Robert S. Bennett v. Broocks, Baker and Lange, LLP

Opinion issued July 8, 2014.

In The

Court of Appeals
For The

First District of Texas
————————————
NO. 01-13-00674-CV
———————————
ROBERT S. BENNETT, Appellant
V.
BROOCKS BAKER & LANGE, LLP, Appellee

On Appeal from the 152nd District Court
Harris County, Texas
Trial Court Case No. 2000-20780

MEMORANDUM OPINION

This appeal involves the latest chapter in a law firm’s attempts to collect on

a judgment it obtained against its former partner. Robert Bennett appeals the trial

court’s order appointing a receiver in the matter, contending that the order
improperly subjects his wholly-owned personal limited liability company to

turnover. Finding no error, we affirm.

Background

In August 1995, the law firm of Baker Broocks & Lange, LLP (BBL) and

Bennett, a member of the partnership, agreed to dissolve their partnership. The

agreement included a clause that required that any dispute arising out of the

agreement would be resolved in arbitration. When a dispute arose about the

amount each former partner was due upon dissolution, the parties arbitrated their

dispute. The arbitration resulted in an award of $45,724.72 against Bennett and in

favor of BBL, which was later confirmed by a trial court. BBL successfully

pursued a writ of garnishment and received $15,876.00 in August 2004. Later

efforts were unsuccessful in recovering the remainder owed.

BBL then sought the appointment of a receiver and requested an inventory

of Bennett’s assets. The trial court appointed a receiver and conferred “the full and

exclusive authority to administer and manage the business affairs, funds, assets,

choses in action and any other property [of] Bennett; marshal and safeguard of

Bennett’s assets; and take whatever actions necessary for the protection of

creditors.” It directs the receiver to:

1. Take immediate possession of all property, assets and estates of every
kind of Bennett, whatsoever and wheresoever located, belonging to or
in their possession, including, but not limited to, all offices maintained
by Bennett, rights of action, books, papers, data processing records,

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 evidences of debt, bank accounts, savings accounts, certificates of
deposit, stocks, bonds, debentures and other securities, mortgages,
furniture, fixtures, office supplies and equipment, and all real property
wherever situated, and to administer such assets as is required in order
to comply with the directions contained in this Order, and to hold all
other assets pending further order of the Court.

2. Investigate Bennett’s affairs and institute legal actions for its benefit
and the benefit of creditors, as the creditor deems necessary against
those individuals, corporations, partnerships, associations . . . that the
Receiver may claim have wrongfully . . . misappropriated or
transferred mines or other proceeds traceable from Bennett . . .

3. Present a report to the court reflecting the existence and value of
Bennett’s assets and extent of liabilities.

4. Appoint an accountant to ascertain reasonable expenses for the
receivership.
Bennett moved for reconsideration, but the trial court let its initial order stand.

Discussion

Standard of review
Under section 64.001 of the Texas Civil Practice and Remedies Code, a

court may appoint a receiver in an action between partners or “in any other case in

which a receiver may be appointed under the rules of equity.” TEX. CIV. PRAC. &

REM. CODE ANN. § 64.001(a)(3), (6) (West 2008). We review a trial court’s

interlocutory order appointing a receiver for an abuse of discretion. Benefield v.

State, 266 S.W.3d 25, 31 (Tex. App.—Houston [1st Dist.] 2008, no pet.) (citing

Mueller v. Beamalloy, Inc., 994 S.W.2d 855, 858 (Tex. App.—Houston [1st Dist.]

1999, no pet); Abella v. Knight Oil Tools, 945 S.W.2d 847, 849 (Tex. App.—

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Houston [1st Dist.] 1997, no writ)). A trial court abuses its discretion when it rules

arbitrarily, unreasonably, without regard to guiding legal principles, or without

supporting evidence. See Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex. 1998);

Pickens v. Pickens, 62 S.W.3d 212, 214 (Tex. App.—Dallas 2001, pet. denied).

Under the abuse-of-discretion standard, the sufficiency of the evidence is a

relevant factor in assessing whether the trial court abused its discretion. Pickens,

62 S.W.3d at 214. The trial court does not abuse its discretion when its decision is

based on conflicting evidence and some evidence in the record reasonably supports

it. Butnaru v. Ford Motor Co., 84 S.W.3d 198, 211 (Tex. 2002).

“The appointment of a receiver . . . is a harsh, drastic, and extraordinary

remedy, to be used cautiously.” Benefield, 266 S.W.3d at 31 (citing Hunt v.

Merch. Mart, Inc., 391 S.W.2d 141, 145 (Tex. Civ. App.—Dallas 1965, writ ref’d

n.r.e.); Balias v. Balias, Inc., 748 S.W.2d 253, 257 (Tex. App.—Houston [14th

Dist.] 1988, writ denied)). A trial court should not appoint a receiver if another

remedy exists, either legal or equitable. Id. (citing Rowe v. Rowe, 887 S.W.2d 191,

200 (Tex. App.—Fort Worth 1994, writ denied)). Our review focuses on whether

the pleadings and evidence are sufficient to justify a receivership. Id. (citing

Covington Knox, Inc. v. State, 577 S.W.2d 323, 325 (Tex. Civ. App.—Houston

[14th Dist.] 1979, no pet.)).

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Appointment of receiver

Bennett first contends that the trial court erred in appointing a receiver over

his wholly-owned PLLC because the PLLC is not the judgment debtor. This

contention does not accurately characterize the trial court’s order. The receivership

appointment order gives the receiver authority over Bennett’s individual property,

including “business entities . . . which have possession, custody, or control of any

assets or funds in the name of or for the benefit of Bennett” or are operated by

Bennett on his own behalf. The Business Organizations Code explains that a

membership interest in a limited liability company is personal property. TEX. BUS.

ORGS. CODE ANN. § 101.106(a) (West 2012) (entitled “Nature of Membership

Interest”). Bennett does not contend that the trial court lacked authority to make

Bennett’s personal property subject to a receivership order.

Statutory authority for order

Bennett complains that the trial court’s order violates section 31.002 of the

Civil Practice & Remedies Code because it authorizes the turnover of exempt

property. See TEX. CIV. PRAC. & REM. CODE ANN. § 31.002(f). This complaint

rests on a misunderstanding of the order’s effect. The trial court expressly relied

on Chapter 64 of the Civil Practice and Remedies Code—the receivership statute—

in appointing the receiver to “administer and manage the business affairs, funds,

assets, choses in action and other property” belonging to Bennett; “marshal and

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safeguard all of the assets of Bennett; and take whatever actions necessary for the

protection of creditors.” The trial court did not invoke section 31.002 in its order.

Bennett does not identify any provision in the order that either requires the receiver

to turn over any exempt property to Bennett’s judgment creditors or determines

whether any specific property is subject to an exemption, and we find none.

For the same reason, Bennett’s complaint that the order made PLLC’s assets

subject to seizure or attachment is without merit. While the receivership

appointment order places the PLLC under the receiver’s management, it is because

Bennett is the PLLC’s sole owner and, as a result, any value in his PLLC

membership interest is an asset belonging to Bennett, individually. The order does

not accord to the receiver any authority over the PLLC that Bennett himself did not

have.

Nor does the order authorize BBL directly to attach or seize any of Bennett’s

property. Bennett’s complaint about the seizure or attachment of that personal

property is premature, as is his complaint concerning the calculation of

receivership fees and expenses. The receiver has not yet proposed the distribution

or disposition of any of Bennett’s property, nor has the trial court ordered the

receiver to distribute or dispose of any of that property.

Bennett does not challenge the trial court’s authority to appoint the receiver

under section 64.001 of the Civil Practice and Remedies Code, the only statutory

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basis identified in the order, and his challenges to the scope of authorization under

section 31.002 are without merit. We hold that the trial court acted within its

discretion in appointing the receiver over Bennett’s property.

Conclusion

We affirm the trial court’s order.

Jane Bland
Justice

Panel consists of Justices Jennings, Bland, and Massengale.

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