Court Opinion

ID: 9668268
Source: CourtListenerOpinion
Date Created: 2023-08-24 02:07:43.853921+00
Date Added: 2024-06-11T18:15:44.218198
License: Public Domain

ANNE GARDNER, Justice,
dissenting.
I disagree that the Texas Uniform Fraudulent Transfer Act (TUFTA) creates personal liability of Appellant for the damages and attorney’s fees assessed against him. I share the majority’s reaction to Appellant’s egregious misconduct as a lawyer. I believe he should be referred to the grievance committee. But I cannot agree that Appellee was entitled to maintain an independent cause of action against him under that Act in seeking to void the fraudulent transfer of community property and in seeking damages in the context of her divorce. By upholding liability of Appellant under TUFTA, I believe the majority clouds the remedies applicable to spouses on divorce as well as the scope of TUFTA. I also believe the majority opinion conflicts with current Texas law.
The majority affirms based upon the jury’s finding that Appellant conspired with the buyers and Appellee’s husband to fraudulently transfer the donut shop. But the majority does not address an essential prerequisite for a civil conspiracy. Liability for civil conspiracy requires participation in an underlying tort for which the plaintiff seeks to hold at least one of the named defendants liable.1 The underlying tort Appellee relies on is her husband’s violation of TUFTA by fraudulently transferring the donut shop business to Appellant’s clients, as found by the jury. If Appellee had no cause of action against her husband under that Act, then Appellant cannot be liable for conspiracy to violate that Act. The preliminary question we must answer, then, is whether Appellee had a cause of action against her husband under TUFTA.
The purpose of TUFTA is to provide a statutory cause of action through which creditors may seek recourse for fraudulent transfers of assets by debtors.2 The majority accepts Appellee’s argument that, as a spouse, she is a “creditor” under TUFTA as to her husband’s fraudulent transfer, concluding that she has a valid, underlying tort cause of action against her husband under that Act.3 I disagree. Section *51624.002(4) of TUFTA includes “a spouse” in the definition of the term “creditor,” but it is a logical fallacy to conclude that all spouses are therefore creditors within the meaning of the Act. There are at least two reasons why that cannot be so. First, that is not what the section says. Section 24.002 provides the following definitions:
(3) “Claim” means a right to payment or property ...
(4) “Creditor” means a person, including a spouse, ... who has a claim.
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(6) “Debtor” means a person who is liable on a claim.4
Section 24.005(a), the operative section of TUFTA, states:
A transfer made ... 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:
(1) with actual intent to hinder, delay, or defraud any creditor or debtor[.]5
The transfer fraudulently deprived Ap-pellee of her ownership right in the donut shop. But nothing in the briefs or record suggests that Appellee had a “claim” against her husband either before or within a reasonable time after his transfer of the donut shop apart from the fraudulent transfer. Without such a claim, Appellee is not a “creditor,” even though she is a “spouse.”6 Likewise, her husband was not a debtor apart from the transfer. The language , of Section 24.005(a) contemplates a claim that existed “before” or “within a reasonable time after” and apart from the fraudulent transfer, not a claim created by the transfer itself. Absent evidence of a claim that either pre-existed or came into existence shortly after the transfer, I would hold that Appellee had no statutory cause of action as a “creditor” against her husband within TUFTA.
In addition, I have grave doubts that the majority’s holding can be squared with current law. Appellee could not become a “creditor” as a result of the fraudulent transfer because the donut shop was community property. The injury resulting from the fraudulent transfer was to the community estate, not to Appellee personally. In Schlueter v. Schlueter, the Supreme Court of Texas held that a spouse has no independent cause of action for actual or exemplary damages for fraud in *517disposing of community assets.7 Instead, the concept is one of “fraud on the community,” the essential character of which is “a deprivation of community assets as opposed to a tort committed against a person or his or her separate property.”8 The trial court may consider the wrong in awarding a disproportionate division of the community estate to the injured spouse to compensate for the community property wrongfully expended, transferred, or dissipated.9 But TUFTA does not define “creditor” to include the community estate on divorce.
Holding that a spouse has an independent cause of action under TUFTA for a fraudulent transfer of community property seems to conflict with Schlueter’s holding that no independent cause of action for a fraudulent transfer of community property exists. As the supreme court in Schlueter explained in describing the remedies of a spouse for fraud on the community, the trial court may consider actual or constructive fraud by one spouse in disposing of community property when it divides the community estate.10 The claim for fraud on the community “is a means to an end ... to obtain a greater share of the community estate, in order to compensate the wronged spouse for his or her lost interest in the community estate.”11 As additional remedies for fraud on the community, the court may allow the wife to establish her ownership right in specific property fraudulently transferred as against third party possessors.12 The court may also award a money judgment from one spouse to the other to achieve an equitable division up to the specific value of the lost community property.13 But because the amount of a money judgment is directly referable to the specific value of the lost community property, the award will never exceed the value of the community estate.14 Exemplary damages may not be awarded for fraud on the community estate.15
TUFTA preceded Schlueter, and provides remedies that are similar but broader, including allowance of attorney’s fees and “any other relief the circumstances may require,” which may include actual and punitive damages.16 However, I be*518lieve that, unless and until the supreme court says differently, Schlueter precludes a holding that TUFTA provides an independent tort cause of action for Appellee against her husband under these facts.17
In addition to finding a fraudulent transfer in violation of TUFTA by the husband, the jury also found that the husband converted Appellee’s ownership interest in the donut shop and breached his fiduciary duties to Appellee. However, claims of constructive fraud, breach of fiduciary duty, conversion, or waste in disposing of the community estate, like claims of fraud in transferring community property, cannot be brought as independent torts in a divorce proceeding, as those claims are also subsumed within the spouse’s claim of “fraud on the community” to be considered in the division of the community estate.18 Thus, those additional jury findings against Appellee’s husband do not establish an independent tort committed against Appellee, without which she has no action for conspiracy by Appellant.19
I would sustain Appellant’s first issue and hold that the trial court erred in rendering judgment against Appellant for personal liability based upon TUFTA. It appears that the trial court reached the right result as to the husband and buyers in setting aside the transfer and awarding Appellee the business as a part of the property division in the divorce decree, even though it was for the wrong reason.20 Those parties have not appealed, and Appellant does not challenge the assessment of actual damages against him for the lost profits nor does he challenge the award of punitive damages other than to argue that it was excessive. In Schlueter, the supreme court expressly declined to consider whether and to what extent a spouse may maintain an action against a third party who participated or conspired with the oth*519er spouse to commit a fraud on the community.21 I believe that the issue is sufficiently raised here, and that we should proceed to consider whether all or some portion of the judgment may be upheld against Appellant based upon conspiracy to commit fraud on the community, or, alternatively, based upon the separate jury finding against him of common law conversion.

. Tilton v. Marshall, 925 S.W.2d 672, 681 (Tex.1996); Cmty. Initiatives, Inc. v. Chase Bank of Tex., 153 S.W.3d 270, 285 (Tex.App.-El Paso 2004, no pet.).

. Blackthorne v. Bellush, 61 S.W.3d 439, 443 (Tex.App.-San Antonio 2001, no pet.); see also Tel. Equip. Network, Inc. v. TA/Westchase Place, Ltd., 80 S.W.3d 601, 607 (Tex.App.Houston [1st Dist.] 2002, no pet.) (noting Act designed to prevent transfers of property by debtor who intends to defraud creditors by placing assets beyond their reach).

. Appellee relies upon Thomas v. Casale, 924 S.W.2d 433 (Tex.App.-Fort Worth 1996, writ denied). In that case, as noted by the majori*516ty on the instant case, this court did not hold that TUFTA applied but reversed on the basis that the judgment could not be upheld under Section 3.57 of the Texas Family Code, which enables a court to void a community property transfer made by a spouse after a divorce petition is filed, provided the spouse who asks the court to grant that remedy meets the burden of proving that the transferee had notice of the transferor’s intent to injure the other spouse's rights. Id.; see Act of May 4, 1979, 66th Leg., R.S., ch. 193, § 1, 1979 Tex. Gen. Laws 421, 421, recodified by Act of Apr. 3, 1997, 75th Leg., R.S., ch. 7, § 1, 1997 Tex. Gen. Laws 8, 32-33 (current version at Tex. Fam.Code Ann. § 6.707 (Vernon 1998)).

. Tex. Bus. & Com.Code Ann. § 24.002(3), (4), (6) (Vernon 2002) (emphasis added).

. Id. § 24.005(a) (emphasis added).

. See, e.g., Mladenka v. Mladenka, 130 S.W.3d 397, 401-02 (Tex.App.-Houston [14th Dist.] 2004, no pet.) (affirming judgment setting aside conveyance by ex-husband to brother of all his non exempt assets as fraudulent conveyance under TUFTA in post judgment enforcement action by wife as judgment creditor); Goodwin v. Goodwin, 451 S.W.2d 532, 534 (Tex.Civ.App.-Amarillo 1970) (holding that wife with divorce judgment granting lien on airplane that had been part of community estate was creditor entitled to set aside conveyance by husband pending divorce), rev’d on other grounds, 456 S.W.2d 885 (Tex.1970).

. Schlueter v. Schlueter, 975 S.W.2d 584, 585-86, 589-90 (Tex.1998); see also Mayes v. Stewart, 11 S.W.3d 440, 447-48 (Tex.App.-Houston [14th Dist.] 2000, pet. denied); In re Marriage of Moore, 890 S.W.2d 821, 827 (Tex.App.-Amarillo 1994, no writ); Belz v. Belz, 667 S.W.2d 240, 247 (Tex.App.-Dallas 1984, writ ref'd n.r.e.).

. Schlueter, 975 S.W.2d at 589.

. Id. at 588 (citing Belz, 667 S.W.2d at 247).

. Mat 588-89.

. Id. at 588 (quoting Belz, 667 S.W.2d at 246-47).

. See Cohrs v. Scott, 161 Tex. 111, 338 S.W.2d 127, 132-133 (1960) (recognizing and citing prior cases allowing recovery against "third party possessor” and establishing resulting trusts in favor of dispossessed spouse in community property fraudulently transferred); Ginsburg v. Chernoff/Silver & Assocs., Inc., 137 S.W.3d 231, 237 (Tex.App.-Houston [1st Dist.] 2004, no pet.); cf. J. Michael Putman, M.D.P.A. Money Purchase Pension Plan v. Stephenson, 805 S.W.2d 16, 17-19 (Tex.App.-Dallas 1991, no writ) (setting aside deed to third party "insider” by husband pledging community interest in real estate as collateral for existing note).

. Schlueter, 975 S.W.2d at 588.

. Lucy v. Lucy, 162 S.W.3d 770, 777 (Tex.App.-El Paso 2005, no pet.) (citing Schlueter, 975 S.W.2d at 588).

. Schlueter, 975 S.W.2d at 589; see also In re Marriage of Moore, 890 S.W.2d at 825-29.

. Tex Bus. & Com.Code Ann. § 24.008(a), 24.009(b) (Vernon 2002) (allowing recovery of monetary damages equal to value of asset or amount of debt, whichever is less). But see Flores v. Robinson Roofing & Constr. Co., 161 *518S.W.3d 750, 756-57 (Tex.App.-Fort Worth 2005, pet. denied) (op. on reh'g) (applying catchall provision in Section 24.008(a) for "any other relief" to allow remedies other than value of asset transferred); Airflow Houston, Inc. v. Theriot, 849 S.W.2d 928, 933-934 (Tex.App.-Houston [1st Dist.] 1993, no writ) (allowing recovery of full amount of debt owed in excess of value of asset under catchall provision). Courts are split on whether punitive damages may be recovered under various versions of the Uniform Fraudulent Transfer Act. See DFS Secured Healthcare Receivables Trust v. Caregivers Great Lakes, Inc., 384 F.3d 338, 354-55 (7th Cir.2004) (certifying question to Indiana Supreme Court and listing jurisdictions allowing and disallowing punitive damages under Act).

. See Lubbock County v. Trammel’s Lubbock Bail Bonds, 80 S.W.3d 580, 585 (Tex.2002) (explaining that once the supreme court announces a proposition of law, the decision is considered binding precedent, and it is not for courts of appeals to abrogate or modify such precedent).

. Schlueter, 975 S.W.2d at 589 (citing In re Marriage of Moore, 890 S.W.2d at 829); see also Lucy, 162 S.W.3d at 777-78 (holding waste, mismanagement, and breach of fiduciary duty in connection with community funds constituted fraud on community, not separate causes of action of wife); Loaiza v. Loaiza, 130 S.W.3d 894, 902 (Tex.App.-Fort Worth 2004, no pet.) (holding breach of fiduciary duty and constructive fraud by husband in making expenditures for girlfriend did not constitute independent causes of action, precluding damages and exemplary damages as matter of law); Harper v. Harper, 8 S.W.3d 782, 784 (Tex.App.-Fort Worth 1999, pet. denied) (holding wife could not recover damages for separate cause of action in divorce suit for fraud against husband and his future wife).

. See Tilton, 925 S.W.2d at 681; Cmty. Initiatives, Inc., 153 S.W.3d at 285.

. See Lucy, 162 S.W.3d at 777-78 (upholding mislabeling of award such that reversal was not required and upholding disproportionate division of community estate based on fraud on the community even through trial court stated award was reimbursement).

. Schlueter, 975 S.W.2d at 590.