, 272–73 (Tex. App.—Houston [14th Dist.] 1992, writ denied) (turnover order mandating monthly payments upheld).

5.Cause of action of judgment debtor against plaintiff. Associated Ready Mix, Inc. v. Douglas, 843 S.W.2d 758, 762 (Tex. App.—Waco 1992, no writ); Criswell v. Ginsberg & Foreman, 843 S.W.2d 304, 306–07 (Tex. App.—Dallas 1992, no writ); Commerce Savings Ass’n v. Welch, 783 S.W.2d 668, 669–71 (Tex. App.—San Antonio 1989, no writ). See also In re Great Northern Energy, Inc., 493 S.W.3d 283, 290 (Tex. App.—Texarkana 2016, orig. proceed­ing) (against public policy to allow a creditor to use turnover to extinguish the debtor’s claim against the creditor) (citing Criswell, 843 S.W.2d at 306–07).

6.Malpractice claims. Charles v. Tamez, 878 S.W.2d 201, 207 (Tex. App.—Corpus Christi 1994, writ denied) (quot­ing Goodley v. Wank & Wank, Inc., 62 Cal. App. 3d 389, 397 (1976)).

7.Unasserted denied causes of action for legal malpractice for failure to settle under the Stowers doctrine. Charles, 878 S.W.2d at 208.

8.Unpaid commissions for personal services not exceeding 25 percent of the aggregate limitation. Tex. Prop. Code § 42.001(d).

9.Proceeds of exempt property. Tex. Civ. Prac. & Rem. Code § 31.002(f). Exempt property is discussed generally in part III. in this chapter.

§ 27.89:4Property Held by Financial Institution

With respect to turnover of property held by a financial institution in the name of or on behalf of the judgment debtor as a cus­tomer of the financial institution, the rights of a receiver appointed under Texas Civil Practice and Remedies Code section 31.002(b)(3) do not attach until the financial institution receives service of a certified copy of the order of receivership in the manner specified by Texas Finance Code section 59.008. See Tex. Civ. Prac. & Rem. Code § 31.002(g). The service provi­sions of section 59.008 also apply to service of writs of garnishment, discussed at section 27.59:2 above.

A financial institution that receives a request to turn over assets or financial information of a judgment debtor to a judgment creditor or a receiver under a turnover order or receivership under section 31.002 shall be provided and may rely on a certified copy of the order or injunction of the court. Tex. Civ. Prac. & Rem. Code § 31.010(a)(1).

§ 27.90Disposition of Property

Rather than appoint a receiver, the court may order the defendant’s property and related documents and records to be turned over to a designated sheriff or constable for sale by execution or may otherwise apply the property to the satisfaction of the judgment. Tex. Civ. Prac. & Rem. Code § 31.002(b)(1), (2).

In addition, the court may apply the property to the satisfaction of the judgment by turning it over to the registry of the court. Brecheisen v. Johnson, 665 S.W.2d 191, 192 (Tex. App.—Dallas 1984, writ ref’d n.r.e.); Arndt v. National Supply Co., 650 S.W.2d 547, 549 (Tex. App.—Houston [14th Dist.] 1983, writ ref’d n.r.e.). The court, however, may not order turnover directly to a judgment creditor. Ex parte Johnson, 654 S.W.2d 415, 418–19 (Tex. 1983) (orig. proceeding).

If a receiver has been appointed, the receiver can sell the nonexempt property and pay the proceeds to the judgment creditor to the extent required to satisfy the judgment. Tex. Civ. Prac. & Rem. Code § 31.002(b)(3). Citing preturnover case law, the court in Salaymeh held that the sale of property by a receiver is generally not effective until the sale is reported by the receiver and confirmed by the court after notice to the parties. Salaymeh v. Plaza Centro, LLC, 258 S.W.3d 236, 240 (Tex. App.—Houston [1st Dist.] 2008, no pet.) (referring to a sale of real property). The turnover statute itself, however, does not contain specific procedures for the sale of property by the receiver.

§ 27.91Who May Be Ordered to Turn Over Property

The statute is a procedural remedy not to be applied against someone who is not the judgment debtor. Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223, 227 (Tex. 1991). Courts differ on whether it may be used to compel a third party in possession of the debtor’s assets to turn them over, if the property is subject to the debtor’s control. Those in favor include Schultz v. Fifth Judi­cial District Court of Appeals at Dallas, 810 S.W.2d 738, 740 (Tex. 1991) (orig. proceeding), abrogated on other grounds by In re Sheshtawy, 154 S.W.3d 114 (Tex. 2004); Beaumont Bank, 806 S.W.2d at 227.

Those against it reason that it is enough that the judgment debtor can be held in contempt for failure to turn over property that he controls but that is in the hands of a third party. Parks v. Parker, 957 S.W.2d 666, 668–69 (Tex. App.—Austin 1997, no pet.).

Third parties who have been ordered to turn over property include—

1.corporations holding the debtor’s stock, Norsul Oil & Mining Ltd. v. Commercial Equipment Leasing Co., 703 S.W.2d 345, 348–49 (Tex. App.—San Antonio 1985, no writ);

2.representatives of the debtor’s estate, Buller, 806 S.W.2d at 227; First City National Bank of Beaumont v. Phelan, 718 S.W.2d 402 (Tex. App.—Beaumont 1986, writ ref’d n.r.e.); and

3.sureties on the debtor’s supersedeas bond, Schliemann v. Garcia, 685 S.W.2d 690 (Tex. App.—San Antonio 1984, no writ).

If the third party claims an interest in the property, turnover should not be used. See, e.g., Plaza Court, Ltd. v. West, 879 S.W.2d 271 (Tex. App.—Houston [14th Dist.] 1994, no writ) (turnover order improperly placed third parties into receiver­ship); Republic Insurance Co. v. Millard, 825 S.W.2d 780 (Tex. App.—Houston [14th Dist.] 1992, no writ) (third party may not be included as party defendant for first time in postjudgment turnover petition); Cravens, Dargan & Co. v. Peyton L. Tra­vers Co., 770 S.W.2d 573 (Tex. App.—Houston [1st Dist.] 1989, writ denied) (defendant’s bond held by State Board of Insur­ance); United Bank Metro v. Plains Overseas Group, Inc., 670 S.W.2d 281 (Tex. App.—Houston [1st Dist.] 1983, no writ) (creditor sought to establish that corporation wholly owned by defendant was defendant’s alter ego).

Other creative but unsuccessful attempts to reach property in the hands of third parties include Detox Industries, Inc. v. Gul­lett, 770 S.W.2d 954 (Tex. App.—Houston [1st Dist.] 1989, no writ) (creditor sought order compelling corporation to cancel defendant’s stock certificates and reissue stock in creditor’s name); Cross, Kieschnick & Co. v. Johnston, 892 S.W.2d 435 (Tex. App.—San Antonio 1994, no writ) (creditor obtained judgment against misnamed party, then sought turnover order against correctly named party); and Burns v. Miller, Hiersche, Martens & Hayward, P.C., 948 S.W.2d 317 (Tex. App.—Dallas 1997, writ denied) (debtor ordered to turn over distributions from spendthrift trust paid by the trustee to third parties).

The court may order the judgment creditor to turn over property to a sheriff or constable, otherwise apply the property to sat­isfaction of the judgment, or appoint a receiver. See Tex. Civ. Prac. & Rem. Code § 31.002(b)(1)–(3). The property should not be turned over directly to the creditor. See Ex parte Johnson, 654 S.W.2d 415, 419 (Tex. 1983) (orig. proceeding) (debtor may be denied opportunity to assert defenses if creditor promptly or improperly disposes of property); Lozano v. Lozano, 975 S.W.2d 63, 69 (Tex. App.—Houston [14th Dist.] 1998, pet. denied) (turnover statute allows ex parte entry of turnover orders without notice and hearing; direct turnover could deny debtor opportunity to assert defenses).

If turnover relief is sought against a third party, jurisdiction over the third party should be obtained by proper service of cita­tion. See generally Ex parte Swate, 922 S.W.2d 122, 125 (Tex. 1996) (noting potential due-process problems in ordering third parties to turn over assets without notice and hearing to them).

§ 27.92Costs and Attorney’s Fees

A successful judgment creditor is entitled to recover reasonable costs, including attorney’s fees, in a turnover proceeding. Tex. Civ. Prac. & Rem. Code § 31.002(e). The creditor must prove the reasonableness of the fees. See Haden v. David J. Sacks, P.C., 332 S.W.3d 523, 526 (Tex. App.—Houston [1st Dist.] 2009, pet. denied); Great Global Assurance Co. v. Keltex Properties, Inc., 904 S.W.2d 771, 776 (Tex. App.—Corpus Christi 1995, no writ).

The court may refuse to grant attorney’s fees to an unsuccessful turnover applicant. See Great Global Assurance Co., 904 S.W.2d at 776; Boudreaux Civic Ass’n v. Cox, 882 S.W.2d 543 (Tex. App.—Houston [14th Dist.] 1994, no writ); Dallas Power & Light Co. v. Loomis, 672 S.W.2d 309, 312 (Tex. App.—Dallas 1984, writ ref’d n.r.e.); see also Tex. R. Civ. P. 131, 141.

While a judgment creditor’s failure to make sufficient attempts to collect a judgment through other legal process can be con­sidered in determining the reasonableness of the amount of attorney’s fees and costs, it is not a basis to deny such a request under section 31.002. Great Global Assurance Co., 904 S.W.2d at 776.

§ 27.93Enforcement of Turnover Order

The court may enforce its orders under the turnover statutes by contempt or by other means in case of refusal or disobedience. Tex. Civ. Prac. & Rem. Code § 31.002(c); Ex parte Buller, 834 S.W.2d 622, 626–27 (Tex. App.—Beaumont 1992, no writ) (contemner may be imprisoned to coerce compliance with turnover order if she possesses means to satisfy judgment). A motion for contempt brought during an appeal may be filed in either the trial court or the court of appeals. In re Sheshtawy, 154 S.W.3d 114 (Tex. 2004) (abrogating Schultz v. Fifth Judicial District Court of Appeals at Dallas, 810 S.W.2d 738 (Tex. 1991) (orig. proceeding)). For a general discussion of contempt of court, see section 26.7 in this manual. When using the dis­covery contempt forms as a starting point for holding a judgment debtor in contempt for violating a turnover order, the practi­tioner should take care to change the grounds paragraph to refer to Texas Civil Practice and Remedies Code section 31.002 and not Texas Rule of Civil Procedure 215.

§ 27.94Court’s Discretion

The standard of review of a turnover order is whether the trial court abused its discretion. Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223, 226 (Tex. 1991). It is unclear, however, if the trial court’s discretion applies to the determination of whether to grant relief under the entire turnover statute or merely applies to the determination of the manner of the turnover. Compare Buttles v. Navarro, 766 S.W.2d 893, 894 (Tex. App.—San Antonio 1989, no writ), and Barlow v. Lane, 745 S.W.2d 451, 453–54 (Tex. App.—Waco 1988, writ denied) (statute’s use of “may” gives court discretion to grant or deny turnover relief), with Anderson v. Lykes, 761 S.W.2d 831, 834 (Tex. App.—Dallas 1988, no writ) (statute’s use of “entitled” gives creditor right to hearing on application for turnover relief), overruled on other grounds as recognized in In re Crow-Billingsley Air Park, Ltd., 98 S.W.3d 178, 180 (Tex. 2003). See also Charles v. Tamez, 878 S.W.2d 201, 205 (Tex. App.—Corpus Christi 1994, no writ).

§ 27.95Appeal of Turnover Order

A turnover order is in the nature of a mandatory injunction. Therefore, an appeal can be taken from a final turnover order. Schultz v. Fifth Judicial District Court of Appeals at Dallas, 810 S.W.2d 738 (Tex. 1991) (orig. proceeding), abrogated on other grounds by In re Sheshtawy, 154 S.W.3d 114 (Tex. 2004)); Burns v. Miller, Hiersche, Martens & Hayward, P.C., 909 S.W.2d 505, 506 (Tex. 1995). If, however, certain requests for relief are left undecided by the order, such as an award or denial of attorney’s fees, or the turnover order requires further orders of the court, the order may be merely interlocutory and therefore nonappealable. See Brecheisen v. Johnson, 665 S.W.2d 191, 192 (Tex. App.—Dallas 1984, writ ref’d n.r.e.) (defen­dant ordered to turn over property to registry of court; further order releasing funds to creditor required). A turnover order that is contrary to statute or contains errors is only voidable, not void. It must be attacked directly. In re Wiese, 1 S.W.3d 246 (Tex. App.—Corpus Christi 1999) (orig. proceeding). The appellate timetable for a final judgment applies. Burns, 909 S.W.2d 505.

A motion for contempt brought during an appeal may be filed in either the trial court or the court of appeals. In re Sheshtawy, 154 S.W.3d 114.

If the turnover order requires further orders of the court, the order is interlocutory and not appealable. The remedy is manda­mus. See Brecheisen, 665 S.W.2d at 192. Otherwise, the order is a final order subject to appeal. See International Paper Co. v. Garza, 872 S.W.2d 18, 19 (Tex. App.—Corpus Christi 1994, no writ).

§ 27.96Serial Receiverships

The turnover order places the debtor’s nonexempt assets described in the order in custodia legis. First Southern Properties, Inc. v. Vallone, 533 S.W.2d 339, 341 (Tex. 1976). If a turnover order is entered in another action, there are no assets available to that action because the property is in control of the first court. The receiver in the second case could demand documents and perform discovery, but the assets are in control of the court that issued the first order.

§ 27.97Practice Tips

The practitioner should draft the order so that it both compels the judgment debtor to turn over its nonexempt property to the receiver and empowers the receiver to take possession. The attorney should consider a receivership order as a road map for third parties. It is helpful to third parties to see in the order that the receiver has been authorized to make a particular request of them. If the order compels the debtor to make periodic payments, include a finding of fact stating the source of the money and that it is nonexempt. See Ex parte Prado, 911 S.W.2d 849, 850 (Tex. App.—Austin 1995, orig. proceeding) (order that debtor pay $500 per month without identifying specific nonexempt asset held unconstitutional).

The attorney should not include in the order appointing a receiver a finding that the receiver’s fee is reasonable. Obtain a find­ing that the fee is reasonable later, as part of a separate application and order. See Moyer v. Moyer, 183 S.W.3d 48, 57–58 (Tex. App.—Austin 2005, no pet.). See Evans v. Frost National Bank, No. 05-12-01491-CV, 2015 WL 4736543, at *4–5 (Tex. App.—Dallas Aug. 11, 2015) (mem. op.) (no pet.) (initial order setting receiver’s fee was not improper because there was an evidentiary hearing held after sale of property to determine whether receiver’s fee as set forth in order appointing receiver was fair, reasonable, and necessary).

The attorney should provide the receiver with a copy of the judgment and any other postjudgment orders that award fees and let the receiver know of any postjudgment credits that are due and of recoverable costs of court. This allows the receiver to properly calculate the judgment amount.

The attorney also should provide the receiver with whatever documentation and information he has that identifies leviable assets and provide the receiver with the debtor’s and the debtor’s counsel’s contact information.

Once a receiver is appointed, the creditor’s counsel should instruct the plaintiff that the debtor might reach out to the plaintiff but that the debtor should be instructed to contact the receiver instead.

 

 

 

[Sections 27.98 through 27.100 are reserved for expansion.]

VI.  Other Postjudgment Collection Devices

§ 27.101Partnership Charging Order

§ 27.101:1Purpose and Effect of Charging Order

A charging order allows a judgment creditor to reach a debtor’s interest in a partnership to satisfy the judgment. In this situa­tion, the judgment creditor has the right only to receive any distribution to which the debtor would otherwise have been enti­tled in the partnership interest. A charging order constitutes a lien on the debtor’s partnership interest and is the exclusive remedy by which a judgment creditor of a partner or any other owner of a partnership interest may satisfy a judgment out of the debtor’s partnership interest. Tex. Bus. Orgs. Code §§ 152.308(a)–(d), 153.256(a)–(d). Note that sections 152.308 and 153.256 of the Texas Business Organizations Code do not deprive a partner or other owner of a partnership interest of a right under exemption laws with respect to the judgment debtor’s partnership interest. Tex. Bus. Orgs. Code §§ 152.308(e), 153.256(e). Also, a creditor of a partner or of any other owner of a partnership interest does not have the right to obtain pos­session of, or otherwise exercise legal or equitable remedies with respect to, the property of the partnership. Tex. Bus. Orgs. Code §§ 152.308(f), 153.256(f). 

The court’s grant of a charging order is discretionary. Commerce Savings Ass’n v. Welch, 783 S.W.2d 668, 671 (Tex. App.—San Antonio 1989, no writ).

§ 27.101:2Procedure

The attorney should file the application for a charging order in the court that rendered the underlying judgment unless jurisdic­tional or venue considerations force filing in another court.

It is the better practice to serve the partnership with citation, although there is no express requirement to do so. If the applica­tion is filed in a court other than the one rendering the underlying judgment, the attorney should serve citation on the judgment debtor as well. Service of citation brings the party served within the court’s jurisdiction, allowing a judgment ordering the partnership to obey the charging order. Tex. R. Civ. P. 124.

For an application and charging order, see forms 27-23 and 27-24 in this chapter.

§ 27.102Temporary Restraining Orders and Injunctions

A judgment creditor may use injunctions or other means to reach property to satisfy a judgment. Tex. Civ. Prac. & Rem. Code § 31.002(a). Injunctive relief is appropriately used as part of a turnover action to preserve the status quo pending final action. For example, the judgment debtor could be enjoined from disposing of or secreting the property in question pending final orders. See sections 8.33 through 8.40 in this manual for further discussion of injunctions.

If the judgment creditor seeks any form of injunctive relief, care should be taken to comply with all applicable requirements including equitable pleading, verification, bond, filing, citation, and writ requirements. See David Hittner, Texas Post-Judgment Turnover and Receivership Statutes, 45 Tex. B.J. 417, 418 (1982). But see Roosth v. Roosth, 889 S.W.2d 445, 460 (Tex. App.—Houston [14th Dist.] 1994, writ denied); Childre v. Great Southwest Life Insurance Co., 700 S.W.2d 284, 288 (Tex. App.—Dallas 1985, no writ) (traditional requirements for appointing receiver or granting injunction do not apply when relief is granted under turnover statute).

If the application for turnover seeks both a receiver and an injunction, one bond may serve both purposes. See Childre, 700 S.W.2d at 288–89.

§ 27.103Receivership under Texas Deceptive Trade Practices–Consumer Protection Act

The Texas Deceptive Trade Practices–Consumer Protection Act (DTPA) authorizes the appointment of a receiver if a money judgment entered under the Act remains unsatisfied thirty days after it becomes final. The DTPA creates a set of presumptions entitling the judgment creditor to the appointment of a receiver over the defendant’s business unless the defendant proves that all the presumptions do not apply. Tex. Bus. & Com. Code § 17.59. If the conditions for the appointment are met, the court must appoint a receiver. Dudley v. E.W. Hable & Sons, 683 S.W.2d 102, 103–04 (Tex. App.—Tyler 1984, no writ).

§ 27.104Investment Securities

A creditor whose debtor is the owner of an investment security may obtain aid from the courts, by injunction or otherwise, in reaching the security. Tex. Bus. & Com. Code § 8.112(e).

§ 27.105Assignment of Judgment

The judgment creditor may sell its interest in a judgment in lieu of collecting the judgment. The formal requirements for trans­fers of judgments (or transfers of a cause of action) are found in Tex. Prop. Code § 12.014. The assignment must be in writing, acknowledged or sworn to in the form and manner required by law for acknowledgment or swearing of deeds, and filed among the papers of the suit. Tex. Prop. Code § 12.014(a), (b). Additionally, the assignment may be filed in the real property records where the abstract of judgment is filed so that the real property records reflect the owner of the judgment and any liens related thereto. See Tex. Prop. Code § 12.014(c). See form 27-25 in this chapter.