Texas Global Equity Fund XII, LLC v. Breckenridge Development 2019, LLC

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN



                                      NO. 03-24-00308-CV


                       Texas Global Equity Fund XII, LLC, Appellant

                                                 v.

                       Breckenridge Development 2019, LLC, Appellee


              FROM THE 98TH DISTRICT COURT OF TRAVIS COUNTY
  NO. D-1-GN-23-002878, THE HONORABLE MADELEINE CONNOR, JUDGE PRESIDING



                            MEMORANDUM OPINION


               Appellant Texas Global Equity Fund XII, LLC (TGE) appeals from the district

court’s order granting appellee Breckenridge Development 2019, LLC (BD19)’s motion to

dissolve prejudgment writs of garnishment that TGE had obtained against 22 entities that TGE

believed owed money to BD19. In two issues on appeal, TGE argues that the district court

abused its discretion by dissolving the writs of garnishment because (1) TGE had proven the

statutory grounds for garnishment and (2) BD19’s extrinsic grounds for dissolution of the writs

of garnishment lacked any basis in law or fact. For the following reasons, we will reverse the

district court’s order dissolving the writs of garnishment, render judgment reinstating the writs,

and remand the case to the district court for further proceedings consistent with this opinion.
                                        BACKGROUND

               In April 2022, TGE, an Austin-based real-estate investment firm, loaned seven

million dollars to BD19, an Austin-based real-estate development company. The loan agreement

required BD19 to use part of the loan proceeds to pay off a pre-existing loan between BD19 and

Frost Bank (the Frost Loan), and it also required BD19 to provide TGE with annual financial

statements and compliance certificates, as well as signed monthly borrowing base certificates.

TGE’s managing director, Jared Mermis, testified at the hearing on the motion to dissolve that

TGE “manages the life savings of several families,” and it needed this financial information from

BD19 “to monitor the collateral” used for the loan and “make sure it’s intact and safe.”

               Mermis further testified that from November 2022 through May 2023, BD19

failed to provide TGE with any of the required monthly borrowing base certificates, as well as

the annual financial statements and compliance certificates for fiscal year 2022. Additionally,

BD19 had failed to pay off the Frost Loan as required by the agreement. On May 8, 2023, TGE

made a formal demand on BD19 to cure these and other defaults. After the time to cure had

passed, TGE received the following email from BD19 manager Dan Fuchs, in which Fuchs

explained BD19’s failure to file the required financial statements:



       With regard to the year-end financials, we have had a large amount of turnover on
       the accounting team over the last 6 months, and that coupled with incremental
       initiatives to secure additional short-term funding to continue the business as a
       going concern has created strain on the accounting team being able to complete
       the financial statements at the company’s normal timeline.


       ....


       As previously mentioned, providing focus to securing funding to continue as a
       going concern has been top priority. Once we secure such short-term funding, we

                                                 2
       plan to devote substantial time to finalizing our financial statements and sending
       out to you and other creditors.


BD19 failed to provide the required documents to TGE or otherwise cure its default. As a result,

TGE accelerated the debt and demanded immediate repayment of the loan. BD19 failed to

make payment.

              TGE subsequently filed suit against BD19, seeking recovery of the principal loan

amount plus interest, which at that time was $7,575,926.01. Shortly after filing suit against

BD19, TGE also filed ex-parte applications for prejudgment writs of garnishment against 22

entities that TGE believed owed money to BD19. TGE sought garnishment from these entities

because it had concerns regarding BD19’s solvency moving forward. In a declaration attached

to the applications for writs of garnishment, TGE manager Robert Gritz averred the following:



       The debt that is the subject of the aforesaid suit is just, due, and unpaid.


       Within my knowledge, Defendant does not possess property in Texas subject to
       execution sufficient to satisfy the debt. This garnishment is not sought to injure
       Defendant or Garnishee.


       Prior to bringing suit, Plaintiff repeatedly made demands on Defendant to provide
       up to date financial information pursuant to the Loan Documents. Pursuant to the
       Loan Documents, Defendant covenanted to furnish Plaintiff with such
       information and statements, lists of assets and liabilities, tax returns, and other
       reports with respect to Borrower’s financial condition as Lender may request from
       time to time. However, Defendant continually refuses to provide the demanded
       information. After making demand that Defendant cure such defaults, Plaintiff
       declared an Event of Default as a result of Defendant’s failure to honor the Loan
       Documents and accelerated the debt making it then due and owing. Attached
       hereto as Exhibit A are true copies of the Loan Documents. Attached hereto as
       Exhibit B is Plaintiff's demand that Defendant cure its default. Attached hereto as
       Exhibit C is Plaintiff’s Declaration of Default, Notice of Acceleration, and
       Demand for Payment.


                                                  3
       Defendant’s obligations under the Loan Documents are secured by (among other
       things) certain receivables and other personal property of BD 2019 more fully
       described in the Loan Documents and UCC financing statement (“Collateral”).


       On information and belief, Defendant is insolvent or about to become insolvent,
       and is struggling (if not failing) to pay debts as they come due. Further,
       Defendant is believed to be misappropriating Plaintiff’s Collateral to fund its
       operations. On information and belief, Plaintiff’s Collateral is being diminished
       by Defendant and Plaintiff is materially at risk of becoming undersecured or
       unsecured in toto.


       ln the suit against Defendant, Plaintiff has alleged that the unpaid principal and
       interest is currently due to Plaintiff in an amount of $7,575,926.0l, together with
       interest, attorneys’ fees, additional fees and costs of collection, and other costs
       which are continuing to accrue. As of May 30, 2023, $7,575,926.01 is just, due,
       and owing. Such debt is accruing interest at the rate of $3,452.05 per day.


The district court granted each of TGE’s applications for writs of garnishment and made the

following findings of fact regarding each garnishment order:



       Plaintiff Texas Global Equity Fund XII, LLC, as Lender, and Defendant
       Breckenridge Development 2019, LLC, as Borrower, executed (1) a Loan
       Agreement dated April 26, 2022; (2) a Security Agreement dated Apri1 26, 2022;
       (3) a Term Promissory Note dated April 26, 2022; (4) a First Modification
       Agreement dated July 29, 2022; and (5) a Second Modification Agreement dated
       September 30, 2022 (collectively, and together with all other instruments and
       documents evidencing, securing, governing, guaranteeing or pertaining to the
       indebtedness, the “Loan Documents”);


       Defendant’s indebtedness to Plaintiff pursuant to the Loan Documents became
       due on May 26, 2023, and is secured by, inter alia, certain accounts receivable of
       Defendant, including specifically Garnishee’s indebtedness to Defendant;


       Defendant is in default under the Loan Documents, and Defendant is indebted to
       Plaintiff in the liquidated sum of $7,515,926.01, which represents unpaid
       principal and interest. 1 Interest, attorneys’ fees, additional fees and costs of

       1
         Some of the garnishment orders specified a different amount of principal and interest
owed, specifically, $7,600,090.36. Although the record is unclear as to the reason for this
                                               4
       collection, and other costs are continuing to accrue;


       Defendant’s debt to Plaintiff is just, due, and unpaid;


       Within Plaintiff’s knowledge, Defendant possesses no property in Texas subject
       to execution sufficient to satisfy the debt;


       If Garnishee’s indebtedness to Defendant is not immediately garnished, the
       collateral which secures payment of Plaintiff’s claims will likely be dissipated by
       the Defendant to Plaintiff’s prejudice; and


       The garnishment is not sought to injure Defendant or Garnishee.


Texas Global coordinated service of the garnishment writs on each of the garnishees through the

Travis County Constable Precinct 5. The record reflects that the writs were personally delivered

to the Texas Secretary of State as the registered agent for service of process for seven of

the garnishees.

                  Subsequently, BD19 filed a motion to dissolve the writs of garnishment. In its

motion, BD19 admitted that it had executed the loan documents, that TGE had sent BD19 notice

declaring that BD19’s indebtedness under the loan documents was due, and that the loan had not

been repaid. BD19 asserted that the garnishments were wrongful and must be dissolved because

(1) “many of the alleged facts on which they are based are unsupported and untrue”; (2) the

garnishments “were sought to injure BD19 and, if not dissolved, will cause irreparable injury” to

BD19; and (3) “they have not been and, could not be, duly served on the garnishees.”




difference, we note that these garnishment orders were issued on later dates, which would have
affected the amount of interest that had accrued.
                                                 5
                The district court held a two-day hearing on BD19’s motion. At the hearing, the

loan agreement and other documents were admitted into evidence, TGE managing director

Mermis testified as to the circumstances surrounding the loan and alleged default by BD19, and

another witness for TGE testified as to the letter that TGE sent to BD19 notifying it of the

default. No witnesses testified for BD19, although BD19 offered and the district court admitted

into evidence a declaration of BD19 manager Fuchs, who averred that “not all fees owed to BD

2019 were or are part of the ‘Collateral’ pledged to TGE under the Loan Agreement or Security

Agreement”; that not all garnishees owed fees to BD19 with respect to the “applicable projects”

under the loan documents, that many of the garnishees “do not owe any fees” to BD19, and that

some or all of the fees to be earned by BD19 on certain projects “were pledged or assigned to

others”; and that the writs of garnishment were causing “substantial harm” to BD19 by harming

its relationships with its business partners and depriving BD19 of fees to which it was entitled.

                At the conclusion of the hearing, the district court took the matter under

advisement and, approximately four months later, granted BD19’s motion. The district court

later made findings of fact and conclusions of law, including that TGE had failed to prove the

statutory grounds for garnishment, that the garnishments were harmful to BD19, that TGE had

misrepresented the scope of its collateral under the loan, and that TGE’s service to the

non-resident garnishees was improper. This appeal by TGE followed. 2


                                   STANDARD OF REVIEW

                We review a trial court’s ruling on a motion to dissolve a writ of garnishment for

abuse of discretion. Jacobs v. Jacobs, 448 S.W.3d 626, 631 (Tex. App.—Houston [14th Dist.]


       2
           We note that BD19 did not file an appellee’s brief.
                                                 6
2014, no pet.). A trial court abuses its discretion if it acts in an arbitrary or unreasonable manner

without reference to any guiding rules or principles. Downer v. Aquamarine Operators, Inc.,

701 S.W.2d 238, 241–42 (Tex. 1985). A trial court has no discretion in determining what the

law is or applying the law to the facts, and a clear failure by the trial court to analyze or apply the

law correctly will constitute an abuse of discretion. Walker v. Packer, 827 S.W.2d 833, 840

(Tex. 1992). Thus, an abuse of discretion occurs when either (1) the trial court fails to analyze or

apply the law correctly, or (2) the trial court could reasonably have reached only one decision

and failed to do so. Jaster-Quintanilla & Assocs. v. Prouty, 549 S.W.3d 183, 188 (Tex. App.—

Austin 2018, no pet.) (citing Walker, 827 S.W.2d at 839-40).


                                       APPLICABLE LAW

               Garnishment is an ancillary proceeding brought by a judgment creditor (the

garnishor) whereby the property, money, or credits of the judgment debtor (the debtor) in the

possession of another (the garnishee) may be applied to payment of the final judgment against

the debtor. Zeecon Wireless Internet, LLC v. American Bank of Texas, N.A., 305 S.W.3d 813,

820 (Tex. App.—Austin 2010, no pet.) (citing Bank One Texas, N.A. v. Sunbelt Sav., F.S.B.,

824 S.W.2d 557, 558 (Tex.1992); Beggs v. Fite, 106 S.W.2d 1039, 1042 (Tex. 1937)).

Garnishment proceedings in Texas are governed by Chapter 63 of the Texas Civil Practice and

Remedies Code and by Rules 657 through 679 of the Texas Rules of Civil Procedure. See Tex.

Civ. Prac. & Rem. Code §§ 63.001-.008; Tex. R. Civ. P. 657-679. Because garnishment is a

creature of statute, garnishment proceedings cannot be sustained unless they strictly conform to

the statutory requirements and related rules governing such proceedings.            Zeecon Wireless




                                                  7
Internet, 305 S.W.3d at 816; Walnut Equip. Leasing Co. v. J–V Dirt & Loam, a Div. of J–V

Marble Mfg., Inc., 907 S.W.2d 912, 915 (Tex. App.—Austin 1995, writ denied).

               “Either at the commencement of a suit or at any time during its progress the

plaintiff may file an application for a writ of garnishment.” Tex. R. Civ. P. 658. “Such

application shall be supported by affidavits of the plaintiff, his agent, his attorney, or other

person having knowledge of relevant facts.” Id. “The application shall comply with all statutory

requirements and shall state the grounds for issuing the writ and the specific facts relied upon by

the plaintiff to warrant the required findings by the court.” Id. Under the Civil Practice and

Remedies Code, a prejudgment writ of garnishment is available if a plaintiff sues for a debt and

makes an affidavit stating that: (1) “the debt is just, due, and unpaid”; (2) “within the plaintiff’s

knowledge, the defendant does not possess property in Texas subject to execution sufficient to

satisfy the debt”; and (3) “the garnishment is not sought to injure the defendant or the garnishee.”

Tex. Civ. Prac. & Rem. Code § 63.001(2).

               After a writ of garnishment has issued, “[a] defendant whose property or account

has been garnished or any intervening party who claims an interest in such property or account,

may file a motion to dissolve or modify the writ of garnishment, the order directing its issuance,

or both for any grounds or cause, extrinsic or intrinsic.” Tex. R. Civ. P. 664a. A hearing must

be held on the motion, and “[t]he writ must be dissolved unless, at such hearing, the plaintiff

proves the statutory grounds relied upon for the writ’s issuance.” Id. However, “[a]part from

proof of the grounds supporting issuance of the writ, the party moving to dissolve the writ bears

the burden to prove the ground for dissolution.” Walnut Equip., 907 S.W.2d at 915, 917.




                                                 8
                                         DISCUSSION

Statutory grounds for garnishment

               In its first issue, TGE argues that the district court erred when it found that TGE

failed to prove the statutory grounds for garnishment. We will address each ground in turn.


       Just, due, and unpaid

               The first ground is that the debt be “just, due, and unpaid.” Tex. Civ. Prac. &

Rem. Code Ann. § 63.001(2)(A). In a suit for breach of contract, this means that the debt must

be “liquidated, that is, the amount of the claim is not contingent, is capable of being definitely

ascertained by the usual means of evidence, and does not rest in the discretion of the jury.”

Cleveland v. San Antonio Bldg. & Loan Ass’n, 223 S.W.2d 226, 228 (Tex. 1949); BBX

Operating, LLC v. American Fluorite, Inc., No. 09-19-00279-CV, 2021 WL 3196513, at *3

(Tex. App.—Beaumont July 29, 2021, pet. denied) (mem. op.).

               Here, the amount of the debt was liquidated. TGE manager Robert Gritz averred

that as of May 30, 2023, the unpaid principal and interest on the loan was in amount of

$7,575,926.01 and that such debt was accruing interest at the rate of $3,452.05 per day. These

amounts are supported by the loan documents, which specify the principal amount of the loan

and the interest rate, and confirmed by the testimony of TGE managing director Mermis.

               TGE also proved that the amount of the debt was due and unpaid. The terms of

the loan required BD19 to, among other things, provide TGE with annual financial statements,

compliance certificates, and borrowing base certificates.     The loan specified that failure to

provide these documents would constitute an “event of default” and that upon occurrence of

default, “the entire unpaid balance of principal of the Notes, together with all accrued but unpaid


                                                9
interest thereon . . . shall, at the option of Lender, become immediately due and payable without

further notice . . . .” TGE provided undisputed evidence that it provided BD19 with notice of

default and a demand to cure, that BD19 failed to cure, and that, consequently, TGE accelerated

the maturity of the loan and demanded payment. Mermis testified that BD19 failed to make

payment as required by the terms of the loan, and BD19 admitted that it had not repaid the loan. 3


       Insufficient property to satisfy the debt

               The second ground is that “within the plaintiff’s knowledge, the defendant does

not possess property in Texas subject to execution sufficient to satisfy the debt.” Tex. Civ. Prac.

& Rem. Code § 63.001(2)(B).          In its response to TGE’s Requests for Admissions, BD19

admitted that it does not currently maintain or possess aggregate unencumbered liquid assets in

an amount of $4,000,000 or more.          Thus, by BD19’s own admissions, it did not possess

sufficient property to satisfy the $7.5 million debt.


       Not sought to injure

               The third ground is that “the garnishment is not sought to injure the defendant or

the garnishee.” Tex. Civ. Prac. & Rem. Code § 63.001(2)(C). Mermis testified that TGE

“manage[s] the life savings of several families,” that “it’s our job to monitor the collateral and

make sure it’s intact and safe,” and that without access to BD19’s financial documents, TGE

cannot “monitor the loan to make sure BD 2019 is complying with its collateral obligations.” At

the time TGE filed suit and sought garnishment, BD19 had refused to honor its loan obligations

and BD19’s manager had stated in an email that the company “had a large amount of turnover on

       3
           We note that even absent acceleration, the loan fully matured by its own terms on
March 31, 2024, and was due to be repaid no later than that date. The district court dissolved the
writs of garnishment after that date, on April 30, 2024.
                                                   10
the accounting team over the last 6 months, and that coupled with incremental initiatives to

secure additional short-term funding to continue the business as a going concern has created

strain on the accounting team being able to complete the financial statements at the company’s

normal timeline.” Mermis denied that TGE was seeking to injure BD19:



       Q.     In seeking a garnishment in this case, is TGE attempting to harm BD
              2019?


       A.     We’re not looking to injure BD 2019. We’re simply trying to recover our
              collateral and make sure that our families’ investments are covered by the
              collateral. And it’s a—it’s a very rapidly—we’re worried that it’s a very
              rapidly dissipating collateral reserve.


       Q.     Right. And has—is—is that worry that it’s a rapidly dissipating collateral
              reserve, is that a concern that you have because of your communications
              with BD 2019?


       A.     It is. Dan Fuchs mentioned to us that he had going concern issues early in
              the year, late in 2022, and that was obviously of severe concern to us.


       ....


       Q.     What does that mean when you see somebody talking about they’re—
              they’re having going concern issues?


       ....


       A.     Put simply, it means the business is worried that they’re going to go out of
              business.


Thus, TGE established that in seeking garnishment, it was trying to protect itself from the

possibility—implicitly acknowledged by BD19’s manager—that BD19 was struggling to stay in



                                              11
business and might not have the funds necessary to repay the loan. BD19 provided no contrary

evidence demonstrating that TGE had sought garnishment to injure BD19. 4

               In sum, we conclude that TGE proved the statutory grounds for garnishment. The

district court abused its discretion in concluding otherwise.

               We sustain TGE’s first issue.


Extrinsic grounds for dissolution of writ

               In its second issue, TGE argues that BD19 failed to carry its burden of proof

regarding its alleged extrinsic grounds for dissolution.          These grounds are that TGE

misrepresented the scope of its collateral under the loan; that BD19 proved the affirmative

defenses of ratification, waiver, and offset; and that TGE’s service of the writs of garnishment on

out-of-state garnishees was improper.

       Scope of collateral

               In each of its applications for garnishment, TGE stated that “Garnishee’s

indebtedness to Defendant constitutes an express and material portion of the collateral securing

Defendant’s debt to Plaintiff.” The district court found this statement to be untrue “in many

       4
           The district court found that the garnishment orders were harmful to BD19 in that they
hampered with its ability to operate, interfered with its business relationships, and threatened its
ability to pay normal operating expenses. However, the inquiry is not whether garnishment is
harmful to the defendant, as that is an inevitable consequence of garnishment, but whether the
garnishment was “sought to injure” the defendant. See Tex. Civ. Prac. & Rem. Code
§ 63.001(2)(C); see also BBX Operating, LLC v. American Fluorite, Inc., No. 09-19-00279-CV,
2021 WL 3196513, at *5 (Tex. App.—Beaumont July 29, 2021, pet. denied) (mem. op.). BD19
provided no evidence that TGE sought garnishment for any reason other than to recover the
money that it had loaned to BD19, which it was permitted to do by the terms of the loan
agreement. The district court similarly found that the garnishment orders “impaired the rights of
non-parties that have an interest in the excluded shared collateral and/or funds that are not unpaid
contracted fees or collateral.” The district court did not specify the non-parties whose rights it
found to be impaired, and the evidence presented at the hearing does not support this finding.


                                                 12
instances.”   More specifically, the district court found that “only seven of the twenty-two

Garnishees contracted to pay fees to BD2019 with respect to any of the seven Applicable

Projects [specified in the loan agreement], and those fees may be deferred and/or may not be

presently owed”; and “at least eight of the Garnishees do not owe any fees to BD2019 because

their projects have already been completed or have yet to begin.”

               However, these findings misconstrue the nature of the garnishment inquiry.

“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 debt.” Aycock v. EECU, 510 S.W.3d

636, 638 (Tex. App.—El Paso 2016, no pet.) (citing Bank One, Tex., N.A., 824 S.W.2d at 558).

The statute applies broadly to most funds owed to a debtor and does not require the garnishor to

possess any security interest or collateral in the funds that are being garnished. See Bechem

v. Reliant Energy Retail Servs., LLC, 441 S.W.3d 839, 843 (Tex. App.—Houston [14th Dist.]

2014, no pet.) (“[T]he garnishor steps into the shoes of the debtor and may enforce against the

garnishee whatever rights the debtor could have enforced had the debtor sued the

garnishee directly.”).

               Moreover, a Rule 664a hearing, which is what occurred here, “is a distinct

proceeding from the writ of garnishment proceeding between the garnishor and garnishee.”

Swiderski v. Victoria Bank & Tr. Co., 706 S.W.2d 676, 678 (Tex. App.—Corpus Christi-

Edinburg 1986, writ ref’d n.r.e.). “When a defendant debtor seeks to dissolve a prejudgment writ

of garnishment, the plaintiff must prove the grounds relied upon for its issuance,” id. at 678-79,

but “a Rule 664a motion does not require the garnishor to prove that the garnishee is indebted to

the debtor,” Thompson v. Harco Nat’l Ins. Co., 997 S.W.2d 607, 613 (Tex. App.—Dallas 1998,

pet. denied); Swiderski, 706 S.W.2d at 678. To the extent that any garnishee did not owe money

                                               13
to BD19 at the time the writ of garnishment was served on it, the proper remedy was for the

garnishee itself to file an answer to the writ of garnishment seeking discharge under Rule 666,

which requires: (1) a denial that the garnishee is indebted to the defendant; (2) a denial that the

garnishee has effects of the defendant; and (3) a denial of knowledge of third persons who may

be indebted to the defendant or have effects of the defendant, or the names of such persons. See

Tex. R. Civ. P. 666; Rowley v. Lake Area Nat’l Bank, 976 S.W.2d 715, 720 (Tex. App.—

Houston [1st Dist.] 1998, pet. denied). That is not what occurred here. Accordingly, the district

court abused its discretion to the extent that it dissolved the writs of garnishment on grounds

related to Rule 666 and the scope of TGE’s collateral.

       Affirmative defenses

               At the hearing, BD19 asserted the affirmative defenses of ratification and waiver. 5

Specifically, BD19 argued that TGE had ratified BD19’s failure to file financial reports when

BD19 tendered some of the required financial reports after the loan had accelerated and that TGE

had waived the requirement that the loan proceeds be used to retire the Frost Loan. However,

TGE’s May 8 notice of default and May 26 declaration of default, both of which were admitted

into evidence at the hearing, expressly provided that “Lender’s acceptance of any amounts less

than the full amount currently due Lender or the partial performance of any obligations have not,

and will not . . . reinstate the Loan or cure any default or event of default under the Loan.”

Additionally, the terms of the loan agreement expressly provided that “no waiver of any

provision” of the agreement “shall be effective unless the same shall be in writing and signed by

Lender . . . .” BD19 provided no evidence of a signed writing from TGE waiving the express


       5
          At the hearing, BD19 also mentioned the affirmative defense of offset but provided no
explanation or evidence for why it would be entitled to an offset of the amount owed.
                                                14
condition that the Frost loan be retired out of the loan proceeds, and TGE provided documentary

evidence and testimony at the hearing that no such waiver had occurred. Accordingly, BD19

failed to prove its affirmative defenses and the district court abused its discretion to the extent

that it dissolved the writs of garnishment on grounds related to those defenses.

       Service of process and jurisdiction

                Finally, the district court found that TGE had not established that the court could

exercise personal jurisdiction over the nonresident garnishees or that those entities were properly

served through the Texas Secretary of State.

                Rule 663 provides that “[t]he sheriff or constable receiving the writ of

garnishment shall immediately proceed to execute the same by delivering a copy thereof to the

garnishee, and shall make return thereof as of other citations.” Tex. R. Civ. P. 663. The record

reflects that the writs of garnishment were personally delivered by a Travis County Constable to

the garnishees’ registered agent for service of process in Texas, and proof of service was

admitted into evidence at the hearing. For seven of the garnishees, the agent was the Texas

Secretary of State. This is permitted under the Texas long-arm statute for nonresidents who

engage in business in Texas. See Tex. Civ. Prac. & Rem. Code § 17.044(b). The record reflects

that service on the nonresident garnishees was done properly under the statute. See id. § 17.045.

As for the court’s jurisdiction over the nonresident garnishees, garnishment proceedings are

quasi in rem.    See Zeecon Wireless Internet, LLC, 305 S.W.3d at 816.             “A quasi in rem

proceeding is an action between parties where the object is to reach and dispose of property

owned by them or of some interest therein.” Bodine v. Webb, 992 S.W.2d 672, 676 (Tex.

App.—Austin 1999, pet. denied). Only three of the nonresident garnishees contested the court’s

jurisdiction over them, and their counsel acknowledged at the hearing that they contracted with

                                                15
BD19 and made payments to BD19 pursuant to those contracts.                  For purposes of this

garnishment proceeding, that is sufficient for the district court to exercise quasi in rem

jurisdiction over the nonresident garnishees. See Stena Rederi AB v. Comision de Contratos del

Comite Ejecutivo General del Sindicato Revolucionario de Trabajadores Petroleros del la

Republica Mexicana, S.C., 923 F.2d 380, 391 n.17 (5th Cir. 1991) (“Constitutional due process

concerns require a connection between the garnished debt (or attached property) and the subject

matter of the action before a court can exercise quasi in rem jurisdiction.”). The district court

abused its discretion to the extent that it dissolved the writs of garnishment on these grounds.

               We conclude that BD19 failed to prove its extrinsic grounds for dissolution of the

writ. The district court abused its discretion in concluding otherwise.

               We sustain TGE’s second issue.


                                         CONCLUSION

               We reverse the district court’s order dissolving the writs of garnishment, render

judgment reinstating the writs, and remand the case to the district court for further proceedings

consistent with this opinion.



                                              __________________________________________
                                              Gisela D. Triana, Justice

Before Justices Triana, Theofanis, and Crump

Reversed, Rendered, and Remanded

Filed: April 17, 2026




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