Bruce Gore v. Scotland Golf, Inc., f/k/a Golf Tease Inc.--Appeal from 288th Judicial District Court of Bexar County

MEMORANDUM OPINION
No. 04-03-00143-CV
Bruce GORE,
Appellant
v.
SCOTLAND GOLF, INC. f/k/a Golfing Tease, Inc.,
Appellee
From the 228th Judicial District Court, Bexar County, Texas
Trial Court No. 1998-CI-14141
Honorable John J. Specia, Jr., Judge Presiding

Opinion by: Karen Angelini, Justice

Sitting: Alma L. L pez, Chief Justice

Paul W. Green, Justice

Karen Angelini, Justice

Delivered and Filed: October 1, 2003

REVERSED AND REMANDED

This is an accelerated appeal from an ex parte order directing Bruce Gore ("Gore") to turn over assets and appointing a receiver and a master in chancery to assist Scotland Golf, Inc. ("Scotland Golf") in the collection of a judgment. Gore raises numerous issues on appeal, including: (1) the trial court's failure to file timely requested findings of fact and conclusions of law; (2) the lack of specificity in the turnover order and absence of evidence of non-exempt status of property; (3) the appointment of the receiver as the master in chancery; (4) the absence of evidence to support the appointment of a receiver; (5) the appointment of a receiver to take charge of real property; (6) the denial of Gore's due process rights; and (7) the erroneous award of attorney's fees. We conclude that the trial court abused its discretion in entering the order.

Background

On February 3, 2003, Scotland Golf filed an unverified application for turnover after judgment, appointment of receiver and appointment of master in chancery. The application states that Scotland Golf recovered a judgment against Gore in the sum of $422,075.69. The application further states that Scotland Golf has reason to believe that Gore owns non-exempt personal property of the nature and type which cannot by ordinary legal means be attached to satisfy the judgment. Scotland Golf requested that the court appoint a receiver and that the receiver be appointed as master in chancery. Scotland Golf also requested that the application be considered ex parte without notice to Gore.

On the same day the application was filed, the trial court granted Scotland Golf's request. The trial court's order states that the relief was granted upon "the Court's ex parte review of the papers herein on file." The order appoints a receiver to take possession of all of Gore's non-exempt real and personal property, including: (1) all monies held in escrow for Gore; (2) all commissions or contracts receivable by Gore, more specifically bank accounts; (3) all monies from Gore's monthly net receipts; (4) all documents or records, including financial records related to such property that is in the actual or constructive possession or control of Gore; (5) all financial accounts (bank accounts), certificates of deposit, money market accounts, accounts held by any third-party; (6) all securities; (7) all real property, equipment, vehicles, boats and planes; (8) all safety deposit boxes or vaults; (9) all cash; (10) all negotiable instruments, including promissory notes, drafts and checks; (11) causes of action or "choices of action"; (12) all contract rights whether present or future; and (13) all accounts receivable. The order also appoints the receiver as a master in chancery. Finally, the order requires Gore to turn over to the receiver all documents listed on an attached exhibit and "all checks, cash, securities (stocks and bonds, promissory notes, documents of title and contracts) owned by or in the name of [Gore] after June 11, 2001" and "all checks, cash, securities, promissory notes, documents of title, commissions, and contracts" within five days of Gore's receipt and possession of such property if, as and when Gore comes into receipt and possession of such property until the judgment is fully paid.

Discussion

A judgment creditor is entitled to a court's aid through injunction or other means in order to reach property to obtain satisfaction on a judgment if the judgment debtor owns property, including present or future rights to property that: (1) cannot readily be attached or levied on by ordinary legal process; and (2) is not exempt from attachment, execution, or seizure for the satisfaction of liabilities. Tex. Civ. Prac. & Rem. Code Ann. 31.002(a) (Vernon Supp. 2003). The court may: (1) order the judgment debtor to turn over nonexempt property; or (2) appoint a receiver with authority to take possession of the nonexempt property. Tex. Civ. Prac. & Rem. Code Ann. 31.002(b) (Vernon Supp. 2003). The court may not enter or enforce an order that requires the turnover of the proceeds of, or the disbursement of, property exempt under any statute. Tex. Civ. Prac. & Rem. Code Ann. 31.002(f) (Vernon Supp. 2003)

We review a turnover order and an order appointing a receiver or master in chancery under an abuse of discretion standard. See Simpson v. Canales, 806 S.W.2d 802, 811 (Tex. 1991) (master in chancery); Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223, 226 (Tex. 1991) (turnover); Huffmeyer v. Mann, 49 S.W.3d 554, 559 (Tex. App.--Corpus Christi 2001, no pet.) (receiver); O & G Carriers,Inc. v. Smith Energy 1986-A P'ship, 826 S.W.2d 703, 706 (Tex. App.--Houston [1st Dist.] 1992, no writ) (receiver). "Whether there was evidence to support the turnover award would, of course, be a relevant consideration in determining if the trial court abused its discretionary authority in issuing the order." Buller, 806 S.W.2d at 226.

Having reviewed the trial court's order and the applicable case law, we conclude that the issues in this appeal are settled by existing precedent, and we reverse the trial court's order in this memorandum opinion (1) for the following reasons:

1. Rules 296 and 297 of the Texas Rules of Civil Procedure apply to a turnover order. Bergman v. Bergman, 828 S.W.2d 555, 557 (Tex. App.--El Paso 1992, no writ). Accordingly, "it was error for the trial court to fail to comply with a timely request for findings of fact and conclusions of law." Id. "Because of other errors, we need not decide whether to reverse and remand or whether to abate the appeal to permit the filing of such findings and conclusions." Id.

2. A court may not enter or enforce an order that requires the turnover of, or the disbursement of, property exempt under any statute. Tex. Civ. Prac. & Rem. Code Ann. 31.002(f) (Vernon Supp. 2003); Leibman v. Grand, 981 S.W.2d 426, 430 (Tex. App.--El Paso 1998, no writ). Although the portion of the order appointing the receiver restricts the receiver to taking possession of "non-exempt" property, the turnover order is not so limited. The turnover order requires Gore to turn over "all" of the listed property. Requiring Gore to turn over "all" of his property, as opposed to all of his non-exempt property, is an abuse of discretion.

3. The trial court gave the receiver the authority to take possession of real property. First, the application never mentioned real property, but only stated that Gore owned "personal property." Second, Texas Rule of Civil Procedure 695 states, "Except where otherwise provided by statute, no receiver shall be appointed to take charge of property which is fixed and immovable. When an application for appointment of a receiver to take possession of property of this type is filed, the judge or court shall set the same down for hearing and notice of such hearing shall be given to the adverse party by serving notice thereof not less than three days prior to such hearing." Tex. R. Civ. P. 695. "It is settled that 'fixed and immovable property' under Rule 695 refers to real property." Independent American Sav. Ass'n v. Preston 117 Joint Venture, 753 S.W.2d 749, 750 (Tex. App.--Dallas 1998, no pet.). Accordingly, the trial court was required to have a hearing before appointing a receiver to take possession of Gore's real property. Finally, section 31.002 requires a showing that the property in question cannot readily be attached or levied on by ordinary legal process. Tex. Civ. Prac. & Rem. Code Ann. 31.002(a) (Vernon Supp. 2003). No evidence exists in the record to support such a showing with regard to Gore's real property. Permitting the receiver to take possession of Gore's real property was an abuse of discretion.

4. The trial court's order is based on an "ex parte review of the papers on file." Nothing in our record indicates that the papers on file contained any evidence regarding the non-exempt status of Gore's property, and nothing in our record indicates that the trial court conducted an evidentiary hearing before entering the order. (2)

The Texas Supreme Court has stated, "The [turnover] statute requires a factual showing that the judgment debtor has non-exempt property that is not readily subject to ordinary execution. ...Upon proof of the necessary facts, it authorizes the trial court to order affirmative action by the judgment debtor and others to assist the judgment creditor in subjecting such non-exempt property to satisfaction of the underlying judgment." Schultz v. Fifth Judicial Dist. Court of Appeals at Dallas, 810 S.W.2d 738, 740 (Tex. 1991). In interpreting this language, the El Paso court held, "This language certainly mandates that the trial court is to have a hearing, determine what specific assets are exempt, and what assets are subject to the court's order and then to direct the payment as the court determines is proper." Bergman v. Bergman, 828 S.W.2d at 557.

Noting that the appellate courts are split on the issue of which party has the burden to prove that property is nonexempt or exempt, see Burns v. Miller, Hiersche, Martens & Hayward, P.C., 948 S.W.2d 317, 324 (Tex. App.--Dallas 1997, writ denied), Scotland Golf contends that the trial court's order should be affirmed because the trial court was permitted to grant relief ex parte and Gore has not identified on appeal which of his assets are exempt. First, assuming that the burden of proving the exempt status of property generally should be placed on the debtor, there must be an exception when relief is granted ex parte because the debtor is not given the opportunity to meet his burden. Under those circumstances, absent proof by the creditor regarding the non-exempt status of the property the creditor is requesting to have turned over, the court would have no evidence before it upon which to base its turnover order. Second, in the cases upholding orders granting ex parte turnover relief in the absence of an evidentiary hearing, the trial court has only permitted funds to be turned over to the registry of the court until an evidentiary hearing is held. Universe Life Ins. Co. v. Giles, 982 S.W.2d 488, 493-94 (Tex. App.--Texarkana 1998, pet. denied) (noting hearing held prior to allowing disbursement of funds from registry of court and order stated court heard evidence); Thomas v. Thomas, 917 SW.2d 425, 433-34 (Tex. App.--Waco 1996, no writ) (ordering funds delivered into registry of court until after hearing held to show cause why funds should not be released). In this case, the trial court ordered the funds turned over to a receiver without an evidentiary hearing or any evidence regarding the exempt or non-exempt status of the property. (3) Finally, evidence also is necessary to limit the property a receiver may take into possession to non-exempt property. Plaza Court, Ltd. v. West, 879 S.W.2d 271, 277 (Tex. App.--Houston [14th Dist.] 1994, orig. proceeding). The trial court abused its discretion in issuing an ex parte order requiring Gore to turn over property and appointing a receiver to take possession of Gore's property in the absence of evidence regarding the non-exempt status of that property.

5. The trial court ordered that the receiver had the authority to possess and Gore was required to turn over broad categories of assets. A trial court abuses its discretion if it signs a turnover order that does not identify specific nonexempt property subject to the order. Roebuck v. Horn, 74 S.W.3d 160, 163 (Tex. App.--Beaumont 2002, no pet.); Burns, 948 S.W.2d at 324. In identifying the property subject to the order, the trial court's order must be definite, clear, and concise, leaving the debtor no doubt about his duty and not calling for interpretations, inferences, or conclusions. Burns, 948 S.W.2d at 324; Bergman, 828 S.W.2d at 557. "A reference to broad categories of assets does not constitute a reference to specific assets that is required in a turnover order." Roebuck, 74 S.W.3d at 163 (listing books, stocks, automobiles, cash, other vehicles, and real property as broad categories); see also Burns, 948 S.W.2d at 325 (holding proceeds could reach exempt property); Bergman, 828 S.W.2d at 557 ("funds" not sufficiently specific). Just as the assets to be turned over must be specific, the assets a receiver has the authority to possess should also be specific. The trial court abused its discretion in signing an order that failed to identify specific non-exempt property subject to the order.

6. Rule 171 of the Texas Rules of Civil Procedure permits a trial court to appoint a master in chancery "in exceptional cases, for good cause." Tex. R. Civ. P. 171; Simpson v. Canales, 806 S.W.2d at 811; see also Roebuck, 74 S.W.3d at 165 (noting limited occasions justifying appointment of master and potential conflict if receiver is appointed as master). Our record contains no evidence to show that the underlying case was "exceptional" and that there was "good cause" to appoint a master in chancery. See Simpson, 806 S.W.2d at 811-12 (holding record did not contain required evidence). The appointment of a master in chancery without such a showing is an abuse of discretion.

7. Because we reverse the trial court's order granting the relief requested by Scotland Golf, we also reverse the attorneys' fees to enable the trial court to reconsider the fees on remand. Burns, 948 S.W.2d at 327-28.

Conclusion

The trial court's order is reversed, and the cause is remanded to the trial court for further proceedings consistent with this opinion.

Karen Angelini, Justice

1. Tex. R. App. P. 47.4

2. Although the clerk's record contains documents setting a hearing on Scotland Golf's first amended application for turnover relief, the record does not contain any order issued as a result of that hearing assuming the hearing was held.

3. Scotland Golf cites Ross v. 3D Tower Ltd., 824 S.W.2d 270 (Tex. App.--Houston [14th Dist.] 1992, writ denied) as authority that evidence was not required. In Ross, however, a hearing was set prior to the entry of the order; the debtor simply failed to attend. 824 S.W.2d at 271. In addition, a hearing also was set on the debtor's motion for rehearing; however, the debtor also failed to attend that hearing. Id. at 272.