Phillippe Tanguy, 13500 Air Express, L.L.C. and 13500 Air Express, L.P., and PTRE Holdings. L.P. v. William G. West, as Chapter 7 Trustee of Richard Davis, Debtor, and Eva S. Engelhart, Receiver
2016 Tex. App. LEXIS 11639
| Tex. App. | 2016Background
- Richard Davis filed Chapter 7; William G. West was appointed Chapter 7 trustee and obtained a bankruptcy judgment against Philippe Tanguy and his businesses based on a promissory note related to an airplane. The bankruptcy judgment awarded principal, interest, and attorney’s fees.
- The federal district court and the Fifth Circuit affirmed the bankruptcy judgment and rejected Tanguy’s Article III jurisdiction/Stern arguments; certiorari was denied.
- The Trustee domesticated the federal judgment in Harris County, Texas. PTRE Holdings intervened claiming payments it made on improvements and mortgage for 1714 Driscoll Street.
- The state trial court entered: (1) an Order Granting Turnover and Appointing Receiver and Master (appointing Eva Engelhart); (2) an Order to Compel Turnover of nonexempt real estate (1714 Driscoll St.); and (3) an amended Order to Sell the Driscoll property.
- Appellants appealed, arguing the bankruptcy judgment was void (Article III/Stern), the Driscoll property was subject to ordinary execution (so turnover/receiver improper and fees improper), the turnover order lacked specificity, insufficient evidence supported the orders, entitlement to jury trial, and abuse in appointing a master/awarding fees.
- While the appeal was pending the constable sold the Driscoll property at an execution sale, which the court found rendered several issues moot.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1) Validity of bankruptcy judgment (collateral attack) | Tanguy: bankruptcy judgment is void for lack of Article III jurisdiction (Stern) and may be collaterally attacked. | Trustee/Receiver: federal courts already decided jurisdiction; relitigation in state court is barred absent fraud. | Overruled Tanguy’s attack; federal adjudication of jurisdiction precludes collateral attack in state court (issue rejected). |
| 2) Use of turnover/receiver sale vs. ordinary execution for Driscoll property | Tanguy: Driscoll is Texas real property subject to ordinary execution; turnover/receiver improper and fees should not reduce credit to debtor. | Trustee: turnover/receiver orders were properly entered. | Dismissed as moot — property was later sold by ordinary execution, eliminating the live controversy on these points. |
| 3) Specificity of turnover order | Tanguy: turnover order failed to specifically describe property to be turned over. | Trustee: statute does not require identification of specific assets in the turnover order. | Overruled Tanguy; turnover statute does not require listing specific assets. |
| 4) Right to jury trial and appointment of master in chancery / receiver fee issues | Tanguy/PTRE: factual disputes (e.g., whether property not subject to ordinary sale) entitled them to jury trial; appointment of receiver as master and fee award were abusive. | Trustee: issues were properly resolved by court; appointment and fees within discretion. | Jury-trial complaint dismissed as moot (sale mooted dispute). Appointment-as-master issue dismissed for lack of appellate jurisdiction. |
Key Cases Cited
- Stern v. Marshall, 564 U.S. 462 (2011) (limits on bankruptcy-court adjudication of certain state-law counterclaims)
- Stoll v. Gottlieb, 305 U.S. 165 (1938) (federal determination of jurisdiction bars relitigation in state court absent fraud)
- Durfee v. Duke, 375 U.S. 106 (1963) (application of Stoll principle to sister-state adjudications)
- Republic Supply Co. v. Shoaf, 815 F.2d 1046 (5th Cir. 1987) (federal adjudication prevents state relitigation of same jurisdictional issue)
- Tanner v. McCarthy, 274 S.W.3d 311 (Tex. App.—Houston [1st Dist.] 2008) (turnover statute does not require trial court to identify specific property in turnover order)
- Sheikh v. Sheikh, 248 S.W.3d 381 (Tex. App.—Houston [1st Dist.] 2007) (appellate court lacks jurisdiction to review appointment of a master in chancery embedded in turnover/receivership order)
- Steenland v. Tex. Commerce Bank N.A., 648 S.W.2d 387 (Tex. App.—Tyler 1983) (debtor entitled to jury determination of excess nonexempt homestead value)