Scott Van Dyke and Anglo-Dutch Energy, LLC v. Littlemill Limited, Prosperity Settlement Funding, Inc., Robert M. Press, and Anzar Settlement Funding Corp. ( 2019 )


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  • Affirmed and Opinion filed May 23, 2019.
    In The
    Fourteenth Court of Appeals
    NO. 14-18-00237-CV
    SCOTT VAN DYKE AND ANGLO-DUTCH ENERGY, LLC, Appellants
    V.
    LITTLEMILL LIMITED, PROSPERITY SETTLEMENT FUNDING, INC.,
    ROBERT M. PRESS, AND ANZAR SETTLEMENT FUNDING CORP.,
    Appellees
    On Appeal from the 61st District Court
    Harris County, Texas
    Trial Court Cause No. 2004-20712
    OPINION
    This is an appeal of a release and turnover order. Appellants contend that the
    trial court erred in releasing and turning over to appellees all funds remaining in
    the court registry after the judgment in the underlying case was satisfied.
    Appellants argue that they are third-party secured creditors whose rights to the
    funds are superior to those of appellees, who are judgment creditors. Because we
    hold that the trial court erred by adjudicating appellants’ substantive property
    rights in a turnover proceeding, we reverse the trial court’s order and remand for
    further proceedings.
    I. FACTUAL AND PROCEDURAL BACKGROUND
    The history of the litigation among the parties is lengthy and complex. We
    recount only the facts relevant to the current dispute over the funds remaining in
    the court registry after the underlying judgment was satisfied.
    A.     The Parties’ Disputes Leading to the Underlying Judgment
    Appellant Scott Van Dyke is an owner and president of appellant Anglo-
    Dutch Energy, LLC. Van Dyke is also the majority owner of Anglo-Dutch
    Petroleum International, Inc. (ADPI) and Anglo-Dutch (Tenge), LLC (ADT), the
    entities involved in the underlying lawsuit.
    In 2000, ADPI and ADT sued Halliburton Energy Services, Inc. and another
    company. To finance the litigation and stay in business, ADPI and ADT entered
    into contracts with others to invest in the Halliburton lawsuit, including appellees
    Littlemill Limited, Prosperity Settlement Funding, Inc., Robert M. Press, and
    Anzar Settlement Funding Corp. (collectively, the Investors). ADPI and ADT later
    settled with Halliburton for $51 million but failed to comply with the payment
    obligations of their contracts with the Investors. The Investors sued ADPI and
    ADT and eventually obtained judgments against them.1
    In the interim, ADPI and ADT sued Greenberg Peden, P.C. and Gerald
    Swonke, their legal counsel in the Halliburton lawsuit, in the 61st District Court.
    Swonke countersued. In 2007, the court rendered a judgment awarding Swonke
    roughly $1.7 million.
    1
    Appellee Littlemill obtained its judgment and turnover order in a suit filed in the 152nd
    District Court, and the other appellees obtained their judgments and turnover orders in a suit filed
    in the 127th District Court.
    2
    ADPI and ADT attempted to supersede the judgment in favor of Swonke
    without posting a supersedeas bond by claiming that they had a negative net worth.
    In response, Swonke filed a motion contesting the affidavits supporting ADPI and
    ADT’s negative net worth claims. In 2007, the 61st District Court rendered an
    order granting Swonke’s motion (the 2007 Order). The 2007 Order contained
    numerous fact findings, including findings that the affidavits were not credible;
    that ADPI, ADT, Van Dyke, and ADE were alter egos of each other; and that
    ADPI made almost $20 million in fraudulent transfers to Van Dyke and ADE
    “with the actual intent to hinder, delay, or defraud” Swonke. ADPI and ADT did
    not appeal the 2007 Order or its findings.
    ADPI and ADT eventually were able to deposit cash in lieu of a bond into
    the court registry after Van Dyke loaned ADPI $1,086,239.73 specifically for the
    purpose of posting a bond in the case against Swonke. The loan agreement
    between ADPI and Van Dyke was titled “Promissory Note, Security Agreement &
    Collateral Chattel Mortgage.” The money was deposited in the court registry into
    account no. 63901. Later, in a nearly identical loan agreement, ADE loaned ADPI
    $763,346.56 for the purpose of increasing the amount of the cash bond. That
    money was deposited in the court registry into a separate account no. 64056.
    The judgment in favor of Swonke was affirmed on appeal, but the Supreme
    Court of Texas reversed and remanded the case to the trial court for further
    proceedings. See Anglo-Dutch Petroleum International, Inc. v. Greenberg Peden,
    
    352 S.W.3d 445
    , 453 (Tex. 2011).
    B.    The Competing Claims for the Supersedeas Funds
    While the lawsuit was on remand, Van Dyke, ADE, and the Investors
    intervened, each seeking to obtain some or all of the funds remaining in the court
    registry. The Investors alleged that they were entitled to collect on the unsatisfied
    3
    judgments they had obtained in their lawsuits against ADPI and ADT. Van Dyke
    and ADE alleged that they held security interests in the funds based on their loan
    agreements with ADPI.
    In June 2012, the Investors obtained turnover orders against the supersedeas
    funds deposited in the court registry in ADPI and ADT’s lawsuit against Swonke.2
    Two years later, in May 2014, Van Dyke and ADE each filed Uniform
    Commercial Code (UCC) Financing Statements to perfect the claimed security
    interests reflected in their loan agreements with ADPI. Both sides filed motions
    requesting disbursement of the supersedeas funds, but the court declined to
    entertain any requests until after the underlying case was fully concluded.
    On remand, a new final judgment was rendered in favor of Swonke but for a
    lesser amount. The lawsuit was fully concluded after the judgment was affirmed on
    appeal and the Supreme Court of Texas denied further review. See Anglo-Dutch
    Petroleum Int’l, Inc. v. Greenberg Peden, P.C., 
    522 S.W.3d 471
    (Tex. App.—
    Houston [14th Dist.] 2016, pet. denied). In February 2018, the trial court released
    $832,616.78 plus accrued interest to satisfy the judgment in favor of Swonke. As
    of that date, the funds remaining in the court registry totaled $1,268,584.03.
    Van Dyke, ADE, and the Investors entered into a Rule 11 agreement to
    submit their competing claims for the remaining funds to the court on motions to
    be filed and served by specific dates, followed by a hearing before the court. Both
    sides filed substantive motions, responses, and replies supported by numerous
    exhibits.
    The Investors sought the release of the funds on common law and statutory
    2
    Investor Littlemill obtained a turnover order for $173,750.62 of the supersedeas fund in
    the court registry that were “(i) ordered released to ADPI or ADT, (ii) available for release or
    disbursement to ADPI or ADT or (iii) otherwise released or disbursed to ADPI or ADT.” The
    other investors obtained a similarly worded turnover order for $992,813.62.
    4
    grounds, arguing that the trial court had discretion to release the funds in the court
    registry based on the Investors’ unsatisfied judgments, their turnover orders, the
    appellate rules, and the fraud findings against ADPI and ADT in the 2007 Order.
    The Investors also argued that the trial court had the power to help the Investors
    satisfy their judgments by signing its own turnover order. The Investors maintained
    that ADPI and ADT, as the depositors of the funds into the court registry, owned
    “an unadjudicated claim of an equitable interest in the return of those funds” that
    was subject to turnover.
    Van Dyke and ADE also sought release of the funds and turnover relief. Van
    Dyke moved to disburse and turn over to him the $403,252.55 then remaining in
    account no. 63901 after Swonke’s judgment was satisfied. Van Dyke argued that
    he was not a judgment debtor; he had prior and superior rights to the funds than the
    judgment debtors because he loaned ADPI the funds for the discrete purpose of
    posting the funds in lieu of a supersedeas bond; and his interest in the funds was
    secured by a promissory note, security agreement, and assignment and pledge of
    the funds. Van Dyke also argued that the Investors’ motions must be denied
    because it was improper to use a turnover order to determine the parties’
    substantive rights. ADE made similar arguments in its motion to disburse and turn
    over the $865,331.48 then remaining in account no. 64056 based on its loan
    agreement with ADPI.
    After hearing the parties’ arguments, the trial court rendered an “Order
    Releasing Supersedeas Deposits from the Court’s Registry and Turnover Order”
    (the Release and Turnover Order). The court found that the Investors’ motion “is
    meritorious on the common-law and statutory grounds set forth therein and
    therefore should be granted in its entirety.” In the Release and Turnover Order, the
    court made additional findings, including:
    5
     As of March 1, 2018, $403,252.55 remains in Harris County District
    Clerk CRS Account No. 63901, and $865,331.48 remains in Harris
    County District Clerk CRS Account No. 64056. These funds no
    longer constitute supersedeas funds because the judgments for which
    they were deposited to supersede have been paid in full;
     ADPI and ADT own “present or future rights to property” comprised
    of an unadjudicated claim of an equitable interest in the above-
    referenced funds still on deposit in the registry of the court as a matter
    of law;
     Intervenors [Van Dyke and ADE] did not deposit any funds into this
    Court’s registry at any time as a matter of fact and law;
     Intervenors [Van Dyke and ADE] do not own any rights, title or
    interests in or to any funds deposited into this Court’s registry as a
    matter of fact and law;
     The above-referenced funds cannot readily be attached or levied on by
    ordinary legal process; [and]
     The above-referenced funds are not exempt under any statute or other
    law from attachment, execution or seizure for the satisfaction of
    liabilities[.]
    Because the remaining funds were insufficient to fully satisfy the amounts ADPI
    and ADT owed to the Investors, the court ordered the court clerk to “immediately
    pay” the Investors amounts roughly proportionate to the amount of their
    judgments. This appeal followed.
    II. ANALYSIS
    In a single issue, Van Dyke and ADE contend that the trial court erred in
    ordering the almost $1.3 million remaining in the court registry to be paid to the
    Investors rather than to them. In the alternative, Van Dyke and ADE argue that
    turnover proceedings are procedural in nature and may not be used to determine
    the substantive rights of parties and non-judgment debtors without a trial.
    6
    In response, the Investors contend, as they did in the trial court, that the
    court had common law discretion and statutory discretion under the turnover
    statute to order disbursement of the funds to them. The Investors also argue that the
    trial court had no obligation to conduct a trial or other proceeding before awarding
    the funds to them; moreover, Van Dyke and ADE agreed to the resolution of their
    competing claims via a motion practice mirroring summary judgment and thus are
    not entitled to a “do-over.”
    The parties’ briefs raise numerous issues concerning the possible grounds
    for the trial court’s determination that only the Investors were entitled to the
    remaining funds in the court registry. For example, the parties dispute whether the
    trial court could take notice of its findings in the 2007 Order during the
    supersedeas proceeding that ADE, ADPI, and ADT were alter egos of Van Dyke
    (and each other) to invalidate the loan agreements on the theory that alter egos
    cannot enter into contracts with each other because a valid contract requires at least
    two parties.3 The parties also dispute the interpretation and legal effect of the
    property rights, if any, created by security agreements and assignments contained
    in the loan agreements. Among other things, Van Dyke and ADE contend that their
    security interests extend to the full amount of the money loaned for “the Bond”
    plus all accrued interest and all other awards identified in the documents, while the
    Investors contend that the interests granted are limited to only those monies that
    are “collected” by ADPI. The parties also dispute when each other’s interests
    “attached” for purposes of determining priority in time and whether the collateral
    3
    While we do not express any opinion concerning the parties’ merits arguments, we note
    that the supreme court has held that “an alter ego finding in a post-judgment net worth
    proceeding may not be used to enforce the judgment against the unnamed alter ego or any other
    nonjudgment debtor, but only to determine the judgment debtor’s net worth for the purposes of
    Rule 24 [of the Texas Rules of Appellate Procedure].” In re Smith, 
    192 S.W.3d 564
    , 568–69
    (Tex. 2006).
    7
    described in Van Dyke and ADE’s 2014 financing statements should be classified
    as “monies” or “general intangibles” for purposes of determining whether Van
    Dyke and ADE could perfect a security interest in the funds under the UCC.
    We do not address the merits of these arguments, however, because we
    conclude that, based on the recent Supreme Court of Texas opinion in Alexander
    Dubose Jefferson & Townsend LLP v. Chevron Phillips Chemical Co., the trial
    court was not authorized to determine the competing ownership claims of either
    the parties or the third-party intervenors in a turnover proceeding. See 
    540 S.W.3d 577
    , 585 (Tex. 2018) (per curiam). We also conclude that, consistent with the
    appellate opinion on remand in that case, as well as prior precedent, competing
    ownership claims must be determined in separate, initial proceedings. See, e.g.,
    Alexander Dubose Jefferson & Townsend LLP v. Chevron Phillips Chem. Co., ___
    S.W.3d ___, No. 09-14-00313-CV, 
    2019 WL 1181730
    (Tex. App.—Beaumont
    Mar. 14, 2019, no pet. h.); Woody K. Lesikar Special Tr. v. Moon, No. 14-10-
    00119-CV, 
    2011 WL 3447491
    (Tex. App.—Houston [14th Dist.] Aug. 9, 2011,
    pet. denied) (mem. op); Lozano v. Lozano, 
    975 S.W.2d 63
    (Tex. App.–Houston
    [14th Dist.] 1998, pet. denied); Republic Ins. Co. v. Millard, 
    825 S.W.2d 780
    (Tex.
    App.—Houston [14th Dist.] 1992, no writ). We therefore sustain Van Dyke and
    ADE’s first issue as to their alternative argument that a remand for further
    proceedings is required.
    A.    The Turnover Statute
    Texas Civil Practice and Remedies Code section 31.002, commonly referred
    to as the “turnover statute,” is a procedural device that permits a trial court to order
    the judgment debtor to turn over nonexempt property that is in the judgment
    debtor’s possession or control, including present or future rights to property. See
    Tex. Civ. Prac. & Rem. Code § 31.002; Alexander 
    Dubose, 540 S.W.3d at 581
    ;
    8
    Beaumont Bank, N.A. v. Buller, 
    806 S.W.2d 223
    , 224 (Tex. 1991). The turnover
    statute’s purpose is merely to ascertain whether or not an asset is in the possession
    of the judgment debtor or subject to the debtor’s control. 
    Buller, 806 S.W.2d at 227
    . It is not to be used to determine parties’ and non-judgment debtors’
    substantive rights or property rights. Alexander 
    Dubose, 540 S.W.3d at 583
    ;
    
    Lozano, 975 S.W.2d at 68
    .
    The turnover statute provides in part:
    (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 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
    (3) 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.
    See Tex. Civ. Prac. & Rem. Code § 31.002(a)–(d).
    We review the trial court’s order or judgment in a turnover proceeding for
    abuse of discretion. See 
    Buller, 806 S.W.2d at 226
    . A trial court abuses its
    9
    discretion when it acts in an unreasonable or arbitrary manner, without reference to
    any guiding rules and principles. 
    Id. A trial
    court has no discretion in determining
    what the law is or applying the law to the facts. See Huie v. DeShazo, 
    922 S.W.2d 920
    , 927 (Tex. 1996); Marrs v. Marrs, 
    401 S.W.3d 122
    , 124 (Tex. App.—Houston
    [14th Dist.] 2011, no pet.). Consequently, a trial court’s erroneous legal
    conclusion, even in an unsettled area of law, is an abuse of discretion. See 
    Marrs, 401 S.W.3d at 124
    .
    B.    The Supreme Court of Texas’s Opinion in Alexander Dubose
    In Alexander Dubose, the issue before the supreme court was whether a
    post-judgment turnover order that affected the rights of an intervening non-
    judgment debtor was a final judgment for purposes of appeal. 
    See 540 S.W.3d at 578
    . In that case, a law firm intervened in a turnover proceeding seeking a
    declaration that based on the law firm’s fee agreement with the judgment debtor,
    the law firm owned a portion of the funds the judgment creditor sought from the
    judgment debtor. 
    Id. at 579.
    The law firm also argued that its contractual claim had
    priority over the judgment creditor’s claims. 
    Id. The trial
    court signed a turnover
    order that awarded the portion of the funds not in dispute to the judgment creditor
    and ordered the disputed funds deposited into the court registry without prejudice
    to the parties’ rights to assert claims to those funds. 
    Id. at 579.
    After further
    proceedings, the trial court signed a release order denying the law firm’s claims
    and awarding the disputed funds to the judgment creditor. See 
    id. The law
    firm
    appealed the release order, but the Beaumont Court of Appeals dismissed the
    appeal for want of jurisdiction on the grounds that the law firm should have
    appealed the turnover order rather than the subsequent release order because the
    turnover order was the final, appealable judgment. 
    Id. at 580.
    On review, the supreme court considered whether the law firm’s failure to
    10
    timely appeal the turnover order deprived the court of appeals of jurisdiction. 
    Id. at 578.
    The supreme court began by considering whether the court of appeals erred
    by concluding that the turnover order was appealable because it indicated that the
    trial court had determined that the judgment debtor owned the disputed funds. See
    
    id. at 582.
    Contrary to the court of appeals, the supreme court determined that
    neither the trial court’s oral statements nor the turnover order finally disposed of
    the competing claims. 
    Id. at 582–83.
    The supreme court also found it worth noting
    that, in addition, “there was never a separate, initial proceeding adjudicating [the
    law firm’s] claims.” 
    Id. at 583.
    The supreme court criticized the court of appeals’ conclusion that the
    turnover order reflected a determination of the parties’ substantive ownership
    rights because it ran counter to longstanding precedent that “regards turnover
    proceedings as being limited to their purely procedural nature and, thus, bars use of
    the turnover statute to determine parties’ and non-judgment debtors’ substantive
    rights.” See 
    id. at 583
    (citing 
    Buller, 806 S.W.2d at 227
    ). The supreme court also
    disapproved of the case law relied on by the court of appeals and the judgment
    creditor for the proposition that “a non-judgment debtor cannot complain that their
    substantive rights were decided in a turnover proceeding if they intervened.” 
    Id. at 585–86.
    As the supreme court explained: “[T]he turnover statute has no provision
    conferring authority on trial courts to decide the substantive rights of the parties
    properly before it in a turnover proceeding, let alone the rights of strangers to the
    underlying judgment.” 
    Id. at 585.
    The supreme court acknowledged that conflicting opinions issued in 1991
    have since “caused much confusion” about the permissible scope of turnover
    proceedings regarding “(1) how to resolve competing substantive claims to
    property sought in a turnover application if the turnover proceeding[] is truly a
    11
    purely procedural mechanism, and (2) the extent to which a turnover order can
    affect the rights of non-judgment debtors.” 
    Id. at 584.
    However, because neither
    the turnover order nor any other judgment reflected a decision on the law firm’s
    substantive claims, the supreme court found it unnecessary to “delineate the
    appropriate mechanism for resolving competing substantive claims to property
    sought in a turnover application.” 
    Id. at 586.
    The supreme court then determined that the turnover order did not function
    as a mandatory injunction and thus was not a final, appealable order. See 
    id. at 583
    ,
    586–88. The supreme court held that the release order, not the earlier turnover
    order, was the first determination of the parties’ competing substantive ownership
    rights. 
    Id. at 588.
    Because the law firm timely appealed from the release order, the
    supreme court remanded the case to the court of appeals to address the appeal on
    the merits. See 
    id. at 588–89.
    C.    The Court of Appeals’ Opinion on Remand in Alexander Dubose
    On remand, the law firm appealed the trial court’s judgment as contained in
    the release order. Alexander Dubose, 
    2019 WL 1181730
    , at *1. The law firm
    claimed ownership rights to a portion of the disputed funds based on its fee
    agreement as well as a contractual security interest and attorney’s lien that were
    superior to the judgment creditor’s lien. See 
    id. Additionally, the
    law firm argued
    that its property rights as a non-judgment debtor were at issue. 
    Id. at *3.
    To
    determine the appeal, the court of appeals first had to address the issue the supreme
    court declined to reach on review: whether and to what extent the trial court could
    adjudicate such competing claims in a turnover proceeding. See 
    id. at *1;
    see also
    Alexander 
    Dubose, 540 S.W.3d at 584
    –85. Based on the record before it, the court
    of appeals held that the trial court abused its discretion when it entered the release
    order requiring payment of the disputed funds to the judgment creditor without
    12
    first adjudicating the claims of ownership by the non-judgment debtor in a
    separate, initial proceeding. See Alexander Dubose, 
    2019 WL 1181730
    , at *8.
    To reach its conclusion, the court of appeals first examined the split of
    authority among the courts concerning whether substantive claims can be
    adjudicated in turnover proceedings. See 
    id. at *4.
    The court of appeals determined
    that a majority of cases have held that turnover proceedings cannot be used to
    determine the parties’ substantive rights or be applied to non-judgment debtors. 
    Id. at *4–5
    (collecting cases). The court of appeals also determined that a minority of
    cases have allowed for substantive determinations and reaching beyond the
    judgment debtor if the trial court made “particular findings.” 
    Id. at *5
    (collecting
    cases). As the court of appeals found, most of these cases require “at a minimum, a
    finding by the trial court that the true judgment debtors are owners of the property
    at issue.” 
    Id. The court
    of appeals distinguished its case from the minority line of
    cases because the trial court never made a fact finding that the judgment debtor
    owned the disputed funds. 
    Id. Next, the
    court of appeals addressed whether the law firm’s post-judgment
    intervention enabled the trial court to determine the law firm’s substantive claims.
    
    Id. The court
    of appeals rejected the judgment creditor’s position that because the
    law firm “inject[ed] itself into the proceedings” by intervening it could not
    complain about the trial court’s substantive determination. 
    Id. The court
    of appeals
    also cited the supreme court’s rejection of this argument on review. 
    Id. at *6
    (citing
    Alexander 
    Dubose, 540 S.W.3d at 585
    ). As the court of appeals reasoned:
    If we were to agree with [the judgment creditor’s] assertion, we would
    be determining [the law firm’s] only options were: (1) forfeit any
    interest it had in the funds by failing to intervene; or (2) intervene and
    attempt to protect their interest but forfeit any right to complain
    regarding a trial court’s abuse of discretion. We do not believe
    protecting one’s interest in property post-judgment by intervening in a
    13
    turnover proceeding forfeits one’s right to complain about a trial
    court’s rulings on appeal, especially when a trial court “expand[s] the
    scope of the turnover statute beyond its purpose as a purely procedural
    device to assist judgment creditors in post-judgment collections.” See
    Republic Ins. 
    Co., 825 S.W.2d at 782
    . If we were to conclude
    otherwise, a non-party to the underlying litigation holding a property
    interest that is under threat in a post-judgment enforcement
    proceeding would, in effect, be left without a remedy.
    
    Id. Ultimately, the
    court of appeals aligned itself with the majority of cases
    holding that a trial court cannot determine substantive claims in a turnover
    proceeding and concluded that “a trial court must hold separate, initial proceedings
    adjudicating competing claims of ownership before and apart from the issuance of
    a turnover order.” 
    Id. As the
    court of appeals explained:
    We believe this solution affords due process to non-parties who
    intervene post-judgment to protect their property interests, while
    precluding the trial court from expanding the turnover procedure
    beyond its purely procedural nature. By conducting initial, separate
    proceedings on claims of competing ownership, a trial court’s
    resolution will be distinct from the turnover proceeding. This is
    consistent with the turnover statute and long-standing precedent
    holding the parties’ and non-judgment debtors’ substantive rights
    cannot be adjudicated in a turnover proceeding.
    
    Id. (citation omitted).
    The court of appeals also concluded that its holding comports with the
    language of section 31.002: “By statute, a judgment creditor is entitled to aid if the
    judgment debtor owns property; then, the trial court may reach property the
    judgment debtor possesses or controls.” 
    Id. (citing Tex.
    Civ. Prac. & Rem.
    Code § 31.002(a), (b); 
    Buller, 806 S.W.2d at 227
    ; Parks v. Parker, 
    957 S.W.2d 666
    , 670 (Tex. App.—Austin 1997, no pet.)). The court of appeals reasoned that
    without holding an initial, separate proceeding to determine competing claims of
    14
    ownership, a judgment creditor seeking turnover could not meet the first element
    the statute requires, which is to show that “the judgment debtor owns [the]
    property, including present or future rights to property.” 
    Id. at *7
    (alterations in
    original) (quoting Tex. Civ. Prac. & Rem. Code § 31.002(a)).
    Accordingly, the court of appeals held that in light of the competing
    ownership claims to the funds, the trial court abused its discretion when it entered
    the release order requiring payment of the disputed funds in the court’s registry to
    the judgment creditor without first adjudicating the claims of ownership by the
    non-judgment debtor in a separate, initial proceeding. 
    Id. at *7
    –8. The court of
    appeals reversed the trial court’s release order and remanded the case for further
    proceedings. 
    Id. at *8.
    D.    The Trial Court Erred in Determining Substantive Rights in the
    Turnover Proceeding
    In this case, Van Dyke and ADE claim property rights based on security
    agreements and assignments contained in their loan agreements with ADPI, while
    the Investors claim rights as judgment creditors of ADPI and ADT. These
    claimants are neither parties to the underlying judgment nor judgment debtors. Yet,
    the trial court finally adjudicated the parties’ rights in the turnover proceeding,
    finding that ADPI and ADT own an “unadjudicated claim of an equitable interest”
    in the remaining funds, Van Dyke and ADE “do not own any rights, title or
    interests in or to any funds,” and the Investors were entitled to all of the funds
    based on “the common-law and statutory grounds set forth” in the Investors’
    motion.
    In light of the supreme court’s recent emphasis on the continued vitality of
    prior precedent holding that turnover proceedings are purely a procedural device
    that do not authorize trial courts to determine parties’ and non-judgment debtors’
    15
    substantive rights, we conclude that the trial court abused its discretion by reaching
    the merits of the competing claims in the turnover proceeding. See, e.g., Alexander
    
    Dubose, 540 S.W.3d at 584
    –85; 
    Buller, 806 S.W.2d at 227
    ; Alexander Dubose,
    
    2019 WL 1181730
    , at *6–7; see also Elgohary v. Herrera Partners, L.P., No. 01-
    13-00193-CV, 
    2014 WL 2538556
    , at *3 (Tex. App.—Houston [1st Dist.] June 5,
    2014, no pet.) (mem. op.) (stating that “the turnover statute does not authorize a
    court to issue orders against those who are not judgment debtors or under the
    judgment debtor’s control”); Moon, 
    2011 WL 3447491
    , at *6 (holding that the trial
    court abused its discretion by making a substantive determination that the
    appellant’s reimbursement claim was without merit in a turnover proceeding);
    
    Lozano, 975 S.W.2d at 68
    (“Texas courts do not apply the turnover statute to non-
    judgment debtors. Nor can the turnover statute be used to determine a party’s
    substantive rights or property rights of third parties.” (citation omitted)); Republic
    Ins. 
    Co., 825 S.W.2d at 783
    (explaining that the turnover statute “does not allow
    for a determination of the substantive rights of involved parties”).
    The Investors dismiss the supreme court’s opinion in Alexander Dubose as
    inapplicable, however, arguing that Van Dyke and ADE agreed to resolve the
    parties’ competing claims by motion practice and are not entitled to a “do-over”
    now that the trial court ruled against them. The Investors point out that Van Dyke
    and ADE signed a Rule 11 agreement governing how the competing claims would
    be submitted to the trial court, filed separate motions arguing that the trial court
    should disburse the funds to them, and even stated in one filing that “this Court has
    discretion to enter a judgment for ADE and Van Dyke.” According to the
    Investors, Van Dyke and ADE cannot encourage trial courts to proceed in certain
    ways or agree to trial court procedures and then complain on appeal that the trial
    court erred by proceeding as encouraged or agreed. But the Investors do not
    16
    explain how the parties’ agreement could confer authority on the trial court to
    determine rights it is otherwise precluded from determining in a turnover
    proceeding merely because Van Dyke and ADE intervened to protect their
    substantive rights to the disputed funds. Cf. Alexander 
    Dubose, 540 S.W.3d at 585
    (rejecting the argument that a non-party’s intervention in a turnover proceeding to
    protect its interests authorizes a court to adjudicate third-party rights).
    The Investors next contend that the trial court’s order can be affirmed on the
    common law grounds cited in the Release and Turnover Order based on Burns v.
    Bishop, 
    48 S.W.3d 459
    (Tex. App.—Houston [14th Dist.] 2001, no pet.). In Burns,
    the depositor of supersedeas funds and two judgment creditors each sought
    turnover of the funds remaining in the court registry. 
    Id. at 462–63.
    A partnership
    intervened in the proceeding to claim an interest in the funds based on a
    promissory note and assignment from the depositor. See 
    id. at 463.
    This court
    affirmed the trial court’s judgment awarding the remaining funds to the judgment
    creditors, noting that “[f]unds on deposit in the registry of a trial court are always
    subject to the control and order of the trial court, and the court enjoys great latitude
    in dealing with them.” 
    Id. at 467.
    The Investors maintain that just as in Burns, the
    trial court did not abuse its discretion in disbursing the funds to the Investors to
    partially satisfy their judgments and turnover orders. Moreover, the Investors
    contend that because the relief the trial court granted in Burns was based on the
    common law rather than the turnover statute, Alexander Dubose does not apply to
    or permit a “do-over” in a new common law proceeding. We conclude that Burns
    is not dispositive as the Investors suggest.
    In Burns, John Burns made a series of deposits of cash in lieu of a bond into
    the court registry in connection with an appeal and settlement of a lawsuit. 
    Id. at 462.
    Burns borrowed the money for his initial deposit from a family limited
    17
    partnership and assigned to the partnership “all my cash refund up to and including
    the principal amount of $117,274.41 plus accrued interest.” 
    Id. After the
    case was
    concluded and the supersedeas funds were paid out, Burns and two judgment
    creditors claimed rights in the remaining funds. 
    Id. at 462–63.
    The partnership later
    intervened in the proceeding to request that the trial court award it the money on
    deposit. 
    Id. at 463.
    The trial court found that Burns had a claim to the funds in the
    registry against which his creditors could collect, and the partnership’s assigned
    claim of any refund due Burns was inferior to the judgment creditors’ claims to the
    funds in the registry. 
    Id. Because the
    judgment creditors’ claims exceeded the
    amount remaining after the superseded judgment was satisfied, the trial court
    divided the bulk of the funds to the judgment creditors roughly in proportion to the
    amount of their claims. 
    Id. On appeal,
    this court affirmed, explaining that once the superseded judgment
    was satisfied, Burns had the only claim to the funds in the registry until the
    judgment creditors asserted their superior claim to Burns’s interest. See 
    id. at 466–
    67. In contrast, the partnership’s only claim to the funds was based on the
    contingency that the money would be refunded to Burns, and it was further limited
    to the $117,274.41 principal plus interest on that amount. 
    Id. at 467.
    Because
    Burns did not receive a refund, the assignment transferred nothing to the
    partnership. 
    Id. Even if
    there had been a refund, the court explained, the
    partnership failed to advance a viable legal theory supported by evidence to
    recover the specific portion of the funds comprising the principal and interest the
    assignment covered. See 
    id. at 467–68.
    The partnership did not did seek to recover
    against Burns, was not awarded the money, and did not appeal. 
    Id. at 467.
    Significantly, the court noted that had the partnership possessed a claim to the
    unrefunded deposit, the result may well have been different. See 
    id. 18 Unlike
    the partnership in Burns, Van Dyke and ADE claim property
    interests in the remainder of the funds deposited into the court registry based on
    rights created by both assignments and security agreements contained in their loan
    agreements with ADPI, and they have presented legal arguments and evidence in
    support of their claims which the Investors hotly contest. More importantly, in both
    the trial court and on appeal, Van Dyke and ADE have challenged the trial court’s
    authority to determine the parties’ substantive rights in a turnover proceeding—an
    issue not raised or discussed in Burns.
    While the Investors rely on the trial court’s discretion as exercised in Burns,
    Alexander Dubose and the precedent discussed above make clear that a trial court
    has no discretion to determine the substantive rights of parties and non-judgment
    debtors in a turnover proceeding. See, e.g., Alexander 
    Dubose, 540 S.W.3d at 583
    ;
    
    Buller, 806 S.W.2d at 227
    ; see also Ex parte Swate, 
    922 S.W.2d 122
    , 125–26 (Tex.
    1996) (Gonzalez, J., concurring) (arguing that “[a] turnover order that issues
    against a non-party for property not subject to the control of the judgment debtor
    completely bypasses our system of affording due process” absent “other initial
    proceedings”); Elgohary, 
    2014 WL 2538556
    , at *4 (“[A]s a purely procedural
    mechanism to aid in collecting judgments, a turnover order cannot be used as a
    shortcut to avoid judicial proceedings necessary to provide third parties due
    process in adjudicating their substantive rights.”). The Investors cite no case
    holding that a trial court may exercise its discretion over funds in the court registry
    in a manner that allows it to circumvent the limited procedural nature of a turnover
    proceeding and disregard third parties’ due process rights. On this record, we
    conclude that the trial court abused its discretion when it rendered the Release and
    Turnover Order.
    19
    E.    Remand for Separate, Initial Proceedings is Required
    Having concluded that the trial court abused its discretion, we hold that a
    remand for separate, initial proceedings is required in this case. See, e.g.,
    Alexander Dubose, 
    2019 WL 1181730
    , at *6–7 (concluding that a trial court must
    hold separate, initial proceedings adjudicating competing claims of ownership
    before and apart from the issuance of a turnover order); Moon, 
    2011 WL 3447491
    ,
    at *6 (recognizing that the turnover statute does not allow for a determination of
    the parties’ substantive rights and that the trial court had no discretion to “skip the
    trial on the merits and declare a party the winner”) (quotations and alterations in
    original omitted); Elgohary, 
    2014 WL 2538556
    , at *4 (holding that creditor
    “cannot use the turnover statute to determine ownership of disputed funds or
    litigate issues of alter-ego”); United Bank Metro v. Plains Overseas Grp., Inc., 
    670 S.W.2d 281
    , 284 (Tex. App.—Houston [1st Dist.] 1983, no writ) (holding that
    creditor who obtained judgment against individual was not entitled to turnover
    order against corporation alleged to be individual’s alter ego until creditor
    successfully pierced corporate veil “in a separate trial”); see also Resolution Trust
    Corp. v. Smith, 
    53 F.3d 72
    , 80 (5th Cir. 1995) (holding that trial court erred in
    determining that stock pledge was a fraudulent transfer and thus void in a Texas
    turnover proceeding because the validity of the pledge agreement “must be
    challenged in a further proceeding.”).
    As discussed above, the court of appeals on remand in Alexander Dubose
    found that a minority of Texas cases have permitted substantive determinations in
    turnover proceedings if supporting fact findings are made. See Alexander Dubose,
    
    2019 WL 1181730
    , at *5. The court of appeals distinguished the case before it
    from the minority line of cases because no fact findings were made in that case. 
    Id. In the
    case before us, the trial court made fact findings concerning the ownership
    20
    rights and interests of both the parties and the non-party intervenors. Nevertheless,
    we decline to follow the minority line of cases because it is contrary to the
    precedent holding that turnover proceedings cannot be used to determine parties’
    substantive rights or be applied to non-judgment debtors. See Alexander 
    Dubose, 540 S.W.3d at 583
    –84. This precedent applies even as to third parties that
    intervene in the turnover proceeding to protect their property rights. See 
    id. at 585.4
    To conclude otherwise would improperly “enlarge[] the turnover statute’s scope
    beyond the procedural vehicle” our legislature contemplated merely because the
    trial court made fact findings it was not authorized to make. See Republic Ins. 
    Co., 825 S.W.2d at 783
    .
    Because the trial court lacked authority to adjudicate the competing
    ownership claims to the funds remaining in the court registry in a turnover
    proceeding, the trial court abused its discretion in ordering the turnover of those
    finds in the absence of separate, initial proceedings to adjudicate the claims of the
    parties and the intervening non-judgment debtors. See Alexander Dubose, 
    2019 WL 1181730
    , at *7. Accordingly, we do not reach the merits of Van Dyke and
    ADE’s issues.
    III. CONCLUSION
    We sustain Van Dyke and ADE’s sole issue on their alternative ground that
    turnover proceedings may not be used to determine the substantive rights of parties
    and hold that the trial court erred in adjudicating the competing ownership claims
    to the funds remaining in the court registry in a turnover proceeding without
    separate, initial proceedings to resolve the claims of the parties and non-party
    intervenors. We reverse the trial court’s Release and Turnover Order and remand
    4
    Notably, Van Dyke and ADE point out that that the Investors have previously filed
    separate lawsuits raising alter ego and other claims against Van Dyke the Anglo-Dutch entities.
    21
    the case to the trial court for further proceedings.
    /s/    Ken Wise
    Justice
    Panel consists of Justices Wise, Zimmerer, and Spain.
    22