By Corte H.B. No. 18 77R1258 DAK-D A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to disclosure of assets by certain judgment debtors. 1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-4 SECTION 1. Subtitle C, Title 2, Civil Practice and Remedies 1-5 Code, is amended by adding Chapter 40 to read as follows: 1-6 CHAPTER 40. DISCLOSURE OF ASSETS BY JUDGMENT DEBTORS 1-7 Sec. 40.001. DEFINITION. In this chapter, "judgment debtor" 1-8 means a person to whom this chapter applies as described by Section 1-9 40.002. 1-10 Sec. 40.002. APPLICABILITY. (a) This chapter applies to a 1-11 person against whom a statutory county court, district court, or 1-12 statutory probate court has entered a final judgment in an amount, 1-13 subject to Subsection (d), equal to or greater than $10,000 for: 1-14 (1) fraud; 1-15 (2) constructive fraud; 1-16 (3) fraud in real estate and stock transactions under 1-17 Section 27.01, Business & Commerce Code; 1-18 (4) fraud or misrepresentation in connection with the 1-19 sale of securities; 1-20 (5) conversion; 1-21 (6) breach of fiduciary duty; 1-22 (7) conspiracy to defraud; or 1-23 (8) conspiracy to convert. 1-24 (b) This chapter applies to an attorney against whom any 2-1 unpaid sanctions have been awarded under: 2-2 (1) Rule 13 or 215, Texas Rules of Civil Procedure; or 2-3 (2) Chapter 9 or 10 of this code. 2-4 (c) This chapter does not apply to a governmental entity, 2-5 including the federal government, the state, a county, a 2-6 municipality, or a school district. 2-7 (d) The amount of the final judgment in Subsection (a): 2-8 (1) includes any actual or exemplary damages, 2-9 attorney's fees awarded for work done before entry of the final 2-10 judgment, costs, sanctions, and prejudgment interest; and 2-11 (2) does not include postjudgment interest and 2-12 attorney's fees awarded for work in relation to an appeal. 2-13 Sec. 40.003. EXEMPTION FOR INSURED JUDGMENT DEBTOR. This 2-14 chapter does not apply to a judgment debtor if: 2-15 (1) the judgment debtor is insured under a policy that 2-16 will pay the amount awarded in the final judgment; and 2-17 (2) the company carrying the insurance policy files 2-18 with the trial court in which the final judgment was rendered and 2-19 serves on the judgment creditor notice that the judgment debtor's 2-20 insurance policy will pay the amount awarded under the final 2-21 judgment: 2-22 (A) if the final judgment is not appealed, on or 2-23 before the 30th day after the date the company files the notice; or 2-24 (B) if the final judgment is appealed, on or 2-25 before the 30th day after the date that the judgment debtor 2-26 exhausts all appeals applicable to the final judgment. 2-27 Sec. 40.004. REQUIRED INITIAL DISCLOSURE. (a) Not later 3-1 than the 30th day after the date the final judgment is entered 3-2 against a judgment debtor, the judgment debtor shall serve on the 3-3 party in whose favor the final judgment is entered and file with 3-4 the court that entered the judgment: 3-5 (1) an asset disclosure that complies with Section 3-6 40.005; 3-7 (2) a copy of the judgment debtor's federal income tax 3-8 returns for the preceding two completed tax years or, if tax 3-9 returns are not available for the last completed tax year, for the 3-10 two tax years preceding the last completed tax year; and 3-11 (3) if the judgment debtor is a business or an 3-12 unincorporated sole proprietor, a copy of the last property tax 3-13 rendition or notice of appraised value received by the judgment 3-14 debtor for personal property used in connection with the business. 3-15 (b) A judgment debtor may, instead of the asset disclosure, 3-16 serve and file its current Form 10-K and 10-Q reports that it files 3-17 with the federal Securities and Exchange Commission if the judgment 3-18 debtor: 3-19 (1) is a reporting entity with the commission; 3-20 (2) is current in filing all required quarterly and 3-21 annual reports on Forms 10-K and 10-Q as required by the 3-22 commission; and 3-23 (3) has an amount of shareholders' equity that is 3-24 equal to or greater than three times the total amount that it is 3-25 required to pay under the final judgment. 3-26 Sec. 40.005. ASSET DISCLOSURE. (a) The asset disclosure 3-27 must list all assets located anywhere in the world in which the 4-1 judgment debtor has any equitable or legal title, right to 4-2 possession, or right to control, without regard to whether the 4-3 asset: 4-4 (1) is held directly in the name of the judgment 4-5 debtor, an agent, a "straw man," or a trustee; or 4-6 (2) is in bearer form. 4-7 (b) The information in the asset disclosure must be current 4-8 as of 30 days or less before the date it is served or filed. 4-9 (c) The asset disclosure must include, for those assets 4-10 described by Subsection (a): 4-11 (1) the name, account number, amount, and name and 4-12 address of the depository or holder of any fund or account, 4-13 including a fund or account with a financial institution or broker 4-14 or brokerage organization, for which the judgment debtor is a 4-15 signatory or party entitled to make withdrawals, whether in an 4-16 individual capacity or as a trustee or guardian; 4-17 (2) for stock owned or held of record wholly or 4-18 partially by the judgment debtor, or through a brokerage company or 4-19 depository institution for the benefit of the judgment debtor, the 4-20 certificate numbers, share totals, and the corporation's name and 4-21 address; 4-22 (3) for any entity that is not a corporation and in 4-23 which the judgment debtor owns an equity or voting interest, 4-24 directly or as trustee or guardian, or through a brokerage company 4-25 or depository institution for the benefit of the judgment debtor, 4-26 the ownership form, number of units, and the name and principal 4-27 business address; 5-1 (4) for each real property interest in which the 5-2 judgment debtor owns any interest, directly or as trustee or 5-3 guardian, or trust beneficiary, the street address and lot and 5-4 block number or other legal description; 5-5 (5) for each item of personal property, other than 5-6 clothing, food, and perishables, owned wholly or partially by the 5-7 judgment debtor that the judgment debtor or the spouse of the 5-8 judgment debtor originally purchased for an amount equal to or 5-9 greater than $1,000, the type, brand, and location; 5-10 (6) a description of the contents of any collection of 5-11 coins, stamps, sports cards, antique or classic automobiles, 5-12 artwork, or any other collectible or antique items owned wholly or 5-13 partially by the judgment debtor; 5-14 (7) for each person obligated to pay the judgment 5-15 debtor any money under a contract, promissory note, or judgment, 5-16 the name, address, phone number, the amount owed, and the name, 5-17 date, and any other information that identifies the contract, note, 5-18 or judgment; 5-19 (8) for each safe deposit box to which the judgment 5-20 debtor has a key or is entitled to access, the location, box 5-21 number, and a description of the contents; and 5-22 (9) if the judgment debtor is a business entity, the 5-23 date, amount, and type of stock or other consideration received by 5-24 the entity and each owner of the entity for any reorganization, 5-25 merger, disposition, or distribution of assets completed or 5-26 contracted for at any time after the 90th day before the asset 5-27 disclosure is served or filed. 6-1 (d) The asset disclosure must include, for those assets 6-2 described by Subsections (c)(1)-(7): 6-3 (1) the amount of any loan or other obligation secured 6-4 by a lien or security interest in the asset; and 6-5 (2) the name, address, and phone number of the 6-6 creditor that has the lien or security interest. 6-7 (e) The asset disclosure must include information that 6-8 identifies any transfer, assignment, sale, mortgage, pledge of 6-9 collateral, or gift of an asset described by Subsections (c) and 6-10 (d): 6-11 (1) involving an amount of money or property with an 6-12 original purchase price or current market value equal to or greater 6-13 than $1,000; and 6-14 (2) executed after the 90th day before the asset 6-15 disclosure is served or filed. 6-16 (f) The asset disclosure must include the following 6-17 statement: 6-18 "I swear under penalty of perjury that this asset disclosure 6-19 is correct and complete. I understand that if this asset 6-20 disclosure misrepresents the true value of the assets held by me at 6-21 the time I file or serve this disclosure by an amount that exceeds 6-22 five percent of that true value, a court shall conclude that this 6-23 disclosure is not correct and complete." 6-24 Sec. 40.006. SUBSEQUENT ASSET DISCLOSURES. (a) On or after 6-25 the 75th day and on or before the 90th day after the date an 6-26 initial asset disclosure is served or filed, the judgment debtor 6-27 shall file an amended asset disclosure. 7-1 (b) The amended asset disclosure must: 7-2 (1) include every item described by Section 40.005; 7-3 and 7-4 (2) specifically identify any change in an amount 7-5 equal to or greater than $1,000 to any asset. 7-6 (c) On or after the 75th day and on or before the 90th day 7-7 after the date an amended asset disclosure is served or filed, the 7-8 judgment debtor shall file a subsequent amended asset disclosure. 7-9 (d) The judgment debtor shall continue to serve or file 7-10 amended asset disclosures without regard to whether the final 7-11 judgment is being appealed. 7-12 (e) The judgment debtor shall continue to serve or file 7-13 amended asset disclosures until: 7-14 (1) the judgment debtor obtains a reversal of the 7-15 final judgment on appeal that: 7-16 (A) is not subject to further appeal; and 7-17 (B) does not affirm portions of the final trial 7-18 court judgment requiring the judgment debtor to pay an amount, as 7-19 described by Section 40.002(d), equal to or greater than $5,000; or 7-20 (2) the amount of the final judgment for which the 7-21 judgment debtor is liable, including any postjudgment interest and 7-22 attorney's fees for appeal, is paid. 7-23 Sec. 40.007. ENFORCEMENT. (a) A court may enforce this 7-24 chapter by contempt or by other appropriate sanctions. 7-25 (b) In a proceeding for perjury or aggravated perjury in 7-26 connection with information in or missing from an asset or an 7-27 amended asset disclosure, the trier of fact shall find that the 8-1 disclosure is not correct and complete if the trier of fact finds 8-2 that the asset disclosure misrepresents the true value of the 8-3 assets held by the judgment debtor at the time the judgment debtor 8-4 filed or served the disclosure by an amount that exceeds five 8-5 percent of the true value of the assets of the judgment debtor. 8-6 Sec. 40.008. ASSET DISCLOSURE NOT EXCLUSIVE. This chapter 8-7 does not prevent a judgment creditor from conducting any other 8-8 postjudgment discovery to obtain information not required by the 8-9 asset disclosure under this chapter. 8-10 Sec. 40.009. USE OF ASSET DISCLOSURE LIMITED TO THIS 8-11 CHAPTER. An asset disclosure filed or served under this chapter 8-12 may not be used as evidence against the judgment debtor who filed 8-13 or served it in any grand jury proceeding or criminal prosecution 8-14 unless the proceeding or prosecution is for perjury or aggravated 8-15 perjury in connection with information in or missing from the asset 8-16 disclosure. 8-17 SECTION 2. (a) This Act takes effect September 1, 2001, and 8-18 applies only to a final judgment: 8-19 (1) entered by a trial court on or after that date; or 8-20 (2) entered by a trial court before the effective date 8-21 of this Act if: 8-22 (A) the judgment: 8-23 (i) has not been reversed on appeal; or 8-24 (ii) has been partially reversed on appeal 8-25 and a judgment against the judgment debtor in an amount equal to or 8-26 greater than $10,000 remains affirmed; and 8-27 (B) the judgment creditor files a motion with 9-1 the court to require disclosure under Chapter 40, Civil Practice 9-2 and Remedies Code, as added by this Act. 9-3 (b) A court with which a motion is filed under Subsection 9-4 (a)(2) of this section shall order the judgment debtor to make the 9-5 disclosures required under Chapter 40, Civil Practice and Remedies 9-6 Code, as added by this Act, beginning on or before the 30th day 9-7 after the date the motion is filed.