COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 2-03-057-CV
JOSE LOPEZ FLORES AND APPELLANTS
MARIA FLORES
V.
ROBINSON ROOFING & APPELLEES
CONSTRUCTION COMPANY, INC.
------------
FROM THE 17TH DISTRICT COURT
OF TARRANT COUNTY
OPINION ON REHEARING
After
reviewing Appellee’s motion for rehearing, we deny the motion. We withdraw our
January 13, 2005 opinion and judgment and substitute the following.
INTRODUCTION
Appellants
Jose Lopez Flores and Maria Flores appeal a summary judgment in favor of
Appellee Robinson Roofing and Construction Company, Inc. Because we hold that
there are issues of material fact concerning Appellants’ fraudulent transfer
claims, we reverse and remand.
BACKGROUND
Jose
Flores suffered a brain injury and other injuries while he was working as an
employee of M & B Contracting, Inc. M & B was a subcontractor of
Robinson Roofing Company, Inc. Flores and his wife, Maria, sued M & B,
Robinson Roofing, and others for personal injury damages. During the course of
the litigation, M & B filed for bankruptcy,1 and
Robinson Roofing changed its name to R & B Roofing. R & B then filed for
bankruptcy, and Appellee Robinson Roofing and Construction Company, Inc. came
into existence. In its bankruptcy, R & B listed Appellants as creditors
holding a $6,903,000 disputed unsecured claim. However, it did not list its good
will or intangible assets. Flores’s personal injury suit was abated due to the
automatic stay in the R & B Roofing bankruptcy.
Appellants
then sued Appellee in the underlying case, alleging that Robinson Roofing
fraudulently transferred intangible assets to Appellee. To support their
fraudulent transfer claims, Appellants asserted that the two companies were
operated by the same principals. Marshall Robinson was president of Robinson
Roofing. Bret Barnett, who was married to Robinson’s daughter Melissa, was
president and a shareholder of M & B, general manager of Robinson Roofing,
and president and a director of Appellee. Melissa Robinson Barnett was
Appellee’s registered agent and its majority shareholder, as well as having
been a director and shareholder of M & B.
Appellants
also asserted that Robinson Roofing transferred its logo, advertising, graphics,
telephone number, and good will to Appellee. Appellants alleged that Robinson
Roofing fraudulently transferred those assets after changing its name to R &
B Roofing, filing bankruptcy, and dissolving the company in order to escape
liability for Jose Flores’s tort claim. Southwestern Bell Yellow Pages
advertisements for the years 1984-1985, 1990-1991, 1998-1999, and 2000-2001
demonstrate that Appellee had obtained the logo, insignia, and phone number of
Robinson Roofing, and in the 2001-2002 ad, Appellee claimed that it had been
“Family Owned and Operated for Over 35 Years” even though it had been in
business for only three years.
Appellee
filed a combined traditional and no-evidence summary judgment motion. In the
traditional part of its motion, Appellee argued that, as a matter of law, R
& B transferred no goodwill to Robinson Roofing with the intent to defraud
Appellants; there was no fraudulent transfer of any kind from R & B to
Robinson Roofing; and the good will of R & B had no value at the time of the
transfer. In the no-evidence part of its motion, Appellee argued there was no
evidence: (1) that the good will of R & B was transferred to Robinson
Roofing with the intent to defraud Appellants; (2) that Robinson Roofing was
aware of the fraudulent nature of the transfer; (3) that the alleged good will
or other assets had any value; and (4) that Appellants were creditors of R &
B prior to the transfer. The trial court granted Appellee’s summary judgment.
Appellants contend that the trial court erred in granting summary judgment
because there are questions of material fact.
STANDARD OF REVIEW
No-Evidence Summary Judgment
After
an adequate time for discovery, the party without the burden of proof may,
without presenting evidence, move for summary judgment on the basis that there
is no evidence to support an essential element of the nonmovant's claim or
defense. Tex. R. Civ. P. 166a(i).
The motion must specifically state the elements for which there is no evidence. Id.;
Johnson v. Brewer & Pritchard, P.C., 73 S.W.3d 193, 207 (Tex. 2002). The
trial court must grant the motion unless the nonmovant produces summary judgment
evidence that raises a genuine issue of material fact. See Tex. R. Civ. P. 166a(i) & cmt.; S.W.
Elec. Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex. 2002).
We
review the evidence in the light most favorable to the party against whom the
no-evidence summary judgment was rendered. Johnson, 73 S.W.3d at 197; Morgan
v. Anthony, 27 S.W.3d 928, 929 (Tex. 2000). If the nonmovant brings forward
more than a scintilla of probative evidence that raises a genuine issue of
material fact, then a no-evidence summary judgment is not proper. Moore v. K
Mart Corp., 981 S.W.2d 266, 269 (Tex. App.—San Antonio 1998, pet. denied).
Traditional Summary Judgment
A
defendant is entitled to summary judgment if the summary judgment evidence
establishes, as a matter of law, that at least one element of a plaintiff’s
cause of action cannot be established. Elliott-Williams Co. v. Diaz, 9
S.W.3d 801, 803 (Tex. 1999). The defendant as movant must present summary
judgment evidence that negates at least one element of the plaintiff’s claim. Centeq
Realty, Inc. v. Siegler, 899 S.W.2d 195, 197 (Tex. 1995). Once the defendant
produces sufficient evidence to establish the right to summary judgment, the
burden shifts to the plaintiff to come forward with competent controverting
evidence raising a genuine issue of material fact with regard to the element
challenged by the defendant. Id.
DISCUSSION
The
bases of the traditional and no-evidence parts of Appellee’s summary judgment
motion overlap but are not identical. We will consider the no-evidence part of
the motion first.
No-Evidence Motion
1. Intent
to Defraud.
A
fraudulent transfer is a transfer by a debtor with the intent to hinder, delay,
or defraud his creditors by placing the debtor’s property beyond the
creditor’s reach. Nobles v. Marcus, 533 S.W.2d 923, 925 (Tex. 1976); Coleman
Cattle Co., Inc. v. Carpentier, 10 S.W.3d 430, 433 (Tex. App.—Beaumont
2000, no pet.). The Texas Uniform Fraudulent Transfer Act is designed to prevent
transfers of property with the intent to defraud creditors:
A transfer made or obligation incurred by a debtor is fraudulent as to a
creditor, whether the creditor's claim arose before or within a reasonable time
after the transfer was made or the obligation was incurred, if the debtor made
the transfer or incurred the obligation . . . with actual intent to hinder,
delay, or defraud any creditor of the debtor.
Tex. Bus. & Com. Code Ann. §
24.005(a)(1) (Vernon 2002).
“Intent
is a fact question uniquely within the realm of the trier of fact because it so
depends upon the credibility of the witnesses and the weight to be given to
their testimony.” Coleman Cattle Co., 10 S.W.3d at 433 (citing Spoljaric
v. Percival Tours, Inc., 708 S.W.2d 432, 434 (Tex. 1986)). The question of
whether a debtor conveyed property with the intent to defraud creditors is
“ordinarily a question for the jury or the court passing on the fact.” Id.
at 433-34 (quoting Quinn v. Dupree, 157 Tex. 441, 303 S.W.2d 769, 774
(1957)).
TUFTA
provides the following nonexclusive list of facts and circumstances, known as
badges of fraud, that may be considered in determining fraudulent intent:
(1) the transfer or obligation was to an insider;
(2)
the debtor retained possession or control of the property transferred after the
transfer;
(3)
the transfer or obligation was concealed;
(4)
before the transfer was made or obligation was incurred, the debtor had been
sued or threatened with suit;
(5)
the transfer was of substantially all the debtor's assets;
(6)
the debtor absconded;
(7)
the debtor removed or concealed assets;
(8)
the value of the consideration received by the debtor was reasonably equivalent
to the value of the asset transferred or the amount of the obligation incurred;
(9)
the debtor was insolvent or became insolvent shortly after the transfer was made
or the obligation was incurred;
(10)
the transfer occurred shortly before or shortly after a substantial debt was
incurred; and
(11)
the debtor transferred the essential assets of the business to a lienor who
transferred the assets to an insider of the debtor.
Tex. Bus. & Com. Code Ann. §
24.005(b). “If, however, ‘fraudulent intent is only to be deduced from facts
and circumstances which the law considers as mere badges of fraud and not fraud
per se, these must be submitted to the trier of fact, which draws the inference
as to the fairness or fraudulent character of the transaction.’” Coleman
Cattle Co., 10 S.W.3d at 434 (citing Quinn, 303 S.W.2d at 774).
In
this case, Appellants produced summary judgment evidence that the transfer was
to an insider, which is defined in TUFTA as a general partner, director,
officer, or person in control of the debtor, and their relatives. See Tex. Bus. & Com. Code Ann.§
24.005(a)(1). Bret Barnett and Melissa Robinson Barnett had both been officers
of Robinson Roofing, were respectively the general manager and majority
shareholder of Robinson Roofing, and were now operating the new company,
Appellee Robinson Roofing and Construction, after Robinson Roofing changed its
name to R & B, declared bankruptcy, and was dissolved.
There
is also evidence that Appellee received and accepted the transfer of the good
will and intangible property, from which a reasonable inference may be drawn
that a transfer was made. Appellants produced evidence of the usage by Appellee
of Robinson Roofing’s logo, telephone number, address, and similar name, in
addition to the newly formed company’s advertisements that it had been
“Family Owned and Operated for Over 35 Years.”
Furthermore,
Robinson Roofing had been sued before the transfer was made. See id. §
24.005(b)(4). Robinson Roofing filed a Chapter 11 petition in February 1998
after being sued for personal injuries by Appellants. The bankruptcy petition
itself lists a debt to Jose Flores of $6,903,000 as a contingent, unliquidated,
and disputed claim that was incurred by the company on September 25, 1990.
Remarkably, the Flores claim made up the great majority of the company’s
secured and unsecured total debts of $6,994,381. Similarly, the transfer
occurred “shortly after a substantial debt was incurred.” See id. §
24.005(b)(10).
We
conclude that Appellants produced more than a scintilla of probative evidence to
raise an issue of material fact on the issue of intent under TUFTA; therefore,
this issue was improperly decided on summary judgment under either the
no-evidence or traditional standard.
2. Appellee’s
Awareness That the Transfer Was Fraudulent.
Appellee
argues there is no evidence that it was aware of the fraudulent nature of the
alleged transfer. A transferee’s awareness of the fraudulent nature of a
transfer is not an essential element of a fraudulent transfer claim. See id.
§§ 24.005-.006. Section 24.009(a) provides, however, that a transfer is not
voidable under section 24.005(a)(1) if the transferee “took in good faith and
for a reasonably equivalent value.” But even if “good faith” equals
“lack of awareness of the fraudulent nature of the transfer,” Appellee’s
argument fails for two reasons.
First,
good faith is an affirmative defense to a fraudulent transfer claim. See Unif. Fraudulent Transfer Act § 8 cmt.
1, 7A II U.L.A. 352 (1999) (“The person who invokes this defense carries the
burden of establishing good faith and the reasonable equivalence of the
consideration exchanged.”). The burden of proof of this affirmative defense
rests with Appellee. A party may move for no-evidence summary judgment only on a
claim or defense on which the adverse party would have the burden of proof at
trial. Tex. R. Civ. P. 166(a)(i).
Appellee may not, therefore, assert good faith as a basis for no-evidence
summary judgment.
Second,
Appellants’ summary judgment evidence raised a fact issue on “good faith.”
Where a transferee is an insider and knows the transferor is insolvent at the
time of the transfer, it cannot be a good faith transferee. Putman v.
Stephenson, 805 S.W.2d 16, 20 (Tex. App.—Dallas 1991, no writ). As noted
above, Appellants produced evidence that the transfer was to an insider.
Appellants also showed that R & B and Robinson Roofing shared common
officers; this raises an inference that Robinson Roofing knew R & B was
insolvent at the time of the transfer.
3. Value
of the Transferred Assets.
Appellee
argues there is no evidence that the transferred assets had any value. Appellee
points to section 24.009(b) of the Texas Business and Commerce Code for the
proposition that proof of value is an essential element of a fraudulent transfer
claim. Tex. Bus. & Com. Code Ann.
§ 24.009(b) (Vernon 2002). We disagree. Section 24.009(b) provides in part:
[T]o the extent a transfer is voidable in any action by a creditor under
Section 24.008(a)(1) of this code, the creditor may recover judgment for the
value of the asset transferred . . . or the amount necessary to satisfy the
creditor’s claim, whichever is less.
Id.
§ 24.009(b) (emphasis added). Thus the value of transferred assets is an issue
only when a creditor seeks relief under section 24.008(a)(1). But avoidance of a
transfer under section 24.008(a)(1) is not the only remedy available to a
creditor:
In an action for relief against a transfer or obligation under this chapter, a
creditor, subject to the limitations in Section 24.009 of this code, may obtain:
(1)
avoidance of the transfer or obligation to the extent necessary to satisfy the
creditor's claim;
(2)
an attachment or other provisional remedy against the asset transferred or other
property of the transferee in accordance with the applicable Texas Rules of
Civil Procedure and the Civil Practice and Remedies Code relating to ancillary
proceedings; or
(3)
subject to applicable principles of equity and in accordance with applicable
rules of civil procedure:
(A)
an injunction against further disposition by the debtor or a transferee, or
both, of the asset transferred or of other property;
(B)
appointment of a receiver to take charge of the asset transferred or of other
property of the transferee; or
(C)
any other relief the circumstances may require.
Id.
§ 24.008(a). Under subsections 2 and 3, a creditor may seek attachment of the
transferred asset or any other relief the circumstances may require—without
proving the value of the transferred asset under § 24.009(a). We hold,
therefore, that proof of value is not an essential element of Appellants’
fraudulent transfer claim and cannot serve as the basis of a no-evidence summary
judgment in this case.
4. Appellants’
Status as Creditors.
Appellee
argues there is no evidence that Appellants were creditors of the alleged
transferor, R & B, before the transfer. “Creditor” means a person,
including a spouse, who has a claim. Id. § 24.002(4). “Claim,” in
turn, means a right to payment or property, whether or not the right is reduced
to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured, or unsecured. Id. §
24.002(3).
Appellants’
summary judgment evidence shows that they sued Robinson Roofing Company before
it changed its name to R & B Roofing and filed for bankruptcy. The date of
the alleged asset transfer is unclear, but the summary judgment evidence raises
at least an inference that the transfer occurred after Appellants sued Robinson
Roofing Company. Appellants’ summary judgment evidence, therefore, raises a
fact issue as to whether they were creditors of R & B at the time of the
alleged transfer.
Because
Appellants produced summary judgment evidence that raised a genuine issue of
material fact on each essential element of their fraudulent transfer claim, a
no-evidence summary judgment is not proper in this case. See Moore, 981
S.W.2d at 269.
Traditional Motion
1. Transfer
of Goodwill.
We
turn now to the traditional part of Appellee’s summary judgment motion.
Appellee argues that, as a matter of law, there was no transfer of goodwill from
R & B to Appellee. In support of its motion, Appellee filed the affidavit of
its vice-president, Bret Barnett. Barnett stated that R & B transferred no
assets, including goodwill, to Appellee. But Appellants claim R & B
transferred other intangible assets besides goodwill to Appellee. Appellants’
summary judgment evidence shows R & B and Appellee shared a similar name and
address and the identical phone number, logo and phone book graphics. This
evidence raises a fact issue as to whether R & B transferred some
assets to Appellee. Even if Appellee conclusively disproved the transfer of
goodwill, it would not be entitled to summary judgment because Appellants allege
the transfer of other intangible assets.
2. Fraudulent
Transfer.
Appellee
next argues there was not, as a matter of law, any fraudulent transfer of any
nature from R & B to Appellee. As noted in the previous paragraph,
Appellants’ summary judgment evidence raises a fact issue as to whether assets
were transferred from R & B to Appellee. The question, then, is whether
Appellee conclusively negated the possibility the transfer was fraudulent.
A
transfer made by a debtor is fraudulent as to a creditor if the debtor made the
transfer or incurred the obligation with actual intent to hinder, delay, or
defraud any creditor of the debtor. Tex.
Bus. & Com. Code Ann. § 24.005(a). As detailed in our discussion of
Appellee’s no-evidence motion, the summary judgment evidence raises fact
issues as to (a) whether Appellants were creditors of R & B at the time of
the alleged transfer, and (b) whether R & B made the alleged transfer with
actual intent to hinder, delay, or defraud Appellants. These fact issues
preclude summary judgment on the question of whether the alleged transfers were
fraudulent.
3. Value
of Goodwill.
Finally,
Appellee argues it is entitled to summary judgment because the summary judgment
evidence conclusively proves the goodwill of R & B had no value at the time
of the transfer. For summary judgment evidence, Appellee relies on Appellants’
answer to an interrogatory:
State the exact amount that you claim was the value of the good will which you
claim was transferred from R & B Roofing Company to Defendant. . . .
Answer:
Plaintiff does not know, and does not intend to prove the value of such good
will.
In
our analysis of Appellee’s no-evidence motion, we determined that proof of
value of a transferred asset is not an essential element of a fraudulent
transfer claim. Moreover, Appellants allege the transfer of intangible assets
besides goodwill. Thus even if the summary judgment evidence conclusively proved
that R & B’s goodwill had no value, Appellee would not be entitled to
summary judgment.
CONCLUSION
We
hold that material fact issues preclude summary judgment. We sustain
Appellants’ sole issue. We reverse the trial court’s judgment and remand the
cause for further proceedings. See Tex.
R. App. P. 43.2(d).
ANNE
GARDNER
JUSTICE
PANEL
A: CAYCE, C.J.; LIVINGSTON and GARDNER, JJ.
DELIVERED: March 24, 2005
NOTES
1.
M & B listed Appellants as creditors holding a $6,859,000 unsecured
claim. M & B was discharged from bankruptcy after the bankruptcy
trustee determined that it had no assets.