Prejudgment Remedies in Texas - Doug D'Arche - Back to Main Page

More documents

Recommendations

Info

James Talcott, Inc. v. Valley Federal Sav. & Loan Ass'n, 611 S.W.2d 692, 694 (Tex. Civ. App.—Corpus Christi 1980, no writ);N. Community property subject to the sole management by the non-debtor spouse,if the underlying claim arose before marriage or it is a vicarious liability arising during marriage.Tex. Fam. Code § 3.202(b).O. Funds owned under a State Plan for Medical Assistance. 42 U.S.C.§1396a(a)(32).III.EXPLANATION OF THE SIGNIFICANT REMEDIES AVAILABLEA. GARNISHMENT1. OverviewGarnishment is a statutory proceeding whereby the property, money or credits of aDebtor in the possession of a third party are applied to the payment of the debt. Bank One v.Sunbelt Savings, 824 S.W.2d 557, 558 (Tex. 1992); Lozano Assocs. v. La Experencia, 2008Tex. App. LEXIS 2696, *1 (Tex. App.—Dallas 2008, no pet.); Buckeye Ret. Co., LLC, v. Bank ofAm., N.A., 239 S.W.3d 394, 398 (Tex. App.—Dallas 2007, pet. denied). The third party thatholds the assets belonging to the Debtor is described as the "Garnishee." Once a Writ ofGarnishment has been served on a Garnishee, the Garnishee must freeze all funds and/orproperty held by the Garnishee at the time it is served with the Writ of Garnishment and anyfunds that are received through the date that the Garnishee files its answer. Tex. R. Civ. P. 661.Matter of Bohart, 743 F.2d 313, 324 (5 th Cir. 1984); Rome Industries, Inc. v. Intsel Southwest,683 S.W.2d 777, 779 (Tex. App.—Houston [14 th Dist.], 1984) writ ref'd n.r.e.). The maximumamount that should be frozen is set out in the Order granting the Writ of Garnishment. Tex. R.Civ. P. 658. The Garnishee is required to file a verified answer indicating what, if anything, it isindebted to the Debtor at the time the answer was filed and what it was indebted when the writwas served. Tex. R. Civ. P. 661. Garnishment is a strictly statutory remedy and is governed byChapter 63 of the Texas Civil Practices and Remedies Code and Rules 657 - 679 of the TexasRules of Civil Procedure. Because garnishment is an extraordinary remedy, it will only besustained if the proceedings are in strict conformity with the statutory requirements. Mendoza v.Luke Fruia Investments, 962 S.W.2d 650, 651 (Tex. App.—Corpus Christi 1998, no writ); CadleCo. v. Int’l Bank of Commerce, 2007 Tex. App. LEXIS 1952, *5-6 (Tex. App.—San Antonio2007, pet. denied). Although the Creditor may recover attorney’s fees incurred in collecting theunderlying debt, the Creditor may not recover attorney’s fees that are incurred in connectionwith the garnishment. Henry v. Ins. Co. of N. Am., 879 S.W.2d 366, 368-69 (Tex. App. —Houston [14th Dist.] 1994, no writ); Cadle Co., 2007 Tex. App. LEXIS 1952 at *14.2. The Kinds of Property that can be GarnishedA Writ of Garnishment reaches all the Debtor's "effects" in the possession of theGarnishee. The term "effects" means all personal property and interest therein other than thosethat are exempt from garnishment. TEX. R. CIV. P. 659, 661. After service of a Writ ofGarnishment, the Garnishee may not deliver any effects, or pay any debt, to the Debtor. TEX.CIV. PRAC. & REM. CODE § 63.003.The types of effects that are usually garnished are funds or items of personal property.The personal property may include stock certificates, bonds, settlement proceeds, preciousmetals or any other non-exempt item. Funds may include those held in a bank account or anyother financial institution. Garnishment is generally not appropriate for intangible rights such asPage 4 of 36
intellectual property or causes of action. This type of property is normally sought through theuse of a turnover order post judgment.Property that is exempt from seizure cannot be garnished. For a list of some propertythat may be exempt in certain circumstances, see Section II of this paper, “IDENTIFYING THEDEBTOR’S ASSETS.”3. Persons or Entities that may be GarnisheesThe garnishment procedure is most often used to seize funds in a Debtor's depositaccounts with a financial institution. See First Nat. Bank in Dallas v. Banco Longoria, S.A., 356S.W.2d 192 (Tex. Civ. App.—San Antonio 1962, writ ref'd n.r.e.). It may also be used to seizepersonal property that has been loaned, leased or bailed to another or the contents of a safedeposit box. A Writ of Garnishment may be issued against an inmate's trust fund held under theauthority of the Texas Department of Criminal Justice to recover money held for the benefit ofan inmate. See TEX. CIV. PRAC. & REM. CODE § 63.007.Public entities (including city and county agencies and state institutions), are generallynot subject to garnishment for money they owe to Debtor. National Sur. Corp. v. FriendswoodISD, 433 S.W.2d 690, 694 (Tex. 1968) (school districts are state agencies exempt fromgarnishment); Addison v. Addison, 530 S.W.2d 920, 921 (Tex. Civ. App.—Houston [1 st Dist.]1975, no writ) (Texas Southern University and its Board of Regents exempt from garnishment).The United States is not subject to garnishment in state court actions. Buchanan v. Alexander,45 U.S. 20, 4 How. 20, 11 L. Ed. 857 (1846). However, some cases have held that publicofficials and officers are subject to garnishment when there is nothing remaining for thegovernment entity to do but to make delivery or payment of the funds it holds to the Debtor.Southwestern Bell Telephone v. Watson, 413 S.W.2d 846, 848 (Tex. Civ. App.—Corpus Christi1967, no writ); Hardy v. Construction Systems, Inc., 556 S.W.2d 843, 844 (Tex. Civ. App.—Houston [14 th Dist.] 1977, writ ref'd n.r.e.). Excess funds held by a sheriff after the satisfaction ofa writ of execution may be subject to garnishment. Goodson v. Carr, 428 S.W.2d 875, 879 (Tex.Civ. App.—Houston [14 th Dist.] 1968, writ ref'd n.r.e.).The defense of sovereign immunity may only be raised by a sovereign and may not beraised by the Debtor. Daniels v. Pecan Valley Ranch, Inc., 831 S.W.2d 372, 383 (Tex. App.—San Antonio 1992, writ denied). There are also statutory sections that prohibit garnishment inspecific instances. See e.g., 42 U.S.C. § 1396a(32)(B) (prohibiting levy against Medicarepayments); Texas Human Resources Code § 32.036 (prohibiting levy against Medicaidpayments).When a Creditor wants to challenge title to funds held by a third party, the Creditorshould seek a Writ of Garnishment naming the nominal owner, not the true owner. Bank One v.Sunbelt Savings, 824 S.W.2d 557, 558 (Tex. 1992). The Court is then responsible fordetermining true ownership. Id.4. Grounds Required for a Pre-Judgment Writ of GarnishmentLiquidated DebtA pre-judgment Writ of Garnishment is only available if the debt is for a liquidatedamount. See e.g., A. Wolfson's Sons, Inc. v. First State Bank of Corpus Christi, 697 S.W.2d753 (Tex. App.—Corpus Christi 1985, no writ), appeal after remand, 752 S.W.2d 614 (Tex.App.—Corpus Christi 1988, writ denied); Fogel v. White, 745 S.W.2d 444 (Tex. App.—Houston[14 th Dist.] 1988, no writ). A garnishment is not available if the debt is not liquidated. Waples-Page 5 of 36
Page 1 and 2: PREJUDGEMENTREMEDIES IN TEXASPresen
Page 3 and 4: TABLE OF CONTENTS(continued)Page5.
Page 5 and 6: I. INTRODUCTIONA. OVERVIEWPrejudgme
Page 7: B. If the Debtor is an individual,
Page 11 and 12: parties in a garnishment action. Ja
Page 13 and 14: . Hearing on the ApplicationIt is n
Page 15 and 16: may be liable for exemplary damages
Page 17 and 18: The Debtor may also petition the Co
Page 19 and 20: posting a replevy bond. While the p
Page 21 and 22: Like the application, the affidavit
Page 23 and 24: type and in a manner calculated to
Page 25 and 26: Debtor may simply chose to ignore t
Page 27 and 28: property, the bond must require tha
Page 29 and 30: itself. S.R.S. World Wheels, Inc. v
Page 31 and 32: of Court. Id. The Order granting th
Page 33 and 34: 9. Debtor’s Response to the Writ
Page 35 and 36: IV.OTHER POSSIBLE REMEDIESA full de
Page 37 and 38: Debtor. In such cases, the Garnishe
Page 39 and 40: Due to the fact that a bond is requ

Prejudgment Remedies in Texas - Doug D'Arche - Back to Main Page

Create successful ePaper yourself

Delete template?

Save as template?