Affirmed and Opinion Filed June 8, 2021
In The Court of Appeals Fifth District of Texas at Dallas No. 05-19-01359-CV
HELEN CULLEN AUSTIN, Appellant V. MICHAEL W. MITCHELL, INDIVIDUALLY, AND DANIEL MITCHELL, AS TRUSTEE OF THE BRITTANY MITCHELL TRUST FBO CAITLIN MITCHELL AND AS TRUSTEE OF THE BRITTANY MITCHELL TRUST FBO MEGAN MITCHELL, Appellees
On Appeal from the 191st Judicial District Court Dallas County, Texas Trial Court Cause No. DC-17-13917
MEMORANDUM OPINION Before Justices Myers, Nowell, and Goldstein1 Opinion by Justice Nowell This is an appeal from a summary judgment in a fraudulent transfer suit
between former spouses. Helen Cullen Austin filed suit alleging her ex-husband,
Michael W. Mitchell, fraudulently transferred a portion of his limited partnership
interest in a family limited partnership to a trust for the benefit of his children.
1 The Honorable Justice Bonnie Goldstein succeeded the Honorable Justice David Evans, a member of the original panel. Justice Goldstein has reviewed the briefs and the record before the Court. Mitchell defended on the ground that the claims are barred by the repose provision
of the uniform fraudulent transfer act. TEX. BUS. & COM. CODE § 24.010. Austin
counters that Mitchell is estopped from relying on time-based defenses because he
failed to disclose the transfer in his answers to interrogatories. She also claims that
knowledge of the transfer from Mitchell’s deposition testimony cannot be imputed
to her because her attorney at the time had divided loyalties. The trial court granted
summary judgment in favor of Mitchell. We affirm.
Background
Austin and Mitchell are former spouses. During their marriage, Mitchell
established the Cullen-Mitchell Family Limited Partnership (FLP). Austin held a
49.5% limited partnership interest and Mitchell held a 49.5% limited partnership
interest and a 1% general partnership interest. Austin filed for divorce in 2007.
On March 14, 2008, Austin and Mitchell entered into a settlement agreement
regarding the division of their property in the divorce. They agreed Austin would
receive a series of payments from Mitchell and Mitchell would receive the entire
partnership interest in the FLP.
After the settlement, Mitchell signed a trust document on April 7, 2008, which
created a trust for the benefit of his three children2 effective January 1, 2008.
Mitchell named his brother, Daniel, trustee of the trust. On April 7, 2008, he wrote
2 Mitchell has two children by a prior marriage. Austin is the mother of his third child.
–2– three checks totaling $7,500 to fund the trust. The checks were written on an account
in Mitchell’s sole name. According to the settlement agreement, Mitchell was
awarded all accounts in his sole name not specifically awarded to Austin.
The parties tried the issues regarding conservatorship of their child to the court
on April 9 and 10, 2008. After several additional hearings, the court signed a Final
Decree of Divorce on January 8, 2009, which included the terms of the settlement
agreement. Mitchell appealed from the Final Decree of Divorce. While the appeal
was pending, the parties reached a settlement on January 18, 2010. They returned to
the trial court, which signed an Amended Agreed Final Decree of Divorce on June
21, 2010. The Amended Decree provided for a series of payments from Mitchell to
Austin over a period of eight-and-a-half years. It also provided for arbitration of
financial disputes between the parties. Austin later obtained an arbitration award and
judgment against Mitchell in the amount of $51,847.33 on December 14, 2010.
On January 6, 2011, Mitchell assigned 81% of his partnership interest in the
FLP to the trustee for the benefit of the beneficiaries. The assignment was effective
January 1, 2011. After the assignment, Mitchell owned 17% as a limited partner and
1% as a general partner in the FLP.
On February 16, 2011, Mitchell answered post-judgment interrogatories
served by Austin. In response to a question about whether he “conveyed or disposed
of any property, by sale, gift, or otherwise, in the past two years,” Mitchell answered
–3– “No.” According to his affidavit in support of the motion for summary judgment in
this case, Mitchell interpreted the interrogatories as seeking information about
transfers during the previous two calendar years.
A few months later, on October 29, 2012, Austin’s attorney, Tab Lawhorn,
took Mitchell’s deposition. Mitchell testified that he owned a 17% limited
partnership interest and a 1% general partnership interest in the FLP, his brother,
Daniel, owned a 1% limited partnership interest, and the trust owned the remainder
of the limited partnership interest. Austin contends she was not informed of this
information until a few months before her response to the motion for summary
judgment.
On October 10, 2017, Austin filed this suit alleging Mitchell fraudulently
transferred a portion of his partnership interest in the FLP to the trust for his children.
Austin later joined Daniel Mitchell as trustee of the trust and added claims for
disgorgement of trust assets and accounting by a trustee. Austin alleged that
Mitchell’s assignment of 81% of his limited partnership interest in the FLP to the
trustee, effective January 1, 2011, was a fraudulent transfer. She alleged that she did
not learn of the existence of the trust until June 5, 2017. Her disgorgement claim
asserted that the $7,500 Mitchell paid to fund the trust on April 7, 2008 was made
during their marriage with community funds. She also alleged the trust was used as
Mitchell’s alter ego to hide marital assets from her. She claimed she was an
–4– interested person under the trust code and entitled to seek an accounting from the
trustee.
The defendants moved for summary judgment on May 2, 2018. They alleged
Austin’s fraudulent transfer claims were barred by the statute of repose in the
uniform fraudulent transfers act, which requires suit to be filed within four years of
the transfer or within one year of discovery of the transfer. See TEX. BUS. & COM.
CODE § 24.010(a)(1). They also alleged that Austin did not have standing to sue the
trustee for disgorgement and an accounting. The trial court granted summary
judgment that Austin take nothing from appellees. Austin timely filed this appeal.
Standard of Review
We review the trial court’s summary judgment de novo. Provident Life &
Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). A party moving for
traditional summary judgment has the burden to prove that there is no genuine issue
of material fact and it is entitled to judgment as a matter of law. TEX. R. CIV. P.
166a(c); Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844,
848 (Tex. 2009). “When reviewing a summary judgment, we take as true all
evidence favorable to the nonmovant, and we indulge every reasonable inference
and resolve any doubts in the nonmovant’s favor.” Valence Operating Co. v. Dorsett,
164 S.W.3d 656, 661 (Tex. 2005).
–5– Discussion
A. Statute of Repose Austin argues in her second issue that Mitchell is estopped from asserting the
fraudulent transfer act’s statute of repose.3 She argues in her third issue there is a
genuine issue of material fact concerning her prior attorney’s divided loyalty, which
precludes imputation of the attorney’s knowledge of the transfer to her.
Austin alleged in her live petition that the transfer of Mitchell’s partnership
interest to the trust was fraudulent because it was made:
• without fair consideration and Mitchell was left insolvent as a result, BUS. & COM. § 24.006(a); • with the actual intent to hinder, delay, or defraud Austin, id. § 24.005(a)(1); or • without receiving reasonably equivalent value at a time when Mitchell believed or should have believed his debt to Austin was beyond his ability to pay as payments became due, id. § 24.005(a)(2)(B). Section 24.010 provides that a cause of action with respect to a fraudulent
transfer “is extinguished” unless action is brought:
(1) under Section 24.005(a)(1) of this code, within four years after the transfer was made or the obligation was incurred or, if later, within one year after the transfer or obligation was or could reasonably have been discovered by the claimant;
3 The parties have not expressly addressed whether estoppel applies to a statute of repose, given its absolute nature, as opposed to a statute of limitations. See Fiengo v. Gen. Motors Corp., 225 S.W.3d 858, 860 (Tex. App.—Dallas 2007, no pet.) (finding no published Texas case addressing whether estoppel can be asserted against statute of repose, but not reaching issue because appellant failed to raise fact issue on each element even if it applies). Because we conclude Austin had notice of the transfer more than one year before she filed suit, we need not address the estoppel argument, which is based on the earlier interrogatory response. TEX. R. APP. P. 47.1.
–6– (2) under Section 24.005(a)(2) or 24.006(a) of this code, within four years after the transfer was made or the obligation was incurred; or (3) under Section 24.006(b) of this code, within one year after the transfer was made.
BUS. & COM. § 24.010(a). Section 24.010(a) is a statute of repose rather than a statute
of limitations. Nathan v. Whittington, 408 S.W.3d 870, 874 (Tex. 2013) (per curiam).
Unlike statutes of limitations, which encourage diligence on the part of plaintiffs,
the purpose of a statute of repose is to provide absolute protection to certain parties
from the burden of indefinite potential liability. Id. at 873, 875 (quoting Methodist
Healthcare Sys. of San Antonio, Ltd. v. Rankin, 307 S.W.3d 283, 287 (Tex. 2010)
(internal citations omitted)). Statutes of repose are absolute in nature and, while they
may work inequitable hardship in some cases, the “Legislature has balanced this
hardship against the benefits of the certainty that a statute of repose provides by
extinguishing claims upon a specific deadline.” Id. at 876.
All of Austin’s fraudulent transfer claims were brought more than four years
after the transfer. Only Austin’s claim based on an actual intent to hinder, delay, or
defraud is subject to a discovery rule. BUS. & COM. § 24.010(a)(1). Under that
section, Austin was required to bring her cause of action within one year after she
discovered or reasonably could have discovered the transfer. Id.
Mitchell argues that Austin knew or should have known of the transfer by
October 29, 2012 because he disclosed the change in ownership to Austin’s attorney,
–7– Lawhorn, during his deposition. Austin asserts she did not discover the transfer until
June 5, 2017, shortly before she filed suit. She testified she did not learn about
Mitchell’s 2012 deposition testimony before 2017. She argues that Lawhorn’s
divided loyalty at the time of the deposition precludes imputation of his knowledge
to her.
Like other agents, an attorney’s knowledge acquired during his or her
representation of a client is imputed to the client. McMahan v. Greenwood, 108
S.W.3d 467, 480–81 (Tex. App.—Houston [14th Dist.] 2003, pet. denied). However,
an agent’s knowledge is not imputed to the principal if the agent has a personal
adverse interest in not revealing it. See Goldstein v. Union Nat’l Bank, 213 S.W.
584, 590–91 (Tex. 1919); Arabesque Studios, Inc. v. Acad. of Fine Arts, Intern., Inc.,
529 S.W.2d 564, 568 (Tex. Civ. App.—Dallas 1975, no writ). This adverse-interest
exception is a narrow one; the agent’s interests must be “so incompatible with the
interests of his principal as practically to destroy the agency or to render it reasonably
probable” that the agent will not act on his acquired knowledge nor disclose it to his
principal. Goldstein, 213 S.W. at 590–91. The test is not whether the agent has some
slight adverse interest. Id.
As summary judgment evidence, Austin relies on her declaration and an
invoice from Lawhorn dated December 19, 2012. Austin stated she hired Lawhorn
based on her third husband’s confidence in him but had to sign a waiver of conflicts
–8– of interest from his representation of her third husband. By October 2012, however,
Austin was in divorce proceedings with her third husband and “Lawhorn ceased
representing me shortly after that.”
Austin stated she never received the invoice, but that the information in the
invoice and her knowledge of the circumstances in October 2012 “leads me to
conclude that Lawhorn acted adverse to my interest due to his allegiance to my third
husband.” She also stated, “There is no doubt that Lawhorn had divided loyalty;
otherwise, I would not have had to sign a waiver for him to represent me.” Austin
next points to time entries on the invoice for communications between Lawhorn and
her third husband and his attorney. The entries indicate Lawhorn communicated with
her husband and his attorney about not being a witness for Mitchell, their position
on a deposition, conflicts of interest, and a waiver. Austin states Lawhorn did not
disclose these communications to her at the time and suggested his reason was
because he knew “how inappropriate” she would consider Lawhorn’s coordinating
with her third husband.
After Mitchell’s deposition, there is a time entry for a status letter to Austin
regarding issues in Mitchell’s deposition. Austin stated she never received this letter
from Lawhorn. She also stated the invoice was addressed to her former address with
her third husband. She asserted that Lawhorn knew she was not living there at the
time and would have known her husband was not forwarding her mail.
–9– Austin asserts it is reasonable to infer from this evidence that Lawhorn’s
actions show he had an adverse interest to Austin. We cannot agree.
Although we do not have the terms of the waiver Austin signed to engage
Lawhorn, waivers of conflicts of interest are common in attorney-client relationships
and do not establish an adverse interest between the attorney and the client. And
while Austin refers to Lawhorn’s divided loyalty, that is not the test for the adverse
interest exception to the imputation of knowledge. See Goldstein, 213 S.W. at 590–
91 (noting test is not whether there is “some slight adverse interest”). Neither
Austin’s waiver of a conflict of interest at some unknown time before the deposition
nor Lawhorn’s withdrawal at some unknown time after the deposition is evidence of
an adverse interest ‘so incompatible” with Austin’s at the time of the deposition as
to destroy the attorney-client relationship. See id.
Austin does not describe what actions Lawhorn took that were adverse to her
or that showed he had a personal interest in not disclosing Mitchell’s deposition to
her. There is no evidence that the allegedly undisclosed communications with her
husband were adverse to her. It is equally reasonable to infer that these were normal
communications an attorney would engage in while representing his client. And they
may not have been discussed with Austin because they were routine or resulted in
no new information. Further, if Lawhorn intended to hide his contact with her third
husband, he would not have included those contacts in an invoice addressed to
–10– Austin. It is not possible to draw any reasonable inference from this meager
evidence.
In addition, Austin does not deny other communications between her and
Lawhorn reflected in the invoice. These communications were about arbitration
issues, her deposition, upcoming depositions, and settlement. The invoice shows
Lawhorn conferred with Austin for “input on questions to ask Michael Mitchell
during his deposition.” Austin did not deny these communications in her declaration.
To infer that Lawhorn had an adverse interest in not disclosing the deposition when
he asked Austin for input on questions to ask at that deposition is not reasonable.
Nor does Austin’s testimony about addressing the invoice to her former
address allow a reasonable inference that Lawhorn had an adverse interest to Austin.
Sending the invoice to Austin’s former address could reasonably have been a simple
office error of not updating the billing address or Austin could have failed to provide
Lawhorn with her new address.
Several equally probably inferences arise from the facts cited in Austin’s
declaration. While we indulge inferences of favor of the nonmovant, the inferences
must be reasonable. See Valence Operating Co., 164 S.W.3d at 661 (noting courts
“indulge every reasonable inference” in nonmovant’s favor). An inference is not
reasonable, however, if it is premised on mere suspicion—“some suspicion linked
to other suspicion produces only more suspicion, which is not the same as some
–11– evidence.” Suarez v. City of Texas City, 465 S.W.3d 623, 634 (Tex. 2015) (quoting
Marathon Corp. v. Pitzner, 106 S.W.3d 724, 727–28 (Tex. 2003) (citing Johnson v.
Brewer & Pritchard, P.C., 73 S.W.3d 193, 210 (Tex. 2002))). An inference is not
reasonable if it is susceptible to multiple, equally probable inferences, requiring the
factfinder to guess to reach a conclusion. Id. The inferences Austin asks us to draw
from the summary judgment evidence are not reasonable.
Further, Austin’s speculations and conclusory assertions do not raise a
genuine issue of material fact that her attorney had a personal adverse interest to her
interests at the time of the deposition. See TEX. R. CIV. P. 166a(c); Serv. Corp. Intern.
v. Guerra, 348 S.W.3d 221, 228 (Tex. 2011) (evidence that does no more than create
a mere surmise or suspicion and is so slight as to make any inference a guess is no
evidence). Affidavits consisting only of conclusions are insufficient to raise an issue
of fact. Brownlee v. Brownlee, 665 S.W.2d 111, 112 (Tex. 1984). When summary
judgment evidence raises only a mere suspicion or surmise of a fact in issue, no
genuine issue of material fact exists to defeat summary judgment. Selz v. Friendly
Chevrolet, Ltd., 152 S.W.3d 833, 837 (Tex. App.—Dallas 2005, no pet.).
Because Austin failed to raise a genuine issue of fact that her lawyer was so
conflicted and acting against her interests at the time of the deposition, her attorney’s
knowledge is imputed to Austin. Thus, Austin was on notice of the transfer more
than four years before she filed suit. We conclude the summary judgment evidence
–12– establishes Austin’s fraudulent transfer claim is barred by section 24.010’s statute
of repose. We overrule Austin’s second and third issues.
B. Standing Austin argues in her first issue that she has standing to bring disgorgement
and accounting claims against the trustee.4 Mitchell and the trustee moved for
summary judgment on the ground that Austin was not an interested person as
required by the property code.
The property code provides that an “interested person” may bring an action
against a trustee for an accounting and to make determinations of fact affecting a
trust, including determinations regarding trust administration and distributions. TEX.
PROP. CODE §§ 115.011, 115.001. An “interested person” is:
[A] trustee, beneficiary, or any other person having an interest in or a claim against the trust or any person who is affected by the administration of the trust. Whether a person, excluding a trustee or named beneficiary, is an interested person may vary from time to time and must be determined according to the particular purposes of and matter involved in any proceeding.
PROP. § 111.004(7).
Initially, Austin contends the mere fact that she filed a claim against the trustee
grants her standing as a person having a “claim against the trust.” Id. However,
4 Disgorgement is not a cause of action, but an equitable remedy applied to breaches of fiduciary duty. See Meridien Hotels, Inc. v. LHO Fin. P’ship I, L.P., 255 S.W.3d 807, 821 (Tex. App.—Dallas 2008, no pet.). Austin did not allege a breach of fiduciary duty claim against the trustee in her petition. However, Mitchell and the trustee did not raise this argument in the motion for summary judgment.
–13– whether a person is an interested person may vary from time to time and must be
determined according to the particular purposes of and matter involved in the
proceeding. Id. The mere fact that a person has filed a suit against a trustee cannot
confer standing on that person; otherwise, the requirements of section 111.004(7)
would be meaningless, and trustees would be forced to defend any suit filed by any
person. Instead, we determine whether a person who is not a trustee or beneficiary
of a trust is an interested person by looking to the particular purposes of the trust at
issue and the matter involved in the proceeding. Id.
Austin argues she has an interest in the trust because the initial funding of the
trust in 2008 was done before their divorce was final and those funds were presumed
to be community property. Mitchell presented summary judgment evidence,
however, showing that the trust was not formed and funded until after he and Austin
agreed to the division of the marital estate in the settlement agreement. Pursuant to
the settlement agreement, Mitchell was awarded all accounts in his sole name.
Mitchell produced evidence that the $7,500 used to fund the trust in 2008 was drawn
from an account in his sole name. Mitchell’s summary judgment evidence shows he
made no other transfers to the trust during the marriage.
The only other contribution Mitchell made to the trust was the transfer of a
portion of his limited partnership interest in the FLP. Mitchell was awarded Austin’s
entire interest in the FLP in the divorce decrees. The transfer of the partnership
–14– interest to the trust occurred after the parties were divorced. Thus, that transfer did
not involve marital assets.
Absent her fraudulent transfer claim against Mitchell, Austin has no claim
against the trustee. She did not allege and there is no evidence that the trustee owed
any duty to Austin. Any claim she has is through claims against Mitchell, and the
only claim alleged was fraudulent transfer, but that claim is extinguished by the
statute of repose. Thus, she does not have a “claim against the trust.” PROP. §
111.004(7).
Mitchell testified in his affidavit that he does not control the trust and has
never used its accounts for his personal expenses. Mitchell created the irrevocable
trust for the benefit of his children; its purpose is to provide for the health, education,
maintenance, and support of the beneficiaries. Austin is not a beneficiary or trustee
of the trust. She is not named as a contingent beneficiary and the trust document
expressly excludes her from becoming a successor trustee.
Considering the purpose of the trust and the matter involved in this
proceeding, Austin is not an interested person and does not have standing to bring
her claims against the trustee. We overrule Austin’s first issue.
C. Release In her fourth issue, Austin argues the original divorce decree did not release
the claims presented here because the release language was not included in the
–15– amended divorce decree. Because our resolution of other issues is sufficient to affirm
the trial court’s judgment, this issue is not necessary to the resolution of the appeal.
TEX. R. APP. P. 47.1. Therefore, we do not address the fourth issue.
Conclusion We affirm the trial court’s judgment.
/Erin A. Nowell// ERIN A. NOWELL JUSTICE
191359f.p05
–16– Court of Appeals Fifth District of Texas at Dallas JUDGMENT
HELEN CULLEN AUSTIN, On Appeal from the 191st Judicial Appellant District Court, Dallas County, Texas Trial Court Cause No. DC-17-13917. No. 05-19-01359-CV V. Opinion delivered by Justice Nowell. Justices Myers and Goldstein MICHAEL W. MITCHELL, participating. INDIVIDUALLY, AND DANIEL MITCHELL, AS TRUSTEE OF THE BRITTANY MITCHELL TRUST FBO CAITLIN MITCHELL AND AS TRUSTEE OF THE BRITTANY MITCHELL TRUST FBO MEGAN MITCHELL, Appellees
In accordance with this Court’s opinion of this date, the judgment of the trial court is AFFIRMED.
It is ORDERED that appellees Michael W. Mitchell, Individually, and Daniel Mitchell, as Trustee of the Brittany Mitchell Trust FBO Caitlin Mitchell and as Trustee of the Brittany Mitchell Trust FBO Megan Mitchell recover their costs of this appeal from appellant Helen Cullen Austin.
Judgment entered this 8th day of June, 2021.
–17– –18–