Hubbard v. Lagow

567 S.W.2d 489, 21 Tex. Sup. Ct. J. 406, 1978 Tex. LEXIS 352
CourtTexas Supreme Court
DecidedMay 31, 1978
DocketB-7321
StatusPublished
Cited by9 cases

This text of 567 S.W.2d 489 (Hubbard v. Lagow) is published on Counsel Stack Legal Research, covering Texas Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Hubbard v. Lagow, 567 S.W.2d 489, 21 Tex. Sup. Ct. J. 406, 1978 Tex. LEXIS 352 (Tex. 1978).

Opinion

SAM D. JOHNSON, Justice.

This case presents the question of whether a receiver in bankruptcy has standing to seek a writ of error appeal from a default judgment which was rendered against the bankrupt prior to the receiver’s appointment. The court of civil appeals determined that the receiver in bankruptcy, Paul H. Hubbard, did not have standing to appeal as he was not a party in the trial court proceedings and was not the virtual representative of Jack Riley, the defendant in the trial court proceedings. Therefore, the court of civil appeals dismissed the appeal without considering it upon the merits. 559 S.W.2d 133. We reverse the judgment of the court of civil appeals and remand the case to that court for consideration of the appeal on its merits.

On April 21, 1976, Temple National Bank brought suit on a promissory note against Jack Riley, doing business as Webb’s City Drug. The promissory note in the principal amount of $22,750.96 was secured by security interests in all the drugstore’s inventory, *490 accounts receivable, business equipment, and fixtures. On May 24, 1976, the bank assigned all its interest in the note, the security agreements, the financing agreements, and the pending lawsuit against Riley to Jeffrey L. Lagow, trustee. On May 25, 1976, Lagow moved for a default judgment against Riley and sought foreclosure of the liens on the property pledged by the various security agreements. Although Riley had been served with process, he failed to answer or to make an appearance in the cause of action. Consequently, on May 25, 1976, the trial court rendered a default judgment against Riley for the principal amount of the note plus interest and attorneys’ fees, amounting to a total of $27,-758.07. The court also ordered that all security interests held by Lagow be foreclosed and the goods and chattel secured be delivered to Lagow. The assets of the drugstore were sold at a.public sale to the highest bidder for a sum of $31,500. Notice of the sale was sent to Riley, as well as to creditors of Riley’s drugstore — Parke Davis and Company and Southwestern Drug Corporation.

On May 28, 1976, Riley filed for reorganization under Chapter XI of the Bankruptcy Act. Thereafter, on June 4, 1976, upon application of Southwestern Drug Corporation, a creditor, for appointment of a receiver for the assets of the debtor, the bankruptcy court appointed Paul H. Hubbard receiver of the assets and property of John Riley, doing business as Webb’s City Drug. On November 24, 1976, shortly before expiration of six months succeeding entry of the default judgment in the trial court, Hubbard filed his application for writ of error to the court of civil appeals seeking revision and correction of the trial court judgment. Specifically, Hubbard objected to the trial court’s failure to order a judicial sale upon foreclosure of the drugstore property; instead, the court had ordered the property delivered directly to Lagow. Hubbard filed a petition for writ of error in the court of civil appeals, attaching a copy of the default judgment. In his brief to the court of civil appeals Hubbard further appended the order of the bankruptcy court, United States District Court, Western District of Texas, San Antonio Division, appointing Hubbard as receiver in Cause No W-76BK-107, styled, In re: John Riley d/b/a Webb’s City Drug.

During oral argument before the court of civil appeals, the court apparently questioned its jurisdiction to hear the matter since Hubbard was not a party of record in the trial court proceedings. Pursuant to Rule 406, Texas Rules of Civil Procedure, Hubbard filed a motion to sustain the appellate court’s jurisdiction with an affidavit attached establishing facts in support of jurisdiction. In his motion Hubbard asserted that he had the right to bring the appeal as he had succeeded to the interests of Riley as the legal representative of Riley’s interests under the Bankruptcy Act and was the virtual representative of Riley. The court of civil appeals held that writ of error appeals are only available to parties to the litigation in the trial court or to parties covered under the exceptions enunciated in Gunn v. Cavanaugh, 391 S.W.2d 723 (Tex.1965). In Cavanaugh the Supreme Court held that a party may pursue a writ of error appeal if that party is covered under the doctrine of virtual representation which requires an identity of interests between the party in the trial court and the party seeking appeal. The court of civil appeals held that Hubbard and Riley did not have this essential identity of interests. The intermediate court reasoned that Hubbard, as a receiver, was only an interim stakeholder and was required to protect the creditors’ interests, not the bankrupt’s. The court of civil appeals also rejected Hubbard’s contention that he was Riley’s successor in interest and, therefore, entitled to pursue the appeal. Accordingly, the court of civil appeals held that appeal by writ of error from a judgment against Riley was not available to Hubbard as a receiver in bankruptcy.

Article 2249, Texas Revised Civil Statutes Annotated, provides that an appeal of a judgment of a district court in civil cases may be taken to the court of civil appeals by writ of error. Article 2255, Texas Re *491 vised Civil Statutes Annotated, further provides that such writs of error “may be sued out at any time within six months after the final judgment is rendered.” The right to seek a writ of error appeal is limited by Article 2249a, Texas Revised Civil Statutes Annotated, which provides:

“Section 1. No party who participates either in person or by his attorney in the actual trial of the case in the trial court shall be entitled to review by the Court of Civil Appeals through means of writ of error.
“Sec. 2. All laws and parts of laws, insofar as they conflict with this Act, are repealed. Writ of error shall continue to be available under the rules and regulations of the law to a party who does not participate in the trial of the case in the trial court.” [Emphasis added.]

The courts have consistently recognized that such writ of error appeals are available to “those who were parties to the trial court suit but did not participate in the actual trial of the case.” Gunn v. Cavanaugh, supra, at 724. Furthermore, the Supreme Court in Cavanaugh noted the long-established principle enunciated in Smith v. Gerlach, 2 Tex. 424, 426 (1847), which states that a writ of error appeal “can only issue at the instance of a party to the suit, or of one whose privity of estate, title or interest appears from the record of the cause in the court below, or who may be the legal representative of such party.” [Emphasis added.] See also Wood v. Yarbrough, 41 Tex. 540 (1874).

Hubbard maintains that a Chapter XI receiver in bankruptcy is the legal representative of the bankrupt. Accordingly, he asserts that such a receiver is entitled to seek a writ of error appeal from a judgment rendered against the bankrupt when neither the bankrupt nor the receiver participated in the trial court proceedings.

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Bluebook (online)
567 S.W.2d 489, 21 Tex. Sup. Ct. J. 406, 1978 Tex. LEXIS 352, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hubbard-v-lagow-tex-1978.