I. SCOPE OF ARTICLE. This article provides a general discussion of the "turnover" statute, Texas Civil Practice & Remedies Code § 31.002 (Vernon Supp. 2000). It is not an exhaustive, in-depth treatment of the subject. Rather, this article covers only the principal topics, such as the parties and property that may be subject to a turnover order, enforcement of an order, and appellate review.
II. APPLICABLE STATUTES. The turnover statute is found at Texas Civil Practice & Remedies Code § 31.002 (Vernon Supp. 2000). The statute provides:
Sec 31002 Collection of Judgment Through Court Proceeding.
(a) 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:
- cannot readily be attached or levied on by ordinary legal process; and
- is not exempt from attachment, execution, or seizure for the satisfaction of liabilities.
(b) The court may:
- order the judgment debtor to turn over nonexempt property that is in the debtor's possession or is subject to the debtor's control, together with all documents or records related to the property, to a designated sheriff or constable for execution;
- otherwise apply the property to the satisfaction of the judgment; or
- appoint a receiver with the authority to take possession of the nonexempt property, sell it, and pay the proceeds to the judgment creditor to the extent required to satisfy the judgment.
(c) The court may enforce the order by contempt proceedings or by other appropriate means in the event of refusal or disobedience.
(d) The judgment creditor may move for the court's assistance under this section in the same proceeding in which the judgment is rendered or in an independent proceeding.
(e) The judgment creditor is entitled to recover reasonable costs, including attorney's fees.
(f) A court may not enter or enforce an order under this section that requires the turnover of the proceeds of, or the disbursement of, property exempt under any statute, including Section 42.002 Property Code. This subsection does not apply to the enforcement of a child support obligation or a judgment for past due child support.
(g) With respect to turnover of property held by a financial institution in the name of or on behalf of the judgment debtor as customer of the financial institution, the rights of a receiver appointed under Subsection (b)(3) do not attach until the financial institution receives service of a certified copy of the order of receivership in the manner specified by Section 59.008, Finance Code.
(h) A court may enter or enforce an order under this section that requires the turnover of nonexempt property without identifying in the order the specific property subject to turnover.
The legislature added Subsection (h) to the turnover statute in 2005. This amendment became effective May 17, 2005. See House Bill 729, Section 1, 79th Legislature. In Tanner v. McCarthy, 274 S.W.3d 311 (Tex. App. - Houston [1st Dist.] 2008), the Houston Court of Appeals set aside a turnover order, not based on Subsection (h), but Subsection (a). In its discussion the Court of Appeals did acknowledge that Subsection (h) does permit a trial court to enter a turnover order without identifying specific property subject to turnover. However, since this was not an integral part of its decision, it is only dicta.
The legislature added Subsection (g) to the turnover statute in 1999. This amendment became effective September 1, 1999. See Acts 1999, 76th Leg., ch. 344.
The relief available under the turnover statute is limited in part by § 31.0025 which the legislature enacted in 1991. This section provides:
Sec. 31.0025. Authority of Court to Order Turnover of Wages.
(a) Notwithstanding any other law, a court may not, at any time before a judgment debtor, is paid wages for personal services performed by the debtor, enter or enforce an order that requires the debtor or any other person to turn over the wages for the satisfaction of the judgment.
(b) This section applies to wages in any form, including paycheck, cash, or property.
(c) This section does not apply to the enforcement of a child support obligation or a judgment for past due child support.
III. PURPOSE. The overall purpose of the turnover statute is to help diligent judgment creditors obtain timely satisfaction of their judgments. See, e.g., Schliemann v. Garcia, 685 S.W.2d 690, 692 (Tex. App.-San Antonio 1984, no writ) (quoted source omitted). The statute accomplishes this purpose by providing a procedural device through which creditors may reach assets of a debtor that are otherwise difficult to attach or levy upon by ordinary legal process. The legislature's reasons for enacting the turnover statute are more fully expressed in the House and Senate Committee Reports as follows:
The traditional methods of reaching property of a judgment debtor to satisfy a judgment have been found inadequate in cases where the judgment debtor has property outside the State of Texas, where the judgment debtor owns property interests in such items as contract rights receivable, accounts receivable, commissions receivable and similar acts to property or rights to receive money at a future date. Additionally, there are inadequacies in existing procedures where negotiable instruments, corporate stocks, corporate securities and the like are 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.
The bill makes significant changes in the ability of the judgment creditor to enforce his judgment against his debtor. The changes which the bill makes are open-ended in that they allow a judgment creditor to get aid in collection from the court in the form of an order which requires the debtor to bring to the court all documents or property used to satisfy a judgment. The actual effect of the bill is to require the burden of production of property that is subject to execution to be placed with the debtor instead of the creditor attempting to satisfy his judgment. The bill will allow this to be effective against all property and future rights to property that the debtor might own.
The bill proposes to put a reasonable remedy in the hands of a diligent judgment creditor, subject to supervision of the Court, and establish procedures for reaching the types of property and property interest described above. Similar remedies for certain types of property are provided in Sec. 8.317 of the Uniform Commercial Code as adopted in Texas, but the types of property described there are not adequate to cover most situations. The bill proposes to amplify those rights and to bring Texas in conformity with other states having similar legislation. Senate Committee on Judicial Affairs, Bill Analysis, Tex. S.B. 965, 66th Leg. R.S. (1979), and House Committee on Judicial Affairs, Bill Analysis, Tex. H.B. 1260, 66th Leg. R.S. (1979).
IV. THE TURNOVER PROCESS.
A. Overview of the Turnover Process. The turnover statute is a procedural device that empowers a trial court to assist a judgment creditor in reaching a judgment debtor's property that under traditional remedies was beyond a creditor's reach. See TEX. CIV. PRAC. & REM. CODE § 31.002 (a); Republic Ins. Co. v. Millard, 825 S.W.2d 780, 783 (Tex. App.-Houston [14th Dist.] 1992, orig. proceeding). The term "turnover" comes from the trial judge's ability to order the debtor to deliver or "turn over" nonexempt assets to an officer or a receiver when the assets cannot readily be attached or levied on by ordinary legal process. See TEX. CIV. PRAC. & REM. CODE § 31.002(a)(1-2); Ex parte Johnson, 654 S.W.2d 415, 417 (Tex. 1983) (construing former article 3827a, the predecessor to § 31.002). The turnover procedure is not an exclusive remedy, and the creditor will oftentimes need to employ additional remedies, such as a temporary restraining order to prevent further secreting or wasting of assets, a writ of garnishment to impound property due the debtor from a third party, or an order setting aside a fraudulent transfer.
The trial court's power to order the turnover of assets is discretionary and will be overruled by an appellate court only if there has been an abuse of that discretion. See Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223, 226 (Tex. 1991). A trial court abuses its discretion when it "acts without reference to any guiding rules and principles." Sivley v. Sivley, 972 S.W.2d 850, 860 (Tex. App.-Tyler 1998, no pet.). If the underlying judgment itself is reversed on appeal, then the turnover order must also be reversed. See Matthiessen v. Schaefer, 915 S.W.2d 479, 480 (Tex. 1995).
B. Initiation of Proceedings. When a turnover order is in the nature of an attachment, a judgment creditor need not delay an application for turnover relief until a writ of execution is issued. See Childre v. Great Southwest Life Ins. Co., 700 S.W.2d 284, 286-87 (Tex. App. Dallas 1985, no writ). Further, a judgment creditor has the option to move for the