Below is a write up from Guest Contributor – Riecke Baumann, Baumann Law Firm, regarding a change in the rules that may be of interest to you:

At the request of the legal aid groups, the 2021 Legislature mandated the Texas Supreme Court to create rules for Justice Courts to advise judgment debtors of their rights to exempt certain assets from seizure to pay valid judgments. The rules and orders apply to all individual debtors, whether for business or consumer debts, so a slip and fall judgment against a mom-and-pop business is included.

Unfortunately, the process went way beyond the mandate, stripping the Justices of the Peace (“JPs”) of any discretion when granting orders to turn over assets, requiring garnishors and receivers to send extensive notices (that everyday folks will never understand), and leaving unanswered the question of whether there are sanctions for non-compliance.

The Supreme Court Advisory Committee’s Creditors Group is in favor of a model turnover order that allows JPs to retain discretion to tailor orders to the facts of each case, but not a “one-size fits all” order that applies to car wrecks, slips and falls, evictions, and credit card debts because the individual debtors in those cases are so different. Ranchers, convenience store owners, and contractors have different assets (for example, accounts receivable and inventories) that are not owned by the blue-collar workers who the new rules were created to protect.

The Supreme Court Advisory Committee held hearings, but many of its recommendations appear to have been ignored (for example, the model order reduces the committee’s suggested 14-day notice period to 3 days). Because the required form of turnover order was not even drafted until after the committee had adjourned, there was no committee review of the model order.

Examples of Areas of Concern

• The required turnover order strips JPs of all discretion to amend the model order, even if the debtor wants the changes. Why have judges if they have no discretion to modify the order to fit the facts of each case? If the judges have no authority to amend the order, why not have it issued by a clerk, like a writ? Who needs a judge?

• The proposed rules require the receiver or judgment creditor to send several pages of notices to defendants within three days, even though the committee proposed 14 days. If the notice of levy is received by the attorney or receiver by e-mail at 4:00 p.m. on Monday, and the mailman leaves the attorney’s office at 1:00 p.m. on Wednesday, the levying attorney’s staff has only 13 office hours to send the notices, during which the attorney is likely to be out of the office, in court, or in a deposition.

• The proposed rules require the judge, attorney, and receiver to give repeated instructions of where debtors can locate defense attorneys. Lawyers and judges are not supposed to provide legal advice to the debtors (advising opposing parties of their legal rights and which forms to file) or referrals regarding which lawyers to hire. (What if that attorney does a poor job? Is the referring attorney liable?) Mandating referrals to favored law firms deprives other firms of that work, and that sort of work is critical to small, startup firms and firms that represent individuals. That little case may well create a relationship that later brings in a large personal injury case. The court should not favor certain firms over others.

• The proposed rules do not address whether there are sanctions for tardiness in sending notices. Does the debtor get his non-exempt certificate of deposit, sailboat, or gun collection back? This question was asked, but ignored, so there will be constant litigation over the issue until it works its way through three levels of appeals.

These are just the most glaring issues with the proposed rules and order.

Riecke Baumann welcomes your questions, at [email protected] or 713 529-1600.

The “Comments” period ends March 1, 2022. See the order and rules attached below. We urge readers to review the matter, especially the turnover order, then e-mail their comments before the March 1 deadline (or soon after).

No information in this communication is intended to constitute specific legal advice.  For specific legal advice, please contact an attorney, and if you have any such questions or would like more information about this issue, please contact William “Pat” Huttenbach at (713) 752-8616, or email at [email protected].

Thanks.
Pat

William “Pat” Huttenbach | Shareholder | Banking Litigation
Crain Caton & James | Attorneys & Counselors
Five Houston Center | 1401 McKinney St., Suite 1700
Houston, TX 77010
Direct: 713.752.8616 | Fax: 713.658.1921
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Supreme Court of Texas Adopts Exceptions