Bruce A. Atkins

Prejudgment Remedies

PREJUDGMENT REMEDIES

I. INTRODUCTION

This Chapter discusses remedies available after suit is filed, but before judgment is obtained, to preserve the debtor’s assets for satisfaction of anticipated final judgment. The Chapter reviews sequestration, attachment, garnishment, temporary injunctions and mechanic’s liens not involving real property (constitutional mechanic’s liens).

Sequestration, attachment, garnishment, and temporary injunctions are procedural remedies ancillary to an underlying claim. Tex. R. Civ. P. Part VI.

A mechanic’s lien not involving real property is a substantive right emanating from the Texas Constitution. Tex. Const. art. XVI, §37.

This Chapter does not discuss worker’s possessory liens (farm, factory or store worker’s liens) or various mechanic’s liens applicable exclusively to real property, such as Hardeman Act liens (Tex. Prop. Code Ann. ch. 53 (Vernon 2007) and McGregor Act liens for public works construction (Tex. Gov’t Code Ann. ch. 2253 (Vernon 2000). The State Bar of Texas, Texas Real Estate Forms Manual (1999 & Supp. 2004-2008) includes a discussion of those liens.

This paper presents a basic outline for the remedies discussed. Time and space limitations do not permit discussion of nuances or intricacies of each remedy.

II. SEQUESTRATION

A. Seminal Authority

1. Statute

Tex. Civ. Prac. & Rem. Code Ann. §§62.001 – 0.063 (Vernon 1997)

2. Rules

Tex. R. Civ. P. 696 - 716

B. Purpose and Use

The purpose of sequestration is to empower a secured creditor to control possession of collateral securing his debt before judgment or to empower one claiming title to disputed property to control possession of that property until the dispute is justly settled. The main object of sequestration is to preserve and protect the value of the property during pendency of the suit. American Mortg. Corp. v. Samuell, 108 S.W.2d 193 (Tex. 1937). In causing a writ of sequestration to be issued and levied a creditor is merely pursuing a remedy for the preservation and protection of its security that is expressly accorded it by statute. Smart v. Texas American Bank/Galleria, 680 S.W.2d 896 (Tex. App. – Houston (1st Dist.) 1984, no writ).

Sequestration is most commonly sought by secured creditors whose collateral is personal property in an action to foreclosure or enforce a lien or security interest on that collateral. Tex. Civ. Prac. & Rem. Code Ann. § 62.001(1) (Vernon 1997). Sequestration is also available to a creditor whose collateral is fixtures or real property in an action to foreclosure or enforcement of a mortgage or lien on real property. Tex. Civ. Prac. & Rem. Code Ann. § 62.001(2) (Vernon 1997).

Sequestration is a conservatory act; it does not affect title to property involved. Radcliff Finance Corp. v. Industrial State Bank of Houston, 289 S.W.2d 645 (Tex. Civ. App. – Beaumont 1956, no writ); McComic v. Scrinopskie, 76 S.W.2d 539 (Tex. Civ. App. – Texarkana 1934, no writ) [Sequestration is a process used as a conservatory writ to preserve specific property subject to conflicting claims of ownership or liens and privileges when property rights are involved in pending litigation]. By sequestering collateral, the secured creditor is merely pursuing a statutory remedy to preserve and protect its security interest in that collateral. Smart v. Texas American Bank/Galleria, 680 S.W.2d 896, 898 (Tex. App. – Houston (1st Dist.) 1984, no writ). Possession under a writ of sequestration, as to the suit and the parties thereto, is lawful. The act of sequestering personal property is not an act of conversion. Id.

Similarly, a hearing on the dissolution of a writ of sequestration is not intended to be dispositive of the ownership of the property at issue. Rexford v. Holliday, 807 S.W.2d 356, 358 (Tex. App. – Houston [1st Dist.] 1991, no pet.).

Through sequestration, property is physically, in the case of personal property, or constructively, in the case of real property, possessed by a sheriff or constable and placed in the court’s custody until the underlying claim is adjudicated. During the pendency of the levy the sequestered property remains in custodia legis. Id.

Sequestration, as distinguished from attachment, requires the claimant to have an interest in the property subject of the action. Compare Tex. Civ. Prac. & Rem. Code Ann. § 62.001 (Vernon 1997) (requiring suit for title or possession or for foreclosure of mortgage, lien or security interest) with Civ. Prac. & Rem. Code Ann. § 61.001 (Vernon 1997) (requiring just indebtedness to the plaintiff).