Maiz v. Virani

311 F.3d 334, 54 Fed. R. Serv. 3d 562, 2002 U.S. App. LEXIS 27312, 2002 WL 31378466
CourtCourt of Appeals for the Fifth Circuit
DecidedOctober 23, 2002
Docket01-10292
StatusPublished
Cited by68 cases

This text of 311 F.3d 334 (Maiz v. Virani) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fifth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Maiz v. Virani, 311 F.3d 334, 54 Fed. R. Serv. 3d 562, 2002 U.S. App. LEXIS 27312, 2002 WL 31378466 (5th Cir. 2002).

Opinions

ROBERT M. PARKER, Circuit Judge:

This case requires us to consider whether a federal district court can utilize the Texas turnover statute to adjudicate the property rights of a non-judgment debtor corporation not properly before the court so long as the district court makes a factual finding that the corporation is subject to the judgment debtor’s control. We find that the Texas turnover statute cannot be utilized to adjudicate the substantive property rights of the two non-judgment debtor corporations in this case without a prior judicial determination which pierces their corporate veils. Therefore, we reverse and remand.

I. FACTS AND PROCEDURAL HISTORY

In 1997, the plaintiffs-appellees (“judgment creditors”) sued several defendants including Ignacio Santos (“Santos”) in federal district court in Atlanta, Georgia. They asserted claims for fraud, breach of fiduciary duty, and RICO violations which all related to various real estate investments they had made in the Atlanta area. After a trial by jury, Plaintiffs received a judgment against Santos and the other defendants for approximately $19 million on December 22, 1999. However, the At[337]*337lanta district court did not issue a judgment against the appellants, Sanig Investments Limited (“Sanig”) and Tres Vidas Investments Limited (“Tres Vidas”).1 Although Sanig was originally a defendant in the Atlanta action, it was released from the case at the summary judgment stage. The judgment against the Atlanta defendants has subsequently been affirmed by the Eleventh Circuit.

On January 5, 2000, the plaintiffs-appel-lees registered their judgment in the Northern District of Texas, Dallas Division, pursuant to 28 U.S.C. §■ 1963 and filed a “turnover action” pursuant to the Texas Turnover Statute, Tex. Civ. Prac. & Rem.Code § 31.002, to aid in the enforcement of their judgment. The turnover action was clearly instituted against the judgment debtors from the Atlanta case which included Santos in his individual capacity.

On September 7, 2000, the Dallas district court judge issued a turnover order against Santos, Sanig, and Tres Vidas. The district court made a factual finding that Santos effectively owns and controls assets that are titled to Sanig Investments and Tres Vidas. The Sept. 7 turnover order and ensuing implementing orders gave the Receiver the authority to take possession of and sell assets titled to Sanig and Tres Vidas in addition to the assets owned by Santos.2 On October 20, 2000, the district court held Santos in contempt for failing to comply with the turnover order. A bench warrant was issued for his arrest on October 30, 2000. As of today, he is a.fugitive from that warrant.

On February 14, 2001, Sanig and Tres Vidas petitioned for a writ of mandamus. They requested a stay of all proceedings and issuance of orders in the district court. On February 20, 2001, a separate panel denied the writ and motion for stay pending appeal, on February 22, 2001, the district court entered final judgment.

At this point, two appeals ensued. First, Santos, in his individual capacity, appealed the turnover order.3 Second, Sanig and Tres Vidas separately appealed the turnover order to the extent that it allowed the Receiver to take possession of [338]*338and sell their corporate assets. This is the appeal currently before us.

II. STANDARD OF REVIEW

The issues raised concerning standing, whether appellants were properly before the district court, and the timeliness of the notice of appeal filing are issues of law and will be reviewed de novo. Texas Office of Public Utility, 183 F.3d 393, 419 n. 34 (5th Cir.1999)(standing defense, like all constitutional questions, is reviewed de novo). We review the turnover order for abuse of discretion (i.e., whether the trial court acted unreasonably, arbitrarily, or without reference to guiding rules or principles under the turnover statute). Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223, 226 (Tex.1991). In doing so, we note that a trial court’s failure to properly analyze the law or apply it to the facts is an abuse of discretion. Walker v. Packer, 827 S.W.2d 833, 840 (Tex.1992). However, a trial court’s issuance of a turnover order, even if predicated on an erroneous conclusion of law, will not be reversed for abuse of discretion if the judgment is sustainable for any reason. Beaumont Bank, 806 S.W.2d at 226.

III. ANALYSIS

The crux of the case is whether the Texas turnover statute can be used to strip a non-judgment debtor corporation of its assets, based upon a factual finding that a judgment debtor controls the corporation, without a prior separate proceeding which pierces the non-judgment debtor’s corporate veil. However, due to the procedural complexity of the case, several other issues need to be addressed. First, do Sanig and Tres Vidas have standing to appeal the district court’s turnover order? Second, did Tres Vidas file a timely notice of appeal? Third, were Sanig and Tres Vidas properly before the district court?

A. Standing

Appellants posited in their writ of mandamus that they would be unable to directly appeal the turnover orders because they were not parties to the case. Now, they argue that they do have standing to appeal these orders. The judgment creditors contend that appellants should be judicially estopped from taking a position contrary to the one they took in their mandamus petition. See Ergo Science, Inc. v. Martin, 73 F.3d 595, 598 (5th Cir.1996) (judicial estoppel doctrine prevents a party from asserting a position in a legal proceeding that is contrary to a position previously taken in the same or some earlier proceeding). Furthermore, they argue that appellants do not have standing to pursue this appeal should we conclude appellants were not parties to the turnover proceedings at the district court level. See EEOC v. Louisiana Office of Community Services, 47 F.3d 1438, 1442 (5th Cir.1995) (“A person who is not a party to the proceedings below generally cannot appeal the court’s judgment”). We reject the judgment creditors’ contentions.

1. Non-Party Appeal

Although Sanig and Tres Vidas argued in their mandamus petition that they could not directly appeal these orders, the fact is they were wrong. It is true that a non-party generally cannot appeal the district court’s judgment below. However, we have also noted that exceptions to this rule may be warranted in certain situations. See Louisiana Office of Community Services, 47 F.3d at 1442 (citing EEOC v. West La. Health Services, Inc., 959 F.2d 1277 (5th Cir.1992) (non-party appeal allowed where EEOC had not pursued appeal in its representative capacity)).

[339]*339The instant case presents such an exception. Although Sanig and Tres Vidas were not parties to the case, they contend that the district court’s turnover order has divested them of property which they own that is worth tens of millions of dollars.

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311 F.3d 334, 54 Fed. R. Serv. 3d 562, 2002 U.S. App. LEXIS 27312, 2002 WL 31378466, Counsel Stack Legal Research, https://law.counselstack.com/opinion/maiz-v-virani-ca5-2002.