Rule 695 Notice Required Before Receivership | Prosperity Bank v. Steed (2026)

Prosperity Bank v. Steed, 02-26-00264-CV, November 05, 2026.

On appeal from 43rd District Court, Parker County

Synopsis

Texas Rule of Civil Procedure 695 required Prosperity Bank, as a lienholder with an adverse interest in fixed and immovable real property, to receive at least three days’ notice before the trial court appointed a receiver to take control of and sell the property. Because the receiver was appointed without that notice, the Second Court of Appeals reversed the order denying Prosperity Bank’s motion to dissolve and rendered an order dissolving the receivership.

Relevance to Family Law

This decision directly limits the use of receiverships in divorce-related property litigation. Although Texas Family Code Section 6.502(a)(5) authorizes a trial court to appoint a receiver to preserve and protect property belonging to the parties, that authority does not displace Rule 695 when the receivership will encompass real property. If a lender, taxing authority, judgment creditor, or other lienholder holds an adverse interest in the property, counsel must ensure that the creditor receives the notice required by Rule 695 before appointment.

The opinion is particularly important when spouses hold real estate through an LLC, partnership, or other closely held entity. Even if a party alleges that the entity is an alter ego, that the property was acquired with community credit, or that immediate action is necessary to prevent foreclosure, the divorce court cannot disregard the procedural rights of an adverse lienholder. A receivership imposed without the required notice remains vulnerable to interlocutory review and dissolution.

Case Summary

Fact Summary

Christina Marie Steed and Robert Dale Steed owned Bronco Property Group, LLC. In December 2024, Bronco executed a promissory note requiring it to pay Prosperity Bank $1 million plus interest. Husband and Wife personally guaranteed Bronco’s indebtedness, and Bronco executed a deed of trust pledging two tracts of real property in Palo Pinto County as collateral.

Wife filed for divorce in August 2025, and Husband filed a counterpetition. In January 2026, Prosperity Bank notified Bronco and both spouses that they were in default. The bank advised that it could foreclose on the collateral if the indebtedness was not paid.

Husband then moved for the appointment of a receiver to manage the properties and take the steps necessary to avoid foreclosure. In March 2026, the trial court appointed a receiver and authorized her to sell the properties. Prosperity Bank received no notice before the appointment.

The day after her appointment, the receiver filed a separate action against Prosperity Bank and sought temporary restraining and injunctive relief preventing the bank from foreclosing. Prosperity Bank appeared in that proceeding and moved to dissolve the underlying receivership, contending in part that the receiver had been appointed in violation of Rule 695. The trial court denied the motion, and Prosperity Bank pursued an interlocutory appeal under Texas Civil Practice and Remedies Code Section 51.014(a)(2). Neither Husband nor Wife filed an appellee’s brief.

Issues Decided

• Whether real property subject to the receivership constituted “fixed and immovable” property under Texas Rule of Civil Procedure 695.

• Whether Prosperity Bank qualified as an “adverse party” entitled to Rule 695 notice because it held a deed-of-trust lien against the real property.

• Whether Rule 695 applied even though the receiver was appointed during a divorce proceeding under the trial court’s Family Code and equitable authority.

• Whether the trial court abused its discretion by denying Prosperity Bank’s motion to dissolve the receivership after the receiver had been appointed without at least three days’ notice to the bank.

Rules Applied

• Texas Rule of Civil Procedure 695. Except when otherwise provided by statute, a receiver may not be appointed without notice to take charge of fixed and immovable property. The adverse party must receive notice of the hearing at least three days before the hearing.

• Texas Family Code Section 6.502(a)(5). During a suit for dissolution of marriage, a trial court may appoint a receiver for the preservation and protection of property belonging to the parties.

• Texas Civil Practice and Remedies Code Section 64.001(a)(7). A receiver may be appointed under the rules of equity.

• Texas Civil Practice and Remedies Code Section 51.014(a)(2). A party may pursue an interlocutory appeal from an order overruling a motion to vacate an order appointing a receiver.

• Receivership as an extraordinary remedy. Relying on authorities including Elliott v. Weatherman, Krumnow v. Krumnow, and Rusk v. Rusk, the court reiterated that receivership is an extraordinarily harsh remedy that must be cautiously applied. Judicial seizure and court management of property should be a last resort, particularly when an adequate legal or equitable remedy is available.

• Real property as fixed and immovable property. Under Krumnow and Independent American Savings Association v. Preston 117 Joint Venture, real estate falls within Rule 695’s protection.

• Lienholders as adverse parties. Under Independent American Savings Association and North Side Bank v. Wachendorfer, a creditor holding a lien against real property is an adverse party entitled to notice before a receiver is appointed over that property.

• Application in divorce proceedings. Under Rusk and Nationwide Life Insurance v. Nations, Rule 695 applies in marriage-dissolution cases despite the trial court’s authority to appoint a receiver to protect the marital estate.

• Abuse-of-discretion review. The appellate court reviewed the denial of the motion to dissolve for abuse of discretion. A trial court abuses its discretion when it acts without reference to guiding rules and principles or acts arbitrarily or unreasonably.

Application

The appellate court first concluded that the two tracts were fixed and immovable property because they were real estate. The proposed receivership therefore fell squarely within Rule 695.

Prosperity Bank also qualified as an adverse party. Its deed of trust created a lien against the same property the receiver was appointed to control and sell. The receiver’s authority directly implicated the bank’s collateral and foreclosure rights, making the bank entitled to notice of the receivership hearing at least three days in advance.

The fact that the receivership arose in a divorce did not alter the analysis. The trial court possessed statutory authority under Family Code Section 6.502(a)(5) to preserve and protect property belonging to the spouses, as well as equitable authority to appoint a receiver in an appropriate case. But those sources of authority did not create an exception to Rule 695’s notice requirement for fixed and immovable property.

The court found Nationwide Life Insurance v. Nations particularly instructive. There, as here, a divorce court appointed a receiver to sell real property without notifying a lienholder. The Fourteenth Court of Appeals held that the receivership could not stand because appointment without notice is expressly forbidden when immovable property is involved.

Prosperity Bank received no notice before the receiver was appointed. Its later participation in the receiver’s lawsuit and its post-appointment motion to dissolve did not cure the initial Rule 695 violation. The court also observed that the spouses’ interests potentially could have been protected through a less drastic remedy, such as temporary restraining relief, without appointing a receiver outside the bank’s presence.

Holding

The Second Court of Appeals held that Prosperity Bank was an adverse lienholder entitled to at least three days’ notice under Rule 695 before the trial court appointed a receiver to take charge of and sell the real property securing the bank’s loan.

Because Prosperity Bank received no pre-appointment notice, the trial court abused its discretion by denying the bank’s motion to dissolve. The appellate court reversed the denial order and rendered an order dissolving the receivership.

Practical Application

Family-law litigators should treat a request for a receiver over real property as both a substantive and procedural extraordinary-remedy proceeding. Establishing that the property needs protection is not enough. Counsel must identify every person or entity holding an adverse interest and satisfy Rule 695 before seeking appointment.

In a divorce involving threatened foreclosure, counsel should resist the temptation to seek an ex parte receivership merely because the situation is urgent. A temporary restraining order may provide short-term protection while preserving the notice and hearing requirements applicable to a receivership. The opinion signals that less restrictive alternatives should be considered and developed in the record.

When real estate is titled in an LLC or partnership, counsel should not assume that the entity structure eliminates Rule 695 concerns. Alter-ego allegations, community-credit theories, or claims that the entity is effectively marital property may support an argument for the divorce court’s authority over the asset, but they do not extinguish an existing creditor’s procedural rights.

For a party opposing a receivership, the first review should focus on notice, the nature of the property, and the movant’s proof that no adequate alternative remedy exists. A defective appointment may be challenged through a motion to vacate or dissolve, followed by an interlocutory appeal if the motion is denied.

Counsel drafting an appointment order should define the receiver’s powers narrowly. Authority to operate property, collect rents, negotiate with lenders, enjoin foreclosure, or sell collateral may affect different third-party rights. The notice record should correspond to the actual authority requested.

Finally, a post-appointment hearing should not be treated as a safe substitute for compliance with Rule 695. The notice must precede appointment. Once a receiver has been appointed without the required notice, later participation by the lienholder may not save the receivership from dissolution.

Checklists

Before Seeking a Receiver Over Real Property

• Confirm that receivership is authorized under Family Code Section 6.502, Civil Practice and Remedies Code Chapter 64, or applicable equitable principles.
• Identify the precise property the receiver would control.
• Determine whether the property is real estate or otherwise fixed and immovable.
• Obtain current title reports, deed-of-trust records, tax-lien information, judgment-lien searches, and UCC records when relevant.
• Identify all lenders, lienholders, creditors, cotenants, and entities with potentially adverse interests.
• Evaluate whether each interested person or entity is entitled to notice under Rule 695.
• Set the application for hearing.
• Serve notice of the hearing at least three days in advance as required by Rule 695.
• Preserve proof of service in the record.
• Determine whether local rules, standing orders, or due-process considerations require additional notice.
• Prepare evidence showing why ordinary injunctions, temporary orders, bonds, account restrictions, or other remedies are inadequate.
• Draft a proposed order that limits the receiver’s authority to what is necessary to preserve the property.

Responding to an Immediate Foreclosure Threat

• Obtain the note, guaranties, deed of trust, notices of default, acceleration notices, and foreclosure notices.
• Confirm all contractual cure periods and statutory deadlines.
• Determine whether temporary restraining or injunctive relief can preserve the status quo without a receiver.
• Notify the lender and explore a standstill, forbearance, payoff, sale, or refinancing agreement.
• Avoid requesting ex parte receivership relief over real property unless a statute expressly permits it and all procedural requirements are satisfied.
• Explain in the application why any proposed relief is necessary and narrowly tailored.
• Ensure that relief directed at a lender is sought in a procedurally proper action and with appropriate notice.

Drafting the Receivership Application and Order

• Describe the property with legal and practical specificity.
• Identify recorded liens and the creditors holding them.
• State the statutory or equitable basis for appointment.
• Address why the requested receivership is necessary to preserve or protect the property.
• Address the absence of an adequate legal or equitable alternative.
• Attach or offer evidence supporting urgency, waste, mismanagement, dissipation, or threatened loss.
• Specify whether the receiver may collect income, manage operations, negotiate financing, market property, or conduct a sale.
• Require further court approval before any sale that could affect lien rights.
• Preserve valid liens and priorities unless the law and record support different treatment.
• Include findings concerning notice, service, necessity, and the inadequacy of lesser remedies.
• Address the receiver’s bond, reporting duties, compensation, and termination.

Challenging a Defective Receivership

• Determine whether the receiver was appointed over fixed and immovable property.
• Review the clerk’s record and return of service for proof of Rule 695 notice.
• Establish the client’s lien, ownership interest, or other adverse interest.
• Move promptly to vacate or dissolve the receivership.
• Object to any receiver action that could impair the client’s collateral or priority.
• Request a stay or other interim protection when necessary.
• Obtain a ruling on the motion and ensure the order is included in the record.
• Consider an interlocutory appeal under Civil Practice and Remedies Code Section 51.014(a)(2).
• Preserve both the notice violation and any independent challenge to the necessity or scope of the receivership.
• Avoid conduct that could support an argument that the client consented to the receivership or waived objections.

Building the Appellate Record

• Include the receivership application, motion, supporting affidavits, and exhibits.
• Include the order appointing the receiver.
• Include all notices, returns of service, docket entries, and hearing settings.
• Obtain a reporter’s record of the appointment and dissolution hearings.
• Include the lien documents establishing the appellant’s adverse interest.
• Secure a written ruling on the motion to vacate or dissolve.
• Request findings when strategically appropriate.
• Clearly identify the absence of pre-appointment notice.
• Calendar the accelerated appellate deadlines applicable to interlocutory appeals.

Citation

Prosperity Bank v. Steed, No. 02-26-00264-CV (Tex. App.—Fort Worth Nov. 5, 2026, no pet. h.) (mem. op.).

Full Opinion

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