Plaintiffs-appellees Richard L. Marre (Marre) and Agritech Enterprises, Inc. (Agritech), Marre's wholly owned corporation, sued the United States (government) under 26 U.S.C. § 7431 of the Internal Revenue Code for wrongful disclosure of plaintiffs' tax return information. The district court awarded statutory damages and attorneys' fees to Marre but rejected Agritech's claim for damages and attorneys' fees. Plaintiffs appealed and the government cross-appealed on the amount of attorneys' fees awarded to Marre. A panel of this Court affirmed Marre's damages award but reduced his attorneys' fees. The Court also reversed and remanded Agritech's claim for damages and attorneys' fees. On remand, the government and Agritech agreed on the amount of statutory damages. The district court awarded Agritech attorneys' fees in the amount of $55,500 and ordered the government not to set off the damages and attorneys' fees awarded to the plaintiffs against tax assessments made by the government against plaintiffs under 26 U.S.C. §§ 6700 and 6701. Further, the Court allowed HP-84 Nursery Associates (Nursery Associates), a judgment creditor of Marre, to intervene and held that Nursery Associates was entitled to fifty percent of Marre's damages and attorneys' fees. The government and Nursery Associates now appeal. We affirm in part and reverse in part.

In 1981, Marre founded Agritech, a corporation organized to construct modular solar-heated greenhouse facilities on various tracts of land in Ellis and Waller counties in Texas. Marre marketed these greenhouses to limited partnerships and individual investors as tax shelters. In early 1985, the Criminal Investigation Division of the Internal Revenue Service (IRS) began a criminal investigation of the plaintiffs' greenhouse operation. The IRS believed that the plaintiffs had marketed the solar greenhouses as a tax shelter but failed to construct completed greenhouse facilities.

During the course of the investigation, Special Agent Lindell Parrish of the IRS interviewed numerous Agritech investors, promoters, suppliers, and employees and mailed out a large number of form or "circular" letters to the Agritech investors and various suppliers. In these interviews and letters, Agent Parrish stated that Marre and Agritech were under investigation by the IRS for allegedly aiding and assisting in the filing of false tax returns in violation of 26 U.S.C. § 7206(2), and in the view of the IRS, any tax return that showed deductions or credits in connection with the Agritech tax shelter was false and fraudulent. Attached to each letter was a questionnaire that included statements that indicated Marre had been dishonest with the investors.

Marre and Agritech filed suit against the government in the district court below under 26 U.S.C. § 7431, seeking damages for wrongful disclosures of their tax return information as defined in 26 U.S.C. § 6103(b)(2), in violation of 26 U.S.C. §§ 6103(a)(1) and 6103(k)(6). Marre v. United States, No. Civ. A. H-88-1103, 1992 WL 240527 (S.D.Tex. June 22, 1992). Following a bench trial, the district court found that the IRS had made 215 unauthorized disclosures. The court determined that Marre suffered no actual damages from the disclosures and, therefore, was not entitled to an award for either compensatory or punitive damages. The court did, however, award Marre statutory damages of $1,000 per disclosure, or $215,000. The court also held that Agritech was not entitled to any damages because it had ceased doing business approximately two years before the disclosures were made; hence, the court opined, an award of damages to Agritech would amount to a double recovery for Marre. Finally, the court held that Marre, but not Agritech, was entitled under 26 U.S.C. § 7430 to recover reasonable attorneys' fees of $308,444.60 and costs of $17,738.02, for a total of $326,182.62.

Marre appealed on the amount of damages and Agritech appealed the district court's rejection of its claim for damages and attorneys' fees. The government cross-appealed on the amount of attorneys' fees awarded to Marre. On appeal, we affirmed Marre's damages award, holding that the district court did not err in denying him actual damages and that, even if punitive damages were recoverable under 26 U.S.C. § 7431(c) in the absence of actual damages, the evidence did not sufficiently support an award for punitive damages. Marre v. United States, 38 F.3d 823, 825-28 (5th Cir.1994) (Marre I ). This Court also reduced Marre's attorneys' fees award to $107,500 plus costs of $17,738.02, to reflect the actual expenses incurred under his contingency fee agreement with his attorneys. With respect to Agritech, this Court concluded that nothing in section 7431 precluded the corporation from recovering damages under that provision. We vacated that part of the district court's judgment denying damages to Agritech and remanded for reconsideration of Agritech's claim for damages and attorneys' fees.1

On remand, the parties agreed that Agritech was entitled to statutory damages under section 7431 of $111,000 for 111 separate acts of unauthorized disclosure of its tax return information. The parties disagreed, however, on whether Agritech was entitled to any attorneys' fees under section 7430. The district court determined that Agritech was entitled, "under the law of the case," to an award of $55,500 for its attorneys' fees. The court also held that the government could not set off the plaintiffs' damages and attorneys' fees awards against tax assessments the IRS had made against Marre and Agritech under sections 6700 and 6701 while appeal was pending in Marre I.2 Finally, the judgment required the government to pay fifty percent of Marre's damages and attorneys' fees to Nursery Associates, a creditor that had obtained a judgment and turnover order against Marre in Texas state court and that the district court had allowed to intervene.

The government now appeals, arguing that the district court erred in awarding Agritech attorneys' fees and in prohibiting the government from setting off plaintiffs' damages and attorneys' fees against their tax liabilities. Nursery Associates appeals the district court's judgment limiting its award to only fifty percent of Marre's damages and attorneys' fees and denying its request for reasonable attorneys' fees.

Section 7430 of the Internal Revenue Code provides that taxpayers who prevail in tax proceedings may recover their attorneys' fees incurred in such proceeding if they establish that (1) the position of the government at the time of litigation was not substantially justified; (2) the taxpayers substantially prevailed with respect to the amount in controversy or with respect to the most significant issue or set of issues presented; and (3) the taxpayers meet applicable net worth requirements. 26 U.S.C. § 7430(c)(4)(A); see also Nalle v. C.I.R., 55 F.3d 189, 191 (5th Cir.1995).3 The burden of proving that the government was not substantially justified in its litigation position is with the taxpayers. Information Resources, Inc. v. United States, 996 F.2d 780, 786 (5th Cir.1993).

The government concedes that Marre and Agritech substantially prevailed on the most significant issues and meet the net worth requirements. The government contends, however, that the district court's award of attorneys' fees to Agritech was erroneous and should be reversed because, among other things, Agritech has failed to show that the government's position in the litigation with respect to Agritech was not "substantially justified," i.e. that it was not "justified to a degree that could satisfy a reasonable person" or had no "reasonable basis both in law and fact." Nalle, 55 F.3d at 191 (citations omitted). "In determining whether the [government's] position was not substantially justified, the question is whether the [government] acted unreasonably--that is, whether [it] knew or should have known that [its] position was invalid at the onset of the litigation." Id. (citing Bouterie v. C.I.R., 36 F.3d 1361, 1373 (5th Cir.1994)).

We review the lower court's award of attorneys' fees under section 7430 for abuse of discretion, see Wilkerson v. United States, 67 F.3d 112, 119 (5th Cir.1995), and the supporting factual findings are reviewed for clear error. Riley v. City of Jackson, Miss., 99 F.3d 757, 759 (5th Cir.1996). Review of the conclusions of law underlying an award or denial of attorneys' fees is de novo. Texas Food Indus. Ass'n v. United States Dept. of Agric., 81 F.3d 578, 580 (5th Cir.1996). This Court reviews the district court's ruling on substantial justification for abuse of discretion, and will reverse only if we have a definite and firm conviction that an error of judgment was committed. Portillo v. C.I.R., 988 F.2d 27, 28 (5th Cir.1993).

Having reviewed the record, we conclude Agritech has failed to demonstrate that the government's position in the litigation vis-a-vis Agritech was not substantially justified, as the government did not know and had no reason to know that Agritech could recover statutory damages and attorneys' fees under section 7430. There is no evidence Agritech suffered actual damages, and we have held there was no basis for punitive damages. From the very outset of this litigation, the government's position has been that Agritech was not entitled to damages for the unauthorized disclosure of its tax return information because it was, at all relevant times, essentially a defunct entity. The government vehemently argued, and the district court found, that Agritech--at all relevant times wholly owned by Marre--was not entitled to damages because it had not actively engaged in business ever since a time some two years before the complained of disclosures were made. The government reasonably relied on the fact that the Texas Secretary of State had forfeited Agritech's charter twice and the charter had remained forfeited until two months before trial.

Tellingly, even the district court in Marre I believed that the government's position was reasonable, as evidenced by its observation that Agritech was "dead in the water" and "little more than a corporate corpse." Although the court's agreement with the government's argument is not of itself dispositive of the issue, we believe that the court's acceptance of the government's litigation position further demonstrates the reasonableness of that position.

This is not a case where the government "unreasonably defended [its] position after several earlier courts had rejected it, when the IRS had ignored state law that clearly supported the taxpayer, [or] when the IRS had failed to conduct a reasonable investigation that would have revealed the flaw in its position." Nalle, 55 F.3d at 191-92 (internal footnotes omitted). Instead, the issue of Agritech's essentially defunct corporate status at all relevant times was a relatively novel one, as neither this Court nor any other federal court had addressed this precise issue until Marre I. Although we were not persuaded by the government's (and district court's) reliance on Shapiro v. Smith, 652 F. Supp. 218 (S.D.Ohio 1986), which the government claimed supported its position that Agritech was not entitled to damages and attorneys' fees because it was "as good as dead," see Marre I, 38 F.3d at 828, our rejection of this argument was neither an express nor implied finding that the government's position was unreasonable.4 Indeed, the government had no reason to know at the outset of litigation, either by analyzing federal and state case law or through some other reasonable investigation, that Marre's wholly owned corporation Agritech could recover damages and attorneys' fees despite having been inactive and essentially defunct ever since a time approximately two years before the challenged disclosures were made. Because Agritech has failed to demonstrate that the government's position at litigation was not substantially justified, we hold that the court below abused its discretion by awarding Agritech attorneys' fees.5

Next, the government contends that the district court erred in not allowing it (the government) to set off the plaintiffs' damages and Marre's attorneys' fees against their tax liabilities.6 While appeal was pending in Marre I, the government assessed tax penalties of $2,010,733.40 against Marre (in October 1993) and Agritech (in February 1994) for promoting abusive tax shelters in violation of section 6700 and for aiding and abetting the understatement of tax liability in violation of section 6701. Marre and Agritech then filed a separate suit in district court challenging the tax assessments. Meanwhile, the court on remand held that the government could not set off the damages and attorneys' fees awarded to Marre and Agritech against their outstanding tax liabilities.

The government has both a common law and a statutory right of setoff. The government's common law right of setoff--which is inherent in the federal government--is broad and "exists independent of any statutory grant of authority to the executive branch." United States v. Tafoya, 803 F.2d 140, 141 (5th Cir.1986). "The government has the same right which belongs to every creditor, to apply the unappropriated moneys of his debtor, in his hands, in extinguishment of the debts due to him." United States v. Munsey Trust Co. of Washington, D.C., 332 U.S. 234, 239, 67 S. Ct. 1599, 1602, 91 L. Ed. 2022 (1947) (internal quotations omitted).

The government's statutory right of setoff is found in 31 U.S.C. § 3728, which provides:

"(a) The Comptroller General shall withhold paying that part of a judgment against the United States Government presented to the Comptroller General that is equal to a debt the plaintiff owes the Government.

(b) The Comptroller General shall--

(1) discharge the debt if the plaintiff agrees to the setoff and discharges a part of the judgment equal to the debt; or

(2)(A) withhold payment of an additional amount the Comptroller General decides will cover legal costs of bringing a civil action for the debt if the plaintiff denies the debt or does not agree to the setoff; and

(B) have a civil action brought if one has not already been brought.

(c) If the Government loses a civil action to recover a debt or recovers less than the amount the Comptroller General withholds under this section, the Comptroller General shall pay the plaintiff the balance and interest of 6 percent for the time the money is withheld."

The government's right of setoff, although broad, is not unlimited. In order for the government to invoke its right of setoff, there must be mutuality of debt between the parties. See United States v. 717.42 Acres of Land, 955 F.2d 376, 381 (5th Cir.1992); see also Capuano v. United States, 955 F.2d 1427, 1429-30 (11th Cir.1992) (explaining that "[t]he right of set-off is within the equitable power of a court to offset mutual debts running between two parties"). Mutuality requires "that the judgment creditor must be the same person (in the view of the law) as the party who owes the debt to be collected, and the government must be the same person to whom the debt is owed." In re Mr. Alan I. Saltman, Comp. Gen. B-259532, 1995 WL 905738, at * 2 (March 6, 1995) (unpublished).

With respect to the plaintiffs' damages awards in this case, the government has the authority to set off the damages against the plaintiffs' alleged tax liabilities. A mutual debt exists as between the plaintiffs and the government--that is, the government owes the plaintiffs $326,000 in total damages and the plaintiffs allegedly owe the government in excess of $2,000,000 in taxes. Because there is mutuality of debt between the plaintiffs and the government, and because we see no valid reason to disallow setoff,7 we conclude that the district court erred in prohibiting the government from exercising its right of setoff against plaintiffs' tax debts.8

Next, we consider whether the district court erroneously prohibited the government from setting off the award to Marre's attorneys against Marre's tax liabilities. At the conclusion of the first trial, the court awarded Marre, in addition to $215,000 in damages, $308,444.60 in attorneys' fees and $17,738.02 in costs pursuant to section 7430. On appeal, we affirmed the judgment as to the amount of damages and costs, but reduced the attorneys' fees award to $107,500, to reflect the reasonable fees "paid or incurred" by Marre for the services of his attorneys, Urquhart & Hassell, under their contingency fee agreement. On remand, the district court in setting forth the plaintiffs' damages and attorneys' fees awards in a final judgment calculated Marre's attorneys' fees by adding his damages of $215,000 and attorneys' fees of $107,500, and then dividing the total in half to reflect the attorneys' fifty percent interest in the amounts recovered, or $161,250.9 After adding the $17,738.02 in costs, the court ordered that the government pay Urquhart & Hassell a total of $178,988.02.

Section 7430 provides that "the prevailing party may be awarded a judgment or a settlement for ... reasonable litigation costs incurred in connection with such court proceeding."10 26 U.S.C. § 7430. Under the statute, if the court decides to award attorneys' fees to the prevailing party, the fees are to be awarded in addition to any damages awarded to the prevailing party. In other words, the attorneys' fees are not awarded out of the prevailing party's damages, but rather are awarded on top of any damages the prevailing party receives. See generally Plant v. Blazer Financial Services, Inc. of Ga., 598 F.2d 1357, 1365-66 (5th Cir.1979) (disallowing setoff by creditor for violation of Truth in Lending Act where debtor was awarded attorneys' fees under statute making creditor liable for "the costs of the action together with a reasonable attorney's fee as determined by the court"); Duncan v. United States Dept. of Army, No. 88-2143, 1989 WL 117742, at * 1 (4th Cir. Oct.4, 1989) (unpublished opinion) (disallowing setoff of attorneys' fees by Army for violation of Right to Privacy Act, 12 U.S.C. § 3401 et seq., where fees were awarded under 12 U.S.C. § 3417(a)(4), making Army responsible for "the costs of the action together with reasonable attorney's fees as determined by the court"). Thus, damages and attorneys' fees under section 7430 are separate awards, the former going to the prevailing party and the latter to the prevailing party's attorneys. In this case, because the attorneys' fees awarded under section 7430 belong to Urquhart & Hassell, and not Marre, the government cannot set off Marre's tax obligations against the attorneys' fees award, as no mutuality of debt exists between the government and Marre's attorneys.

That the statute provides that attorneys' fees are to be awarded to the prevailing party is not controlling. The issue "is not whether plaintiff is nominally to receive the money but whether ultimately it is to go to her attorney or to be credited toward defendant in repayment of plaintiff's debt." Plant, 598 F.2d at 1366. Here, as in Plant and Duncan, the prevailing party is only nominally the person who receives the award; the real party in interest vis-a-vis attorneys' fees awarded under the statute are the attorneys themselves.11 See, e.g., Id. at 1366; Duncan, 1989 WL 117742, at * 3.

To the extent we conclude that Marre's attorneys' fees award belongs to Urquhart & Hassell--and therefore is not subject to set off--the government cannot take advantage of either United States v. Cohen, 389 F.2d 689 (5th Cir.1967), or United States v. Transocean Air Lines, Inc., 386 F.2d 79 (5th Cir.1967), cert. denied, 389 U.S. 1047, 88 S. Ct. 784, 19 L. Ed. 2d 839 (1968). Cohen involved a prisoner who successfully sued the United States under the Federal Tort Claims Act for failure to prevent his being assaulted by a fellow inmate. The court awarded the plaintiff $110,000, and of that amount $15,000 was awarded in attorneys' fees under 28 U.S.C. § 2678, "free and clear of any and all claims which the Internal Revenue Service, the Treasury Department or the United States of America ... might have or assert against the plaintiff in this case." Id. at 690 (internal quotations omitted). On appeal, we reversed the district court's denial of setoff, holding that under section 2678, the attorneys' rights to the fees were derivative of the plaintiff's recovery and, therefore, subject to the government's right of setoff. Id. at 691-92.

In Transocean Air Lines, plaintiff, a bankrupt air carrier, sued the government over disputed compensation allegedly owed it for its transportation services. The government and the trustee in bankruptcy settled for $75,000, to be credited against a larger claim the government held against Transocean. Plaintiff's attorneys, who under a contingency fee agreement were to be given a one-third interest in all amounts recovered, sought to recover $25,000 for their services. The district court granted judgment in favor of the attorneys in the amount of $25,000 directly against the government and reduced Transocean's judgment to $50,000. In reversing the judgment, we reasoned that the attorneys' interest in the fees was derived from Florida contracts law, and because the right to sue the federal government cannot be granted by state law or through contractual relationships with third parties, the judgment could not be sustained as against the government. Id. at 81-82. We also held that the attorneys' fees award could not be characterized as an assignment of Transocean's claim, as any such assignment of the judgment would be invalid under the Anti-Assignment Act, 31 U.S.C. § 203.12 Id.

Unlike the case at bar, the attorneys' fees in Cohen and Transocean Air Lines were awarded out of the plaintiffs' damages. In Cohen, the attorneys' fees were awarded pursuant to a statute that then provided that the court could award reasonable attorneys' fees of up to twenty percent of the amount recovered by the plaintiff " 'to be paid out of but not in addition to the amount of judgment ... recovered, ...' " Cohen, 389 F.2d at 690 n. 3 (citing 28 U.S.C.A. § 2678) (emphasis added). In Transocean Air Lines, the fees were awarded under a contingency fee contract that provided that the attorneys would receive a one-third interest in the recovery. See Transocean Air Lines, 386 F.2d at 80. Because the attorneys' interest in the fees was derivative of the plaintiffs' interest in the judgment, we allowed the government to set off the attorneys' fees awarded to the plaintiffs against the judgments favorable to the plaintiffs. See Duncan, 1989 WL 117742, at * 3 (distinguishing Cohen on the basis that the case involved two creditors, the government and plaintiff's attorneys, competing for rights to the plaintiff's judgment). As stated earlier, the case before us does not involve derivative rights of the attorneys to the fees; instead, the fees were awarded to Marre's attorneys in addition to the full statutory damages awarded to Marre.13

Our holding that the government may not set off the attorney's fees extends to, but only to, that portion of the fees awarded pursuant to section 7430, i.e. $107,500 in fees and $17,738.02 in costs, or $125,238.02. The government may still set off the remaining portion of the attorneys' fees which was awarded out of Marre's $215,000 in damages, or $53,750. This is so because the $53,750 falls within and comes out of the $215,000 awarded to Marre as damages, which we have held may be set off by the government because of mutuality of debt between the government and Marre.14

III. Nursery Associates' Rights Under the Turnover Order

Nursery Associates, following a jury trial in Texas state court, secured a judgment against Marre individually on December 4, 1989, in the amount of $345,800 plus post-judgment interest of 10% per annum on the amount of $204,000 until paid. Through post-judgment discovery, Nursery Associates identified Marre's interest in the present case as his only significant asset. Pursuant to section 31.002 of the Texas Civil Procedure Practice and Remedies Code, Nursery Associates obtained an order for turnover relief from the state court on March 16, 1993.15 The order required that Marre "and his agents, representatives, and/or attorneys turn over to HP-84 Nursery Associates any and all benefits or items of value that arise or result from [Marre's suit against the government]." In addition, Nursery Associates was awarded reasonable and necessary attorneys' fees of $1,000 along with the costs of the turnover proceeding.

On April 7, 1993, Nursery Associates filed its Notice of Interest, Motion to Intervene and Brief in Support, and Complaint In Intervention, requesting permission to intervene in Marre's federal lawsuit as a judgment creditor pursuant to the Texas state court turnover order. On April 16, 1993, the court denied the intervention. On remand to the district court from Marre I, Nursery Associates again sought to intervene in this case as judgment creditor. On April 21, 1995, the district court granted the Motion to Intervene and thereafter, on May 1, 1995, Nursery Associates filed its Complaint in Intervention. Nursery Associates filed a Motion to Enforce Turnover Order on November 3, 1995, asserting that it was entitled to enforcement of its judgment in the total amount of $503,198.44 ($345,800 principal plus interest).

The district court, however, did not order turnover of all of the damages and attorneys' fees awarded to Marre, which totaled $322,500. Instead, in its enforcement of the turnover order, the district court apparently relied on Marre's contingency fee agreement, which provided for a fee of 50% of all amounts "recovered" by Marre, and awarded Nursery Associates only $161,250, to be paid by the government. The court also denied Nursery Associates's request for attorneys' fees.

On appeal, Nursery Associates argues that the district court erred in prohibiting it from receiving all of the proceeds of the judgment obtained by Marre against the government, including all damages and attorneys' fees. It claims that the court was required to look to state law in enforcing the state court turnover order and, because the language of the turnover order awards Nursery Associates any and all benefits or items of value that arise from Marre's suit against the government, the district court was required to honor the terms of the turnover order without regard to any contractual arrangement between Marre and his attorneys. Moreover, Nursery Associates complains that it was entitled to all attorneys' fees and costs incurred in enforcing its turnover order in these proceedings.16

A. Nursery Associates' Interest in Marre's Damages

With respect to the $215,000 in damages awarded to Marre, we held above that the government could set off the entire amount against Marre's tax liabilities, as the government's right of setoff is superior to both Marre's interest and his attorneys' derivative interest in that award. Because Nursery Associates' interest in Marre's damages is also merely derivative of Marre's interest, we likewise conclude that the government's right of setoff is superior to Nursery Associates' interest in the damages. See Cohen, 389 F.2d at 692.17

Our analysis regarding Nursery Associates' interest in Marre's damages does not end here, however. With the litigation over the legitimacy of Marre's tax assessments currently pending in the district court below, there remains the possibility that the district court could invalidate the government's tax assessments. To that end, we must also consider whether Nursery Associates' interest in the $215,000 damage award is superior to the interests of Marre and his attorneys. As between Nursery Associates and Marre, Nursery Associates' interest in the entire amount of the award is superior to Marre's interest. The turnover order's mandate that Marre turn over to Nursery Associates any and all benefits or items of value that result from the present law suit was clear and unequivocal. Hence, the district court erred in awarding Nursery Associates only half of Marre's recovery.

Likewise, as between Nursery Associates and Marre's attorneys, Nursery Associates' interest in that portion of the $215,000 in damages that was awarded to the attorneys under the contingency agreement--$161,250 less $107,500, or $53,750--is also superior to the interest of Marre's attorneys. An attorney's right to compensation pursuant to a contingency fee agreement is a property right determined under applicable state law. Augustson v. Linea Aerea Nacional-Chile S.A., 76 F.3d 658, 662 (5th Cir.1996). Under Texas law, a contingency fee agreement is generally considered to be an executory contract.18 See Lee v. Cherry, 812 S.W.2d 361, 363 (Tex.App.--Hous. [14th Dist.] 1991, reh'g of writ overruled); Brenan v. LaMotte, 441 S.W.2d 626, 630 (Tex.Civ.App.San Antonio 1969, no writ); White v. Brookline Trust Co., 371 S.W.2d 597, 600 (Tex.Civ.App.Amarillo 1963, writ ref'd n.r.e.); Carroll, 168 S.W.2d at 240. Therefore, as a general rule, "an attorney does not receive a legal or equitable interest pursuant to a contingency fee contract until the contingency actually occurs."19 In re Willis, 143 B.R. at 431. Once the contingency occurs, the attorney has a lien on the judgment or settlement securing his services, and "an attorney's lien is paramount to the rights of the parties in the suit, and is superior to other liens on the money or property involved, subsequent in point of time." Id. at 432 (citations omitted).

Nursery Associates obtained its turnover order from the state court on March 16, 1993, while appeal was pending in Marre I--before the contingency occurred. Because the contingency fee contract between Marre and his attorneys was still executory at the time Nursery Associates obtained its turnover order, Nursery Associates' interest in the fees is superior to the interest held by Urquhart & Hassell. Thus, Nursery Associates' interest in the entire $215,000, including the $53,750 in attorneys' fees awarded out of the damages, is superior to the interests of both Marre and his attorneys.20

B. Nursery Associates' Interest in the $107,500 in Attorneys' Fees

For the same reasons that the government cannot set off the $107,500 in attorneys' fees against Marre's tax assessments, Nursery Associates cannot claim an interest in the $107,500 of the fee award which would be superior to Urquhart & Hassell's interest. Any rights that Nursery Associates has in that portion of the attorneys' fees under the turnover order are, at most, derivative of Marre's right to the fees. Thus, because the fees were awarded to Marre's attorneys, and not Marre, and because Nursery Associates' interest stems from Marre's right to the fees, Urquhart & Hassell's interest in the $107,500 of the attorneys' fees is superior to the interest held by Nursery Associates.21

C. Nursery Associates' Reasonable Attorneys' Fees

Finally, Nursery Associates argues that it is entitled to all of its reasonable and necessary attorneys' fees incurred in having to obtain and enforce the turnover order: $1,000 in attorneys' fees for obtaining the order plus $15,000 in attorneys' fees for the intervention. Attorneys' fees are mandatory under the turnover statute if the evidence shows that the judgment creditor was successful in obtaining turnover relief and the attorneys' fees and costs are reasonable.22 Great Global Assurance Co. v. Keltex Properties, Inc., 904 S.W.2d 771, 775-76 (Tex.App.--Corpus Christi 1995, no writ); see also Cortland Line Co. v. Israel, 874 S.W.2d 178, 184 (Tex.App.--Houston [14th Dist.] 1994, writ denied) (stating that "[a] court has the discretion to fix the amount of attorney's fees, but it does not have the discretion in denying them if they are proper under § 38.001"). Because Nursery Associates was successful in obtaining turnover relief and we find nothing in the record that would indicate to us that the fees are anything but reasonable,23 we conclude the district court erred in refusing to award Nursery Associates its requested attorneys' fees as against Marre.

In sum, we reverse the district court's award of attorneys' fees to Agritech as well as the court's refusal to allow the government to set off Marre's and Agritech's damages of $326,000, which includes the $53,750 in attorneys' fees awarded to Marre. The setoff is allowed so that the government can withhold payment of the damages to Marre and Agritech pending final adjudication of their tax liabilities on the assessments made while the Marre I appeal was pending. However, we affirm the court's judgment to the extent that it prohibits the government from setting off Urquhart & Hassell's fee award of $107,500 and costs of $17,738.02, as these fees and costs belong solely to Marre's attorneys, unencumbered by the government's right of setoff.

We further hold that Nursery Associates' interest in Marre's damages award of $215,000 is likewise subject to the government's right of setoff, but is superior to both Marre's and Urquhart & Hassell's rights to the award. As for the $107,500 in attorneys' fees (and $17,738.02 expenses), Urquhart & Hassell's interest in the fees (and expenses) is superior to both the government's right of setoff and Nursery Associates' rights. Lastly, Nursery Associates is entitled to $16,000 in reasonable attorneys' fees as against Marre.

The district court's judgment is AFFIRMED in part and REVERSED in part.