Baytown State Bank v. Nimmons

• Citation: 904 S.W.2d 902
• Decision Date: 03 August 1995
• Docket Number: No. 01-94-00288-CV,01-94-00288-CV
• Court: Court of Appeals of Texas
• Parties: BAYTOWN STATE BANK, Appellant, v. Paul W. NIMMONS, Jr., Individually and d/b/a Paul Nimmons & Associates; Paul W. Nimmons, P.C., Individually and d/b/a Paul Nimmons & Associates; Gregory-Edwards, Inc.; Constable James Douglas; Harris County, Texas, Appellees. (1st Dist.)

Page 902

904 S.W.2d 902

BAYTOWN STATE BANK, Appellant, v. Paul W. NIMMONS, Jr., Individually and d/b/a Paul Nimmons &

Associates; Paul W. Nimmons, P.C., Individually and d/b/a

Paul Nimmons & Associates; Gregory-Edwards, Inc.;

Constable James Douglas; Harris County, Texas, Appellees.

No. 01-94-00288-CV.

Court of Appeals of Texas,

Houston (1st Dist.).

Aug. 3, 1995.

Rehearing Overruled Aug. 24, 1995.

Ben H. Schleider, Jr., David A. McDougald, Houston, for appellant.

Paul W. Nimmons, Jr., P.C., Houston, for appellees.

Before OLIVER-PARROTT, C.J., and O'CONNOR and MIRABAL, JJ.

OPINION

MIRABAL, Justice.

The case involves the effect of a judgment debtor's bankruptcy filing on the personal liability of a garnishee-bank. Baytown State Bank (the bank), appeals the trial court's judgment denying its bill of review, and denying its claims for injunctive relief and damages. We affirm in part, and reverse in part.

The following facts are uncontested. In November 1991, appellee Gregory-Edwards, Inc., obtained a judgment against Leland Collins. In April 1992, Gregory-Edwards, Inc., filed an application for writ of garnishment naming Baytown State Bank as garnishee. The bank answered, admitting it was indebted to Leland Collins in the amount of $17,213.65. On September 30, 1992, a judgment was entered that Gregory-Edwards, Inc. recover the full garnished amount from the bank. Two weeks after the judgment in garnishment was signed, debtor Collins filed for bankruptcy under Chapter 7 of the Bankruptcy Code.

No motion for new trial was filed in the garnishment action, nor was the judgment in garnishment appealed. An abstract of judgment was filed, naming the bank as judgment debtor. Gregory-Edwards, Inc. obtained a writ of execution, and requested the constable to levy on the assets of the bank. The bank then filed a petition for bill of review, and a suit seeking an injunction and damages, naming Gregory-Edwards, Inc., and others as defendants. ¹ The trial court granted a temporary restraining order prohibiting further attempts to execute on the bank's assets. Thereafter, the trial court entered an agreed order for temporary injunction pending trial. After a bench trial, the trial court entered judgment denying bill of review relief, denying the bank's request for permanent injunction relief and damages, and declaring the judgment in garnishment enforceable against the bank, individually.

Neither party requested findings of fact and conclusions of law. In a trial to the court, where no findings of fact and conclusions of law are filed, the judgment of the trial court implies all necessary findings of fact to support it. Roberson v. Robinson, 768 S.W.2d 280, 281 (Tex.1989); Weng Enters., Inc. v. Embassy World Travel, Inc., 837 S.W.2d 217, 223 (Tex.App.--Houston [1st Dist.] 1992, no writ). Where the implied findings of fact are supported by the evidence it is this Court's duty to uphold the judgment on any theory of law applicable to the case. Point Lookout West, Inc. v. Whorton, 742 S.W.2d 277, 278 (Tex.1987).

In point of error seven, the bank challenges the denial of its bill of review seeking to set aside the judgment in garnishment. A bill of review is an equitable proceeding to set aside a final judgment that is no longer appealable or subject to a motion for new trial. Transworld Fin. Serv. Corp. v. Briscoe, 722 S.W.2d 407, 407 (Tex.1987). The general rule is that to prevail in a bill of review proceeding, a complainant must allege and prove (1) a meritorious defense, (2) which it was prevented from asserting or making by fraud, accident, or mistake of the opposing party, (3) unmixed with any fault or negligence of its own. Baker v. Goldsmith, 582 S.W.2d 404, 406 (Tex.1979).

In the present case, the bank acknowledges that it owed a debt to Leland Collins, the judgment debtor, at the time the bank was served with the writ of garnishment. The bank offered no opposition to the entry of the judgment in garnishment at the time it was entered. The bank presented no evidence at the bill of review proceeding to satisfy the requirements for prevailing on a bill of review. The bank did not meet its burden of proof.

We overrule point of error seven.

Under points of error one and two, the bank argues that the judgment debtor's bankruptcy filing deprived the trial court of jurisdiction to enforce the judgment in garnishment, and automatically stayed appellees' attempt to enforce the judgment in garnishment. In point of error five, the bank asserts the trial court erred in failing to award the bank injunctive relief.

A petition filed under the bankruptcy code "operates as a stay, applicable to all entities, of the enforcement, against the debtor or against the property of the estate, of a judgment obtained before the commencement of the case." 11 U.S.C. § 362(a)(2) (1985). The bankruptcy stay deprives state courts of jurisdiction over the debtor and his property until the stay is lifted or modified. ² Owen Elec. Supply, Inc. v. Brite Day Const., Inc., 821 S.W.2d 283, 287 (Tex.App.--Houston [1st Dist.] 1991, writ denied). Consequently, any subsequent judicial proceedings taken against the debtor are in violation of the automatic stay and are void, not merely voidable. Continental Casing Corp. v. Samedan Oil, 751 S.W.2d 499, 501 (Tex.1988). Any court action in violation of the automatic stay is void, regardless of whether the court had notice of the bankruptcy. Kalb v. Feuerstein, 308 U.S. 433, 443, 60 S.Ct. 343, 348, 84 L.Ed. 370 (1940); Star-Tel, Inc. v. Nacogdoches Telecomm., Inc., 755 S.W.2d 146, 150 (Tex.App.--Houston [1st Dist.] 1988, no writ).

Appellees correctly point out that the automatic stay of judicial proceedings against one defendant does not apply to proceedings against co-defendants. See Star-Tel, 755 S.W.2d at 150. Likewise, the automatic stay does not protect a guarantor on a note. BA Commercial Corp. v. Hynutek, Inc., 705 S.W.2d 713, 717 ((Tex.App.--Dallas 1986, no writ). However, these rules have no application in the present proceedings. The bank is not a co-defendant, nor is the bank a guarantor; the bank is a garnishee.

Garnishment is a statutory proceeding whereby the property, money, or credits of a debtor in the possession of another are applied to the payment of the debtor's debt. See TEX.CIV.PRAC. & REM.CODE ANN. § 63.001 (Vernon 1986); TEX.R.CIV.P. 657-79. The only real issue in a garnishment action is whether the garnishee is indebted to the judgment debtor, or has in its possession effects belonging to the debtor, at the time of service of the writ on the garnishee, and at the time the garnishee files its answer. Funds placed with a bank become general deposits which create a debtor-creditor relationship between the bank and the depositor. Bank One, Texas, N.A. v. Sunbelt Sav., F.S.B., 824 S.W.2d 557, 558 (Tex.1992).

When an action is for garnishment of funds to satisfy a prior judgment against a debtor, the action is considered to be "against the debtor" and is stayed by bankruptcy proceedings of the debtor. Owen Electric Supply, 821 S.W.2d at 287; American Precision Vibrator Co. v. National Air Vibrator Co., 771 S.W.2d 562, 563 (Tex.App.--Houston [1st Dist.] 1989, no writ). As a garnishee, the bank in effect holds the debtor's property as an officer or receiver for the court. Intercontinental Terminals Co. v. Hollywood Marine, Inc., 630 S.W.2d 861, 863 (Tex.App.--Houston [1st Dist.] 1982, writ ref'd n.r.e.). Service of the writ of garnishment creates a lien on the judgment debtor's property, impounding the funds in the hands of the garnishee bank. Rome Indus. Inc. v. Intsel Southwest, 683 S.W.2d 777, 779 (Tex.App.--Houston [14th Dist.] 1984, writ ref'd n.r.e.).

Appellees attempt to distinguish this Court's opinion in Owen Electric Supply by focusing on the timing of the bankruptcy filing. Appellees point out that the bankruptcy court filing in the Owen case was made after the application for writ of garnishment was filed, but before judgment against the garnishee was entered. This is a distinction without a difference. In the present case, the bankruptcy court filing was made before the judgment against the garnishee even became final. ³ In Owen, this Court noted that a judgment against a garnishee, entered in a garnishment proceeding, cannot be enforced when the underlying judgment against the debtor can no longer be enforced against the judgment debtor. Owen Elec. Supply, 821 S.W.2d at 287.

A comparable situation is when an attempt to enforce a contract lien on real property is stayed by bankruptcy proceedings. Graham...