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Rarely Used But Extremely Useful: The Texas Turnover Statute

By: John Faubion

In Texas, judgment creditors have access to a variety of tools the legislature created to assist in the collection of debts.  Beyond garnishment, execution, levy, and sheriff sales, the turnover statute provides Texas creditors with certain advantages that may prove useful in a post-judgment collection context.

The overall purpose of the turnover statute, codified at Texas Civil Practice and Remedies Code section 31.002, is to help diligent judgment creditors obtain timely satisfaction of their judgments.[1]  A turnover proceeding is a procedural device used to allow the judgment creditor to reach a debtor’s assets that are otherwise difficult to obtain.[2]  Texas courts have applied the turnover statute to a wide variety of property, including corporate stock in the hands of third parties and held out of state.[3]  While formerly targeted to property “owned by the judgment debtor but secreted by the judgment debtor in such a fashion that they cannot be found for execution by a levying officer,”[4] the legislature recently revised the turnover statute to eliminate the requirement that property “cannot readily be attached or levied on by ordinary legal process.”  Now, the provision reads simply:

A judgment creditor is entitled to aid from a court of appropriate jurisdiction through injunction or other means in order to reach property to obtain satisfaction on the judgment if the judgment debtor owns property, including present or future rights to property, that is not exempt from attachment, execution, or seizure for the satisfaction of liabilities.[5]

One advantage of the turnover statute is that a turnover order may broadly encompass the judgment-debtor’s nonexempt property, without identifying in the order the specific property subject to turnover.[6]  In addition, under the turnover statute, a creditor may apply for the appointment of a receiver to collect the debt that is owed.[7]  In such circumstances, the court may appoint a receiver to take possession of a judgment debtor’s nonexempt property, sell it, and pay the proceeds to the judgment creditor to satisfy the judgment.[8]  When seeking this type of relief, it is critical to note that the traditional requirements for appointing a receiver under Chapter 64 of the Texas Civil Practice & Remedies Code do not apply in a post-judgment turnover proceeding, and the turnover statute does not provide specific requirements for the appointment of a receiver.  Rather, “appointment of a receiver lies within the sound discretion of the trial court.”[9]  As stated by the First Court of Appeals in Houston, “if the Texas Legislature had intended for the appointment of receivers in turnover proceedings to meet the requirements of the receivership statutes, it would have provided for or at least referred to these requirements in the turnover statute.”[10]

Finally, the turnover statute provides that the judgment creditor is entitled to recover reasonable costs, including attorney’s fees.  This is a feature many other post-judgment collection remedies lack, and another reason to consider the turnover statute when collecting a debt in Texas.

While case law indicates the turnover remedy is used sparingly in Texas courts, the advantages the turnover statute provides to a judgment creditor are compelling.  Whenever a judgment creditor engages in debt collection in Texas, the creditor should seriously consider use of the Texas turnover statute.

 


[1] Allard v. Frech, 735 S.W.2d 311, 319 (Tex. App.—Fort Worth 1987), aff’d, 754 S.W.2d 111 (Tex. 1988).

[2] Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223, 224 (Tex. 1991).

[3] Childre v. Great Sw. Life Ins. Co., 700 S.W.2d 284, 288 (Tex. App.—Dallas 1985, no writ).

[4] Cross, Kieschnick & Co. v. Johnston, 892 S.W.2d 435, 438 (Tex. App.—San Antonio 1994, no writ) (citing Senate Committee on Judicial Affairs, Bill Analysis, Tex. H.B. 1260, 66th Leg. R.S. (1979)).

[5] Tex. Civ. Prac. & Rem. Code Ann. § 31.002 (West).

[6] Goodman v. Compass Bank, No. 05-15-00812-CV, 2016 WL 4142243 at *5 (Tex. App.—Dallas, Aug. 3, 2016, no pet.) (mem. op.) (citing Tex. Civ. Prac. & Rem. Code§ 31.002(h); In re Estate of Hutchins, 391 S.W.3d 578, 584 (Tex. App.—Dallas 2012, orig. proceeding)).

[7] See Tex. Civ. Prac. & Rem. Code § 31.002(a)(3).

[8] Tex. Civ. Prac. & Rem. Code § 31.002(b); see Burns v. Miller, Hiersche, Martens & Hayward, P.C., 948 S.W.2d 317, 321 (Tex. App.—Dallas 1997, writ denied).

[9] In re Estate of Herring, 983 S.W.2d 61, 65 (Tex. App.—Corpus Christi 1998, no pet.).

[10] Holland v. Alker, No. 01-05-00666-CV, 2006 WL 1041785, at *7 (Tex. App.—Houston [1st Dist.], Apr. 20, 2006, pet. denied) (mem. op.).

 


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