      TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN


                                       NO. 03-09-00185-CV


                                     Denise Hodes, Appellant

                                                  v.

                          Diagnostic Experts of Austin, Inc., Appellee

     FROM THE DISTRICT COURT OF TRAVIS COUNTY, 201ST JUDICIAL DISTRICT
        NO. D-1-GN-08-002540, HONORABLE JOHN K. DIETZ, JUDGE PRESIDING



                             MEMORANDUM OPINION


               Diagnostic Experts of Austin, Inc. (“Diagnostic”) filed a writ of garnishment seeking

the release of funds from a trust created after the sale of property belonging to Denise Hodes.1 See

Tex. R. Civ. P. 658. In response, Denise filed a motion to dissolve the writ of garnishment. See id.

R. 664a. Ultimately, the district court denied Denise’s motion and determined that Diagnostic was

entitled to the money requested. Denise appeals the judgment of the district court. We will affirm.


                                         BACKGROUND

               Denise Hodes and Henry Hodes were divorced several years ago.2 Under the terms

of the divorce decree, the Hodeses jointly owned a 17.5 acre tract as tenants in common. A few


       1
          Because several of the people involved in this case have identical last names, we will refer
to those individuals by their first names.
       2
          We note that no reporter’s record was filed in this case and that Denise stated in her brief
that no reporter’s record was prepared because “the court did not have a trial” and because “[t]he
court based everything upon the pleadings and attachments.” Accordingly, the factual background
comes from the clerk’s record and from uncontested statements in the parties’ briefs. See Tex. R.
App. P. 38.1 (stating that appellate courts will “accept as true the facts stated” in briefs “unless
another party contradicts them”).
years after the divorce, Denise filed for bankruptcy. On her bankruptcy application, Denise listed

her interest in the 17.5 acre tract and an adjacent 10 acre tract of land. Denise also claimed that the

two properties were exempt from the claims of her creditors because both properties constituted her

homestead. See Tex. Prop. Code Ann. §§ 41.001 (West Supp. 2009) (listing types of encumbrances

that “may be properly fixed on homestead”), .002 (West 2000) (defining homestead). Once Denise

filed for bankruptcy, Deborah Langehenning was appointed as the bankruptcy trustee for the case.

See 11 U.S.C.A. § 1322(a)(1) (West 2004) (requiring appointment of trustee to supervise execution

of bankruptcy plan). Langehenning filed a motion objecting to the classification of both tracts of

land as a homestead, but the bankruptcy court denied that motion.

                 After Denise filed for bankruptcy, she and Henry agreed to sell the 17.5 acre tract in

order to reimburse Travis County for expenses paid on behalf of their son, Tyler Hodes. The

property was sold pursuant to an order issued by a juvenile court. The order specified that the

proceeds were to be placed into a trust with Jon Evans as trustee.3 Approximately half of the

proceeds were used as reimbursement, and the remainder was left in the trust.

                 Prior to Denise filing for bankruptcy, Diagnostic sued Denise arguing that Denise had

fraudulently transferred property while she was “an officer and fiduciary” of Diagnostic.4 The suit

was initially filed in district court, but it was later transferred to the bankruptcy court. Ultimately,

the bankruptcy court ordered Denise to pay Diagnostic over three million dollars.



        3
            The record does not specify the nature of the trust.
        4
          Other than stating that Diagnostic sued Denise for claims of “fraudulent transfer of
property” and that Denise was an “officer and fiduciary” of Diagnostic, the record does not articulate
what the claims were or the nature of the relationship between Denise and Diagnostic.

                                                   2
               A few months after the bankruptcy court issued a judgment in favor of Diagnostic and

over six months after the proceeds from the sale of the property were placed in a trust, Diagnostic

filed an application for writ of garnishment in the district court seeking the release of the funds held

by Evans as trustee. In response, Denise filed a motion to dissolve the writ of garnishment and

asserted that the funds at issue were exempt because they were proceeds from the sale of her

homestead. The district court denied Denise’s motion to dissolve, determined that the funds in the

trust were “not exempt from garnishment under applicable Texas law,” and further concluded that

the 10 acre tract of land that had not been sold was Denise’s homestead. Ultimately, the district

court ordered Evans to pay Diagnostic $67,128.54.

               Shortly after the district court released its decision, Denise filed this appeal.


                                    STANDARD OF REVIEW

               When reviewing a ruling on a motion to dissolve a writ of garnishment, appellate

courts apply an abuse of discretion standard. General Elec. Capital Corp. v. ICO, Inc., 230 S.W.3d

702, 705 (Tex. App.—Houston [14th Dist.] 2007, pet. denied). A trial court abuses its discretion

if it acts in an arbitrary or unreasonable manner or without reference to any guiding rules or

principles. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985).


                                           DISCUSSION

               In her sole issue on appeal, Denise contends that the district court erred by awarding

the proceeds to Diagnostic. When asserting that the district court erred, Denise raises two related

arguments.



                                                   3
               First, she argues that the 17.5 acre tract was part of her homestead. As support for

this contention, Denise notes that the bankruptcy court denied Langehenning’s motion objecting to

the characterization of both the 17.5 acre tract and the 10 acre tract as her homestead. Accordingly,

Denise insists that the bankruptcy court essentially declared that the 17.5 acre tract was part of her

homestead.5

               Second, Denise contends that because the tract of land was part of her homestead, the

proceeds obtained from the sale of the property are exempt from seizure by a creditor. Under the

property code, proceeds from the sale of a homestead are exempt from seizure, but the exemption

only lasts for six months. Tex. Prop. Code Ann. § 41.001(c). In other words, if the proceeds are not

applied to the purchase of a new homestead within the six-month period, the exemption is lost. In

re Zibman, 268 F.3d 298, 305 (5th Cir. 2001). Although Denise acknowledges the six-month

deadline and admits that Diagnostic filed the writ of garnishment more than six months after the

property was sold, Denise argues that the proceeds from the sale of her homestead were still exempt

when Diagnostic attempted to collect the proceeds through garnishment because the proceeds were

placed in a court-ordered trust immediately after the property was sold and have remained there ever

since. In other words, Denise appears to allege that the six-month deadline was tolled when the

proceeds were placed in the trust and insists that she has not abandoned any right to those proceeds.

               In determining whether the district court abused its discretion in awarding the

proceeds to Diagnostic, we need not determine whether the property sold was in fact part of Denise’s


       5
           In her brief, Denise admits that the “crux of [her] argument [below] was that she was
entitled to the balance of her half of the monies because the bankruptcy court had recognized her
homestead exemption.”

                                                  4
homestead at the time of the sale, nor need we affirmatively decide whether Texas law allows the

type of tolling suggested by Denise.6 Even assuming that the statutory period may be tolled, the few

federal cases addressing this subject have explained that tolling is only permissible if a party

specifically requests the court to toll the six-month statutory period before the expiration of the

deadline. See In re Crum, 414 B.R. 103, 110 (Bankr. N.D. Tex. 2009) (stating that tolling is only

appropriate when “the debtor . . . take[s] some action to protect his rights (i.e., request tolling) before

the rollover period expires”); see also In re Bading, 376 B.R. 143, 156 (Bankr. W.D. Tex. 2007)

(tolling deadline when party filed motion to toll before expiration of six-month deadline).7

        6
          Although we have been unable to find Texas cases addressing whether tolling is
permissible in these circumstances, there is some support for the proposition that merely placing the
proceeds in the care of a court does not toll the six-month period. See Sharman v. Schuble, 846
S.W.2d 574, 576 (Tex. App.—Houston [14th Dist.] 1993, orig. proceeding) (stating that although
proceeds had been in court registry from time of sale of property, six-month deadline was about to
expire).
        7
          As support for her assertion that tolling is appropriate, Denise relies on a single case. See
In re Jeter, 48 B.R. 404 (Bankr. N.D. Tex. 1985). That case involved a lien against Judy Jeter’s
homestead held by the FDIC. Id. at 407. Both Jeter and the FDIC agreed to sell the property, to
deposit the proceeds in the court’s registry, and to wait for the court’s determination regarding
“entitlement to those monies.” Id. at 409. After six months passed, the FDIC asserted that the
proceeds no longer had a homestead exemption. Id. Ultimately, the court concluded that the six-
month deadline did not apply. Id. However, rather than state a rule that the placement of proceeds
in the court’s registry tolls the six-month statutory period, the court simply concluded that it would
be inequitable to apply the six-month deadline between parties who entered into an agreement to sell
the property and to place the proceeds in the court’s registry while the court decided which of those
parties was entitled to the proceeds. Id.

        Unlike Jeter, there was no agreement between Denise and Diagnostics regarding the
placement of the proceeds in a court’s registry. Accordingly, the equitable principles at stake in Jeter
are not applicable here. Moreover, even assuming that the court in Jeter was attempting to state a
rule that the placement of proceeds in a court registry can toll the deadline at issue, that same court
later explicitly stated, as described above, that a party seeking to toll the deadline must take some
action to protect its rights before the passage of the six-month deadline. See In re Crum, 414 B.R.
103, 110 (Bankr. N.D. Tex. 2009).

                                                    5
               Nothing in the record before us suggests that Denise ever specifically asked the

district court or any court to toll the statutory deadline before the deadline expired.8 Accordingly,

we cannot conclude that the district court abused its discretion by concluding that the proceeds were


       8
         In her motion to dissolve the garnishment, Denise did mention the concept of tolling, but
she did not assert that the statutory deadline was tolled due to the placement of the funds into the
care of Evans as trustee. Rather, Denise asserted, without citation to authority, that the six-month
deadline was tolled because the proceeds were “in bankruptcy.” Relevant federal case law
demonstrates that the filing of a bankruptcy petition has no effect on the six-month deadline. See
In re Zibman, 268 F.3d 298, 305 (5th Cir. 2001) (concluding that filing of bankruptcy shortly after
homestead was sold did not affect six-month deadline exempting homestead proceeds); In re Zavala,
366 B.R. 643, 654 (Bankr. W.D. Tex. 2007) (explaining that filing of bankruptcy before or after sale
of homestead does not affect six-month deadline). Even assuming that the deadline was tolled by
the bankruptcy stay imposed when Denise filed her bankruptcy petition, the property was not sold
until four months after Denise received her individual bankruptcy discharge, and the writ of
garnishment was not filed until approximately six months after the property was sold. See
11 U.S.C.A. § 362(c)(2)(C) (West Supp. 2010) (explaining that bankruptcy stay expires at “the time
a discharge is granted or denied”).

        The concept of tolling was also alluded to by Diagnostic in its response to Denise’s motion
to dissolve the garnishment. Specifically, Diagnostic mentioned that Denise asserted during a
hearing on the motion to dissolve that “[t]he 6 month exemption period for homestead proceeds
should be tolled during the period that the funds were held by” Evans. However, that assertion was
made in a hearing that was held over ten months after the property was sold and well past the end
of the six-month period. Moreover, as described above, nothing in the record indicates that Denise
made a similar assertion within the six-month period, and there is no indication that the district court
ever made any ruling regarding tolling. Furthermore, although we cannot be certain what precise
assertion was made at the hearing because no reporter’s record was filed, Diagnostic’s summary of
Denise’s contention is similar to the argument Denise raises on appeal. Essentially, Denise seems
to assert that the statutory deadline is automatically tolled when proceeds are placed in a trust
pursuant to a court order even in the absence of any effort by the party seeking the benefit of tolling.
However, as mentioned above, relevant federal case law has suggested that a person seeking to toll
the six-month deadline must engage in some affirmative act to protect their interests such as filing
a motion to toll the deadline. See In re Crum, 414 B.R. 103, 110 (Bankr. N.D. Tex. 2009); In re
Bading, 376 B.R. 143, 156 (Bankr. W.D. Tex. 2007). Simply surmising that the deadline should be
tolled, without more, would not seem to satisfy this requirement, and the record contains no other
reference to any action by Denise regarding the six-month deadline.

                                                   6
not exempt or by awarding the proceeds to Diagnostic. Therefore, we overrule Denise’s only issue

on appeal.


                                        CONCLUSION

                  Having overruled Denise’s issue on appeal, we affirm the judgment of the

district court.




                                            David Puryear, Justice

Before Justices Patterson, Puryear and Pemberton

Affirmed

Filed: July 23, 2010




                                               7
