Texas Divorce Attorney Blog
Sometimes a party to a Texas divorce may have difficulty collecting what has been awarded to them. Pursuant to the Texas turnover statute, a judgment creditor may ask the court to assist them in reaching the judgment debtor’s non-exempt property. The court is authorized to take a number of actions, including appointing a receiver. Tex. Civ. Prac. & Rem. Code § 31.002. Appointment of a receiver is considered an “extraordinary remedy” and should not occur if there is a lesser remedy available. Gilbreath v. Horan. Although a receiver may be appointed in a divorce case, the turnover statute is not limited to divorce cases. In a recent case, a former wife requested a receiver to satisfy a judgment against her former husband following his divorce from his second wife.
According to the appeals court’s opinion, the former husband remarried after the parties’ divorce in 2011. He and his second wife divorced in 2018. The first wife argued the property division in the husband’s second divorce constituted a fraudulent transfer to the second wife to avoid debts he owed the first wife.
The parties divorced in Arkansas in 2011. The husband was ordered to pay $250,223 to a business and $8,000 to the first wife for attorney’s fees. According to the first wife, she sought garnishment against multiple banks in February 2018 and was awarded $70,000 in one of those actions, partly based on her sole ownership of the business.
In early April 2018, the second wife petitioned for divorce from the husband in Texas and the decree based on the parties’ agreement was signed that August. The second wife was awarded a business, a vehicle, and certain real property, while the husband was awarded a 2000 Ford Ranger.
The first wife argued the husband and second wife continued to live together after the divorce and the property division constituted a fraudulent transfer to the second wife to avoid debts he owed the first wife.
According to the first wife, the Arkansas judgment was domesticated in Texas. She moved to appoint a post-judgment receiver pursuant to Tex. Civ. Prac. & Rem. Code to take possession of and sell the husband’s non-exempt property to satisfy the Arkansas judgment.
The trial court appointed a receiver to take possession of and sell the husband’s non-exempt assets. The trial court found there was an unpaid final judgment against the husband and ordered him to continue turning assets over to the receiver until it was fully paid. The court did not, however, specifically identify the judgment it referenced.
The husband appealed.
Appointment of Receiver
The husband argued the wife’s position was that a receiver should be appointed to challenge the property division in his second divorce. He argued appointment of a receiver was improper use of the turnover statute pursuant to Parr v. First State Bank of San Diego. In Parr, the court determined a bank had an adequate remedy by intervening in a divorce case rather than seeking a receiver to protect its security interest if it was concerned the divorce case would jeopardize its interest. The husband in this case argued the first wife could only challenge the property division in his second divorce by intervening in those proceedings.
The appeals court distinguished this case from Parr because there was no evidence the first wife knew about the husband’s second divorce proceedings while they were pending or that she moved to appoint a receiver during that time.
Additionally, the appeals court noted that the wife had also submitted evidence related to property that had not been transferred to the second wife during the divorce.
Standing
The husband also argued the first wife did not have standing to request a receiver for the entire amount awarded in the Arkansas judgment because part of it was awarded to the business. Although the court found later found the wife was the sole owner of the business, the husband argued she had not identified her relationship with the business in the current case and had not filed a derivative claim on behalf of the company.
The first wife argued the issue was one of capacity instead of standing and the husband waived it by failing to raise it in a verified pleading. The appeals court agreed.
Pursuant to Tex. R. Civ. P. 93, a pleading challenging the plaintiff’s legal capacity to sue or right to recover in the capacity in which they sued generally must be verified by an affidavit. If a party does not raise capacity through a verified pleading, they waive the issue.
There was no evidence the husband had raised the issue of capacity before the trial court, through a verified pleading or otherwise. The appeals court concluded he waived the issue of the first wife’s capacity to sue.
Sufficient Evidence
The husband also argued the wife had not presented admissible evidence he owned any non-exempt property.
Tex. Civ. Prac. & Rem. Code § 31.002 expressly permits a court to enter or enforce an order that requires the turnover of non-exempt property without identifying the specific property.
The wife attached a copy of the husband’s second divorce decree to a response she filed with the trial court. The decree had an attached list of property confirmed as the husband’s “separate property,” including a 2000 Ford Ranger. The first wife argued this vehicle was non-exempt property supporting the appointment of a receiver.
The husband did not prove an exemption. Additionally, the husband did not allege he requested a record of the evidentiary hearing or findings of fact. Without a record of the hearing or findings of fact, the appeals court presumed the trial court had sufficient evidence to support its judgment.
Receiver’s fee
The husband also argued that the award of the receiver’s fee and expenses was premature. The court’s order stated the receiver’s fee was up to 25% of all gross proceeds, not to exceed 25% of the balance due on the judgment, plus out-of-pocket expenses.
Because receiver’s fees and expenses are considered court costs, they are subject to the rules for awarding costs. The court has discretion in assigning the costs and determining how they will be collected, but the fee must be reasonable. Case law has established factors to be considered in determining the value of the receiver’s services.
There was no evidence at the time of the order to establish a reasonable fee based on the factors, which include time spent by the receiver and diligence.
The appeals court concluded there was no abuse of discretion in the appointment of the receiver but the court prematurely awarded the receiver’s fees plus expenses. The appeals court affirmed the trial court’s order in part and reversed in part and remanded.
Call a Knowledgeable Dallas Family Law Attorney
The parties in this case divorced in 2011, but have still been involved in litigation recently, with the wife trying to collect an award to herself and her business. If you are anticipating divorce, a skilled Texas business divorce attorney can help you protect your business. Set up a consultation with McClure Law Group by calling 214.692.8200.