Court Opinion

ID: 9770563
Source: CourtListenerOpinion
Date Created: 2023-08-29 16:09:58.39968+00
Date Added: 2024-06-11T07:31:18.525637
License: Public Domain

BILL J. STEPHENS, Justice,
dissenting (Sitting by Assignment).
I disagree with my colleagues on the disposition of this case; accordingly, I respectfully dissent. Generally, I agree with the facts, yet I view them somewhat differently from the majority.
On November 16, 1992, Central Bank & Trust (the Bank) took a default judgment against Stewart DeVore, Jr. and TOH, Inc. in the amount of $21,458.28. To enforce the judgment, the Bank filed an Application for Turnover Order against DeVore seeking a turnover of all compensation paid to him by the law firm in which he was a partner, DeVore & Carrell, P.C. Following an evi-dentiary hearing on April 15, 1994, the trial court entered an Interlocutory Turnover Order on May 20, 1994, ordering DeVore to turn over an “as yet” undetermined amount of all payments received by DeVore as an independent contractor for services rendered as an attorney.
On June 8, 1994, DeVore perfected an appeal of this order. Additionally, DeVore filed a Motion for Temporary Orders, asking this court to stay a hearing in the trial court for June 10, 1994 to determine a specific amount of money that DeVore would be required to turn over to the Bank. DeVore’s Motion for Temporary Orders to stay the hearing on June 10, 1994 was denied. The June 10th hearing was held and on June 30, 1994, the trial court signed a Final Turnover Order ordering DeVore to turn over the sum of $2,000.00 per month from “payments received by [him] for services rendered as an attorney.”
On July 29, 1994, this court signed an order that determined that DeVore’s appeal bond filed on June 8,1994 properly perfected DeVore’s appeal as to all issues raised by the Interlocutory Turnover Order dated May 20, 1994 and the Final Turnover Order dated June 30, 1994.
On August 24, 1994, the trial court signed Findings of Fact and Conclusions of Law.
APPELLANT’S ARGUMENT
Although DeVore presents four points of error on appeal, I believe his first point is dispositive of the case. In his first point of error, he contends that the trial court abused its discretion because there is no evidence, or insufficient evidence, that his income is other than exempt wages.
I agree with appellant’s first point of error, and, accordingly, I would reverse and render the judgment of the trial court.
FACTS OF THE CASE
This is a turnover proceeding. Following the taking of a default judgment against DeVore, an attorney, the Bank sought to collect its judgment by using the remedy of a turnover order pursuant to Tex.Civ.Prac. & Rem.Code Ann. § 31.002 (Vernon 1986) (the “Turnover Statute”). At a hearing before the trial court on January 28, 1994, although no evidence was offered or received, the trial judge expressed his opinion that DeVore’s income from the practice of law was nonexempt and subject to a turnover order. The parties themselves were not present at the January 28th hearing, although counsel for both parties were present.
On April 15, 1994, the first of two eviden-tiary hearings was held. DeVore was the only witness, and testified that on March 1, 1994, he had become an employee of Larken, Inc., a corporation that he had represented for many years. He testified in detail about his job description, his title, his salary, the kinds of legal services he performed for Larken, and the degree of control the president of the corporation asserted over his work. He testified that he had no source of income other than his wages from Larken.
*612DeVore’s employment agreement with Larken, letterhead, a business card showing DeVore as vice-president and general counsel of Larken, paycheck with standard payroll deductions, and a sublease agreement whereby Larken agreed to pay DeVore’s law firm for the use of its facilities by DeVore, as an office facility for DeVore to perform his duties for Larken, were all admitted into evidence without objection.
At the conclusion of the evidence, despite the lack of supporting evidence, the trial judge stated that he believed the employment agreement was a sham, signed by De-Vore and Larken to avoid the turnover order, which the judge had stated at the January 28th hearing that he intended to impose upon DeVore’s earnings.
Thereafter, a second evidentiary hearing was held for the purpose of determining the amount of money DeVore would be required to turn over. Again, DeVore was the only witness. At this hearing, DeVore testified that his normal and necessary monthly living expenses consumed all of his monthly income. The court proceeded to consider each of the expense items testified to by DeVore, and again, despite any supporting evidence, expressed his opinion that some of them could be reduced or eliminated, and ordered DeVore to begin turning over $2,000.00 per month to the Bank to be applied to its judgment.
POINT OF ERROR NUMBER ONE
POINT OF ERROR NUMBER ONE:
The trial court abused its discretion by ordering DeVore to turn over a portion of his monthly income from LARKEN, INC. because there is no evidence or insufficient evidence that such income is anything other than exempt wages for personal services.
The Texas Supreme Court has held that an abuse of discretion is the proper standard of review in a turnover proceeding. Beaumont Bank, N.A. v. Butter, 806 S.W.2d 223, 226 (Tex.1991). The exercise of power in a manner contrary to law or reason is an abuse of discretion. Landon v. Jean-Paul Budinger, Inc., 724 S.W.2d 931, 935 (Tex.App.—Austin 1987, no writ). Abuse of discretion includes cases in which the law has been misapplied to the facts. State v. Southwestern Bell Tel. Co., 526 S.W.2d 526, 528 (Tex.1975). It also includes cases where the trial court makes an unreasonable decision based on factually insufficient or no evidence, in which event the appellate court must state the reason the decision was unreasonable. Pool v. Ford Motor Co., 715 S.W.2d 629, 635 (Tex.1986).
At trial the only witness was the appellant. He testified as follows:
1. He is an employee of Larken, Inc. pursuant to a written employment agreement effective March 1, 1994.
2. He is paid twice monthly by Larken, is reimbursed for out-of-pocket business expenses incurred in the performance of his duties, has federal income tax and social security withheld from his paychecks, and receives the same salary every month regardless of the number of hours he works.
3. He reports directly to the president of Larken, who controls his work, assigns his projects, and sets his priorities.
4. He is described on the letterhead and business cards of Larken as its Vice President and General Counsel.
5. A sublease agreement between Larken and DeVore & Carrell, P.C. provides that Larken pays the professional corporation monthly for the use of its office space and facilities by DeVore as an office facility for DeVore to perform his duties for Larken.
6. DeVore & Carrell, P.C. is reimbursed by Larken for any business expenses it advances to Larken.
7. DeVore has no source of income other than his paychecks from Larken.
8. Prior to his employment by Larken, he was paid by DeVore & Carrell, P.C.
9. DeVore receives no compensation from DeVore <& Carrell, P.C., has no agreement to receive any compensation in the future from DeVore & Carrell, P.C., and is not paid directly by any clients for legal services.
10. Larken, through its president, requested that DeVore sign an employ*613ment agreement so that his compensation could be allocated by Larken to its various affiliates who were receiving the benefits of his services.
11. DeVore goes to Larken’s offices in Iowa approximately once every two or three months, Larken’s president comes to DeVore’s Texas office twice that often, they meet at other locations more often than that, and they average a one to four-day meeting every two to three weeks.
12. DeVore renders various legal services for Larken, including supervising outside counsel, negotiating with lenders on restructuring or extending loans, seeking new financing, buying and selling hotels, and handling employee matters.
13. DeVore first began representing Larken in 1970 when the company was started and continued to represent the company as its business and legal needs grew.
14. Until March 1, 1994, DeVore rendered legal services to Larken through DeVore & Carrell, P.C.
15. Most of DeVore’s legal work for Larken is transactional, related to buying hotels, financing, and leasing.
16. The legal work done by DeVore for Larken as an employee of the company is the same type of work he did when he represented Larken through DeVore & Carrell, P.C.
17. Larken pays DeVore a salary of $18,-000.00 per month, for a net of $5,402.44 every two weeks, which is more than he was paid as an employee of DeVore & Carrell, P.C.
18. DeVore & Carrell, P.C., through its attorney Meg Carrell, performs legal services for other clients.
19. The sublease between DeVore & Carrell, P.C. and Larken provides that Larken will pay for a portion of the office space and facilities of DeVore & Carrell, P.C., including the office of DeVore and the nonexclusive use of the other space and facilities.
20. DeVore is still a shareholder in De-Vore & Carrell, P.C. but receives no compensation from it and has no present expectation of receiving any dividend distribution.
21. DeVore is in contact with the president of Larken by telephone on an hourly basis every business day and the degree of the president’s control over his work continues to increase.
The evidence presented by DeVore is un-controverted. The evidence is further undisputed that the trial court ordered DeVore to turn over “payment received by Stewart De-Vore, Jr. for services rendered as an attorney.” Furthermore, it is undisputed that DeVore’s only source of income is his monthly salary from Larken.
Section 81.002 of the Texas Civil Practice & Remedies Code provides:
Sec. 31.002. 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:
(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.
(b) The court may:
(1) 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;
(2) otherwise apply the property to the satisfaction of the judgment; or
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(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 *614any statute, including Section 42.0021, Property Code....
TEX.Crv.PRAC. & Rem.Code ANN. § 31.002 (Vernon 1986 & Supp.1995).
The language of section 31.002 is clear in its direction that a court is powerless to require the turnover of exempt property under any statute. From the uncontroverted evidence in this ease, monies received from Larken, Inc. are wages to DeVore and as such they are exempt. This matter was succinctly set out in Caulley v. Caulley, 806 S.W.2d 795 (Tex.1991), as follows:
The trial court ordered that Robert must turn over his wages to a receiver on the first and fifteenth days of each month until the judgment is satisfied. We hold that this order violates Sec. 31.002(f) of the Texas Civil Practice and Remedies Code. By prohibiting the turnover of the proceeds of property exempt under any statute, this section necessarily prohibits the turnover of the proceeds of current wages. Tex.Prop.Code Sec. 42.002(8) (listing current wages as one of the personal property items exempt from attachment, execution, and seizure by creditors).
Id. at 798.
Not only are the monies received by De-Vore from Larken current wages, the evidence reveals that prior to the employment contract between DeVore and Larken, Inc., DeVore received a salary from DeVore & Carrell, P.C.; thus, those monies would also be current wages. Schultz v. Fifth Judicial District Court of Appeals, 810 S.W.2d 738, 740 (Tex.1991). Furthermore, once the funds from salary payments both from De-Vore & Carrell, P.C., and Larken, Inc. are in the hands of DeVore, they become proceeds of current wages and as such are also exempt. See Caulley, 806 S.W.2d at 798.
Additionally, the courts have construed section 31.002(a) as placing the burden on the creditor to prove that the property is not exempt. In Sloan v. Douglass, 713 S.W.2d 436 (Tex.App.—Fort Worth 1986, writ ref'd n.r.e.), the court held:
[U]nder the turnover statute the creditor must prove that the property of the debtor is subject to turnover by proving the property cannot be readily attached or levied on and that the property is not exempt.
Id. at 441 (emphasis in original).
Subsequently, in Brink v. Ayre, 855 S.W.2d 44 (Tex.App.—Houston [14th Dist.] 1993, no writ), the court held:
A judgment creditor may show himself entitled to relief by establishing that the judgment debtor is the owner of the property, that the property could not readily be attached, and that the property is not exempt from attachment, execution, and every type of seizure.
Id. at 45.
The Bank only introduced into evidence an abstract of the original judgment against De-Vore and a copy of its writ of execution returned nulla bona. These documents did show that the judgment against DeVore was obtained; however, they did not show that DeVore’s salary from Larken, Inc. was exempt and subject to a turnover order. I conclude that the Bank failed to meet its burden to prove that the wages of DeVore were exempt and thus subject to a turnover order.
I would sustain appellant’s first point of error. Having sustained this point of error, I would decline to address the other points. It is my conclusion that in the absence of supporting evidence, the trial court abused its discretion by requiring proceeds of De-Vore’s salary to be turned over to the Bank, and, accordingly, the judgment of the trial court should be reversed and rendered.