Texas Charging Orders – Collection Devices Available Against Limited Partnerships

Texas Charging orders are an often overlooked collection device. A charging order is a postjudgment collection device, meaning you must have already obtained a judgment in the underlying lawsuit. Charging orders in Texas are discretionary, and the Court does not have to grant one. With a charging order, a creditor can reach a debtor’s interest in a limited partnership. It is basically a lien on the debtor’s partnership interest. Payment to the creditor is ordered out of the debtor’s interest in the partnership. However, the creditor can only receive distributions that the debtor would otherwise receive. For example, if the debtor is a partner in a limited partnership, the creditor can obtain a charging order ordering the partnership to pay any distributions to which the debtor is entitled in the future to the creditor in satisfaction of the Judgment. For judgments obtained prior to September 1, 2007, the Court may, at its discretion, appoint a receiver, foreclose on the interest, and order a sale of the interest. However, due to recent changes in the law, for Judgments obtained after September 1, 2007, the lien against the debtor’s interest is the exclusive remedy. Appointment of a receiver, foreclose on the interest, and ordering the sale of the interest are no longer available.

Note: A charging order in Texas is unavailable against partners of general partnerships but is available against members of limited liability companies.

Filing Time-Barred Lawsuits Violates the Fair Debt Collection Practices Act

Creditors must ensure that they are referring files to their attorneys before the limitations period for filing suit has run. Failure to do so may prevent the attorney from filing suit due to possible liability under the FDCPA. The FDCPA prohibits a debt collector from using any false, deceptive or misleading representation or means in connection with the collection of any debt. The purpose of the Act is to eliminate abusive debt collection practices, and courts view FDCPA claims with an unsophisticated debtor standard. Generally, when a lawsuit is filed beyond the limitations period, it is the Defendant’s burden to raise the affirmative defense that the claim is time-barred, that the Plaintiff waited too long to bring suit. However, in the collections arena, filing a time-barred lawsuit may be construed as a violation of the FDCPA. An Illinois court recently ruled that a debt-collector violates the FDCPA if he files a lawsuit and knew or reasonably should have known that it was time-barred. (Ramirez v. Palisades Collection L.L.C.) If a debt collector does file a time-barred lawsuit, to defend himself against accusation of an FDCPA violation, he must be able to show that it was a bona fide error that occurred even though procedures were in place to avoid such an error.

Lien Rights of Engineers, Architects & Surveyors in Texas

The Texas Constitution provides that “[m]echanics, artisans and material men, of every class, shall have a lien upon the buildings and articles made or repaired by them for the value of their labor done thereon, or material furnished therefor; and the Legislature shall provide by law for the speedy and efficient enforcement of said liens.” Tex. Const., Article 16, Section 37. This is the basis for the so-called Constitutional Lien, and the authorizing Texas Constitutional provision, for the statutory lien as provided for in Chapter 53 of the Texas Property Code.

In 1995, the Texas Legislature added provisions to the Texas Property Code that made it much easier for engineers, architects, and surveyors to secure a lien for their work. The amendments eliminated the difficult and problematic requirement that the design professional’s contract be filed prior to the commencement of work. Now, the design professional only needs to have a written contract and properly record (file) the lien.

Thus, § 53.021 of the Texas Property Code only requires that an architect, engineer or surveyor who: (1) prepares a plan or plat, (2) under or by virtue of a written contract with the Owner or the Owner’s agent, trustee, or receiver, and (3) that the work be done in connection with the actual proposed design, construction, or repair of improvements on real property or the location of the boundaries of real property has a lien on the property. As a result, as long as the engineer, architect or surveyor has a written contract with the owner and has actually prepared the plan or plat, the engineer, architect or surveyor, he or she will have a right to the lien, without regard to whether construction on the property actually occurred. It should be noted that as with all statutory liens under Chapter 53 of the Property Code, scrupulous observance of the deadlines for the sending of notices, and recording (filing) of the lien affidavit, are still required in order to obtain or “perfect” the lien.

Domestication of Foreign Judgments

Clients sometimes come to us with a judgment that was obtained in another state that they would like to enforce in Texas. In order to enforce a judgment obtained in the United States, but outside of Texas, known as a “foreign judgment,” it is necessary to first domesticate the foreign judgment. Under the Uniform Enforcement of Foreign Judgment Act, judgments rendered in sister states, as well as judgments rendered by federal courts, may be domesticated and enforced in Texas. To domesticate a foreign judgment in Texas, a judgment creditor files an authenticated copy of the judgment with the Texas court, along with an affidavit of the creditor’s and the debtor’s last known addresses. Once the judgment has been properly filed with the Texas court, the judgment creditor is free to pursue post-judgment collection activities including abstracting the judgment in the real property records and sending post-judgment written discovery. Thirty days after filing the foreign judgment a writ of execution may be obtained.

CollectionLinks.com

Here's a pretty decent searchable database of collection links at CollectionLinks.com, particularly Texas Debt Collection Sites. There are a lot more to be added, and the site currently lacks design, but it is a decent place to start.

Fair Debt and Texas Foreclosure

This opinion is from a long time ago, but I continue to get questions related to non-judicial foreclosures in Texas and the "30 day" language found in the Fair Debt Collection Practices Act and how it affects the "20 day" residential requirement under the Texas Property Code Sec. 51.002. This question was presented to the FTC, in fact, many years ago. The response, shown here, relates that the notices required by statute are notices required by law and therefore are not covered by the Fair Debt Collection Practices Act unless it is in connection with a demand for payment that is "not required by law". Essentially, if one is merely making the offer to cure known, as required by state law, it is not covered by the Act. It seems like splitting hairs, but essentially the Act is involved if it is anything more than what is specifically required by the Act. If you do a demand for payment, couch it in terms of the statutory "opportunity to cure" in your forms for foreclosure and it is less likely to kick in the 30 day validation notice requirement for consumer collections.

Collection outside the state of Texas

I'm often asked about collections out of state. A great place to locate lawyers with a familiarity with creditors' rights in another state is through the Commercial Law League of America. Members of the organization, often collection lawyers and agencies, can be searched by geographic location.