Texas Divorce Attorney Blog
The court in a Texas divorce case may appoint a receiver to protect and preserve the property of the parties. TEX. FAM. CODE § 6.502(a)(5). The receiver only has the powers authorized by the court. The receiver’s role is to receive and preserve the property for all interested parties’ benefit. The receiver must exercise ordinary care in performing their duties. Receivers may be appropriate in high net worth divorces with complex assets or where there are concerns a party may hide or misuse assets. In a recent case, a former husband appealed a trial court order terminating receivership, discharging the receiver, and granting turnover relief to the wife.
Appointment of Receiver
The husband petitioned for divorce in 2009. The court appointed a receiver in 2011 and ordered that he was to take necessary actions to secure payments and manage, control and dispose of the husband’s property. He was also authorized to pay the husband’s living expenses, legal fees and expenses, and court-ordered obligations.
The receiver was subsequently ordered to take possession and control of certain of the husband’s assets, including property in his bankruptcy estate and any exempt retirement accounts. The court instructed the receiver to pay the husband’s living expenses of $5,000 per month, obligations to the wife and minor children, court-ordered obligations to third parties, and up to $1,500 in unexpected expenses of either party, but not more than $6,000 in any four-month period without a court order.
In the 2015 final decree, the court awarded the wife certain of the husband’s securities accounts. It also awarded her a $1,199,874 judgment against the husband for fraud against the community. The brokerage firm was not notified of the change in ownership of the account.
The court awarded the husband 100% of the parties’ interest in a managed futures fund limited partnership to the husband. The receiver kept all of the rights, powers, and duties from the previous orders.
Motions to End Receivership
The wife moved to dissolve the receivership in 2021. She also sought turnover relief, claiming the receiver had control of non-exempt property that should be turned over in to satisfy the judgment.
That same year, the receiver also filed a motion to terminate the receivership and discharge the receiver. He attached an accounting of the funds he had received and disbursed, disclosing a Morgan Stanley account the husband owned that was related to the interest in the limited partnership.
At the hearing, the husband stated he was not opposed to discharging the receiver but did not want to turn over the money and Morgan Stanley account to the wife. He also thought the receiver was responsible for failing to pay his federal income taxes for 2015 and 2016 and did not want to discharge him from liability.
The wife testified the gains in her assets for 2015 were initially reported to the husband. She said the parties agreed on a process to determine the tax liability and she filed an amended return in 2021. She also testified the husband had not made any efforts to pay her the judgments she had against him. She said he still owed her $1.5 million. In addition to requesting the court order him to turn over certain assets, she also wanted any cause of action the husband had against the receiver.
The receiver testified the husband had raised the question of his tax liability in 2018. The receiver said he informed the appellant he did not believe the decree authorized him to use the money without court approval. He testified “taxes” was not included in the list of what he was authorized to pay. Additionally, the taxes exceeded the $6,000 limit he was allowed to pay in unexpected expenses during a four-month period.
The receiver testified he had not liquidated any holdings from the securities accounts awarded to the wife because they had “sufficient cash.” He did not know of any related tax liability because he did not know the tax basis. He said the brokerage firm would not communicate with him, so he did not know which party’s social security number was associated with the accounts.
The receiver received certain distribution payments on the husband’s behalf that he thought were pre-tax, but he never received tax documents from the company that made the payments for 2015-2017. He said he forwarded any tax documents he did receive to the husband and sent the husband or his lawyers accountings of the money received. He said he was accustomed to taxes being allocated in the divorce decree. He said he did not take any action to resolve the husband’s tax issues because the husband “had competent counsel. . .”
He testified the Morgan Stanley account had been identified in the decree as a partnership interest, so he thought it was illiquid and did not list it in his previous report. He said he had not deposited or withdrawn any money from it.
In January 2022, the associate judge found the receiver ‘s duties were discharged according to the court’s orders, and he had fully complied with the receivership orders and performed his fiduciary duties with due care and prudence. The judge ordered some of the husband’s assets and funds to be turned over to the wife to partially satisfy her judgments.
The husband appealed to the district court. He testified he thought the receiver was “in control of all [husband’s] finances. . .” He said he discovered in 2017 the receiver had not filed taxes on his behalf in 2011 or 2012. The bankruptcy trustee filed them in 2013 and 2014. He said he first asked the receiver to file his taxes in 2018. He was asked if the receiver or the receiver’s attorney told him to file a motion and answered that he “did not have a lawyer at that time.”
The trial court generally affirmed and adopted the associate judge’s ruling. The court affirmed and approved the receiver’s accounting. The court ordered certain assets in the receiver’s control that had been allocated to the husband be turned over to the wife to partially satisfy the judgments. The court terminated the receivership.
The Husband’s Appeal
The husband appealed, arguing the court abused its discretion when it affirmed the associate judge’s report and confirmed the receiver’s activities, approved the accounting, expenditures, and compensation, and terminated and discharged the receiver. He argued there was insufficient evidence to support the courts findings and conclusions.
The appeals court found no abuse of discretion in the trial court’s findings in discharging the receiver. The evidence showed he had generally used ordinary care in performing his duties. He testified that he only received a few tax documents and had forwarded them to the husband or the husband’s attorneys. The orders did not address taxes and the receiver testified he told the husband to file a motion regarding taxes. It was reasonable for the trial court to conclude the husband was responsible for filing his taxes or to at least clarify responsibility for axes with the receiver.
The receiver had testified he was not aware there had been a taxable event involving the brokerage accounts awarded to the wife. He also testified he could not know whose social security number was associated with those accounts and the brokerage firm was not cooperative with him because it did not think it was bound by the receivership order. When the issue was identified, the record shows the receiver and parties determined tax liabilities and filed amended returns.
The husband also argued the receiver had not exercised ordinary care when he omitted the Morgan Stanley account in the initial report. The receiver testified, however, that he had believed it was a passive partnership interest and he disclosed the account when he learned otherwise. Additionally, there was uncontradicted evidence the account had not been touched.
The appeals court concluded there was sufficient evidence for the trial court to exercise discretion and found no error in the trial court’s findings.
The appeals court also rejected the husband’s challenges to the turn over relief awarded to the wife.
The appeals court affirmed the trial court’s order.
Contact a Dallas Divorce Lawyer
This case illustrates how difficult a case involving complex assets can be. The receiver was in place for more than ten years. If you are facing a high net worth divorce or a divorce involving complex assets or business interests, a skilled Texas divorce attorney can help you protect your assets and pursue a favorable outcome. Set up a consultation with McClure Law Group at 214.692.8200.