Maiz v. Virani
| Citation | 311 F.3d 334 |
| Decision Date | 23 October 2002 |
| Docket Number | No. 01-10292.,01-10292. |
| Parties | Jose MAIZ; Alfonso Aldape Lopez, Margaret Griffiths De Aldape, Alfonso Aldape Griffiths; Alejandra Aldape Griffiths, et. al., Plaintiffs-Appellees, Richard M. Hull, Receiver, Appellee, v. Amir VIRANI, et al., Defendants, Sanig Investments Limited and Tres Vidas Investments Limited, Appellants. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Phillip W. Offill, Jr. (argued), Krage & Janvey, Dallas, TX, for Appellee.
John Matney Harmon (argued), Steven D. Smit, Graves, Dougherty, Hearon & Moody, Austin, TX, for Plaintiffs-Appellees.
A. Federico Longoria, III (argued), Hall, Quintanilla & Alarcon, Laredo, TX, for Appellants.
Appeal from the United States District Court for the Northern District of Texas.
Before JONES, WIENER, and PARKER, Circuit Judges.
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.
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 Atlanta 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-appellees 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 and sell their corporate assets. This is the appeal currently before us.
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.
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?
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) (). 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) (). We reject the judgment creditors' contentions.
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 ().
The 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. Clearly, they allege an actual injury and thus have a personal stake in this appeal. This is sufficient to provide them with standing under Article III. Lewis v. Al Knutson, 699 F.2d 230, 236 (5th Cir.1983). Moreover, it is sufficient to grant them an exception to the general rule that a non-party should not be allowed to appeal the district court's judgment.
Although we have applied the doctrine of judicial estoppel in this Circuit in order to protect the integrity of the judicial process, equity requires that we exercise our discretion to apply this doctrine only when it is necessary to protect the integrity of the judicial process. Ergo Science, 73 F.3d at 598.
Appellants' arguments are somewhat contradictory. However, due to the factual complexities of the case and the ambiguities in the law on this point, we do not view these contradictions as striking a blow at the integrity of the judicial process. As we see it, the equities weigh in favor of hearing this appeal. Therefore, we will not use the judicial estoppel doctrine to prevent the appeal from going forward. Sanig and Tres Vidas have standing to appeal.
The district court entered final judgment in this case on February 22, 2001. Sanig and Tres Vidas appealed the judgment to the Fifth Circuit on the same day. Appellees' counsel contended at oral argument that Tres Vidas' appeal was untimely as the final order concerning Tres Vidas was issued in October 2000. We agree that the October 2000 implementing order was the last order addressing Tres Vidas' interest. However, we reject appellees' "timeliness" argument for three reasons.
First, in October 2000, Tres Vidas was not a party to the case. We have, however, determined that Tres Vidas has standing to appeal. On that basis, we place Tres Vidas in the same position as a party-appellant with regard to its appeal. Second, even holding Tres Vidas to the same timeliness standard as a typical party appellant, appellees' timeliness argument is unpersuasive in this instance because Tres Vidas could not have known that the October 20, 2000 implementing order was to be the last order affecting its interest given the many implementing orders ...
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