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

Opinion issued October 27, 2016

In The

Court of Appeals
For The

First District of Texas
————————————
NO. 01-14-00455-CV
———————————
PHILLIPPE TANGUY, 13500 AIR EXPRESS, L.L.C. AND 13500 AIR
EXPRESS, L.P., AND PTRE HOLDINGS, L.P., Appellants
V.
WILLIAM G. WEST, AS CHAPTER 7 TRUSTEE OF RICHARD DAVIS,
DEBTOR, AND EVA S. ENGELHART, RECEIVER, Appellees

On Appeal from the 270th District Court
Harris County, Texas
Trial Court Case No. 2013-67779

OPINION

Appellee, Eva S. Engelhart, has filed a motion to dismiss, or, alternatively, a

motion for rehearing, contending that, while on appeal, this case has become moot.
Appellants, too, have filed a motion for rehearing. We agree that certain issues in

the case have been rendered moot since this Court’s opinion was issued on April

28, 2016. Accordingly, we grant the motion to dismiss in part, withdraw our

previous opinion and judgment, and issue this opinion and judgment in their stead.

In light of our new opinion, we deny both parties’ motions for rehearing as moot.

See TEX. R. APP. P. 49.1; see, e.g., Brookshire Bros., Inc. v. Smith, 176 S.W.3d 30,

41 (Tex. App.—Houston [1st Dist.] 2005, pet. denied) (holding that issuance of

new opinion renders motion attacking previous opinion moot).

After the trial court domesticated a foreign judgment against appellants

Philippe Tanguy, 13500 Air Express, LLC, and 13500 Air Express, L.P., it entered

several orders that (1) appointed a receiver; (2) ordered appellants to turn over

property to satisfy the judgment; and (3) authorized the receiver to sell certain

property. On appeal, appellants collaterally attack the judgment that was

domesticated and directly attack the post-domestication orders entered by the trial

court. We affirm.

BACKGROUND

In 2007, Richard Davis filed a voluntary petition under Chapter 7 of the

Bankruptcy Code, and appellee, William G. West [“the Trustee”], was named the

Chapter 7 Trustee. West filed an adversary proceeding against appellant, Philippe

Tanguy, and two businesses owned and operated by him, Air Express, LLC and

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Air Express, LP [collectively, “appellants”], based on a promissory note that

appellants had issued to Davis in conjunction with the purchase of an airplane,

which had since become a part of Davis’s bankruptcy estate. The Bankruptcy

Court entered a judgment in favor of the Trustee in the amount of $1,183,090.80

for the principal and interest on the note, plus $31,180.75 in attorney’s fees. See

West v. Tanguy (In re Davis), Bankruptcy No. 07-33986-H3-7, 2010 WL 1330232

(Bankr. S.D. Tex. Mar. 30, 2010).

Appellants appealed to the U.S. District Court, which (1) concluded that

Stern v. Marshall, 564 U.S. 462, 131 S. Ct. 2594 (2011)1 was not applicable to the

appeal, (2) affirmed the Bankruptcy Court’s opinion and dismissed the appeal; and

(3) assessed fees and costs against appellants for filing a frivolous appeal. See

Tanguy v. West (In re Davis), No. H-10-1194, 2012 WL 2871662 (S.D. Tex. July

10, 2012).

Appellants appealed to the Court of Appeals for the U.S. Fifth Circuit, which

(1) held that Stern did not apply, and the bankruptcy and district courts had both

properly exercised jurisdiction, and (2) affirmed the district court’s judgment and

adopted its analysis in full; appellants’ subsequent petition for certiorari to the

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Stern held that the bankruptcy court lacked subject matter jurisdiction over
counterclaims asserted by the bankruptcy estate against a creditor when the claim
is a “state law action independent of the federal bankruptcy law and not
necessarily resolvable by a ruling on the creditor’s proof of claim in the
bankruptcy.” 564 U.S. at 487, 131 S. Ct. at 2611. Instead, such claims had to be
resolved by an Article III court. Id.
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United States Supreme Court was denied. See Tanguy v. West, 538 F. App’x 440

(5th Cir. 2013), cert. denied, 134 S. Ct. 1002 (2014).

The Trustee then domesticated the federal court’s judgment in the 270th

District Court of Harris County. See, e.g., Tanner v. McCarthy, 274 S.W.3d 311,

318–20 (Tex. App.—Houston [1st Dist.] 2008, no pet.) (holding that foreign

judgment that may be domesticated under Chapter 35 of Texas Civil Practices and

Remedies Code includes judgment of federal court located in Texas). PTRE

Holdings, L.P. [“PTRE”] intervened seeking to recover money it paid to Tanguy

for mortgage payments on and improvements to real property located at 1714

Driscoll Street, Harris County, Texas.

The trial court entered three orders complained of on appeal. On April 25,

2014, the trial court signed an Order Granting Turnover and Appointing Receiver

and Master, which appointed Eva Engelhart as the Receiver [“the Receiver

Order”], and also made her master in chancery. On May 30, 2014, the trial court

signed an Order to Compel Turnover of Non-Exempt Real Estate [“the Turnover

Order”], specifically, the real property located at 1714 Driscoll Street. And, on

October 10, 2014, the trial court entered its Third Amended Order to Sell Property

at 1714 Driscoll Street. [“the Sale Order”].

On appeal, appellants challenge these three orders, contending that:

(1) The bankruptcy court judgment on which the trial court’s orders
were based is void for lack of Article III subject matter jurisdiction
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 under the United States Constitution, is subject to collateral attack,
and requires dismissal.

(2) Real property subject to execution and sale by ordinary legal
process cannot serve as a basis for a turnover order appointing a
receiver. The credit against judgment to be received by the
judgment debtor for the sale of such property cannot be reduced by
receiver broker fees and costs.

(3) The [Receiver Order] failed to specifically describe any property to
be turned over and must be reversed.

(4) The [Receiver Order, Turnover Order, and Sale Order] are not
supported by any proof that the debtors (Tanguy, 13500 Air
Express, LLC and 13500 Air Express, LP) own any non-exempt
property which is not subject to sale by ordinary legal process.

(5) The [Receiver Order, Turnover Order, and Sale Order] are not
supported by legally or factually sufficient evidence that the
debtors (Tanguy, 13500 Air Express, LLC and 13500 Air Express,
LP) own any non-exempt property which is not subject to sale by
ordinary legal process.

(6) Appellants, Tanguy, 13500 Air Express, LLC and 13500 Air
Express, LP and [Intervenor] PTRE Holdings, L.P., were entitled
to a Jury Trial on the contested fact issues raised by their answer,
counterclaim, and intervention petition.

(7) The trial court’s [Receiver Order, Turnover Order, and Sale Order]
appointing the receiver a master, appointing a biased receiver, and
awarding a 25% receiver’s fee without proof of reasonableness
were an abuse of discretion.

COLLATERAL ATTACK ON BANKRUPTCY JUDGMENT

In their first issue on appeal, appellants contend that the bankruptcy court

judgment is void, and that, therefore, the domesticated judgment is likewise void.

Specifically, appellants claim that the “Bankruptcy Judge signed a judgment
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disposing of Tanguy’s common law and statutory private claims and defenses over

which that Judge had no Article III jurisdiction under the United States

Constitution.”

However, appellants raised this jurisdictional argument both in the U.S.

District Court and on appeal to the U.S. Court of Appeals for the Fifth Circuit,

where the issue was resolved against them. See In re Davis, 538 F. App’x. at 443

(“We are unpersuaded by Tanguy’s argument that neither the bankruptcy court, the

district court, nor this Court have subject matter jurisdiction over these proceedings

. . . .”). When a federal court has decided the question of its jurisdiction as a

contested issue, a state court has no power, in the absence of allegations of fraud,

to inquire again into such question. See Stoll v. Gottlieb, 305 U.S. 165, 172, 59 S.

Ct. 134, 138 (1938); see also Republic Supply Co. v. Shoaf, 815 F.2d 1046, 1052–

53 (5th Cir. 1987).

Because the issue of the bankruptcy court’s jurisdiction was fully tried in the

federal courts, the issue cannot be retried here. See Stoll, 305 U.S. at 172, 59 S. Ct.

at 138; see also Durfee v. Duke, 375 U.S. 106, 111–12, 84 S. Ct. 242, 245 (1963)

(applying Stoll even when jurisdiction was fully litigated in sister state court rather

than federal court); Baker & Taylor Drilling Co. v. Amend, 438 S.W.2d 144, 149

(Tex. Civ. App.—Amarillo 1969, writ ref’d n.r.e.) (refusing to address issue of

federal court’s jurisdiction when that issue had been decided by both federal

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district court and federal court of appeals). As such, appellants’ collateral attack on

the bankruptcy court’s judgment fails.

We overrule appellants’ first issue on appeal.

COMPLIANCE WITH TURNOVER STATUTE

In issues two, four, and five, appellants contend the trial court abused its

discretion in entering the Receiver Order, the Turnover Order, and the Sale Order.

Appellants contend that the Receiver Order, and the subsequent orders based

thereon, were erroneously entered because there was no evidence that all three

orders, as they relate to the house at 1714 Driscoll Street, are erroneous because

1714 Driscoll Street is real property located within Texas, and, as such, may be

readily attached or levied on by ordinary legal process. See Suttles v. Vestin Realty

Mortg. I, Inc., 317 S.W.3d 412, 418 (Tex. App.—Houston [1st Dist.] 2010, no

pet.). Appellant’s counsel indicated to the trial court that he would prefer to sell

the property by ordinary legal process, i.e., a sheriff’s sale, because he believed his

clients would recover more money to go toward the judgment if they did not have

to pay a receiver’s fee or a broker’s fee.

However, on May 3, 2016, while this case was pending on appeal, the

Constable’s Office, after issuing a Notice of Sale and Levy on the Driscoll

Property, sold it at an execution sale without incurring the fees of a receiver. A

case becomes moot if at any stage there ceases to be an actual controversy between

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the parties. Nat’l Collegiate Athletic Ass’n v. Jones, 1 S.W.3d 83, 86 (Tex. 1999).

This sale of the Driscoll Property by ordinary legal process renders issues two,

four, and five moot because it extinguishes the only controversy between the

parties that was raised in appellants’ brief relating to those issues.

Accordingly, we dismiss issues two, four, and five as moot.

SPECIFICITY OF TURNOVER ORDER

In issue three, appellants contend the Turnover Order must be reversed

because it “failed to specifically describe any property to be turned over[.]” We

disagree. “[S]ection 31.002 does not require that a judgment creditor seeking a

turnover order identify all, or even any, of the judgment debtor’s assets that are to

be the subject of the turnover order, nor does the statute require the trial court to

identify the specific property subject to turnover in its turnover order.” Tanner v.

McCarthy, 274 S.W.3d 311, 321 (Tex. App.—Houston [1st Dist.] 2008, no pet.).

Accordingly, we overrule issue three.

RIGHT TO JURY TRIAL

In issue six, appellants and the intervenor, citing Steenland v. Tex.

Commerce Bank N.A., 648 S.W.2d 387, 390 (Tex. App—Tyler 1983, writ ref’d

n.r.e).2 contend that they were entitled to a jury trial because there was a fact issue

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In Steenland, the Tyler Court of Appeals held that the judgment debtor was
entitled to a jury trial to determine the excess nonexempt value of his homestead.
648 S.W.2d at 390.
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as to whether the real property at 1714 Driscoll Street was “not subject to sale

under ordinary legal process.” For the same reason we dismissed issues two, four,

and five as moot, we also dismiss issue six.

APPOINTMENT OF MASTER IN CHANCERY

In issue seven, appellants contend the Receiver Order, the Turnover Order,

and the Sale Order are abuses of discretion because, in the Receiver Order the trial

court also gave the receiver the powers of a master in chancery. However, this

Court has held that we have no appellate jurisdiction to consider an order

appointing a master in chancery, even when such order is embedded within a

turnover-and-receivership order. See Sheikh v. Sheikh, 248 S.W.3d 381, 394 (Tex.

App.—Houston [1st Dist.] 2007, no pet.) We note, as this Court did in Sheikh,

that, inasmuch as we have reversed the orders complained of, the trial court, on

remand, may reconsider whether the receiver should also be appointed master in

chancery. See id. at 394–95.

We dismiss issue seven for lack of jurisdiction.

CONCLUSION

We reject appellants’ collateral attack on the bankruptcy court judgment.

We dismiss issues two, four, five, and six as moot. We dismiss issue seven for lack

of jurisdiction.

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 Having either dismissed or overruled all of appellants’ issues on appeal, we

affirm the trial court’s orders.

Sherry Radack
Chief Justice

Panel consists of Chief Justice Radack and Justices Massengale and Brown.

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