RECEIVERSHIPS IN FAMILY LAW CASES

JOHN T. ECK
LAW OFFICES OF ROBERT T. STITES, P.C.
933 West Weatherford Street
Fort Worth, Texas 76102
(817) 336-7577
Facsimile (817) 336-7583

3RD ANNUAL FAMILY LAW ON THE FRONT LINES CONFERENCE

March 27-28, 2003
Austin, Texas

RECEIVERSHIPS IN FAMILY LAW CASES

TABLE OF CONTENTS
I. INTRODUCTION AND SCOPE............................................................................................1
II. POWER TO APPOINT A RECEIVER.................................................................................1
A. Texas Family Code.............................................................................................................1
B. Predicate for a Receivership in a Pending Divorce Case ...............................................2
1. Cases Not Requiring a Predicate....................................................................................2
2. Cases Requiring a Predicate...........................................................................................2
3. Alter Ego Problems ........................................................................................................3
C. Texas Civil Practice and Remedies Code.........................................................................3
1. The General Receivership Statute..................................................................................3
2. The Turnover Statute......................................................................................................4
III. DO YOU REALLY NEED A RECEIVERSHIP?.................................................................4
A. Costs and Benefits of Receivership...................................................................................5
B. Selling the House of Horrors.........................................................................................5
C. Running the Business.........................................................................................................5
D. I Dont Like the Receiver ..................................................................................................5
IV. THE MECHANICS OF THE REQUEST .............................................................................6
A. The Application Process--Spouse .....................................................................................6
B. The Application Process--Third Parties ..........................................................................6
C. Sua Sponte Receiverships ..................................................................................................6
D. Notice of Receiverships......................................................................................................7
1. General Notice Requirements ........................................................................................7
2. Ex Parte Applications ....................................................................................................7
E. Applicants Bond................................................................................................................8
F. Qualifications of Receiver .................................................................................................8
G. Helping the receiver Sell the Home ..................................................................................9
V. POWERS AND DUTIES OF THE RECEIVER.................................................................10
A. Receivers Oath ................................................................................................................10
B. Receivers Bond................................................................................................................10
C. Notice Requirements and Lis Pendens ...........................................................................10
D. Legal Status of Property--Custodia Legis.......................................................................10
E. Inventory...........................................................................................................................11
F. Activities............................................................................................................................11
1. In General.....................................................................................................................11
2. Administration Tips .....................................................................................................12
3. Taking Possession of Property .....................................................................................12
4. Selling Homestead Property.........................................................................................13
5. Final Report and Discharge..........................................................................................14
G. Priority and Application of Funds..................................................................................15
H. Compensating the Receiver.............................................................................................15
1. Priority and Court Costs...............................................................................................15

RECEIVERSHIPS IN FAMILY LAW CASES

2.
3.
4.
5.
6.

No Jury Trial ................................................................................................................16

Basis of Calculation .....................................................................................................16
Interim Payments .........................................................................................................16
Payments for Attorneys Fees ......................................................................................16
Allocating Costs ...........................................................................................................17

VI. CHALLENGING THE APPOINTMENT OF A RECEIVER ..........................................18

A. Immunity and Irregularities of Receivers Actions ......................................................18
B. Jury Trial ..........................................................................................................................19
C. Motion to Vacate the Receivership.................................................................................19
D. Appeal of the Appointment or Denial of a Receivership..............................................20
E. Appeal of the Other Receivership Matters ....................................................................20
F. Mandamus ........................................................................................................................20
VII. CREDITORS RELIEF ......................................................................................................21
A. Turnover Relief ................................................................................................................21
B. Use of Turnover Relief in Family Law Cases ................................................................21
C. Cumulative Remedy.........................................................................................................22
D. Application Process..........................................................................................................22
E. Parties Subject to Turnover Order ................................................................................23
F. Burden of Proof................................................................................................................24
1. Discretion of Court.......................................................................................................24
2. Who Has the Burden of Proof? ....................................................................................25
3. Affirmative Defenses ...................................................................................................25
G. Property Subject to Turnover.........................................................................................25
1. Property Affected by Turnover Relief .........................................................................25
2. Conditions and Exceptions on the Property Affected by Turnover Relief ..................26
H. Judicial Aid.......................................................................................................................29
I. Attorneys Fees and Costs ...............................................................................................29
J. Enforcement .....................................................................................................................30
K. Appellate Review..............................................................................................................30
VIII. BANKRUPTCY..................................................................................................................31
IX. SUMMARY AND CONCLUSION ......................................................................................32
APPENDIX A (Texas Family Code Section 6.502) ...................................................................33
APPENDIX B (Texas Family Code Section 6.709) ...................................................................34
APPENDIX C (Texas Civil Practice and Remedies Code Section 64.001).............................35
APPENDIX D (Texas Civil Practice and Remedies Code Section 31.002).............................36
APPENDIX E (Texas Property Code Section 42.001)..............................................................37
APPENDIX F (Texas Property Code Section 42.002) ..............................................................38
APPENDIX G (Texas Property Code Section 42.0021) ...........................................................39

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RECEIVERSHIPS IN FAMILY LAW CASES

RECEIVERSHIPS IN FAMILY LAW CASES

I. INTRODUCTION AND SCOPE
A receivership is primarily a remedy of commercial law. However, receiverships have
uses in family law cases. The family law practitioner who selects a receivership as a remedy
should BE CAREFUL. Texas courts generally consider receiverships an exceedingly harsh
remedy that should be available only in exceptional circumstances. Jones v. Strayhorn, 159 Tex.
421, 321 S.W.2d 290, 294 (1959) (a receivership is one of the harshest remedies available to the
law); Rex Refining Co., Inc. v. Morris, 72 S.W.2d 687, 692 (Tex. Civ. App.--Dallas 1934, no
writ) (a receivership discredits, cripples, and, in a majority of instances puts an end to any
business or enterprise....). Consequently, courts generally view receiverships with disfavor and
prefer milder remedies when available. Independent Am. Sav. Assn v. Preston 117 Joint
Venture, 753 S.W.2d 749, 750 (Tex. App.--Dallas 1988, no writ); Mallou v. Payne & Vendig,
750 S.W.2d 251, 255 (Tex. App.--Dallas 1988, writ denied). Further, receivership law is often
very technical and confusing. Therefore, the purpose of this article is to give the family law
practitioner who needs a receivership an overview of receivership law in Texas, focusing on the
common uses, considerations, and problems associated with this remedy in the family law case.
The author would like to thank Barbara K. Runge and would recommend her article
Whos Minding the Store? Dealing with Receiverships (with G. Scott Williams and Deborah
C.S. Folse), from the 2001 Advanced Family Law Course.
II. POWER TO APPOINT A RECEIVER
A. Texas Family Code
The Texas Family Code, provides for the use of receiverships for the preservation
and protection of the property of the parties while the divorce is pending. See TEX. FAM.
CODE 6.502(5). See Appendix A. It also provides the same protection while an appeal of
the divorce is pending. See id. 6.709(a)(3). See Appendix B.
Further, the Texas Family Code authorizes a court to render further orders (including
clarifying orders) to enforce the division of marital property made in a decree or annulment.
See id. 9.006-9.009; Young v. Young, 765 S.W.2d 440, 444 (Tex. App.--Dallas 1988, no
writ) (use of receiverships authorized). However, [a]n order to enforce the division is limited
to an order to assist in the implementation of or to clarify the prior order and may not alter or
change the substantive division of the property. TEX. FAM. CODE 9.007(a). See Young, 765
S.W.2d at 444; Sloan v. Sloan, 474 S.W.2d 272, 275 (Tex. Civ. App.--Waco 1971, no writ);
Elliott v. Elliott, 422 S.W.2d 757, 758-59 (Tex. Civ. App.--Fort Worth 1968, writ dismd).
An order that amends, modifies, alters or changes the actual, substantive division of
property made or approved in a final divorce decree is unenforceable and beyond the courts
power. Elliott, 422 S.W.2d at 758-59; McDowell v. McDowell, 705 S.W.2d 345, 347 (Tex.
App.--Dallas 1986, no writ) (appointment of a receiver to enforce a property division, when
the appointment changed the time at which the property would be sold, is unenforceable as a
modification).

RECEIVERSHIPS IN FAMILY LAW CASES

B. Predicate for a Receivership in a Pending Divorce Case

There is a conflict of authority as to what circumstances justify the appointment of a
receiver under the Texas Family Code. The general receivership statute in the Texas Civil
Practice and Remedies Code provides that the court may only appoint a receiver if the
property is in danger of being lost and if a less drastic remedy is not available. TEX. CIV.
PRAC. & REM. CODE 64.001(a); Appendix C; Texas Consol. Oils v. Hartwell, 240 S.W.2d
324, 327 (Tex. Civ. App.--Dallas 1951, no writ). The Texas Family Code does not contain an
equivalent predicate provision.
1. Cases Not Requiring a Predicate
Some Texas courts hold that the Texas Family Code allows the court to exercise
broad discretion to appoint a receiver in a divorce action, regardless of whether the
property is in danger of being lost. This authority is derived from section 7.001 of the
Texas Family Code. See, e.g., Vannerson v. Vannerson, 857 S.W.2d 659, 673 (Tex. App.-Houston [1st Dist.] 1993, writ denied) (the broad authority of the Texas Family Code
includes the power to enlist the aid of a receiver to effectuate the trial courts orders and
judgments); Young, 765 S.W.2d at 444 (the Texas Family Code controls property division
in a divorce, thus the Texas Civil Practice and Remedies Code requirements are
irrelevant); Sparr v. Sparr, 596 S.W.2d 164, 165 (Tex. Civ. App.--Texarkana 1980, no
writ) (no evidence of threat to property); Jones v. Jones, 211 S.W.2d 269, 274 (Tex. Civ.
App.--El Paso 1944, no writ) (same). See also Estate of Herring, 983 S.W.2d 61, 65 (Tex.
App.--Corpus Christi, 1998, no writ) (citing O & G Carriers, Inc. v. Smith Energy 1986A Partnership, 826 S.W.2d 703, 706 (Tex. App.--Houston [1st Dist.] 1992, no writ));
Cross v. Cross, 738 S.W.2d 86, 89 (Tex. App.--Corpus Christi 1987, writ dismd w.o.j.);
B & W Cattle Co. v. First Natl Bank, 692 S.W.2d 946, 951 (Tex. App.--Amarillo 1985,
no writ).
2. Cases Requiring a Predicate
Despite the lack of a predicate requirement in the Texas Family Code, most courts
require some showing that the property of the divorcing spouses is in danger and that a
less drastic remedy is unavailable before a receiver is appointed. See, e.g., Readheimer v.
Readheimer, 728 S.W.2d 872, 873 (Tex. App.--Houston [1st Dist.] 1987, no writ);
Whitehill v. Whitehill, 628 S.W.2d 148, 151 (Tex. App.--Houston [14th Dist.] 1982, no
writ); Parness v. Parness, 560 S.W.2d 181, 182 (Tex. Civ. App.--Dallas 1977, no writ).
See also Joy v. Joy, 153 S.W.2d 180, 183 (Tex. Civ. App.--Dallas 1941, writ dismd) (a
pre-judgment receivership is never an end within itself, but merely incident to the case,
and whether an application for appointment of a receiver is based on statute or equity,
appointment is only justified when it is necessary to preserve and protect the subject
property while the case is pending).
The Readheimer court specifically disagreed with cases allowing courts to have
broad discretion in choosing whether to appoint a receiver in divorce actions.
Readheimer, 728 S.W.2d at 873. The Readheimer court held that there should be some