POST JUDGMENT DISCOVERY AND ENFORCEMENT

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1 POST JUDGMENT DISCOVERY AND ENFORCEMENT DANIEL J. GOLDBERG Ross, Banks, May, Cron & Cavin, P.C. 2 Riverway, Suite 700 Houston, Texas Tel: / Fax: dgoldberg@rossbanks.com State Bar of Texas COLLECTIONS AND CREDITORS RIGHTS COURSE April 20-21, 2006 San Antonio CHAPTER 2

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3 ROSS, BANKS, MAY, CRON & CAVIN, P.C. Attorneys at Law DANIEL JACOB GOLDBERG Shareholder Current Employer/Title: Ross, Banks, May, Cron & Cavin, P.C. - Attorney, Shareholder. Profession: Attorney - Arbitration and Mediation, Bankruptcy and Corporate Reorganization, Civil Litigation, Commercial Transactions, Banking Litigation, Collections. Work History: Attorney/Shareholder, Ross, Banks, May, Cron & Cavin, P.C., present. Experience: Primarily engaged in business law (including debtor-creditor and collections), bankruptcy, real property law (including landlord/tenant) and banking law. Involved in contract drafting and litigation related to debtor/creditor matters, mechanic and materialmen liens, real estate, financial institutions and business related matters; Chapter 7 Panel Trustee - Bankruptcy Court, Eastern District of Texas. Alternative Dispute Resolution Experience: Arbitrator and/or mediator in 400+ cases; AAA panelist arbitrator and lecturer; Mediator for City of Houston Pilot Mediation Project, A.A. White Dispute Resolution Institute; EEOC Mediation Pilot Project and Center for Dispute Settlement; Past Chair of the Commercial Law League of America ADR Committee. Professional Licenses: Admitted to the Bar: Texas, 1969; U.S. District Court: Southern (1970), Northern (1970), Eastern (1970) and Western (1970) Districts of Texas; U.S. Court of Appeals: Fifth Circuit. Professional Associations: Board Certified, Creditors Rights Specialist; American Board of Certification; Commercial Law League of America (President ); Houston Bar Association; Texas Bar Association; East Fort Bend County Exchange Club (Past President); Maplewood South/North Community Improvement Association (Past President); Sugar Creek Homes Association (Past Board Member). Education: University of Virginia (BA-1966); University of Texas at Austin (JD-1969). Publications and Speaking Engagements: Contributing author, MANUAL OF CREDIT AND COMMERCIAL LAWS, 92 nd Edition, National Association of Credit Management, 2001; TEXAS COLLECTIONS MANUAL, Third Edition, Chair, Manual committee and contributing author, State Bar of Texas, 2000; Fighting the Latest Frauds, COMMERCIAL LAW BULLETIN, Vol. 13 #4, July/August, 2000; Editor and contributing author, TEXAS COLLECTIONS MANUAL, Second Edition, State Bar of Texas, 1987, revised 1996; Reclamation Under Section 546(c) of the Bankruptcy Code. COMMERCIAL LAW BULLETIN, vol. 3, no. 2, 1988; Contributing author, CREDITORS RIGHTS IN TEXAS, second edition, State Bar of Texas, 1981; Writs of Execution, TEXAS BAR JOURNAL, vol. 39, p. 139, 1976; UCC Article II-Sales-Problem Areas and Pitfalls, Texas Tapes Professional Development Program, 1975; Instructor/Lecturer at various associations, institutes and universities including State Bar of Texas, Houston Bar Association, University of Houston Bates College of Law; South Texas College of Law, University of Texas School of Law, University of Alabama School of Law; Commercial Law League Fund for Public Education, Continuing Legal Education Satellite Network, Lorman Education Services, National Business Institute, Inc. and Stromar Educational Services, Inc. 2 Riverway, Suite 700 Houston, Texas Telephone (713) Facsimile (713)

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5 Post Judgment Discovery and Enforcement Chapter 2 TABLE OF AUTHORITIES Arbor Holding Company v. The Cadle Company, 2002 WL (Tex. App.-Houston [1 st Dist.], July 11, 2002)...2 Bullock v. Foster Cathead Co., 631 S.W.2d 208 (Tex. App.-Corpus Christi 1982, no writ)... 4 Daniels v. E.W. Ross, individually and d/b/a Cash Auto Sales, 2001 WL (Tex-App-Austin, December 13, 2001)... 1 Ex Parte Conway, 843 S.W.2d 765 (Tex. App.-Houston [14th Dist.] 1992, no writ)...2 Ex Parte Hall, 854 S.W.2d 656 (Tex. 1993)... 2 F.D.I.C. v. LeGrand, 43 F.3d 163(5th Cir. 1995)... 3 Fisher v. P.M. Clinton International Investigations, 81 S.W.3d 484, (Tex. App.-Houston [1 st Dist.] 2002, no writ)... 2 Harding v. Lewis, 133 S.W.3d 693 (Tex. App.-Corpus Christi 2003, no writ)... 3 Hatton v. Grigar, 2004 WL (Tex.App-Houston [14th Dist.], March 25, 2004)... 1 Howell v. Thompson, 839 S.W.2d 92 (Tex. 1992)... 3 In re Arbor Holding Company, Inc., 2002 WL (Tex.App.- Houston [1 st Dist.], July 11, 2002)... 2 In re Cary R. Platt, 2001 WL (Tex. App.-Dallas, November 5, 2001)... 1 In re David L. Montgomery, 138 S.W. 3d 569, (CA Beaumont)... 5 In re Donald H. Smith, 2003 WL (Tex. App.- San Antonio, March 12, 2003)...2 In re Jones, 63 F.3d 411 (5 th Cir. 1995)... 3 In re De La Garza, 159 S.W. 3d 119 (Tex.App.-Corpus Christi, February 17, 2004)... 3 In re Virgil Mott, Sr., 137 S.W. 3d 870 CA Houston (1 st Dist.), Jones v. American Airlines, Inc., 131 S.W.3d 261 (Tex. App.-Fort Worth 2004, no writ)... 1 Moyer v. Moyer - SW 3d WL (CA - Austin, 2005)... 5 National Satellite Sports, Inc. v. Elizondo, 2003 WL (N.D. Tex., April 25,003)... 3 Piratello v. Philips Electronics North America Corporation, 360 F. 3d 506 (5 th Cir., March 3, 2004 )... 3 R.V. Hebisen v. Nassau Development Co., 2002 WL (Tex. App.-Houston [14 th Dist], March 31, 2002)... 3 Santibanez v. Wier McMahon & Co., et al., 105 F.3d 234 (5 th Cir. 1997)... 4 i

6 Post Judgment Discovery and Enforcement Chapter 2 Shah v. Moss, 67 S.W.3d 836 (Tex.2001)... 3 S.V. v. R.V., 933 S.W.2d 1 (Tex. 1996)... 3 Texas Employers Ins. Ass n v. Engelke 790 S.W.2d 93 (Tex. App.-Houston [1 st Dist.] 1990, no writ)... 1 The Wall Street Journal, October 30, 2003, Medical Seizures: Hospitals Try Extreme Measures To Collect Their Overdue Debts Patients Who Skip Hearings On Bills Are Arrested; It s a Body Attachment Mr. Beans s Time Behind Bars... 5 Thomas N. Heap, D.D.S., Inc. and Arne M. Ray v. Val-Pak of Greater Houston, 2001 WL (Tex. App.-Houston [14 th Dist.], June 1, Billy Mac Thompson v. United States, 524 U.S. 920, 118 S. Ct Ct Travel Music of San Antonio, Inc. v. Mott, 2001 WL (Tex. App.-San Antonio, April 11, 2001)... 2 United States v. Billy Mac Thompson, 130 F.3d 676 (5 th Cir. 1997)... 4 World Fuel Services Corporation v. Moorehead, 229 F. Supp.2d 584 (N.D.Tex. 2002)... 4 ii

7 Post Judgment Discovery and Enforcement Chapter 2 POST JUDGMENT DISCOVERY AND ENFORCEMENT A number of recent cases have been decided dealing with the issues of post-judgment discovery and the enforcement of court orders compelling that discovery. Even though many of the opinions are unpublished, a review of the facts of the case and the opinion of the Court are instructive as guidelines for proceeding in this area. (Where the opinion has not been published, the Westlaw cite is given.) Thomas N. Heap, D.D.S., Inc. and Arne M. Ray v. Val-Pak of Greater Houston 2001 WL (Tex. App.-Hous.1st Dist.) was decided June 21, In this case the issue was over the jurisdiction of the trial court when the judgment debtor filed an appeal in the underlying suit and the steps necessary to suspend the enforcement of a judgment pending appeal. The case also discussed the time for issuing a writ of garnishment as opposed to a writ of execution. The Court state that the judgment creditor is entitled to seek enforcement of a judgment unless that enforcement is suspended pending appeal. Citing Texas Rule of Civil Procedure 657 and the case of Texas Employers Ins. Ass n v. Engelke 790 S.W.2d 93 (Tex. App.-Houston [1 st Dist.]) the court ruled that unless a supersedeas bond is filed the judgment creditor has a statutory right to have execution issue to enforce a judgment pending an appeal. The filing of an appeal bond alone will not stop a creditor from seeking post-judgment enforcement. The court also went on to state that unlike a writ of execution that requires a 30 day wait after the final judgment is signed or the overruling of a motion for new trial, a writ of garnishment may issue at any time following the entry of a final judgment. In this context, it is also important to note the requirement for the garnishee in answering a writ of garnishment. Rule 661 prescribes the form of the writ of garnishment. It requires the garnishee to answer as to not only what effects of the judgment debtor he may have in his possession, but in an often overlooked provision it requires the garnishee to answer as to what other persons, if any, within your knowledge are indebted to the judgment debtor or have effects belonging to him in their possession. While a financial institution may or may not have this type of knowledge, a garnishee in the business arena might be a fountain of information as to other debts owed to the judgment-debtor. In re Cary R. Platt, 2001 WL (Tex. App.- Dallas), decided November 5, 2001, raised the issue of whether the trial court had jurisdiction to determine if an assignee of the judgment-creditor was entitled to answers to post-judgment discovery from the judgment debtor because the plenary jurisdiction of the trial court had expired. The rational of the argument as espoused by the judgment-debtor was that the assignee of the judgmentcreditor was not entitled to answers to post judgment discovery since the assignee had failed to prove that he was the owner of the judgment. By maintaining that the trial court had no jurisdiction to determine such ownership, the judgment debtor hoped to forestall his being required to respond to the post judgment discovery. The appellate court determined that the trial court did have jurisdiction to determine ownership of the judgment for the purposes of post judgment discovery. It further went on to use the abuse of discretion standard in reviewing the orders of the trial court requiring the judgment-debtor to respond to post judgment discovery. It also confirmed that in state court matters, unlike bankruptcy court, a party claiming an exemption bears the burden of proving that he is entitled to the exemption. This same abuse of discretion standard was applied to a review of and order entered in a case involving the turnover statute V.T.C.A. Civ. Prac. & Rem. Code Sec Jones v. American Airlines, Inc., 131 S.W. 3d 261 (Tex.App.-Fort Worth). A ploy to avoid the entry of a contempt order in a post-judgment injunction situation was used in Hatton v. Grigar, 204 WL (Tex.App-Hous.14th Dist.) decided January 15, While not involving a collection proceeding, the respondent in a contempt proceeding tried to enter a special appearance. Along with deciding other issues, the court found that a special appearance was inappropriate in a post-judgment proceeding. On the other hand, in Daniels v. E.W. Ross, individually and d/b/a Cash Auto Sales, 2001 WL (Tex-App-Austin), Daniels attempted to file a notice of appeal from a post-judgment contempt order. The contempt order imposed only a fine. No incarceration was involved. The court found that a contempt order cannot be attacked directly by appeal. It further reasoned that since no restraint was involved, the requirement for a writ of habeas corpus was not present. It stated that a fine-only contempt order was properly attacked by a writ of mandamus and this was the appropriate method for raising the iss ue in the appellate court. Another appeal case is Fisher v. P.M. Clinton International Investigations, 81 S.W.3d 484, (Tex. App. Hous.- 1 st Dist.). Here Fisher challenged a post-judgment discovery order to compel and for sanctions. Fisher was ordered to respond to interrogatories and requests for production, to pay $70.00 as discovery costs to plaintiff s 1

8 Post Judgment Discovery and Enforcement Chapter 2 attorney and to appear for his deposition. The opinion of the court was that a post-judgment discovery order does not resolve all disputes between the parties, a Rule 621a order is not a final and appealable order. The court found that orders granting or denying post-judgment discovery requests were not appealable orders. In Arbor Holding Company v. The Cadle Company, 2002 WL (Tex. App.-Hous. 1 st Dist.), Cadle sued to enforce a $375,000 judgment against a John Riddle that Cadle purchased from Sunbelt Savings, F.S.B. Cadle registered it with the 189 th District Court under the Uniform Enforcement of Foreign Judgments Act. The appeal of a post-judgment discovery order was not an appealable judgment and the court dismissed the appeal for want of jurisdiction. Arbor Holding then came back to the appellate court with a mandamus proceeding. To raise the issue of review of a trial court s postjudgment discovery order, mandamus is the proper procedure. In re Arbor Holding Company, Inc., 2002 WL (Tex.App.-Houston. 1 st Dist.) involved a writ of mandamus filed by the judgment-debtor to avoid responding to judgment-creditor s request for document production after its attempted appeal of the post-judgment discovery order was dismissed by the appellate court. The corporation was the subsidiary of a trust in which the judgment-debtor was the sole beneficiary. The judgmentdebtor was employed by the corporation and could write checks to himself on the corporation s account. The corporation was not a party to the judgment at issue. The corporation also tried to assert affirmative defenses to enforcement of the judgment debt. The court found that the corporation had no standing to assert affirmative defenses to the enforcement of the judgment debt. It went on to reaffirm that the rules governing and related to pre-trial discovery apply equally to post-judgment discovery. Discovery was to be permitted of any unprivileged information relevant to the subject a lawsuit as long as it appears reasonably calculated to lead to the discovery of admissible evidence. An order requiring turnover as well as a postjudgment discovery were the subjects of the appeal in Travel Music of San Antonio, Inc. v. Mott, 2001 WL ( Tex. App.-San Antonio). The court determined that turnover orders are final, appealable orders but not subject to the accelerated timetables applicable to interlocutory orders. With regard to the post-judgment discovery order, the court stated that, generally, orders entered in aiding the enforcement of a judgment are not appealable and again reiterated that the proper way to challenge the discovery order was through a writ of mandamus. Not only can contempt orders involve fines but they can also involve imprisonment. In re Donald H. Smith, 203 WL (Tex. App.- San Antonio) raises a number of interesting issues. In this case a contempt order was issued ordering imprisonment for the failure of a judgment-debtor to pay a prior monetary sanction of costs and attorney s fees. The judgment-creditor, Farmer s Insurance, had sent the judgment-debtor postjudgment interrogatories. Smith answered the first twenty-six and objected to the remainder. They cited Tex. R. Civ.P (b)(3) as their justification for refusing to answer the additional interrogatories. Farmers requested a motion to compel and sanctions. The court ordered Smith to answer the interrogatories fully and completely and awarded $1,500 attorney s fees. The court pointed out that the limitations of Rule 190.3(b) as stated in Rule do not apply to limitations on discovery conducted under Rule 621a. The court held Smith in contempt for violating its orders to answer the interrogatories and to pay the $1,500. It ordered (a) Mr. Donald H. Smith... incarcerated in the Bexar County Jail until payment of the $1,500. Such sentence is ordered probated so long as Mr. Smith make[s] payments of $75.00 per month to Texas Farmer s Insurance Company, until the $1,500 is fully paid ; (b) if Mr. Smith fails to make the monthly payments timely, the probation is revoked and Mr. Donald H. Smith [is] ordered committed to Bexar County Jail for six months or until the remainder of the $1,500 is paid ; (c) Mr. Donald H. Smith... to tour the Bexar County Jail ; and (d) Mr. and Mrs. Smith... to pay an additional $4,650 to cover attorneys [sic] fees and costs arising out of the c ontempt. The trial court concluded that based on credible and sufficient evidence, the Smiths had sufficient non-exempt property to pay the $1,500. In support of its position, Farmers cited Ex Parte Conway, 843 S.W.2d 765 (Tex. App.-Houston[14th Dist.] 1992). The Houston Appeals Court refused to grant a Writ of Habeas Corpus concluding that a discovery sanction was not a debt. The San Antonio Court in this case disagreed citing Ex Parte Hall, 854 S.W.2d 656 (Tex. 1993) and ruled the court did not have the authority to enforce the payment by contempt proceedings since this would be imprisonment for failure to pay a debt. Another interesting case involved the issue of whether or not the trial court exceeded its authority in reviving a dormant judgment and awarded the creditor attorney fees. The Court in R.V. Hebisen v. Nassau Development Co., 2002 WL (Tex. App.-Hous. 14 th Dist) revived a judgment in favor of a landlord for rent due under a lease and awarded attorneys fee. The court s order decreed that Judgment dated April 25, 2

9 Post Judgment Discovery and Enforcement Chapter is hereby and shall be revived and declared fully enforceable in all respects and that Nassau recover all damages and award of value, including attorneys fees, costs of court, and any and all additional remedies and entitlements.... Counsel for Nassau argued that Nassau was entitled to attorney s fee under Rules 621a and 215. The appellate court sustained the trial court s revival of the judgment but found that there was no support for the award of additional attorney s fees in a revival action under 621a and that there had been no discovery abuse under Rule 215. Continuing on with revival issues, Section of the Texas Civil Practices and Remedies Code provides the basis and procedure for revival of a dormant judgment. The text of the Rule states A dormant judgment may be revived by scire facias or by an action of debt brought not later than the second anniversary of the date that the judgment becomes dormant. The judgment creditor in Harding v. Lewis, 133 S.W. 3d 693 (Tex. App.-Corpus Christi, 2003) waited until after the two year period to bring the action to revive the judgment. Harding, as the judgment-debtor, objected to the revival of the judgment arguing that it was brought outside of the two year window of opportunity. Lewis, the judgment-creditor, responded that there was an equitable exception to the two year period of the dormant judgment rules. He asserted that the judgment- debtor had engaged in a series of fraudulent conveyances designed to evade execution. Based on the actions of the judgment-debtor, he concluded that there was an equitable exception to two year rule. He also argued that he had used reasonable diligence in attempting to collect the judgment and was prevented from doing so by the actions of the judgment-debtor. The court, in upholding the revival of the judgment cited several Texas Supreme Court cases. In Shah v. Moss, 67 S.W.3d 836 (Tex.2001), the Texas Supreme Court held: Fraudulent concealment tolls limitations until the plaintiff discovers the fraud or could have discovered the fraud with reasonable diligence. It also looked to the holding in S.V. v. R.V., 933 S.W.2d 1 (Tex. 1996) in which the court held fraud, we have said, in and of itself prevents running of the statute of limitations. As often happens during the course of collection litigation, the debtor will file a bankruptcy proceeding. That was the situation that occurred in the case of In re De La Garza, 159 S.W. 3d 119 (Tex.App.-Corpus Christi, 2004). Judgment was entered in the matter during the pendency of the bankruptcy and in violation of the automatic stay. The bankruptcy however was dismissed a month after the judgment was entered and the judgment-creditor sent out a notice of post-judgment deposition and obtained an order compelling the judgment-debtor s appearance. The judgment-debtor objected, arguing that the judgment was void and therefore any attempt to collect it was void, even though the bankruptcy had been subsequently dismissed. The U.S. Court of Appeals for the Fifth Circuit had previously ruled that actions taken in violation of the automatic stay were not void but voidable. In re Jones, 63 F.3d 411 (5 th Cir. 1995). On the other hand, the appellate court noted that the Texas Supreme Court in Howell v. Thompson, 839 S.W.2d 92 (Tex. 1992) had ruled that such actions taken in violation of the automatic stay were void. The Texas Court of Appeals was faced with the issue of whether it should follow the ruling of the U.S. Fifth Circuit or the Texas Supreme Court. It determined that when such a conflict arose it was obliged to follow only the rulings of the U.S. Supreme Court or the higher Texas court. It therefore determined that it was obliged to follow the ruling of the Texas Supreme Court and held the judgment void and granted the mandamus request. These same type of issues arise in federal litigation as well as state litigation. The judgment-creditor has the right to discover information pertaining to the judgmentdebtor s ability to satisfy the judgment. F.D.I.C. v. LeGrand, 43 F.3d 163(5th Cir. 1995). Federal Rule of Civil Procedure 69(a) allows the normal procedure of c ompelling discovery in post-judgment discovery situations. In National Satellite Sports, Inc. v. Elizando, 2003 WL (N.D. Tex.), the court concluded that objections to post-judgment discovery are waived if not timely raised and compelled a response and considered the award of attorney s fees. The Fifth Circuit Court of Appeals has enunciated a ruling regarding appeals of sanction orders. In Piratello v. Philips Electronics North America Corporation, decided March 3, 2004, 360 F (5 th Cir. Tex.) the judgment-debtor claimed that his privilege against selfincrimination had been violated by the discovery order. The court determined that if a judgment-debtor wanted to immediately appeal a discovery order, he must first refuse compliance, be held in contempt, and then appeal the order. A post-judgment order was, in an of itself, not a final order and could not be immediately appealed absent an imposition of sanctions. Another interesting federal court case involved the use of the Turnover statute in federal court. In World Fuel Services Corporation v. Moorehead, 229 F. Supp.2d 584, the court ordered the debtor to turnover his interest in stock even though it had been pledged to third parties and went on to appoint a receiver for the debtor. The court ruled that even though assets have been pledged to 3

10 Post Judgment Discovery and Enforcement Chapter 2 third parties does not necessarily mean that they were not owned or subject to the control of the debtor. It supported its ruling by the determination that a pledgee acquires no interest in the [pledged] property except as security for his debt or obligation, and his actual interest is purely contingent in that it depends for effect on something that may or may not occur. Bullock v. Foster Cathead Co., 631 S.W.2d 208 (Tex. App.-Corpus Christi 1982, no writ), 53 F. 3d 72 (5 th Cir 1995). Billy M. Thompson, a judgment-debtor appealed a turnover order entered by the Hon. Kenneth M. Hoyt.,U.S. Judge for the Southern District of Texas. Santibanez v. Wier McMahon & Co., et al., Defendants, (105 F.3d 234). A receiver was appointed to receive and dispose of judgment-debtor s property. The debtor was ordered to describe and value his assets, classify each asset as exempt or non-exempt and give the legal basis for each exemption. After an evidentiary hearing the court held Thompson in contempt for willfully refusing to comply with the court s order, sentenced him to 30 days in jail, and ordered that he be incarcerated indefinitely pending his full compliance. The Fifth Circuit Court of Appeals determined that it had jurisdiction to hear the debtor s appeal from the order appointing a receiver and directing the sale and disposition of the debtor s property regardless of whether the decree qualified as a final judgment. While reiterating that a court may not imprison a debtor for failure to pay a debt, it found in this case that the debtor had been informed of what he had to do to purge himself and that the debtor had been incarcerated for failing to comply with the court s turnover order. A petition for writ of certiorari to the Supreme Court was denied. Billy Mac Thompson v. United States, 524 U.S. 920, 118 S. Ct Not content to let the matter end with the United States Supreme Court, While in jail, Thompson solicited inmate Stephen Gerber to kill The Honorable Kenneth Hoyt, an able and respected judge of the United States District Court for the Southern District of Texas. Judge Hoyt had sent Thompson to jail on a civil contempt charge related to a civil case in Judge Hoyt s court in which Thompson was a party. In jail, Thompson had met Gerber and asked him to hire a hit man. Thompson expressed outrage that Hoyt had sent him to jail and was generally displeased with the way his litigation was proceeding in Judge Hoyt s court. United States of America v. Billy Mac Thompson, 130 F3d 676. In 2003 the Legislature amended the Government Code to specifically provide for a limit on civil contempt confinement. Article of the Code provides that: (a) (b) (c) (d) (e) (f) (g) (h) Except as provided by Subsection (g), a court may punish for contempt. The punishment for contempt of a court other than a justice court or municipal court is a fine of not more than $500 or confinement in the county or city jail for not more than 6 months, or both such a fine and confinement in jail. The punishment for contempt of a justice court or municipal court is a fine of not more than $100 or confinement to the city or county jail for not more than three days, or both such a fine and confinement in jail. An officer of a court who is held in contempt by a trial court shall, on proper motion filed in the offended court, be released on his own personal recognizance pending a determination of his guilt or innocence. The presiding judge of the administrative judicial region in which the alleged contempt occurred shall assign a judge who is subject to assignment by the presiding judge other than the judge of the offended court to determine the guilt or innocence of the officer of the court. Except as provided by subsection (h), this section does not affect a court s power to confine a contemner to compel the contemnor to obey a court s order. Article , Code of Criminal Procedure, and Chapter 157, Family Code, apply where a person is punished by confinement for contempt of court for disobedience of a court order to make periodic payments for the support of a child. Subsection (h) does not apply to that person. A court may not punish by contempt an employee or an agency or institution of this state for failure to initiate any program or to perform a statutory duty related to that program: (1) if the legislature has not specifically and adequately funded the program; or (2) until a reasonable time has passed to allow implementation of a program specifically and adequately funded by the legislature. Notwithstanding any other law, a person may not be confined for contempt of court longer than: (1) 18 months, including three or more periods of confinement for contempt arising out of 4

11 Post Judgment Discovery and Enforcement Chapter 2 the same matter that equal a cumulative total of 18 months, if the confinement is for criminal contempt; or (2) the lesser of 18 months or the period from the date of the confinement to the date the person complies with the court order that w as the basis of the finding of contempt, if the confinement is for civil contempt. The courts have required that the Contempt Order be very specific as to the grounds for holding a person in contempt and ordering confinement. In re David L. Montgomery, 138 S.W. 3d 569, (CA Beaumont) decided June 17, 2004, involved a turnover order that ordered the judgment debtor to turn deliver [a]ll cash in the control or possession of judgment debtor to a specified constable at a specified time was not sufficient to support a contempt finding for failure to turn over $86,926. The turnover order was granted ex parte. The appellate court decided that because the turnover order did specify a specific sum of cash to be turned over, it was not sufficiently specific to support an order of contempt and confinement. The court so found because without reference to a specific sum determined to be in his possession or control..., the relator would not have a reasonable opportunity to meet [any subsequent contempt] charges by way of defense or explanation. In Moyer v. Moyer SW 3d, 2005 WL (CA - Austin, 2005), the court the court stated that the trial court must be specific in both identifying the non-exempt property that is susceptible to turnover and in tailoring turnover relief to that property. It then went on to say that the mere fact that general property categories in a turnover order coincide with some actual existing property is insufficient to cure the order s lack of specificity. The question of specificity in a turnover order has recently undergone a radical change. In 2005, the turnover statute was amended to include Subdivision (h). It provides that 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. Another recent case, In re Virgil Mott, Sr., 137 S.W. 3d 870 CA Houston (1 st Dist.), 2004, is interesting for several reasons. First, it enunciated the established rule that a person held in jail for civil contempt has the burden of showing that he has either complied with the court s order or is incapable of complying. On December 2, 2002, Mott was sued and on December 20, 2002, Mott pledged 2,000 shares in Mott Petroleum to the law firm of Fuqua and Keim to secure payment of their current and future legal fees. On April 30, 2003, an Agreed judgment was entered by the court for over $260,000 and the creditor asked for a turnover order for the stock which was granted. Mott argued the stock was in Fuqua s possession and he could not comply. The court ordered the stock turned over. Fuqua gave notice that a private sale was to be held of the stock and it was purchased by Mott Petroleum as corporate shares. The court was not persuaded by this mechanism and ordered the stock turned over and when Mott failed to do so, he was confined. Mott requested habeas corpus relief and a jury trial. The appellate court stated that a person is not entitled to habeas corpus relief because he was denied a jury trial when the contempt order is civil in nature. The use of post-judgment discovery and enforcement procedures should go hand -in -hand with the practice of keeping your client informed of the actions that you take and making certain that they understand and approve of them. On Thursday October 30, 2003 The Wall Street Journal published an article titled Medical Seizures: Hospitals Try Extreme Measures To Collec t Their Overdue Debts Patients Who Skip Hearings On Bills Are Arrested; It s a Body Attachment Mr. Beans s Time Behind Bars. Quoting from part of the article Some also use one of the harshest and leastknown collections tactics of all: seeking the arrest of noshow debtors. And continuing in another paragraph The legal tactic of arresting a debtor who fails to appear for a court hearing known in some areas as body attachment is so extreme that some of the country s biggest commercial creditors say they never use it. The article says that Sears and Ford Motor Credit Company expressly prohibit their collections agents from asking for it and state In many areas of the country, collections lawyers say, the procedure has been all but abandoned. The forms attached to this paper come from the Texas Collections Manual published by the Texas Bar Association. Generally the post judgment collection procedure will begin with written interrogatories to the judgment or a notice of post-judgment deposition. Assuming that the interrogatories are not answered satisfactorily by the debtor or not answered at all, or that the debtor fails to appear for his deposition, the next step would be a Motion to Compel Answers to Interrogatories or to compel the debtor s appearance for the deposition. 5

12 Post Judgment Discovery and Enforcement Chapter 2 Where the Order is ignored, the next step would be a show cause why the debtor should not be held in contempt for failure to answer the interrogatories or to appear for his deposition. This motion should be very specific as to the reason for the motion and the order for contempt should be carefully drafted so that it specifically sets out what the failures of the debtor are in responding to past motions and orders and what the debtor can do to purge himself. I would recommend that the Motion be served personally on the debtor so there is no question that he received it. Practical considerations must also be taken into effect. If the debtor is found in contempt and arrested, what is the mechanism by which he can free himself pending the next court hearing. Most orders for contempt provide for the posting of a bond by the debtor. The practitioner should always remember that the object here is to gain information about the debtor s assets or require that they be turned over for levy and not to put the debtor in jail. The actions are not to be considered a substitute for debtor s prison. They are used only when the debtor fails to obey an order of the court. 6

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