Opinion ID: 19825
Heading Depth: 2
Heading Rank: 2

Heading: Summary Judgment - Was the Partition Void as to Mrs. Hinsley?

Text: 10 We review a grant of summary judgment de novo, applying the same criteria as the district court. King v. Ames, 179 F.3d 370, 373 (5th Cir. 1999) (citing Merritt-Campbell, Inc. v. RxP Prods., Inc., 164 F.3d 957, 961 (5th Cir. 1999)).
11 The trustee moved for summary judgment 6 against Mrs. Hinsley under 11 U.S.C. 544(b) and, in reliance on Tex. Fam. Code 4.106(a), 7 sought to void the partitions as fraudulent. The trustee submitted approximately 700 pages of financial documentation in support of his motion, arguing that the documentary evidence established numerous badges of fraud sufficient to prove Mr. Hinsley's fraudulent intent. The trustee did not submit any evidence regarding Mrs. Hinsley's intent, but argued only that the marital reasons put forth by Mrs. Hinsley as her intent in entering into partition do not constitute reasonably equivalent value and thus evince another badge of fraud. 12 In opposition to summary judgment, Mrs. Hinsley submitted only her own affidavit and that of Mr. Hinsley. Both affidavits flatly denied that the purpose of partition was to defraud creditors and recounted the marital troubles that partition was allegedly intended to address. On appeal, Mrs. Hinsley contends that the district court erred by (1) concluding that the affidavits did not create genuine issues of material fact sufficient to defeat summary judgment and (2) considering any of the trustee's evidence that conflicted with the Hinsleys' affidavits. 13 The district court held the partition void as to Mrs. Hinsley since it had previously been held void as to Mr. Hinsley, and held that her intent was therefore immaterial. It is significant, but perhaps overlooked by Mrs. Hinsley, that our prior decision finding the partition void was a final resolution. The remand was to permit her to rebut the facts on which the court concluded that the partition was void -- if she could. Due process required no more. If it was void, it was of necessity void as to both parties. The remand was solely to provide her an opportunity to rebut the factual basis for the conclusion. However, the district court also found that the evidenceestablished Mrs. Hinsley's fraudulent intent in entering into partition. 14
15 Section 24.005(b) 9 of Tex. Bus. & Com. Code, the Texas Uniform Fraudulent Transfer Act (UFTA), lists eleven, non-exclusive, badges of fraud that may be used to prove the fraudulent intent of the transferor. The trustee contends that eight of the badges of fraud were present. The Hinsleys' affidavits do not address or dispute any of the evidence submitted by the trustee with the exception of their general statements as to the reasons for partition and Mrs. Hinsley's claims about the value of the property divided to each spouse. 16 In arguing that the affidavits are decisive on the issue of intent, Mrs. Hinsley has misconstrued the summary judgment standard. For purposes of summary judgment, [a]n issue is 'material' if it involves a fact that might affect the outcome of the suit under the governing law. Merritt-Campbell, 164 F.3d at 961 (citation omitted). Mrs. Hinsley contends that the affidavits raise issues of materiality and credibility because they go to the issue of fraudulent intent. Intent to defraud . . . can be decided as a matter of law. BMG Music v. Martinez, 74 F.3d 87, 90 (5th Cir. 1996). A party's self-serving and unsupported claim that she lacked the requisite intent is not sufficient to defeat summary judgment where the evidence otherwise supports a finding of fraud. See id. 1. Reasonably Equivalent Value 17 In her affidavit, Mrs. Hinsley avers that she believed the community estate at the time of partition to be approximately $8 million, based on the sale of a business in 1985. She further claims that the partition was equitable because she received $3.75 million in the partition while her husband received approximately $4 million. 18 One of UFTA's badges of fraud is whether the transferor received consideration reasonably equivalent in value to the asset transferred. See Tex. Bus. & Com. 24.005(b)(8). Intangible, non-economic benefits, such as preservation of marriage, do not constitute reasonably equivalent value. See Dietz v. St. Edward's Catholic Church (In re Bargfrede), 117 F.3d 1078, 1080 (8th Cir. 1997) (per curiam) (interpreting same phrase in bankruptcy code, 11 U.S.C. 548(a)); see also Leibowitz v. Parkway Bank & Trust Co., (In re Image Worldwide, Ltd.), 139 F.3d 574, 577 (7th Cir. 1998) (UFTA took phrase reasonably equivalent value from 11 U.S.C. 548(a)(2)); Viscount Air Svcs, Inc. v. Cole (In re Viscount Air Servs., Inc.), 232 B.R. 416, 434 (Bank. D. Ariz. 1998) (states that have adopted the UFTA interpret it similarly to 11 U.S.C. 548). 19 Mrs. Hinsley's belief about the value of her assets at the time of partition is insufficient to create a issue of material fact on this issue in light of the credible and undisputed evidence as to the actual value of the assets. In addition, at least with respect to one asset, the Road Rescue stock, Mrs. Hinsley's valuation of $200-250,000 is flatly contradicted by her March1989 financial balance sheet which valued this stock at $1.125 million. The March 1989 balance sheet also states her total assets at just over $3.5 million, not $3.75 million. 20 The value of consideration given for a transfer alleged to be in fraud of creditors is determined from the standpoint of creditors. See In re Viscount Air Svcs., 232 B.R. at 434 (interpreting Arizona's UFTA); Mancuso v. Champion (In re Dondi Fin. Corp.), 119 B.R. 106, 109 (Bank. N.D. Tex. 1990) (interpreting similar provision of Texas Uniform Fraudulent Conveyance Act, the precursor of UFTA). The proper focus is on the net effect of the transfers on the debtor's estate, the funds available to the unsecured creditors. In re Viscount Air Servs., 232 B.R. at 435. Value is determined as of the date of transfer. See id. at 437. In the instant case, the net effect of the partition and assignments was to remove the valuable assets from Mr. Hinsley's ownership, making them unavailable to the judgment creditors. The significant debt on the property held by Mr. Hinsley on the date of transfer was properly considered in determining equivalent value. Mrs. Hinsley's affidavit was not sufficient to raise a genuine issue of material fact. 2. Intent of Transferee 21 Texas Family Code 4.106 is silent as to whether both spouses must intend to defraud creditors to void a transfer or partition. However, under the UFTA, Tex. Bus. & Com. 24.009(a), a transfer is not voidable by a creditor against a person who took in good faith and for a reasonably equivalent value. Mrs. Hinsley is not a mere transferee since the property could not have been divided without her active participation. The record reflects that she desired the partition and had specific criteria for the property she wished to receive. 10 Moreover, she did not exchange equivalent value for the property she received in partition. See Roland v. United States, 838 F.2d 1400, 1403 (5th Cir. 1988) (lack of knowledge not relevant where transferee not purchaser for value). Our de novo review of the record satisfies us that the grant of summary judgment was proper. 22 The evidence, taken as a whole, supported summary judgment.