Turnover Receivership without Notice (is coming)
by Andrew R. Korn, Esq.
february 7, 2020
Traditional requirements for appointment of a receiver are not applicable in post-judgment turnover proceedings. See Stanley v. Reef Secs., Inc., 314 S.W.3d 659, 670 (Tex. App.—Dallas 2010, no pet.).
While Texas courts have been reluctant to grant ex parte receiverships under the common law or other statutes, ex parte motions for turnover receiverships are permitted as regular proceedings. This has been well known for over 37 years. See Judge David Hittner, Texas Post-Judgment Turnover and Receivership Statutes, 45 Tex. B.J. 417 (1982):
B. With regard to entry of a turnover order:
(1) The order may be entered ex parte
See also, Robert M. O’Boyle, Post-Judgment Collection, The Appellate Advocate, Vol. VIII, No. 3, p. 7 at 10-11 (State Bar of Texas May 1995) (“A turnover motion may be granted ex parte. In fact, notice or an opportunity to be heard is not required by the turnover statute.”).
A judgment debtor who does not satisfy a judgment may have a Receiver appointed over the judgment debtor’s assets, without notice. That means the judgment debtor may not learn about the court order appointing the Receiver until the Receiver is at the judgment debtor’s door. This is not an unusual or rare procedure. Ex parte turnover relief has been universally permitted by courts in Texas. See:
• Bloc Entm’t, Ltd. v. Abco Props., Inc., 2010 Tex. App. LEXIS 2179, at *8 (Tex. App.—Houston [1st Dist.] Mar. 11, 2010, no pet.) (“Section 31.002 does not require notice or a hearing.”).
• Main Place Custom Homes, Inc. v. Honaker, 192 S.W.3d 604, 628 (Tex. App.—Fort Worth 2006, pet. denied) (“The [turnover] statute itself does not require notice and a hearing.”); In re Bays, 355 S.W.3d 715, 720 (Tex. App.—Ft. Worth 2011, no pet.) (“[D]ue process does not require that a complainant who has been granted an opportunity to be heard and has had his day in court should, after a judgment has been rendered against him, have further notice and hearing before supplemental proceedings are taken to reach his property in satisfaction of the judgment against him.”).
• Gary Pools, Inc. v. McCaffety, 2002 Tex. App. LEXIS 3893, at *8 (Tex. App.—Austin May 31, 2002, no pet.) (Citations omitted) (“Appellant complains that the failure to give him notice of the hearing violated the rules of civil procedure. Courts have held that defendants are not entitled to notice or a hearing regarding a motion for turnover. The statute does not require notice…”).
• Scheel v. Alfaro, 406 S.W.3d 216, 228 (Tex. App.—San Antonio 2013, pet. denied) (“Civil Practice and Remedies Code section 31.002 (‘Collection of Judgment Through Court Proceeding’) does not require notice of a turnover application or prohibit turnover orders from being granted absent notice.”).
• Henderson v. Chrisman, 2016 Tex. App. LEXIS 4402, at *7 (Tex. App.—Dallas Apr. 27, 2016, no pet.) (“The [turnover] statute does not require notice and a hearing.”); Goodman v. Compass Bank, 2016 Tex. App. LEXIS 8338, at *9 (Tex. App.—Dallas Aug. 3, 2016, no pet.) (“The turnover statute does not require notice and a hearing prior to entry of a trial court order granting relief.”); Trinity Fin. Servs., Inc. v. Crockett, 2000 Tex. App. LEXIS 871, at *7 (Tex. App.—Dallas Feb. 8, 2000) (“Section 31.002 does not require a defendant in a turnover proceeding be afforded notice or a hearing.”).
• In re Tyeskie, 558 S.W.3d 719, 725 (Tex. App.—Texarkana 2018, no pet.) (“Inger argues that the trial court was required to provide notice before entering a turnover order. However, ‘[t]he turnover statute itself does not require notice and a hearing prior to issuance of a turnover order.’”).
• Khan v. Chaudhry, 2016 Tex. App. LEXIS 4163, at *2 (Tex. App.—Beaumont Apr. 21, 2016, no pet.) (“[T]he statute allows a turnover order to be entered ex parte…”).
• Sivley v. Sivley, 972 S.W.2d 850, 860 (Tex. App.—Tyler 1998, no pet.) (“The statute itself does not provide for notice or a hearing to be afforded a judgment debtor in a turnover proceeding.”).
• Williams Farms Produce Sales, Inc. v. R&G Produce Co., 443 S.W.3d 250, 256 (Tex. App.—Corpus Christi-Edinburg 2014, no pet.):
The turnover statute itself does not require notice and a hearing prior to issuance of a turnover order. See Tex. Civ. Prac. & Rem. Code Ann. § 31.002; see Ex parte Johnson, 654 S.W.2d 415, 418 (Tex. 1983) (stating that notice and hearing prior to issuance of the turnover order was not required under predecessor statute).
• Ross v. 3D Tower Ltd., 824 S.W.2d 270, 272 (Tex. App.—Houston [14th Dist.] 1992, writ denied) (“section 31.002 does not provide for notice to be afforded defendant in a turnover proceeding.”).
Accord Shanze Enters. v. Amigo MGA, LLC, 2014 U.S. Dist. LEXIS 154290, at *2 (N.D. Tex. Sept. 23, 2014) (Horan, Mag.) (“The turnover statute itself does not require notice and a hearing prior to issuance of a turnover order.”); Dynamic Sports Nutrition, Inc. v. Roberts, 2009 U.S. Dist. LEXIS 131145, at *23 (S.D. Tex. July 14, 2009) (Rosenthal, J.) (“Notice and a hearing are not required before a turnover order may issue.”); In re Altman Nursing, Inc., 299 B.R. 813, 820 (Bankr. N.D. Tex. 2003), aff’d 306 B.R. 854 (N.D. Tex. 2004), vacated & remanded on other grounds 121 Fed. Appx. 56 (5th Cir. 2005) (“Because a turnover proceeding is an ex parte proceeding, service of a Motion for Turnover Order is not required under Texas law…. Thus, [judgment creditor] was not required to serve [judgment debtor] with his Motion for Turnover…”).
Because there is no authority to the contrary, any contention that notice and hearing is required before a turnover order may be signed is sanctionable. See Saltany v. Reagan, 886 F.2d 438, 440 (D.C. Cir. 1989) (“We do not see how filing a complaint that ‘plaintiffs’ attorneys surely knew’ had “no hope whatsoever of success” can be anything but a violation of Rule 11.”); See generally, Monroe v. Grider, 884S.W.2d 811, 817 (Tex. App.—Dallas 1994, writ denied) (We look to cases interpreting Federal rule 11 to interpret rule 13).
Especially after the above authority is shared with the judgment debtor making such a contention. See Smith v. Jones Warehous, Inc., 1983 U.S. Dist. LEXIS 10908, at *3 (N.D. Ill. Dec. 12, 1983) (“This Court finds the continued assertion of the claim against Union, in the face of Union counsel’s courtesy in identifying squarely applicable and unimpeachable precedent, was both unreasonable and vexatious (and indeed reflected bad faith)”); Bravenec v. Flores, 2013 Tex. App. LEXIS 2863, at *2 (Tex. App.—San Antonio Mar. 20, 2013, no pet.) (“A party acts in bad faith if he has been put on notice that his claim may be groundless and he does not make reasonable inquiry before pursuing the claim further.”).
Ex parte turnover relief is necessary:
Ex parte turnover relief is necessary to preserve the effectiveness of this method of judgment enforcement. Courts have recognized that giving a judgment debtor advance notice of any collection method is more likely to thwart the relief being sought. See, e.g. In re L.A.M. & Assocs., 975 S.W.2d 80, 84 (Tex. App.—San Antonio 1998, orig. proceeding) (“Service of the judgment debtor is necessarily delayed to ensure the writ serves its intended purpose–to “trap” funds belonging to a judgment debtor but in the hands of a third party.”); Lind v. Midland Funding, L.L.C., 688 F.3d 402, 409 (8th Cir. 2012):
The Minnesota Supreme Court decided that practical concerns must guide its use of presumptions… Although Tracy’s interest in a predeprivation hearing may be greater than her husband’s, the risk to a creditor is the same. A requirement that a non-debtor joint account holder receive predeprivation notice and hearing would likely increase the risk that the debtor joint account holder might conceal or transfer the property that is subject to attachment.
cf. Miller v. United States, 230 F.2d 486, 490 (5th Cir. 1956) (“Execution of process and the performance of duty by constituted officers must not be thwarted.”).