Opinion
No. 04-06-00456-CV.
Delivered and Filed: March 14, 2007.
Appeal From the 57th Judicial District Court, Bexar County, Texas, Trial Court No. 2006-CI-04890, Honorable Barbara Hanson Nellermoe, Judge Presiding.
Sitting: Alma L. Ló pez, Chief Justice, Phylis J. Speedlin, Justice, Rebecca Simmons, Justice.
Opinion by: PHYLIS J. SPEEDLIN, Justice.
MEMORANDUM OPINION
The Cadle Company appeals the trial court's order dissolving a writ of garnishment. The trial court's order also taxes Mark T. Davis's attorney's fees in the amount of $1,000.00 against The Cadle Company as costs. In its brief, The Cadle Company asserts that the trial court erred in dissolving the writ because: (1) the evidence is legally and factually insufficient to support the trial court's finding that the judgment was fully satisfied; and (2) judgment debtors are not entitled to recover attorney's fees under Rule 677 of the Texas Rules of Civil Procedure. We reverse the portion of the trial court's order taxing The Cadle Company with Davis's reasonable attorney's fees and render judgment that Davis is not entitled to recover his attorney's fees. We affirm the remainder of the trial court's order.
Background
Davis borrowed money for a business from San Antonio Savings Association. The loan was secured by a first lien on certain real property in Comal County, Texas. Through a series of transactions, The Cadle Company was assigned the loan and the lien. In October of 1993, Davis agreed to a Consent Judgment in favor of The Cadle Company, representing the amount outstanding on the loan. For four years, The Cadle Company regularly contacted Davis to determine if he had any non-exempt assets that could be used to satisfy the judgment.
In 1997, Davis was approached by Peter Barta of The Cadle Company "with a proposition to `get all this behind us' and to allow [Davis] to `be through with it." Barta agreed to settle and release all claims relating to the judgment if Davis would (1) satisfactorily resolve the tax lien on the Comal County Property and then (2) sell the property with all of the remaining proceeds going to The Cadle Company. Barta dictated a letter for Davis to send to the IRS to negotiate a release of the tax lien, and the IRS negotiated the tax lien to an amount that was acceptable to The Cadle Company. On November 24, 1997, Barta sent a letter to the title company acknowledging the proceeds from the sale of the Comal County property would be approximately $9,000.00. The letter states, "Of that amount, we will release our mortgage for $7,500.00, leaving $1,500.00 for the IRS."
In connection with the sale, Davis executed an Affidavit as to Debt and Liens. In the affidavit, Davis lists The Cadle Company as a secured party and states that $39,950.97 was to be released. Subsequent to the closing, the title company sent a letter to The Cadle Company referring to the Davis loan. The letter states, "In connection with the above referenced loan, we enclose our check #091050 in the amount of $7,500.00 for payment in full." The letter instructs The Cadle Company to return the original Release of Lien to the title company but not to forward any other miscellaneous cancelled loan papers to the title company including the original note. The Cadle Company endorsed and deposited the check.
Almost six years later, in September of 2003, a Bexar County sheriff deputy left a business card at the home of Davis's mother. Davis contacted the deputy and was advised that the deputy was trying to collect on a judgment in favor of The Cadle Company. Davis informed the deputy that the matter had been settled, and he did not have any non-exempt property anyway. The record contains a writ of execution dated August 26, 2003, which was the basis for the deputy contacting Davis.
On November 25, 2003, Ted Lance with The Cadle Company sent Davis a letter requesting information to be used to collect a debt. Davis contacted Lance and told him the matter had been settled in 1997. Lance insisted the matter had not been settled and that The Cadle Company intended to seize Davis's money in his IBC bank account. Unable to immediately locate the 1997 documents and fearful of having his account seized, Davis sent Lance a check for $40.00 on January 24, 2004. Once Davis located the 1997 documents, he retained counsel, who sent Lance a letter dated March 31, 2004, stating that the matter had previously been settled and demanding that action be taken regarding Davis's credit report. Unbeknownst to Davis, The Cadle Company recorded an Abstract of Judgment on April 14, 2004.
Approximately two years later, in March of 2006, Davis attempted to withdraw funds from his IBC account; however, the transaction was rejected. Davis contacted IBC and was advised that the account was frozen by a writ of garnishment. Neither the application for the writ of garnishment nor the Abstract of Judgment refer to the $7,500.00 paid to The Cadle Company by the title company in 1997.
Davis filed an emergency motion to dissolve the writ of garnishment. After a hearing, the trial court granted the motion and dissolved the writ of garnishment. The trial court also taxed all costs of the proceeding, including Davis's reasonable attorney's fees in the amount of $1,000.00, against The Cadle Company.
Dissolution of Writ
"It has long been recognized in this state that the remedy of garnishment is summary and harsh, and should not be sustained unless there is strict compliance with the statutory requirements." In re Tex. American Exp., Inc., 190 S.W.3d 720, 725 (Tex.App.-Dallas 2005, orig. proceeding). Because the remedy of garnishment is purely statutory, we look to the Texas Rules of Civil Procedure and Chapter 63 of the Texas Civil Practice and Remedies Code relating to garnishments to determine the respective rights and responsibilities of the parties in a garnishment action. Jamison v. Nat'l Loan Investors, L.P., 4 S.W.3d 465, 468 (Tex.App.-Houston [1st Dist.] 1999, pet. denied). The prerequisites for the issuance of a writ of garnishment after judgment are set forth in the Texas Civil Practice and Remedies Code, which provides that such a writ is available if a plaintiff has a valid, subsisting judgment and makes an affidavit stating that, within the plaintiff's knowledge, the defendant does not possess property in Texas subject to execution sufficient to satisfy the judgment. Tex. Civ. Prac. Rem. Code Ann. § 63.001(3) (Vernon 1997); Jamison, 4 S.W.3d at 468. A garnishment is wrongful if the factual allegations in the affidavit prescribed by Section 63.001 are false. Jamison, 4 S.W.3d at 468.
Rule 664a of the Texas Rules of Civil Procedure governs the dissolution of a writ of garnishment and permits a defendant to seek a dissolution for grounds or cause, extrinsic or intrinsic. Tex. R. Civ. P. 664a.; Thompson v. Harco Nat'l Ins. Co., 997 S.W.2d 607, 612 (Tex.App.-Dallas 1998, pet. denied). Rule 664a provides, "The writ shall be dissolved unless, at [the] hearing [on the motion to dissolve], the plaintiff shall prove the grounds relied upon for its issuance." Tex. R. Civ. P. 664a; Thompson, 997 S.W.2d at 612. "In the context of a postjudgment garnishment proceeding, this means the garnishor must prove it has a valid, subsisting judgment." Thompson, 997 S.W.2d at 612. Since the garnishor has the burden of proof, any failure on its part to carry that burden would require the trial court to dissolve the writ. Id. at 613; Huie-Clark Joint Venture v. American States Ins. Co., 629 S.W.2d 109, 110-11 (Tex.App.-Dallas 1981, writ ref'd n.r.e.). In this case, The Cadle Company had the burden of proving that the 1993 Consent Judgment was a valid, subsisting judgment at the hearing on Davis's motion to dissolve.
In its brief, The Cadle Company asserts four reasons it contends the trial court erred in granting the motion to dissolve the writ of garnishment. First, The Cadle Company contends that Davis failed to comply with section 52.005 of the Texas Property Code, entitled "Satisfaction of Judgment," which provides that a satisfaction of a judgment may be shown by the recordation of certain instruments. See Tex. Prop. Code Ann. § 52.005 (Vernon Supp. 2006). Section 52.005 is not, however, the exclusive means by which a satisfaction of a judgment can be shown. If a judgment creditor accepts money in complete satisfaction and release of his judgment, that judgment has no further force or authority. Rapp v. Mandell Wright, P.C., 123 S.W.3d 431, 434-35 (Tex.App.-Houston [14th Dist.] 2003, pet. denied); Reames v. Logue, 712 S.W.2d 802, 805 (Tex.App.-Dallas 1986, writ ref'd n.r.e.). Accordingly, although section 52.005 is one means by which a judgment debtor can prove satisfaction of a judgment, it is not the exclusive means.
The Cadle Company next contends that the alleged release was without consideration. However, Davis testified that The Cadle Company agreed to the release if the IRS would also compromise its lien. The consideration for a composition of creditors is the mutual covenant of each creditor to accept the settlement. Reinhardt v. Tommy Burns Painting Decorating Co., 383 S.W.2d 72, 73 (Tex.Civ.App.-San Antonio 1964, writ ref'd); Texarkana Nat `l Bank v. Hubbard, 114 S.W.2d 389, 392 (Tex.Civ.App. — Beaumont 1938, writ dism'd). "Such an agreement, if entered into by a debtor with a number of his creditors, each acting on the faith of the engagement of others, will be binding on them, for each in that case has the undertaking of the rest as a consideration for his own undertaking." Hubbard, 114 S.W.2d at 392. In this case, two creditors, the IRS and The Cadle Company, agreed to accept a reduced sum in order to facilitate the sale of property owned by Davis so that the proceeds from such sale could be distributed to the two creditors. This composition of creditors provided sufficient consideration for The Cadle Company's release.
The Cadle Company also cites Bank One, N.A. v. Wohlfahrt, 193 S.W.3d 190, 195 (Tex.App.-Houston [1st Dist.] 2000, no pet.), as support for its contention that the trial court could only consider the terms contained in the judgment and "may not allow an alleged settlement agreement that is not part of the judgment to alter the terms of the judgment." In Bank One, N.A., however, the portion of the opinion discussing whether the settlement agreement could be considered was the section of the opinion discussing the amount of the debt for which the garnishment was sought. 193 S.W.3d at 194-95. Bank One argued that the amount of the debt included $10,007.11 in post-judgment attorney's fees that Wohlfahrt had agreed to pay in an earlier attempt to settle the matter. Id. at 192, 194. The appellate court rejected that argument reasoning that because Bank One's application for writ of garnishment was premised on the judgment, the amount of debt to be enforced could not include any additional obligation that was not contained in the judgment. Id. at 194-95. With regard to evidence of payment, however, the trial court relied on the affidavits of the parties and their experts and spreadsheet exhibits to determine whether Wohlfahrt had satisfied the judgment through payment. Id. at 195-96. Because the evidence raised a genuine issue of material fact with regard to whether Wohlfahrt had paid the judgment, the appellate court held that neither party was entitled to summary judgment. Id. at 195-97. Accordingly, the court in Bank One did not hold that evidence of a settlement that affected whether a judgment was paid in full could not be considered in determining whether a valid and subsisting judgment exists.
Finally, The Cadle Company challenges the sufficiency of the evidence to support the trial
court's dissolution of the writ based on its finding that the judgment had been satisfied. In conducting a legal sufficiency review, we review the evidence in the light most favorable to the verdict giving "credit [to] favorable evidence if reasonable jurors could, and disregard[ing] contrary evidence unless reasonable jurors could not." City of Keller v. Wilson, 168 S.W.3d 802, 827-28 (Tex. 2005). Evidence is legally insufficient when the record discloses: (1) a complete absence of evidence of a vital fact; (2) the court is barred by rules of law from giving weight to the only evidence offered to prove a vital fact; (3) the evidence offered to prove a vital fact is no more than a mere scintilla; or (4) the evidence establishes conclusively the opposite of the vital fact. Id. at 810. When a party attacks the factual sufficiency of an adverse finding on an issue on which the party had the burden of proof, the party must demonstrate on appeal that the adverse finding is against the great weight and preponderance of the evidence. Dow Chem. Co. v. Francis, 46 S.W.3d 237, 242 (Tex. 2001). The court of appeals must consider and weigh all of the evidence, and can set aside a verdict only if the evidence is so weak or if the finding is so against the great weight and preponderance of the evidence that it is clearly wrong and unjust. Id. Under this analysis, we do not serve as a fact finder, pass upon the credibility of witnesses, or substitute our judgment for that of the trier of fact, even if there is conflicting evidence upon which a different conclusion could be supported. Golden Eagle Archery, Inc. v. Jackson, 116 S.W.3d 757, 761 (Tex. 2003); Wal-Mart Stores, Inc. v. Garcia, 30 S.W.3d 19, 21 (Tex.App.-San Antonio 2000, no pet.).
As previously noted, The Cadle Company had the burden to prove that a valid and subsisting judgment existed. Davis stated in his affidavit that The Cadle Company agreed to accept the proceeds from the sale of the Comal County property as payment in full. Several documents that were prepared at the time of the sale support Davis's testimony. Furthermore, the absence of any additional collection efforts by The Cadle Company for almost six years, which was a pattern inconsistent with actions taken prior to the 1997 sale, is further evidence supporting the position that the parties had agreed that the 1997 sales proceeds would constitute payment in full of the Consent Judgment. The Cadle Company failed to introduce any evidence that controverted Davis's testimony. The only representative from The Cadle Company to testify admitted that he was not with the company at the time of the 1997 sale and had not spoken with Barton regarding the parties' understanding. Accordingly, the evidence was legally and factually sufficient to support the trial court's decision to dissolve the writ of garnishment because The Cadle Company failed to prove a valid and subsisting judgment.
We express no opinion as to whether The Cadle Company would be able to garner sufficient evidence to establish a valid and subsisting judgment in any subsequent proceeding between the parties. We only hold that The Cadle Company failed to introduce sufficient evidence to satisfy its burden in the underlying garnishment proceeding.
Attorney's Fees
It is established law in Texas that a claimant seeking an award of attorney's fees must establish a statutory or contractual ground for the award, since attorney's fees may not be awarded on any judicially created basis. Henry v. Ins. Co. of North America, 879 S.W.2d 366, 368 (Tex.App.-Houston [14th Dist.] 1994, no pet.); State v. Estate of Brown, 802 S.W.2d 898, 901 (Tex.App.-San Antonio 1991, no writ). A garnishment is not a cause of action based on contract, therefore, attorney's fees are not recoverable under section 38.001 of the Texas Civil Practice and Remedies Code. See Henry, 879 S.W.2d at 368-69. Rule 677, cited by Davis and construed by the court in Rowley v. Lake Area Nat `l Bank, 976 S.W.2d 715, 721-724 (Tex.App.-Houston [1st Dist.] 1998, pet. denied), has consistently been construed to afford the garnishee recovery of attorneys' fees, not the garnishor or a judgment debtor. Henry, 897 S.W.2d at 369. In fact, no contractual or statutory authority exists for the award of attorneys' fees to the garnishor in a garnishment action. Id. at 369-70.
Davis globally cites chapters 9 and 10 of the Texas Civil Practice and Remedies Code in support of his assertion that the attorney's fees could be upheld as an award of a sanction. An order imposing a sanction under chapter 10, however, must "explain the basis for the sanction imposed." Tex. Civ. Prac. Rem. Code Ann. § 10.005 (Vernon 2002). In addition, reasonable notice must be given to a party before a sanction may be imposed. Tex. Civ. Prac. Rem. Code Ann. §§ 9.012, 10.003 (Vernon 2002). Finally, we are unconvinced that the five line discussion of the attorney's fees issue on the record below can sustain an award of attorney's fees as a sanction. Accordingly, the trial court erred in taxing Davis's attorney's fees against The Cadle Company without a statutory or contractual basis for such an award.
Under Texas law, attorneys' fees are not even recoverable as actual damages in a wrongful garnishment suit, and we note that Davis did not assert such a claim against The Cadle Company. See Beutel v. Paul, 741 S.W.2d 510, 514 (Tex.App.-Houston [14th Dist.] 1987, no pet.).
Conclusion
The portion of the trial court's order taxing The Cadle Company with Davis's attorney's fees is reversed, and judgment is rendered that Davis is not entitled to recover attorneys' fees. The remainder of the trial court's order is affirmed.
Phylis J. Speedlin, Justice