David Diaz, Scott Fisher, and Kristi Fisher v. SMS Financial Cap, LLC, Capital One, National Association, Stephen F. Perkins, and Christopher Fitzwater

Court of Appeals of Texas·Decided August 30, 2023·No. 05-21-00696-CV·Published

Opinion

Reverse and Remand and Opinion Filed August 30, 2023

In The

Court of Appeals

Fifth District of Texas at Dallas No. 05-21-00696-CV

DAVID DIAZ, SCOTT FISHER, AND KRISTI FISHER, Appellants V.

SMS FINANCIAL CAP, LLC, CAPITAL ONE, NATIONAL ASSOCIATION, STEPHEN F. PERKINS, AND CHRISTOPHER FITZWATER, Appellees

On Appeal from the 199th Judicial District Court Collin County, Texas

Trial Court Cause No. 199-00653-2011

MEMORANDUM OPINION

Before Justices Molberg, Reichek, and Garcia Opinion by Justice Molberg This case involves an interlocutory appeal and a related petition for a writ of

mandamus.1 In the interlocutory appeal, appellants David Diaz, Scott Fisher, and Kristi Fisher argue the trial court erred by granting appellees’ motion to strike appellant Diaz’s motion to vacate the trial court’s turnover order appointing appellee Chirstopher Fitzwater as receiver. They also argue the trial court erred by alternatively denying the motion to vacate the order appointing Fitzwater receiver.

1 We previously consolidated the mandamus petition proceeding into this cause.

In the petition for writ of mandamus, relators Scott Fisher and Kristi Fisher argue the trial court abused its discretion by rendering a turnover order against them. For reasons explained below, we reverse the trial court’s order striking Diaz’s motion to vacate and its order denying Diaz’s motion to vacate, and we conditionally grant the writ of mandamus sought by the Fishers.

I. Background

The 199th District Court entered a final judgment on May 23, 2011, in favor of Capital One against Stephen Perkins, PS Royal Self Storage, and GP Royal Self Storage for $2,428,227.83 plus attorney’s fees. On October 14, 2013, Capital One assigned its interest in the judgment to SMS Financial (SMS).

Matthew Tadlock announced himself as lead counsel for SMS on August 13, 2019. The same day, SMS filed a post-judgment application for turnover relief and appointment of receiver against PS Royal, GP Royal, and Stephen Perkins. The application stated SMS’s judgment remained unsatisfied and the defendants had non-exempt property. SMS requested the trial court appoint a receiver—Christopher Fitzwater—under § 31.002(b)(3) of the civil practice and remedies code and to order the defendants to turn over all non-exempt property to the receiver. Attached to the application was the final judgment in favor of Capital One.

On August 13, 2019, at the hearing on the application for appointment of receiver, Tadlock appeared for SMS and no other parties appeared. No evidence was presented to the trial court. The court announced it would grant the requested

fees of $1,500 for preparing the application and would appoint Fitzwater receiver at the negotiated rate of $200 per hour.

The trial court signed an order on September 25, 2019, granting SMS’s application, finding that the defendants owned non-exempt property, and appointing Fitzwater receiver. The order stated Fitzwater had the power and authority to take possession of and sell all leviable property of the defendants, and it ordered each defendant to turn over to Fitzwater within five days of a request “all documents and financial records which may be requested” by him and “all checks, cash, securities (stocks and bonds), promissory notes, documents of title, and contracts owned by or in the name of each defendant.” Each defendant was required to identify and turn over to Fitzwater all interests of each defendant in any business or venture and all agreements and other documents pertaining to the business or venture within five days of each defendant’s receipt of a copy of the order. Each defendant had a continuing obligation to turn over to Fitzwater, except for paychecks for current wages and social security income, all checks, cash, securities, promissory notes, documents of title, and contracts within three days of each defendant’s receipt and possession of any such property. The order further specified certain other rights and powers Fitzwater had with respect to the defendants’ property.

On December 18, 2019, Fitzwater filed a notice of appearance that Tadlock, counsel for SMS, would also represent Fitzwater.

Fitzwater filed his first report on February 4, 2021. Among other things, Fitzwater noted he learned David Diaz was appointed on June 18, 2020, as receiver by the 219th District Court of Collin County in Cause No. 219-01665-2014 relating to Scott and Kristi Fisher’s judgment against Perkins and two corporate entities. Fitzwater argued he and the 199th District Court had “exclusive possession and custody of the non-exempt assets of judgment debtor Stephen Perkins due to being first in time.” Fitzwater learned Diaz sold a Perkins property, yielding $49,097, despite there being five judgments senior to the Fishers’ judgment. The net proceeds were then distributed to the Fishers ($31,545.75) and to Diaz ($17,551.25). Fitzwater argued the sale of the property was void and the cash transfers were void.

At the same time he filed his report, Fitzwater filed an application for temporary restraining order, temporary injunction, and permanent injunction against Diaz. Fitzwater alleged that, on January 26, 2021, he demanded Diaz turn over all assets and cash seized or recovered from his activities as receiver within five days, and he sent Diaz a copy of the 199th District Court’s order appointing Fitzwater receiver. Fitzwater alleged that despite this demand, Diaz filed a receiver’s report of sale, seeking to sell another Perkins property and listed it for sale on January 28, 2021. Fitzwater argued that, because his receivership was first in time, Diaz’s unauthorized transfers were void. Accordingly, Fitzwater requested Diaz be restrained from acting as receiver of assets of the judgment debtors in circumvention of the 199th court’s order establishing Fitzwater as receiver and from “seizing,

transferring, selling, disbursing or otherwise disposing of assets and cash belonging to the Receivership Estate[.]” Fitzwater specifically sought to restrain Diaz from selling the additional Perkins property.

The trial court granted Fitzwater’s application for a temporary restraining order and set a date for a hearing on the temporary injunction.

On February 5, 2021, Fitzwater filed a motion to compel turnover from Diaz, arguing that, because Diaz was appointed nine months after Fitzwater was appointed receiver, “any transfer of the judgment debtor’s non-exempt property that was not authorized by the [199th] court or [Fitzwater] is void.” Fitzwater argued that, “[u]nder the Turnover Receivership Order and Section 31.002” of the civil practice and remedies code, he was entitled to the turnover of assets as demanded. Fitzwater filed a motion to compel turnover from the Fishers for the same reasons stated above, arguing “the proceeds of a void transaction were delivered to the Fishers as a result of an interfering receiver David Diaz[.]”

Fitzwater also filed a notice of prior-appointed receiver in the 219th District Court, notifying the court and the parties of his senior receivership estate. He “made demand upon Diaz for the turnover of any and all assets of the defendants pursuant to the receivership order.” He made demand upon the Fishers for the turnover of all assets of the defendants, particularly the $31,545.75 of proceeds from the sale of the property.

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David Diaz, Scott Fisher, and Kristi Fisher v. SMS Financial Cap, LLC, Capital One, National Association, Stephen F. Perkins, and Christopher Fitzwater, (Tex. Ct. App. 2023).

David Diaz, Scott Fisher, and Kristi Fisher v. SMS Financial Cap, LLC, Capital One, National Association, Stephen F. Perkins, and Christopher Fitzwater (David Diaz, Scott Fisher, and Kristi Fisher v. SMS Financial Cap, LLC, Capital One, National Association, Stephen F. Perkins, and Christopher Fitzwater) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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