in Re: Catherine Karlseng ( 2014 )

Conditionally GRANT; and Opinion Filed February 12, 2014.
Court of Appeals
S In The
Fifth District of Texas at Dallas
No. 05-14-00049-CV
IN RE CATHERINE KARLSENG, Relator
Original Proceeding from the 192nd Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC-08-14206-K
MEMORANDUM OPINION
Before Justices Bridges, Lang-Miers, and Myers
Opinion by Justice Lang-Miers
Relator, Catherine Karlseng, filed this mandamus proceeding after the trial court rendered
a turnover order requiring her to turn over certain income that she receives from the law firm
where her husband Robert Karlseng, the judgment debtor, works. We conditionally grant relief.
BACKGROUND
This petition for writ of mandamus arises from a turnover proceeding following the trial
court’s rendition of summary judgment against Robert Karlseng for the unpaid principal, interest,
and charges on a promissory note. Catherine Karlseng was not a party in the case. After
attempting a variety of means to identify executable property owned by Robert Karlseng, Wells
Fargo Bank, N.A. 1, the party seeking to enforce the judgment and real party in this proceeding,
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Catherine Karlseng argues that Wells Fargo is not the proper party to enforce the judgment in this case because the judgment was in favor
of Wachovia Bank, National Association. Because we conclude that the issuance of a turnover order against Catherine Karlseng was improper in
a proceeding in which she was not joined as a party, we need not reach this issue.
filed an application for a turnover order, the appointment of a receiver, and a temporary
restraining order pursuant to Section 31.002(b)(3) of the Texas Civil Practice and Remedies
Code. During the course of the proceedings on the turnover order, Wells Fargo sought to
establish that while Robert Karlseng is nominally an employee of the professional corporation
where he is a named principal and works as a lawyer, he is actually an independent contractor.
Wells Fargo further sought to establish that while Catherine Karlseng is also nominally
employed by the same law firm, she does not do any work for the firm and receives wages only
by virtue of Robert Karlseng’s work at the firm. Wells Fargo argued that the amounts Catherine
Karlseng receives from the firm are actually Robert Karlseng’s income held on his behalf by
Catherine Karlseng. Wells Fargo argued that all of the proceeds that the Karlsengs receive from
the law firm, whether paid to Robert Karlseng or Catherine Karlseng, are not wages, which are
exempt from execution under Texas law, but rather are subject to execution as the proceeds from
Robert Karlseng’s work as an independent contractor.
After reviewing extensive briefing and argument and conducting several evidentiary
hearings on the application for turnover, the trial court rendered an order requiring Catherine
Karlseng to turn over “all income and other amounts derived by Catherine Karlseng, directly or
indirectly, from Defendant's work as a lawyer and his law firm” and to further turn over a variety
of assets related to that income. Catherine Karlseng then brought this mandamus proceeding.
Robert Karlseng is not a party to the petition for writ of mandamus.
AVAILABILITY OF MANDAMUS REVIEW
Standard of Review
To obtain mandamus relief, a relator must show both that the trial court has clearly
abused its discretion and that she has no adequate appellate remedy. In re Prudential Ins. Co.,
148 S.W.3d 124, 135-36 (Tex. 2004) (orig. proceeding); Walker v. Packer, 827 S.W.2d 833,
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839-40 (Tex. 1992) (orig. proceeding). A trial court has “no ‘discretion’ in determining what the
law is or applying the law to facts.” In re Prudential, 148 S.W.3d at 135 (quoting Walker, 827
S.W.2d at 840).
Adequacy of Appeal
Wells Fargo argues first that Catherine Karlseng is not entitled to relief because she has
an adequate remedy by appeal. As between the judgment debtor and the judgment creditor, a
turnover order is a final, appealable judgment. See Davis v. West, 317 S.W.3d 301, 309 (Tex.
App.—Houston [1st Dist.] 2009, no pet.); Burns v. Miller, Hiersche, Martens & Hayward, P.C.,
909 S.W.2d 505, 506 (Tex. 1995).
Third parties also have a right to appeal turnover orders to “protect their affected property
interests.” Schultz v. Fifth Judicial Dist. Court of Appeals, 810 S.W.2d 738, 739 n.3 (Tex. 1991)
(dictum), abrogated on other grounds, In re Sheshtawy, 154 S.W.3d 114 (Tex. 2004); see also
Gerjets v. Davila, 116 S.W.3d 864, 869-70 (Tex. App.—Corpus Christi 2003, no pet.). Texas
Courts of Appeals disagree, however, on whether appeal is the only appropriate remedy for
attacking an improvidently granted turnover order rendered against a third party. Compare Plaza
Court, Ltd. v. West, 879 S.W.2d 271, 276-77 (Tex. App.—Houston [14th Dist.] 1994, no writ)
(mandamus appropriate where turnover order authorized receiver to dispose of assets of third
party); Republic Ins. Co. v. Millard, 825 S.W.2d 780, 783 (Tex. App.—Houston [14th Dist.]
1992, no writ) (third party lacked adequate remedy by appeal) with Int'l Paper Co. v. Garza, 872
S.W.2d 18 (Tex. App.—Corpus Christi 1994, no writ) (mandamus denied because third party
had an adequate remedy by appeal).
Whether an appellate remedy is adequate depends heavily on the circumstances
presented. In re Prudential, 148 S.W.3d at 136–37; In re Estate of Hutchins, 391 S.W.3d 578,
583 (Tex. App.—Dallas 2012, orig. proceeding). Mandamus review is not justified simply
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because an appeal would arguably involve more cost or delay than mandamus. Walker, 827
S.W.2d at 842. But this case does not involve a complaint simply that appeal would involve a
costly delay in the resolution of Catherine Karlseng’s complaints. Rather, in this case she asserts
that the receiver has frozen her bank account and refuses to disclose whether her funds are still
being held in her bank account or whether they have been disposed of in some other fashion. She
contends that she has been unable to pay her living expenses and that checks she has written
from her checking account have been returned for insufficient funds. A complaint that a
turnover action will permanently impact the rights of a third party is not a complaint about the
delay or expense associated with appeal. Plaza Court, 879 S.W.2d at 276-77.
Here, Wells Fargo argues that Catherine Karlseng has an adequate remedy on appeal
because she can supersede execution of the judgment against her assets and obtain appellate
review. We disagree. A judgment debtor can supersede a turnover order to suspend its
enforcement of the judgment. Schultz, 810 S.W.2d at 739 n.3; Elaine A. Carlson, Reshuffling
the Deck: Enforcing and Superseding Civil Judgments on Appeal After House Bill 4, 46 S. TEX.
L. REV. 1035, 1062 (2005). But that does not necessarily mean the same path provides an
adequate remedy in all circumstances for a non-party to the underlying judgment who has been
ordered to turn over property in which the non-party claims an ownership interest. The
provisions of the Texas Rules of Appellate Procedure and the Texas Civil Practice & Remedies
Code concerning supersedeas bonds apply expressly to judgment debtors. TEX. R. APP. P.
24.1(a); TEX. CIV. PRAC. & REM. CODE ANN. §52.006(b). A supersedeas bond is security for
delay in enforcing the judgment against the judgment debtor. Universe Life Ins. Co. v. Giles, 982
S.W.2d 488, 493 (Tex. App.—Texarkana 1998, pet. denied); Weber v. Walker, 591 S.W.2d 559,
563 (Tex. Civ. App.—Dallas 1979, no writ); Mudd v. Mudd, 665 S.W.2d 128, 130 (Tex. App.—
San Antonio 1983, no writ); see generally Elaine A. Carlson, Mandatory Supersedeas Bond
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Requirements-A Denial of Due Process Rights?, 39 BAYLOR L. REV. 29, 61 (1987). Catherine
Karlseng is not a judgment debtor in this case and cannot be required to supersede the judgment
to prevent execution against her assets. Accordingly, mandamus lies for her to seek relief from
the turnover order that purports to allow execution against assets she claims are hers.
ENFORCEMENT OF TURNOVER ORDER AGAINST NON-PARTY
The legislature's purpose in enacting the turnover statute was to facilitate the collection of
assets from judgment debtors. Republic Ins. Co. v. Millard, 825 S.W.2d 780, 783 (Tex. App.—
Houston [14th Dist.] 1992, no writ). But “Texas courts do not apply the turnover statute to non-
judgment debtors,” Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223, 227 (Tex. 1991)
(representative of estate could not be ordered to turn over property she possessed in her
individual capacity), and we have said that a trial court may not adjudicate third party ownership
claims in a turnover proceeding. Turner Bros. Trucking, L.L.C. v. Baker, 396 S.W.3d 672, 675
(Tex. App.—Dallas 2013, no pet.) (turnover statute was not available to obtain relief from non-
parties in their individual capacities). The turnover statute is purely procedural and does not
allow for the determination of the substantive rights of third parties. Cross, Kieschnick & Co. v.
Johnston, 892 S.W.2d 435, 439 (Tex. App.—San Antonio 1994, no writ) (turnover order could
not be rendered against partners when underlying judgment involved corporation); Republic Ins.,
825 S.W.2d at 783 ( judgment creditor could not use turnover proceeding to force a third party to
litigate a bad faith claim in court issuing turnover order); Cravens, Dargan & Co. v. Peyton L.
Travers Co., 770 S.W.2d 573, 576–77 (Tex. App.—Houston [1st Dist.] 1989, writ denied)
(judgment creditor could not use turnover statute to reach funds held by State Board of
Insurance); United Bank Metro v. Plains Overseas Group, Inc., 670 S.W.2d 281, 284 (Tex.
App.—Houston [1st Dist.] 1983, no writ) (judgment creditor who obtained judgment against
individual was not entitled to turnover order against corporation). But see Dale v. Fin. Am.
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Corp., 929 S.W.2d 495, 498 (Tex. App.—Fort Worth 1996, writ denied) (adjudicating a claim
that a trust was community property in a turnover proceeding); Norsul Oil & Mining Ltd. v.
Commercial Equip. Leasing Co., 703 S.W.2d 345, 349 (Tex. App.—San Antonio 1985, no writ)
(determining whether judgment debtor had actually assigned and conveyed shares of stock to
third party).
It is undisputed that Catherine Karlseng was not a party before the court in the underlying
litigation and was not a judgment debtor. A judgment may be enforced against a non-party to the
judgment only by bringing a separate suit alleging a basis for enforcing the judgment against that
party. In re Smith, 192 S.W.3d 564, 568 (Tex. 2006) (judgment may not be amended to include
an alter ego or any other nonjudgment debtor that was not named in the suit); see also Custom
Corporates, Inc. v. Sec. Storage, Inc., 207 S.W.3d 835, 840 (Tex. App.—Houston [14th Dist.]
2006, no pet.) (neither a court's inherent authority to enforce a judgment nor the Texas Rules of
Civil Procedure authorize joinder of parties post-judgment). As a result, the trial court could not
order her to turn over property in which she claims an ownership interest without conducting
proceedings in which she was a party and afforded the opportunity to assert her claim to that
property. Accordingly, we CONDITIONALLY GRANT the relator’s petition for writ of
mandamus. A writ will issue only in the event the trial court fails to vacate its November 21,
2013 Order Granting Plaintiff’s Designation of Assets (Related to Catherine Karlseng Received
Income) for Turnover to Receiver and Granting Powers and Duties of Receiver.
/Elizabeth Lang-Miers/
ELIZABETH LANG-MIERS
JUSTICE
140049F.P05
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