CRE8 International, LLC v. Elexis Rice

Affirmed as Modified and Opinion Filed June 3, 2015
S In The
Court of Appeals
Fifth District of Texas at Dallas
No. 05-14-00377-CV
CRE8 INTERNATIONAL, LLC, Appellant
V.
ELEXIS RICE, Appellee
On Appeal from the 68th Judicial District Court
Dallas County, Texas
Trial Court Cause No. DC 10-15253
MEMORANDUM OPINION
Before Justices Francis, Lang-Miers, and Whitehill
Opinion by Justice Whitehill
Appellee Elexis Rice obtained a money judgment against Gary Pilant and filed a motion
for a turnover order. Appellant Cre8 International, Inc., which had not previously been a party to
the suit, filed a petition in intervention opposing Rice’s motion. The trial court signed a turnover
order, and Cre8 perfected this appeal. For the following reasons, we modify the trial court’s
order and affirm as modified.
I. BACKGROUND
Rice sued 3G Global, LLC for nonpayment of a debt and Gary Pilant as guarantor of that
debt. The trial judge severed the claim against Pilant and signed an agreed final judgment
awarding Rice $250,000 against him.
Rice later filed a motion for a turnover order, which sought an order compelling Pilant to
turn over the internet domain names and registrations for seven different websites, each
containing the characters “cre8stone.” She also sought the turnover of “Cre8stone.com email
addresses” and a specific telephone number. Pilant did not respond. The turnover motion was
set for hearing.
On the morning of that hearing, Cre8 filed a petition in intervention praying for denial of
Rice’s turnover order. Cre8’s counsel also appeared at and participated in the hearing. Three
witnesses testified: Pilant, his son Gary V. Pilant II, and Rice’s attorney. After the hearing, the
trial judge signed an order (1) directing the immediate issuance of a writ of execution, (2)
directing a sheriff or constable to endorse the levy on the writ, and (3) ordering the domain
names, telephone number, and email addresses to be auctioned off in satisfaction of the
judgment.
Cre8 timely filed a motion for new trial and a notice of appeal. In four issues, Cre8
argues (1) the trial court erred by deciding the parties’ substantive property rights, (2) the
turnover order does not comply with the statute, (3) the trial court erred by issuing the turnover
order against Cre8 because Cre8 is a non-party and non-judgment debtor, and (4) the trial court
erred by ordering turnover of assets not owned by the judgment debtor.
II. ANALYSIS
A. Standard of review
We review a turnover order for abuse of discretion. Beaumont Bank, N.A. v. Buller, 806
S.W.2d 223, 226 (Tex. 1991); Stanley v. Reef Secs., Inc., 314 S.W.3d 659, 663 (Tex. App.—
Dallas 2010, no pet.). Accordingly, we affirm unless the trial court acted in an arbitrary or
unreasonable manner. Beaumont Bank, 806 S.W.2d at 226. The sufficiency of the evidence to
support the order is relevant to determining whether the trial court abused its discretion. Id. If a
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turnover order is sustainable for any reason, we will not reverse the order even if it is predicated
on an erroneous conclusion of law. Id.
B. Issue 1: Did the trial court abuse its discretion procedurally by deciding substantive
property rights of the parties?
Cre8’s first appellate issue argues that the trial court abused its discretion by deciding the
parties’ substantive property rights in the assets in question. According to Cre8, the trial court
may not use a turnover proceeding to adjudicate the ownership of property when a third party
claims an interest in the property sought by a judgment creditor. Although Cre8 did not assert
this argument in its plea in intervention, its attorney did argue near the beginning of the hearing
that a turnover proceeding is a “procedural matter” and “is not the forum by which ownership of
an asset is determined.” And after evidence was taken, Cre8 argued again that “the law doesn’t
allow the Court to determine ownership in this sort of procedure.” We conclude Cre8 preserved
its argument for appeal. See TEX. R. APP. P. 33.1(a).
A turnover order is a procedural device that allows a judgment creditor to reach a
judgment debtor’s assets that are otherwise difficult to levy on or attach. See Beaumont Bank,
806 S.W.2d at 224. Civil Practice and Remedies Code § 31.002 authorizes turnover orders as
follows:
(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;
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(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.
TEX. CIV. PRAC. & REM. CODE ANN. § 31.002(a)–(b) (West 2015). The statute’s purpose is to
put a reasonable remedy in the hands of a diligent judgment creditor, subject to court
supervision. Associated Ready Mix, Inc. v. Douglas, 843 S.W.2d 758, 763 (Tex. App.—Waco
1992, orig. proceeding).
Thus, property may be subject to turnover if (1) it is in the debtor’s possession or subject
to his control, (2) it cannot be readily attached or levied on by ordinary legal process, and (3) it is
not exempt from attachment, execution, or seizure for the satisfaction of liabilities. See CIV.
PRAC. § 31.002(a)–(b). The judgment creditor bears the burden of showing that the judgment
debtor owns, possesses, or controls the property. See id.; HSM Dev., Inc. v. Barclay Props., Ltd.,
392 S.W.3d 749, 751 (Tex. App.—Dallas 2012, no pet.). The judgment debtor must then show
that the property is exempt from attachment. Europa Int’l, Ltd. v. Direct Access Trader Corp.,
315 S.W.3d 654, 656 (Tex. App.—Dallas 2010, no pet.).
A trial court considering a turnover motion has discretion to determine whether property
meets the statutory requirements. See Bay City Plastics, Inc. v. McEntire, 106 S.W.3d 321, 325
(Tex. App.—Houston [1st Dist.] 2003, pet. denied) (“The trial court . . . is permitted to determine
what property meets those statutory requirements.”); see also Beaumont Bank, 806 S.W.2d at
227 (“The purpose of the turnover proceeding is merely to ascertain whether or not an asset is in
the possession of the judgment debtor or subject to the debtor’s control.”); Stanley, 314 S.W.3d
at 667 n.4 (“Texas intermediate appellate courts have concluded that whether property is exempt
from execution is properly decided in a turnover proceeding.”). For example, in one recent case
the trial court was asked to determine whether a judgment debtor owned, possessed, or controlled
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a $15,000 retainer that had been paid to his attorney. In re C.H.C., 290 S.W.3d 929, 930 (Tex.
App.—Dallas 2009, no pet.). The trial court concluded that the debtor had no ownership or
control of the funds, and we affirmed because there was competent evidence to support the trial
court’s ruling. Id. at 933.
On the other hand, as Cre8 states, turnover proceedings ordinarily may not be used to
determine third parties’ substantive rights. See In re Karlseng, No. 05-14-00049-CV, 2014 WL
1018321, at *3 (Tex. App.—Dallas Feb. 12, 2014, orig. proceeding) (mem. op.); see also
Beaumont Bank, 806 S.W.2d at 227 (“Texas courts do not apply the turnover statute to non-
judgment debtors.”). Thus, our sister court has said that “[a]ny findings made by the trial court
to facilitate the issuance of the turnover order will bind the judgment debtors only, and not third
parties that the turnover order has not issued against.” Bay City Plastics, 106 S.W.3d at 325.
Here, the disputed assets are intangible and cannot readily be attached or levied on by
ordinary legal process, and the trial court found that the debtor “owns and/or controls right, title
and interest to” the assets in question. That finding ordinarily would not bind non-debtor Cre8,
but Cre8 voluntarily injected itself into the proceedings by intervening in the turnover
proceeding, appearing at the turnover hearing, introducing evidence regarding its ownership of
the telephone number, and arguing the issue in the trial court. Indeed, Cre8’s appellate brief
states:
At the hearing on December 30, 2013, Cre8 International asserted its claim to
the property rights of the property, identified as the domain name, registration,
telephone number and email address for Cre8stone, sought in the second motion
for turnover order. . . . The ownership of the property identified in the turnover
order was debated and much of [the] subject of the December 30, 201[3] hearing.
(Emphasis added.)
Furthermore, regardless of whether Cre8 intervened, Rice had to prove that the debtor
(Pilant) owned and controlled the assets to get any relief. Cre8 could have sat on the sidelines
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and later attacked the sale by proving superior rights had Rice won, but it chose to forgo that step
and to inject itself into the matter. Cre8 having done so cannot now complain that the trial court
ruled against it on the ownership issue. See In re C.H.C., 396 S.W.3d 33, 43 (Tex. App.—Dallas
2013, no pet.) (“Waiver is the intentional relinquishment of a right actually or constructively
known, or intentional conduct inconsistent with claiming that right.”).
We thus conclude that the trial court did not abuse its discretion by deciding, over Cre8’s
objection, whether the debtor “owns and/or controls right, title and interest to” the assets in
question. (Nor, as discussed below, did it abuse its discretion in finding that the debtor factually
owned and controlled those assets.) Accordingly we reject Cre8’s first issue.
C. Issue 2: Did the trial court abuse its discretion by “signing a turnover order that
does not comply with the turnover statute”?
Cre8’s second issue argues that the turnover order fatally does not comply with the
turnover statute because it does not (i) require affirmative action by the debtor (Pilant); (ii) order
anything to be collected or turned over, or (iii) appoint a receiver. See CIV. PRAC.
§ 31.002(b)(1)–(3).
This issue raises statutory construction principles. When we construe a statute, we strive
to ascertain and effectuate the legislature’s intent. TIC N. Cent. Dallas 3, L.L.C. v.
Envirobusiness, Inc., No. 05-13-01021-CV, 2014 WL 4724706, at *3 (Tex. App.—Dallas Sept.
24, 2014, pet. denied); see also TEX. GOV’T CODE ANN. § 311.023(1) (West 2013) (when
construing a statute, courts may consider the “object sought to be attained”). We take the plain
meaning of the text as the best expression of legislative intent unless a different meaning is
apparent from the context or the plain meaning yields absurd or nonsensical results. TIC, 2014
WL 4724706, at *3. We read a statute as a whole and do not construe its provisions in isolation.
Id. Thus, we endeavor to read the statute contextually and give effect to every word, clause, and
sentence. Id.
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Based on those principles, we for several reasons reject Cre8’s premise that the turnover
statute applies that narrowly to this case. First, § 31.002(a) provides that a judgment debtor is
entitled to aid from a court “through injunction or other means.” Id. § 31.002(a) (emphasis
added). Second, § 31.002(b)(2) similarly authorizes the trial court to “otherwise apply the
property to the satisfaction of the judgment.” Id. § 31.002(b)(2). Finally, § 32.002(b)(2)’s list of
options begins with “The court may” use the listed remedies, indicating that it is a permissive
list.
The statute thus expressly gives the trial court powers beyond just mandatory injunctions
(or appointing receivers) to achieve the statutory purpose of aiding judgment creditors in
reaching hard to get assets to satisfy their judgments. Here, the trial court ordered the sheriff to
(i) obtain a writ of execution listing the intangible assets at issue (which the clerk had a
ministerial duty to issue) and (ii) then sell those assets at a sheriff’s sale. This remedy, which has
elements of both injunctive relief and a receivership, is a reasonable and narrowly tailored
remedy that aids this judgment debtor in realizing on these intangible assets that could not be
readily reached by ordinary execution or attachment because there is nothing physical for the
sheriff to seize.
For these reasons, we conclude that the trial court did not abuse its discretion in ordering
this specific relief in this case and disagree with Cre8’s second issue.
D. Issue 3: Did the trial court abuse its discretion by “issuing a turnover order against
a nonparty who is not the judgment debtor”?
Similar to its Issue 1 arguments, Cre8’s third issue cites numerous cases for the premise
that the trial court abused its discretion by ordering the “turnover of property in possession of
and subject to the control of Cre8 International, LLC, a third party non-judgment debtor”
because the “plain language of the statute only permits a turnover order to issue against the
judgment debtor, and only to secure property owned by the judgment debtor.” Cre8’s cases are
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all factually distinguishable because Cre8 voluntarily intervened in the turnover proceeding and
actively litigated the matter and lost.
Likewise, Cre8’s argument that the creditor (Rice) needed to file a separate case to
litigate Cre8’s alleged rights in these assets lacks merit because Cre8 obviated the need for a
separate proceeding by itself joining the issue in the turnover proceeding.
Moreover, to the extent that Cre8 argues that the turnover order was an abuse of
discretion because it is “issued against” a non-debtor, that argument lacks merit for the above
stated reasons and because the order does not mention Cre8.
As with Issue 1, we conclude that the trial court did not abuse its discretion in this case
and disagree with Cre8’s third issue.
E. Issue 4: Did the trial court abuse its discretion by “issuing a turnover order which
allowed for the sale of assets not owned by the judgment debtor”?
1. Applicable Standards
Cre8’s fourth issue argues that the “trial court abused its discretion in issuing the turnover
order ordering the sale of Cre8 International, LLC property because there was no evidence that
judgment debtor Gary V. Pilant owned any property right in those assets.” A trial court does not
abuse its discretion if there is some substantive and probative evidence to support its decision. In
re C.H.C., 290 S.W.3d at 931.
In a turnover proceeding, the judgment creditor bears the burden of tracing the assets to
the judgment debtor. Id. Once assets are traced to a judgment debtor, a presumption arises that
the assets remain in his possession, and the burden shifts to the debtor to account for the assets.
See Beaumont Bank, 806 S.W.2d at 226.
2. Website Domain Names
There is some evidence that Pilant owned or controlled the website domain names.
Several pages of documents were admitted during the turnover hearing as plaintiff’s exhibit 2.
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These documents, which appear to be printouts of webpages, list “Gary Pilant” as the
“Registrant,” “Admin,” and “Tech” for each domain name. The documents also list addresses
and telephone numbers for “Gary Pilant” that Pilant admitted were his. This was some evidence
from which the trial court reasonably could have found that Pilant owned the domain names.
Although Pilant also testified that one of the domain names, cre8stone.com, is owned by
Cre8, the trial court was not bound to believe his testimony. See Strong v. Strong, 350 S.W.3d
759, 770 n.6 (Tex. App.—Dallas 2011, pet. denied) (“The trial court, as the trier of fact, is the
sole judge of the credibility of the witnesses and the weight to be given their testimony.”). The
trial court did not abuse its discretion by ordering turnover of the domain names.
3. Email Addresses
The order also requires the sale of “Cre8stone.com email addresses.” Neither side directs
us to any evidence of ownership, possession, or control of Cre8stone email addresses. We see no
evidence that Cre8 owns or has any interest in any email addresses affected by the turnover
order. An appellant may not complain of errors that do not injure it or that merely affect the
rights of others. See Tex. Workers’ Comp. Ins. Fund v. Mandlbauer, 988 S.W.2d 750, 752 (Tex.
1999) (per curiam).
4. Telephone Number
The turnover order requires the sale of a specific telephone number. Our record review
reveals no evidence that Pilant owned, possessed, or controlled that telephone number. The
record contains evidence that Cre8 has some right or interest in that telephone number, so Cre8
has standing to complain about this aspect of the turnover order. Because there is no evidence
that Pilant owned, possessed, or controlled the telephone number, the trial court abused its
discretion by ordering the sale of that telephone number. See Stanley, 314 S.W.3d at 669 (trial
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court abused its discretion by ordering judgment debtor to turn over property in the absence of
any evidence that the debtor owned the property).
We resolve Cre8’s fourth issue in its favor as to the telephone number only.
III. DISPOSITION
We modify the trial court’s turnover order to delete the provision ordering the sale of the
telephone number. We affirm the trial court’s order as modified.
140377F.P05
/Bill Whitehill/
BILL WHITEHILL
JUSTICE
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S
Court of Appeals
Fifth District of Texas at Dallas
JUDGMENT
CRE8 INTERNATIONAL, LLC, Appellant On Appeal from the 68th Judicial District
Court, Dallas County, Texas
No. 05-14-00377-CV V. Trial Court Cause No. DC 10-15253.
Opinion delivered by Justice Whitehill.
ELEXIS RICE, Appellee Justices Francis and Lang-Miers
participating.
In accordance with this Court’s opinion of this date, the trial court’s Turnover Order is
MODIFIED as follows:
On page two of the Order, the subparagraph numbered (2) is modified to state:
(2) Property: Cre8stone.com email addresses.
Location: Telecommunications provider, AT&T.
As modified, the trial court’s Turnover Order is AFFIRMED.
It is ORDERED that each party bear its own costs of this appeal.
Judgment entered June 3, 2015.
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