523 S.W.3d 749
Tex. App.2017Background
- Joel Gillet, a 45% member of ZUPT, LLC, demanded a buyout under a Buy-Sell Agreement; he later resigned employment and joined a competitor but retained his membership interest.
- An appraisal and adjustments (non-compete refusal and minority discount) produced a valuation of Gillet’s 45% interest at $499,050.
- Arbitrator awarded Gillet $499,050 for his membership interest and $70,060 in fees; arbitrator also found Gillet breached fiduciary duties and awarded ZUPT $1,869,164 (plus statutory recovery) and attorney’s fees. Arbitrator denied offset.
- Trial court confirmed the arbitration award. ZUPT then sought a turnover order and receiver to collect the judgment.
- Trial court ordered turnover of broad categories of nonexempt property (including Gillet’s 45% membership interest) and appointed a receiver. Gillet appealed the turnover order.
Issues
| Issue | Plaintiff's Argument (Gillet) | Defendant's Argument (ZUPT) | Held |
|---|---|---|---|
| Whether there was evidence to support turnover | Trial court lacked evidence that Gillet had nonexempt assets subject to turnover | Final judgment and nulla bona return, plus judicially noticed membership interest, suffice as evidence | Court: Partially for Gillet — evidence supported turnover of the judgment and membership interest, but not other unspecified assets |
| Whether charging order is exclusive remedy against LLC membership interest | Charging order is exclusive; turnover of membership interest violates Business Organizations Code | Charging-order rationale inapplicable because judgment creditor is the LLC itself and judgment expressly awarded the interest | Court: ZUPT may seek turnover of the membership interest under these circumstances; charging order not exclusive here |
| Whether turnover order conflicts with final judgment | Turnover order allows receiver to take interest without ensuring Gillet receives the monetary payment required by final judgment | ZUPT argued turnover is enforcement of judgment and receiver could be used consistent with judgment | Court: Turnover order conflicted with final judgment because it did not require that Gillet receive a dollar credit or the judgment amount in exchange for surrendering the interest; remand to revise order |
| Whether trial court abused discretion by ordering turnover of broad asset categories | Order is overbroad and unsupported by evidence | Court could judicially notice the judgment and membership interest; turnover statute allows receiver to collect nonexempt assets | Court: Abuse of discretion as to any asset categories other than the final judgment (the monetary award) and Gillet’s membership interest |
Key Cases Cited
- Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223 (Tex. 1991) (standards for turnover orders and abuse-of-discretion review)
- Arndt v. Farris, 633 S.W.2d 497 (Tex. 1982) (trial court’s inherent authority to enforce judgments)
- Tanner v. McCarthy, 274 S.W.3d 311 (Tex. App.-Houston [1st Dist.] 2008) (evidentiary flexibility for turnover proceedings)
- Stanley v. Reef Sec., Inc., 314 S.W.3d 659 (Tex. App.-Dallas 2010) (turnover permitted for supported future payment rights; unsupported categories reversed)
- Gerdes v. Kennamer, 155 S.W.3d 541 (Tex. App.-Corpus Christi 2004) (turnover of documents to effect transfer of ownership upheld)
- Beluga Chartering B.V. v. Timber S.A., 294 S.W.3d 300 (Tex. App.-Houston [14th Dist.] 2009) (post-judgment enforcement cannot materially alter adjudicated rights)
- Goodier v. Duncan, 651 S.W.2d 25 (Tex. App.-Dallas 1983) (a judgment is an obligation to pay money and may be treated as collectible property)
- United Bank Metro v. Plains Overseas Grp., Inc., 670 S.W.2d 281 (Tex. App.-Houston [1st Dist.] 1984) (turnover statute facilitates collection of rights to future payments)