Opinion ID: 2733450
Heading Depth: 2
Heading Rank: 1

Heading: Fraudulent Asset Transfer

Text: The Plaintiffs allege that the Defendants are all liable under Section 24.005(a) of the Texas Uniform Fraudulent Transfer Act (“TUFTA”) for their participation as subsequent transferees in the fraudulent asset transfer of the VTL Group’s and Bacon Whitney’s assets to prevent satisfaction of the Plaintiffs’ Texas state court judgment against the VTL Group and Bacon Whitney. To establish a claim under TUFTA, a plaintiff must prove that (1) she is a “creditor” with a claim against a “debtor”; (2) the debtor transferred assets 4 Plaintiffs have not established a prima facie case that any of the Defendants are subject to general jurisdiction. Halpern and Denny are residents of Massachusetts, and Plaintiffs did not allege any facts that, if true, would establish that the Vendomation Defendants, as foreign corporations, were “at home” in the state of Texas. Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846, 2854 (2011). 9 Case: 12-10986 Document: 00512771210 Page: 10 Date Filed: 09/16/2014 No. 12-10986 after, or a short time before, the plaintiff's claim arose; and (3) the debtor made the transfer with the intent to hinder, delay, or defraud the plaintiff. Nwokedi v. Unlimited Restoration Specialistis, Inc., 428 S.W.3d 191, 203-05 (Tex. App. – Houston 1st Dist. 2013, pet. Denied). We have recently explained that In general, a determination of liability under TUFTA is a two-step process: first, a finding that a debtor committed an actual, fraudulent transfer, TUFTA § 24.005(a)(1), or a constructive, fraudulent transfer, id. § 24.005(a)(2); and, second, recovery of that fraudulent transfer, or its value, from the transferees, id. §§ 24.008–24.009. Spring Street Partners-IV, L.P. v. Lam, 730 F.3d 427, 436 (5th Cir. 2013). With regard to the debtor’s intent, actual fraud requires an “actual intent to hinder, delay, or defraud any creditor of the debtor,” whereas constructive fraud is established by demonstrating that a debtor made the transfer or incurred an obligation “without receiving a reasonably equivalent value in exchange for the transfer or obligation,” and either (1) “was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small,” or (2) “intended to incur, or believed or reasonably should have believed that the debtor would incur, debts beyond the debtor’s ability to pay as they became due.” Id. at 437 (quoting Tex. Bus. & Com. Code § 24.005(a)(2)). TUFTA defines a creditor as someone who has a “claim”—that is, a “right to payment or property, whether or not the right is reduced to judgment, liquidated, . . . fixed, contingent, matured . . . disputed, undisputed, legal, equitable, [or] secured.” In re Galaz, 13-50781, 2014 WL 4197213 (5th Cir. Aug. 25, 2014) (quoting Tex. Bus. & Com. Code §§ 24.002(3), (4)). A plaintiff’s status as a creditor thus “turns on whether ‘she had a right to payment or property that existed at the time of the fraudulent transfer[ ] or that arose within a reasonable time afterwards.’” Id. (citing Williams v. Performance 10 Case: 12-10986 Document: 00512771210 Page: 11 Date Filed: 09/16/2014 No. 12-10986 Diesel, Inc., No. 14-00-00063-CV, 2002 WL 596414 at  (Tex. App. – Houston Apr. 18, 2002, no pet.). A “debtor” is defined as “a person who is liable on a claim[.]” Id. (quoting Tex. Bus. & Com. Code § 4.002(6)). The statute provides a good faith defense for subsequent transferees who accept the fraudulent transfer “in good faith and for a reasonably equivalent value.” Spring Street Partners-IV, L.P., 730 F.3d at 438 (quoting Tex. Bus. & Com. Code § 24.009(a)). Thus, as Plaintiffs note on appeal, if the debtor has actual or constructive fraudulent intent, then any “subsequent transferee of the asset” is liable under TUFTA, unless the transferee took the assets “in good faith and for a reasonably equivalent value.” Id. A “reasonably equivalent value” is defined under TUFTA as “within the range of values for which the transferor would have sold the assets in an arm’s length transaction.” Id. at 437 (quoting Tex. Bus. & Com. Code § 24.004(d)). As noted supra, a tortious act committed outside the forum state that has consequences or effects within the forum will establish minimum contacts if the tortious conduct is purposefully or expressly aimed at the forum state. See Mullins v. TestAmerica, Inc., 564 F.3d 386, 400 (5th Cir. 2009) (citing Calder v. Jones, 465 U.S. 783, 789-90 (1984)). While this court is hesitant to make per se rules regarding the fact-specific minimum contacts analysis, a debtor who is liable under TUFTA to a Texas resident is likely subject to suit in the creditor’s forum state because the debtor acted with actual or constructive fraudulent intent to expressly aim their conduct at a creditor in the forum, where the tort’s harm was felt. Id. However, a subsequent transferee’s liability under TUFTA alone may be insufficient to establish minimum contacts with the creditor’s forum state. Id. 400-401 (“Knowingly accepting a fraudulent transfer may subject a transferee to liability, but such conduct is not necessarily tantamount to committing a wrongful act 11 Case: 12-10986 Document: 00512771210 Page: 12 Date Filed: 09/16/2014 No. 12-10986 purposefully aimed at a creditor of the transferor in his state of residence.”). For example, an individual or corporation who is a mere “passive transferee,” is unlikely to be subject to jurisdiction in the creditor’s resident state. Id. at 401. However, if the transferee “precipitate[s] and direct[s] an alleged fraudulent transfer at the expense of a known, . . . creditor in Texas whose right to payment arises out of contracts that share a strong connection with Texas,” then the transferee is subject to suit in Texas court. Id. at 402.