Phila. Indem. Ins. Co. v. JJ Red Commercial Roofing LLC

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PHILADELPHIA INDEMNITY INSURANCE COMPANY, Plaintiff, v. JJ RED COMMERCIAL ROOFING LLC; ROBERT M. EDWARDS; and RHONDA S. EDWARDS, Defendants, and PLAINSCAPITAL BANK, Garnishee.

Civil Action No. 3:23-CV-2581-L-BN

United States District Court, N.D. Texas, Dallas Division

February 23, 2024

MEMORANDUM OPINION AND ORDER

SAM A LINDSAY UNITED STATES DISTRICT JUDGE

Before the court is Plaintiff Philadelphia Indemnity Insurance Company's (“Plaintiff”) Application for Writ of Garnishment (“Application”) (Doc. 1). On January 25, 2024, the Findings, Conclusions, and Recommendation of the United States Magistrate Judge (“Report”) (Doc. 7) regarding Plaintiff's Application was filed. For the reasons herein explained, the court accepts the Report grants Plaintiff's Application (Doc. 1) and directs the clerk of court to issue and file as a separate document the attached Writ of Garnishment and deliver it to Plaintiff or Plaintiff's counsel.

I. Background

Plaintiff requests that the court issue a writ of garnishment, pursuant to Texas law, to Garnishee PlainsCapital Bank to enforce the default judgment that was entered on September 19, 2023, in its favor against Defendants JJ Red Commercial Roofing, LLC; Robert M. Edwards; and Rhonda S. Edwards (“Defendants”) in Civil Action No. 3:23-CV-00655-M. The default judgment was entered against Defendants, “jointly and severally, in the amount of $98,177.30,” plus postjudgment “interest at a rate of 10%, computed daily on the unpaid balance from the date of entry of th[e] judgment until the judgment is paid in full, and compounded annually.” Ex. A to Pl.'s Application. The default judgment further provides that Plaintiff is entitled to recover its costs of court, and that “all writs and process necessary for the enforcement of th[e] judgment be issued in favor of Plaintiff.” Id.

II. Law Governing Garnishment Proceedings

Generally, “[a] garnishment action, although ancillary to the underlying suit, is a separate proceeding.” National Loan v. Fidelity Bank, 51 F.3d 1045, 1995 WL 153421, at *1 (5th Cir. 1995) (citation omitted). “The Federal Rules of Civil Procedure require that federal courts conduct garnishment proceedings pursuant to the law of the state in which the district court sits.” Id. (citing Fed.R.Civ.P. 64 (procedure for seizing persons or property, including via garnishment, to secure a satisfaction of a potential judgment), and Fed.R.Civ.P. 69 (procedure for enforcing a money judgment through enforcement of a writ of execution)). Because Plaintiff seeks a writ of garnishment from the United States District Court for the Northern District of Texas, the court applies Texas garnishment law. National Loan, 1995 WL 153421, at *1.

Garnishment proceedings in Texas “are governed by Chapter 63 of the Civil Practice and Remedies Code and Rules 657 through 679 of the Texas Rules of Civil Procedure” and “determine whether the garnishee is indebted to or has in its possession effects belonging to the debtor.” Strobach v. WesTex Cmty. Credit Union, 621 S.W.3d 856, 867-68 (Tex. App.-El Paso 2021, pet. denied). In Texas, garnishment proceedings are statutory in nature and involve the application of “property, money, or credits of a debtor in the possession of another . . . to the payment of the debt.” Aycock v. EECU, 510 S.W.3d 636, 638 (Tex. App.-El Paso 2016, no pet.) (citing Bank One, Tex., N.A. v. Sunbelt Sav., F.S.B., 824 S.W.2d 557, 558 (Tex. 1992)). “When a plaintiff has obtained a ‘valid, subsisting judgment' against a defendant in a lawsuit, it may file an application with the trial court, accompanied by affidavits stating the relevant facts, requesting that the court issue a writ of garnishment to the garnishee who is allegedly in possession of the defendantdebtor's property.” Strobach, 621 S.W.3d 856 at 868 (citing Tex.R.Civ.P. 658; and Tex. Civ. Prac. & Rem. Code Ann. § 63.001(3)) (other citation omitted).

“A garnishment proceeding involves at least three parties: (1) the plaintiff (also known as the garnishor); (2) the defendant or debtor; and (3) the garnishee.” Id. at 868 (citations omitted). “The plaintiff or garnishor is a creditor of the debtor and requests the court to issue a writ of garnishment to the garnishee,” and “[t]he garnishee is a third party who owes a debt to or holds property of the debtor.” Id. The garnishor, however, is subrogated to the rights of the debtor against the garnishee and may only enforce against the garnishee the rights that the debtor could have enforced had it sued the garnishee directly. See National City Bank v. Texas Capital Bank, N.A., 353 S.W.3d 581, 584 (Tex. App.-Dallas 2011, no pet.) (citations omitted). Thus, the garnishor “cannot acquire any greater rights against the garnishee than the debtor . . . possesses.” Id. (citations omitted). “Service of the writ on the garnishee fixes a lien on the debtor's property or debts due him, subject to prior valid rights and liens against such property or debt.” Id. at 585 (citations omitted).

Under Texas law, a writ of garnishment may be issued by the clerk of the court or a justice of the peace. Tex. Civ. Prac. & Rem. Code § 63.002. Texas Rule of Civil Procedure 659 provides that, if the rules for issuance of a writ are met, a writ of garnishment directed to the garnishee shall issue and command the garnishee:

to appear before the court out of which the same is issued at or before 10 o'clock a.m. of the Monday next following the expiration of twenty days from the date the writ was served, if the writ is issued out of the district or county court; or the Monday next after the expiration of ten days from the date the writ was served, if the writ is issued out of the justice court. The writ shall command the garnishee to answer under oath upon such return date what, if anything, he is indebted to the defendant, and was when the writ was served, and what effects, if any, of the defendant he has in his possession, and had when such writ was served, and what other persons, if any, within his knowledge, are indebted to the defendant or have effects belonging to him in their possession.

Tex. R. Civ. P. 659. Texas Rule of Civil Procedure 661 sets forth the “Form of Writ” to be executed in accordance with Rule 659. Tex.R.Civ.P. 661. Rule 662 further provides that the writ of garnishment “shall be dated and tested as other writs, and may be delivered to the sheriff or constable by the officer who issued it, or [the issuing officer] may deliver it to the plaintiff, his agent or attorney, for that purpose.” Tex.R.Civ.P. 662.

When a court issues a writ of garnishment, the garnishee and judgment debtor must be served with the writ and other documents in accordance with Rules 663 and 663a. See Tex.R.Civ.P. 663 (explaining that, upon delivery, the person receiving the writ of garnishment must immediately execute the writ by delivering a copy of the writ to the garnishee.); Tex.R.Civ.P. 663a (providing that a “defendant must be served as provided in Rule 21a or Rule 501.4, as applicable, with a copy of the writ of garnishment, the application, accompanying affidavits, and orders of the court,” and the writ served on the defendant must include the notice language in Rule 663a.). The return of a writ of garnishment is governed by the same rules that govern the return of citations in Texas. Tex.R.Civ.P. 663 (“shall make return thereof as of other citations.”); Curry Motor Freight, Inc. v. Ralston Purina Co., 565 S.W.2d 105, 106 (Tex. Civ. App.-Amarillo 1978, no writ).

“[G]arnishment proceedings cannot be sustained unless they strictly conform to the statutory requirements and related rules.” Walnut Equip. Leasing Co. v. J-V Dirt & Loam, a Div. of J-VMarble Mfg., Inc., 907 S.W.2d 912, 915 (Tex. App.-Austin 1995, writ denied) (“J-V's voluntary appearance did not cure Walnut's failure to serve it with a copy of the writ . . . [because] actual notice to the debtor of a garnishment action does not constitute sufficient notice under Rule 663a.”); Strobach, 621 S.W.3d at 870 (“the failure to give proper notice to the defendant-debtor, as required by law, is not considered a mere irregularity, but rather, it is an integral part of the statutory requirements of the garnishment proceedings; therefore, a garnishment judgment rendered without such notice is void.”); Curry Motor Freight, Inc., 565 S.W.2d at 106 (requiring strict compliance with garnishment return of citation rules); McMullen v. J.M. Smith Assocs., P.S.C., No. 05-91-00812-CV, 1991 WL 192543, at *2 (Tex. App.-Dallas Sept. 30, 1991, no writ) (concluding that “the failure of the . . . return [of a writ of garnishment] to indicate the manner of service as required by rule 107 of the rules of civil procedure render[ed] the service void and of no effect.”). Accordingly, it is incumbent on the garnishor to strictly comply with the rules governing garnishment proceedings in Texas, including those pertaining to service and return of citation.

Upon service of the writ, the garnishee has three duties: (1) to “freeze or impound any money in its possession belonging to the judgment-debtor”;^[1](2) to “file an answer with the trial court, under oath, in writing and signed by him, indicating whether he is in debt to the defendant or not”;^[2]and (3) to pay the garnishor in accordance with any garnishment judgment issued by the court.^[3]In certain circumstances, a garnishee can also file a bill of interpleader to pay the funds into the court registry and by interpleader bring into the suit all other claimants to the funds to protect itself against liability. See Bank One, Tex., N.A., 824 S.W.2d at 558.^[4]

III. The Magistrate Judge's Recommendation

This action was referred for pretrial management to the magistrate judge on January 4, 2024. As indicated, the magistrate judge...